Buckeye Announces Third Quarter FY 2011 Results

Record sales revenue and earnings

Net sales up 25% versus year-ago quarter

Adjusted 3Q EPS* of $0.71 compared to $0.28 in 3Q-FY10 and $0.50 in 2Q-FY11

Used strong cash flow to reduce debt by $27.5 million or 17% during the quarter

MEMPHIS, Tenn.--(BUSINESS WIRE)--Buckeye Technologies Inc. (NYSE:BKI) today announced third quarter net income of $28.7 million or $0.70 per share. Third quarter earnings included after-tax costs relating to restructuring and accrued interest associated with the cellulosic biofuel credit totaling $0.3 million, or $0.01 per share. This compared to net income of $19.3 million or $0.49 per share in the prior year comparable period, which included net income of $8.3 million, or $0.21 per share, from alternative fuel mixture credits and energy investment tax credits, net of after-tax costs relating to restructuring and early retirement of debt.

“continue (or the negative or other derivatives of each of these terms or similar terminology). The “forward-looking statements”

Net sales were a record $237.8 million for the third quarter of fiscal 2011, up 25% versus net sales of $190.7 million in the third quarter of fiscal 2010 due to higher selling prices and improved mix.

Excluding special items, adjusted net income was $29.0 million, or $0.71 per share versus third quarter fiscal 2010 adjusted net income* of $11.0 million, or $0.28 per share. The $0.43 per share increase in adjusted EPS*, compared to the prior year period, was largely driven by higher selling prices overall in the specialty fibers segment and somewhat better capacity utilization at our Memphis specialty cotton fibers plant due to some improvement in the availability of cotton linters.

Comparing the third quarter to the second quarter of FY11, sales were up $28.3 million or 14% due to higher selling prices and increased shipment volumes. Adjusted EPS* of $0.71 was up $0.21 compared to $0.50 in the second quarter, driven by higher selling prices and increased shipment volumes.

Chairman and Chief Executive Officer John B. Crowe said, “We were very pleased with our record third quarter financial results. Both sales revenue and earnings showed strong improvement compared both to the same quarter a year ago and to the immediately preceding quarter. During the quarter, strong cash flow generation allowed us to reduce our long-term debt by another $27.5 million to $136.6 million. We continue to be encouraged about our outlook and ability to further increase shareholder value. We are focused on generating returns above our cost of capital and continuing our balanced approach to the allocation of capital.”

Buckeye has scheduled a conference call for April 27, 2011 at 9:00 a.m. ET to discuss third quarter fiscal year 2011 results. Those interested in listening by telephone may dial in at [phone] within the United States. International callers should dial [phone]. Supplemental material for the call will be available on the Company’s website at www.bkitech.com or at www.streetevents.com.

Buckeye, a leading manufacturer and marketer of specialty fibers and nonwoven materials, is headquartered in Memphis, Tennessee, USA. The Company currently operates facilities in the United States, Germany, Canada, and Brazil. Its products are sold worldwide to makers of consumer and industrial goods.

Note Regarding Non-GAAP Financial Measures

*This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”). The non-GAAP measures presented are “adjusted operating income”, “adjusted net income”, and “adjusted earnings per share” and are equal to net income, operating income and earnings per share excluding the after-tax effects of alternative fuel mixture credits (AFMC) and cellulosic biofuel credits (CBC), investment tax credits (ITC) on prior period expenditures, restructuring cost and early debt extinguishment cost.

