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Buckeye Announces Fourth Quarter and Fiscal Year Results

MEMPHIS, TENN.-(Business Wire)-August 11, 2008 - Buckeye Technologies Inc. (NYSE:BKI) today announced that net sales in the April-June quarter grew by 7.6% over the prior year to $215.3 million, a new sales record for the Company. Earnings for the quarter were $9.3 million after tax ($0.24 per share, compared with $15.9 million ($0.41 per share) in the prior year. During the same quarter of the prior year, the Company's results included a $2.0 million pre-tax benefit from a water conservation partnership payment, a $2.1 million pre-tax benefit from reversal of accrued interest related to cancellation of a contingent note owed to Stac-Pac Technologies Inc., and a $3.3 million tax benefit from adjustments relating to federal and state valuation allowances and credits. The combined benefit of these three items on our year ago fourth quarter earnings was $0.15 per share.

Increased selling prices across all of our businesses as compared to the year-ago quarter were sufficient to offset significantly higher raw materials, energy, chemicals and transportation costs. However, reduced production volumes due to unplanned maintenance outages at our Perry, Florida wood cellulose mill and lower Nonwovens sales were the primary drivers behind a year-over-year reduction in Operating Income of $7.1 million. Excluding reversal of the accrued Stac-Pac interest that impacted the fourth quarter of last year, our net interest expense was reduced by about $2 million compared to last year mainly due to the reduction in debt. Also, our effective tax rate of 26.5% for the quarter, while higher than last year's 21.9% rate, was favorably impacted by about $1.3 million in adjustments relating to identification of additional R&D tax credits and tax planning associated with intercompany interest charges to our Brazilian subsidiary.

Net sales for the fiscal year grew 7.3% over the prior year to $825.5 million, also a new sales record for the Company. Earnings for the fiscal year were $47.1 million after tax ($1.20 per share) compared to $30.1 million after tax ($0.79 per share) in the prior year.

Chairman and Chief Executive Officer John B. Crowe said, "Fiscal year 2008 was an outstanding year for Buckeye. Building on the momentum from 2007, we achieved a variety of significant performance milestones, including our highest ever sales revenue, debt below $400 million and EPS up 52% over the prior year. Due to the unprecedented cost escalation we have experienced over the past 6 months, we have implemented additional price increases and surcharges which went into effect on July 1st. While oil and natural gas prices have moderated from recent peaks, we are still facing rising cost trends for energy, raw materials, chemicals and transportation in the July-September quarter compared to the April-June quarter."

Mr. Crowe went on to say, "We continue to involve the entire organization in Lean Enterprise as a key strategy to grow our business and improve margins, and we have made progress in eliminating waste and non-value added activities. We are entering the second year of a three-year energy savings project at our wood fibers facility in Florida, which when completed will save the equivalent of over 200,000 barrels of #6 fuel oil annually and reduce our dependency on fossil fuels and purchased electricity. Complementing this project are several innovative renewable energy opportunities with the potential to further reduce our reliance on fossil fuels while creating additional value streams. Finally, during the past quarter we have formed a Strategic Growth Team, which includes strong outside expertise, responsible for evaluating and developing options to support our corporate objective of executing profitable growth strategies."

Buckeye has scheduled a conference call for tomorrow morning, August 12th, at 10:00 a.m. EDT to discuss fourth quarter and fiscal year performance. Persons interested in listening by telephone may dial in at (877) 856-1961 within the United States. International callers should dial (719) 325-4808.

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.

