Aug 8, 2012
Operator
Good day and welcome to the Buckeye Technologies fourth quarter and fiscal year 2012 earnings results conference call. Today’s call is being recorded.
Presently all parties participating in this call will listen to opening remarks made by the company. After the prepared remarks, Buckeye management will answer questions.
At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Eric Whaley, Director of Investor Relations for Buckeye Technologies.
Please go ahead, sir.
Eric Whaley
Thanks, Jeanine. Good morning and welcome to Buckeye’s conference call commenting on our results for the April to June quarter 2012.
Today I’m joined on this call by John Crowe, Chairman and Chief Executive Officer; Steve Dean, Executive Vice President and Chief Financial Officer; Doug Dowdell, Executive Vice President, Specialty Fibers; Marko Rajamaa, Senior Vice President of Nonwovens; and Hank Hall, Vice President of Cotton Specialties. After John and Steve make some introductory remarks, we will respond to your questions.
First, let me briefly cover our Safe Harbor statement. The matters discussed in this call include forward-looking statements that involve risks and uncertainties that may cause the company’s actual results to differ materially from those projected in such forward-looking statements.
For further information on factors that could impact the company and statements contained herein, please refer to the slides accompanying this presentation as well as the company’s most recent annual report on Form 10-K and quarterly report on Form 10-Q. I’d also like to refer you to the supplemental earnings slides posted on our website and on www.streetevents.com for additional details related to this call.
Now I’ll turn it over to John.
John Crowe
Thanks, Eric. Good morning, and I’ll be referring to Slide 3.
Our fourth quarter fiscal 2012 was challenging, but productive. Unfortunately, we were impacted by an unplanned outage at our Florida facility due to a steam drum failure on our Pluck Mill paper machine.
We shared several press releases on the failure and the recovery executed by our organization and onsite contractor. Considering the significance of the event, the plant restarted from the failure in a safe and remarkably short period of time.
During the quarter we made progress on our specialty expansion project at our Florida wood fibers facility and complete the sale of our Americana facility in Brazil. Due to the unplanned outage that began in mid-June and the subsequent downtime at our Foley facility, our financial performance was below the expectations we communicated with you on our earnings call in April.
The impact of the outage on quarter four results was approximately $0.06 per share. Net sales revenue for the quarter was $225 million, off 10$ from our record fourth quarter revenue last year of $249 million and was a 4% improvement over the previous quarter.
Approximately $5 million of the $24 million decline year-over-year was due to the sale of the converting business at King, North Carolina. The additional shortfall was due to lower shipment volumes and fluff pulp prices.
With a strong gross margin of 23.6$, our quarter four adjusted earnings of $26 million or $0.66 per share was a good quarter given the impact of the unplanned outage. This compares with adjusted earnings of $28 million, or $0.68 per share, and $27 million, or $0.67 per share, for the same quarter last year, and immediately preceding quarter respectively.
We continue to focus on generating strong cash flow and taking a balanced approach to the allocation of capital. Yesterday the Board of Directors voted to pay a quarterly cash dividend on $0.08 per share on September 14th, 2012.
During quarter four, we applied $22 million to share repurchases, $12 million to debt reduction, and increased our cash on the balance sheet by $10 million, leaving us with net debt on June 30th of approximately $11 million. As I can as first of August, our net debt is now zero.
Also, we increased our CapEx in the quarter to $39 million from $22 million in quarter 3 as we ramped up spending on the specialty expansion project. Fiscal 2012 was another record year for Buckeye.
Our sales revenue of $895 million, our adjusted net income of $111 million, and our return on invested capital of 16.5% were all records. It was a very productive year with the completion of the energy project, the groundbreaking on our specialty fibers expansion project, the closure and sale of our Americana assets, the sale of our King converting facility, and the positioning of our Delta facility for closure and sale of the property by the end of calendar year 2012.
These assets were underperforming and are noncore to our growth strategy. Excluding the income from cellusoic biofuel credit, noncash asset impairment charges, and other special items, Buckeye’s adjusted earnings was strong at $111 million, or $2.76 per share in fiscal 2012.
