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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, 1997
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Commission file number: 33-60032
BUCKEYE TECHNOLOGIES INC.
(formerly Buckeye Cellulose Corporation)
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 XX No
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As of November 10, 1997, there were outstanding 18,598,598 Common Shares of the
Registrant.
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<PAGE>
INDEX
BUCKEYE TECHNOLOGIES INC.
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ITEM PAGE
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PART I - FINANCIAL INFORMATION
1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Income for the Three Months
Ended September 30, 1997 and 1996.................................. 3
Condensed Consolidated Balance Sheets as of September 30, 1997 and
June 30, 1997...................................................... 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended September 30, 1997 and 1996........................... 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...................................... 9
SIGNATURES............................... 10
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<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except share data)
Three Months Ended
September 30
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1997 1996
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Net sales .......................................... $ 153,313 $ 126,514
Cost of goods sold ................................. 111,172 94,196
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Gross margin ....................................... 42,141 32,318
Selling, research and administrative expenses ...... 11,372 7,775
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Operating income ................................... 30,769 24,543
Net interest expense and amortization of debt costs. 9,344 6,318
Other .............................................. 668 140
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Income before income taxes ......................... 20,757 18,085
Income taxes ....................................... 7,596 6,143
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Net income ......................................... $ 13,161 $ 11,942
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Net income per share ............................... $ 0.70 $ 0.62
========== ==========
Weighted average shares outstanding ................ 18,708,845 19,249,995
========== ==========
See accompanying notes.
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<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 30 June 30
1997 1997
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Assets
Current assets:
Cash and cash equivalents ..................... $ - $ 5,164
Short-term investments ........................ 2,900 2,900
Accounts receivable--net ...................... 77,693 79,703
Inventories ................................... 104,080 107,390
Deferred income taxes and other ............... 6,286 5,966
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Total current assets .......................... 190,959 201,123
Property, plant and equipment .................... 477,151 469,629
Less allowances for depreciation ................. (95,059) (86,952)
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382,092 382,677
Goodwill ......................................... 140,250 140,845
Deferred debt costs and other .................... 9,516 12,819
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Total assets .................................. $ 722,817 $ 737,464
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Liabilities and stockholders' equity
Current liabilities:
Accounts payable .............................. $ 21,617 $ 29,761
Accrued expenses .............................. 50,209 49,830
Notes payable ................................. 3,398 3,440
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Total current liabilities ..................... 75,224 83,031
Noncurrent liabilities:
Long-term debt ................................ 462,261 474,631
Accrued postretirement benefit obligation ..... 14,447 14,208
Deferred income taxes ......................... 30,767 29,846
Other liabilities ............................. 3,157 7,558
Stockholders' equity ............................. 136,961 128,190
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Total liabilities and stockholders' equity .... $ 722,817 $ 737,464
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See accompanying notes.
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<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
September 30
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1997 1996
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OPERATING ACTIVITIES
Net income ............................................ $ 13,161 $ 11,942
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ....................................... 8,949 7,008
Amortization and other ............................. 2,525 1,456
Deferred income taxes .............................. 961 905
Changes in operating assets and liabilities:
Accounts receivable .............................. 1,972 10,032
Inventories ...................................... 3,268 (4,228)
Other assets ..................................... (46) 1,780
Accounts payable and other current liabilities ..... (9,108) (4,614)
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Net cash provided by operating activities .......... 21,682 24,281
INVESTING ACTIVITIES
Acquisition of businesses ............................. (3,869) (60,774)
Net purchases of property, plant and equipment ........ (10,018) (12,155)
Other ................................................. -- (85)
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Net cash used in investing activities ................. (13,887) (73,014)
FINANCING ACTIVITIES
Purchase of treasury shares ........................... (2,662) (50,000)
Proceeds from sale of equity interests ................ 703 --
Net borrowings under revolving line of credit ......... 10,925 9,297
Proceeds from long term debt .......................... -- 99,450
Principal payments on long term debt and other ........ (21,907) --
Payments for debt issuance costs ...................... -- (3,624)
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Net cash provided by (used in) financing activities ... (12,941) 55,123
Effect of foreign currency rate fluctuations on cash .. (18) 29
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Increase (decrease) in cash and cash equivalents ...... (5,164) 6,419
Cash and cash equivalents at beginning of period ...... 5,164 --
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Cash and cash equivalents at end of period ............ $ -- $ 6,419
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See accompanying notes.
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<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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NOTE A -- BASIS OF PRESENTATION
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The accompanying unaudited condensed consolidated financial statements
of Buckeye Technologies Inc. (formerly Buckeye Cellulose Corporation) 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, 1997 are not necessarily indicative of the
results that may be expected for the year ended June 30, 1998. All significant
intercompany accounts and transactions have been eliminated in consolidation and
combination. 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,
1997.
