Edgar Filing: BUCKEYE TECHNOLOGIES INC

dec3109-10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2009

¨ 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

(State or other jurisdiction of incorporation)

IRS — Employer Identification No. 62-1518973

1001 Tillman Street, Memphis, TN 38112 901-320-8100

(Address of principal executive offices) (Zip Code) (Registrant’s telephone number,

including area code)

Indicate by check mark whether the 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 x

No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨

No ¨

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

Large accelerated filer ¨

Accelerated filer x

Non-accelerated filer ¨

Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨

No x

As of January 25, 2010, there were outstanding 38,766,116 Common Shares of the Registrant.

INDEX

BUCKEYE TECHNOLOGIES INC.

ITEM		PAGE

	PART I - FINANCIAL INFORMATION

1.	Financial Statements:

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2009 and 2008	3

	Condensed Consolidated Balance Sheets as of December 31, 2009 and June 30, 2009	4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2009 and 2008	5

	Notes to Condensed Consolidated Financial Statements	6

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

3.	Quantitative and Qualitative Disclosures About Market Risk	28

4.	Controls and Procedures	29


	PART II - OTHER INFORMATION

4.	Submission of Matters to a Vote of Security Holders	29

6.	Exhibits	29

	SIGNATURES	30

Item 1.

Financial Statements

PART I - FINANCIAL INFORMATION

BUCKEYE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

	Three Months Ended December 31						Six Months Ended December 31
	2009			2008			2009			2008
Net sales	$	183,308		$	184,665		$	360,582		$	405,958
Cost of goods sold		153,094			161,533			306,225			347,488
Gross margin		30,214			23,132			54,357			58,470

Selling, research and administrative expenses		11,181			11,266			22,730			23,476
Goodwill impairment loss		-			138,008			-			138,008
Amortization of intangibles and other		477			471			950			940
Alternative fuel mixture credits		(37,073	)		-			(72,915	)		-
Other operating income		(91	)		-			(91	)		-
Operating income (loss)		55,720			(126,613	)		103,683			(103,954	)

Net interest expense and amortization of debt costs		(4,621	)		(7,469	)		(9,910	)		(14,907	)
Gain on early extinguishment of debt		-			401			165			401
Gain (loss) on foreign exchange and other		(199	)		213			(299	)		(618	)

Income (loss) before income taxes		50,900			(133,468	)		93,639			(119,078	)
Income tax expense (benefit)		4,616			(8,484	)		8,123			(2,944	)

Net income (loss)	$	46,284		$	(124,984	)	$	85,516		$	(116,134	)

Earnings (loss) per share
Basic	$	1.19		$	(3.23	)	$	2.21		$	(3.00	)
Diluted	$	1.18		$	(3.23	)	$	2.18		$	(3.00	)

Weighted average shares for earnings per share
Basic		38,752			38,670			38,739			38,688
Effect of diluted shares		530			-			470			-
Diluted		39,282			38,670			39,209			38,688

See accompanying notes.

BUCKEYE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	December 31 2009			June 30 2009
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	20,797		$	22,061
Accounts receivable – net		120,420			111,292
Income tax and alternative fuel mixture credits receivable		64,814			9,374
Inventories – net		83,894			87,637
Deferred income taxes and other		6,290			6,507
Total current assets		296,215			236,871

Property, plant and equipment		1,125,345			1,091,313
Less accumulated depreciation		(594,985	)		(564,724	)
		530,360			526,589
Goodwill		2,425			2,425
Intellectual property and other, net		20,118			26,499
Total assets	$	849,118		$	792,384

Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	26,780		$	30,882
Accrued expenses		33,403			40,804
Current portion of long-term debt		19,000			-
Total current liabilities		79,183			71,686

Long-term debt		271,000			327,465
Accrued postretirement benefits		22,511			23,235
Deferred income taxes		46,988			48,399
Other liabilities		11,387			3,568
Stockholders’ equity		418,049			318,031
Total liabilities and stockholders’ equity	$	849,118		$	792,384

See accompanying notes.

BUCKEYE TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six Months Ended December 31
	2009			2008
Operating activities
Net income (loss)	$	85,516		$	(116,134	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		22,824			24,769
Amortization		1,483			1,252
Gain on early extinguishment of debt		(165	)		(401	)
Deferred income taxes and other		(2,409	)		(5,861	)
Goodwill impairment loss		-			138,008
Excess tax benefit from stock based compensation		(16	)		-
Changes in operating assets and liabilities:
Accounts receivable		(905	)		11,580
Income tax and alternative fuel mixture credits receivable		(55,440	)		-
Inventories		4,781			(9,381	)
Other assets		689			323
Accounts payable and other current liabilities		(11,379	)		(15,615	)
Net cash provided by operating activities		44,979			28,540
Investing activities
Purchases of property, plant and equipment		(18,672	)		(25,011	)
Proceeds from State of Florida grant		7,381			-
Other		(153	)		(73	)
Net cash used in investing activities		(11,444	)		(25,084	)
Financing activities
Net borrowings under lines of credit		72,529			2,541
Payments on long-term debt and other		(110,000	)		(5,358	)
Excess tax benefit from stock based compensation		16			-
Purchase of treasury shares		-			(494	)
Net proceeds from sale of equity interests		155			-
Net cash used in financing activities		(37,300	)		(3,311	)
Effect of foreign currency rate fluctuations on cash		2,501			(2,047	)
Decrease in cash and cash equivalents		(1,264	)		(1,902	)
Cash and cash equivalents at beginning of period		22,061			10,393
Cash and cash equivalents at end of period	$	20,797		$	8,491

See accompanying notes.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(In thousands)

NOTE 1: BASIS OF PRESENTATION

Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended December 31, 2009 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2010. All significant intercompany accounts and transactions have been eliminated in consolidation. For further information and a listing of our significant accounting policies, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2009, which was filed with the Securities and Exchange Commission on August 27, 2009 (“Annual Report”). Except as otherwise specified, references to a year indicate our fiscal year ending on June 30 of the year referenced and comparisons are to the corresponding period of the prior year.

