Edgar Filing: BUCKEYE TECHNOLOGIES INC

june300810-k.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

SANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2008

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From ____ to ____

Commission file number: 33-60032

Buckeye Technologies Inc.

(Exact name of registrant as specified in its charter)

Delaware		62-1518973
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1001 Tillman Street, Memphis, Tennessee		38112
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (901) 320-8100

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on which Registered
Common Stock, par value $0.01 per share		New YorkStock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

Yes No S

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes No S

Note – Checking the box above will not relieve any registrant required to file report pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. S

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer” or “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one).

Large accelerated filer 

Accelerated filer S

Non-accelerated filer 

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No S

As of December 31, 2007, the aggregate market value of the registrant’s voting common equity held by non-affiliates, computed by reference to the price at which the common equity was last sold, was approximately $469.5million.

As of August 25, 2008, there were outstanding 39,160,377Common Shares of the Registrant.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Buckeye Technologies Inc.’s 2008Annual Proxy Statement to be filed with the commission in connection with the 2008Annual Meeting of Stockholders are incorporated by reference into Part III and IV.

INDEX

BUCKEYE TECHNOLOGIES INC.

ITEM		PAGE
	PART I
1.	Business	3
1A.	Risk Factors	8
1B.	Unresolved Staff Comments	11
2.	Properties	12
3.	Legal Proceedings	13
4.	Submission of Matters to a Vote of Security Holders	13

	PART II
5.	Market for the Registrant’s Common Stock, Related Security Holder Mattersand Issuer Purchases of Equity Securities	13
6.	Selected Financial Data	15
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
7A.	Qualitative and Quantitative Disclosures About Market Risk	27
8.	Financial Statements and Supplementary Data	29
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	29
9A.	Controls and Procedures	29
9B.	Other	29

	PART III
10.	Directors,Executive Officersand Corporate Governance	30
11.	Executive Compensation	32
12.	Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters	32
13.	Certain Relationships and Related Transactions, and Director Independence	32
14.	Principal Accountant Fees and Services	32

	PART IV
15.	Exhibits and Financial Statement Schedules	33
	Signatures	34

	OTHER
	Index to Consolidated Financial Statements and Schedules	F-1

PART I

Item 1. Business

General

Buckeye Technologies Inc. is a leading producer of value-added cellulose-based specialty products, headquartered in Memphis, Tennessee. We believe that we have leading positions in many of the high-end niche markets in which we compete. We utilize our expertise in polymer chemistry, leading research and development and advanced manufacturing facilities to develop and produce innovative and proprietary products for our customers. We sell our products to a wide array of technically demanding niche markets in which we believe our proprietary products, manufacturing processes and commitment to customer technical service give us a competitive advantage. We are the only manufacturer in the world offering cellulose-based specialty products made from both wood and cotton and utilizing wetlaid and airlaid technologies. As a result, we believe we produce and market a broader range of cellulose-based specialty products than any of our competitors. We produce precisely tailored products designed to meet individual customer requirements. Our focus on specialty niche markets allows us to establish long-term supply positions with key customers. We operate manufacturing facilities in the United States, Canada, Germany and Brazil.

Cellulose is a natural fiber derived from trees and other plants that is used in the manufacture of a wide array of products. The total cellulose market generally can be divided into two categories: commodity and specialty. Manufacturers use commodity cellulose to produce bulk paper and packaging materials, the markets for which are very large but highly cyclical. Specialty cellulose is used to impart unique chemical or physical characteristics to a diverse range of highly engineered products. Specialty cellulose generally commands higher prices, and demand for specialty cellulose is less cyclical than commodity cellulose. We believe the more demanding performance requirements for products requiring specialty cellulose limit the number of participants in our niche markets. Our focus on niche specialty cellulose markets has enabled us to maintain positive cash flows even during cyclical downturns in the commodity cellulose markets.

Company History

We and our predecessors have participated in the specialty cellulose market for over 85 years and have developed new uses for many cellulose-based products. We began operations as an independent company on March 16, 1993, when we acquired the cellulose manufacturing operations of the Procter & GambleCompany located in Memphis, Tennessee and Perry, Florida (the Foley Plant), with Procter & Gamble retaining a 50% limited partnership interest in the Foley Plant. We became a public company in November of 1995 and simultaneously acquired and redeemed Procter & Gamble’s remaining interest in the Foley Plant.

In May 1996, we acquired the specialty cellulose business of Peter Temming AG located in Glueckstadt, Germany. In September 1996, we acquired Alpha Cellulose Holdings, Inc., a specialty cellulose producing facility located in Lumberton, North Carolina. In May 1997, we acquired Merfin International Inc., a leading manufacturer of airlaid nonwovens with facilities located in Canada, Irelandand the United States. In October 1999, we acquired essentially all of the assets of Walkisoft, UPM-Kymmene’s airlaid nonwovens business. The acquisition of Walkisoft added manufacturing facilities in Steinfurt, Germanyand Gaston County, North Carolina. In March 2000, we acquired the intellectual property rights to the Stac-Pac™ folding technology. In August 2000, we acquired the cotton cellulose business of Fibra, S.A. located in Americana, Brazil. In calendar 2001, we commenced operating the world’s largest airlaid nonwovens machine at our Gaston, North Carolina facility and started up a cosmetic cotton fiber line at our Lumberton, North Carolina facility.

Due to a decline in demand for cotton content paper, in August 2003, we closed the specialty cotton papers portion of our Lumberton, North Carolina facility. Due to excess airlaid production capacity around the globe we closed our single-line airlaid nonwovens facility in Cork, Ireland during July 2004. In December 2005, we ceased production at our cotton linter pulp facility in Glueckstadt, Germany. In conjunction with this closure, we upgraded the capability of our Americana, Brazil manufacturing facility. This expansion was completed during fiscal year 2006. See Note 3, Impairment of Long-Lived Assets and Assets Held for Sale, to the Consolidated Financial Statements for further discussion of the Lumberton, North Carolina; and Glueckstadt, Germany closures.

We are incorporated in Delaware and our executive offices are located at 1001 Tillman Street, Memphis, Tennessee. Our telephone number is (901) 320-8100.

Products

Our product lines can be broadly grouped into four categories: chemical cellulose, customized fibers, fluff pulp and nonwoven materials. We manage these products within two reporting segments: specialty fibers and nonwoven materials. The chemical cellulose and customized fibers are derived from wood and cotton cellulose materials using wetlaid technologies. Fluff pulps are derived from wood using wetlaid technology. Wetlaid technologies encompass cellulose manufacturing processes in which fibers are deposited using water. Airlaid nonwoven materials are derived from wood pulps, synthetic fibers and other materials using airlaid technology. Airlaid technology utilizes air as a depositing medium for fibers, one benefit of which is an increased ability as compared to wetlaid processes to mix additional feature-enhancing substances into the material being produced. A breakdown of our major product categories, percentage of sales, product attributes and applications is provided below.

Product Groups	% of Fiscal 2008Sales	Value Added Attributes	Market for End Use Applications
Specialty Fibers Chemical Cellulose Food casings Rayon industrial cord High purity cotton ethers Film for liquid crystal displays	32%	Purity and strength Strength and heat stability High viscosity, purity and safety Transparency/clarity, strength and purity	Hot dog and sausage casings High performance tires and hose reinforcement Personal care products, low fat dairy products, pharmaceuticals and construction materials Laptop and desktop computers and television screens
Customized Fibers Filters Specialty cotton papers Cosmetic Cotton Buckeye UltraFiber 500®	17%	High porosity and product life Color permanence and tear resistance Absorbency, strength and softness Finishing and crack reduction	Automotive, laboratory and industrial filters Personal stationery, premium letterhead and currency Cotton balls and cotton swabs Concrete
Fluff Pulp Fluff pulp	19%	Absorbency and fluid transport	Disposable diapers, feminine hygiene products and adult incontinence products
Nonwoven Materials Airlaid nonwovens	32%	Absorbency, fluid management and wet strength	Feminine hygiene products, specialty wipes and mops, tablecloths, napkins, placemats, incontinence products and food pads

See Note 14, Segment Information, to the Consolidated Financial Statements for additional information on products.

Raw Materials

Slash pine timber and cotton fibers are the principal raw materials used in the manufacture of our specialty fibers products. These materials represent the largest components of our variable costs of production. The region surrounding the Foley Plant has a high concentration of slash pine timber, which enables us to purchase adequate supplies of a species well suited to our products at an attractive cost. In order to be better assured of a secure source of wood at reasonable prices, we have entered into timber purchase agreements which allow us to purchase a portion of our wood at market prices that are fixed annually or current market prices as stated in the agreements. Additional information is included in Note 16, Commitments, to the Consolidated Financial Statements.

We purchase cotton linter fiber either directly from cottonseed oil mills or indirectly through agents or brokers. We purchase the majority of our requirements of cotton fiber for the Memphis and Lumberton plants domestically. The majority of the cotton fiber processed in the Americana plant comes from within Brazil.

Fluff pulp is the principal raw material used in the manufacture of our nonwoven materials products. Approximately 65% of our fluff pulp usage is supplied internally and the remainder is purchased from several other suppliers. In addition to fluff pulp, these products are comprised of synthetic fibers, latex polymers, absorbent powders and carrier tissue depending on grade specifications. These materials are also purchased from multiple sources.

The cost and availability of slash pine timber, cotton linter fiber and fluff pulp are subject to market fluctuations caused by supply and demand factors. We do not foresee material constraints from pricing or availability for slash pine timber and fluff pulp. We continue to have raw material availability issues for our cotton linter fibers in both North America and Brazil. We have increased our imported cotton linters purchases for specialty cotton fiber production in Memphis in order to minimize the impact of current constraints on North American cotton fiber availability. For the near term, this raw material availability will limit our growth and increase production costs.

Our manufacturing processes, especially for specialty fibers, require significant amounts of fuel oil and natural gas. These manufacturing inputs are subject to significant changes in prices and availability, which have adversely impacted our operating results.

Sales and Customers

Our products are marketed and sold through a highly trained and technically skilled sales force. We maintain sales offices in the United States and Europe. Our worldwide sales are diversified by geographic region as well as end-product application. Our sales are distributed to customers in over 60 countries around the world. Our fiscal 2008 sales reflect this geographic diversity, with 42% of sales in North America, 37% of sales in Europe, 11% of sales in Asia, 4% of sales in South America and 6% in other regions. Approximately 85% of our worldwide sales for fiscal 2008 were denominated in U.S. dollars. Our products are shipped by rail, truck and ocean carrier. Geographic segment data and product sales data are included in Note 14, Segment Information, to the Consolidated Financial Statements.

Sales by geographical destination for the three years ended June 30, 2008 were as follows:

(in millions)

Sales by Destination
	2008				2007				2006
United States	$	274	33	%	$	254	33	%	$	230	32	%
Germany		72	9			66	9			59	8
Italy		62	7			72	9			66	9
Japan		39	5			38	5			38	5
Mexico		38	5			33	4			25	3
Canada		31	4			45	6			47	6
France		31	4			25	3			22	3
Brazil		30	3			25	3			21	3
Spain		26	3			26	3			25	3
All other		223	27			185	25			195	28
Total	$	826	100	%	$	769	100	%	$	728	100	%

The high-end, technically demanding specialty niche markets that we serve require a higher level of sales and technical service support than do commodity product sales. Our sales, product development and customer service professionals work with customers in their plants to design products tailored precisely to their product needs and manufacturing processes. In addition to a direct sales force, we also utilize outside sales agents in some parts of the world.

Procter & Gamble is our largest customer, accounting for 10% of our fiscal 2008 net sales. Our Specialty Fibers segment accountsfor approximately 66% of the total sales to Procter & Gamble. No other customer accounted for greater than 5% of our fiscal 2008 net sales.

Research and Development

Our research and development activities focus on developing new products, improving existing products and enhancing process technologies to further reduce costs and respond to environmental needs. We have research and development pilot plant facilities in Memphis, and we employ engineers, scientists and technicians who are focused on advanced products and new applications to drive future growth. Our pilot plant facilities allow us to produce, test and deliver breakthrough products to the market place on a more cost-effective basis while minimizing interruptions to the normal production cycles of our operating plants.