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NOTE B -- BUSINESS COMBINATION
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On September 1, 1996, the Company acquired all of the issued and
outstanding stock of Alpha Cellulose Holdings, Inc. (Alpha). On May 28, 1997,
the Company's wholly owned subsidiary, Buckeye Acquisition Inc. (BAI), acquired
97.5% of the common shares of Merfin International Inc (Merfin). On July 30,
1997, BAI acquired the remaining outstanding common shares of Merfin. These
transactions were as discussed and disclosed in the annual report. The
consolidated operating results of Alpha and Merfin have been included in the
consolidated statements of income from the respective date of acquisition.
The following unaudited pro forma results of operations assume that the
acquisitions of Alpha and Merfin occurred as of the beginning of the periods
presented.
Three Months Ended
September 30
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1997 1996
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(In thousands, except per share data)
Net sales........................ $153,313 $148,527
Net income....................... 13,161 6,854
Net income per common share...... .70 .35
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<PAGE>
Pro forma results of operations for the three months ended September
30, 1996 include certain non-recurring charges incurred by Alpha prior to its
acquisition by the Company. These charges include acquisition related costs and
the excess of raw materials cost over replacement value and in the aggregate
reduced pro forma net income by $1.8 million or $.09 per share.
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 combinations been consummated as of the
above dates, nor is it necessarily indicative of future operating results.
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NOTE C -- INVENTORIES
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The components of inventory consist of the following:
September 30 June 30
1997 1997
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(In thousands)
Raw materials.................... $ 21,968 $ 25,409
Finished goods................... 63,995 63,932
Storeroom and other supplies..... 18,117 18,049
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$104,080 $107,390
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Effective October 21, 1997, the Company changed its name from Buckeye Cellulose
Corporation to Buckeye Technologies Inc. to reflect the breadth of technologies
that are utilized in its growing and diverse business.
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Results of Operations
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Net sales for the three months ended September 30, 1997 were $153.3
million compared to $126.5 million for the same period in 1996, an increase of
$26.8 million or 21.2%. The increase was primarily due to the acquisition of two
new businesses: Alpha on September 1, 1996 and Merfin on May 28, 1997.
Operating income for the quarter ended September 30, 1997 was $30.8
million compared to $24.5 million for the same period in 1996, an increase of
$6.3 million or 25.4%. The increase is due to the higher sales volume, discussed
previously, plus lower raw material costs. Selling, research and administrative
expenses increased by $3.6 million as the result of increased employment, the
new business acquisitions, and the amortization of the non-compete agreement
associated with Alpha.
Net interest and amortization of debt costs for the quarter ended
September 30, 1997 were $9.3 million compared to $6.3 million for the same
period in 1996, an increase of $3.0 million. This increase was due to higher
average debt balances.
The effective income tax rate increased to 36.6% for the quarter ended
September 30, 1997 as compared to 34% for the same period in 1996.
The Company's net income for the quarter ended September 30, 1997 was
$13.2 million, or $.70 per share, compared to $11.9 million or $.62 per share
for the same period of the prior year.
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Financial Condition
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Cash Flow
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Cash provided by operating activities for the quarter ended September
30, 1997 was $21.7 million. These funds were used, along with additional
borrowings from the credit facility, to repay certain European bank and other
loans and to acquire the remaining outstanding stock of Merfin. During the three
month period ended September 30, 1997, the Company repurchased 70,000 shares of
common stock bringing the total shares repurchased to 659,500, pursuant to a
previously announced one million share repurchase plan.
Liquidity and Capital Resources
-------------------------------
The Company believes that its cash flow from operations, together with
the borrowings available under its existing bank credit facility, will be
sufficient to fund capital expenditures (including environmental expenditures),
meet operating expenses, fund any common stock repurchases, and service all debt
requirements for the foreseeable future. At September 30, 1997, the Company had
unused borrowing capacity of approximately $84.0 million on its bank credit
facility.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. Exhibit 27 Financial Data Schedule
2. Reports on 8-K
During the quarter ended September 30, 1997, the following report was
filed on Form 8-K:
- Report dated August 11, 1997, pursuant to Item 2 and Item 7 of that
form. Financial statements filed were:
-- Pro forma Financial Information
-- Audited Consolidated Financial Statements of Merfin International
Inc. for the year ended December 31, 1996.
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<PAGE>
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, Director, President, and Chief Operating Officer
Date: November 14, 1997
By: /s/ DAVID H. WHITCOMB
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David H. Whitcomb, Sr. Vice President-Finance
Date: November 14, 1997
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