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We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.
The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.
These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.
When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?
Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.
Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.
Home / Markets / Industries / Industrials
Monday, May 05, 2008
Buckeye Announces January-March Quarter Results
Comtex
MEMPHIS, Tenn., May 05, 2008 (BUSINESS WIRE) ----Buckeye Technologies Inc. (NYSE:BKI) today announced earnings for the January-March quarter of 26 cents per share compared to 17 cents per share in the year ago quarter. These results include a $0.8 million (2 cents per share) tax benefit related to the identification of additional R&D tax credits. Earnings for the prior year period included $0.8 million after tax (2 cents per share) in restructuring expenses associated with consolidations made in our European Sales Offices, Product and Market Development, and corporate overhead.
Net sales for the third quarter of fiscal 2008 increased 5% to $201.9 million as compared to fiscal 2007 third quarter net sales of $193.0 million. Net sales for the first nine months of fiscal 2008 were $610.2 million, up 7% compared to net sales of $569.1 million for the same period last year.
Chairman and Chief Executive Officer John B. Crowe said, "We had a another good quarter, with sales up 5% and earnings per share up 55% versus the same period a year ago, even though our operating performance fell short of our expectations. Unplanned maintenance outages at our Florida wood cellulose facility, delayed shipments due to ocean vessel availability issues and lower Nonwovens sales negatively impacted our results. A significant accomplishment for the quarter was the reduction of long-term debt by $18.6 million during the quarter to $394.5 million."
Mr. Crowe added, "We have recently replaced a sizeable portion of the nonwovens business that we lost at the beginning of January, and we expect Nonwovens sales and operating income to increase over the next several quarters. While we expect higher sales and production volumes in the April-June quarter versus the immediately preceding quarter, we anticipate that our margins will be constrained by higher input and transportation costs."
Buckeye has scheduled a conference call for later this morning at 11:00 a.m. EDT to discuss third quarter performance. Persons interested in listening by telephone may dial in at (877) 857-6176 within the United States. International callers should dial (719) 325-4826.
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.
BUCKEYE TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share data) Three Months Ended Nine Months Ended ----------------------------- ------------------- March 31, December March 31, March 31, March 31, 2008 31, 2007 2007 2008 2007 --------- --------- --------- --------- --------- Net sales $201,865 $210,922 $193,009 $610,186 $569,145 Cost of goods sold 167,664 168,943 160,070 493,351 477,852 --------- --------- --------- --------- --------- Gross margin 34,201 41,979 32,939 116,835 91,293 Gross margin as a percentage of sales 16.9% 19.9% 17.1% 19.1% 16.0% Selling, research and administrative expenses 11,470 11,796 11,680 34,740 34,047 Amortization of intangibles and other 468 361 500 1,390 1,638 Restructuring costs - - 1,201 96 1,225 --------- --------- --------- --------- --------- Operating income 22,263 29,822 19,558 80,609 54,383 Net interest expense and amortization of debt costs (7,814) (8,524) (10,020) (25,495) (31,211) Early extinguishment of debt - 251 (85) (535) (737) Gain on sale of assets held for sale - - - - 355 Foreign exchange and other 313 (94) 422 51 674 --------- --------- --------- --------- --------- Income before income taxes 14,762 21,455 9,875 54,630 23,464 Income tax expense 4,340 7,589 3,302 16,845 9,264 --------- --------- --------- --------- --------- Net income $ 10,422 $ 13,866 $ 6,573 $ 37,785 $ 14,200 ========= ========= ========= ========= ========= Earnings per share $ 0.27 $ 0.36 $ 0.17 $ 0.97 $ 0.38 Diluted earnings per share $ 0.26 $ 0.35 $ 0.17 $ 0.96 $ 0.37 Weighted average shares for basic earnings per share 39,011 38,953 37,887 38,902 37,750 Weighted average shares for diluted earnings per share 39,372 39,448 38,442 39,360 38,048