This compares with adjusted earnings from fiscal 2011 of $91 million, or $2.23 per share, a 24% earnings growth. In summary, we were disappointed with the unplanned outage this quarter, but pleased with the progress we made to improve returns and add shareholder value.
While we have seen a softening in a few of our markets, we have a number of opportunities to continue improving our results and delivering on our profitable growth strategy. I will discuss the outlook going forward after Steve reviews the supplemental financial reconciliations charts.
Steve?
Steve Dean
Thank you, John. Good morning, as usual I’d like to review with you a few of the supplemental financial reconciliation charts posted on the website with you, folks, and comparing the April/June, which is our fiscal fourth quarter to the January/March quarter, our fiscal third quarter.
I also wanted to provide you with some additional details on the actual and projected impacts of the June steam drum failure outage at Foley on our financial results. We’ve included the usual slides with comparisons against the year ago quarter in the appendix for your reference.
Starting with Slide 4, we have the summary of our key financial metrics from the quarter compared to the same period from a year ago for your reference. One statistic that we didn’t get on the chart this time around, but which we plan to add going forward is ROIC.
As John mentioned, we finished the year with an ROIC of 16.5%, which is well above our cost of capital compared to 13.6% in fiscal 2011. On Slide 5, you will see a consolidated earnings summary comparing our earnings for the just completed fourth quarter of our fiscal year 2012 to the third quarter.
Fourth quarter net sales of $225 million were up $8 million, or 4%, compared to the third quarter due to a 20% increase in shipment volume in our Nonwoven segment. Although this only represented a 3% volume increase compared to the year ago quarter.
Nonwoven sales of $62 million in quarter 4 were up $8 million versus the third quarter as shipment volume was particularly strong in North America for the quarter. Sowing prices were unchanged compared to the third quarter across our businesses with the exception of fluff pulp prices which were down $13 per ton.
Moving down the chart, you can see that adjusted operating income was down $1.6 million compared to the third quarter. Operating income was down $1.5 million for specialty fibers due to the larger $4 million of the quarter 4 Foley steam drum failure compared to the smaller impact of the power outage we experienced in the previous quarter, which was $2.3 million.
Operating income for Nonwovens was up $0.6 million compared to the third quarter due to the strong increase in shipment volume. At the bottom of the chart, you can see that we had $2.8 million after tax and special items negatively impacting our reported earnings in the fourth quarter.
The largest items were a reduction in our accrued cellulosic biofuel tax credit benefit of $1.8 million, based on actual 2012 taxable income, and the other largest item was $1.2 in restructuring charges related to the final sale of our American business. Moving to Slide 6, we have a waterfall chart that shows all the drivers behind the $1.6 million reduction in operating income between the third and fourth quarters.
Volume outside of the impact of the unplanned Foley outages had very little impact on the change. Selling prices were unchanged quarter-over-quarter with the exception of fluff pulp prices, which drove a reduction of $0.3 million in operating income quarter-over-quarter.
Mix was a positive of $3.8 million as high-end specialty shipments accounted for a larger share of Foley specialty wood fiber shipments in Q4 versus Q3. Raw material costs were down $1.7 million due to lower cotton linter raw material prices, but direct costs were up $3.6 million.
The June outage at Foley due to the steam drum failure reduced EBIT by $4 million in quarter 4 compared to the $2.5 million impact of the February power outage. So incrementally this was a $1.5 million hit to operating income in quarter 4 compared to quarter 3.
Selling, research, and administrative expenses were up $1.5 million, mainly due to year-end (inaudible) of bonus accruals and timing of audit and tax fees. On Slide 7, you can see at a more summary level the drivers behind the $0.01 reduction in adjusted earnings per share, particularly in the third and fourth quarters.
Unplanned outages at Foley cost us $0.02, and we picked up $0.06 from favorable mix. We lost $0.03 on cost as higher direct costs were partly offset by a lower raw material cost, and SRA expenses were up $0.02.
On Slide 8, I’ve included a table to provide some more detail on the impact of the Foley steam drum failure outage in June, both on the just completed quarter and the expected impacts on quarter one and quarter two for fiscal 2013. You’ll recall that both our lines went down on June 17th with our number one specialty line coming back up on June 23rd, and our number two fluff pulp line back in production on July 4th.