Research and development costs of $8.2 million, $8.3 million and $9.2 million were charged to expense as incurred for the years ended June 30, 2008, 2007and 2006, respectively.

Competition

There are relatively few specialty fibers producers when compared with the much larger commodity paper pulp markets. The technical demands and unique requirements of the high-purity chemical cellulose or customized fiber pulp user tend to differentiate suppliers on the basis of their ability to meet the customer’s particular set of needs, rather than focusing only on pricing. The high-purity chemical cellulose and customized fiber markets are less subject to price variation than commodity paper pulp markets. Major competitors include Archer-Daniels-Midland Company, Borregaard, RayonierInc. and Tembec Inc.

We believe that the number of producers is unlikely to grow significantly due to the substantial investment required to enter the mature specialty fibers market and due to sufficient existing capacity. However, Sateri is in the process of adding 250,000 tons of specialty pulp capacity in Brazil (Bahia) in fiscal year 2008 and is currently operating in the start-up stage. Also, a former Weyerhaeuser mill in Cosmopolis, Washington with an annual capacity of 155,000 metric tons may restart production. We do not expect that this planned increase in industry capacity will adversely impact our specialty fibers business in our fiscal year 2009. However, it is possible that it could have an impact in the following fiscal year.

Although global demand for fluff pulp is growing by 3% to 5% annually, fluff pulp prices tend to vary directly with commodity paper pulp prices because fluff pulp is often produced in mills that also produce commodity paper pulp. Our strategy is to reduce our exposure to fluff pulp by increasing our sales of more specialized wood cellulose into new and existing markets. We also used approximately 41,000 metric tons of fluff pulp from our Perry, Florida wood cellulose facilityduring this fiscal year as a key raw material in our airlaid nonwovens operations. We currently produce less than 6% of the world’s supply of fluff pulp. Major competitors include AbitibiBowaterInc., International PaperCompany, GP Cellulose, LLC, Rayonier and Weyerhaeuser. We understand International Paper has added capability at two of its mills to begin producing fluff pulp and GP Cellulose announced it is adding capacity at its Brunswick mill, both of which will create additional fluff pulp capacity. The potential added capacity from these and other smaller announced additions is in the 500,000 to 600,000 ton range over a two year period (2008 to 2009) compared to a current global market size 4.5 million tons annually.

Demand for airlaid nonwovens grew significantly in the 1990’s. Since then, significant capacity expansion in 2001, primarily in North America, resulted in the market being oversupplied. Buckeye is the leading supplier of airlaid nonwoven materials worldwide. The markets we compete in also utilize nonwovens materials produced with technologies other than airlaid such as spunlace. Major nonwovens competitors include Ahlstrom, FiberwebPlc, Concert IndustriesLtd., DuniAB, Koch Industries,Inc., Kimberly-ClarkCorporation and Polymer Group, Inc.

While the North American industry is operating in an environment of excess supply, there is limited availability of airlaid nonwoven capacity in Europe. However, one of our competitors there, Fiberweb has commenced production at a new airlaid nonwovens plant in Italy with an annual capacity of approximately 10,000 metric tons, and Concert has announced another line at their Falkenhagen, Germany facility also with an annual capacity of 10,000 metric tons to be online in the fall of 2009. In other parts of the world, Fiberweb has started up a second machine in China, also with approximately 10,000 metric tons of annual capacity, and Sambo started up a 10,000 metric tons per year line in South Koreathis year.

Intellectual Property

At June 30, 2008and 2007, we had intellectual property assets recorded totaling $16.6 million and $18.0 million, respectively. These amounts include patents (including application and defense costs), licenses, trademarks, and tradenames, the majority of which were obtained in the acquisition of airlaid nonwovens businesses and Stac-Pacв technology. We intend to protect our patents and file applications for any future inventions that are deemed to be important to our business operations. The Stac-Pacв packaging technology, a proprietary system for packaging low-density nonwoven materials in compressed cube-shaped bales, is an example of technology we acquired to further differentiate us from our airlaid nonwovens competitors. Stac-Pacв bales facilitate our customers’ high-speed production lines with a continuous flow of material. Stac-Pacв units also reduce freight costs by compressing more material in a bale than can be shipped in a traditional roll form, which enables us to ship the bales more effectively in trucks and containers. Additional information is included in Note 1, Accounting Policies, to the Consolidated Financial Statements.

Inflation

We have experienced a significant increase in our raw material, energy, chemicals and transportation costs over the past fiscal year. We have been able to offset this cost inflation with significant increases in the selling prices of our products for the total year compared to the prior year. While oil and natural gas prices have moderated from recent peaks, we are still facing rising cost trends.

Seasonality

Our business generally is not seasonal to a substantial extent, although we ship somewhat lower specialty fiber volume in the July – September quarter and somewhat lower nonwovens volume is shipped in the October – December quarter.

Employees

As of August 15, 2008, we employed approximately 1,500 employees, of whom approximately 1,100 are employed at our facilities in the United States. Approximately 55% of the U.S.employees are represented by unions at two plants in Perry, Floridaand Memphis, Tennessee. Our Foley Plant’s labor agreement expired on March 31, 2008 and a new agreement is currently being negotiated. The agreement for the Memphis Plant is in effect through March 18, 2009. The union at our Canadian facility ratified a new labor agreement effective through June 30, 2009. A national union provides employee representation for non-management workers at our specialty fibers plant in Americana, Brazil. A works council provides employee representation for non-management workers at our nonwoven materials plant in Steinfurt, Germany. Our plants in Gaston, King and Lumberton, North Carolinaare not unionized.

None of our facilities has had labor disputes or work stoppages in recent history. The Foley and Memphis Plants have not experienced any work stoppages due to labor disputes in over 30 years and 50 years, respectively. We consider our relationships with our employees and their representative organizations to be good. An extended interruption of operations at any of our facilities, however,could have a material adverse effect on our business.

Environmental Regulations and Liabilities

Our operations are subject to extensive general and industry-specific federal, state, local and foreign environmental laws and regulations. We devote significant resources to maintaining compliance with these laws and regulations. We expect that, due to the nature of our operations, we will be subject to increasingly stringent environmental requirements (including standards applicable to wastewater discharges and air emissions) and will continue to incur substantial costs to comply with such requirements. Our failure to comply with environmental laws or regulations could subject us to penalties or other sanctions which could materially affect our business, results of operations or financial condition. Additional information is included in Note 17, Contingencies, to the Consolidated Financial Statements.

Other Information

Our website is www.bkitech.com. We make available, free of charge, through our website under the heading “Investor Relations,” annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those filed or furnished, pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended. The information on our website is not part of or incorporated by reference in this Annual Report on Form 10-K.

These reports are also available as soon as reasonably practicable after we electronically file such materials with, or furnish such materials to, the Securities and Exchange Commission, or the SEC. The public may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at Station Place, 100 F Street NE, Washington, D.C. 20549. The public may obtain information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet site that contains reports, proxy and information statements and other information filed electronically by us, which are available at http://www.sec.gov.

Safe HarborProvisions

This document contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect management’s current expectations concerning future results and events.

These forward-looking statements generally can be identified by the use of statements that include phrases such as "believe," "expect," "anticipate," "intend," "plan," "foresee," "likely," "will" or other similar words or phrases. Similarly, statements that describe management’s objectives, plans or goals are or may be forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause the actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements.

The following important factors, among others, could affect future results, causing these results to differ materially from those expressed in our forward-looking statements: dependence on a single customer; the ability to obtain additional capital, maintain adequate cash flow to service debt as well as meet operating needs; maintaining satisfactory labor relations; an inability to predict the scope of future environmental compliance costs or liabilities; pricing fluctuations and worldwide economic conditions; competition; and fluctuations in the costs and availability of raw materials.

The forward-looking statements included in this document are only made as of the date of this document and we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.

Item 1A. Risk Factors

Our operations are subject to a number of risks including those listed below and discussed elsewhere in this Annual Report on Form 10-K (particularly in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations). If any of the events described in the following risk factors actually occur, it could materially impact our results of operations and financial condition.

Risks related to our industry

We are subject to the cyclicality of our industry.

The demand and pricing of our products, particularly fluff pulp, are influenced by the much larger market for papermaking pulps which is highly cyclical. The markets for most cellulose and absorbent products are sensitive to both changes in general global economic conditions and to changes in industry capacity. Both of these factors are beyond our control. The price of these products can fluctuate significantly when supply and demand become imbalanced for any reason. Our financial performance can be heavily influenced by these pricing fluctuations and the general cyclicality of the industries in which we compete. Furthermore, a general economic downturn in a particular country or on an international scale, could reduce the overall sales within our industry, thereby likely reducing our sales. We cannot assure you that current prices will be maintained, that any price increases will be achieved, or that industry capacity utilization will reach favorable levels. The demand, cost and prices for our products may fluctuate substantially in the future and downturns in market conditions could have a material adverse effect on our business, results of operations and financial condition.

Competition and surplus capacity could adversely affect our operating results and financial condition.

The markets for our products are all competitive. Actions by competitors can affect our ability to sell our products and can affect the volatility of the prices at which our products are sold. Other actions by competitors, such as reducing costs or adding low-cost capacity, may adversely affect our competitive position in the products we manufacture and, consequently, our sales, operating income and cash flows. New competitors and the expansion of existing competitors could create a surplus capacity of the goods that we sell, which might cause us to either lose sales or lower the prices of our goods. As examples of existing competitors expanding their production, Sateri has announced that it will add 250,000 tons of specialty pulp capacity in Braziland Weyerhauser could reopen a mill with an annual capacity of 155,000 metric tons. In addition, Fiberweb and Sambo have increased airlaid nonwoven production capacity in Asia and Concert has announced additional capacity in Germanyin the fall of 2009. Actions by our competitors and any surplus capacity could cause our profits to decline, affecting our operating results and financial condition.

Market fluctuations in the availability and cost of energy and raw materials are beyond our control and may adversely impact our business.

Energy, chemicals, and raw material costs, including fuel oil, natural gas, electricity, cotton linters, wood, and caustic and other chemicals are a significant operating expense. The prices and availability of raw materials and energy can be volatile and are susceptible to rapid and substantial changes due to factors beyond our control such as changing economic conditions, currency fluctuations, weather conditions, political unrest and instability in energy-producing nations, and supply and demand considerations. We have raw material availability issues at our Memphis and Americana specialty fibers plants. We have the option to import cotton linters purchases for our Memphis specialty cotton fiber production in order to minimize the impact of current constraints on North American cotton fiber availability. We have limited production at our Americana, Brazil and Memphis specialty fibers facilities because of raw material constraints. For the near term, this raw material availability will limit growth and increase our production costs. Additionally, energy and chemical costs have increased substantially in recent years, which has resulted in increased production costs for our products. Increases in production costs could have a material adverse effect on our business, financial condition and results of operations. In addition to increased costs, it is possible that a disruption in supply of natural gas or other fossil fuels could limit our ability to operate our facilities.

Market fluctuations in the availability and cost of transportation are beyond our control and may adversely impact our business.

Our business depends on the transportation of a large number of products, both domestically and internationally. An increase in transportation rates or fuel surcharges and/or a reduction in transport availability in truck, rail and international shipping could negatively impact our ability to provide products to our customers in a timely manner. An increase in international shipping rates or fuel surcharges or a reduction in the availability of vessels could negatively impact our costs and our ability to provide products to our international customers in a timely manner. While we have had adequate transportation availability, there is no assurance that such availability can continue to be effectively managed in the future.

Risks related to our business

Exposure to commodity products creates volatility in pricing and profits.

If our research and development efforts do not result in the commercialization of new, proprietary products, we will continue to have significant exposure to fluff pulp, which could result in volatility in sales prices and profits.

If our significant customer changes its purchasing habits, our business could be adversely impacted.

Procter & Gamble is our largest single customer. We supply Procter & Gamble with fluff pulp and airlaid nonwovens, and sales to Procter & Gamble accounted for approximately 10% of our sales in fiscal year 2008. In the event that Procter & Gamble fails to continue to purchase these products from us in substantial volume, our results of operations and financial condition could be materially and adversely affected, particularly if we are unable to attract new customers.

