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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, 1998
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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 November 4, 1998, there were outstanding 35,809,936 Common Shares of the
Registrant.
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1
<PAGE>
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 Three Months
Ended September 30, 1998 and 1997.......................... 3
Condensed Consolidated Balance Sheets as of September 30, 1998
and June 30, 1998........................................... 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended September 30, 1998 and 1997.................. 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
2
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30
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1998 1997
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<S> <C> <C>
Net sales............................................ $156,177 $153,313
Cost of goods sold................................... 113,823 111,172
----------------- ----------------
Gross margin......................................... 42,354 42,141
Selling, research and administrative expenses........ 11,828 11,372
----------------- ----------------
Operating income..................................... 30,526 30,769
Net interest expense and amortization of debt costs 9,654 9,344
Other................................................ 389 668
----------------- ----------------
Income before income taxes........................... 20,483 20,757
Income taxes......................................... 7,100 7,596
----------------- ----------------
Net income........................................... $ 13,383 $ 13,161
================= ================
Net income per share................................. $0.37 $0.35
================= ================
Net income per share - assuming dilution............. $0.36 $0.34
================= ================
See accompanying notes.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 30 June 30
1998 1998
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<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................... $ 1,095 $ 1,472
Short-term investments............................. - 2,900
Accounts receivable-net............................ 91,420 88,721
Inventories........................................ 106,020 100,372
Deferred income taxes and other.................... 9,098 10,041
----------------------------------
Total current assets 207,633 203,506
Property, plant and equipment............................ 542,891 523,508
Less allowances for depreciation......................... (130,638) (121,561)
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412,253 401,947
Goodwill................................................. 130,233 132,488
Deferred debt costs and other 12,849 13,595
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Total assets.......................... $762,968 $751,536
==================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable................................... $ 27,289 $ 25,142
Accrued expenses................................... 50,085 49,547
Notes payable...................................... 597 829
Current portion of long-term debt.................. 431 511
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Total current liabilities 78,402 76,029
Noncurrent liabilities:
Long-term debt..................................... 475,323 456,332
Accrued postretirement benefit obligation.......... 15,473 15,159
Deferred income taxes.............................. 36,209 34,609
Other liabilities.................................. 1,737 13,728
Stockholders' equity
Common stock....................................... 431 431
Additional paid-in capital......................... 65,677 65,799
Deferred stock compensation........................ (2,200) (2,405)
Retained earnings.................................. 204,362 190,979
Treasury shares.................................... (97,096) (82,065)
Cumulative translation adjustment.................. (15,350) (17,060)
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Total stockholders' equity..... 155,824 155,679
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Total liabilities and stockholders' equity $762,968 $751,536
==================================
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
September 30
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1998 1997
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<S> <C> <C>
Operating activities
Net income........................................................ $13,383 $13,161
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................... 8,791 8,949
Amortization and other..................................... 2,320 2,525
Deferred income taxes...................................... 1,650 961
Changes in operating assets and liabilities:
Accounts receivable.................................... (2,014) 1,972
Inventories............................................ (4,657) 3,268
Other assets........................................... 1,266 (46)
Accounts payable and other current liabilities......... 1,956 (9,108)
-----------------------------------
Net cash provided by operating activities.................. 22,695 21,682
-----------------------------------
Investing activities
Acquisition of business........................................... - (3,869)
Net purchases of property, plant and equipment.................... (17,331) (10,018)
Other............................................................. 2,780 -
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Net cash used in investing activities............................. (14,551) (13,887)
Financing activities
Purchase of treasury shares....................................... (15,721) (2,662)
Proceeds from sale of equity interests............................ 370 703
Net borrowings under revolving line of credit..................... 18,640 10,925
Principal payments on long term debt and other.................... (11,880) (21,907)
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Net cash provided by (used in) financing activities............... (8,591) 12,941
Effect of foreign currency rate fluctuations on cash.............. 70 (18)
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Decrease in cash and cash equivalents............................ (377) (5,164)
Cash and cash equivalents at beginning of period.................. 1,472 5,164
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Cash and cash equivalents at end of period........................ $ 1,095 $ -
===================================
See accompanying notes.
</TABLE>
5
<PAGE>
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, 1998
are not necessarily indicative of the results that may be expected for the year
ended June 30, 1999. 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, 1998.
