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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, 2000
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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 31, 2000, there were outstanding 34,802,740 Common Shares of the
Registrant.
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<PAGE>
INDEX
BUCKEYE TECHNOLOGIES INC.
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<TABLE>
<CAPTION>
ITEM PAGE
PART I - FINANCIAL INFORMATION
<S> <C>
1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2000
and 1999............................................................................... 3
Condensed Consolidated Balance Sheets as of September 30, 2000 and June 30, 2000............ 4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30,
2000 and 1999.......................................................................... 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
</TABLE>
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
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2000 1999
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<S> <C> <C>
Net sales............................................ $178,909 $153,400
Cost of goods sold................................... 130,611 111,180
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Gross margin......................................... 48,298 42,220
Selling, research and administrative expenses........ 13,408 12,230
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Operating income..................................... 34,890 29,990
Net interest expense and amortization of debt costs 11,265 9,221
Other................................................ 159 1,129
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Income before income taxes........................... 23,466 19,640
Income taxes......................................... 7,930 6,285
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Net income........................................... $15,536 $ 13,355
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Basic earnings per share............................. $ 0.45 $ 0.38
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Diluted earnings per share........................... $ 0.43 $ 0.37
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Weighted average shares for basic earnings per share 34,796 35,375
Effect of dilutive stock options 1,470 738
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Adjusted weighted average shares for diluted earnings per share 36,266 36,113
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</TABLE>
See accompanying notes.
3
<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
September 30 June 30
2000 2000
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<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................... $ 13,364 $ 12,257
Accounts receivable-net............................ 103,717 111,899
Inventories........................................ 109,861 107,238
Deferred income taxes and other.................... 12,026 13,556
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Total current assets 238,968 244,950
Property, plant and equipment............................ 751,978 717,646
Less allowances for depreciation......................... (206,240) (197,244)
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545,738 520,402
Goodwill, net............................................ 139,085 122,399
Intellectual property and other, net 44,378 42,970
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Total assets.......................... $968,169 $930,721
===========================
Liabilities and stockholders' equity Current liabilities:
Accounts payable................................... $ 26,788 $ 36,397
Accrued expenses................................... 61,373 71,549
Current portion of long-term debt.................. 27,000 26,892
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Total current liabilities 115,161 134,838
Noncurrent liabilities:
Long-term debt..................................... 557,240 505,983
Accrued postretirement benefit obligation.......... 17,848 17,531
Deferred income taxes.............................. 58,480 56,691
Other liabilities.................................. 1,602 1,699
Stockholders' equity..................................... 217,838 213,979
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Total liabilities and stockholders' equity......... $968,169 $930,721
===========================
</TABLE>
See accompanying notes.
4
<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30
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2000 1999
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<S> <C> <C>
Operating activities
Net income........................................................ $15,536 $13,355
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation............................................... 10,892 10,029
Amortization............................................... 1,863 1,243
Deferred income taxes and other............................ 2,074 2,135
Changes in operating assets and liabilities:
Accounts receivable.................................... 7,513 (1,417)
Inventories............................................ (4,380) (3,123)
Other assets........................................... 75 2,689
Accounts payable and other current liabilities......... (17,607) (2,093)
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Net cash provided by operating activities....................... 15,966 22,818
Investing activities
Net purchases of property, plant and equipment.................... (33,021) (7,789)
Acquisition of business........................................... (35,175) -
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Net cash used in investing activities............................. (68,196) (7,789)
Financing activities
Purchase of treasury shares....................................... - (795)
Proceeds from sale of equity interests............................ 2,484 22
Net borrowings (payments) under revolving line of credit.......... 73,956 (8,768)
Principal payments on long term debt and other.................... (22,000) -
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Net cash (used in) provided by financing activities............... 54,440 (9,541)
Effect of foreign currency rate fluctuations on cash.............. (1,103) 188
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Increase in cash and cash equivalents............................. 1,107 5,676
Cash and cash equivalents at beginning of period.................. 12,257 403
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Cash and cash equivalents at end of period........................ $13,364 $6,079
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</TABLE>
See accompanying notes.
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<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, 2000
are not necessarily indicative of the results that may be expected for the year
ended June 30, 2001. 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, 2000.
