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Buckeye Technologies, Inc. (BKI)

F1Q2011 (Qtr End 09/30/10) Earnings Conference Call

October 28, 2010 9 AM ET

Executives

Daryn Abercrombie – IR Manager

John Crowe – Chairman and CEO

Steve Dean – SVP and CFO

Marko Rajamaa – SVP, Nonwovens

Doug Dowdell – SVP, Specialty Fibers

Kris Matula – President and COO

Analysts

Gail Glazerman – UBS

James Armstrong – Credit Suisse

Michael Keith – 12th Street Asset Management

Presentation

Operator

Good day, and welcome to the Buckeye Technologies first quarter 2011 earnings results conference call. Today’s call is being recorded. Presently all parties participating in this call will listen to remarks made by the company. After the prepared remarks, Buckeye management will answer analyst questions.

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

Good morning and welcome to Buckeye’s conference call commenting on our results for the July to September quarter 2010, our fiscal 2011 first quarter.

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, Corporate 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

Buckeye’s first quarter results were significantly improved when compared to last year’s first quarter and the previous. While sales revenue was down slightly over the previous quarter, sales revenue was up over 14% compared to the July-September quarter last year. During the quarter we recovered from the June power outage at our Florida facility. We did experience additional losses in July due to the power outage in June. We have installed additional protective equipment and we believe that event is well behind us.

We reported yesterday that our first quarter net income was $64.4 million or $0.59 per share. Excluding income from cellulosic biofuels credit and restructuring charges, first quarter’s net income was $13.7 million or $0.34 per share. Excluding special items this quarter and in comparison quarters, our earnings per share compares to earnings per share of $0.26 in the previous quarter and $0.12 for the July-September quarter last year. First quarter sales revenue of $203 million shows a significant improvement on ours markets and product mix compared to $177 million for the same period last year.

In our fourth quarter earnings call, we indicated that we expected to have lower shipments in the first quarter due to the power outage we experienced in June, the seasonal shortage of cotton linters and the need to build an adequate inventory to protect our customers. Shipment volume was down 5% sequentially and year-over-year. However, nonwoven shipment volume was up 9% year-over-year.

With the help of our $67 million income tax refund, we reduced long-term debt during the quarter to $165 million.

Quarter one was a milestone quarter for Buckeye. On September 15, we paid our first ever dividend of $0.04 per share. Also September 1, we announced that we would call the remaining $140 million of our 8.5% 2013 bonds on October 1, which we did with cash and increased borrowing on our revolver. As of October 22, 2010, we have refinanced our remaining debt by establishing a new and larger revolver of $300 million with a five-year tenure and current rate of LIBOR plus 200 basis points. Steve will cover the terms of that new revolver in more detail during his comments.

In summary, we had a good quarter and with most of our markets performing at better than pre-recession conditions, we continue to have low finished goods inventory and our specialty fibers business continues to be sold out and we are not able to meet all the product demands of our customers. This was our best quarter in nearly three years and we are positive about our outlook that we have more to do and we will discuss the outlook going forward after Steve reviews the supplemental financial reconciliation charts. Steve?

Steve Dean

Thank you, John. Good morning. I would like to refer you to the earnings slides, which are posted on our website and on www.streetevents.com, which include more detailed reconciliations of our first quarter earnings versus prior periods. This morning I am going to focus my comments on comparing our results for the just completed July to September quarter, which is our fiscal first quarter to the April-June quarter, our fiscal fourth quarter. We have also included several slides with comparisons against the year-ago quarter in the appendix for your reference.

Starting with number 4, you will see a consolidated earnings summary comparing our earnings for the just completed first quarter to the fourth quarter. First quarter net sales of $202.1 million were up $3 million or 1.5% compared to the fourth quarter. Specialty fiber sales were down $5.9 million or 4.0%. Shipment volume for the segment was up 6% as we rebuilt inventories after the fourth quarter power outage at our Foley mill and limited cotton linter availability constrained shipments from our specialty cotton fibers plants, which only operated at about 30% of capacity during the quarter.

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