Shipment volumes up for cotton specialty fibers & nonwovens at Buckeye
Buckeye Technologies Inc announced first quarter net income of $39.2 million or $1.00 per share. First quarter earnings included net income of $35.1 million, or $0.89 per share, from alternative fuel mixture credits earned during the quarter. Net sales were $177 million for the first quarter of fiscal 2010 compared to a record $221 million in the first quarter of fiscal 2009.
Excluding income from alternative fuel mixture credits (AFMC), adjusted net income was $4.1 million, or $0.11 per share versus first quarter fiscal 2008 net income of $8.9 million, or $0.23 per share. This $0.12 per share decrease in earnings, compared to last year, was driven by reduced operating income (-$0.17 per share after tax) due primarily to the economic downturn which has resulted in reduced shipment volumes and in a less favorable grade mix. While overall selling prices were lower, this was offset by lower input prices for raw materials, chemicals, energy and transportation costs. The impact of reduced operating income was partially offset by lower interest expense (+$0.03) and reduced foreign exchange loss (+0.01).
Adjusted earnings of $0.11 per share, excluding the impact of the AFMC, were $0.07 lower than the $0.18 earned in the fourth quarter. A higher effective tax rate accounted for $0.06 of this reduction in earnings. The drop in adjusted operating income, including a $0.01 cost relating to staffing reductions implemented during the quarter at our Memphis cotton specialty fibers plant, was mostly offset by lower interest expenses. Compared to the fourth quarter, sales were up slightly as shipment volumes were up about 4% but this was offset by lower pricing and a less favorable grade mix. Alternative fuel mixture credits earned during the quarter, at $35.8 million net of expenses, was down by $18.4 million compared to the fourth quarter because we recognized income for the first four and a half months of earned credits during that quarter.
Total debt declined by a further $32.5 million to $295.0 million during the quarter, of which $8 million was due to cash generated by the alternative fuel mixture credit, and $26 million was due to strong cash flow from operations, including a $6 million reduction in inventory. We expect to use a portion of the AFMC in fiscal year 2010 to offset U.S. federal estimated income tax payments and to receive the balance in fiscal year 2011 as a cash refund after filing our 2010 tax return. The receipt of $7.4 million in grant money from the State of Florida in support of our Foley Energy Project reduced the net cash used in investing activities to only $1.4 million for the quarter. As of September 30, we had $23 million of cash and $100 million in borrowing capacity on our credit facility.
Chairman and Chief Executive Officer John B. Crowe said, “While our sales and earnings, excluding alternative fuel mixture credits, continue to be down significantly compared to the year ago quarter, we are encouraged that our shipment volume has increased sequentially in each of the past two quarters. In the just completed quarter, shipment volumes were up for both wood and cotton specialty fibers and for nonwovens. Capacity utilization at our cotton cellulose plants in Memphis and Americana improved over the preceding quarter, but was still below 50% at both facilities. We further reduced staffing at our Memphis plant during the quarter to better align staffing levels with current market conditions. Increased demand for our high-end wood specialty fibers is expected to yield an improved mix in the current quarter.”