Translation adjustment

Management has determined that the local currency of our German, Canadian, and Brazilian subsidiaries is the functional currency, and accordingly, European euro, Canadian dollar, and Brazilian real denominated balance sheet accounts are translated into U.S. dollars at the rate of exchange in effect at the balance sheet date. Income and expense activity for the period is translated at the weighted average exchange rate during the period. Translation adjustments are included as a separate component of stockholders' equity.

Use of estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from the estimates and assumptions used.

Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Areas in which the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include: impairment assessments on long-lived assets (including goodwill), allowance for doubtful accounts, inventory reserves, income tax liabilities and contingent liabilities.

NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS

In December 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (“ASU 2009-17”) amending the FASB Accounting Standards Codification (“Codification”). The amendments in ASU 2009-17 replace the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. An approach that is expected to be primarily qualitative will be more effective for identifying which enterprise has a controlling financial interest in a variable interest entity. The amendments in ASU 2009-17 also require additional disclosures about an enterprise’s involvement in variable interest entities, which will enhance the information provided to users of financial statements. We adopted ASU 2009-17 effective December 31, 2009 and it did not have a material effect on our current financial statements, however, it may have an effect on future financial statements depending on our future activities.

In January 2010, the FASB issued Accounting Standards Update 2010-01, “Equity: Accounting for Distributions to Shareholders with Components of Stock and Cash,” (“ASU 2010-01”). ASU 2010-01 amends the Codification to clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend. ASU 2010-01 codifies the consensus reached by the Emerging Issues Task Force in Issue No. 09-E, “Accounting for Stock Dividends, including Distributions to Shareholders with Components of Stock and Cash.” We adopted ASU 2010-01 effective December 31, 2009 and it did not have a material effect on our current financial statements, however, it may have an effect on future financial statements depending on our future activities.

In January 2010, the FASB issued Accounting Standards Update 2010-02, “Consolidation: Accounting and Reporting for Decreases in Ownership of a Subsidiary – A Scope Clarification,” (“ASU 2010-02”). ASU 2010-02 amends the Codification to clarify that the scope of the decrease in ownership provisions of ASC 810-10 and related guidance applies to: (i) a subsidiary or group of assets that is a business or nonprofit activity; (ii) a subsidiary that is a business or nonprofit activity that is transferred to an equity method or joint venture; (iii) an exchange of a group of assets that constitutes a business or nonprofit activity for a non-controlling interest in an entity (including an equity-method investee or joint venture); and (iv) a decrease in ownership in a subsidiary that is not a business or nonprofit activity when the substance of the transaction causing the decrease in ownership is not addressed in other authoritative guidance. If no other guidance exists, an entity should apply the guidance in ASC 810-10. The amendments in the update also clarify that the decrease in ownership guidance in ASC 810-10 does not apply to sales of in-substance real estate or conveyances of oil and gas mineral rights, even if these transfers involve businesses. We adopted ASU 2010-02 effective December 31, 2009 and it did not have a material effect on our current financial statements.

NOTE 3: SEGMENT INFORMATION

We report results for two segments, specialty fibers and nonwoven materials. The specialty fibers segment consists of our chemical cellulose, customized fibers and fluff pulp product lines which are cellulosic fibers based on both wood and cotton. Management makes financial decisions and allocates resources based on the sales and operating income of each segment. We allocate selling, research, and administrative expenses to each segment and management uses the resulting operating income to measure the performance of the segments. The financial information attributed to these segments is included in the following tables:

Three Months Ended December 31		Specialty Fibers		Nonwoven Materials		Corporate			Total
Net sales	2009	$	129,585	$	60,241	$	(6,518	)	$	183,308
	2008		137,739		56,841		(9,915	)		184,665
Operating income (loss)	2009		16,246		4,560		34,914			55,720
	2008		11,339		1,506		(139,458	)		(126,613	)
Depreciation and amortization of	2009		7,411		3,668		929			12,008
intangibles	2008		8,060		3,497		940			12,497
Capital expenditures	2009		8,794		1,135		(19	)		9,910
	2008		11,855		1,558		516			13,929

Six Months Ended December 31		Specialty Fibers		Nonwoven Materials		Corporate			Total
Net sales	2009	$	251,744	$	122,969	$	(14,131	)	$	360,582
	2008		302,718		122,703		(19,463	)		405,958
Operating income (loss)	2009		24,783		9,704		69,196			103,683
	2008		31,457		5,099		(140,510	)		(103,954	)
Depreciation and amortization of	2009		14,451		7,475		1,850			23,776
intangibles	2008		16,408		7,542		1,759			25,709
Capital expenditures	2009		16,230		1,863		579			18,672
	2008		21,952		2,336		723			25,011

Management evaluates operating performance of the specialty fibers and nonwoven materials segments excluding amortization of intangibles, the impact of goodwill impairment loss, alternative fuel mixture credits, charges related to restructuring, unallocated at-risk compensation and unallocated stock-based compensation for executive officers and certain other employees. Therefore, the corporate column includes operating elements such as segment eliminations, amortization of intangibles, goodwill impairment loss, alternative fuel mixture credits, charges related to restructuring, unallocated at-risk compensation and unallocated stock-based compensation for executive officers and certain other employees. Corporate net sales represent the elimination of intersegment sales included in the specialty fibers reporting segment. We account for intersegment sales as if the sales were to third parties.