In terms of lost production volume, we’re looking at a total impact of about 20,000 tons with 13,000 tons of that in quarter four, 5,600 tons in quarter one, and 1,800 tons in quarter two as we get the fluff pulp line back up to full rate. Out of the 20,000 ton production loss, 17,000 tons of it was on the fluff pulp line.
You can see that while the production loss primarily impacted the fourth quarter, the impact on sales is going to be mostly in the first quarter. Lost sales revenues as a result of this outage is currently estimated at about $19 million, just under the $20 million in guidance we put out shortly after the incident, with $15 million of that coming in the current quarter, quarter one.
The EBIT impact for the 4th quarter as mentioned earlier was $4 million or $0.06 per share, net of insurance recovery. This was lower than our $0.08 to $0.11 guidance mainly because we were able to recognize more insurance recovery in the quarter than we have originally expected.
We expect the impact on the first quarter to be about a $6 million reduction in EBIT, or a $0.10 reduction in earnings per share. And in the second quarter, we expect to see a pick-up, favorable impact between $3.6 million and $6.6 million, or between $0.06 and $0.11 per share.
As it is reasonable to assume that we will have the final insurance settlement by then. This brings us to a total impact from this event over three quarters in the -$0.05 to -$0.10 per share range with is consistent with our earlier guidance.
As John will describe due to the changes we have made since the incident, it is highly unlikely that such an even could ever reoccur in the future. Now I’ll turn it back over to John.
John Crowe
Thanks, Steve. As Steve shared, we had a busy quarter with several challenges.
We are pleased with the progress we have made with our return on invested capital; we are recovering from the steam drum failure, and following a comprehensive failure analysis we made several modifications and procedure changes to ensure this type of failure doesn’t happen again. We will be glad to provide additional details in the Q&A if desired.
As Steve shared, there will be some lingering effects from the outage in the first half of fiscal year 2013. We will need to build some minimum inventory that will reduce our sales volume and top line revenue.
Additionally, we will install several additional steam drums to have the optimal number of drums in place on the paper machine for rate and efficiency. This will require planned downtime on the number two paper machine.
Fluff prices have declined $140 per ton year-over-year, and we are expecting more weakness in the first half of fiscal 2013. The RISI Fluff Index is currently at $945 per ton, and that is down $90 per ton year-over-year.
The index may go lower as new capacity gets absorbed into the market until once again demand and supply are balanced. Our Cotton business had another strong year and going forward we expect to see good demand in most of our cotton fibers markets.
For shipment volumes, we are down sequentially in year-over-year due to supply chain inventory corrections and lower growth projection in the LED TV market. We have a good supply of linters, and we’re well positioned to meet customers’ needs.
Cotton linter raw material pricing has come down. Our Cotton business is performing well, and as lower input cost is passed through to our customers, we anticipate higher volume levels in the second half of the year.
In our Nonwovens business we continue to work transitioning the supply of our current Delta customers to our other two Nonwovens facilities following the closure. We remain on schedule to close the Delta facility in December 2012.
Recent sales volumes have picked up in both the U.S. and Europe, and we anticipate quarter one shipments to be similar to the same period last year, but not quite as strong as the previous quarter.
We continue to increase shareholder value by executing a disciplined approach to capital allocations. We expect capital spending this quarter and in fiscal year 2013 to increase significantly due to the Foley specialty expansion project and the installation of oxygen delignification on our fluff mill line.
We now expect the start-up of the expansion project to be in April of 2013, due to some delays in scheduled delivery of critical equipment and the impact on the construction schedule from tropical storm Debbie in July. We still expect the project to deliver a return on investment between 15% and 20%.
The O2 delignification project will improve our environmental performance and provide attractive cost savings. Yesterday the Board of Directors approved a fiscal year 2013 CapEx plan of $114 million.
Having addressed underperforming and noncore businesses, we are sharpening our focus on strategic growth opportunities which included acquisitions, joint ventures, or partnerships. Our valuation criteria remain ROIC better than our cost of capital, rapid earnings and cash flow accretion, and assets that complement our core competencies and operations.