Certain matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities laws that involve risks and uncertainties, including but not limited to economic, competitive, governmental, and technological factors affecting the Company's operations, financing, markets, products, services and prices, and other factors. For further information on factors which could impact the Company and the statements contained herein, please refer to public filings with the Securities and Exchange Commission. -0- *T BUCKEYE TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share data) Three Months Ended Twelve Months Ended ——————————————- —————————- June 30, March 31, June 30, June 30, June 30, 2008 2008 2007 2008 2007 ————- ————- ————- ————- ————- Net sales $215,331 $201,865 $200,176 $825,517 $769,321 Cost of goods sold 182,605 167,664 159,652 675,955 637,505 ————- ————- ————- ————- ————- Gross margin 32,726 34,201 40,524 149,562 131,816 Gross margin as a percentage of sales 15.2% 16.9% 20.2% 18.1% 17.1% Selling, research and administrative expenses 12,537 11,470 12,974 47,277 47,021 Amortization of intangibles and other 466 468 697 1,856 2,335 Restructuring costs - - 25 96 1,249 ————- ————- ————- ————- ————- Operating income 19,723 22,263 26,828 100,333 81,211 Net interest expense and amortization of debt costs (7,491) (7,814) (7,587) (32,986) (38,798) Early extinguishment of debt (88) - (95) (623) (832) Gain on sale of assets held for sale - - - - 355 Foreign exchange and other 530 313 1,228 581 1,902 ————- ————- ————- ————- ————- Income before income taxes 12,674 14,762 20,374 67,305 43,838 Income tax expense 3,358 4,340 4,456 20,203 13,720 ————- ————- ————- ————- ————- Net income $ 9,316 $ 10,422 $ 15,918 $ 47,102 $ 30,118 ========= ========= ========= ========= ========= Earnings per share $ 0.24 $ 0.27 $ 0.42 $ 1.21 $ 0.80 Diluted earnings per share $ 0.24 $ 0.26 $ 0.41 $ 1.20 $ 0.79 Weighted average shares for basic earnings per share 38,843 39,011 38,166 38,888 37,842 Weighted average shares for diluted earnings per share 39,009 39,372 38,772 39,401 38,218 *T -0- *T BUCKEYE TECHNOLOGIES INC. CONSOLIDATED BALANCE SHEETS (unaudited) (In thousands) June 30 March 31 June 30 2008 2008 2007 ————— ———— ———— Current assets: Cash and cash equivalents $ 10,393 $ 20,835 $ 14,790 Accounts receivable, net 127,521 121,985 116,865 Inventories 110,254 103,531 86,777 Deferred income taxes and other 11,530 9,716 9,452 ————— ———— ———— Total current assets 259,698 256,067 227,884 Property, plant and equipment, net 555,708 544,957 537,655 Goodwill 163,622 160,285 155,937 Intellectual property and other, net 30,197 29,947 30,346 ————— ———— ———— Total assets $1,009,225 $991,256 $951,822 ========== ======== ======== Liabilities and stockholders' equity Current liabilities: Trade accounts payable $ 49,157 $ 44,659 $ 41,030 Accrued expenses 50,451 55,303 49,532 Current portion of capital lease obligations 358 459 399 Short-term debt 207 647 - ————— ———— ———— Total current liabilities 100,173 101,068 90,961 Long-term debt 393,910 394,532 445,138 Deferred income taxes 59,702 56,379 41,761 Capital lease obligations - - 356 Other liabilities 25,883 27,702 26,452 Stockholders' equity 429,557 411,575 347,154 ————— ———— ———— Total liabilities and stockholders' equity $1,009,225 $991,256 $951,822 ========== ======== ======== *T -0- *T BUCKEYE TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands) Three Months Ended Twelve Months Ended ——————————————- —————————— June 30, March 31, June 30, June 30, June 30, 2008 2008 2007 2008 2007 ————- ————- ————- ————— ————- OPERATING ACTIVITIES Net income $ 9,316 $ 10,676 $ 15,918 $ 47,102 $ 30,118 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 12,794 12,670 12,758 50,873 49,212 Amortization 489 540 904 2,155 3,258 Loss on early extinguishment of debt 88 - 95 623 832 Deferred income taxes 998 2,879 2,855 14,589 7,205 Gain on sale of assets held for sale - - - - (355) Loss on disposal of equipment 161 230 489 955 1,190 Provision for bad debts 78 (52) 107 16 277 Excess tax benefit from stock based compensation - - 18 (44) (24) Other (969) 408 (287) (14) 971 Change in operating assets and liabilities Accounts receivable (4,559) (541) (408) (5,875) (1,931) Inventories (6,230) (10,550) (2,722) (20,185) 13,159 Other assets (185) (1,356) (287) (1,205) (1,041) Accounts payable and other liabilities (398) 11,684 1,859 3,316 8,490 ————- ————- ————- ————— ————- Net cash provided by operating activities 11,583 26,588 31,299 92,306 111,361 INVESTING ACTIVITIES Purchases of property, plant & equipment (17,992) (12,513) (18,965) (49,197) (45,200) Proceeds from sale of assets 17 - - 17 521 Other (198) (118) (159) (451) (539) ————- ————- ————- ————— ————- Net cash used in investing activities (18,173) (12,631) (19,124) (49,631) (45,218) FINANCING ACTIVITIES Net borrowings (payments) under line of credit 14,031 (17,796) (3,368) 78,235 (3,000) Payments on long term debt and other (15,101) (101) (17,625) (129,019) (67,752) Payments for debt issuance costs 80 - - (1,321) - Excess tax benefit from stock based compensation - - (18) 44 24 Purchase of treasury shares (2,720) - - (2,720) - Net proceeds from sale of equity interests 77 - 7,549 5,819 9,857 ————- ————- ————- ————— ————- Net cash used in financing activities (3,633) (17,897) (13,462) (48,962) (60,871) Effect of foreign currency rate fluctuations on cash (219) 1,209 580 1,890 784 Increase (decrease) in cash and cash equivalents (10,442) (2,731) (707) (4,397) 6,056 ————- ————- ————- ————— ————- Cash and cash equivalents at beginning of period 20,835 23,566 15,497 14,790 8,734 ————- ————- ————- ————— ————- Cash and cash equivalents at end of period $ 10,393 $ 20,835 $ 14,790 $ 10,393 $ 14,790 ========= ========= ========= ========== ========= *T -0- *T BUCKEYE TECHNOLOGIES INC. SUPPLEMENTAL FINANCIAL DATA (unaudited) (In thousands) Three Months Ended Year Ended —————————————- —————————- SEGMENT RESULTS June 30, March 31, June 30, June 30, June 30, 2008 2008 2007 2008 2007 ———— ————- ———— ————- ————- Specialty Fibers Net sales $160,945 $150,928 $143,432 $595,782 $543,831 Operating income (a) 20,097 22,431 23,152 90,640 65,847 Depreciation and amortization (b) 8,504 8,492 8,312 33,168 31,770 Capital expenditures 14,978 10,981 16,231 42,347 36,614 Nonwoven Materials Net sales $61,798 $58,157 $66,002 $263,551 $258,843 Operating income (a) 642 1,356 4,972 15,300 22,210 Depreciation and amortization (b) 3,870 3,791 4,013 16,134 16,047 Capital expenditures 2,113 1,298 1,474 4,855 4,316 Corporate Net sales $(7,413) $(7,219) $(9,258) $(33,816) $(33,353) Operating loss (a) (1,015) (1,524) (1,296) (5,607) (6,846) Depreciation and amortization (b) 883 854 1,126 3,425 3,775 Capital expenditures 901 234 1,260 1,995 4,270 Total Net sales $215,330 $201,866 $200,176 $825,517 $769,321 Operating income (a) 19,724 22,263 26,828 100,333 81,211 Depreciation and amortization (b) 13,257 13,137 13,451 52,727 51,592 Capital expenditures 17,992 12,513 18,965 49,197 45,200 (a) The corporate segment includes operating elements such as segment eliminations, amortization of intangibles, impairment of long-lived assets, charges related to restructuring, unallocated at-risk compensation and unallocated stock-based compensation for executive officers and certain other employees. We have reclassified the at- risk compensation and stock based compensation from the specialty fibers and nonwovens segments for previous periods for comparability. 