NOTE B -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
September 30 June 30
1998 1998
---------------------------------
(In thousands)
<S> <C> <C>
Raw materials................. $ 26,464 $26,421
Finished goods................ 60,692 55,939
Storeroom and other supplies.. 18,864 18,012
---------------------------------
$106,020 $100,372
=================================
</TABLE>
NOTE C -- COMPREHENSIVE INCOME In June 1997, the Financial Accounting Standards
Board issued Statement No. 130, Reporting Comprehensive Income. This statement
requires reporting of changes in shareholders' equity that do not result
directly from transactions with shareholders. The following is an analysis of
these changes:
<TABLE>
<CAPTION>
Three Months Ended
September 30
1998 1997
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(In thousands)
<S> <C> <C>
Net income........................................... $13,383 $13,161
Foreign currency translation adjustments - net....... 1,710 (2,753)
------------------------------------
Comprehensive income................................. $15,093 $10,408
====================================
</TABLE>
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D --EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators used
to calculate earnings per share in the consolidated statements of income:
<TABLE>
<CAPTION>
Three Months Ended
September 30
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1998 1997
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(In thousands, except per share data)
Numerator:
<S> <C> <C>
Net income for basic and diluted earnings per share........ $13,383 $13,161
Denominator:
Weighted average shares outstanding - used for 36,456.4 37,417.7
basic earnings per share............................
Effect of dilutive options................................. 1,029.9 983.1
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Denominator for diluted earnings per share................. 37,486.3 38,400.8
Net income per share....................................... $0.37 $0.35
Net income per share - assuming dilution................... $0.36 $0.34
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales for the three months ended September 30, 1998 were $156.2
million compared to $153.3 million for the same period in 1997, an increase of
$2.9 million or 1.9%. The increase was primarily due to increased sales of
air-laid products.
Operating income for the quarter ended September 30, 1998 was $30.5
million compared to $30.8 million for the same period in 1997, a decrease of
$0.3 million or 1.0%. Operating income as a percentage of sales was 19.6% for
the quarter, a decrease of 0.5 percentage points due to an increased investment
in product development.
Net interest and amortization of debt costs for the quarter ended
September 30, 1998 were $9.7 million compared to $9.3 million for the same
period in 1997, an increase of $0.4 million. This increase was due to higher
average interest rates.
The Company's effective tax rate of 34.7% is comparable to the
effective tax rate for the entire fiscal year ended June 30, 1998.
The Company's net income for the quarter ended September 30, 1998 was
$13.4 million, or $0.36 per share on a diluted basis, compared to $13.2 million
or $0.34 per share on a diluted basis for the same period of the prior year.
Cash Flow
Cash provided by operating activities for the quarter ended September
30, 1998 was $22.7 million. These funds were used, along with additional
borrowings from the credit facility, to purchase, modernize and upgrade
production equipment and facilities and to repurchase stock. During the quarter
ended September 30, 1998, the Company repurchased 949,300 shares of common
stock, pursuant to a 4,000,000 share repurchase plan. The total number of shares
repurchased through this plan through September 30, 1998 is 3,039,500.
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 authorized common stock repurchases, and service
all debt requirements for the foreseeable future. At September 30, 1998, the
Company had unused borrowing capacity of approximately $158.0 million on its
bank credit facility.
Year 2000 Compliance
Based on the plan and timetable the Company has established, the next
update will be reported on the company's Form 10-Q for the quarter ending
December 31, 1998. For further information, refer to the financial review in the
Company's annual report for the year ended June 30, 1998.
8
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
1. Exhibit 27 Financial Data Schedule
2. The Company did not file any reports on Form 8-K during the three months
ended September 30, 1998.
9
<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 6, 1998
By: /s/ DAVID H. WHITCOMB
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David H. Whitcomb, Sr. Vice President-Finance and Accounting
Date: November 6, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 1,095
<SECURITIES> 0
<RECEIVABLES> 92,527
<ALLOWANCES> 1,107
<INVENTORY> 106,020
<CURRENT-ASSETS> 207,633
<PP&E> 542,891
<DEPRECIATION> 130,638
<TOTAL-ASSETS> 762,968
<CURRENT-LIABILITIES> 78,402
<BONDS> 475,323
0
0
<COMMON> 431
<OTHER-SE> 155,393
<TOTAL-LIABILITY-AND-EQUITY> 762,968
<SALES> 156,177
<TOTAL-REVENUES> 156,177
<CGS> 113,823
<TOTAL-COSTS> 125,651
<OTHER-EXPENSES> 389
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,654
<INCOME-PRETAX> 20,483
<INCOME-TAX> 7,100
<INCOME-CONTINUING> 13,383
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,383
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.36
</TABLE>