NOTE 4: ALTERNATIVE FUEL MIXTURE CREDITS

The U.S. Internal Revenue Code of 1986, as amended (“the Code”) permits a refundable excise tax credit under certain circumstances for the production and use of alternative fuels and alternative fuel mixtures in lieu of fossil-based fuels. The credit is equal to $.50 per gallon of alternative fuel contained in the mixture. We qualify for the alternative fuel mixture credit because we produce liquid fuels derived from biomass, byproducts of our wood pulping process, and utilize those fuels to power our Foley Plant in Perry, Florida.

On March 19, 2009 the U.S. Internal Revenue Service (IRS) accepted our application to be registered as an alternative fuel mixer. We began producing and consuming alternative fuel mixtures on February 12, 2009. We recorded $37,073 and $72,915 in alternative fuel mixture credits, which was net of expenses, in our consolidated statements of operations related to credits earned for the three and six months ended December 31, 2009, respectively. During the six months ended December 31, 2009 we received $2,868 in cash related to these credits and $5,581 related to prior period credits. Of the $75,224 in income tax credits accumulated in fiscal 2010, approximately $21,000 will be realized in the current fiscal year as an offset to taxes due on income earned in the U.S., eliminating the need for quarterly estimated federal tax payments this fiscal year. The remainder will be realized when we apply for our tax refund in fiscal 2011. We have treated the credits received in cash as taxable income and the income tax credits as non-taxable income. The alternative fuel mixture credits are subject to audit by the IRS. The credit expired on December 31, 2009.

NOTE 5: MITIGATION BANK

In February 2002, we were issued a mitigation bank/environmental resource permit by the State of Florida to restore approximately 6,748 acres of property to wetlands. As the three phases of the project are completed under this permit, credits are released that can be sold under the mitigation bank and an obligation is created to maintain the property as wetlands in perpetuity.

In 2005, we began construction on the first phase of the mitigation bank. Since that time, we have completed two of the 3 phases covered under the permit. Phase III will not commence before fiscal year 2013. During fiscal years 2006 through 2009, we sold approximately 17 credits for $417. As of December 31, 2009 we have recorded a long-term asset of $566 for mitigation bank credits and a long-term perpetual maintenance liability of $157. The value of the asset on the balance sheet includes all costs associated with the construction required to return the property to wetlands, hydrologic monitoring, vegetation monitoring and the present value of the perpetual maintenance. During the three months ended December 31, 2009, we recorded $91, which was net of expenses, in mitigation bank sales which are shown as other operating income on our consolidated statements of operations.

NOTE 6: INVENTORIES

Inventories are valued at the lower of cost or market. The costs of manufactured cotton-based specialty fibers and costs for nonwoven raw materials are generally determined on the first-in, first-out basis. Other manufactured products and raw materials are generally valued on an average cost basis. Manufactured inventory costs include material, labor and manufacturing overhead. Slash pine timber, cotton fibers and chemicals are the principal raw materials used in the manufacture of our specialty fiber products. Fluff pulp is the principal raw material used in our nonwoven materials products. We take physical counts of inventories at least annually, and we review periodically the provision for potential losses from obsolete, excess or slow-moving inventories.

The components of inventory consist of the following:

	December 31 2009		June 30 2009

Raw materials	$	20,176	$	20,004
Finished goods		38,538		42,599
Storeroom and other supplies		25,180		25,034
	$	83,894	$	87,637

NOTE 7: GOODWILL

In accordance with GAAP, we perform a goodwill impairment analysis on an annual basis and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of businesses acquired. Goodwill of businesses acquired is specifically identified to the reporting units to which the businesses belong. Goodwill is reviewed annually for impairment in the fourth fiscal quarter. We estimate fair value based on a combination of the income approach and the market approach. The income approach 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 are consistent with the reporting unit’s internal planning. The market approach estimates the fair value of our reporting units on comparable market prices. Goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair market value of the reporting unit. The analysis of potential impairment of goodwill requires a two-step process. The first step is the estimation of fair value. If step one indicates that impairment potentially exists, the second step is performed to measure the amount of impairment, if any. Goodwill impairment exists when the implied fair value of goodwill is less than its carrying value.

During our quarter ended December 31, 2008, based on the economic environment at that time and the steep decline in the price of our stock, which created a significant gap between the book and market value of our equity, we concluded that there were sufficient indicators to require us to perform an interim goodwill impairment test as of December 31, 2008. As a result, during the three months ended December 31, 2008, we recorded an impairment charge of $138,008 which represented our best estimate of the resulting goodwill impairment. We engaged an independent valuation firm to assist with this impairment testing by expressing opinions as of December 31, 2008 of the fair values of the business enterprises of our four reporting units. The results of step one indicated goodwill was impaired at three of our reporting units as the estimated fair value was less than the carrying value of the reporting units. As such, step two of the goodwill impairment test was performed to determine the actual amount of goodwill impairment. In this step, we were required to allocate the fair value of the reporting unit, as determined in step one, to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if these reporting units had been acquired on the date of the test. Upon completion of this step, our original estimate did not change and therefore no change was required to the $138,008 non-cash goodwill impairment charge estimated and recorded in the second quarter of fiscal 2009. We reviewed our long-lived tangible and intangible assets within the impaired reporting units and determined that the forecasted undiscounted cash flows related to these assets or asset groups were in excess of their carrying values, and therefore these assets were not impaired. There were no changes in the carrying amount of goodwill for the six months ended December 31, 2009.

