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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 December 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 February 5, 2001, there were outstanding 34,526,940 Common Shares
of the Registrant.
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INDEX
BUCKEYE TECHNOLOGIES INC.
ITEM PAGE
PART I - FINANCIAL INFORMATION
1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Income for the Three Months Ended December 31, 2000
and 1999; Six Months Ended December 31, 2000 and 1999.................................. 3
Condensed Consolidated Balance Sheets as of December 31, 2000 and June 30, 2000............. 4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 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
4. Submission of Matters to a Vote of Security Holders......................................... 10
6. Exhibits and Reports on Form 8-K............................................................ 10
SIGNATURES 11
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
December 31 December 31
---------------------------- ----------------------------
2000 1999 2000 1999
---------------------------- ----------------------------
Net sales.............................................. $175,803 $183,702 $354,712 $337,102
Cost of goods sold..................................... 132,431 136,066 263,042 247,246
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Gross margin........................................... 43,372 47,636 91,670 89,856
Selling, research and administrative expenses.......... 12,427 13,570 25,835 25,800
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Operating income....................................... 30,945 34,066 65,835 64,056
Net interest expense and amortization of debt costs.... 11,294 11,349 22,559 20,570
Other.................................................. 401 1,172 560 2,301
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Income before income taxes............................. 19,250 21,545 42,716 41,185
Income taxes........................................... 5,932 7,307 13,862 13,592
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Net income............................................. $ 13,318 $ 14,238 $ 28,854 $ 27,593
============================ ============================
Basic earnings per share............................... $ 0.38 $ 0.40 $ 0.83 $ 0.78
============================ ============================
Diluted earnings per share............................. $ 0.38 $ 0.40 $ 0.80 $ 0.77
============================ ============================
Weighted average shares for basic earnings per share 34,755 35,171 34,776 35,273
Effect of dilutive stock options 702 711 1,085 725
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Adjusted weighted average shares for diluted earnings
per share 35,457 35,882 35,861 35,998
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See accompanying notes.
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PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
December 31 June 30
2000 2000
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Assets
Current assets:
Cash and cash equivalents.................................... $ 8,653 $ 12,257
Accounts receivable - net.................................... 109,131 111,899
Inventories.................................................. 123,111 107,238
Deferred income taxes and other.............................. 13,108 13,556
---------------- -----------------
Total current assets................................ 254,003 244,950
Property, plant and equipment..................................... 793,205 717,646
Less accumulated depreciation..................................... (217,941) (197,244)
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575,264 520,402
Goodwill, net..................................................... 138,075 122,399
Intellectual property and other, net.............................. 43,835 42,970
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Total assets........................................ $1,011,177 $930,721
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Liabilities and stockholders' equity Current liabilities:
Accounts payable............................................. $ 30,480 $ 36,397
Accrued expenses............................................. 54,551 71,549
Current portion of long-term debt 27,000 26,892
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Total current liabilities........................... 112,031 134,838
Long-term debt............................................... 588,854 505,983
Accrued postretirement benefit obligation.................... 18,244 17,531
Deferred income taxes........................................ 58,865 56,691
Other liabilities............................................ 1,572 1,699
Stockholders' equity.............................................. 231,611 213,979
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Total liabilities and stockholders' equity.......... $1,011,177 $930,721
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See accompanying notes.
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PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
December 31
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2000 1999
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Operating activities
Net income........................................................ $28,854 $27,593
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation............................................... 21,649 21,324
Amortization .............................................. 3,759 2,711
Deferred income taxes and other............................ 1,883 5,025
Changes in operating assets and liabilities:
Accounts receivable.................................... (9,136) 4,801
Inventories............................................ (16,288) (87)
Other assets........................................... 350 3,015
Accounts payable and other current liabilities......... (22,222) (3,172)
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Net cash provided by operating activities......................... 22,786 47,273
Investing activities
Acquisition of businesses......................................... (36,388) (28,090)
Purchases of property, plant and equipment........................ (68,094) (20,154)
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Net cash used in investing activities............................. (104,482) (48,244)
Financing activities
Purchase of treasury shares....................................... (5,526) (6,052)
Proceeds from sale of equity interests............................ 300 2,558
Net borrowings under revolving line of credit..................... 102,728 15,582
Net payments on long term debt.................................... (20,000) -
Other............................................................. 177 -
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Net cash provided by financing activities......................... 10,533 79,234
Effect of foreign currency rate fluctuations on cash.............. (638) (1,142)
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Increase (decrease) in cash and cash equivalents.................. (3,604) 8,924
Cash and cash equivalents at beginning of period.................. 403 12,257
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Cash and cash equivalents at end of period........................ $8,653 $ 9,327
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See accompanying notes.
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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 six months ended December 31,
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 financial statements for the period ended December 31,
1999 have been reclassified to conform with the financial statements for the
period ended December 31, 2000.