Our substantial indebtedness could adversely affect our financial health.

As of June 30, 2008, our total debt was approximately $394 million and our total debt, as a percentage of total capitalization, was 48%. Our level of debt could have a significant adverse future effect on our business. For example:

- we may have limited ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our growth strategy, research and development costs or other purposes;

- a substantial portion of our cash flow may be used to pay principal and interest on our debt, which will reduce the funds available for working capital, capital expenditures, acquisitions and other purposes;

- our senior secured credit facility covenants require us to meet certain financial objectives and impose other restrictions on business operations. These covenants and those contained in the indentures governing our senior and senior subordinated notes limit our ability to borrow additional funds or dispose of assets and limit our flexibility in planning for and reacting to changes in our business;

- we may be more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;

- our debt level and the various covenants contained in the indentures related to our senior notes, senior subordinated notes and the documents governing our other existing indebtedness may place us at a relative competitive disadvantage as compared to certain of our competitors; and

- our borrowings under our senior secured credit facility are at floating rates of interest, which could result in higher interest expense in the event of an increase in interest rates.

Our ability to pay principal of and interest on our senior notes and senior subordinated notes, to service our other debt and to refinance indebtedness when necessary depends on our financial and operating performance, each of which is subject to prevailing economic conditions and to financial, business and other factors beyond our control.

We cannot assure you that we will generate sufficient cash flow from operations or that we will be able to obtain sufficient funding to satisfy all of our obligations. If we are unable to pay our debts, we will be required to pursue one or more alternative strategies, such as selling assets, refinancing or restructuring our indebtedness or selling additional equity capital. However, we cannot assure you that any alternative strategies will be feasible at the time or prove adequate. Also, certain alternative strategies will require the consent of our senior secured lenders before we engage in any such strategy.

Our failure to maintain satisfactory labor relations could have a material adverse effect on our business.

If our negotiations with the representatives of the unions, to which many of our employees belong, are not successful, our operations could be subject to interruptions at many of our facilities. As of August 15, 2008, we employed approximately 1,500 employees, of whom approximately 1,100 are employed at our facilities in the United States. Approximately 55% of the U.S. employees are represented by unions at two plants in Perry, Florida and Memphis, Tennessee. Our Foley Plant’s labor agreement expired on March 31, 2008 and a new agreement is currently being negotiated. The agreement for the Memphis Plant is in effect through March 18, 2009. The union at our Canadian facility ratified a new labor agreement effective through June 30, 2009.

Employee representation is provided by a national union for non-management workers at our specialty fibers plant in Americana, Brazil, and a works council at our nonwoven materials plant in Steinfurt, Germany. Our plants in Gaston, Lumbertonand King, North Carolina are not unionized.

None of our facilities has had labor disputes or work stoppages in recent history. The Foley and Memphis Plants have not experienced any work stoppages due to labor disputes in over 30 years and 50 years, respectively. We consider our relationships with our employees and their representative organizations to be good. An extended interruption of operations at any of our facilities could have a material adverse effect on our business.

Problems regarding the negotiation of any labor contracts could also affect our business. The failure to renegotiate labor agreements in a timely manner could lead to a curtailment or stoppage of work at our factories. If we negotiated a labor agreement on unfavorable terms, our production costs will increase. A reduction in production or increasing the costs of production would lower our profits and harm our business.

Compliance with extensive general and industry specific environmental laws and regulations requires significant resources, and the significant associated costs may adversely impact our business.

Our operations are subject to extensive general and industry specific federal, state, local and foreign environmental laws and regulations. We devote significant resources to maintaining compliance with these laws and regulations. We expect that, due to the nature of our operations, we will be subject to increasingly stringent environmental requirements (including standards applicable to wastewater discharges and air emissions) and will continue to incur substantial costs to comply with these requirements. Because it is difficult to predict the scope of future requirements, there can be no assurance that we will not incur material environmental compliance costs or liabilities in the future.

The Foley Plant, located in Perry, Florida, discharges treated wastewater into the Fenholloway River. Under the terms of an agreement with the Florida Department of Environmental Protection (“FDEP”), approved by the U. S. Environmental Protection Agency (the “EPA”) in 1995, we agreed to a comprehensive plan to attain Class III (“fishable/swimmable”) status for the Fenholloway River under applicable Florida law (the “Fenholloway Agreement”). The Fenholloway Agreement requires us, among other things, to (i) make process changes within the Foley Plant to reduce the coloration of its wastewater discharge, (ii) restore certain wetlands areas, (iii) relocate the wastewater discharge point into the Fenholloway River to a point closer to the mouth of the river, and (iv) provide oxygen enrichment to the treated wastewater prior to discharge at the new location. We have completed the process changes within the Foley Plant as required by the Fenholloway Agreement. In making these in-plant process changes, we incurred significant expenditures, and, we expect to incur significant additional capital expenditures to comply with the remaining obligations under the Fenholloway Agreement.

Based on the requirements anticipated in the proposed permit, we expect to incur capital expenditures of approximately $9.0 million over the next two years on in-plant process changes, and additional capital expenditures of at least $50 million over at least five years, possibly beginning as early as fiscal year 2012. The amount and timing of these capital expenditures may vary depending on a number of factorsincluding when the permit is issued and whether there are any further changes to the proposed permit. For additional information on environmental matters, see Note 17, Contingencies,to the Consolidated Financial Statements. These possible expenditures could have a material adverse effect on our business, results of operations or financial condition.

Because approximately 67% of our sales are to customers outside the United States, we are subject to the economic and political conditions of foreign nations.

We have manufacturing facilities in four countries and sell products in approximately 60 countries. For the fiscal year ended June 30, 2008, sales of our products outside the United Statesrepresented approximately 67% of our sales. The global economy and relative strength or weakness of the U.S. dollar can have a significant impact on our sales. In addition, although approximately 82% of our sales are denominated in U.S. dollars, it is possible that as we expand globally, we will face increased risks associated with operating in foreign countries, including:

- the risk that foreign currencies will be devalued or that currency exchange rates will fluctuate;

the risk that limitations will be imposed on our ability to convert foreign currencies into U.S. dollars or on our foreign subsidiaries' ability to remit dividends and other payments to the United States;

the risk that our foreign subsidiaries will be required to pay withholding or other taxes on remittances and other payments to the United States or that the amount of any such taxes will be increased;

- the risk that certain foreign countries may experience hyperinflation; and

- the risk that foreign governments may impose or increase investment or other restrictions affecting our business.

Any of these risks could have a material adverse effect on our business, results of operations or financial condition.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Corporate Headquarters. Our corporate headquarters, research and development laboratories, and pilot plants are located in Memphis, Tennessee.

Specialty Fiber Plants

Memphis Plant. The Memphis Plant is located on approximately 75 acres adjacent to the headquarters complex and has a capacity of approximately 100,000 annual metric tons of cotton cellulose. As of June 30, 2008, the Memphis Plant operated at approximately 80% of its capacity.

Foley Plant. The Foley Plant is located at Perry, Florida, on a 2,900 acre site and has a capacity of approximately 465,000 annual metric tons of wood cellulose. In connection with the acquisition of the Foley Plant, we also own 13,000 acres of real property near the plant site. As of June 30, 2008, the Foley Plant operated at 100% of its capacity.

Lumberton Plant. The Lumberton Plant is located in Lumberton, North Carolinaon a 65-acre site and has a capacity of approximately 8,000 annual metric tons of cosmetic cotton fiber. As of June 30, 2008, the Lumberton Plant operated at approximately 100% of its capacity.

Americana Plant. The Americana Plant is located in the city of Americanain the state of Sao Paulo, Brazilon 27 acres and is part of a multi-business industrial site with a capacity of approximately 40,000 annual metric tons of cotton cellulose. As of June 30, 2008, the Americana Plant operated at approximately 65% of its capacity.

Nonwovens Plants

The stated capacity of airlaid nonwovens machines is based upon an assumed mix of products. The flexible nature of airlaid technology allows for a wide range of materials to be produced. Machine production capability has typically been lower than the stated capacity, often by factors of 10-20%, when adjusted to reflect the actual product mix. Based on current product mix, utilization of our airlaid machines worldwide, as of June 30, 2008, was approximately 70% of its capacity.

Delta Plant. The Delta Plant is located in Delta, British Columbia on a 12-acre industrial park site and has a total capacity of approximately 30,000 annual metric tons of airlaid nonwovens (26,000 based on current production mix) from two production lines.

Steinfurt Plant. The Steinfurt Plant is located in Steinfurt, Germany on an 18-acre site and has a total capacity of approximately 30,000 annual metric tons of airlaid nonwovens from two production lines.

Gaston Plant. The Gaston Plant is located in Gaston Countynear Mt. Holly, North Carolinaon an 80-acre site and has a total capacity of approximately 60,000 annual metric tons of airlaid nonwovens (43,000 annual metric tons based on current production mix) from two production lines.

King Plant. The King Plant is located in King, North Carolina and converts airlaid materials and wetlaid papers into wipes, towels and tissues for industrial and commercial uses.

We own our corporate headquarters, the Memphis Plant, the Foley Plant, the Lumberton Plant, the Gaston Plant, the Delta, Canada Plant, the Steinfurt, Germany Plant and the Americana, Brazil Plant. We lease buildings that house the King, North Carolina Plant, the sales offices in Europe and distribution facilities in Savannah, Georgia. All of the facilities located in the United States are pledged as collateral for certain debt agreements.

We believe that our specialty fibers and nonwoven materials manufacturing facilities and administrative buildings are adequate to meet current operating demands.

Item 3. Legal Proceedings

We are involved in certain legal actions and claims arising in the ordinary course of business. We believe that such litigation and claims will be resolved without a materially adverse effect on our financial statements as a whole.

On January 3, 2008, K.T. Equipment (International)(K.T.), Inc. filed a claim in the United States District Court, Western District of Tennessee, against us, in which K.T. alleged that we breached our obligation under the Stac-Pac® acquisition agreement to pay K.T.a contingent promissory note in the principal amount of $5millionplus accrued interest of approximately $2.6 million as of June 30, 2008. Payment of the contingent note was dependent on the satisfaction of certain specified conditions relating to the rights obtained by us with regard to the intellectual property assets. When these conditions were not met pursuant to the terms of the Stac-Pac® acquisition agreement, wecanceled the contingent note in the year ended June 30, 2007. We believe we have meritorious defenses to K.T.’s claim and intend to defend against the claim vigorously.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for the Registrant’s Common Stock,Related Security Holder Mattersand Issuer Purchases of Equity Securities

Buckeye Technologies Inc.’s common stock is traded on the New York Stock Exchange under the symbol BKI. There were approximately 4,000 shareholders on August 15, 2008, based on the number of record holders of our common stock and an estimate of the number of individual participants represented by security position listings. The table below sets forth the high and low sales prices for our common stock.

	Year Ended June 30
	2008				2007
	High		Low		High		Low
First quarter (ended September 30)	$	17.81	$	10.43	$	9.00	$	6.84
Second quarter (ended December 31)		18.77		11.46		12.72		8.33
Third quarter (ended March 31)		13.54		9.90		14.00		11.16
Fourth quarter (ended June 30)		12.19		8.45		16.25		11.75

We did not make any dividend payments during the fiscal years ended June 30, 2008 or 2007and have no plans to pay dividends in the foreseeable future. We repurchased 300,000 shares of our common stock during the fiscal year ended June 30, 2008 and repurchased no shares during the fiscal year ended June 30, 2007. Due to certain debt agreements we are limited in our ability to make dividend distributions and share repurchases in the future. The amount available will depend on our financial results and ability to comply with certain conditions under our most restrictive debt agreements at the time of distribution or repurchase.

Issuer Purchases of Equity Securities

	(a) Total number of shares purchased		(b) Average price paid per share	(c) Total number of shares purchased as part of publicly announced plans or programs	(d) Maximum number of shares that may yet be purchased under plans or programs
					990,700
April1 – April 30, 2008	-		-	-	990,700
May 1 – May 31, 2008	300,000	$	9.07	300,000	690,700
June 1 – June 30, 2008	-		-	-	690,700
Total	300,000	$	9.07	300,000	690,700

On August 8, 2008 the Board of Directors authorized the repurchase of 5.0 million shares of common stock in addition to the 6.0 million shares of common stock previously authorized. Repurchased shares will be held as treasury stock and will be available for general corporate purposes, including the funding of employee benefit and stock-related plans.