NOTE 8: DEBT

The components of long-term debt consist of the following:

	December 31 2009		June 30 2009

Senior Notes due 2013	$	200,000	$	200,000
Senior Subordinated Notes due 2010		-		110,444
Credit facility		90,000		17,021
	$	290,000	$	327,465

Senior Notes

Our 8.5% senior notes due October 1, 2013 (the “2013 Notes”) are unsecured obligations and are senior to any of our subordinated debt. The 2013 Notes are guaranteed by our direct and indirect domestic subsidiaries that are also guarantors on our credit facility. The 2013 Notes became redeemable at our option, in whole or part, at any time on or after October 1, 2008, at redemption prices varying from 104.25% to 100% of principal amount on or after October 1, 2011 (102.88% at December 31, 2009), together with accrued and unpaid interest to the date of redemption.

On June 30, 2009 we amended the 2013 Notes to permit the redemption, repurchase or retirement of subordinated indebtedness, including our 8% senior subordinated notes due 2010 (the “2010 Notes” and, with the 2013 Notes, the “Notes”), up to sixteen months prior to maturity, which represented an increase of four months compared to the prior terms of the indentures pursuant to which the Notes were issued. We paid a consent fee of $650 in the aggregate to all consenting holders. We recorded this consent fee as a deferred financing cost and will amortize it over the remaining term of the 2013 Notes using the effective interest rate method.

On January 4, 2010, we redeemed $35,000 of the 2013 Notes using a combination of $19,000 cash on hand and $16,000 in borrowings on our revolving credit facility. See Note 16.

Senior Subordinated Notes

On July 31, 2009 we redeemed the remaining $110,000 then outstanding of 2010 Notes using borrowings on our revolving credit facility. During the six months ended December 31, 2009 we recorded a $165 gain related to the early extinguishment of this debt, which was the net of the write-off of the related deferred financing costs and the remaining unamortized interest rate swap early termination fee.

Revolving Credit Facility

Our $200,000 senior secured revolving credit facility (the “Credit Facility”) currently has a maturity date of July 25, 2012. The interest rate applicable to borrowings under the Credit Facility is 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%. The Credit Facility is secured by substantially all of our assets located in the United States.

The 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. At December 31, 2009, we were in compliance with the financial covenants under the Credit Facility.

At December 31, 2009, we had $20,797 of cash and cash equivalents and we had $105,082 borrowing capacity under the Credit Facility. The Credit Facility allows for a sublimit on letters of credit of $50,000. As of December 31, 2009, $45,082 of the sublimit was unused. 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.

NOTE 9: FAIR VALUE MEASUREMENTS

For certain of our financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, the carrying amounts approximate fair value due to their short maturities. The fair value of our long-term public debt is based on an average of the bid and offer prices. The carrying value and fair value of long-term debt at December 31, 2009, were $290,000 and $295,750, respectively, and at June 30, 2009 were $327,465 and $311,362, respectively. The fair value of the Credit Facility approximates its carrying value due to its variable interest rate.

For the financial instruments disclosed below, fair value is determined at each balance sheet date using an income approach, which consists of a discounted cash flow model that takes into account the present value of future cash flows under the terms of the contracts using current market information as of the reporting date, such as prevailing interest rates and foreign currency spot and forward rates. The following table provides a summary of the inputs used to develop these estimates under the fair value hierarchy:

	Fair Value Measurements at December 31, 2009
	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:
Natural gas hedge	$	3	$	-	$	3	$	-
Total assets	$	3	$	-	$	3	$	-

Liabilities:
Natural gas hedge	$	1	$	-	$	1	$	-
Euro currency hedge		256		-		256		-
Total liabilities	$	257	$	-	$	257	$	-

NOTE 10: FINANCIAL DERIVATIVE INSTRUMENTS

As part of our risk management program, we use a variety of financial instruments such as foreign currency forwards and options, interest rate swaps, and natural gas contracts as cash flow hedges to mitigate risk. We do not hold or issue derivative financial instruments for trading purposes.

Foreign Currency Hedging

We periodically use hedging to address the risk associated with non-functional currency (primarily Brazilian real and European euro) financial statement exposures. Fluctuations in exchange rates can change our foreign currency equivalent revenue and hence our foreign currency earnings. When conditions warrant, our foreign subsidiaries hedge a portion of forecasted U.S. dollar denominated sales/receivables utilizing foreign exchange forward and option contracts. These contracts are designated as cash flow hedges and accounting for these hedge instruments requires that they be recorded on the balance sheet as either an asset or a liability measured at fair value as of the reporting date. The effective portion of the hedge gain or loss is reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified into gain (loss) on exchange rates when the hedged exposure affects earnings. Any ineffective portions of related gains or losses are recorded in the statements of operations immediately. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, we will reclassify the gain or loss on the related cash flow hedge from accumulated other comprehensive income (loss) to gain (loss) on exchange rates on our consolidated statement of operations. As of December 31, 2009, we had a euro currency forward contract with a value of ($256) that did not qualify for hedge accounting treatment. As of June 30, 2009 we had a foreign currency contract that did not qualify for hedge accounting treatment with a value of $320 recorded in prepaid expenses and other on the balance sheet.

Interest Rate Swaps

In May 2001, we entered into an interest rate swap relative to $100,000 of our 2010 notes. The swap converted interest payments from a fixed rate to a floating rate of LIBOR plus 1.97%. This arrangement qualified as a fair value hedge. As such, the net effect from the interest rate swap was recorded as part of interest expense. On October 15, 2003, the swap counter party exercised its right to terminate the swap and paid us $4,000 as an early termination fee, which was being amortized as a reduction to interest expense through October 15, 2010. At June 30, 2009, the unamortized portion of the termination fee was recorded as an increase in debt of $541. On July 31, 2009, the remaining $506 was recorded as a gain on early extinguishment of debt when we redeemed the remaining 2010 Notes. During the three and six months ended December 31, 2008, the swap reduced our interest expense by $144 and $253, respectively.

