September 30, 2006 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549




FORM 10-Q



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

For the quarterly period ended September 30, 2006

¨ 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.
Delaware
(state or other jurisdiction of incorporation)


Internal Revenue Service — Employer Identification No. 62-1518973

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


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 o

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 x
Non-accelerated filer ¨

As of October 25, 2006, there were outstanding 37,662,764 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 Months Ended September 30, 2006 and 2005
3
 
 
 
 
Condensed Consolidated Balance Sheets as of September 30, 2006 and June 30, 2006
4
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2006 and 2005
5
 
 
 
 
Notes to Condensed Consolidated Financial Statements
6
 
 
 
2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
15
 
 
 
3.
Quantitative and Qualitative Disclosures About Market Risk
21
 
 
 
4.
Controls and Procedures
21
 
 
 
 
PART II - OTHER INFORMATION
 
 
 
 
 
 
 
6.
Exhibits
22
 
 
 
 
SIGNATURES
23
 
 
 



 
2

 


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
September 30
 
 
 
2006
 
2005
 
Net sales
 
$
191,406
 
$
165,456
 
Cost of goods sold
 
 
162,071
 
 
141,263
 
Gross margin
 
 
29,335
 
 
24,193
 
 
 
 
 
 
 
 
 
Selling, research and administrative expenses
 
 
11,204
 
 
11,406
 
Amortization of intangibles and other
 
 
631
 
 
531
 
Restructuring costs
 
 
13
 
 
1,951
 
Operating income
 
 
17,487
 
 
10,305
 
 
 
 
 
 
 
 
 
Net interest expense and amortization of debt costs
 
 
(10,751
)
 
(10,184
)
Gain on sale of assets held for sale
 
 
355
 
 
-
 
Loss on early extinguishment of debt
 
 
(556
)
 
(151
)
Foreign exchange and other
 
 
6
 
 
(368
)
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
 
6,541
 
 
(398
)
Income tax expense (benefit)
 
 
2,734
 
 
(109
)
 
 
 
 
 
 
 
 
Net income (loss)
 
$
3,807
 
$
(289
)
 
 
 
 
 
 
 
 
Earnings (loss) per share
 
 
 
 
 
 
 
Basic
 
$
0.10
 
$
(0.01
)
Diluted
 
$
0.10
 
$
(0.01
)
 
 
 
 
 
 
 
 
Weighted average shares for basic earnings per share
 
 
37,661
 
 
37,588
 
Weighted average shares for diluted earnings per share
 
 
37,692
 
 
37,588
 

See accompanying notes.

 
3

 



BUCKEYE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 
 
September 30
2006
 
June 30
2006
 
 
 
(Unaudited)
 
 
 
Assets
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
18,058
 
$
8,734
 
Accounts receivable - net
 
 
113,073
 
 
114,098
 
Inventories
 
 
91,798
 
 
98,567
 
Deferred income taxes and other
 
 
8,158
 
 
8,473
 
Total current assets
 
 
231,087
 
 
229,872
 
 
 
 
 
 
 
 
 
Property, plant and equipment
 
 
962,911
 
 
957,677
 
Less accumulated depreciation
 
 
(437,345
)
 
(425,779
)
 
 
 
525,566
 
 
531,898
 
Goodwill
 
 
148,868
 
 
149,106
 
Intellectual property and other, net
 
 
37,203
 
 
38,677
 
Total assets
 
$
942,724
 
$
949,553
 
 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Trade accounts payable
 
$
37,278
 
$
32,973
 
Accrued expenses
 
 
57,793
 
 
48,416
 
Current portion of capital lease obligation
 
 
544
 
 
627
 
Current portion of long-term debt
 
 
998
 
 
1,294
 
Total current liabilities
 
 
96,613
 
 
83,310
 
 
 
 
 
 
 
 
 
Long-term debt
 
 
495,348
 
 
519,414
 
Accrued postretirement benefits
 
 
19,480
 
 
19,367
 
Deferred income taxes
 
 
36,508
 
 
35,686
 
Capital lease obligation
 
 
659
 
 
755
 
Other liabilities
 
 
1,309
 
 
1,304
 
Stockholders’ equity
 
 
292,807
 
 
289,717
 
Total liabilities and stockholders’ equity
 
$
942,724
 
$
949,553
 

See accompanying notes.


