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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, 1999
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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 3, 1999, there were outstanding 35,177,864 Common Shares of the
Registrant.
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<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, 1999 and 1998 ........ 3
Condensed Consolidated Balance Sheets as of
September 30, 1999 and June 30, 1999................... 4
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended September 30, 1999 and 1998..... 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
<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30
------------------------------------
1999 1998
------------------------------------
<S> <C> <C>
Net sales............................................ $153,400 $156,177
Cost of goods sold................................... 111,180 113,823
---------------- ----------------
Gross margin......................................... 42,220 42,354
Selling, research and administrative expenses........ 12,230 11,828
---------------- ----------------
Operating income..................................... 29,990 30,526
Net interest expense and amortization of debt costs 9,221 9,654
Other................................................ 1,129 389
---------------- ----------------
Income before income taxes........................... 19,640 20,483
Income taxes......................................... 6,285 7,100
---------------- ----------------
Net income........................................... $ 13,355 $ 13,383
================ ================
Basic earnings per share............................. $0.38 $0.37
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Diluted earnings per share........................... $0.37 $0.36
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Weighted average shares for basic earnings per share 35,375 36,456
Effect of dilutive stock options 738 1,030
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Adjusted weighted average shares for diluted earnings per share 36,113 37,486
</TABLE>
See accompanying notes.
3
<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
September 30 June 30
1999 1999
-----------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................... $ 6,079 $ 403
Accounts receivable-net............................ 82,759 81,648
Inventories........................................ 108,374 104,584
Deferred income taxes and other.................... 7,975 10,458
-----------------------------------------
Total current assets 205,187 197,093
Property, plant and equipment............................ 579,561 569,755
Less allowances for depreciation......................... (167,381) (157,524)
-----------------------------------------
412,180 412,231
Goodwill................................................. 127,448 127,409
Deferred debt costs and other 10,451 11,149
-----------------------------------------
Total assets............................ $755,266 $747,882
=========================================
Liabilities and stockholders' equity Current liabilities:
Accounts payable................................... $ 17,773 $22,848
Accrued expenses................................... 46,985 45,127
-----------------------------------------
Total current liabilities 64,758 67,975
Noncurrent liabilities:
Long-term debt..................................... 432,860 441,214
Accrued postretirement benefit obligation.......... 16,611 16,270
Deferred income taxes.............................. 45,089 43,480
Other liabilities.................................. 1,467 1,524
Stockholders' equity..................................... 194,481 177,419
-----------------------------------------
Total liabilities and stockholders' equity......... $755,266 $747,882
=========================================
</TABLE>
4
<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30
---------------------------------------
1999 1998
---------------------------------------
<S> <C> <C>
Operating activities
Net income........................................................ $13,355 $13,383
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................... 9,748 8,791
Amortization and other..................................... 2,088 2,320
Deferred income taxes...................................... 1,571 1,650
Changes in operating assets and liabilities:
Accounts receivable.................................... (1,417) (2,014)
Inventories............................................ (3,123) (4,657)
Other assets........................................... 2,689 1,266
Accounts payable and other current liabilities......... (2,093) 1,956
-------- ------------------------------
Net cash provided by operating activities.................. 22,818 22,695
Investing activities
Net purchases of property, plant and equipment.................... (7,789) (17,331)
Other............................................................. - 2,780
---------------------------------------
Net cash used in investing activities............................. (7,789) (14,551)
Financing activities
Purchase of treasury shares....................................... (795) (15,721)
Proceeds from sale of equity interests............................ 22 370
Net borrowings (payments) under revolving line of credit.......... (8,768) 18,640
Principal payments on long term debt and other.................... - (11,880)
---------------------------------------
Net cash used in financing activities............................. (9,541) (8,591)
Effect of foreign currency rate fluctuations on cash.............. 188 70
---------------------------------------
Increase (decrease) in cash and cash equivalents................. 5,676 (377)
Cash and cash equivalents at beginning of period.................. 403 1,472
---------------------------------------
Cash and cash equivalents at end of period........................ $ 6,079 $ 1,095
=======================================
</TABLE>
See accompanying notes.
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, 1999
are not necessarily indicative of the results that may be expected for the year
ended June 30, 2000. 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, 1999.