While some of the tailwinds we have experience during the last two years may be shifting and even becoming a headwind, we are committed to disciplined execution of our strategy. Our continued strong cash flow from operations and attractive balance sheet provide us the flexibility to allocate capital to growth opportunities and to increase shareholder returns via dividends and share repurchases.
The use of cash may not be balanced as fiscal year 2012 due to our planned capital spending on the expansion project and other high rate of return projects, but over a period of several years, we expect project capital spending and returning cash to our shareholders to be about equal. Buckeye will continue to focus on three megatrends: number one, growing prosperity of emerging economies and expanding middle class customers increasing the demand for our products; number two, aging population increasing the demand for health products; and number three, focus on renewable energy and sustainability initiatives.
These trends match Buckeye’s business strengths. We have long-term relationships with most of our customers, and many of them are growing in health care and in emerging markets.
Our airspun material we have developed for flushable moist tissue market is anticipated to more than double in volume over the next several years. I want to remind you that our fibers serve diverse end markets in both developed and emerging markets, diapers, wipes, LED screens, automotive filtration, pharmaceutical applications, food casing, tabletop, tire cord, prestige paper applications, and construction materials, just to name a few.
These products are renewable, sustainable, and primarily reduced from renewable energy sources. In the July/September quarter, we anticipate year-over-year sequential earnings will be challenged by several factors: slowing world economy, revenue impact of divestiture, closure, and sale of noncore or underperforming assets, softening in fluff markets due to the start-up of new capacity, costs associated with growth initiatives, and carry-over volume losses from the June steam drum failure and outage, which we estimate at approximately $0.10 per share.
We expect input costs to remain relatively flat. Given these conditions, including the $0.10 outage carry-over, we expect our quarter 1 earnings to be in the range of $0.55 to $0.60 per share.
In closing, fiscal 2012 was another record year. We are well positioned to continue to provide shareholder value and meet the challenges a new fiscal year as we move into it.
Last week, we shared some leadership moves made as part of our restructuring. I’d like to recognize Kris Matula for his many years of significant and dedicated service to Buckeye.
For 18 years, Kris has been a member of the Buckeye’s leadership teams. Kris has announced his intentions to leave Buckeye at the end of August to pursue personal interests, and we wish him and his family all the best.
While we will miss Kris, Buckeye is fortunate to have a strong team of leaders, and I want to recognize Steve Dean and Doug Dowdell in their promotions to Executive Vice President. With an exceptional leadership team, we are confident that our strategy and our long-term focus will drive shareholder value.
This completes our prepared remarks and we will now turn the call back over to Jeanine and look forward to answering your questions.
Operator
Thank you. (Operator instructions) We’ll take our first question from Gail Glazerman with UBS.
Gail Glazerman
Hi, good morning.
John Crowe
Good morning, Gail.
Gail Glazerman
I guess starting some of the reference to market weakness, and maybe starting with cotton; I’m surprised a little bit to hear about supply chain adjustments there because I thought your new contracts took care of most of that. Can you just give a little bit more color?
And I guess last quarter you talked about expecting to see the TV business kind of pick up at the end of the calendar year. Is that still something you think is possible?
John Crowe
Gail, I’m going to ask Hank Hall, our Vice President of Cotton, speak to that.
Hank Hall
Yes, Gail. We have seen a reduction in the overall demand for cotton linter pulp, specifically in the LCD/LED TV market.
Right now it’s stabilized. We feel like going forward as cotton linter raw material prices input costs go down to more manageable levels, we do anticipate our volumes returning in the second half of the year.
I’d also like to say that the reduction in our pulp going into the acetate market has been partially offset by volume going into our industrial and pharmaceutical segments.
Gail Glazerman
Okay. And maybe a little bit more color on the fluff market as well.
I know you don’t trade a lot in the spot markets, but is there anything you’re picking up there that gives you indications of how the markets might play out over the next couple of quareters? And can you give any sort of insight into what your first quarter price change might be given the index moves?
Doug Dowdell
Yeah, Gail. This is Doug.
What we are seeing is increased discounts on kind of base business, and that’s primarily due to this increased capacity we see right now. And we have had some key customers reduce their take which has caused us to need to go to the spot market more than usual.