 
4

 


BUCKEYE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

 
 
Three Months Ended
September 30
 
 
 
2006
 
2005
 
Operating activities
 
 
 
 
 
 
 
Net income (loss)
 
$
3,807
 
$
(289
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation
 
 
12,146
 
 
11,589
 
Amortization
 
 
937
 
 
831
 
Loss on early extinguishment of debt
 
 
556
 
 
151
 
Deferred income taxes and other
 
 
1,276
 
 
(1,639
)
Gain on sale of assets held for sale
 
 
(355
)
 
-
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
 
 
2,745
 
 
12,199
 
Inventories
 
 
6,681
 
 
(15,257
)
Other assets
 
 
(1,294
)
 
(1,094
)
Accounts payable and other current liabilities
 
 
13,465
 
 
8,288
 
Net cash provided by operating activities
 
 
39,964
 
 
14,779
 
Investing activities
 
 
 
 
 
 
 
Purchases of property, plant and equipment
 
 
(6,605
)
 
(20,280
)
Proceeds from sale of assets
 
 
521
 
 
-
 
Other
 
 
(124
)
 
(178
)
Net cash used in investing activities
 
 
(6,208
)
 
(20,458
)
 
Financing activities
 
 
 
 
 
 
 
Net borrowings (payments) under lines of credit
 
 
(3,000
)
 
23,100
 
Payments on long-term debt and other
 
 
(21,429
)
 
(15,794
)
Net cash provided by (used in) financing activities
 
 
(24,429
)
 
7,306
 
Effect of foreign currency rate fluctuations on cash
 
 
(3
)
 
257
 
Increase in cash and cash equivalents
 
 
9,324
 
 
1,884
 
Cash and cash equivalents at beginning of period
 
 
8,734
 
 
9,926
 
Cash and cash equivalents at end of period
 
$
18,058
 
$
11,810
 

See accompanying notes.


 
5

 


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 generally accepted accounting principles 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 generally accepted accounting principles 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 months ended September 30, 2006 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2007. 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, 2006, which was filed with the Securities and Exchange Commission on September 1, 2006 (“Annual Report”). Except as otherwise specified, references to years indicate our fiscal year ending June 30, 2007 or ended 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 accounting principles generally accepted in the United States 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 where 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:
COMPUTATION OF EARNINGS PER SHARE
 
The calculation of basic and diluted earnings per common share was as follows:
 
 
 
Three Months Ended September 30
 
 
 
2006
 
2005
 
Net income (loss)
 
$
3,807
 
$
(289
)
 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding
 
 
37,661
 
 
37,588
 
Effect of diluted shares
 
 
31
 
 
-
 
Weighted average common and common equivalent shares outstanding
 
 
37,692
 
 
37,588
 
 
 
 
 
 
 
 
 
Earnings (loss) per share
 
 
 
 
 
 
 
Basic
 
$
0.10
 
$
(0.01
)
Diluted
 
$
0.10
 
$
(0.01
)


 
6

 

NOTE 3:
SEGMENT INFORMATION
 
We report results for two segments, specialty fibers and nonwoven materials. The specialty fiber segment is an aggregation of 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 table:
 
Three Months Ended
September 30
 
 
 
Specialty
Fibers
 
Nonwoven
Materials
 
 
Corporate
 
 
Total
 
Net sales
 
 
2006
 
$
134,875
 
$
64,967
 
$
(8,436
)
$
191,406
 
 
 
 
2005
 
 
114,561
 
 
57,326
 
 
(6,431
)
 
165,456
 
Operating income (loss)
 
 
2006
 
 
12,288
 
 
5,979
 
 
(780
)
 
17,487
 
 
 
 
2005
 
 
10,163
 
 
2,560
 
 
(2,418
)
 
10,305
 
Depreciation and amortization of
 
 
2006
 
 
7,698
 
 
4,171
 
 
954
 
 
12,823
 
intangibles
 
 
2005
 
 
7,274
 
 
4,038
 
 
845
 
 
12,157
 
Capital expenditures
 
 
2006
 
 
5,573
 
 
417
 
 
615
 
 
6,605
 
 
 
 
2005
 
 
19,330
 
 
599
 
 
351
 
 
20,280
 
 
Management evaluates operating performance of the specialty fibers and nonwoven materials segments excluding amortization of intangibles, the impact of impairment of long-lived assets and charges related to restructuring. Therefore, the corporate segment includes operating elements such as segment eliminations, amortization of intangibles, impairment of long-lived assets and charges related to restructuring. Corporate net sales represent the elimination of intersegment sales included in the specialty fibers reporting segment. Intersegment sales are at current market prices.

NOTE 4: RESTRUCTURING COSTS AND ASSETS HELD FOR SALE
 
During the three months ended September 30, 2005, we incurred restructuring costs of $1,951 primarily related to the closure of our Glueckstadt facility. Severance and employee benefit costs comprised $1,796 of these costs. For the three months ending September 30, 2006, $13 was recorded. 
 
In September 2006, the remaining assets located at our Glueckstadt facility were sold for $520. Since we previously had written the value of these assets down to $165, we recorded a gain on sale of assets held for sale of $355 during the three months ended September 30, 2006.
 