On September 17, 2007 we entered into an interest rate swap agreement that matured on September 19, 2009 relative to $30,000 of debt under our Credit Facility. The swap involved the exchange of interest payments from a floating-rate three month LIBOR plus the applicable margin on the revolving credit facility to a fixed rate of 4.79% plus the same applicable margin. This arrangement qualified as a cash flow hedge; therefore, the net effect from the interest rate swap was recorded as interest expense. On June 17, 2009 we retired the $30,000 of variable rate debt that had been hedged. As a result of the extinguishment of the underlying debt, hedge accounting on the interest rate swap was no longer appropriate. During the three and six months ended December 31, 2008, the swap increased our interest expense by $163 and $315, respectively.

Commodity Hedging

We have entered into contracts for the purchase of natural gas at a fixed rate to manage the price risk associated with a portion of our forecasted purchases. The objective of these hedges is to provide supply assurance for contracted volumes at a pre-determined price; provide a systemic method of purchasing commodities which enables us the opportunity to take advantage of forward price trends based on historical data; provide a methodology to bring price stability that will contribute to improved price forecasting and budgeting assumptions; and reduce the variability of cash flows associated with the purchase of natural gas at certain plants. These contracts are designated as cash flow hedges. As of December 31, 2009 and June 30, 2009 we had contracts in place to purchase 101,379 million BTUs and 359,220 million BTUs of natural gas at various fixed prices through May 2010, respectively.

Fair Value of Derivative Instruments

In the next twelve months, we intend to reclassify into earnings $2 in net gains in respect of cash flow hedges.

All cash flows associated with purchasing and selling derivatives are classified as operating cash flows in the unaudited condensed consolidated statements of cash flows. The following table presents the location of all assets and liabilities associated with our hedging instruments within the unaudited condensed consolidated balance sheets:

		Asset Derivatives				Liability Derivatives
Derivatives designated as hedging instruments	Balance Sheet Location	Fair Value at 12/31/09		Fair Value at 6/30/09		Fair Value at 12/31/09		Fair Value at 6/30/09
Natural gas hedges	Accrued expenses	$	3	$	-	$	1	$	234
Interest rate swap	Accrued expenses		-		-		-		320
Total derivatives designated as hedging instruments		$	3	$	-	$	1	$	554

The following tables present the impact of derivative instruments, net of tax, and their location within the unaudited condensed consolidated statements of operations:

Derivatives in Cash Flow Hedging Relationships:
	Amount of (Gain) Loss Recognized in AOCI on Derivative (Effective Portion)					Amount of (Gain) Loss Reclassified from AOCI into Income (Effective Portion)(a)					Amount of (Gain) Loss Recognized in Income on Derivatives (Ineffective Portion)
	Six months ended December 31,					Six months ended December 31,					Six months ended December 31,
	2009		2008			2009			2008		2009		2008
Natural gas hedges	$	193	$	697		$	(149	)	$	149	$	-	$	-
Interest rate swap		-		(198	)		-			106		-		-
Total	$	193	$	499		$	(149	)	$	255	$	-	$	-
(a) Amounts related to natural gas contracts are included in cost of goods sold and amounts related to interest rate swaps are included in net interest expense and amortization of debt costs.

Derivatives not Designated as Cash Flow Hedges:
		Six months ended December 31,
	Classification of (gains) or losses	2009			2008
Foreign currency swap	Foreign exchange and other	$	(31	)	$	-

NOTE 11: COMPREHENSIVE INCOME

The components of comprehensive income consist of the following:

	Three Months Ended December 31					Six Months Ended December 31
	2009		2008			2009		2008

Net income	$	46,284	$	(124,984	)	$	85,516	$	(116,134	)
Foreign currency translation adjustments – net		1,173		(35,449	)		12,983		(61,540	)
Unrealized gains (losses) on hedging activities - net		31		(177	)		149		(255	)
Comprehensive income (loss), net of tax	$	47,488	$	(160,610	)	$	98,648	$	(177,929	)

For the three and six months ended December 31, 2009, the change in the foreign currency translation adjustment was due to fluctuations in the exchange rate of the U.S. dollar against the euro of ($1,581) and $1,734, the Brazilian real of $1,639 and $6,545 and the Canadian dollar of $1,115 and $4,704, respectively.

For the three and six months ended December 31, 2008, the change in the foreign currency translation adjustment was due to fluctuations in the exchange rate of the U.S. dollar against the euro of ($2,466) and ($11,468), the Brazilian real of ($12,029) and ($24,114) and the Canadian dollar of ($20,954) and ($25,958), respectively.

A rollforward of the amounts included in Accumulated Other Comprehensive Income, net of taxes is shown below:

		Hedging Activities		Foreign Currency Translation		Post-Employment Healthcare			Accumulated Other Comprehensive Income
Balance at June 30, 2009	$	(147	)	$	35,637	$	(1,789	)	$	33,701
Changes in value		298			12,983		-			13,281
Reclassification into earnings		(149	)		-		-			(149	)
Balance at December 31, 2009	$	2		$	48,620	$	(1,789	)	$	46,833

NOTE 12: INCOME TAXES

We file income tax returns with federal, state, local and foreign jurisdictions. As of December 31, 2009, we remain subject to examinations of our U.S. federal and state income tax returns for 2002 through 2009, Canadian income tax returns for 2002 through 2009 and German tax filings for 2004 through 2009.

