Buckeye sales off 12.4% versus year-ago quarter
Buckeye Technologies Inc announced earnings for the October – December quarter of 7 cents per share (excluding a potential goodwill impairment charge) compared to 35 cents per share in the same period last year and 23 cents per share recorded in the July – September quarter of 2008 due to weakened demand and associated production downtime at several plants resulting from the global economic slowdown.
Net sales of $184.7 million for the quarter were down 12.4% compared to the same quarter a year ago and were down 16.6% versus the record July-September quarter.
Due to adverse equity market conditions which have caused a decrease in current market multiples and the price of the company's stock, which is currently trading well below book value, it has been determined that an indicator of potential goodwill impairment exists for the October-December quarter.
Accordingly, the Company has commenced performing an interim goodwill impairment test, and expects by the first week of February to have an indication of whether an impairment charge will be required. In the event that there is a determination that goodwill is impaired, a non-cash charge, which would reduce reported net income and earnings per share for the quarter, would be required. The maximum goodwill balance that would be subject to impairment as of December 31, 2008 is $140 million.
Chairman and Chief Executive Officer John B. Crowe said, “This has been a challenging quarter for Buckeye, as the global economic recession has reduced demand for some of our products. While demand for most of our high-end specialty wood products remains solid, demand for our specialty cotton fibers has weakened significantly."
"Sales of our airlaid nonwovens products were also down primarily due to customer inventory reductions and normal seasonal weakness in Europe in December. As we previously announced, we took market downtime at our Foley, Memphis and Americana plants during the quarter to match production to shipment demand.”
“In addition to a company-wide focus on reducing costs and maintaining tight control over our working capital, we have reduced our planned capital spending for this fiscal year from $64 million to $40 million in order to accelerate debt reduction efforts."
"We have established a goal of paying down our debt from the current level of $391 million to $350 million by December 2009 in order to ensure that we have sufficient borrowing capacity on our $200 million revolving credit facility to pay off the $110 million in bonds which mature in October 2010 without going to the credit markets for new financing. Buckeye was well in compliance with all of its debt covenants and had $114 million in available borrowing capacity plus $8.5 million in cash on its balance sheet at the end of December.”
Mr. Crowe went on to say, “Because of our restructuring efforts over the last few years, which included closing high cost capacity, lowering our operating costs, and reducing our debt from $700 million to under $400 million, we believe we are well positioned to deal with this economic downturn. While our visibility into future order trends at the moment is poor, we expect that the January-March quarter will show improved profitability at similar revenue levels as compared to the quarter just completed."
"While we expect fluff pulp prices to decline, we have instituted price increases in our high-end wood specialty markets effective January 1 and energy and transportation costs are down. Caustic prices will start to come down in February, but our average caustic cost for the quarter is still likely to be higher than it was in the October-December quarter.”
Buckeye Technologies Inc