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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 March 31, 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 May 9, 2000, there were outstanding 34,926,464 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 March 31, 2000 and
1999; Nine Months Ended March 31, 2000 and 1999........................................ 3
Condensed Consolidated Balance Sheets as of March 31, 2000 and June 30, 1999................ 4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 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............................................................ 10
SIGNATURES 11
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
-------------------------- ---------------------------
2000 1999 2000 1999
-------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net sales............................................. $188,388 $155,880 $525,490 $459,331
Cost of goods sold.................................... 138,752 116,997 385,998 340,089
-------------------------- ---------------------------
Gross margin.......................................... 49,636 38,883 139,492 119,242
Selling, research and administrative expenses......... 14,321 11,080 40,121 33,313
-------------------------- ---------------------------
Operating income...................................... 35,315 27,803 99,371 85,929
Net interest expense and amortization of debt costs... 11,207 9,772 31,777 29,355
Other................................................. 1,876 1,019 4,177 2,386
-------------------------- ---------------------------
Income before income taxes............................ 22,232 17,012 63,417 54,188
Income taxes.......................................... 7,338 5,524 20,930 18,443
-------------------------- ---------------------------
Net income............................................ $14,894 $11,488 $42,487 $35,745
========================== ===========================
Basic earnings per share.............................. $0.43 $0.32 $1.21 $1.00
========================== ===========================
Diluted earnings per share............................ $0.42 $0.32 $1.18 $.98
========================== ===========================
Weighted average shares for basic earnings per share 34,967 35,442 35,171 35,882
Effect of dilutive stock options 806 507 752 778
-------------------------- ---------------------------
Adjusted weighted average shares for diluted earnings per
share 35,773 35,949 35,923 36,660
</TABLE>
See accompanying notes.
3
<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
March 31 June 30
2000 1999
---------------- -----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................................... $ 15,377 $ 403
Accounts receivable - net.................................... 105,429 81,648
Inventories.................................................. 107,161 104,584
Deferred income taxes and other.............................. 8,490 10,458
---------------- -----------------
Total current assets................................ 236,457 197,093
Property, plant and equipment..................................... 688,966 569,755
Less allowances for depreciation.................................. (187,804) (157,524)
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501,162 412,231
Goodwill.......................................................... 124,754 127,409
Other assets...................................................... 43,255 11,149
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Total assets........................................ $905,628 $747,882
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Liabilities and stockholders' equity Current liabilities:
Accounts payable............................................. $ 25,333 $22,848
Accrued expenses............................................. 67,923 45,127
Current portion of long-term debt............................ 21,784 -
---------------- -----------------
Total current liabilities........................... 115,040 67,975
Noncurrent liabilities:
Long-term debt............................................... 521,339 441,214
Accrued postretirement benefit obligation.................... 17,203 16,270
Deferred income taxes........................................ 47,720 43,480
Other liabilities............................................ 1,770 1,524
Stockholders' equity.............................................. 202,556 177,419
---------------- -----------------
Total liabilities and stockholders' equity................... $905,628 $747,882
================ =================
</TABLE>
See accompanying notes.
4
<PAGE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
--------------------------------------
2000 1999
---------------- -----------------
<S> <C> <C>
Operating activities
Net income........................................................ $42,487 $35,745
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation............................................... 31,627 27,856
Amortization and other..................................... 8,169 7,129
Deferred income taxes...................................... 4,119 6,816
Changes in operating assets and liabilities:
Accounts receivable.................................... (14,519) 12,450
Inventories............................................ 1,764 (10,296)
Other assets........................................... 2,438 843
Accounts payable and other current liabilities......... 18,709 (11,685)
---------------- -----------------
Net cash provided by operating activities.................. 94,794 68,858
Investing activities
Acquisition of businesses......................................... (28,484) -
Net purchases of property, plant and equipment.................... (37,432) (41,471)
Other............................................................. (12,215) 2,780
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Net cash used in investing activities............................. (78,131) (38,691)
Financing activities
Purchase of treasury shares....................................... (8,296) (23,000)
Proceeds from sale of equity interests............................ 513 420
Net borrowings under revolving line of credit..................... 7,450 2,861
Principal payments on long term debt and other.................... 10 (11,941)
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Net cash used in financing activities............................. (323) (31,660)
Effect of foreign currency rate fluctuations on cash.............. (1,366) 21
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Increase (decrease) in cash and cash equivalents.................. 14,974 (1,472)
Cash and cash equivalents at beginning of period.................. 403 1,472
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Cash and cash equivalents at end of period........................ $ 15,377 $ -
================ =================
</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 and nine months ended March 31,
2000 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 - BUSINESS COMBINATION
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. UPM-Kymmene was paid approximately $26 million at
closing and will be paid $22 million on each of the first four anniversaries of
closing. The allocation of the purchase price is preliminary as the Company is
evaluating the final appraisal. Walkisoft is a manufacturer of airlaid nonwoven
materials, with manufacturing locations in Steinfurt, Germany and near Mt.
Holly, North Carolina. The consolidated operating results of Walkisoft have been
included in the consolidated statement of income from the date of acquisition.
The following unaudited pro forma results of operations assume that the
acquisition of Walkisoft occurred as of the beginning of the periods presented.