During the three months ended December 31, 2009, we claimed the alternative fuel mixture credits as income tax credits on the federal income tax return to be filed for 2010. During the six months ended December 31, 2009, we claimed the alternative fuel mixture credits as cash refunds through the filing of periodic excise tax refund claims and as income tax credits on the federal income tax return to be filed for 2010. For purposes of calculating federal and state income taxes, we treat the credits claimed as cash refunds of excise tax as taxable income and the credits claimed on the federal income tax return as non-taxable income. During the three and six months ended December 31, 2009, we recorded a tax benefit of $13,396 and $25,207, respectively due to the non-taxable nature of the alternative fuel mixture credits claimed on the federal income tax return.

Our effective tax rate for the three and six month periods ended December 31, 2009 was 9.1% and 8.7%, respectively. Our effective tax rate for the same periods in 2008 was 6.4% and 2.5%, respectively. We recorded a $138,008 goodwill impairment charge in the three months ended December 31, 2008. Accordingly, we recognized a tax benefit of $10,410 in connection with the goodwill impairment charge. Our income tax expense differs from the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes due to the following:

	Three Months Ended December 31						Six Months Ended December 31
	2009			2008			2009			2008
Expected tax expense (benefit) at 35%	$	17,816		$	(46,714	)	$	32,774		$	(41,677	)
Nondeductible goodwill impairment charge		-			37,892			-			37,892
Alternative fuel mixture credits		(13,396	)		-			(25,207	)		-
Effect of foreign operations		433			391			759			1,167
Other		(237	)		(53	)		(203	)		(326	)
Income tax expense (benefit)	$	4,616		$	(8,484	)	$	8,123		$	(2,944	)

NOTE 13: EMPLOYEE BENEFIT PLANS

We provide medical, dental and life insurance postretirement plans covering certain U.S. employees who meet specified age and service requirements. Effective January 1, 2006, Medicare eligible retirees age 65 or older are no longer covered under the self-funded plan. Instead, they are provided a subsidy towards the purchase of supplemental insurance. The components of net periodic benefit costs are as follows:

	Three Months Ended December 31						Six Months Ended December 31
	2009			2008			2009			2008
Service cost for benefits earned	$	101		$	121		$	202		$	241
Interest cost on benefit obligation		350			374			700			747
Amortization of unrecognized prior service cost		(247	)		(251	)		(494	)		(502	)
Actuarial loss		31			69			62			139
Total cost	$	235		$	313		$	470		$	625

On July 1, 2008, we changed our measurement date of the plan’s funded status to be the same as our fiscal year end. The change in the measurement date resulted in a decrease in accrued postretirement benefits of $1,175, an increase in deferred tax liabilities of $433, an increase in accumulated other comprehensive income of $882 and a decrease in the opening balance of retained earnings of $140.

NOTE 14: STATE OF FLORIDA GRANT

On August 11, 2009 we announced that we had qualified to receive up to $7,381 from the State of Florida Quick Action Closing Fund. This performance-based incentive provides up-front cash for approved economic development projects. On September 30, 2009, we received the $7,381 as an incentive to complete our $45,000 Foley Energy Project which had been put on hold in March 2009. We have committed to invest $32,300 on this and other related energy projects after the date of the grant, and to maintain at least 555 jobs, at a specified average wage, at our Florida facility. We are required to make the investment by December 31, 2012 and to maintain the jobs and specified wage level through December 31, 2015. If we fail to make at least 80% of the investment or if we fall below the 555 jobs or specified wage level in any of the next six years, we would be required to repay a prorated portion of the award. We have recorded this cash incentive in the long-term liability section of our condensed consolidated balance sheets. As we invest in the Foley Energy Project, we are reclassifying this liability as a reduction in the cost of equipment. For the three months ended December 31, 2009 we have reclassified $1,529. When the project is complete, we will amortize the $7,381 over the life of the equipment.

NOTE 15: CONTINGENCIES

Our operations are subject to extensive general and industry-specific federal, state, local and foreign environmental laws and regulations, particularly those relating to air and water quality, waste disposal and the cleanup of contaminated soil and groundwater. We devote significant resources to maintaining compliance with these laws and regulations. Such environmental laws and regulations at the federal level include the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Clean Air Act of 1990, as amended, the Clean Water Act of 1972, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control Act of 1976, as amended, and the Safe Drinking Water Act of 1974, as amended. These environmental regulatory programs are primarily administered by the U.S. Environmental Protection Agency (EPA). In addition, the individual states and foreign countries in which we operate have adopted and may adopt in the future equivalent or more stringent environmental laws and regulations or have enacted their own parallel environmental programs. We closely monitor our environmental compliance with current environmental requirements and believe that we are in substantial compliance.

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, such as emissions of greenhouse gases, and general permitting requirements for our manufacturing facilities. We also expect that we will continue to incur substantial costs to comply with such requirements. Any failure on our part to comply with environmental laws or regulations could subject us to penalties or other sanctions that could materially affect our business, results of operations or financial condition. We cannot currently assess, however, the impact that more stringent environmental requirements may have on our operations or capital expenditure requirements.

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 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 established a schedule for the filing of necessary permit applications and approvals to implement the following activities, among others: (i) make process changes within the Foley Plant to reduce the coloration of its wastewater discharge, (ii) restore certain wetlands areas, (iii) install a pipeline to 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 capital expenditures. Based on the anticipated permit conditions, we expect to incur significant additional capital expenditures once final permits are issued.

