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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
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Commission file number: 33-60032
Buckeye Technologies Inc.
incorporated pursuant to the Laws of Delaware
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Internal Revenue Service -- Employer Identification No. 62-1518973
1001 Tillman Street, Memphis, TN 38112
901-320-8100
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No ____
As of October 30, 2001, there were outstanding 34,673,900 Common Shares of the
Registrant.
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INDEX
BUCKEYE TECHNOLOGIES INC.
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ITEM PAGE
PART I - FINANCIAL INFORMATION
1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Income for the Quarter Ended September 30, 2001 and
2000................................................................................... 3
Condensed Consolidated Balance Sheets as of September 30, 2001 and June 30, 2001............ 4
Condensed Consolidated Statements of Cash Flows for the Quarter Ended September 30, 2001
and 2000............................................................................... 5
Notes to Condensed Consolidated Financial Statements........................................ 6
2. Management's Discussion and Analysis of Financial Condition and Results of Operations....... 8
PART II - OTHER INFORMATION
6. Exhibits and Reports on Form 8-K............................................................ 10
SIGNATURES 11
2
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Quarter Ended
September 30
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2001 2000
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Net sales............................................ $155,157 $188,604
Cost of goods sold 135,112 140,306
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Gross margin......................................... 20,045 48,298
Selling, research and administrative expenses........ 8,621 13,408
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Operating income..................................... 11,424 34,890
Net interest expense and amortization of debt costs.. 10,830 11,265
Other 576 159
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Income before income taxes and cumulative
effect of change in accounting.................... 18 23,466
Income taxes......................................... 6 7,930
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Income before cumulative effect of change
in accounting..................................... 12 15,536
Cumulative effect of change in accounting
(net of tax of $1,286)............................ - 3,249
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Net Income........................................... $ 12 $ 18,785
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Earnings per share before cumulative effect of
change in accounting
Basic earnings per share.................... $ 0.00 $ 0.45
Diluted earnings per share.................. $ 0.00 $ 0.43
Cumulative effect of change in accounting
Basic earnings per share................... $ - $ 0.09
Diluted earnings per share................. $ - $ 0.09
Earnings per share
Basic earnings per share.................. $0.00 $ 0.54
Diluted earnings per share................ $0.00 $ 0.52
Weighted average shares for basic earnings per share 34,443 34,796
Effect of dilutive stock options 357 1,470
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Adjusted weighted average shares for diluted earnings per share 34,800 36,266
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See accompanying notes.
3
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 30 June 30
2001 2001
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Assets
Current assets:
Cash and cash equivalents................ $ 3,294 $ 6,912
Accounts receivable-net.................. 104,479 104,589
Inventories.............................. 150,763 136,780
Deferred income taxes and other.......... 14,878 16,288
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Total current assets 273,414 264,569
Property, plant and equipment.................. 883,501 860,980
Less accumulated depreciation.................. (242,641) (231,429)
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640,860 629,551
Goodwill, net.................................. 128,670 131,688
Intellectual property and other, net 50,035 45,150
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Total assets................ $1,092,979 $1,070,958
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Liabilities and stockholders' equity
Current liabilities:
Accounts payable.......................... $ 29,982 $46,625
Accrued expenses.......................... 57,405 51,457
Current portion of long-term debt......... 22,000 21,895
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Total current liabilities 109,387 119,977
Long-term debt............................. 658,873 632,784
Accrued postretirement benefit obligation.. 19,339 18,923
Deferred income taxes...................... 67,663 65,781
Other liabilities.......................... 443 3,471
Stockholders' equity............................. 237,274 230,022
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Total liabilities and stockholders' equity. $1,092,979 $1,070,958
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See accompanying notes.