BUCKEYE TECHNOLOGIES INC. CONSOLIDATED BALANCE SHEETS (unaudited) (In thousands) March 31 December June 30 31 2008 2007 2007 -------- -------- -------- Current assets: Cash and cash equivalents $ 20,835 $ 23,566 $ 14,790 Accounts receivable, net 121,985 120,413 116,865 Inventories 103,531 92,140 86,777 Deferred income taxes and other 9,716 9,371 9,452 -------- -------- -------- Total current assets 256,067 245,490 227,884 Property, plant and equipment, net 544,957 542,796 537,655 Goodwill 160,285 164,251 155,937 Intellectual property and other, net 29,947 30,459 30,346 -------- -------- -------- Total assets $991,256 $982,996 $951,822 ======== ======== ======== Liabilities and stockholders' equity Current liabilities: Trade accounts payable $ 44,659 $ 38,323 41,030 Accrued expenses 55,302 48,636 49,532 Current portion of capital lease obligations 459 560 399 Short-term debt 647 219 - -------- -------- -------- Total current liabilities 101,067 87,738 90,961 Long-term debt 394,532 413,149 445,138 Deferred income taxes 56,379 53,223 41,761 Capital lease obligations - - 356 Other liabilities 27,702 26,714 26,452 Stockholders' equity 411,576 402,172 347,154 -------- -------- -------- Total liabilities and stockholders' equity $991,256 $982,996 $951,822 ======== ======== ========
BUCKEYE TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands) Three Months Ended Nine Months Ended ----------------------------- -------------------- March 31, December March 31, March 31, March 31, 2008 31, 2007 2007 2008 2007 --------- --------- --------- ---------- --------- OPERATING ACTIVITIES Net income $ 10,422 $ 13,866 $ 6,573 $ 37,785 $ 14,200 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 12,670 12,780 12,143 38,079 36,454 Amortization 540 624 706 1,666 2,354 Loss on early extinguishment of debt - (251) 85 535 737 Deferred income taxes 3,133 5,834 2,096 13,591 4,350 Gain on sale of assets held for sale - - - - (355) Loss on disposal of equipment 230 448 486 794 701 Provision for bad debts (52) (1) (11) (62) 170 Excess tax benefit from stock based compensation - (29) (1) (44) (6) Other 408 364 432 956 1,258 Change in operating assets and liabilities Accounts receivable (541) 951 (8,383) (1,316) (1,523) Inventories (10,550) 2,166 3,489 (13,955) 15,881 Other assets (1,356) 555 2,103 (1,020) (754) Accounts payable and other liabilities 11,684 (14,925) 6,297 3,714 6,631 --------- --------- --------- ---------- --------- Net cash provided by operating activities 26,588 22,382 26,015 80,723 80,098 INVESTING ACTIVITIES Purchases of property, plant & equipment (12,513) (9,702) (11,910) (31,205) (26,235) Proceeds from sale of assets - - - - 521 Other (118) (89) (100) (253) (380) --------- --------- --------- ---------- --------- Net cash used in investing activities (12,631) (9,791) (12,010) (31,458) (26,094) FINANCING ACTIVITIES Net borrowings (payments) under line of credit (17,796) (6,267) 1,855 64,204 368 Payments on long term debt and other (101) (98) (14,438) (113,918) (50,127) Payments for debt issuance costs - (112) - (1,401) - Excess tax benefit from stock based compensation - 29 1 44 6 Net proceeds from sale of equity interests - 3,037 1,209 5,742 2,308 --------- --------- --------- ---------- --------- Net cash used in financing activities (17,897) (3,411) (11,373) (45,329) (47,445) Effect of foreign currency rate fluctuations on cash 1,209 383 172 2,109 204 Increase (decrease) in cash and cash equivalents (2,731) 9,563 2,804 6,045 6,763 --------- --------- --------- ---------- --------- Cash and cash equivalents at beginning of period 23,566 14,003 12,693 14,790 8,734 --------- --------- --------- ---------- --------- Cash and cash equivalents at end of period $ 20,835 $ 23,566 $ 15,497 $ 20,835 $ 15,497 ========= ========= ========= ========== =========