NOTE 5:
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:
 
 
 
September 30
2006
 
June 30
2006
 
 
 
 
 
 
 
Raw materials
 
$
29,250
 
$
30,028
 
Finished goods
 
 
40,751
 
 
45,759
 
Storeroom and other supplies
 
 
21,797
 
 
22,780
 
 
 
$
91,798
 
$
98,567
 


 
7

 

NOTE 6:
DEBT

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

 
 
September 30
2006
 
June 30
2006
 
Senior Notes due:
 
 
 
 
 
2013
 
$
200,000
 
$
200,000
 
Senior Subordinated Notes due:
 
 
 
 
 
 
 
2008
 
 
64,913
 
 
64,902
 
2010
 
 
151,936
 
 
152,059
 
Credit facility
 
 
74,497
 
 
98,747
 
Other
 
 
5,000
 
 
5,000
 
 
 
 
496,346
 
 
520,708
 
Less current portion
 
 
998
 
 
1,294
 
 
 
$
495,348
 
$
519,414
 

Senior Notes - During September 2003, we placed privately $200,000 in aggregate principal amount of 8.5% Senior Notes due October 1, 2013. In fiscal year 2004, we exchanged these outstanding notes for public notes with the same terms. The notes are unsecured obligations and are senior to any of our subordinated debt. The notes are guaranteed by our direct and indirect domestic subsidiaries that are also guarantors on our senior secured indebtedness.

Senior Subordinated Notes - During July 1996, we completed a public offering of $100,000 in aggregate principal amount of 9.25% unsecured Senior Subordinated Notes due September 15, 2008 (the “2008 Notes”). These notes have been redeemable at our option, in whole or in part, at any time since September 15, 2004, at a redemption price of 100% of principal amount together with accrued and unpaid interest to the date of redemption.
 
Through fiscal years 2006, we redeemed $35,000 of the 2008 Notes. As a result of these redemptions, we wrote off a portion of the deferred financing costs and unamortized discount related to the redeemed bonds.
 
During June 1998, we completed a private placement of $150,000 principal amount of 8% unsecured Senior Subordinated Notes due October 15, 2010. In fiscal year 1999, we exchanged these outstanding notes for public notes with the same terms. These notes have been redeemable at our option, in whole or in part, at any time since October 15, 2006, at a redemption price of 100% of principal amount together with accrued and unpaid interest to the date of redemption.
 
Under the indentures governing our senior notes and each series of our senior subordinated notes, our ability to incur additional debt is limited. Under these indentures, additional debt must be incurred as “Ratio Debt” or, alternatively, must be permitted in form and amount as “Permitted Indebtedness.” In order to incur Ratio Debt, a specified consolidated fixed charge coverage ratio (as defined in the indentures) must equal or exceed 2:1 (measured on a rolling four-quarter basis). Falling below the 2:1 ratio does not breach any covenant or constitute an event of default under any of our debt agreements. As of September 30, 2006 we exceeded the required 2:1 ratio and as a result are not limited to the “Ratio Debt” restrictions under the indentures governing the senior notes and each series of the senior subordinated notes.
 
Revolving credit facility - On November 5, 2003, we established a $220,000 senior secured credit facility (the “credit facility”), comprised of a $70,000 revolving credit facility (the “revolver”) maturing on September 15, 2008 and a $150,000 term loan (the “term loan”) with serial maturities of $249 quarterly with final payment at maturity. The term loan maturity date is March 15, 2008, unless we retire or refinance the 2008 Notes, with a due date after October 15, 2010, in which case the maturity date would be April 15, 2010. The term loan also requires an annual excess cash flow payment (as defined under the credit agreement). During the three months ending September 30, 2006, we made an excess cash flow payment of $296 based on fiscal 2006 operating and cash flow performance.
 
We had $74,497 outstanding on this facility ($74,497 on the term loan and $0 on the revolver) at an average variable interest rate of 7.3% as of September 30, 2006. The interest rate applicable to borrowings under the revolver is the agent’s prime rate plus 1.50% to 1.75%, or a LIBOR-based rate ranging from LIBOR plus 2.50% to LIBOR plus 3.25%. The interest rate applicable to the term loan is the agent’s prime rate plus 1.00% or a LIBOR-based rate plus 2.00%. The credit facility is secured by substantially all of our assets located in the United States.
 
During the three months ended September 30, 2006, we made additional voluntary prepayments on the term loan of $20,704. As a result of these prepayments, we wrote off a portion of the deferred financing costs related to the term loan. The non-cash charges, related to early extinguishment of debt, were $556 during the three months ended September 30, 2006.
 

 
8

 



The credit facility contains covenants customary for financing of this type. The financial covenants include: maximum ratio of consolidated net senior secured debt to consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”), minimum ratio of consolidated EBITDA to consolidated interest expense and minimum ratio of consolidated EBITDA minus capital expenditures and taxes to consolidated fixed charges; as well as limitations on capital expenditures, share repurchases and dividend payments. As of September 30, 2006, we were in compliance with these financial covenants.
 