In August 2005, FDEP drafted a proposed renewal of the Buckeye National Pollutant Discharge Elimination System (NPDES) permit. The FDEP completed the required public notice, review and comment process and issued the formal Notice of Intent to Issue Permit in November 2005. The proposed permit was challenged by some members of the public. In January 2008, the pending administrative hearing was dismissed due to anticipated revisions to the permit based on additional studies and development of a total maximum daily load (TMDL) for the Fenholloway River. The development of the TMDL is necessary because the EPA and FDEP have listed the Fenholloway River as an impaired water (not meeting all water quality standards) under the Clean Water Act for certain pollutants. In addition, we also have filed petitions with the FDEP for the establishment of Site-Specific Alternative Water Quality Criteria (SSAC), which petitions must be approved by the EPA. The additional studies necessary to support revisions to the permit have been completed. The revised draft NPDES permit to be issued by FDEP will be based upon modeling performed in conjunction with the EPA and the FDEP, will address the TMDL established for the Fenholloway River by the EPA and will also contain Water Quality Based Effluent Limits. When the FDEP issues the revised draft permit it will be subject to public comment and opportunity for requesting a hearing.

We expect to incur additional capital expenditures related to our wastewater treatment and discharge of between $40 million and $60 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 including when the final NPDES permit is issued and its final terms and conditions.

On November 4, 2009, our Americana, Brazil facility received an Infraction Document from the São Paulo State Tax Authority, related to Brazilian state value-added taxes (“ICMS Taxes”) for the period of January 1, 2005 through December 31, 2008. On December 4, 2009, we filed our objection to 2,624 real ($1,507 at December 31, 2009 exchange rates) of the taxes and penalties that were assessed. The process for defending our objection will involve a lengthy appeals process and it could be several years before we reach resolution. We believe we have meritorious defenses to this assessment and intend to defend our position vigorously.

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

NOTE 16: SUBSEQUENT EVENTS

We have evaluated events and transactions subsequent to December 31, 2009 through January 28, 2009, the date these condensed consolidated financial statements were included in this Form 10-Q and filed with the SEC. We have identified the following events that occurred subsequent to December 31, 2009.

On January 4, 2010, we redeemed $35,000 of the 2013 Notes using a combination of $19,000 cash on hand and $16,000 in borrowings on our revolving credit facility.

In January 2010, we began to implement a restructuring plan to reduce selling, research and administrative costs and to transfer employees to manufacturing sites to fill vacant positions and therefore minimize the need for outside hiring.

NOTE 17: CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The guarantor subsidiaries presented below represent our subsidiaries that are subject to the terms and conditions outlined in the indenture governing the 2013 Notes and that guarantee the 2013 Notes, jointly and severally, on a senior unsecured basis. The non-guarantor subsidiaries presented below represent the foreign subsidiaries that do not guarantee the 2013 Notes. Each subsidiary guarantor is 100% owned directly or indirectly by us and all guarantees are full and unconditional.

The supplemental financial information for our guarantor subsidiaries and non-guarantor subsidiaries for the 2013 Notes is presented in the following tables.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended December 31, 2009

	Buckeye Technologies Inc.			Guarantors US Subsidiaries			Non- Guarantor Subsidiaries				Consolidating Adjustments			Consolidated
Net sales	$	22,967		$	125,048			$	42,688		$	(7,395	)	$	183,308
Cost of goods sold		19,370			101,408				39,125			(6,809	)		153,094
Gross margin		3,597			23,640				3,563			(586	)		30,214

Selling, research and administrative expenses, and other		(3,866	)		12,813				2,620			-			11,567
Alternative fuel mixture credits		-			(37,073	)			-			-			(37,073	)

Operating income (loss)		7,463			47,900				943			(586	)		55,720

Other income (expense):
Net interest income (expense) and amortization of debt costs		(5,000	)		398				(19	)		-			(4,621	)
Other income (expense), including equity in income (loss) in affiliates		30,020			(2	)			(113	)		(30,104	)		(199	)
Intercompany interest income (expense)		6,840			(6,104	)			(736	)		-			-

Income (loss) before income taxes		39,323			42,192				75			(30,690	)		50,900

Income tax expense (benefit)		(6,961	)		22,354				272			(11,049	)		4,616

Net income (loss)	$	46,284		$	19,838			$	(197	)	$	(19,641	)	$	46,284

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Six Months Ended December 31, 2009

	Buckeye Technologies Inc.			Guarantors US Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net sales	$	40,673		$	250,840		$	85,188		$	(16,119	)	$	360,582
Cost of goods sold		37,692			207,012			77,048			(15,527	)		306,225
Gross margin		2,981			43,828			8,140			(592	)		54,357

Selling, research and administrative expenses, and other		(7,448	)		25,756			5,281			-			23,589
Alternative fuel mixture credits		-			(72,915	)		-			-			(72,915	)

Operating income (loss)		10,429			90,987			2,859			(592	)		103,683

Other income (expense):
Net interest income (expense) and amortization of debt costs		(10,637	)		741			(14	)		-			(9,910	)
Other income (expense), including equity in income (loss) in affiliates		81,343			31			(439	)		(81,069	)		(134	)
Intercompany interest income (expense)		13,700			(12,236	)		(1,464	)		-			-

Income (loss) before income taxes		94,835			79,523			942			(81,661	)		93,639

Income tax expense (benefit)		9,319			27,300			902			(29,398	)		8,123

Net income (loss)	$	85,516		$	52,223		$	40		$	(52,263	)	$	85,516

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended December 31, 2008

	Buckeye Technologies Inc.			Guarantors US Subsidiaries			Non- Guarantor Subsidiaries				Consolidating Adjustments			Consolidated
Net sales	$	26,414		$	132,816			$	36,355		$	(10,920	)	$	184,665
Cost of goods sold		25,652			112,160				34,515			(10,794	)		161,533
Gross margin		762			20,656				1,840			(126	)		23,132

Selling, research and administrative expenses, and other		(3,528	)		12,991				2,274			-			11,737
Goodwill impairment loss		20,230			24,922				92,856			-			138,008

Operating loss		(15,940	)		(17,257	)			(93,290	)		(126	)		(126,613	)