NOTE B -- INVENTORIES
The components of inventory consist of the following:
September 30 June 30
1999 1999
---------------------------------
(In thousands)
Raw materials....................... $29,874 $28,619
Finished goods...................... 59,545 56,927
Storeroom and other supplies........ 18,955 19,038
---------------------------------
$108,374 $104,584
=================================
NOTE C -- COMPREHENSIVE INCOME
The components of comprehensive income consist of the following:
<TABLE>
<CAPTION>
Three Months Ended
September 30
1999 1998
------------------------------------
(In thousands)
<S> <C> <C>
Net income................................................... $13,355 $13,383
Foreign currency translation adjustments - net............... 4,092 1,710
------------ -------------
Comprehensive income......................................... $17,447 $15,093
============ =============
</TABLE>
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D --SUBSEQUENT EVENTS
On October 1, 1999, the Company completed its acquisition of essentially
all of the assets of the Walkisoft division of UPM-Kymmene for approximately
$114 million. The acquisition includes $9 million in working capital and will be
funded over the next four years by paying UPM-Kymmene $26 million at closing and
$22 million on each of the first four anniversaries of closing. Walkisoft is a
manufacturer of airlaid nonwoven materials, with manufacturing locations in
Steinfurt, Germany and Mt. Holly, North Carolina.
On October 12, 1999, the Company announced that it will construct the
world's largest airlaid nonwovens machine at the newly acquired Walkisoft
facility located in Gaston County, North Carolina.
On November 4, 1999, the stockholders approved an amendment to increase the
total number of shares of common stock authorized for issuance under the Amended
and Restated 1995 Incentive and Non-Qualified Stock Option Plan for Management
Employees from 3.3 million to 4.9 million.
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, 1999 were $153.4 million
compared to $156.2 million for the same period in 1998, a decrease of $2.8
million or 1.8%. Operating income for the three months ended September 30, 1999
was $30.0 million compared to $30.5 million for the same period in 1998, a
decrease of $0.5 million or 1.6%. The decrease in net sales and operating income
was primarily due to lower cellulose sales prices, which reflect the January 1,
1999 fluff pulp contract price reduction to Procter & Gamble.
Net interest and amortization of debt costs for the quarter ended September
30, 1999 were $9.2 million compared to $9.7 million for the same period in 1998,
a decrease of $0.5 million. This decrease was due to lower average debt
balances. Other expenses were $1.1 million compared to $0.4 million for the
quarter ended September 30, 1998. The 1998 quarter includes a gain from foreign
currency transactions.
The Company's effective tax rate of 32.0% is comparable to the effective
tax rate for the prior fiscal year ended June 30, 1999.
The Company's net income for the quarter ended September 30, 1999 was $13.4
million, or $0.37 per share on a diluted basis, compared to $13.4 million or
$0.36 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, 1999 was $22.8 million. These funds were used to purchase, modernize and
upgrade production equipment and facilities, to repurchase stock and to reduce
borrowings from the credit facility. During the quarter ended September 30,
1999, the Company repurchased 52,300 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, 1999 is 3,574,400.
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, 1999, the
Company had unused borrowing capacity of approximately $200.8 million on its
bank credit facility. The completed Walkisoft acquisition for approximately $114
million, includes $9 million in working capital. This acquisition will be funded
by paying UPM-Kymmene $26 million at closing and $22 million on each of the
first four anniversaries of closing. Interest of 5% annually will be paid on the
unpaid balance. The announced construction of the world's largest airlaid
nonwovens machine will cost approximately $100 million, including $16 million in
working capital. Funding for this machine, over the next two years, will be made
from the Company's operating funds or through borrowings from the credit
facility.
8
<PAGE>
Subsequent Events
On November 4, 1999, the stockholders approved an amendment to increase the
total number of shares of common stock authorized for issuance under the Amended
and Restated 1995 Incentive and Non-Qualified Stock Option Plan for Management
Employees from 3.3 million to 4.9 million.
9
<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, 1999.
10
<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, President and Chief Operating Officer
Date: 11/4/99
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By: /S/ DAVID H. WHITCOMB
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David H. Whitcomb, Senior Vice President, Finance and Accounting
Date: 11/4/99
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11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 6,079
<SECURITIES> 0
<RECEIVABLES> 83,805
<ALLOWANCES> 1,046
<INVENTORY> 108,374
<CURRENT-ASSETS> 205,187
<PP&E> 579,561
<DEPRECIATION> 167,381
<TOTAL-ASSETS> 755,266
<CURRENT-LIABILITIES> 64,758
<BONDS> 432,880
0
0
<COMMON> 431
<OTHER-SE> 194,050
<TOTAL-LIABILITY-AND-EQUITY> 755,266
<SALES> 153,400
<TOTAL-REVENUES> 153,400
<CGS> 111,180
<TOTAL-COSTS> 123,410
<OTHER-EXPENSES> 1,129
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,221
<INCOME-PRETAX> 19,640
<INCOME-TAX> 6,285
<INCOME-CONTINUING> 13,355
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,355
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.37
</TABLE>