And as you know in the spot market the discounts are very significant. So because of that, our first quarter we expect a fluff price decline of between $30 and $40 per ton, and then frankly, we see it leveling out.
Gail Glazerman
Okay, thank you. And looking at Nonwovens, the 20% sequential volume increase, would that be within the context of normal seasonality or were you starting to regain some of the business that you lost as you are transitioning some of the Delta volume.
Marko Rajamaa
Gail, the recent element of seasonality there, particularly in Europe, we are seeing some peaks during the fourth quarter in the tabletop business. But mostly this was actually driven by North America, particularly by our Wipes business where customers were replenishing their inventories after somewhat slow winter months.
And again, that was also in view of the summer months and travel season and all that good stuff.
Gail Glazerman
Okay. And then, just on the cost side, I know overall costs are expected to be fairly stable, but are you having any particular issue with wood cost at Foley given the storm activity that happened during the quarter?
Doug Dowdell
No, not at all. We do expect year-over-year for wood costs kind of a moderate increase, 1% to 2%.
Gail Glazerman
Okay. And then, just in terms of the CapEx, can you give any sort of more detail on the delignification project in terms of opportunity, timing, costs?
And in terms of the procedural changes you are making at Foley, is there any sort of CapEx involved behind it or is it just all labor-related?
John Crowe
On the procedures changes you’re referring to, the steam drums is most of the expense. And what we’re doing there is a pretty simple change.
Once we completed the comprehensive failure analysis, we looked at the design, as the way the drums come, they come with a counterweight in them for high-speed operations, and we operate our machine in the lower ranges, so they’re not critical to it. And we actually had them all removed, so there’s not a chance that same type failure could happen where this counterweight came lose and machined the drum.
And as for the capital, again, you asked about, the majority of the up is for the expansion project, and the O2 delignification project which we just approved.
Gail Glazerman
Okay. But the delignification project, I don’t think we’ve really heard much about that.
Is that something that you would just include in the overall expansion project benefit? Or is there some more specifics in terms of cost and targets you could give us there.
John Crowe
It complements the expansion project, but it’s been something we’ve studied for quite a while. It has some environmental improvement opportunities with it that we’ve look at how we continue to work our sustainability goals, reducing water usage, and improving our treatment system prior to discharging the water back to the river.
It also has some attractive cost savings. Let’s say it comes on a year from now, so it’ll be about this time next year we’ll be starting it up.
So it was primarily driven initially by looking at our environmental performance, but we can also benefit some chemical savings as well as it complements the expansion project. Anything you’d want to add to that, Doug?
Doug Dowdell
That's great.
Gail Glazerman
Okay. Thank you.
John Crowe
You're welcome.
Operator
(Operator Instructions) We'll hear next from Tim Quillin with Stephens Inc.
Tim Quillin
Good morning. John, in terms of the economic headwinds that you referred to, and I understand the specific weakness in LCD/LED, but is it across the board, maybe you could talk a little bit about how you're seeing those economic headwinds manifest in your business.
How would you predict that in a more significant global economic slowdown, how you're specialty cellulose demand and pricing would hold up?
John Crowe
Tim, I'm going to ask Doug to respond to that.
Doug Dowdell
Yeah, Tim. We remain sold out, and expect to be completely sold out, certainly in specialty, into 2013.
We have seen some softness in the filtration market, and we're just now hearing from some of [power chord] customers, particularly in Europe. That they're seeing reduced takes from their customers, and I'm not sure if that's a blip, or if there's more to come there.
Certainly in Europe with the exchange rate, with the U.S. dollar strengthening, that increases cost to our European customers.
So that's one of the concerns we have for affordability. We feel good about where we are, and pricing certainly, it's too early to comment on where we might be next year, we haven't begun those negotiations.
We've gone two years in a row with very significant increases, and we do not anticipate repeating that.
Tim Quillin
Okay. How much of a consideration, when you go into those pricing negotiations is the upcoming conversion?
Rayonier's upcoming conversion, does a prospect of additional capacity, maybe make you less willing or aggressive, in terms of seeking price increases?
Steve Dean
Well certainly, more competition wherever it is, that's always a factor. It really comes down to frankly, what we believe is right in the market conveyor and our customers can afford.