Performance Graph

The line graph below comparesthe cumulative total stockholder return on our common stock with the cumulative total return of the Standard & Poor’s 500 Index and the New York Stock Exchange (NYSE) Paper & Allied Products peer group for the five fiscal years ended June 30, 2008. The graph and table assume that $100 was invested on June 30, 2003 in each of our common stock, the Standard & Poor’s index and the NYSE Paper & Allied Products peer group and that all dividends were reinvested.

	2003	2004	2005	2006	2007	2008

Buckeye Technologies Inc.	100.00	169.12	117.21	112.35	227.50	124.41
S&P 500	100.00	119.11	126.64	137.57	165.90	144.13
NYSE Paper & Allied Products - SIC Codes 2600-2699 (U.S.& Foreign Cos.)	100.00	133.76	122.27	132.70	159.21	125.40

Item 6. Selected Financial Data

Selected Financial Data

In thousands, except per share data	Year Ended June 30
	2008(a)		2007(b)		2006(c)			2005(d)		2004(e)
Operating Data:

Net sales	$	825,517	$	769,321	$	728,485		$	712,782	$	656,913

Operating income (loss)		100,333		81,211		44,420			57,601		(19,079	)

Cumulative effect of changes in accounting, net of tax		-		-		-			-		5,720

Net income (loss)		47,102		30,118		1,980			20,204		(38,190	)

Basic earnings (loss) per share	$	1.21	$	0.80	$	0.05		$	0.54	$	(1.03	)
Diluted earnings (loss) per share	$	1.20	$	0.79	$	0.05		$	0.54	$	(1.03	)

Pro forma amounts (f)
Net income (loss)	$	47,102	$	30,118	$	1,980		$	20,204	$	(43,910	)

Earnings (loss) per share
Basic	$	1.21	$	0.80	$	0.05		$	0.54	$	(1.18	)
Diluted	$	1.20	$	0.79	$	0.05		$	0.54	$	(1.18	)

Balance sheet data:
Total assets	$	1,009,225	$	951,822	$	948,213		$	949,737	$	970,823
Total long-term debtand capital leases(including current portion)	$	394,268	$	445,893	$	522,090		$	538,982	$	606,748

Ratio of earnings to fixed charges (g)		2.9x		2.1x	$	(497	)		1.4x	$	(69,522	)

(a)	Includes a pretax charge of $623 ($392 after tax) for early extinguishment of debt.

(b)

Includes a pretax benefit of $2,000 ($1,274 after tax) from a water conservation partnership payment. Includes $1,867 ($1,171 after tax) from reversal of accrued interest related to cancellation of a contingent note. Includes a pretax charge of $1,249 ($812 after tax) for restructuring costs and $832 ($521 after tax) for early extinguishment of debt.

(c)	Includes a pretax charge of $5,616 ($3,497 after tax) for restructuring and impairment costs. (See Note 3, Impairment of Long-Lived Assets and Assets Held for Sale).

(d)

Includes a pretax charge of $16,905 ($9,392 after tax) for restructuring and impairment costs. Includes a pretax charge of $242 ($153 after tax) for loss on early extinguishment of debt. Includes a pretax gain of $7,203 ($4,682 after tax) for gain on sale of assets held for sale. During fiscal 2005, the IRS completed an audit of our tax return for fiscal year 2002. With the conclusion of this audit, we released the reserve on a tax deduction we claimed relating to our investment in our former facility in Cork, Irelandand recorded a non-cash tax benefit of $5,481 to our provision for income taxes.

(e)

Includes a pretax charge of $51,853 ($33,522 after tax) for restructuring and impairment costs. Includes $4,940 ($3,112 after tax) for loss on early extinguishment of debt. Includes $5,720 ($0.15 per share), net of tax, cumulative effect of change in accounting relating to a change in the way we account for planned maintenance activities at our Perry, Florida facility.

(f)	Pro forma amounts reflect net income (loss) and earnings (loss) per share as if the change in accounting method was applied retroactively.

(g)	Earnings were inadequate to cover fixed charges during fiscal years 2006and 2004. Amounts reflect the deficit of earnings to fixed charges. See Exhibit 12.1 for computation.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management's Discussion and Analysis of Results of Operations and Financial Condition ("MD&A") summarizes the significant factors affecting our results of operations, liquidity, capital resources and contractual obligations, as well as discussing our critical accounting policies. This discussion should be read in conjunction with the Consolidated Financial Statements, Notes to the Consolidated Financial Statements, and other sections of this Annual Report on Form 10-K. Our MD&A is composed of four major sections; Executive Summary, Results of Operations, Financial Condition and Critical Accounting Policies.

Executive Summary

Buckeye manufactures and distributes value-added cellulose-based specialty products used in numerous applications, including disposable diapers, personal hygiene products, engine, air and oil filters, concrete reinforcing fibers, food casings, cigarette filters, rayon filaments, acetate plastics, thickeners and papers. Our products are produced in the United States, Canada, Germany and Brazil, and we sell these products in approximately 60 countries worldwide. We generate revenues, operating income and cash flows from two reporting segments: specialty fibers and nonwoven materials. Specialty fibers are derived from wood and cotton cellulose materials using wetlaid technologies. Our nonwoven materials are derived from wood pulps, synthetic fibers and other materials using an airlaid process.

Our strategy is to continue to strengthen our position as a leading supplier of cellulose-based specialty products. We believe that we can continue to expand market share, improve profitability and decrease our exposure to cyclical downturns by pursuing the following strategic objectives: focus on technically demanding niche markets, develop and commercialize innovative proprietary products, strengthen long-term alliances with customers, provide our products at an attractive value and evaluate growth opportunities that match our specialty market focus.

Buckeye had an excellent year, with record revenue and the highest earnings in eightyears. Highlights for fiscal year 2008 compared to fiscal year 2007 include:

·	Net sales increased 7.3% to a company record of $825.5 million

·	Gross margin improved from 17.1% to 18.1%

·	Operating income was $100.3 million versus $81.2 million

·	Earnings per share were $1.20, up 52% compared to the prior year

·	Long-term debt decreased by $51.2 million to $393.9 million at year-end

·	Net income increased 56% to $47.1 million

Total year earnings benefited from higher selling prices across all of our businesses. We continue to see particularly strong demand and a strong pricing environment for our products in the Specialty Fibers segment of our business. As a result of higher selling prices, improved product mix and improved chemical usage, our gross margin for fiscal 2008 improved to 18.1% versus 17.1% in fiscal 2007. However, our gross margin percentage trended down sharply during the second half of the fiscal year primarily as increased selling prices were not sufficient to offset the negative impacts of higher input costs, reduced production volume at our Perry, Florida wood cellulose mill and reduced capacity utilization at our Canadian airlaid nonwovens plant.

Transitioning our Americana plant to a profitable operation continues to be a challenge as our sales out of that facility are constrained due to limited raw material supply. While our operating loss is down significantly year over year, over the past four quarters our operating loss at Americana has stayed fairly constant in the range of $0.8 million to $1.0 million per quarter, and we have been operating close to cash breakeven during that time. Over the past year, we have raised our selling prices aggressively to cover rapidly escalating cotton fiber prices. Selling prices for fiscal year 2008 were up 21% and cotton linter costs were up 30%. We have also made some progress in improving our raw material supply, as total production tons for fiscal year 2008 were up about 10% to approximately 27,000 tons. Our ability to prevent our operating results at this facility from deteriorating remains dependent on our ability to purchase cotton linters at an affordable cost. Further strengthening of the Brazilian real versus the U.S. dollar would also impair the profitability of this operation by about $1.3 million annually for every ten basis point move in the currency.

We are moving forward on our Foley Energy Project initiative. The savings potential of this initiative continues to grow with the trend toward mandates on renewable energy sources and with higher oil prices. Our Board of Directors has approved total capital expenditures of $45 million over a three year period for this project, which was based on a design goal of an equivalent reduction of over 200,000 barrels of #6 fuel oil annually. We have spent $6.3 million of this amount through June 30, 2008 and have secured the appropriate construction permit in August. Additionally, upon the successful implementation of this initiative, we should be capable of producing excess energy and electricity using only biomass.

UltraFiber 500® held its own in the face of a collapsing housing market as we continue to leverage the value of our UltraFiber 500® dispensing system. Additionally, we are working to expand the use of Ultrafiber 500® in commercial construction, specifically in the concrete used on steel decks. We recently confirmed that Ultrafiber 500® enhances the fire resistance of normal weight concrete, which could provide significant cost savings in the construction of multi-level buildings. Finally, we are targeting growth in China, where a significant amount of concrete is being used to develop China’s basic infrastructure needs.

Strong cash flow generation enabled us to reduce long-term debt by $51.2 million during fiscal year 2008. Our interest expense decreased $5.6 million as compared to fiscal year 2007. This was a result of the lower debt and lower average interest rates which reduced interest expense by $7.5 million partially offset by the $1.9 million reversal of interest related to the cancellation of the Stac-Pac Technologies Inc. contingent note.

Results of Operations

Consolidated results

The following table compares the components of consolidated operating income for the three fiscal years ended June 30, 2008.

(millions)	Year Ended June 30						$ Change						Percent Change
	2008		2007		2006		2008/ 2007			2007/ 2006			2008/ 2007			2007/ 2006
Net sales	$	825.5	$	769.3	$	728.5	$	56.2		$	40.8			7.3	%		5.6	%
Cost of goods sold		676.0		637.5		628.7		38.5			8.8			6.0			1.4
Gross margin		149.5		131.8		99.8		17.7			32.0			13.4			32.1
Selling, research and administrative expenses		47.3		47.0		47.8		0.3			(0.8	)		0.6			(1.7	)
Amortization of intangibles and other		1.8		2.3		2.0		(0.5	)		0.3			(21.7	)		15.0
Impairment and restructuring costs		0.1		1.3		5.6		(1.2	)		(4.3	)		(92.3	)		(76.8	)
Operating income	$	100.3	$	81.2	$	44.4	$	19.1		$	36.8			23.5	%		82.9	%

Net sales increased 7.3% for the year ended June 30, 2008, primarily due to selling prices which were higher by approximately 10% on average compared to the year ended June 30, 2007, accounting for $69.4 million in incremental sales. Partially offsetting the impact of favorable price increases, fiscal year 2008 sales volumes declined versus fiscal year 2007, accounting for a reduction in sales of $27.4 million. Nonwovens accounted for the largest part of this sales volume impact ($18.7 million) as a result of the loss of business with a large customer in January. Lower sales volume at our two specialty cotton fiber mills due to raw material availability issues also negatively impacted sales by $7.1 million compared to the prior year.

Our gross margin improved by $17.7 million in fiscal 2008 versus fiscal 2007. Our selling price increases of $69.4 million more than offset the impact of higher costs for raw materials and the lower shipment and production volumes. Raw material costs were higher year over year ($29.8 million) mainly for cotton linter fibers ($18.6 million) and in our nonwoven materials ($8.2 million) business. Increased chemical costs ($5.2 million) overall were partially offset by lower usage at our specialty wood fibers facility. Higher energy costs had a negative impact of $5.8 million and higher transportation costs reduced our gross margin by $4.8 million compared to the prior year.

Net sales were higher during the year ended June 30, 2007, primarily driven by higher selling prices across all segments of our business. The shift from tolling operations to market sales at our Americana specialty fibers facility contributed a positive mix impact. A positive currency impact, due to the strong euro, added to the improvement. Shipment volume was down for the year ended June 30, 2007, mainly due to the closure of our specialty fibers facility in Glueckstadt, Germany.

The gross margin improvement from fiscal year 2006 to fiscal year 2007 was mainly a result of the higher selling prices discussed previously. We also had improved operational results at our Americana plant, lower energy costs, and improved capacity utilization at our North American nonwovens sites. These improvements more than offset increased raw material costs in our cotton fibers and nonwovens business, increased transportation cost and higher plant direct costs.