NOTE B - BUSINESS COMBINATION
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 the
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 Six Months Ended December 31
2000 1999
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Net sales $355,342 $358,504
Net income 28,812 26,417
Basic earnings per share 0.83 0.75
Diluted earnings per share 0.80 0.73
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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:
December 31 June 30
2000 2000
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(In thousands)
Raw materials..................... $ 36,150 $ 26,527
Finished goods.................... 64,967 59,255
Storeroom and other supplies...... 21,994 21,456
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$123,111 $107,238
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NOTE D -- COMPREHENSIVE INCOME
The components of comprehensive income consist of the following:
Three Months Ended Six Months Ended
December 31 December 31
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2000 1999 2000 1999
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(In thousands) (In thousands)
Net income...................................... $13,318 $14,238 $28,854 $27,593
Foreign currency translation adjustments - net.. 6,304 (7,075) (8,170) (2,983)
----------------------------- ----------------------------
Comprehensive income............................ $19,622 $ 7,163 $20,684 $24,610
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The Company has increased its foreign assets through various acquisitions. The
change in the foreign currency translation adjustment is primarily due to
fluctuations in the exchange rate of the Euro and the US Dollar.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net sales for the three months ended December 31, 2000 were $175.8
million compared to $183.7 million for the same period in the prior fiscal year,
a decrease of $7.9 million or 4.3%. Net sales for the six-month period ended
December 31, 2000 were $354.7 million compared to $337.1 million for the same
period in the prior fiscal year, an increase of $17.6 million or 5.2%. The
decrease for the three month period is mainly due to lower shipment volumes. The
increase for the six month period is mainly due to the acquisition of Walkisoft.
Operating income for the three months ended December 31, 2000 was $30.9
million compared to $34.1 million for the same period in the prior fiscal year,
a decrease of $3.2 million or 9.4%. The decrease is due primarily to the
increased cost of cotton fibers and start-up costs related to folding nonwovens
materials. Operating income for the six months ended December 31, 2000 was $65.8
million compared to $64.1 million for the same period in the prior fiscal year,
an increase of $1.7 million or 2.7%. The increase is primarily due to higher
prices on fluff pulp sales.
Net interest expense and amortization of debt costs were $11.3 million
for both the three months ended December 31, 2000 and the three months ended
December 31, 1999. Net interest expense and amortization of debt costs were
$22.6 million for the six months ended December 31, 2000 compared to $20.6
million for the same period of the prior fiscal year. This increase was
primarily due to higher debt levels.
Other expenses for the quarter ended December 31, 2000 were $0.4
million compared to $1.2 million for the quarter ended December 31, 1999. Other
expenses for the six months ended December 31, 2000 were $0.6 million compared
to $2.3 million for the six months ended December 31, 1999. The decrease in both
periods was due to higher gains from foreign currency transactions offsetting
amortization of goodwill and intellectual properties.
The Company's effective tax rate of 30.8% for the three months ended
December 31, 2000 is lower than the effective tax rate of 33.9% for the three
months ended December 31, 1999 primarily due to a year-to-date adjustment for
recently enacted lower tax rates in Germany.
Financial Condition
Cash Flow
Cash provided by operating activities for the six months ended December
31, 2000 was $22.8 million. These funds were used, along with additional
borrowings from the credit facility, to construct, purchase, modernize and
upgrade production equipment and facilities, to repurchase stock and to make the
first $22 million note payment to UPM-Kymmene for the purchase of Walkisoft.
During the six months ended December 31, 2000, the Company repurchased 426,800
shares of common stock, pursuant to a 5,000,000 share repurchase plan. The total
number of shares repurchased through this plan through December 31, 2000 is
4,666,800. On January 16, 2001, the Board of Directors authorized the repurchase
of an additional one million shares of common stock to bring the total shares
authorized to be repurchased to 6,000,000 shares.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (cont'd)
Liquidity and Capital Resources
In May 2001, the borrowing availability on the Company's existing bank
credit facility will be reduced by $75 million. In anticipation of this
reduction, the Company is currently working on having a new credit facility in
place by early April 2001. With this new credit facility, the Company believes
that its cash flow from operations, together with the borrowings available under
this 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 December 31, 2000, the Company
had unused borrowing availability of approximately $93 million on its bank
credit facility. The Company has also announced the deferral of the second
airlaid nonwoven machine at the facility in Cork, Ireland and now estimates
capital expenditures for the fiscal year ending June 30, 2001 to total
approximately $155 million.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On November 2, 2000, the Company held its Annual Meeting of
Stockholders. At the meeting, Red Cavaney and David B. Ferraro were each
re-elected as Class I directors to hold office for a three-year term or until
their successors are elected and qualified. For Red Cavaney, 32,192,493 votes
were cast in favor and 249,014 votes were withheld. For David B. Ferraro,
32,192,493 votes were cast in favor and 249,014 were withheld.
Following the election, the Company's Board of Directors consisted of
Mr. Red Cavaney, Mr. R. Howard Cannon, Mr. Robert E. Cannon,
Mr. David B.Ferraro, Mr. Henry F. Frigon, Mr. Samuel M. Mencoff,
and Mr. Harry J. Phillips, Sr.
On January 12, 2001, after four years of distinguished service on
the Company's Board of Directors, Mr. Harry J. Phillips, Sr. passed away.
The stockholders also ratified the appointment of Ernst & Young LLP as
the Company's independent auditors. 32,397,465 votes were cast in favor of the
ratification, 36,008 were cast against and 8,034 votes abstained.
Item 6. Exhibits and Reports on Form 8-K
1. Exhibit 10.1
- Amended and Restated Formula Plan for Non-Employee Directors
2. Reports on Form 8-K
- The Company did not file any reports of Form 8-K during the six
months ended December 31, 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, Director, President, and Chief Operating Officer
Date: February 6, 2001
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By: /S/ GAYLE L. POWERLSON
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Gayle L. Powelson, Senior Vice President and Chief Financial Officer
Date: February 6, 2001
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