We're at very high levels and we do not see big increases, but would expect some.
Tim Quillin
Okay. What is the current expected timing on the finalization of the conversion?
John Crowe
Yeah, we've moved it out a couple of months now, to probably, late, late March early April. We would expect to quickly begin the process of qualifying customers, and have a similar ramp up that we've shared before, maybe moved out a couple of months.
Tim Quillin
Got it. Then, in terms of the impact on shipments from the steam drum failure, the 14,000 tons of reduced shipments in Q1.
What's the mix of that fluff versus specialty?
Steve Dean
I don't know if we have exact mix, but it's more fluff. Because that was the number two mill, so the mix will be a positive force in the first quarter with more specialty, but we will be down numbers of tons.
Partly to let us get our inventory back to where we can manage, when the customer orders in a sequence it doesn't add cost.
Tim Quillin
Right.
John Crowe
Probably 2,000 or 3,000 tons of that total will be specialty, and that's just resulting from the production outage itself, and we got that back up in about a week.
Steve Dean
Yeah, yeah. The majority will be fluff.
Tim Quillin
Got it, got it. Then, just lastly, on the notion of looking into acquisitions and joint ventures and partnerships.
What is the right balance sheet for the company? You (inaudible) I guess right now you're at no debt, but what's the proper debt level for you?
Thank you.
John Crowe
I'm going to answer it, then my CFO can chime in, if I miss it. Because he's comfortable and I'm comfortable, and I think the company is comfortable with up to 2.5 times levered.
Again, our criteria is for rapid accretion of earnings and cash flow. So, whatever we initiate and have to raise debt on our balance sheet, we would certainly want it to be something we could pay down rapidly, and stay at 2 to 2 1/2 times levered.
How did I do, Steve?
Steve Dean
I think you did excellent.
Tim Quillin
Thank you.
John Crowe
You're welcome.
Operator
We'll hear next from Chip Dillon, with Vertical Research Partners.
Chip Dillon
Hi, good morning. First question is just, I guess more for Steve, is on the, it looks like you restated the revenues, or maybe moved it around for one of the segments.
It looks like there's $15 or $14 million of revenue missing from the fiber segment. I didn't know if it all was in the first quarter where you restated, or was it spread between the first and second quarter?
Steve Dean
Yeah, as a result of selling the Americana business, have to reclassify that as a discontinued operation. So if you look at the income statement, you'll see that now there's a couple of new lines at the bottom, and come from continuing operations and loss from discontinued.
Basically we pulled Americana out of every line on the income statement, in all the periods. So, there's a table that I put in, at the end of the press release memo, and you can actually see quarter by quarter, what the effect was.
So, basically that was $14 million of net sales that were pulled out of fiscal 12, negative .6 of gross margin. The year before it was $25 million and -4.4.
You can see all the details; it has the impairments and everything else.
Chip Dillon
I do see that. Just out of curiosity, was all of that just in the first quarter, or was it spread between the first and second quarter?
Steve Dean
Basically, there were no sales in the fourth quarter for Americana, anyway. There was some restructuring costs, from severance, and that kind of thing.
Chip Dillon
Okay.
Steve Dean
We stopped sales in the second quarter of 2012. Was that your question?
Chip Dillon
Got you. Yeah, because if you look at the last quarters, not to get too (inaudible) in the weeds here, but if you look at the last quarter, you actually show the same revenue for the third quarter as you did this time.
So, we know that you didn't have Americana in the fiscal third quarter or fourth quarter. We just want to know as we adjust our model, do we restate, is all the restatement in the first quarter?
I think that you're pretty much saying that that gets us pretty close. Just to make the numbers comparable.
Steve Dean
First and second quarter, Chip.
Chip Dillon
Okay. Is there any way we can see the segment sales, for those two quarters, or do we have to wait until you report them, actually next year?
Steve Dean
I think we'll detail that out in the K.
Chip Dillon
Okay. All right.
That would be great. Then, John, you had mentioned, after you get through, I mean we have a big CapEx ahead of us here in '13, withe $114 million.
Maybe I missed this, but two questions. What should we see CapEx go down to?
Look, I know it can change a bit, based on circumstances or if you make acquisitions. But, what is sort of a good range to use?