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 Year Ended —————————————- —————————- ADJUSTED EBITDA June 30, March 31, June 30, June 30, June 30, 2008 2008 2007 2008 2007 ———— ————- ———— ————- ————- Income $9,316 $10,677 $15,919 $47,102 $30,118 Income tax expense 3,358 4,086 4,456 20,203 13,720 Interest expense 7,331 7,731 7,377 32,469 37,853 Amortization of debt costs 259 259 321 1,088 1,300 Early extinguishment of debt 88 - 95 623 832 Depreciation, depletion and amortization 13,260 13,138 13,451 52,729 51,592 ———— ————- ———— ————- ————- EBITDA 33,612 35,891 41,619 154,214 135,415 Non cash charges 176 230 490 970 1,451 Gain on sale of assets held for sale - - - - (355) Restructuring charges - - 24 - 1,249 ———— ————- ———— ————- ————- Adjusted EBITDA $33,788 $36,121 $42,133 $155,184 $137,760 ======== ========= ======== ========= ========= 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, restructuring charges prior to July 1, 2007 and other (gains) losses. 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 July 25, 2007, 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.). *T -0- *T BUCKEYE TECHNOLOGIES INC. SUPPLEMENTAL RECONCILIATIONS (unaudited) (In thousands, except per share data) Twelve months Three Months Ended Ended —————————————— ——————- June 30, 2007 March 31, 2008 June 30, 2007 reconciled to reconciled to reconciled to NET SALES RECONCILIATION June 30, 2008 June 30, 2008 June 30, 2008 ——————- ——————— ——————- Net sales $ 200.2 $ 201.9 $ 769.3 Volume (1) (9.6) 6.8 (27.4) Pricing (2) 20.8 5.9 69.4 Product sales mix and other (3) 3.9 0.7 14.2 ——————- ——————— ——————- Net sales $ 215.3 $ 215.3 $ 825.5 ============= ============== ============= (1) Volume relates to the change in volume on comparable products (2) Pricing relates to the changes in unit prices on comparable products (3) Product sales mix relates to the impact of changes in the mix of products shipped. Other includes the impact of changes in foreign currency exchange rates on the translation of sales denominated in currencies other than the US dollar. Twelve months Three Months Ended Ended —————————————— ——————- June 30, 2007 March 31, 2008 June 30, 2007 reconciled to reconciled to reconciled to EARNINGS PER SHARE June 30, 2008 June 30, 2008 June 30, 2008 RECONCILIATION (4) ——————- ——————— ——————- EARNINGS (LOSS) PER SHARE $ 0.41 $ 0.26 $ 0.79 Volume (5) (0.04) 0.02 (0.10) Pricing / product mix (6) 0.37 0.10 1.20 Costs (7) (0.45) (0.16) (0.81) Restructuring, impairment, early debt extinguishment costs - - 0.02 Corporate / Other (8) (0.05) 0.02 0.10 ——————- ——————— ——————- EARNINGS PER SHARE $ 0.24 $ 0.24 $ 1.20 ============= ============== ============= (4) All calculations are net of taxes (5) Volume - Changes in volume on comparable products at prior period gross margins (price, unit cost and mix are at the same levels as the prior quarter). (6) Pricing / Product Mix - Impact of changes in selling prices (on comparable products) and changes in the mix of products shipped. (7) Costs - Changes in production volume, energy related prices, price and usage of chemicals and raw materials, transportation costs, direct spending and selling, research and administrative expenses. (8) Corporate / Other - Net interest expense, intangible amortization, foreign exchange gain(loss), gain(loss) on sale of assets, other income(expense), and tax adjustments and changes in tax rate. *T

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