As of September 30, 2006, we had $65,125 of borrowing capacity on our revolving credit facility. 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.
 
Other long-term debt - On March 1, 2000, we purchased certain technology from Stac-Pac Technologies Inc. In connection with the purchase, we entered into an unsecured promissory note with Stac-Pac Technologies Inc. The principal amount of the note is $5,000 and bears interest at a rate of 7%. In accordance with the purchase agreement, we are entitled to withhold or retain the final installment of the purchase price until and unless there is final resolution of patent rights and to cancel the final installment of the purchase price if the patent rights in certain jurisdictions are not resolved according to the terms of the purchase agreement. As of September 30, 2006, these patent rights were not resolved. Therefore, the principal amount of the note remains unpaid and has been classified as long-term debt. As of September 30, 2006, we have accrued interest on the note of $1,954.
 
NOTE 7:
COMPREHENSIVE INCOME
 
The components of comprehensive income consist of the following:
 
 
 
Three Months Ended
September 30
 
 
 
2006
 
2005
 
 
 
 
 
 
 
Net income (loss)
 
$
3,807
 
$
(289
)
Foreign currency translation adjustments - net
 
 
(975
)
 
8,175
 
Comprehensive income
 
$
2,832
 
$
7,886
 
 
For the three months ended September 30, 2006, the change in the foreign currency translation adjustment is primarily due to fluctuations in the exchange rate of the U.S. dollar against the euro of $(233), the Brazilian real of $(291) and the Canadian dollar of $(630).
 
For the three months ended September 30, 2005, the change in the foreign currency translation adjustment was primarily due to fluctuations in the exchange rate of the U.S. dollar against the euro of $(339), the Brazilian real of $1,271 and the Canadian dollar of $7,456.

NOTE 8:
INCOME TAXES
 
Our effective tax rate for the three month period ended September 30, 2006 was 41.8%. Our effective tax rate for the same period of 2005 was 27.4%. Our tax rate is impacted by several factors including operations in jurisdictions with varying tax rates and the extraterritorial income tax exclusion. Due to the absolute value of our earnings (loss) before taxes for the three months ended September 30, 2005, these factors had a more significant impact on our effective tax rate. The rate increase for the three month period ended September 30, 2006 results from a change in assumptions used to calculate the valuation allowance for the Brazil net operating loss carryforwards. Our income tax expense (benefit) differs from the amount computed by applying the statutory federal income tax rate of 35% to income (loss) before income taxes (benefit) due to the following:
 
 
 
Three Months Ended
September 30
 
 
 
2006
 
2005
 
 
 
 
 
 
 
Expected tax expense at 35%
 
$
2,289
 
$
(139
)
Effect of foreign operations
 
 
849
 
 
307
 
Extraterritorial income benefit
 
 
(96
)
 
(152
)
Other
 
 
(308
)
 
(125
)
Income tax expense (benefit)
 
$
2,734
 
$
(109
)


 
9

 

NOTE 9: EMPLOYEE BENEFIT PLANS
 
We provide medical, dental and life insurance postretirement plans covering certain U.S. employees who meet specified age and service requirements. Pursuant to an amendment, 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
September 30
 
 
 
2006
 
2005
 
Service cost for benefits earned
 
$
149
 
$
157
 
Interest cost on benefit obligation
 
 
352
 
 
314
 
Amortization of unrecognized prior service cost
 
 
(250
)
 
(264
)
Actuarial loss
 
 
142
 
 
150
 
Total cost
 
$
393
 
$
357
 

NOTE 10: ACCOUNTING PRONOUNCEMENTS
 
In September 2006, the FASB issued SFAS 157, Fair Value Measurements (SFAS 157) and SFAS 158 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R) (SFAS 158). SFAS 157 provides enhanced guidance for using fair value measurements. It establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and for interim periods within those fiscal years. We are currently evaluating the provisions of SFAS 157.
 
SFAS 158 requires recognition of the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and recognition of changes in that funded status in the year in which the change occurs through comprehensive income. SFAS 158 also requires measurement of the funded status of a plan as of the fiscal year end. This statement requires initial recognition of the funded status of a defined benefit postretirement plan as of the end of the fiscal year ending after December 15, 2006. The requirements to measure plan assets and benefit obligations as of the fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. We are currently evaluating the provisions of SFAS 158.
 
NOTE 11: CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
 
The guarantor US subsidiaries presented below represent our subsidiaries that are subject to the terms and conditions outlined in the indenture governing the senior notes and that guarantee the notes, jointly and severally, on a senior unsecured basis. The non-guarantor subsidiaries presented below represent the foreign subsidiaries that do not guarantee the senior notes. Each subsidiary guarantor is 100% owned directly or indirectly by us and all guarantees are full and unconditional.
 