Certain amounts in the 1999 financial statements have been reclassified to
conform with the 2000 financial statement presentation.
NOTE B --- BUSINESS COMBINATIONS
On October 1, 1999, the Company acquired essentially all of the assets of
Walkisoft, UPM-Kymmene's nonwovens business, for $29,501 in cash and $83,963
($88,000 in notes payable, net of $4,037 discount) in debt payable to
UPM-Kymmene. The acquisition of Walkisoft added manufacturing facilities in
Steinfurt, Germany and Gaston County, North Carolina, as well as engineering
operations in Finland. On August 1, 2000, the Company acquired the cotton
cellulose business of Fibra, S.A. (Fibra), located in Americana, Brazil for
approximately $36.5 million, including related acquisition costs. The
acquisition has been funded using borrowings from the Company's bank credit
facility. Both acquisitions were accounted for using the purchase method of
accounting. The allocation of the purchase price for Fibra is preliminary as the
Company is awaiting a final appraisal.
The consolidated operating results of Walkisoft and Fibra have been included in
the consolidated statements of income from the dates of acquisition. The
following unaudited pro forma results of operations assume that the acquisitions
occurred at the beginning of the periods presented.
Pro forma results of operations
Three Months Ended September 30
2000 1999
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Net sales $179,539 $172,859
Net income 15,494 12,269
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Basic earnings per share $ 0.45 $ 0.35
Diluted earnings per share $ 0.43 $ 0.34
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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
2000 2000
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(In thousands)
Raw materials.................... $ 28,012 $ 26,527
Finished goods................... 60,063 59,255
Storeroom and other supplies..... 21,786 21,456
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$109,861 $107,238
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NOTE D -- COMPREHENSIVE INCOME
The components of comprehensive income consist of the following:
Three Months Ended
September 30
2000 1999
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(In thousands)
Net income........................................ $15,536 $13,355
Foreign currency translation adjustments - net.... (14,474) 4,092
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Comprehensive income.............................. $ 1,062 $17,447
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The increase in the foreign currency translation adjustment is primarily the
result of the increase in the Company's foreign assets and the decline in the
Euro against the US dollar.
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<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, 2000 were $178.9 million
compared to $153.4 million for the same period in 1999, an increase of $25.5
million or 16.6%. Operating income for the three months ended September 30, 2000
was $34.9 million compared to $30.0 million for the same period in 1999, an
increase of $4.9 million or 16.3%. The increase in net sales and operating
income was primarily due to the acquisition of Walkisoft and Fibra, favorable
product mix on existing businesses and higher unit sales prices on fluff pulp.
Net interest expense and amortization of debt costs for the quarter ended
September 30, 2000 were $11.3 million compared to $9.2 million for the same
period in 1999, an increase of $2.1 million. This increase was due primarily to
higher average debt levels. Other expenses for the quarter ending September 30,
2000 were $0.2 million compared to $1.1 million for the quarter ended September
30, 1999. The decrease was due to higher gains from foreign currency
transactions offsetting amortization of goodwill and intellectual properties.
The Company's effective tax rate of 33.8% is comparable to the effective
tax rate for the prior fiscal year ended June 30, 2000.
Financial Condition
Cash Flow
Cash provided by operating activities for the quarter ended September
30, 2000 was $16.0 million. These funds were used, along with additional
borrowings from the credit facility, to purchase, modernize and upgrade
production equipment and facilities, and to make the first $22.0 million note
payment to UPM-Kymmene for the purchase of Walkisoft.
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 the completion of the
construction of the airlaid nonwovens machine at the Gaston County, North
Carolina plant and environmental expenditures), meet operating expenses, fund
authorized common stock repurchases, and service all debt requirements for the
foreseeable future. At September 30, 2000, the Company had unused borrowing
capacity of $122.9 million on its bank credit facility. The acquisition of Fibra
for approximately $36.5 million has been funded using borrowings from the
Company's bank credit facility.
8
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
1. Exhibit 27 - Financial Data Schedule
2. Reports on Form 8-K
- The Company did not file any reports on Form 8-K during the three months
ended September 30, 2000.
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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: 11-1-00
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By: /S/ GAYLE L. POWELSON
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Gayle L. Powelson, Senior Vice President and Chief Financial Officer
Date: 11-1-00
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