================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-Q
- --------------------------------------------------------------------------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
- --------------------------------------------------------------------------------
Commission file number: 33-60032
Buckeye Technologies Inc.
incorporated pursuant to the Laws of Delaware
- --------------------------------------------------------------------------------
Internal Revenue Service -- Employer Identification No. 62-1518973
1001 Tillman Street, Memphis, TN 38112
901-320-8100
- --------------------------------------------------------------------------------
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 May 6, 1999, there were outstanding 35,379,736 Common Shares of the
Registrant.
================================================================================
<PAGE>
INDEX
BUCKEYE TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
ITEM PAGE
PART I - FINANCIAL INFORMATION
1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Income for the Three Months
Ended March 31, 1999 and 1998; Nine Months Ended March 31, 1999
and 1998.......................................................... 3
Condensed Consolidated Balance Sheets as of March 31, 1999
and June 30, 1998................................................. 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 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................................ 9
SIGNATURES 10
<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
-------------------------- ---------------------------
1999 1998 1999 1998
-------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net sales............................................. $155,880 $162,474 $459,331 $469,397
Cost of goods sold.................................... 116,997 119,877 340,089 344,303
-------------------------- ---------------------------
Gross margin.......................................... 38,883 42,597 119,242 125,094
Selling, research and administrative expenses......... 11,080 12,334 33,313 33,842
-------------------------- ---------------------------
Operating income...................................... 27,803 30,263 85,929 91,252
Net interest expense and amortization of debt costs... 9,772 8,911 29,355 27,513
Other................................................. 1,019 438 2,386 1,460
-------------------------- ---------------------------
Income before income taxes............................ 17,012 20,914 54,188 62,279
Income taxes.......................................... 5,524 6,710 18,443 21,576
-------------------------- ---------------------------
Net income............................................ $11,488 $14,204 $35,745 $40,703
========================== ===========================
Net income per share.................................. $0.32 $0.38 $1.00 $1.09
========================== ===========================
Net income per share - assuming dilution.............. $0.32 $0.37 $0.98 $1.06
========================== ===========================
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
March 31 June 30
1999 1998
---------------- -----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................................... $ 1,472
$ -
Short-term investments....................................... - 2,900
Accounts receivable - net.................................... 76,177 88,721
Inventories.................................................. 110,214 100,372
Deferred income taxes and other.............................. 9,070 10,041
---------------- -----------------
Total current assets................................ 195,461 203,506
Property, plant and equipment..................................... 560,776 523,508
Less allowances for depreciation.................................. (148,300) (121,561)
---------------- -----------------
412,476 401,947
Goodwill.......................................................... 127,421 132,488
Deferred debt costs and other..................................... 11,374 13,595
---------------- -----------------
Total assets........................................ $746,732 $751,536
================ =================
Liabilities and stockholders' equity Current liabilities:
Accounts payable............................................. $19,841 $25,142
Accrued expenses............................................. 42,937 49,547
Notes payable................................................ - 829
Current portion of long-term debt............................ - 511
---------------- -----------------
Total current liabilities........................... 62,768 76,029
Noncurrent liabilities:
Long-term debt............................................... 459,388 456,332
Accrued postretirement benefit obligation.................... 15,979 15,159
Deferred income taxes........................................ 41,551 34,609
Other liabilities............................................ 1,621 13,728
Stockholders' equity.............................................. 165,425 155,679
---------------- -----------------
Total liabilities and stockholders' equity................... $746,732 $751,536
================ =================
</TABLE>
See accompanying notes.
<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
-------------------------------------------
1999 1998
---------------- -----------------
<S> <C> <C>
Operating activities
Net income........................................................ $35,745 $40,703
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation............................................... 27,856 27,953
Amortization and other..................................... 7,129 7,448
Deferred income taxes...................................... 6,816 1,224
Changes in operating assets and liabilities:
Accounts receivable.................................... 12,450 (6,341)
Inventories............................................ (10,296) 6,974
Other assets........................................... 843 (1,038)
Accounts payable and other current liabilities......... (11,685) (14,041)
---------------- -----------------
Net cash provided by operating activities.................. 68,858 62,882
Investing activities
Acquisition of businesses......................................... - (3,869)
Net purchases of property, plant and equipment.................... (41,471) (39,008)
Other............................................................. 2,780 346
---------------- -----------------
Net cash used in investing activities............................. (38,691) (42,531)
Financing activities
Purchase of treasury shares....................................... (23,000) (16,392)
Proceeds from sale of equity interests............................ 420 1,690
Net borrowings under revolving line of credit..................... 2,861 22,961
Principal payments on long term debt and other.................... (11,941) (33,613)
---------------- -----------------
Net cash used in financing activities............................. (31,660) (25,354)
Effect of foreign currency rate fluctuations on cash.............. 21 (161)
---------------- -----------------
Decrease in cash and cash equivalents............................. (1,472) (5,164)
Cash and cash equivalents at beginning of period.................. 1,472 5,164
---------------- -----------------
Cash and cash equivalents at end of period........................ $ - $ -
================ =================
</TABLE>
See accompanying notes.