	3rd Quarter		2nd Quarter
($ in Millions)	2011	2010	2011
Operating income
Operating income in accordance with GAAP	44.0	23.7	31.6
Special items:
Restructuring costs	(0.1)	2.4	0.6
AFMC / CBC	---	(4.8)	---
Adjusted operating income	43.9	21.3	32.2
Net income
Net income in accordance with GAAP	28.7	19.3	17.1
Special items, after-tax:
Restructuring costs	(0.1)	1.5	0.5
AFMC / CBC	0.4	(4.2)	0.4
Early Extinguishment of Debt	---	1.0	2.3
ITC on Prior Period Expenditures	---	(6.6)	---
Adjusted net income	29.0	11.0	20.3
Earnings per share (EPS)
EPS in accordance with GAAP	$0.70	$0.49	$0.42
Special items, after-tax, per share:
Restructuring costs	---	0.04	0.01
AFMC / CBC	0.01	(0.11)	0.01
Early Extinguishment of Debt	---	0.03	0.06
ITC on Prior Period Expenditures	---	(0.17)	---
Adjusted EPS	$0.71	$0.28	$0.50

Note Regarding Forward-Looking Statements

This press release also contains forward-looking statements within the meaning of the federal securities laws and is intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. “Forward-looking statements” generally can be identified by the use of forward-looking terminology such as “assumptions,” “target,” “guidance,” “outlook,” “plans,” “projection,” “may,” “will,” “would,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “potential,” or “continue (or the negative or other derivatives of each of these terms or similar terminology). The “forward-looking statements” include, without limitation, statements regarding the economic outlook for the Company and the demand for its products, expected cost reductions associated with our recent move to one-machine operation at our Delta plant and the completion of our Foley energy independence project, and expected levels of cash flow and debt reduction. These statements are based on management’s estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those projected as a result of certain factors. A discussion of factors that could cause results to vary is included in the Company’s Annual Report on Form 10-K and other period filings with the Securities and Exchange Commission.

BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
	Three Months Ended									Nine Months Ended
	March 31, 2011			December 31, 2010			March 31, 2010			March 31, 2011			March 31, 2010
Net sales	$	237,782		$	209,516		$	190,714		$	649,373		$	551,296
Cost of goods sold		180,318			165,090			157,567			511,170			463,028
Gross margin		57,464			44,426			33,147			138,203			88,268
Gross margin as a percentage of sales		24.2	%		21.2	%		17.4	%		21.3	%		16.0	%
Selling, research and administrative expenses		13,102			11,836			11,985			36,609			34,666
Amortization of intangibles and other		488			486			472			1,453			1,422
Restructuring costs		(125	)		570			2,395			997			3,209
Alternative fuel mixture credits		-			-			(4,762	)		-			(77,677	)
Other operating income		(17	)		(39	)		(633	)		(63	)		(724	)
Operating income		44,016			31,573			23,690			99,207			127,372
Net interest expense and amortization of debt costs		(1,642	)		(1,717	)		(3,920	)		(6,956	)		(13,830	)
Early extinguishment of debt		-			(3,649	)		(1,537	)		(3,649	)		(1,372	)
Foreign exchange and other		(892	)		(199	)		(421	)		(1,705	)		(720	)
Income before income taxes		41,482			26,008			17,812			86,897			111,450
Income tax expense (benefit)		12,789			8,955			(1,531	)		(23,274	)		6,592
Net income	$	28,693		$	17,053		$	19,343		$	110,171		$	104,858
Earnings per share
Basic	$	0.71		$	0.42		$	0.50		$	2.74		$	2.71
Diluted	$	0.70		$	0.42		$	0.49		$	2.71		$	2.66
Weighted average common shares outstanding
Basic		39,660			39,478			38,785			39,497			38,754
Diluted		40,195			39,984			39,638			39,965			39,352

BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
	March 31		December 31		June 30
	2011		2010		2010
Current assets:
Cash and cash equivalents	$	27,792	$	25,152	$	22,121
Accounts receivable, net		141,008		119,316		122,960
Income tax and AFMC Receivable		5,777		16,589		68,356
Inventories		97,879		93,023		74,850
Deferred income taxes and other		11,789		9,665		9,541
Total current assets		284,245		263,745		297,828
Property, plant and equipment, net		538,082		536,554		524,475
Goodwill		2,425		2,425		2,425
Deferred income taxes		25,441		14,824		-
Intellectual property and other, net		27,261		26,998		27,726
Total assets	$	877,454	$	844,546	$	852,454
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable	$	39,311	$	31,412	$	39,376
Accrued expenses		55,905		36,018		44,007
Short-term debt		-		-		198
Current portion of long-term debt		-		-		67,000
Total current liabilities		95,216		67,430		150,581
Long-term debt		136,570		164,026		170,332
Deferred income taxes		719		5,322		56,344
Other liabilities		74,500		74,711		37,876
Stockholders' equity		570,449		533,057		437,321
Total liabilities and stockholders' equity	$	877,454	$	844,546	$	852,454

BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
			Three Months Ended									Nine Months Ended
			March 31, 2011			December 31, 2010			March 31, 2010			March 31, 2011			March 31, 2010
OPERATING ACTIVITIES
Net income			$	28,693		$	17,053		$	19,342		$	110,171		$	104,858
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation			12,778			12,132			11,500			36,884			34,324
	Amortization			643			641			704			1,961			2,187
	Loss on early extinguishment of debt			-			3,649			1,537			3,649			1,372
	Deferred income taxes			(15,119	)		(420	)		1,718			(80,974	)		75
	Noncurrent AFMC refund payable			-			-			-			41,144			-
	Loss on disposal of equipment			99			712			286			910			459
	Insurance proceeds applied to capital investments			-			(161	)		-			(161	)		-
	Provision for bad debts			(162	)		(24	)		(98	)		(74	)		(354	)
	Excess tax benefit from stock based compensation			(383	)		(435	)		(3	)		(828	)		(19	)
	Stock-based compensation expense			1,235			1,200			805			3,370			2,040
	Other			114			88			(94	)		70			(777	)
	Change in operating assets and liabilities
		Accounts receivable		(20,093	)		7,838			(7,458	)		(13,631	)		(8,363	)
		Income tax and AFMC receivable		10,812			7,924			(8,995	)		62,579			(64,435	)
		Inventories		(3,900	)		(7,065	)		466			(20,714	)		5,247
		Other assets		(1,738	)		932			271			91			960
		Accounts payable and other liabilities		25,083			(20,201	)		9,439			(482	)		(3,175	)
Net cash provided by operating activities				38,062			23,863			29,420			143,965			74,399
INVESTING ACTIVITIES
	Purchases of property, plant & equipment			(9,696	)		(19,520	)		(11,097	)		(41,132	)		(29,769	)
	Proceeds from sale of assets			-			-			-			4			8
	Proceeds from State of Florida grant			-			-			-			-			7,381
	Proceeds from insurance settlement related to capital investments			-			161			-			161			-
	Other			(138	)		(139	)		(158	)		(349	)		(319	)
Net cash used in investing activities				(9,834	)		(19,498	)		(11,255	)		(41,316	)		(22,699	)
FINANCING ACTIVITIES
	Net borrowings (payments) under line of credit			(27,456	)		139,026			18,470			39,040			90,999
	Payments on long term debt and other			-			(140,000	)		(35,000	)		(140,000	)		(145,000	)
	Payments for debt issuance costs			-			(2,586	)		-			(2,586	)		-
	Payments related to early extinguishment of debt			-			(1,984	)		-			(1,984	)		-
	Excess tax benefit from stock based compensation			383			435			3			828			19
	Net proceeds from sale of equity interests			955			2,338			539			3,334			694
	Payment of dividend			(2,018	)		(1,605	)		-			(5,240	)		-
Net cash used in financing activities				(28,136	)		(4,376	)		(15,988	)		(106,608	)		(53,288	)
Effect of foreign currency rate fluctuations on cash				2,548			2,763			3,961			9,630			6,462
Increase in cash and cash equivalents				2,640			2,752			6,138			5,671			4,874
Cash and cash equivalents at beginning of period				25,152			22,400			20,797			22,121			22,061
Cash and cash equivalents at end of period			$	27,792		$	25,152		$	26,935		$	27,792		$	26,935