Our supplemental financial information and our guarantor subsidiaries and non-guarantor subsidiaries for the senior notes is presented in the following tables.
 

 
10

 
 
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2006

 
 
Buckeye Technologies Inc.
 
Guarantors
US
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
 
Consolidating
Adjustments
 
 
 
Consolidated
 
Net sales
 
$
31,143
 
$
123,183
 
$
46,273
 
$
(9,193
)
$
191,406
 
Cost of goods sold
 
 
25,484
 
 
103,404
 
 
42,394
 
 
(9,211
)
 
162,071
 
Gross margin
 
 
5,659
 
 
19,779
 
 
3,879
 
 
18
 
 
29,335
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, research and administrative expenses, and other
 
 
2,021
 
 
8,077
 
 
1,737
 
 
-
 
 
11,835
 
Restructuring and impairment costs
 
 
-
 
 
-
 
 
13
 
 
-
 
 
13
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
 
3,638
 
 
11,702
 
 
2,129
 
 
18
 
 
17,487
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense) and amortization of debt
 
 
(10,709
)
 
(62
)
 
20
 
 
-
 
 
(10,751
)
Other income (expense), including equity income (loss) in affiliates
 
 
1,789
 
 
5
 
 
307
 
 
(2,296
)
 
(195
)
Intercompany interest income (expense)
 
 
7,220
 
 
(4,993
)
 
(2,227
)
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
 
1,938
 
 
6,652
 
 
229
 
 
(2,278
)
 
6,541
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense (benefit)
 
 
(1,869
)
 
2,206
 
 
780
 
 
1,617
 
 
2,734
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
3,807
 
$
4,446
 
$
(551
)
$
(3,895
)
$
3,807
 
 
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2005
 
 
 
 
 
 
 
 
 
 
 
 
Buckeye Technologies Inc.
 
Guarantors
US
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
 
Consolidating
Adjustments
 
 
 
Consolidated
 
Net sales
 
$
22,459
 
$
99,996
 
$
50,035
 
$
(7,034
)
$
165,456
 
Cost of goods sold
 
 
19,211
 
 
85,010
 
 
44,190
 
 
(7,148
)
 
141,263
 
Gross margin
 
 
3,248
 
 
14,986
 
 
5,845
 
 
114
 
 
24,193
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, research and administrative expenses, and
other
 
 
2,957
 
 
7,038
 
 
1,942
 
 
-
 
 
11,937
 
Restructuring costs
 
 
-
 
 
-
 
 
1,951
 
 
-
 
 
1,951
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
 
291
 
 
7,948
 
 
1,952
 
 
114
 
 
10,305
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income/(expense) and amortization of debt
costs
 
 
(10,917
)
 
67
 
 
666
 
 
-
 
 
(10,184
)
Other income/(expense), including equity
income in affiliates
 
 
3,107
 
 
42
 
 
(427
)
 
(3,241
)
 
(519
)
Intercompany interest income/(expense)
 
 
7,126
 
 
(5,283
)
 
(1,843
)
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income/(loss) before income taxes
 
 
(393
)
 
2,774
 
 
348
 
 
(3,127
)
 
(398
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense/(benefit)
 
 
(104
)
 
931
 
 
159
 
 
(1,095
)
 
(109
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(289
)
$
1,843
 
$
189
 
$
(2,032
)
$
(289
)


 
11

 


 
CONDENSED CONSOLIDATING BALANCE SHEETS
As of September 30, 2006

 
 
Buckeye Technologies Inc.
 
Guarantors
US
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
 
Consolidating
Adjustments
 
 
 
Consolidated
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
9,453
 
$
243
 
$
8,362
 
$
-
 
$
18,058
 
Accounts receivable, net of allowance
 
 
17,146
 
 
66,112
 
 
29,815
 
 
-
 
 
113,073
 
Inventories
 
 
20,202
 
 
51,531
 
 
20,489
 
 
(424
)
 
91,798
 
Other current assets
 
 
2,178
 
 
5,386
 
 
594
 
 
-
 
 
8,158
 
Intercompany accounts receivable
 
 
-
 
 
72,910
 
 
-
 
 
(72,910
)
 
-
 
Total current assets
 
 
48,979
 
 
196,182
 
 
59,260
 
 
(73,334
)
 
231,087
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
 
 
55,217
 
 
325,883
 
 
144,466
 
 
-
 
 
525,566
 
Goodwill and intangibles, net
 
 
20,899
 
 
51,055
 
 
101,351
 
 
-
 
 
173,305
 
Intercompany notes receivable
 
 
338,181
 
 
-
 
 
-
 
 
(338,181
)
 
-
 
Other assets, including investment in subsidiaries
 
 
321,099
 
 
338,749
 
 
92,864
 
 
(739,946
)
 
