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Buckeye Technologies Inc. (BKI)

F3Q08 Earnings Call

May 5, 2008 11:00 am ET

Executives

John B. Crowe, Chief Executive Officer

Kristopher J. Matula, President and Chief Operating Officer

Steven G. Dean, Senior Vice President and Chief Financial Officer

Elizabeth J. Welter, Vice President and Chief Accounting Officer

Daryn Abercrombie, Senior Finance and Investor Relations Manager

Analysts

Gail Glazerman – UBS Securities LLC

Chip A. Dillon – Citigroup

Napoleon Overton – Morgan Keegan

Presentation

Operator

Good day and welcome to the Buckeye Technologies Inc. Third Quarter Earnings Results Conference Call. Today’s call is being recorded. Presently, all parties participating in this call will listen to opening remarks made by the company. After the prepared remarks, Buckeye management will answer analyst questions. At this time for opening remarks and introductions, I’d like to turn the call over to Mr. John Crowe, Chief Executive Officer of Buckeye. Please go ahead sir.

John B. Crowe

Thank you Vickie. Good morning and welcome to Buckeye’s conference call commenting on our results for the January-March quarter 2008. Today I’m joined in this call by Kris Matula, President and Chief Operating Officer; Steve Dean, Senior Vice President and Chief Financial Officer; Beth Welter, Vice President and Chief Accounting Officer; and Daryn Abercrombie, Senior Finance and Investor Relations Manager. After Steve and I have made some introductory remarks, we will respond to your questions. First, Daryn will read our Safe Harbor Statement.

Daryn Abercrombie

Thank you John. Answers to questions and other comments may constitute forward-looking statements within the meaning of the Federal Securities laws. Although management believes these statements are based on reasonable assumptions, these statements are subject to risks and uncertainties that could cause actual results to differ materially, including but not limited to risks relating to economic, competitive, governmental, and technological factors affecting the company’s financing, markets, order volumes, prices, products, operations, capital expenditures, and costs. Other risk factors can by found on Buckeye’s press releases and public filings with the Securities and Exchange Commission. Additionally, non-GAAP financial measures may be discussed during this call. Any required disclosures with respect to these measures are provided in the investor relations section of our company website, www.bkitech.com.

John B. Crowe

Thank you Daryn. We had another good quarter with sales up 5% and earnings per share up 55% versus the same period a year ago. I’d indicated in January it would be very difficult to repeat the outstanding operating performance of the October-December quarter. In the just completed quarter, the company’s earnings were $10.4 million after tax, 26 cents per share, including a $0.8 million, 2 cents per share tax benefit related to the identification of additional R&D tax credits. This compares to earnings for the same period a year ago of $6.6 million after tax, 17 cents per share including $0.8 million after tax, 2 cents per share in restructuring expenses. Net sales of $201.9 million increased 4.6% compared to the same quarter a year ago. We also reached a significant milestone in the just completed quarter as we reduced our long-term debt to $394.5 million. This achieves the $400 million debt target we established several years ago, and now positions Buckeye to pursue growth initiatives and opportunities. While our earnings were substantially improved from the year ago period, our financial results for the just completed quarter fell short of our expectations. Sales for the quarter in our non-woven segment were up $14 million compared to the October-December quarter; $12 million of that reduction was due to the previously announced volume loss with a large customer and $2 million because of weaker than expected sales in North America, wet wipes market this quarter. We continue to see strong demand and a strong pricing environment for our products in especially fiber segment of our business with sales up $3 million for the quarter compared to the October-December quarter. However, our specialty fiber sales were $3.5 million lower than we expected due to unplanned maintenance outages and delayed shipments due to outbound ocean vessel availability issues. Now, Steve will review the supplemental reconciliation chart. Steve?

Steven G. Dean

Good morning. I would like to provide some additional color to the quarterly sales and earnings reconciliations included on the last page of this quarter’s press release financials. Starting with the first column at the top of the page, net sales for the third quarter were up $8.9 million or 4.6% compared to the same quarter a year ago. Selling prices were significantly higher, up 9.4% on the average compared to the same period a year ago and accounting for $18.1 million in incremental sales revenue year over year. Sales volumes have declined year over year accounting for a reduction in sales of $12.7 million compared to the same period in 2007, partially offsetting the impact of higher prices. This reduction in volume is mostly due to the previously announced volume loss with a large customer in our non-woven segment. The impact of the stronger year added $3.2 million to our sales for the quarter. Selling prices were up across all segments of our business compared to the same period last year. Selling prices were up approximately 9% for the quarter on our wood specialty products primarily as a result of price increases implemented in January. Prices were up about 15% year over year on our cotton specialty products due to price increases implemented over the course of the year. Fluff pulp pricing increased by about $100 per ton compared to the same quarter in 2007 and nonwoven selling prices were up about 2% on the average excluding the impact of mix in prices.

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