4
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Quarter Ended
September 30
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2001 2000
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Operating activities
Net income........................................................ $ 12 $18,785
Adjustments to reconcile net income to net cash provided by operating
activities:
Cumulative effect of change in accounting.................. - (3,249)
Depreciation............................................... 10,682 10,892
Amortization............................................... 961 1,863
Deferred income taxes and other............................ 1,825 2,074
Changes in operating assets and liabilities:
Accounts receivable.................................... 1,755 7,513
Inventories............................................ (11,978) (4,380)
Other assets........................................... (591) 75
Accounts payable and other current liabilities......... (9,801) (17,607)
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Net cash (used in) provided by operating activities.............. (7,135) 15,966
Investing activities
Purchases of property, plant and equipment........................ (16,791) (33,021)
Acquisition of business........................................... - (35,175)
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Net cash used in investing activities............................. (16,791) (68,196)
Financing activities
Proceeds from exercise of stock options........................... 3,605 2,484
Net borrowings under revolving line of credit..................... 17,522 73,956
Principal payments on long term debt.............................. - (22,000)
Payments for debt issuance costs.................................. (791) -
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Net cash provided by financing activities......................... 20,336 54,440
Effect of foreign currency rate fluctuations on cash.............. (28) (1,103)
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Increase (decrease) in cash and cash equivalents.................. (3,618) 1,107
Cash and cash equivalents at beginning of period.................. 6,912 12,257
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Cash and cash equivalents at end of period........................ $ 3,294 $ 13,364
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See accompanying notes.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Buckeye Technologies Inc. and its subsidiaries (the Company) have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended September 30, 2001
are not necessarily indicative of the results that may be expected for the year
ended June 30, 2002. All significant intercompany accounts and transactions have
been eliminated in consolidation. For further information and a listing of the
Company's significant accounting policies, refer to the financial statements and
notes thereto included in the Company's annual report on Form 10-K for the year
ended June 30, 2001.
Certain amounts in the 2000 financial statements have been reclassified to
conform with the 2001 financial statement presentation.
NOTE B --- BUSINESS COMBINATIONS
On August 1, 2000, the Company acquired the cotton cellulose business of Fibra,
S.A. (Americana), located in Americana, Brazil for $36,588, including
acquisition costs. The acquisition was funded using borrowings from the
Company's bank credit facility. The acquisition was accounted for using the
purchase method of accounting. In May 2001, production at Americana was
suspended and capital improvements are being made to allow sales to market
customers.
The consolidated operating results of Americana have been included in the
consolidated statements of income from the date of acquisition. The following
unaudited pro forma results of operations assume that the acquisition occurred
at the beginning of the periods presented.
Pro forma results of operations Quarter Ended September 30
2001 2000
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Net sales $155,157 $189,234
Net income 12 18,743
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Basic earnings per share $ 0.00 $ 0.54
Diluted earnings per share $ 0.00 $ 0.52
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The pro forma financial information is presented for information purposes only
and is not necessarily indicative of the operating results that would have
occurred had the business combination been consummated as of the above dates,
nor is it necessarily indicative of future operating results.
NOTE C -- INVENTORIES
The components of inventory consist of the following:
September 30 June 30
2001 2001
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(In thousands)
Raw materials........................ $39,397 $39,008
Finished goods....................... 89,185 77,111
Storeroom and other supplies......... 22,181 20,661
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$150,763 $136,780
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NOTE D -- COMPREHENSIVE INCOME
The components of comprehensive income consist of the following:
Quarter Ended
September 30
2001 2000
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(In thousands)
Net income..................................... $ 12 $18,785
Foreign currency translation adjustments - net. 3,451 (14,474)
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Comprehensive income........................... $3,463 $ 4,311
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The change in the foreign currency translation adjustment is primarily due to
fluctuations in the exchange rate of the US dollar and the euro, the Brazilian
real and the Canadian dollar.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales for the quarter ended September 30, 2001 were $155.2 million
compared to $188.6 million for the same period in 2000, a decrease of $33.4
million or 17.7%. Operating income for the quarter ended September 30, 2001 was
$11.4 million compared to $34.9 million for the same period in 2000, a decrease
of $23.5 million or 67.3%. The decrease in net sales was primarily due to lower
shipment volumes and lower sales prices on fluff pulp. The decrease in both
shipment volume and sales prices reflects the impact of the contractual changes
in the Fluff Pulp Supply Agreement with The Procter & Gamble Company. The
decrease in operating income, due mainly to the lower sales volumes and prices
on fluff pulp, was partially offset by a reduction of $4.8 million in sales,
research and administrative expenses.