12,766
 
Total assets
 
$
784,375
 
$
911,869
 
$
397,941
 
$
(1,151,461
)
$
942,724
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trade accounts payable
 
$
5,072
 
$
23,160
 
$
9,046
 
$
-
 
$
37,278
 
Other current liabilities
 
 
25,932
 
 
20,313
 
 
13,090
 
 
-
 
 
59,335
 
Intercompany accounts payable
 
 
68,521
 
 
-
 
 
4,387
 
 
(72,908
)
 
-
 
Total current liabilities
 
 
99,525
 
 
43,473
 
 
26,523
 
 
(72,908
)
 
96,613
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
 
 
495,348
 
 
-
 
 
-
 
 
-
 
 
495,348
 
Deferred income taxes
 
 
(47,472
)
 
64,370
 
 
19,610
 
 
-
 
 
36,508
 
Other long-term liabilities
 
 
6,532
 
 
13,372
 
 
1,544
 
 
-
 
 
21,448
 
Intercompany notes payable
 
 
-
 
 
201,836
 
 
136,344
 
 
(338,180
)
 
-
 
Stockholders’/invested equity
 
 
230,442
 
 
588,818
 
 
213,920
 
 
(740,373
)
 
292,807
 
Total liabilities and stockholders’ equity
 
$
784,375
 
$
911,869
 
$
397,941
 
$
(1,151,461
)
$
942,724
 


 
12

 


 
CONDENSED CONSOLIDATING BALANCE SHEETS
As of June 30, 2006

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Buckeye Technologies Inc.
 
Guarantors
US
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
 
Consolidating
Adjustments
 
 
 
Consolidated
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,535
 
$
162
 
$
7,037
 
$
-
 
$
8,734
 
Accounts receivable, net    
 
 
 17,395
 
 
 66,207
 
 
30,496
 
 
 -
 
 
114,098
 
Inventories
 
 
 24,680
 
 
 53,756
 
 
 20,573
 
 
(442
)
 
98,567
 
Other current assets    
 
 
 2,422
 
 
 4,845
 
 
 1,206
 
 
 -
 
 
 8,473
 
Intercompany accounts receivable
 
 
 -
 
 
 57,105
 
 
 -
 
 
 (57,105
)
 
-
 
Total current assets
 
 
 46,032
 
 
 182,075
 
 
 59,312
 
 
 (57,547
)
 
 229,872
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
 
 
 55,440
 
 
 329,020
 
 
 147,438
 
 
 -
 
 
 531,898
 
Goodwill and intangibles, net
 
 
 20,913
 
 
 51,730
 
 
 101,636
 
 
 -
 
 
 174,279
 
Intercompany notes receivable
 
 
 342,478
 
 
-
 
 
 -
 
 
 (342,478
)
 
 -
 
Other assets, including investment in subsidiaries
 
 
 304,581
 
 
 337,654
 
 
 93,066
 
 
(721,797
)
 
 13,504
 
Total assets
 
$
 769,444
 
$
900,479
 
$
 401,452
 
$
 (1,121,822
)
$
949,553
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trade accounts payable
 
$
 4,857
 
$
 21,077
 
$
 7,039
 
$
 -
 
$
32,973
 
Other current liabilities
 
 
 20,416
 
 
 17,390
 
 
 12,530
 
 
1
 
 
 50,337
 
Intercompany accounts payable
 
 
 52,297
 
 
 -
 
 
 4,808
 
 
 (57,105
)
 
 -
 
Total current liabilities
 
 
 77,570
 
 
 38,467
 
 
 24,377
 
 
 (57,104
)
 
 83,310
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
 
 
 519,414
 
 
 -
 
 
 -
 
 
 -
 
 
519,414
 
Deferred income taxes
 
 
(48,099
)
 
 64,030
 
 
 19,755
 
 
-
 
 
35,686
 
Other long-term liabilities
 
 
 6,414
 
 
 13,476
 
 
 1,536
 
 
 -
 
 
 21,426
 
Intercompany notes payable
 
 
 -
 
 
 201,993
 
 
 140,485
 
 
 (342,478
)
 
-
 
Stockholders’/invested equity
 
 
 214,145
 
 
 582,513
 
 
 215,299
 
 
 (722,240
)
 
 289,717
 
Total liabilities and stockholders’ equity
 
$
 769,444
 
$
 900,479
 
$
 401,452
 
$
 (1,121,822
)
$
949,553
 



 
13

 


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 2006
 
 
 
 
 
 
 
 
 
 
Buckeye Technologies Inc.
 