Selling, research and administrative expenses increased slightly in the year ended June 30, 2008. Selling, research and administrative expenses decreased slightly in the year ended June 30, 2007. As a percentage of net sales these costs decreased to 5.7% in fiscal year 2008 versus 6.1% in fiscal 2007 and 6.6% in fiscal 2006.

During the second half of the year ended June 30, 2007, we entered into a restructuring program that complemented our operations’ consolidations and involved consolidation in our European sales offices, product and market development and corporate overhead. The total cost of this program wasapproximately $1.4 million and was completed during the first quarter of the 2008 fiscal year. As a result of this restructuring, 22 positions were eliminated.

Further discussion of revenue, operating trends, impairment and restructuring costs can be found later in this MD&A. Additional information on the impairment and restructuring programs and charges may also be foundin Note 3, Impairment of Long-Lived Assets and Assets Held for Sale, and Note 4, Restructuring Costs, to the Consolidated Financial Statements.

Segment results

Although nonwoven materials, processes, customers, distribution methods and regulatory environment are very similar to specialty fibers, we believe it is appropriate for nonwoven materials to be disclosed as a separate reporting segment from specialty fibers. The specialty fibers segment consistsof our chemical cellulose, customized fibers and fluff pulp product lines which are cellulosic fibers based on both wood and cotton. We make separate financial decisions and allocate resources based on the sales and operating income of each segment. We allocate selling, research, and administration expense to each segment, and we use the resulting operating income to measure the performance of the two segments. We exclude items that are not included in measuring business performance, such as restructuring costs, asset impairment, amortization of intangibles,certain financing and investing costs and unallocated at-risk and stock-based compensation. We have reclassified the at-risk compensation and stock-based compensation from the specialty fibers and nonwovens segments for fiscal years 2007 and 2006 for comparability.

Specialty fibers

The following table compares specialty fibers net sales and operating income for the three years ended June 30, 2008.

(millions)	Year Ended June 30						$ Change				Percent Change
	2008		2007		2006		2008/ 2007		2007/ 2006		2008/ 2007			2007/ 2006
Net sales	$	595.8	$	543.8	$	515.9	$	52.0	$	27.9		9.6	%		5.4	%
Operating income		90.6		65.8		36.7		24.8		29.1		37.7			79.3

Net sales increased 9.6% in fiscal 2008 versus fiscal 2007, primarily due to higher prices. Selling prices were up approximately 8% on our wood specialty products and 15% on our cotton specialty fibers products. In fiscal 2008, fluff pulp prices increased approximately $107 per ton compared to fiscal 2007. Shipment volume was down approximately 2%, partially offsetting the favorable price increases.

Operating income improved as a percentage of sales from 12.1% in fiscal 2007 to 15.2% in fiscal 2008. The favorable impact of higher selling prices ($66.9 million) was partially offset by higher raw material costs ($21.7 million), mainly due to the increase in cotton fibers for which costs were up 36% year over year. In addition, higher chemical, energy and transportation costs reduced the favorable impact of the higher selling prices.

Our operating loss at Americana was reduced significantly in fiscal 2008 versus fiscal 2007 (approximately 50%). Increased pricing (21%), higher production volume and reductions in fixed costs helped offset the higher cotton linter prices and the strengthening Brazilian currency (1.77 versus 2.11 BRL/USD).

Specialty fibers net sales improved during the year ended June 30, 2007 versus the prior year, primarily driven by higher selling prices and improved product mix, offset partially by the closure of the Glueckstadt plant, which had a negative impact on sales volume. Strong demand in our high-end specialty and fluff markets allowed us to raise prices during the year. Fluff pulp pricing increased by approximately $55 per ton on the average during the year ended June 30, 2007 versus the previous year. Average selling prices on our high-end specialty products increased in the mid-single digit range for the year.

Sales pricing and improved product mix were the primary drivers of our operating income improvement in fiscal 2007. Costs as a percentage of sales increased compared to the prior year as the impact of lower energy costs was not enough to offset increases in transportation costs, raw material costs and factory direct costs.

Our Memphis and Americana plants are working to solve the fundamental raw material supply constraints in North America and Brazil, reduce operating costs and improve gross margins on an on-going basis. Raw material availability continues to limit productionat these two sites. According to the USDA, in the U.S., cotton production decreased 11% in the 2007/08 crop year and is expected to decrease another 28% in the 2008/09 crop year (harvested in the fall of 2008). According to the USDA, in Brazil cotton production in the 2006/07 crop year increased 49% from the prior year and is expected to increase by about 2% in the 2007/08 crop year (harvest began in June 2008). In both cases, the amount of cottonseed that is delinted and crushed for oil determines our raw material supply, and this has not been increasing fast enough to meet our needs. We expect that the amount of seed crushed for our fiscal year 2009 could increase approximately 10% in Brazil and is likely to decrease approximately 5% in the United States. We are strengthening relationships with our raw material suppliers to increase delinting capacity and assisting with their expansion plans. Improving our lint supply is a top priority, but will take time to implement. As more lint becomes available, we intend to ramp up production levels at our cotton fiber facilities. During our fiscal year 2009, we expect to continue to operate the Americana, Brazil facility at its current rate of approximately 2,200 tons per month due to constraints on raw material availability, assuming we are able to purchase sufficient cotton linters at a reasonable price. The Memphis, Tennessee facility is expected to run at approximately 75% to 80% of capacity during fiscal year 2009, up slightly compared to 2008, due to the constraints of the North American cotton crop.

Nonwoven materials

The following table compares nonwoven materials net sales and operating income for the three years ended June 30, 2008.

(millions)	Year Ended June 30						$ Change					Percent Change
	2008		2007		2006		2008/ 2007			2007/ 2006		2008/ 2007			2007/ 2006
Net sales	$	263.6	$	258.8	$	240.9	$	4.8		$	17.9		1.9	%		7.4	%
Operating income		15.3		22.2		16.3		(6.9	)		5.9		(31.1	)		36.2

Nonwoven materials sales increased in fiscal 2008 versus fiscal 2007. Strong sales volume in the first half of fiscal year 2008 was offset by weak volume in the second half of the fiscal year due to the loss of business with a long-time customer. Shipment volume year over year was down 8% from fiscal 2007 to fiscal 2008. We have recently replaced a sizeable portion of that lost business in North America. We started to see the impact of this in June and anticipate that sales in the first quarter of fiscal 2009 should increase by $3.0 to $4.0 million compared to the fourth quarter of fiscal year 2008. Improved pricing and improved product mix contributed $6.4 million and $4.8 million, respectively, to the sales increase. The strengthening of the euro provided $12.2 million of the increased revenues.

Operating income decreased 31% in fiscal 2008 versus fiscal 2007. The impact of higher sales prices was more than offset by lower volume, higher raw material costs for fluff pulp, bi-component fiber and latex binder, and higher energy and transportation costs.

A strong market for Nonwoven materials in North America contributed to the increase in net sales during fiscal year 2007 versus fiscal year 2006. Increased demand resulted in higher sales volumes at increased selling prices. We implemented similar sales price increases in Europe during the year, and our sales volume remained stable. Additionally, net sales in Europe saw improvement due to the strengthening of the euro during this time period. Most products sold at our Steinfurt, Germany facility are denominated in euros and translated to US dollars for consolidation purposes.

Operating income improvement during fiscal year 2007 versus fiscal year 2006 was driven by the increased volumes and selling prices. Increased volumes in North America and the associated improvements in capacity utilization helped to improve operating margins during the year. Higher revenues from increased selling prices largely offset increased raw material costs in North America and Europe.

Corporate

Our intercompany net sales elimination represents intercompany sales from our Florida and Memphis specialty fiber facilities to our airlaid nonwovens plants. The unallocated at-risk compensation and unallocated stock based compensation represent compensation for executive officers and certain other employees. We have reclassified the at-risk compensation and stock-based compensation from the specialty fibers and nonwovens segments for fiscal years 2007 and 2006 for comparability.

The following tables compare corporate net sales and operating loss for the three years ended June 30, 2008.

(millions)	Year Ended June 30									$ Change				Percent Change
	2008			2007			2006			2008/ 2007		2007/ 2006		2008/ 2007			2007/ 2006
Net sales	$	(33.8	)	$	(33.4	)	$	(28.2	)	$	0.4	$	5.2		1.2	%		18.4	%
Operating income		(5.6	)		(6.8	)		(8.6	)		1.2		1.8		17.6			20.9

The operating loss for the three years ended June 30 consists of:


(millions)	2008			2007			2006
Unallocated at-risk compensation	$	(2.6	)	$	(2.2	)	$	(0.8	)
Unallocated stock based compensation		(0.9	)		(0.8	)		(0.6	)
Intellectual property amortization		(1.9	)		(2.3	)		(2.0	)
Restructuring expenses		(0.1	)		(1.2	)		(3.5	)
Impairment on long-lived assets		-			-			(2.1	)
Gross margin on intercompany sales		(0.1	)		(0.3	)		0.4
	$	(5.6	)	$	(6.8	)	$	(8.6	)

Restructuring and impairment activities

During the three years ended June 30, 2008, we entered into various restructuring programs, which resulted in restructuring and impairment charges. In order to continue to provide both specialty fibers and nonwoven materials at attractive values, we intend to continue to look for ways to reduce costs and optimize our operating structure. The following table summarizes restructuring expense by program and impairment charges for the three years ended June 30, 2008. Following the table is an explanation of the programs and the resulting impairment charges. For further explanation of these charges, see Note 3, Impairment of Long-lived Assets and Assets Held for Sale, and Note 4, Restructuring Costs, to the Consolidated Financial Statements.

	Year Ended June 30						Total
(millions)	2008		2007		2006		Charges
Impairment charges	$	-	$	-	$	2.1

Restructuring costs
2007 Restructuring program	$	0.1	$	1.3	$	-	$	1.4
2005 Restructuring program		-		-		3.5		6.5
Total restructuring costs	$	0.1	$	1.3	$	3.5	$	7.9

2007 Restructuring program

In January 2007, we entered into a restructuring program that complements our operations’ consolidations and involves consolidation in our European sales offices, product and market development and corporate overhead operations. The total cost of this program wasapproximately $1.4 million and wascompleted during the first quarter of the 2008 fiscal year. As a result of this restructuring, 22 positions were eliminated which should provide annual savings of over $2.0 million.

2005 Restructuring program and impairments

In January 2005, we announced our decision to discontinue producing cotton linter pulp at our Glueckstadt facility. During fiscal 2006, management reevaluated its estimate of fair value less the cost to sell the remaining equipment and determined an additional impairment should be recognized for equipment with a carrying value of $0.3 million. Therefore, we wrote down the carrying value of the remaining equipment to its fair value less costs to sell of $0.2 million and recorded an impairment charge of $0.1 million. In September 2006, the remaining assets were sold for $0.5 million. Since we previously had written the value of these assets down to $0.2 million, we recorded a gain on sales of assets held for sale of $0.3 million.

During fiscal year 2006, we began to actively market the land and buildings, and the equipment which had carrying values of $1.6 million and $0.5 million, respectively. Therefore, we wrote down the carrying value of the land and buildings to their fair value less costs to sell of $0.1 million and recorded an additional impairment charge of $1.5 million during fiscal year 2006. Subsequent to this impairment, we sold the land and building for $0.1 million.

The closure of the Glueckstadt facility resulted in the termination of 103 employees, and restructuring expenses related to the closure of $6.5 million over fiscal year 2005 and 2006.

Impairments

During fiscal year 2006, we began to actively market idled cotton linter pulping equipment at our specialty fibers Lumberton, North Carolina facility which had a carrying value of $1.5 million. Management evaluated its estimate of fair value less the cost to sell the assets and determined an impairment should be recognized for the equipment. We wrote down the carrying value of the equipment to its fair value less costs to sell of $1.0 million and recorded an impairment charge of $0.5 million during fiscal year 2006. Subsequent to this impairment, we sold the equipment for net proceeds of $1.0 million.

Interest expense and amortization of debt costs

Interest expense and amortization of debt costs decreased $5.6 million for fiscal year 2008 versus fiscal year 2007. This improvement was primarily the result of lower average debt levels during fiscal 2008 and lower average interest rates. This favorable impact was partially offset by the decrease in interest expense in fiscal year 2007 due to the reversal of $1.9 million of interest related to the cancellation of a contingent note owed to Stac-Pac Technologies Inc.

