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Buckeye Technologies Inc. (BKI)

F1Q13 Earnings Call

October 24, 2012 11:00 AM ET

Executives

Eric Whaley – Director, IR

John Crowe – Chairman and CEO

Doug Dowdell – SVP, Specialty Fibers

Hank Hall – VP, Cotton Cellulose

Marko Rajamaa – SVP, Nonwovens

Steve Dean – SVP and CFO

Analysts

Gale Glazerman – UBS Securities

James Armstrong – Vertical Research Partners

Tim Quillin – Stephens Incorporated

Steve Chercover – D.A. Davidson

Hamir Patel – RBC Capital Markets

Stuart Benway – S&P Capital IQ

Presentation

Operator

Good day and welcome to the Buckeye Technologies first quarter 2013 earnings conference call. Today’s conference call is being recorded. Presently all parties participating on 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 would like to turn the call over to Eric Whaley, Investor Relations Director. Please go ahead sir.

Eric Whaley

Thanks Lindy. Good morning and welcome to Buckeye’s conference call, commenting on our results for the July – September quarter, 2012.

Today I’m joined in this call by John Crowe, Chairman and CEO; Steve Dean, Executive Vice President and Chief Financial Officer; Doug Dowdell, Executive Vice President of Specialty Fibers; Marco Rajamaa, Senior Vice President of Nonwovens; and Hank Hall, Vice President of Cotton Cellulose.

After John, Steve, Doug and Hank have made some introductory remarks we will respond to your questions. First let me briefly cover our safe harbor statement.

The matters discussed in this call include forward-looking statements and while 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 these presentation as well as the company’s most recent annual report and form 10-K and quarterly report on form 10-Q.

I’d also like to refer you to the supplemental earnings slides posted on our website and on www.streetevents.comfor additional details related to this call. Now I’ll turn it over to John.

John Crowe

Thanks Eric. Good morning and I will be referencing my comments to slide number three in our information we have online. Our first quarter fiscal 2013 was as we expected that the impact of the June Foley outage on the quarter was less than we expected. We provided guidance at our last earnings call that we expected earnings in the range of $0.55 to $0.60 and we delivered adjusted earnings of $24.6 million or $0.62 per share.

This compared with our record adjusted earnings of $29.9 million or $0.74 per share for the first quarter last year. Our quarter one fiscal 2013 results included the impact of the June steam drum failure of $0.04 per share versus our forecast of $0.10 and over $1 million for approximately $0.02 per share impact of our growth initiative, expenses for travel, consulting and legal fees.

During the quarter we made good progress on our specialty expansion project and the Oxygen Delignification project at our Florida wood fibers facility. Both are important projects that will be coming online in April and July of 2013 respectively and will be key contributors to our revenue growth and cost reduction efforts. Net sales revenue for the first quarter was $197 million, off 15% from our adjusted first quarter revenue last year of $231 million and down 12% from our previous quarter.

The sale of decaying assets accounted for $5 million of the reduction in sales revenue and weaker sales in wood and cotton accounted for the additional $30 million year-over-year shortfall. We had forecasted some of this shortfall due to our recovery from the June/July Foley mill outage. In the just completed quarter we needed to restock what at that time was a depleted inventory situation.

But then headwinds in the market particularly softness in our key markets of tire cord, auto filtration and fluff for more than expected. We were able to offset some of this shortfall by generating a strong gross margin of 25.4%. Our nonwoven segment was also a good contributor. We are pleased with the strong revenue quarter for nonwovens and the improving ROIC for the nonwoven segment.

Balance sheet debt climbed during the quarter as we repaid approximately $28 million of alternative fuel mixture credit for a higher value cellulosic biofuel credit to be received in the near future. Steve will speak to this in his remarks. We continue to focus on a balanced approach to the allocation of capital. Yesterday the board of directors voted to increase our quarterly cash dividend to $0.09 per share, a 1% increase, payable on December 14th 2012.

While we have seen softening in some of the markets where we are the number one supplier, we have a number of opportunities to continue improving our results and delivering on our profitable, sustainable growth strategy. I will discuss the outlook going forward after Steve reviews the supplemental financial reconciliation charts. Steve?

Steve Dean

Thanks John. Good morning? I’d like to review a few of the supplemental financial reconciliation charts posted on the website with you this morning focusing on comparing the July – September quarter which is our fiscal first quarter. To the April – June quarter which was our fiscal fourth quarter of the previous year.

I also wanted to provide you with some additional details on the actual and projected impacts of the June steam drum failure outage at Foley on our financial results. We have included the usual slides with comparisons against the year-ago quarter and the appendix for your reference.

Read the rest of this transcript for free on seekingalpha.com