Guarantors
US
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
 
 
Consolidated
 
Net cash provided by (used in) operations 
 
$
37,601
 
$
5,033
 
$
(2,670
)
$
39,964
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investing activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchases of property, plant and equipment
 
 
(1,135
)
 
(4,807
)
 
(663
)
 
(6,605
)
Other
 
 
-
 
 
(123
)
 
520
 
 
397
 
Net cash used in investing activities
 
 
(1,135
)
 
(4,930
)
 
(143
)
 
(6,208
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Net payments under line of credit
 
 
(3,000
)
 
-
 
 
-
 
 
(3,000
)
Net borrowings (payments) on long-term debt and other
 
 
(25,548
)
 
(22
)
 
4,141
 
 
(21,429
)
Net cash provided by (used in) financing activities
 
 
(28,548
)
 
(22
)
 
4,141
 
 
(24,429
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of foreign currency rate fluctuations on cash
 
 
-
 
 
-
 
 
(3
)
 
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in cash and cash equivalents
 
 
7,918
 
 
81
 
 
1,325
 
 
9,324
 
Cash and cash equivalents at beginning of period
 
 
1,535
 
 
162
 
 
7,037
 
 
8,734
 
Cash and cash equivalents at end of period
 
$
9,453
 
$
243
 
$
8,362
 
$
18,058
 

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 2005
 
 
 
 
 
 
 
 
 
 
Buckeye Technologies Inc.
 
Guarantors
US
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
 
 
Consolidated
 
Net cash provided by operations
 
$
1,558
 
$
10,958
 
$
2,263
 
$
14,779
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investing activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchases of property, plant and equipment
 
 
(1,965
)
 
(6,866
)
 
(11,449
)
 
(20,280
)
Other
 
 
-
 
 
(178
)
 
-
 
 
(178
)
Net cash used in investing activities
 
 
(1,965
)
 
(7,044
)
 
(11,449
)
 
(20,458
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Net borrowings under revolving line of credit
 
 
23,100
 
 
-
 
 
-
 
 
23,100
 
Net borrowings (payments on) long-term debt and other
 
 
(23,128
)
 
(3,985
)
 
11,319
 
 
(15,794
)
Net cash provided by (used in) financing activities
 
 
(28
)
 
(3,985
)
 
11,319
 
 
7,306
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of foreign currency rate fluctuations on cash
 
 
-
 
 
-
 
 
257
 
 
257
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (decrease) in cash and cash equivalents
 
 
(435
)
 
(71
)
 
2,390
 
 
1,884
 
Cash and cash equivalents at beginning of period
 
 
860
 
 
151
 
 
8,915
 
 
9,926
 
Cash and cash equivalents at end of period
 
$
425
 
$
80
 
$
11,305
 
$
11,810
 



 
14

 


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

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("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 accompanying unaudited financial statements and our Annual Report on Form 10-K for the year ended June 30, 2006 ("Annual Report"), which include additional information about our significant accounting policies, practices and transactions that underlie our financial results. Our MD&A is composed of four major sections: Executive Summary, Results of Operations, Financial Condition, and Critical Accounting Policies.
 
Except as otherwise specified, references to years indicate our fiscal year ending June 30, 2007 or ended June 30 of the year referenced and comparisons are to the corresponding period of the prior year. The following discussion includes a comparison of the results of operations for the three months ended September 30, 2006 to the three months ended September 30, 2005.
 
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, food casings, 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 significantly reduce our debt.
 
We earned net income of $3.8 million for the three months ended September 30, 2006 versus a net loss of $0.3 million during the same period in 2005. Last year’s earnings were negatively impacted by $2.0 million in restructuring costs relating to the closure of our Glueckstadt, Germany specialty fibers facility. The improvement in earnings was driven primarily by increased shipment volumes and higher selling prices in both our specialty fibers and nonwoven materials business segments.
 
Net sales during the three months ended September 30, 2006 increased by 16% versus the same period in 2005. Demand for high-end specialty fibers helped drive prices higher during the past year. Fluff pulp sales were particularly strong compared to the period ended September 30, 2005 due to higher shipment volume. Higher shipment volumes (particularly in North America) and increased pricing drove increased sales of nonwoven materials during the quarter. We also experienced sales increases from our Americana plant and our UltraFiber 500â business.
 
We are making progress with the ramp-up of our cotton cellulose manufacturing facility in Americana, Brazil, but we did not improve our results there by as much as we had expected. We reduced our operating loss at this facility by approximately $0.6 million during the three months ended September 30, 2006 compared to the three months ended June 30, 2006. The comparison to the three months ended September 30, 2005 is negative $2.2 million because we were still profiting from our tolling operations during that period. Sales from the Americana facility in the period ended September 30, 2006 increased by approximately 30% versus the three months ending June 30, 2006. Production rates and reliability have improved, raising our capacity utilization to about 55% in the quarter ended September 30, 2006. We expect an accelerated rate of improvement in the three months ending December 31, 2006 and expect to generate positive operating income during the period ending March 31, 2007.
 