Interest expense and amortization of debt costs decreased $4.7 million for fiscal year 2007 versus fiscal year 2006. This decrease includes the reversal of $1.9 million of accrued interest previously discussed. The remaining decrease was primarily due to lower debt levels. The decrease would have been larger, but capitalized interest related to the Americana project reduced last year’s interest expense by $1.3 million that was not replicated in fiscal 2007. The weighted average effective interest rate on our variable rate debt increased from 7.2% at June 30, 2006 to 7.3% at June 30, 2007. See Note 8, Debt, in the Consolidated Financial Statements for further discussion of variable interest rates.

Loss on early extinguishment of debt costs

Fiscal year 2008– During fiscal year 2008, we used cash from operations and borrowings on our revolving credit facility to redeem the remaining $60 million of our 2008 notes and to redeem $35 million of the 2010 notes. As a result of these extinguishments, we wrote off a portion of deferred financing costs, resulting in non-cash expenses of $0.6 million during fiscal year 2008.

Fiscal year 2007 –During fiscal year 2007 we used cash from operations to redeem $5 million of our senior subordinated notes due in 2008 and to make voluntary prepayments on our term loan of $60.8 million. As a result of these partial extinguishments, we wrote-off a portion of deferred financing costs, resulting in non-cash expense of $0.8 million during fiscal year 2007.

Fiscal year 2006– OnSeptember 26, 2005 we used borrowings on our revolving credit facility to redeem $15 million of our senior subordinated notes due in 2008. As a result of this partial extinguishment, we wrote-off a portion of deferred financing costs, resulting in non-cash expense of $0.2 million during fiscal year 2006.

See Note 8, Debt, in the Consolidated Financial Statements for further discussion of the debt issuance and related extinguishment.

Gain on sale of assets held for sale

In September 2006, the remaining assets located at our Glueckstadt facility were sold for $0.5 million. Since we had previously written the value of these assets down to $0.2 million, we recorded a gain on sale of assets held for sale of $0.3 million during fiscal 2007.

Foreign exchange and other

Foreign exchange and other in fiscal 2008, 2007and 2006 were $0.6 million, $1.9 million and $(0.4) million, respectively. The income in fiscal 2008 was primarily due to foreign currency gains as a result of the strengthening of the Brazilian real. The income in fiscal 2007 was primarily due to $2.0 million from a water conservation partnership payment received pursuant to our reduction in the daily water permit limit at the Foley plant. The expense in fiscal 2006 was primarily due to foreign currency losses as a result of the strengthening of the Canadian dollar during the fiscal year.

Income tax expense

Our effective tax rate for 2008 was approximately 30.0% versus 31.3% in fiscal 2007and (189.5%) in fiscal 2006.

During fiscal year 2008, we decreasedour valuation allowance related to deferred tax assets for net operating losses of the Americana, Braziloperations by $0.5 million due to tax planning associated with intercompany interest charges offsetting the operating losses. During fiscal year 2007 and fiscal year 2006, we increased our valuation allowance related to deferred tax assets for net operating losses of the Americana, Brazil operations by $2.5 million and $1.7 million, respectively. This was almost entirely offset by a reduction of valuation allowances in the amount of $2.5 million related to certain state net operating losses and tax credits due to tax planning efforts. The increase in our valuation allowance in fiscal year 2006 was primarily due to the allowance for losses of the Americana, Brazil operation.

Effective June 22, 2006, many of the tax measures introduced in the 2006 Canadian Federal budget were passed into law. Included in the budget was a reduction in the general corporate tax rate to 20.5% for 2008, 20% for 2009, and 19% for 2010 and later years. As a result, the company remeasured its Canadian deferred tax balances based on the reversal pattern of our temporary differences, resulting in a $791 net tax benefit in fiscal 2006. Effective December 2007, Canada enacted Canada Bill C-28 which further reduced its Canadian corporate tax rates to 19.5% for 2008, 19% for 2009, 18% for 2010, 16.5% for 2011 and 15% for 2012 and later years. This further reduction in corporate rates resulted in an additional remeasurement of Canadian deferred tax balances with a net tax benefit of $165 in fiscal 2008. Furthermore, changes in estimates and tax planning resulted in a net tax benefit of $438 in fiscal 2008 related to utilization of Canadian net operating loss carryforwards.

Effective July 2007, Germany reduced its tax rates resulting in a $2.2 million net tax benefit for fiscal 2008 related to remeasurement of German deferred tax liabilities based on reversal of temporary differences.

On July 1, 2007, we adopted the provisions of FASB Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. As a result of the adoption, we recorded an adjustment of $0.9 million to reduce retained earnings at July 1, 2007. At adoption and June 30, 2008, our unrecognized tax benefits totaled $1.8 million and cumulative potential interest and penalties accrued related to unrecognized tax benefits totaled $0.2 million. We include interest and penalties related to income tax matters as a component of income before income taxes. All unrecognized tax benefits at adoption would affect the effective tax rate, if recognized.

Financial Condition

Our financial condition continued to improve during fiscal year 2008. We are committed to reducing our debt, strengthening our operations and continuing to improve our profitability and cash flow.

Liquidity and capitalization

We have the following major sources of financing: a senior secured credit facility, senior notes and senior subordinated notes. Our senior secured credit facility, senior notes and senior subordinated notes contain various covenants. We were in compliance with these covenants as of June 30, 2008, and believe we will continue to remain in compliance for the foreseeable future. These sources of financing are described in detail in Note 8, Debt, to the Consolidated Financial Statements.

Our total debt and capital leases decreased $51.4 million to $394.5 million at June 30, 2008 from $445.9 million at June 30, 2007. From June 30, 2006 to June 30, 2007, total debt decreased by $76.2 million (including the cancellation of the $5.0 million note owed to Stac-Pac Technologies Inc). Our total debt as a percentage of our total capitalization was 47.9% at June 30, 2008,as compared to 56.2% at June 30, 2007and 64.3% at June 30, 2006.

On July 25, 2007, we established a new $200 million senior secured revolving credit facility with a maturity date of July 25, 2012. This facility amended and restated our previous credit facility. Initially, we used the proceeds from this credit facility to pay the outstanding balance on the former credit facility plus fees and expenses. The interest rate applicable to borrowings under the credit facility is grid based pricing, related to our total leverage ratio, at the agent’s prime rate plus 0.25% to 1.00% or a LIBOR-based rate ranging from LIBOR plus 1.25% to LIBOR plus 2.00%. We also used proceeds from this facility to redeem the remaining $60 million of our 2008 notes, to redeem $20 million of the 2010 notes in mid-September 2007, and for general corporate purposes. The credit facility is secured by substantially all of our assets located in the United States.

Our credit facility contains covenants customary for financing of this type. The financial covenants include: maximum total leverage ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”), and minimum ratio of consolidated EBITDA to consolidated interest expense. During fiscal year 2008 and at June 30, 2008, we were in compliance with the financial covenants under our credit facility.

On June 30, 2008, we had $10.4 million of cash and cash equivalents and we had $116.7 million borrowing capacity on our credit facility. The credit facility also contains a $50 million increase option. The portion of this capacity that we could borrow on a particular date will depend on our financial results and ability to comply with certain borrowing conditions under the revolving credit facility. The commitment fee on the unused portion of the revolving credit facility ranges from 0.25% to 0.40% per annum based on a grid related to our leverage ratio. Total costs for the issuance of the facility were approximately $1.3 million and are being amortized to interest expense using the effective interest method over the life of the facility.

While we can offer no assurances, we believe that our cash flow from operations, together with current cash and cash equivalents, will be sufficient to fund necessary capital expenditures, meet operating expenses and service our debt obligations for the foreseeable future.

Treasury stock

During fiscal years 1997 to 2001 the Board of Directors authorized total repurchases of 6.0 million shares of common stock. During fiscal year 2008, we repurchased 0.3 million shares of our common stockat a total cost of $2.7 million. At June 30, 2008, atotal of 5.3 millionshares have been repurchasedunder these authorizations. On August 8, 2008 the Board of Directors authorized the repurchase of 5.0 million shares of common stock in addition to the 6.0 million shares of common stock previously authorized. Repurchased shares will be held as treasury stock and will be available for general corporate purposes, including the funding of employee benefit and stock-related plans.

Cash Flow

Cash and cash equivalents totaled $10.4 million at June 30, 2008, compared to $14.8 million at June 30, 2007and $8.7 million at June 30, 2006. The following table provides a summary of cash flows for the three years ended June 30, 2008.

(millions)	2008			2007			2006
Operating activities:
Net income	$	47.1		$	30.1		$	2.0
Noncash charges and credits, net		67.5			62.5			49.3
Changes in operating assets and liabilities, net		(22.3	)		18.8			7.4
Net cash provided by operating activities		92.3			111.4			58.7

Investing activities:
Purchases of property, plant and equipment		(49.2	)		(45.2	)		(45.6	)
Proceeds from sales of assets		-			0.5			1.2
Other investing activities		(0.4	)		(0.5	)		(0.5	)
Net cash used in investing activities		(49.6	)		(45.2	)		(44.9	)

Financing activities:
Net borrowings (payments) under lines of credit		78.2			(3.0	)		0.4
Payments on long-term debt and other		(129.0	)		(67.8	)		(16.8	)
Other financing activities, net		1.8			9.9			0.5
Net cash used in financing activities		(49.0	)		(60.9	)		(15.9	)

Effect of foreign currency rate fluctuations on cash		1.9			0.8			0.9

Net increase (decrease) in cash and cash equivalents	$	(4.4	)	$	6.1		$	(1.2	)

Cash provided by operating activities

The $19.1 million decrease in cash flows from operating activities in fiscal 2008 was primarily due to higher inventory levels, partially offset by improved profits of $17.0 million. The inventory increase was primarily due to increasing inventory levels of raw cotton linters from very low levels at the beginning of the year, and higher raw material costs across all of our businesses.

The $52.7 million increase in cash flows from operating activities in fiscal 2007 was primarily due to improved profits of $28.1 million, higher accounts payable and current liabilities and deferred taxes. The higher current liabilities were the result of increases in taxes payable, incentive plans and general payables. The change in deferred taxes was a result of our higher profits and the reversal of some federal and state valuation allowances being an offset to our net operating loss.

Net cash used in investing activities

Purchases of property, plant and equipment were consistent during the last three fiscal years. We expect efficiency improvement and energy savings projects, maintenance capital, and environmental spending will result in total capital expenditures of approximately $64 million for fiscal 2009. We are moving ahead with the Foley Energy Project. Our Board of Directors has approved total capital expenditures of $45 million over a three year period for this project, which was based on a design goal of an equivalent reduction of over 200,000 barrels of #6 fuel oil annually. We have spent $6.3 million of this amount through June 30, 2008, and our capital budget for fiscal 2009 includes $23 million related to this project.

We expect to incur significant capital expenditures in the future to comply with environmental obligations at our Perry, Florida specialty fibers facility. Based on the requirements anticipated in the proposed permit, we expect to incur capital expenditures of approximately$9.0 million over the next two years on in-plant process changes, and additional capital expenditures of at least $50.0 million over at least five years, possibly beginning as early as fiscal year 2012. The amount and timing of these capital expenditures may vary depending on a number of factors. For additional information on environmental matters, see Note 17, Contingencies, to the Consolidated Financial Statements.

Net cash used in financing activities

During fiscal year 2008, we used cash from operations and proceeds from stock option exercises to reduce our debt and capital leases by $50.8 million.

During fiscal year 2007, we used cash from operations and $9.9 million received from option exercises to reduce our debt and capital leases by $70.8 million.

Contractual Obligations

The following table summarizes our significant contractual cash obligations as of June 30, 2008. Certain of these contractual obligations are reflected in our balance sheet, while others are disclosed as future obligations under accounting principles generally accepted in the United States.