Nine Months Ended March 31
2000 1999
--------------------------------------
(In thousands, except per share data)
Net sales $542,981 $500,442
Net income 41,483 29,033
Basic earnings per share 1.18 0.81
Diluted earnings per share 1.15 0.79
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.
6
<PAGE>
NOTE C -- INVENTORIES
The components of inventory consist of the following:
March 31 June 30
2000 1999
-------------------------------------
(In thousands)
Raw materials...................... $ 28,544 $ 28,619
Finished goods..................... 58,763 56,927
Storeroom and other supplies....... 19,854 19,038
-------------------------------------
$107,161 $104,584
=====================================
NOTE D -- COMPREHENSIVE INCOME
The components of comprehensive income consist of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
2000 1999 2000 1999
----------------------------- ----------------------------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Net income........................................ $14,894 $11,488 $42,487 $35,745
Foreign currency translation adjustments.......... (7,333) (3,549) (10,316) (4,255)
-------------- -------------- ------------- --------------
Comprehensive income.............................. $7,561 $7,939 32,171 $31,490
============== ============== ============= ==============
</TABLE>
The increase in the foreign currency translation adjustment for the three and
nine months ended March 31, 2000 is the result of the increase in the Company's
foreign assets and the decline in the Euro against the US Dollar.
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 March 31, 2000 were $188.4 million
compared to $155.9 million for the same period in the prior fiscal year, an
increase of $32.5 million or 20.8%. Net sales for the nine month period ended
March 31, 2000 were $525.5 million compared to $459.3 million for the same
period in the prior fiscal year, an increase of $66.2 million or 14.4%. More
than half of the increase for both the three and nine month periods was due to
the acquisition of Walkisoft, with the remaining being due to higher volume on
existing businesses. Unit sales prices for the nine month period were slightly
below the previous year due primarily to the January 1, 1999 fluff pulp
contract price reduction to Procter & Gamble offset by favorable product mix.
Operating income for the three months ended March 31, 2000 was $35.3
million compared to $27.8 million for the same period in the prior fiscal year,
an increase of $7.5 million or 27.0%. Operating income for the nine months ended
March 31, 2000 was $99.4 million compared to $85.9 million for the same period
in the prior fiscal year, an increase of $13.5 million or 15.7%. The increase
for the three and nine month periods is primarily due to the higher sales
volume. Both periods also reflect lower manufacturing costs.
Net interest expense and amortization of debt costs were $11.2 million
for the three months and $31.8 million for the nine months ended March 31, 2000.
This is a $1.4 million and $2.4 million increase, respectively, compared to the
same period of the prior fiscal year. This increase was due to higher debt
levels as a result of the Walkisoft acquisition and the purchase of the Stac-Pac
technology.
The Company's net income for the three month and nine month period
ended March 31, 2000 was $14.9 million or $0.42 per share on a diluted basis,
and $42.5 million or $1.18 per share on a diluted basis, respectively. This
compares to $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 for the same periods of the prior
year.
Financial Condition
Cash Flow
Cash provided by operating activities for the nine months ended March
31, 2000 was $94.8 million. These funds were used, along with additional
borrowings from the credit facility, to purchase, modernize and upgrade
production equipment and facilities, to repurchase stock, to make the initial
payment to UPM-Kymmene for the purchase of Walkisoft and to make the initial
payment for the Stac-Pac technology. During the nine months ended March 31,
2000, the Company repurchased 541,300 shares of common stock, pursuant to a
5,000,000 share repurchase plan. The total number of shares repurchased through
this plan through March 31, 2000 is 4,063,400.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
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, 2000, the Company
had unused borrowing capacity of approximately $186 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
making the initial payment to UPM-Kymmene of approximately $26 million during
October 1999 with an additional $22 million payment on each of the first four
anniversaries of closing. Interest of 5% annually will be paid on the unpaid
balance. The purchase of the Stac-Pac technology will be funded by making
initial payments to Stac-Pac Technologies and KT Industries of $15 million with
additional payments to Stac-Pac Technologies of $5 million on March 1, 2001 and
March 1, 2002. 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.
9
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. 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, 2000.
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
----------------------
David B. Ferraro, Director, President, and Chief Operating Officer
Date: May 10, 2000
By: /S/ DAVID H. WHITCOMB
----------------------
David H. Whitcomb, Sr. Vice President, Finance and Accounting
Date: May 10, 2000
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 15,377
<SECURITIES> 0
<RECEIVABLES> 106,664
<ALLOWANCES> 1,235
<INVENTORY> 107,161
<CURRENT-ASSETS> 236,457
<PP&E> 688,966
<DEPRECIATION> 187,804
<TOTAL-ASSETS> 905,628
<CURRENT-LIABILITIES> 115,040
<BONDS> 521,339
0
0
<COMMON> 431
<OTHER-SE> 202,125
<TOTAL-LIABILITY-AND-EQUITY> 905,628
<SALES> 525,490
<TOTAL-REVENUES> 525,490
<CGS> 385,998
<TOTAL-COSTS> 426,119
<OTHER-EXPENSES> 4,177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,777
<INCOME-PRETAX> 63,417
<INCOME-TAX> 20,930
<INCOME-CONTINUING> 42,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,487
<EPS-BASIC> 1.21
<EPS-DILUTED> 1.18
</TABLE>
