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Buckeye Technologies Inc. (BKI)

F4Q10 (Qtr End 06/30/10) Earnings Conference Call

August 4, 2010 11:00 AM ET

Executives

Daryn Abercrombie – IR Manager

John Crowe – Chairman and CEO

Steve Dean – SVP and CFO

Kristopher Matula – President and COO

Doug Dowdell – SVP, Specialty Fibers

Marko Rajamaa – SVP, Nonwovens

Dennis Livingston – Tax Director

Analysts

Gail Glazerman – UBS

James Armstrong – Credit Suisse

William Hiller – Ridge Crest Investors

Presentation

Operator

Good day, and welcome to the Buckeye Technologies Inc’s Fourth Quarter and Fiscal Year 2010 Earnings Results Conference Call. (Operator Instructions) At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Daryn Abercrombie, Investor Relations Manager of Buckeye Technologies. Please go ahead.

Daryn Abercrombie

Thank you, (Melissa). Good morning and welcome to Buckeye’s conference call commenting on our results for the April to June quarter 2010 and our 2010 fiscal year. Today I’m joined on this call by John Crowe, Chairman and Chief Executive Officer; Kris Matula, President and Chief Operating Officer; Steve Dean, Senior Vice President and Chief Financial Officer; Doug Dowdell, Senior Vice President, Specialty Fibers; Marko Rajamaa, Senior Vice President Nonwovens; and Dennis Livingston, Tax Director.

After John and Steve make some introductory remarks, we will respond to your questions. Before we get started, however, I’d like to read our Safe Harbor statement. The matters discussed in this call include forward-looking statements that involve risks and uncertainties that may cause the company’s actual results to differ materially from those projected in such forward-looking statements.

For further information on factors that could impact the company and statements contained herein, please refer to the slides accompanying this presentation as well as the company’s most recent annual report on Form 10-K and quarterly report on Form 10-Q.

Now I’ll turn it over to John.

John Crowe

Thanks, Daryn. Good morning. Buckeyes’ fourth quarter results showed good improvement over last year’s results. While earnings were down from the previous quarter, I was pleased with the overall performance given the massive power failure in (inaudible) Florida facility. On June 17, we experienced the failure our utility provider’s incoming line that sent a voltage surge to most of our electrical components resulting in losses of variable frequency drives and other electrical controlled components. It is times like these when you see the strength and can-do attitude of the organization. Working around the clock, the Florida organization recovered on both mills, holding the outage to a total of five days.

As we reported yesterday, fourth quarter net income was $9.7 million or $0.24 per share. Excluding restructuring charges and early extinguishment of debt, fourth quarter’s net income was $10.6 million or $0.26 per share. Excluding special items this quarter in the comparison quarters, our adjusted earnings per share compares to adjusted earnings per share of $0.28 in the previous quarter and $0.18 for the April-June quarter last year.

Quarter 4 sales revenue of $205 million shows the continued improvement in our markets and compares to 177 million for the same period last year and 191 million for the previous quarter.

The power outage negatively impacted our fourth quarter operational results by approximately $4 million. Strong shipment volumes across the company were not enough to offset the expenses associated with the outage and recovery. We expect to recover some of the losses, less our $2 million deductible from our Business interruption and Property insurance. Also we had two major plan maintenance outages for our Florida facility in June. And both were impacted by the power outage, adding to increased expenses.

June 30 was the end of our fiscal year 2010 and we finished the year with sales revenue of $756 million, slightly above fiscal year 2009 totals. Our fiscal year earnings were a record, $114.6 million, or $2.90 per share, compared to a loss in fiscal 2009 of $65million $1.69 per share. Excluding special items, our fiscal year 2010 net earnings of $0.88 per share, compares to fiscal year 2009 of $0.58 per share. The improvement was due to better product mix, improved (inaudible) specialty in nonwovens’ volume, lower operating cost, and reduction in interest expense and improved pricing in several areas of our businesses.

We reduced balance sheet debt during the quarter to $238 million better than the target that we set up $250 million. In fiscal year 2010, we reduced our long-term debt by $90 million through a combination of free cash flow and the proceeds from the alternative fuel mixture tax credit.

We recently received our fiscal year 2010 income tax refund of $67 million less and at the end of business on August 2, of $67 million. As I stated in our earnings call in April, Buckeye is better positioned to have a balanced approach to allocation of capital. While debt reduction is staying below two to two and a half times debt to EBITDA or properties, Buckeye will look at ways to return cash to our shareholders plus investing in high rated return projects to grow and enhance the value of our businesses.

Yesterday, our board of directors announced our first ever quarterly dividend of $0.04 per share to be paid on September 14. With approximately 40 million shares outstanding. This will initially represent approximately a $6.5 million annual distribution of cash to our shareholders. This is a milestone for Buckeye. It is one way to reward shareholders and reflects our strong financial and our confidence in our outlook. Additionally, we are in position to considerably purchasing shares when it can be done at a stock price it can provide an acceptable return of investment and is competitive with our other investment opportunities. Currently we have authorization to repurchase 5.6 million shares.

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