BUCKEYE TECHNOLOGIES INC. SUPPLEMENTAL FINANCIAL DATA (unaudited) (In thousands) Three Months Ended Nine Months Ended ----------------------------- ------------------- SEGMENT RESULTS March 31, December March 31, March 31, March 31, 2008 31, 2007 2007 2008 2007 --------- ------------------- --------- --------- Specialty Fibers Net sales $150,928 $148,208 $135,398 $434,837 $400,399 Operating income (a) 22,265 25,889 15,948 70,220 41,430 Depreciation and amortization (b) 8,492 8,157 7,901 24,664 23,458 Capital expenditures 10,981 8,468 8,727 27,369 20,383 Nonwoven Materials Net sales $ 58,157 $ 71,966 $ 65,386 $201,753 $192,841 Operating income (a) 1,277 5,273 5,873 14,504 16,698 Depreciation and amortization (b) 3,791 4,241 3,898 12,264 12,034 Capital expenditures 1,298 737 1,845 2,742 2,842 Corporate Net sales $ (7,219) $ (9,252) $ (7,775) $(26,404) $(24,095) Operating loss (a) (1,279) (1,340) (2,263) (4,115) (3,745) Depreciation and amortization (b) 854 744 844 2,541 2,649 Capital expenditures 234 497 1,338 1,094 3,010 Total Net sales $201,865 $210,922 $193,009 $610,186 $569,145 Operating income (a) 22,263 29,822 19,558 80,609 54,383 Depreciation and amortization (b) 13,137 13,142 12,643 39,469 38,141 Capital expenditures 12,513 9,702 11,910 31,205 26,235 (a) Asset impairment and restructuring costs are included in operating income for the corporate segment. (b) Depreciation and amortization includes depreciation, depletion and amortization of intangibles. Three Months Ended Nine Months Ended ----------------------------- ------------------- ADJUSTED EBITDA March 31, December March 31, March 31, March 31, 2008 31, 2007 2007 2008 2007 --------- ------------------- --------- --------- Income $ 10,422 $ 13,866 $ 6,573 $ 37,785 $ 14,200 Income tax expense 4,340 7,589 3,302 16,845 9,264 Interest expense 7,731 8,435 9,776 25,138 30,476 Amortization of debt costs 259 267 319 829 979 Early extinguishment of debt - (251) 85 535 737 Depreciation, depletion and amortization 13,138 13,142 12,643 39,469 38,141 --------- --------- --------- --------- --------- EBITDA 35,890 43,048 32,698 120,602 93,797 Asset impairments - - - - - Non cash charges 230 448 506 794 961 Gain on sale of assets held for sale - - - - (355) Restructuring charges - - 1,201 - 1,225 --------- --------- --------- --------- --------- Adjusted EBITDA $ 36,120 $ 43,496 $ 34,405 $121,395 $ 95,628 ========= ========= ========= ========= ========= 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.).
BUCKEYE TECHNOLOGIES INC. SUPPLEMENTAL RECONCILIATIONS (unaudited) (In thousands, except per share data) Three Months Ended Nine months Ended --------------------- ----------------- March 31, December March 31, 2007 2007 31, 2007 reconciled reconciled reconciled to to to NET SALES RECONCILIATION March 31, March 31, March 31, 2008 2008 2008 --------------------- ----------------- Net sales $193.0 $210.9 $569.1 Volume (1) (12.7) (17.5) (17.3) Pricing (2) 18.1 7.8 48.1 Product sales mix and other (3) 3.5 0.7 10.3 --------------------- ----------------- Net sales $201.9 $201.9 $610.2 ========== ========== ================= (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. Three Months Ended Nine months Ended --------------------- ----------------- March 31, December March 31, 2007 2007 31, 2007 reconciled reconciled reconciled to to to EARNINGS PER SHARE March 31, March 31, March 31, 2008 RECONCILIATION (4) 2008 2008 --------------------- ----------------- EARNINGS (LOSS) PER SHARE $ 0.17 $ 0.35 $ 0.37 Volume (5) (0.04) (0.06) (0.05) Pricing / product mix (6) 0.31 0.13 0.83 Costs (7) (0.25) (0.20) (0.37) Restructuring, impairment, early debt extinguishment costs 0.02 - 0.02 Corporate / Other (8) 0.05 0.04 0.16 --------------------- ----------------- EARNINGS PER SHARE $ 0.26 $ 0.26 $ 0.96 ========== ========== ================= (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.
SOURCE: Buckeye Technologies Inc.
Buckeye Technologies Inc. Steve Dean, 901-320-8352 Senior Vice President and Chief Financial Officer or Daryn Abercrombie, 901-320-8908 Investor Relations www.bkitech.com
Copyright Business Wire 2008
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