We continue to establish our global sales and distribution network for UltraFiber 500â, a revolutionary concrete-reinforcing fiber. UltraFiber 500â is a niche product for the building industry and an example of the new product initiatives we are undertaking to reduce our dependency on fluff pulp. Sales for the three months ended September 30, 2006 were $1.5 million compared to $0.6 million in the same period in 2005. While this is a significant increase in sales, it fell short of our initial expectations.
 
We continued to generate strong cash flows during the quarter with $40.0 million cash generated from operations, enabling us to fund $6.6 million in capital expenditures and reduce debt and capital leases by $24.4 million during the quarter. Total inventory reduction during the quarter was $6.7 million and capital spending decreased by $13.7 million compared to the three months ended September 30, 2005 as spending on the Americana project has been completed.
 

 
15

 

The combination of new product initiatives, strong demand in important markets and an improved, lower cost manufacturing configuration gives us optimism that we can generate future growth in sales and profitability. Like other manufacturing firms, we are still being negatively impacted by high costs for energy, chemicals, transportation and other materials, but we are encouraged by recent downward trends in oil and natural gas prices, which should also positively impact our results. We are committed to our strategy of implementing Lean methods to reduce waste, spending and working capital and expect this effort will begin to yield positive financial results as the year progresses.
  
Results of Operations
 
Consolidated results
 
The following table compares components of operating income for the three months ended September 30, 2006 and 2005.
 (millions)
 
Three Months Ended September 30
 
 
 
2006
 
2005
 
Change
 
% Change
 
Net sales
 
$
191.4
 
$
165.5
 
 $
25.9
 
 
16
%
Cost of goods sold
 
 
162.1
 
 
141.3
 
 
20.8
 
 
15
%
Gross margin
 
 
29.3
 
 
24.2
 
 
5.1
 
 
21
%
Selling, research and administrative expenses
 
 
11.2
 
 
11.4
 
 
(0.2
)
 
(2)
%
Restructuring costs
 
 
-
 
 
2.0
 
 
(2.0
)
 
*
 
Amortization of intangibles and other
 
 
0.6
 
 
0.5
 
 
0.1
 
 
20
%
Operating income
 
$
17.5
 
$
10.3
 
 $
7.2
 
 
70
%
* Percent change not meaningful
 
Net sales for the three months ended September 30, 2006 were $191.4 million, a 15.7% increase over the $165.5 million achieved in the same period in 2005. Demand was strong for all our businesses during the quarter. Higher shipment volume accounted for approximately 55% of the sales increase and higher product pricing and improved sales mix accounted for the balance of the increase.
 
Fluff pulp sales growth was particularly strong (+30%) compared to the unusually low sales level in the three months ended September 30, 2005. Selling prices for fluff pulp were down approximately 2% over the same period but increased as the period progressed. Fluff pulp sales represented 16% of total sales for the three months ended September 30, 2006. Selling prices were higher for both our specialty products and nonwoven materials. In January of 2006 we implemented price increases averaging 8% on specialty wood cellulose products. On April 1, 2006 additional price increases were implemented for specialty fibers products and nonwoven materials.
 
Combined energy, chemicals and transportation costs for the three months ended September 30, 2006 were at approximately the same level as the same period a year ago which were already at high levels. While the price of natural gas has decreased significantly compared to the three months ended September 30, 2005, the price of oil has increased, chemical prices have remained fairly stable and transportation costs are higher. Also, we have seen increases in the prices of our raw materials, which are partly the result of these same cost trends.
 
Gross margin improved from 14.6% of sales in the three months ended September 30, 2005 to 15.3% in the same period in 2006. Selling prices were up and the favorable impact of increased production volumes and lower energy costs offset the unfavorable impacts of higher raw material costs, chemical usage and transportation costs.
 
Selling, research and administrative expenses decreased slightly in the three months ended September 30, 2006 as compared to the same period in 2005, and, as a percent of sales, were down significantly from 6.9% to 5.9%. We were able to increase sales without incurring additional costs related to sales, research and administration.
 
The costs associated with the closure of the Glueckstadt, Germany specialty fibers facility are materially complete. During the three months ended September 30, 2005, we incurred $2.0 million of restructuring costs. In September 2006, the remaining assets located at the Glueckstadt facility were sold for $0.5 million. The value of these assets had been reduced to $0.2 million during the previous fiscal year. We, therefore, recorded a gain on sales of assets held for sale of $0.4 million.
 

 
16

 


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 is an aggregation of 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 administrative expenses to each segment, and we use the resulting operating income to measure the performance of the segments. We exclude items that are not included in measuring business performance, such as amortization of intangibles, restructuring costs, asset impairment and certain financing and investing costs.
 
Specialty fibers
 
The following table compares specialty fibers net sales and operating income for the three months ended September 30, 2006 and 2005.

(millions)
 
Three Months Ended September 30
 
 
 
2006
 
2005
 
Change
 
% Change
 
Net sales
 
$
134.9