(millions)	Payments Due by Period (6)
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		Greater than 5 years

Long-term obligations (1)	$	526.0	$	30.2	$	170.9	$	116.4	$	208.5
Capital lease obligations (2)		0.4		0.4		-		-		-
Operating lease obligations (2)		4.5		1.9		2.1		0.5		-
Timber commitments (3)		28.5		12.0		16.5		-		-
Linter commitments (4)		19.1		19.1		-		-		-
Other purchase commitments (5)		45.0		27.0		10.6		6.0		1.4
Total contractual cash obligations	$	623.5	$	90.6	$	200.1	$	122.9	$	209.9

(1)Amounts include related interest payments. Interest payments for variable debt of $78.1 million are based on the effective rate as of June 30, 2008 of 5.2%. See Note 8, Debt, to the Consolidated Financial Statements for further information on interest rates.

(2)Capital lease obligations represent principal and interest payments. See Note 9, Leases, to the Consolidated Financial Statements for further information.

(3)See Note 16, Commitments, to the Consolidated Financial Statements for further information.

(4)Linter commitments are take-or-pay contracts made in the ordinary course of business that usually are less than one year in length.

(5)The majority of other purchase commitments are take-or-pay contracts made in the ordinary course of business related to utilities and raw material purchases.

(6)Less than one year references fiscal 2009; 1-3 years references fiscal 2010 and 2011; 3-5 years references fiscal 2012 and 2013.

Note:

Additionally, the cash flow to fund postretirement benefit obligations , for our U.S.plan, has an expected net present value of $23.7 million. The actuarially estimated annual benefit payments are as follows: 2009- $1.9 million; 2010-2011- $3.7 million; 2012- 2013- $3.6 million; and 2014through 2018- $10.1million. These obligations are not included in the table above as the total obligation is based on the present value of the payments and would not be consistent with the contractual cash obligations disclosures included in the table above. See Note 12, Employee Benefit Plans, to the Consolidated Financial Statements for further information.

Recent Accounting Pronouncements

See Note 2, Recent Accounting Pronouncements, to the Consolidated Financial Statements for a discussion of recent accounting pronouncements and their impact.

Critical Accounting Policies and Estimates

This discussion and analysis is based upon our consolidated financial statements. Our critical and significant accounting policies are more fully described in Note 1, Accounting Policies, to theConsolidated Financial Statements. Some of our accounting policies require us to make significant estimates and assumptions about future events that affect the amounts reported in our financial statements and the accompanying notes. Future events and their effects cannot be determined with certainty. Therefore, the determination of estimates underlying our financial statements requires the exercise of management’s judgment. Actual results could differ from those estimates, and any such differences may be material to our financial statements. Our management exercises critical judgment in the application of our accounting policies in the following areas, which significantly affect our financial condition and results of operation. Management has discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directorsand with our independent auditors.

Allowance for doubtful accounts

We provide an allowance for receivables we believe we may not collect in full. Management evaluates the collectability of accounts based on a combination of factors. In circumstances in which we are aware of a specific customer’s inability to meet its financial obligations (i.e., bankruptcy filings or substantial downgrading of credit ratings), we record a specific reserve. For all other customers, we recognize reserves for bad debts based on our historical collection experience. If circumstances change (i.e., higher than expected defaults or an unexpected material adverse change in a major customer’s ability to meet its financial obligations), our estimates of the recoverability of amounts due could be reduced by a material amount.

Bad debt expense for fiscal years 2008, 2007and 2006 was $0.1 million, $0.3 million and $0.1 million, respectively.

Deferred income taxes and other liabilities

Deferred income tax assets and liabilities are recognized based on the difference between the financial statement and the tax law treatment of certain items. Realization of certain components of deferred tax assets is dependent upon the occurrence of future events. We record a valuation allowance to reduce our net deferred tax assets to the amount we believe is more likely than not to be realized. These valuation allowances can be impacted by changes in tax laws, changes to statutory tax rates, and future taxable income levels and are based on our judgment, estimates and assumptions regarding those future events.

In fiscal 2008, we decreased our valuation allowance recorded against certain foreign net operating losses by approximately $0.5 million. In fiscal 2007, we increased the valuation allowance recorded against certain foreign net operating losses by approximately $2.5 million and decreased the valuation allowances recorded against certain state net operating losses and tax credits by approximately $2.5 million.

In the event we were to determine that we would not be able to realize all or a portion of the net deferred tax assets in the future, we would increase the valuation allowance through a charge to income in the period that such determination is made. Conversely, if we were to determine that we would be able to realize our deferred tax assets in the future, in excess of the net carrying amounts, we would decrease the recorded valuation allowance through an increase to income in the period that such determination is made.

We record our world-wide tax provision based on the tax rules and regulations in the various jurisdictions in which we operate. Significant managerial judgment is required in determining our effective tax rate and evaluating our tax positions. Where we believe that the deduction of an item is supportable for income tax purposes, the item is deducted in our income tax returns.

On July 1, 2007 we adopted the provisions of FIN 48, which clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. We record our unrecognized tax benefits on the consolidated balance sheets in other liabilities. Cumulative potential interest and penalties accrued related to unrecognized tax benefits are included as a component of income before income taxes.

Depreciation

We provide for depreciation on our production machinery and equipment at our cotton cellulose and airlaid nonwovens plants using the units-of-production depreciation method. Under this method, we calculate depreciation based on the expected total productive hours of the assets subject to a minimum level of depreciation. We review our estimate of total productive hours at least annually. If the estimated productive hours of these assets change based on changes in utilization and useful life assumptions, we adjust depreciation expense per unit of production accordingly. We use the straight-line method for determining depreciation on our other capital assets.

Long-lived assets

Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are held and used, recoverability is evaluated based on the undiscounted cash flows expected to be generated by the asset. If the carrying value of the assets is determined to not be recoverable, we measure the potential impairment by comparing the carrying value of the assets to their fair value. If impairment exists, an adjustment is made to write the asset down to its fair value. Estimated fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.

Based on the estimated fair values of long-lived assets, we recorded no impairment charges in fiscal years 2008 and 2007. We recorded $2.1 million for year ended June 30, 2006. If circumstances change, our estimated fair values may be impacted and have a material effect on our reported financial position and results of operations. See Note 3, Impairment of Long-Lived Assets and Assets Held for Sale, to the Consolidated Financial Statements for further information concerning impairment charges.

We have made acquisitions in the past that included a significant amount of goodwill and other intangible assets. We have previously adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”), and, as a consequence, discontinued the amortization of goodwill. Under the guidelines of SFAS 142, goodwill is subject to an annual impairment test based on its estimated fair value. Unless circumstances otherwise dictate, we perform our annual impairment testing in the fourth quarter. We will continue to amortize other intangible assets that meet certain criteria over their useful lives. We utilize the present value of expected net cash flows to determine the estimated fair value of our reporting units. This present value model requires management to estimate future net cash flows, the timing of these cash flows and an appropriate discount rate (or weighted average cost of capital) representing the time value of money and the inherent risk and uncertainty of future cash flows. The discount rate is based on independently calculated beta risks for a composite group of companies, our target capital mix and an estimated market risk premium. The assumptions used in estimating future cash flows were consistent with the reporting unit’s internal planning. If the estimated fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. The determination of an impairment loss is complex and requires that we make many assumptions and estimates. If our estimates of future cash flows or the underlying assumptions and estimates change, we may need to record impairment losses in the future. See Note 1, Accounting Policies, to the Consolidated Financial Statements for further information on long-lived assets.

Item 7a. Qualitative and Quantitative Disclosures About Market Risk

We are exposed to market risk from changes in foreign exchange rates, interest rates, raw material costs and the price of certain commodities used in our production processes. To reduce such risks, we selectively use financial instruments. All hedging transactions are authorized and executed pursuant to clearly defined policies and procedures. Further, we do not enter into financial instruments for trading purposes.

The following risk management discussion and the estimated amounts generated from the sensitivity analyses are forward-looking statements of market risk, assuming that certain adverse market conditions occur. Actual results in the future may differ materially from those projected results due to actual developments in the global financial markets. The analysis methods used to assess and mitigate risks discussed below should not be considered projections of future events or losses.

A discussion of our accounting policies for risk management is included in Note 1, Accounting Policies, to the Consolidated Financial Statements.

Interest Rates

The fair value of our long-term public debt is based on an average of the bid and offer prices at year-end. The fair value of the credit facility approximates its carrying value due to its variable interest rate. The carrying value and fair value of long-term debt and capital leases at June 30, 2008were $394.3 million and $395.6 million and at June 30, 2007 were $445.9 million and $450.8 million, respectively. Market risk is estimated as the potential change in fair value resulting from a hypothetical 100 basis point decrease in interest rates and would amount to a $6.3 million increase in the fair value of long-term debt as of June 30, 2008.

We had $78.1 million of variable rate long-term debt outstanding at June 30, 2008. At this borrowing level, a hypothetical 100 basis point increase in interest rates would have a $0.8 million unfavorable impact on our pre-tax earnings and cash flows. The primary interest rate exposures on floating rate debt are with respect to LIBOR rates and U.S.prime rates.

Foreign Currency Exchange Rates

Foreign currency exposures arise from transactions including firm commitments and anticipated transactions denominated in a currency other than an entity’s functional currency. We and our subsidiaries generally enter into transactions denominated in their respective functional currencies. Our primary foreign currency exposure arises from foreign-denominated revenues and costs and their translation into U.S. dollars. The primary currencies to which we are exposed include the euro, Canadian dollar and the Brazilian real. Our euro exposure is internally hedged for the most part because a high percentage of both the sales and costs at our Steinfurt, Germany plant are denominated in euros. We do not have any hedges in place to protect against fluctuations in the Canadian dollar or the Brazilian real. Our currency exposure to the Brazilian real is approximately a $1.3 million negative impact on profitability for every ten basis point strengthening of the real versus the U.S. dollar. We are continuously evaluating our foreign currency exposure and our hedging policy is subject to change.

We generally view as long-term our investments in foreign subsidiaries with a functional currency other than the U.S. dollar. As a result, we do not generally hedge these net investments. However, we use capital structuring techniques to manage our net investment in foreign currencies as considered necessary. The net investment in foreign subsidiaries translated into dollars using the year-end exchange rates is $234.7 million and $201.3 million at June 30, 2008 and 2007, respectively. The potential foreign currency translation loss from investment in foreign subsidiaries resulting from a hypothetical 10% adverse change in quoted foreign currency exchange rates amounts to approximately $21.3 million at June 30, 2008. This change would be reflected in the equity section of our consolidated balance sheet in accumulated other comprehensive loss. The primary foreign currency exposures on our long-term investments are with the euro, Canadian dollar and the Brazilian real.

Availability and Cost of Raw Materials

Amounts paid by us for wood, cotton fiber and fluff pulp represent the largest component of our variable costs of production. The availability and cost of these materials are subject to market fluctuations caused by factors beyond our control, including weather conditions. Significant decreases in availability or increases in the cost of wood or cotton fiber to the extent not reflected in prices for our products, could materially and adversely affect our business, results of operations and financial condition. We have raw material availability issues in our specialty cotton fibers business in both North America and Brazil. We have the option to import cotton linters purchases for our Memphis specialty cotton fiber production facility in order to minimize the impact of the current constraints on North American cotton fiber availability. Currently our production is constrained by lint availability.

Commodities

We are dependent on commodities in our production process. Natural gas, electricity, fuel oil, caustic and other chemicals are just some of the commodities that our processes rely upon. Exposure to these commodities can have a significant impact on our operating performance.

In May 2007, we entered into a seven year electrical power contract for power usage in Brazil. This contract bypasses the local utility company thereby reducing our energy costs by approximately $0.5 million each year.

In order to minimize market exposure, we may use forward contracts to reduce price fluctuations in a desired percentage of forecasted purchases of fossil fuels over a period of generally less than one year. There were no fossil fuel contracts outstanding at June 30, 2008or 2007 requiring fair value treatment.

Exposure to commodity products also creates volatility in pricing. If our research and development efforts do not result in the commercialization of new, proprietary products, we will continue to have significant exposure to fluff pulp and other commodity products, which could result in volatility in sales prices and profits.

Industry Cyclicality

pricing fluctuations and the general cyclicality of the industries in which we compete. It is not certain that current prices will be maintained, that any price increases will be achieved, or that industry capacity utilization will reach favorable levels. The demand, cost and prices for our products may thus fluctuate substantially in the future and downturns in market conditions could have a material adverse effect on our business, results of operations and financial condition.