Net interest expense and amortization of debt costs for the quarter ended
September 30, 2001 were $10.8 million compared to $11.3 million for the same
period in 2000, a decrease of $0.5 million. The decrease was due primarily to
lower interest rates, the capitalization of $1.7 million of interest on large
construction projects and the interest rate swap agreement that the Company
entered into on May 7, 2001 which offset higher average debt levels.
Other expenses for the quarter ended September 30, 2001 were $0.6 million
compared to $0.2 million for the quarter ended September 30, 2000. The increase
was due to increased losses from foreign currency transactions offsetting the
cessation of amortization of goodwill and the gain of $0.6 million on the
insurance settlement related to the fire at the Lumberton, North Carolina plant.
Financial Condition
Cash Flow
Cash used in operating activities for the quarter ended September 30,
2001 was $7.1 million. Cash provided by operating activities for the quarter
ended September 30, 2000 was $16.0 million. The decrease of $23.1 million of
cash generated from operating activities was due primarily to lower earnings and
increases in wood pulp finished goods inventory. Additional borrowings from the
credit facility, along with proceeds of $3.6 million from the exercise of stock
options were used to fund the increased working capital requirements and capital
expenditures to modernize and upgrade production equipment and facilities.
Liquidity and Capital Resources
The Company amended its Credit Facility on September 7, 2001 to modify
the financial convenants for the period September 30, 2001 through September 30,
2002 and to place restrictions on certain expenditures, including the repurchase
of treasury shares, and other new indebtedness at any time that total leverage
exceeds 3.5x EBITDA. Interest rates were amended to range from LIBOR plus 0.75%
to LIBOR plus 3.25%, or the agent's prime rate plus 1.75%. At September 30,
2001, the Company had unused borrowing availability of approximately $30.6
million on its bank credit facility.
UPM-Kymmene and the Company entered into an agreement dated September
20, 2001 to extend the due date of the $22.0 million promissory note from
October 1, 2001 to no later than December 31, 2001. For the period October 1,
2001 through the date of payment, the Company will pay UPM-Kymmene interest at a
rate of 9% on the $22.0 million promissory note.
8
On September 21, 2001, the Company entered into a revolving credit
facility with The Toronto Dominion Bank in Canada providing for borrowings up to
approximately $12.7 million, of which the entire amount was outstanding at
September 30, 2001. The credit facility matures on September 30, 2003. The
interest rate applicable to borrowings under the credit facility is the agent's
prime rate plus 0.25% to prime plus 1.25% or Bankers' Acceptances (BA) ranging
from BA plus 1.75% to BA plus 2.75%. The credit facility is secured by
substantially all the assets of the Company in Canada.
On October 16, 2001, the Company amended its U.S. credit facility dated
as of April 16, 2001. The amendment requires the Company to provide the lenders
with a perfected security interest in the Company's real and personal property
at its plant in Gaston, North Carolina on or before the earlier of fourteen days
after the closing of a receivable securitization or December 31, 2001.
The Company is in the process of negotiating other arrangements to
increase credit availability. The Company believes that its cash flow from
operations, borrowings available under its bank credit facility and borrowings
under the new credit facilities being arranged will be sufficient to fund
capital expenditures (expected to total $50.0 million for this fiscal year),
meet operating expenses and service all debt requirements for the foreseeable
future.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
1. Exhibit 10.1
- Amendment No. 2 to the Credit Agreement dated October 16, 2001.
2. Reports on Form 8-K
During the quarter ended September 30, 2001, the following reports were
filed on Form 8-K:
- Report dated July 11, 2001, announcing the conference call
regarding operating results for the fiscal year ended June 30,
2001.
- Report dated September 26, 2001 announcing new credit
arrangements; announcing an anticipated decrease in July-September
earnings; and announcing the conference call regarding operating
results for the first quarter ended September 30, 2001.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Buckeye Technologies Inc.
By: /S/ DAVID B. FERRARO
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David B. Ferraro, President and Chief Operating Officer
Date: October 31, 2001
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By: /S/ GAYLE L. POWELSON
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Gayle L. Powelson, Senior Vice President, Chief Financial Officer
Date: October 31, 2001
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