BUCKEYE TECHNOLOGIES INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(In thousands)
		Three Months Ended									Nine Months Ended
SEGMENT RESULTS		March 31, 2011			December 31, 2010			March 31, 2010			March 31, 2011			March 31, 2010
Specialty Fibers
	Net sales	$	181,334		$	155,323		$	137,049		$	479,449		$	388,793
	Operating income (a)		43,965			34,445			20,345			100,550			45,943
	Depreciation and amortization (b)		8,447			8,160			7,393			24,394			21,844
	Capital expenditures		8,764			17,362			10,335			37,029			26,565
Nonwoven Materials
	Net sales	$	64,488		$	62,427		$	59,922		$	195,035		$	182,891
	Operating income (a)		3,074			817			3,347			8,494			13,051
	Depreciation and amortization (b)		3,885			3,506			3,653			11,118			11,128
	Capital expenditures		1,143			1,789			663			3,714			2,526
Corporate
	Net sales	$	(8,040	)	$	(8,234	)	$	(6,257	)	$	(25,111	)	$	(20,388	)
	Operating income (loss) (a)		(3,023	)		(3,689	)		(2	)		(9,837	)		68,378
	Depreciation and amortization (b)		934			953			926			2,826			2,776
	Capital expenditures		(211	)		369			99			389			678
Total
	Net sales	$	237,782		$	209,516		$	190,714		$	649,373		$	551,296
	Operating income (loss) (a)		44,016			31,573			23,690			99,207			127,372
	Depreciation and amortization (b)		13,266			12,619			11,972			38,338			35,748
	Capital expenditures		9,696			19,520			11,097			41,132			29,769
(a) The corporate segment includes operating elements such as segment eliminations, amortization of intangibles, impairment of long-lived assets, alternative fuel mixture credits, charges related to restructuring, unallocated at-risk compensation and unallocated stock-based compensation for executive officers and certain other employees. Corporate net sales represents the elimination of intersegment sales included in the specialty fibers reporting segment.
(b) Depreciation and amortization includes depreciation, depletion and amortization of intangibles.
		Three Months Ended									Nine Months Ended
ADJUSTED EBITDA		March 31, 2011			December 31, 2010			March 31, 2010			March 31, 2011			March 31, 2010
Net income (loss)		$	28,693		$	17,053		$	19,343		$	110,171		$	104,858
Income tax expense			12,789			8,955			(1,531	)		(23,274	)		6,592
Interest expense			1,533			1,589			3,706			6,555			13,185
Amortization of debt costs			155			155			232			508			759
Early extinguishment of debt			-			3,649			1,537			3,649			1,372
Depreciation, depletion and amortization			13,266			12,618			11,972			38,337			35,746
Alternative Fuel Mixture Credits			-			-			(4,762	)		-			(77,677	)
EBITDA			56,436			44,019			30,497			135,946			84,835
Non cash charges			99			712			397			911			646
Adjusted EBITDA		$	56,535		$	44,731		$	30,894		$	136,857		$	85,481
We calculate EBITDA as earnings before cumulative effect of change in accounting plus interest expense, income taxes and depreciation and amortization. Adjusted EBITDA further adjusts EBITDA by adding back the following items: asset impairment charges, non-cash charges and other (gains) losses and deducting any non-cash expense associated with alternative fuel mixture credits.  You should not consider adjusted EBITDA to be an alternative measure of our net income, as an indicator of operating performance; or our cash flow, as an indicator of liquidity.   Adjusted EBITDA corresponds with the definition contained in our US revolving credit facility, established on October 22, 2010, and it provides useful information concerning our ability to comply with debt covenants. Although we believe adjusted EBITDA enhances your understanding of our financial condition, this measure, when viewed individually, is not a better indicator of any trend as compared to other measures (e.g., net sales, net earnings, net cash flows, etc.).  Prior period amounts have been adjusted to conform to the definition contained in our new credit facility.