Contingencies

Our operations are subject to extensive general and industry-specific federal, state, local and foreign environmental laws and regulations. We devote significant resources to maintaining compliance with such requirements. We expect that, due to the nature of our operations, we will be subject to increasingly stringent environmental requirements (including standards applicable to wastewater discharges and air emissions) and will continue to incur substantial costs to comply with such requirements. Given the uncertainties associated with predicting the scope of future requirements, there can be no assurance that we will not in the future incur material environmental compliance costs or liabilities. For additional information on environmental matters, see Note 17, Contingencies, to the Consolidated Financial Statements.

Forward-Looking Statements

Except for the historical information contained herein, the matters discussed in this Annual Report are forward-looking statements that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors affecting our operations, markets, products, services and prices and other factors. The forward-looking statements included in this document are only made as of the date of this document and we undertake no obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Item 8. Financial Statements and Supplementary Data

See Index to Financial Statements on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

We had no changes in or disagreements with Ernst & Young LLP, our independent auditors.

Item 9A. Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to Buckeye management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective, as of June 30, 2008 (the end of the period covered by this Annual Report on Form 10-K).

Assessment of Internal Control Over Financial Reporting

Management’s report on our internal control over financial reporting is presented on page F-3 of this Annual Report on Form 10-K. The report of Ernst & Young LLP with respect to internal control over financial reporting is presented on page F-4 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

During our fiscal quarter ended June 30, 2008, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors,Executive Officersand Corporate Governance

Directors and Executive Officers

Information regarding members of the Board of Directors will be presented in our 2008 Annual Proxy Statement for the 2008 annual meeting of stockholders and is incorporated herein by reference.

Executive Officers of the Registrant

The names, ages and positions held by our executive officers on August 25, 2008 are:

Name	Age	Position	Elected to Present Position
John B. Crowe	61	Chairman of the Board, Chief Executive Officer and Director	July 2006
Kristopher J. Matula	45	President, Chief Operating Officer and Director	July 2006
Charles S. Aiken	58	Sr. Vice President, Manufacturingand Sustainability	October 2003
Jeffery T. Cook	46	Sr. Vice President, Marketing	February 2006
Sheila Jordan Cunningham	56	Sr. Vice President, General Counsel and Secretary	April 2000
Steven G. Dean	52	Sr. Vice President and Chief Financial Officer	July 2007
Douglas L. Dowdell	50	Sr. Vice President, Specialty Fibers	February 2006
William M. Handel	62	Sr. Vice President, Lean Enterprise	February 2006
Paul N. Horne	53	Sr. Vice President, Product and Market Development	February 2006
Marko M. Rajamaa	46	Sr. Vice President, Nonwovens	October 2006

John B. Crowe

Chairman of the Board, Chief Executive Officer and Director

Mr. Crowe has served as Chairman of the Board and Chief Executive Officer since July 1, 2006. He served as President and Chief Operating Officer from April 2003 to July 2006. Mr. Crowe was elected as a director of Buckeye in August 2004. He served as Senior Vice President, Wood Cellulose from January 2001 to April 2003. He served as Vice President, Wood Cellulose Manufacturing from January 1998 to January 2001. Prior to joining the Company, he was Executive Vice President/General Manager of Alabama River Pulp and Alabama Pine Pulp Operations, a division of Parsons and Whittemore, Inc. and was Vice President and Site Manager of Flint River Operations, a subsidiary of Weyerhauser Company. From 1979 to 1992, he was an employee of Procter & Gamble.

Kristopher J. Matula

President, Chief Operating Officer and Director

Mr. Matula has served as President and Chief Operating Officer since July 1, 2006. Mr. Matula was elected as a director of Buckeye in April 2007. He served as Executive Vice President and Chief Financial Officer from October 2003 to July 2006. Mr. Matula served as Senior Vice President, Nonwovens and Corporate Strategy from April 2003 to October 2003. He served as Senior Vice President, Nonwovens from January 2001 to April 2003. He served as Senior Vice President, Commercial - Absorbent Products from July 1997 to January 2001 and as Vice President, Corporate Strategy from April 1996 to July 1997. Prior to joining Buckeye in 1994, he held various positions with Procter & Gamble and General Electric.

Charles S. Aiken

Senior Vice President, Manufacturingand Sustainability

Mr. Aiken has served as Senior Vice President, Manufacturing since October 1, 2003. He served as Senior Vice President, Nonwovens Manufacturing from April 2000 to October 2003. He served as Vice President, Business Systems from April 1998 to April 2000 and as Vice President, Foley Plant from June 1995 to April 1998. He was an employee of Procter & Gamble from 1977 to March 1993.

Jeffery T. Cook

Senior Vice President, Marketing

Mr. Cook has served as Senior Vice President, Marketing since February 1, 2006. He served as Senior Vice President, Product and Market Development from February 2005 to February 2006. Mr. Cook served as Vice President, Product and Market Development from July 2003 to February 2005. He served as Vice President of Research and Development, Wood Cellulose from August 1999 to July 2003. He was an employee of Procter and Gamble from 1988 to 1998.

Sheila Jordan Cunningham

Senior Vice President, General Counsel and Secretary

Ms. Cunningham has served as Senior Vice President, General Counsel and Secretary since April 2000. She served as Vice President, General Counsel and Secretary from April 1998 to April 2000. She served as Assistant General Counsel from March 1997to April 1998and as Secretary from July 1997 to April 1998. Prior to joining the Company, she was a partner in the law firm of Baker, Donelson, Bearman & Caldwell.

Steven G. Dean

SeniorVice President and Chief Financial Officer

Mr. Dean has served as SeniorVice President and Chief Financial Officer since July 1, 2007. He served as Vice President and Chief Financial Officer from July 2006 to July 2007. He served as Vice President and Controller from February 2006 to July 2006. Mr. Dean served as Company Controller from December 2005 to February 2006. Previously, he served as Controller for Buckeye's Specialty Fibers Division from December 2004 to November 2005 and Controller for Buckeye's Nonwovens Division from August 2001 to November 2004. Prior to joining Buckeye in 1999, he held various financial management positions with Thomas & Betts and Hewlett-Packard.

Douglas L. Dowdell

Senior Vice President, Specialty Fibers

Mr. Dowdell has served as Senior Vice President, Specialty Fibers since February 1, 2006. He served as Senior Vice President, Nonwovens from February 2005 to February 2006. Mr. Dowdell served as Vice President, Nonwovens from October 2003 to February 2005. He served as Vice President, Absorbent Wood Fiber Sales from February 2002 to October 2003. He served as Vice President, Nonwovens Business Development from February 2001 to February 2002. He served as Vice President, Absorbent Products Business Development from August 2000 to February 2001. Prior to August 2000 he held several positions in the Company including: Manager, Absorbent Fiber Sales; Manager, Business Development; and Manager, Wood Procurement. He was an employee of Procter & Gamble from 1988 to March 1993.

William M. Handel

Senior Vice President, Lean Enterprise

Mr. Handel has served as Senior Vice President, Lean Enterprise since February 1, 2006. He served as Senior Vice President, Human Resources from April 2000 to February 2006. Mr. Handel served as Vice President, Human Resources from November 1995 to April 2000 and as Human Resources Manager from March 1993 to November 1995. He was an employee of Procter & Gamble from 1974 to March 1993.

Paul N. Horne

Senior Vice President, Product and Market Development

Mr. Horne has served as Senior Vice President, Product and Market Development since February 1, 2006. He served as Senior Vice President, Cotton Cellulose from January 2001 to February 2006. Mr. Horne served as Senior Vice President, Commercial - Specialty Cellulose from July 1997 to January 2001 and as Vice President, North and South American Sales from October 1995 to July 1997. He was an employee of Procter & Gamble from 1982 to March 1993.

Marko M. Rajamaa

Senior Vice President, Nonwovens

Mr. Rajamaa has served as Senior Vice President, Nonwovens since October 26, 2006. He served as Vice President, Nonwovens from February 2006 to October 2006 and as Vice President, Nonwovens Sales – Europe and Middle Eastfrom January 2002 to February 2006. Previously, he served as Manager, Nonwoven Sales, Europe, Middle East and Africa from 1999 to 2002. Prior to joining Buckeye in 1999, he held various sales management positions with Walkisoft / UPM-Kymmene.

Code of Business Conduct & Ethics

We have a Code of Business Conduct & Ethics, which applies to all of our directors, officers and employees, including our principal executive officer and senior financial officers. Our Code of Business Conduct & Ethics is available in the corporate governance section of the investor relations page of our website, www.bkitech.com. In addition, we intend to post in the corporate governance section of the investor relations page of our website information regarding any amendment to, or waiver from, the provisions of our Code of Business Conduct & Ethics to the extent such disclosure is required. The information on our website, however, does not form part of this Report.

Corporate Governance and Compliance with Section 16(a) of the Exchange Act

Information relating to corporate governance and compliance with Section 16(a) of the Exchange Act will be included in our 2008 Annual Proxy Statement and is incorporated herein by reference. As part of this Annual Report on Form 10-K, we are filing the applicable certifications of our Chief Executive Officer and Chief Financial Officer required under Section 302 and 906 of the Sarbanes-Oxley Act of 2002. In addition, on November 8, 2007, we filed with the New York Stock Exchange the annual certification of our Chief Executive Officer stating that he is not aware of any violation by Buckeye Technologies Inc. of the New York Stock Exchange’s corporate governance listing standards.

Item 11. Executive Compensation

Information relating to this item will be included in our 2008 Annual Proxy Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters

Information relating to this item will be included under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our 2008Annual Proxy Statement and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information relating to this item will be included in our 2008 Annual Proxy Statement and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

Information regarding principal accountant fees and services will be included in our 2008 Annual Proxy Statement and is incorporated by reference herein.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)	(1)	Financial Statements
		- See Index to Consolidated Financial Statements and Schedule on page F-1.
	(2)	Financial Statement Schedules
		- See Index to Consolidated Financial Statements and Schedule on page F-1. All other financial statement schedules are omitted as the information is not required or because the required information is presented in the financial statements or the notes thereto.
	(3)	Listing of Exhibits. See exhibits listed under Item 15 (b).

Exhibit 15 (b). Exhibits required by Item 601 of Regulation S-K

Exhibit		Incorporation by Reference or
Numbers	Description	Filed Herewith

3.1	Second Amended and Restated Certificate of Incorporation	Exhibit 3.1 to Form 10-Q for quarter ended December 31, 1997 file no. 001-14030, filed on February 13, 1998
3.1(a)	Articles of Amendment to the Second Amended and Restated Certificate of Incorporation	Exhibit 3.1(a) to Form S-4 file no. 333-59267, filed on July 16, 1998
3.2	Amended and Restated By-laws	Exhibit 3.2 to Form 10-Q for quarter ended March 31, 2006 file no. 001-14030, filed on April 27,2006
4.1	First Amendment to the Rights Agreement	Form 8-A to Form 10-K for year ended June 30, 1997 file no. 001-41030, filed on September 26, 1997
4.2	Indenture for 8% Senior Subordinated Notes due 2010, dated June 11, 1998	Exhibit 4.3 to Form S-4 file no. 333-59267, filed on July 16, 1998
4.3	Indenture for 8.5% Senior Notes due 2013, dated September 22, 2003	Exhibit 4.4 to Form S-4, file no. 333-110091, filed on October 30, 2003
10.1	Amended and Restated 1995 Management Stock Option Plan	Exhibit 10.1 to Form 10-K for year ended June 30, 1998 file no. 001-14030, filed on September 23, 1998
10.2	Second Amended and Restated 1995 Incentive and Nonqualified Stock Option Plan for Management Employees	Exhibit 10.2 to Form S-4 file no. 333-59267, filed on July 16, 1998
10.3	Form of Management Stock Option Subscription Agreement	Exhibit 10.3 to Form 10-K for year ended June 30, 1998 file no. 001-14030, filed on September 23, 1998
10.4	Form of Stock Option Subscription Agreement	Exhibit 10.4 to Form 10-K for year ended June 30, 1998 file no. 001-14030, filed on September 23, 1998
10.5	Amended and Restated Formula Plan