<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 and nine months ended March 31,
1999 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. 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>
March 31 June 30
1999 1998
-------------------------------------
(In thousands)
<S> <C> <C>
Raw materials........................................ $27,800 $ 26,421
Finished goods....................................... 63,638 55,939
Storeroom and other supplies......................... 18,776 18,012
-------------------------------------
$110,214 $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 Nine Months Ended
March 31 March 31
----------------------------- ----------------------------
1999 1998 1999 1998
----------------------------- ----------------------------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Net income........................................ $11,488 $14,204 $35,745 $40,703
Foreign currency translation adjustments - net.... (3,549) (2,701) (4,255) (10,780)
----------------------------- ----------------------------
Comprehensive income.............................. $7,939 $11,503 $31,490 $29,923
============================= ============================
</TABLE>
<PAGE>
NOTE D -- EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators used
to calculate net income per share in the consolidated statements of income:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
----------------------------- ----------------------------
1999 1998 1999 1998
----------------------------- ----------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Numerator:
Net income for basic and diluted earnings per share $11,488 $14,204 $35,745 $40,703
Denominator:
Weighted average shares outstanding - used for basic
earnings per share........................... 35,442.3 36,959.4 35,881.5 37,212.3
Effect of dilutive options........................ 506.2 1,124.3 778.7 1,095.0
----------------------------- ----------------------------
Denominator for diluted earnings per share........ 35,948.5 38,083.7 36,660.2 38,307.3
Net income per share.............................. $0.32 $0.38 $1.00 $1.09
============================= =============================
Net income per share - assuming dilution $0.32 $0.37 $0.98 $1.06
============================= ============================
</TABLE>
<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 March 31, 1999 were $155.9 million
compared to $162.5 million for the same period in the prior fiscal year, a
decrease of $6.6 million or 4.1%. Net sales for the nine month period ended
March 31, 1999 were $459.3 million compared to $469.4 million for the same
period in the prior fiscal year, a decrease of $10.1 million or 2.2%. The
decrease for both the three month and nine month periods was primarily due to
lower cellulose volume. Lower unit sales prices on fluff pulp, which resulted
from a scheduled January 1, 1999 contract price reduction to Procter & Gamble,
were largely offset by improved air-laid sales.
Operating income for the three months ended March 31, 1999 was $27.8
million compared to $30.3 million for the same period in the prior fiscal year,
a decrease of $2.5 million. Operating income for the nine months ended March 31,
1999 was $85.9 million compared to $91.3 million for the same period in the
prior fiscal year, a decrease of $5.4 million or 5.9%. The decrease for the
three and nine month periods is primarily due to the lower sales previously
discussed partially offset by lower raw material costs and tighter control on
selling, general and administrative expenditures.
Net interest expense and amortization of debt costs were $9.8 million
for the three months and $29.4 million for the nine months ended March 31, 1999.
This is a $0.9 million and $1.9 million increase, respectively, compared to the
same period of the prior fiscal year. This increase was due to higher average
interest rates.
The Company's effective tax rate for the three months and nine months
ended March 31, 1999 was 32.5% and 34.0%, respectively. During the quarter, the
Company recognized additional benefit from optimizing its Foreign Sales
Corporation.
The Company's net income for the three month and nine month period
ended March 31, 1999 was $11.5 million or $0.32 per share on a diluted basis,
and $35.7 million or $0.98 per share on a diluted basis, respectively. This
compares to $14.2 million or $0.37 per share on a diluted basis and $40.7
million or $1.06 per share on a diluted basis for the same periods of the prior
year.
Financial Condition
Cash Flow
Cash provided by operating activities for the nine months ended March
31, 1999 was $68.9 million. These funds were to purchase, modernize and upgrade
production equipment and facilities and to repurchase stock. During the nine
months ended March 31, 1999, the Company repurchased 1,420,200 shares of common
stock, pursuant to a 4,000,000 share repurchase plan. The total number of shares
repurchased through this plan through March 31, 1999 is 3,510,400.
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 March 31, 1999, the Company
had unused borrowing capacity of approximately $174.0 million on its bank credit
facility.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits pursuant to Item 601 of Regulation S-K
- Exhibit 10.1 - Amendment No. 1 to Timberlands Agreement dated
January 1, 1999 by and between Buckeye Florida, Limited
Partnership and Foley Timber and Land Company. Certain portions of
the Agreement have been omitted pursuant to an Application for
Confidential Treatment dated October 30, 1995.
- Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K
- The Company did not file any reports on Form 8-K during the three
months ended March 31, 1999.
<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
--------------------------------
David B. Ferraro, Director, President, and Chief Operating Officer
Date: May 13, 1999
By: /s/ DAVID H. WHITCOMB
--------------------------------
David H. Whitcomb, Sr. Vice President, Finance and Accounting
Date: May 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 77,268
<ALLOWANCES> 1,091
<INVENTORY> 110,214
<CURRENT-ASSETS> 195,461
<PP&E> 560,776
<DEPRECIATION> 148,300
<TOTAL-ASSETS> 746,732
<CURRENT-LIABILITIES> 62,768
<BONDS> 459,388
0
0
<COMMON> 431
<OTHER-SE> 164,994
<TOTAL-LIABILITY-AND-EQUITY> 746,732
<SALES> 459,331
<TOTAL-REVENUES> 459,331
<CGS> 340,089
<TOTAL-COSTS> 373,402
<OTHER-EXPENSES> 2,386
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,355
<INCOME-PRETAX> 54,188
<INCOME-TAX> 18,443
<INCOME-CONTINUING> 35,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,745
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 0.98
</TABLE>