Other income (expense):
Net interest income (expense) and amortization of debt costs		(7,889	)		358				62			-			(7,469	)
Other income (expense), including equity in income (loss) in affiliates		(205,966	)		(197	)			343			206,434			614
Intercompany interest income (expense)		7,719			(6,703	)			(1,016	)		-			-

Income (loss) before income taxes		(222,076	)		(23,799	)			(93,901	)		206,308			(133,468	)

Income tax expense (benefit)		(96,890	)		639				(4,357	)		92,124			(8,484	)

Net income (loss)	$	(125,186	)	$	(24,438	)		$	(89,544	)	$	114,184		$	(124,984	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Six Months Ended December 31, 2008

	Buckeye Technologies Inc.			Guarantors US Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net sales	$	62,685		$	277,341		$	87,548		$	(21,616	)	$	405,958
Cost of goods sold		59,456			228,125			81,897			(21,990	)		347,488
Gross margin		3,229			49,216			5,651			374			58,470

Selling, research and administrative expenses, and other		(7,665	)		26,748			5,333			-			24,416
Goodwill impairment loss		20,230			24,922			92,856			-			138,008

Operating income (loss)		(9,336	)		(2,454	)		(92,538	)		374			(103,954	)

Other income (expense):
Net interest income (expense) and amortization of debt costs		(15,646	)		639			100			-			(14,907	)
Other income (expense), including equity in income (loss) in affiliates		(199,234	)		(273	)		(444	)		199,734			(217	)
Intercompany interest income (expense)		15,437			(13,244	)		(2,193	)		-			-

Income (loss) before income taxes		(208,779	)		(15,332	)		(95,075	)		200,108			(119,078	)

Income tax expense (benefit)		(92,442	)		3,434			(3,985	)		90,049			(2,944	)

Net income (loss)	$	(116,337	)	$	(18,766	)	$	(91,090	)	$	110,059		$	(116,134	)

CONDENSED CONSOLIDATING BALANCE SHEETS

As of December 31, 2009

	Buckeye Technologies Inc.			Guarantors US Subsidiaries		Non- Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Assets
Current assets
Cash and cash equivalents	$	14,350		$	3	$	6,444	$	-		$	20,797
Accounts receivable, net		43,779			42,119		34,522		-			120,420
Income tax and alternative fuel mixture credits receivable		-			64,814		-		-			64,814
Inventories, net		12,418			53,387		18,414		(325	)		83,894
Other current assets		(75	)		4,875		1,490		-			6,290
Intercompany accounts receivable		-			216,012		16,653		(232,665	)		-
Total current assets		70,472			381,210		77,523		(232,990	)		296,215

Property, plant and equipment, net		57,440			337,139		135,781		-			530,360
Goodwill and intangibles, net		13,980			2,425		-		-			16,405
Intercompany notes receivable		363,717			-		-		(363,717	)		-
Other assets, including investment in subsidiaries		388,271			301,610		99,132		(782,875	)		6,138
Total assets	$	893,880		$	1,022,384	$	312,436	$	(1,379,582	)	$	849,118

Liabilities and stockholders’ equity
Current liabilities
Trade accounts payable	$	1,705		$	17,743	$	7,332	$	-		$	26,780
Other current liabilities		(52,223	)		81,700		3,927		(1	)		33,403
Intercompany accounts payable		232,665			-		-		(232,665	)		-
Current portion of long-term debt		19,000			-		-		-			19,000
Total current liabilities		201,147			99,443		11,259		(232,666	)		79,183

Long-term debt		271,000			-		-		-			271,000
Deferred income taxes		(5,414	)		44,654		7,748		-			46,988
Other long-term liabilities		9,098			22,907		1,893		-			33,898
Intercompany notes payable		-			261,839		101,878		(363,717	)		-
Stockholders’/invested equity		418,049			593,541		189,658		(783,199	)		418,049
Total liabilities and stockholders’ equity	$	893,880		$	1,022,384	$	312,436	$	(1,379,582	)	$	849,118

CONDENSED CONSOLIDATING BALANCE SHEETS

As of June 30, 2009


	Buckeye Technologies Inc.			Guarantors US Subsidiaries		Non- Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Assets
Current assets
Cash and cash equivalents	$	1,138		$	4	$	20,919	$	-		$	22,061
Accounts receivable, net		18,644			63,522		29,126		-			111,292
Income tax and alternative fuel mixture credits receivable		9,374			-		-		-			9,374
Inventories, net		17,325			53,722		16,931		(341	)		87,637
Other current assets		332			5,156		1,019		-			6,507
Intercompany accounts receivable		-			131,302		-		(131,302	)		-
Total current assets		46,813			253,706		67,995		(131,643	)		236,871

Property, plant and equipment, net		58,821			336,836		130,932		-			526,589
Goodwill and intangibles, net		14,845			2,425		-		-			17,270
Intercompany notes receivable		363,717			-		-		(363,717	)		-
Other assets, including investment in subsidiaries		328,471			267,118		103,781		(687,716	)		11,654
Total assets	$	812,667		$	860,085	$	302,708	$	(1,183,076	)	$	792,384

Liabilities and stockholders’ equity
Current liabilities
Trade accounts payable	$	4,856		$	18,295	$	7,731	$	-		$	30,882
Other current liabilities		29,105			5,190		6,510		(1	)		40,804
Intercompany accounts payable		127,923			-		3,379		(131,302	)		-
Total current liabilities		161,884			23,485		17,620		(131,303	)		71,686

Long-term debt		327,465			-		-		-			327,465
Deferred income taxes		(3,862	)		44,251		8,010		-			48,399
Other long-term liabilities		9,149			15,802		1,852		-			26,803
Intercompany notes payable		-			268,991		94,726		(363,717	)		-
Stockholders’/invested equity