Again, if I heard you right, it sounds like you expect to see whatever that number is to see an equivalent amount, more or less returned to shareholders every year. How would you see that mix between dividend and buybacks?
Because certainly, let's to say CapEx goes down to 60 or 70, if that's what you're going to return, if that's all the dividend that would be a very big dividend increase, indeed.
John Crowe
Yeah, I don't see it being 50/50 that we see it. If you look at this year, when I say returning cash to the shareholder, I talk about dividends and share repurchase.
Gather, we repurchased $33 million of shares, and $11 million roughly in dividends, so about $44 million totaled there. If you took out our CapEx for maintaining our assets of about $35 million, this year we spent $85, and you would have $50 million left, and that $50 million was directed toward high rate of return projects.
Primarily the expansion project this year, but also the completion of the energy project. Now, next year going forward we'll still have spend for the 02 project in the early part of the year.
Our capital will come back down; our depreciation is near $50 million, $48 right now. So coming back down closer to that would be kind of ongoing capital you would expect.
Remember $35 million of that is to maintain assets, so on high rate of return projects, we would be spending very similarly to what we would on dividends and share repurchases. Anything you want to add Steve or (inaudible)?
Chip Dillon
Got you.
Steve Dean
That's right. If you look at what we did this last year, it was about $50 million, on these high rate of return projects and returned $33 million in the form of share repurchases, and about $11 million in dividends.
Chip Dillon
As we look at this high CapEx year, should we expect maybe a little bit less, in terms of, I certainly don't expect the dividend to go down. But, would we expect to pace the buybacks maybe to moderate a bit, given the high CapEx?
Or not necessarily?
John Crowe
Well, again, we're going to look and see, what's the best use of our cash, measured against our return on invested capital. We believe, I think Steve would support this, and the team would support it.
In fact we had a good discussion yesterday at our board meeting, to modestly grow the dividend. Our favorite thing would be high rate of return projects, and investments that improve the company's growth strategy.
Steve Dean
I think I would say that not necessarily would you see the rate of share repurchases go down this year. I mean, one thing to remember is that if you think about our cash flow for fiscal '13, we are going to realize the proceeds from the sale of the Delta land and building.
Probably in the December time frame. Between that and working capital reduction, that was $30 million, on top of the normal cash flow we would generate, even after high CapEx year.
Chip Dillon
Did you say how much you expect to get, for just the building for Delta, those assets?
Steve Dean
It's in the $24 million range.
Chip Dillon
That's in December. Then, just a last question.
I think you mentioned this, but I want to make sure I heard this correctly. As we look at the high-alpha dissolving pulp business; you're saying that the demand on the acetate side continues to grow, or at least your sales to that part of the market.
(inaudible) is down, which I think is a lower end of the market, if I'm not mistaken. Then did you say that some other part of the business was not quite as strong, maybe it was.
If you did, I missed that.
Doug Dowdell
Yeah, Chip this is Doug. Our filtration business is a little soft, and the tower chord business is, we're hearing from our customers that their customers take is down a bit.
That's correct.
Chip Dillon
Are the negatives as big as the growth in acetate, or do they about offset each other, or is one bigger than the other?
Doug Dowdell
It's not that much of a down, certainly, not at all. We're talking small blips down, a few thousand tons.
In the acetate market as we know it, will still be growing 2% to 3% a year. That's a 600,000 ton market.
Then ether is growing even more than that, and that's a 350,000 to 400,000 ton market. So we expect the specialty market to continue to outpace and grow any small reductions.
Steve Dean
(inaudible) vice president. He mentioned earlier that he's actually getting more sales into ether in the cotton business, and balancing up the reduction.
Do you want to speak to that?
John Crowe
Absolutely. Even though we've seen a reduction in our acetate volume in the Memphis plant, that has been partially off-set by ether's volume.
We anticipate our ether's volume to continue to grow in the Memphis plant, for the foreseeable future.
Chip Dillon
Very helpful. Thanks.
Operator
We'll take our next question from Steve Chercover, with D.A. Davidson.
Steve Chercover
Thank. Good morning.
Just a couple quick questions. First of all, you gave us the impact,
John Crowe
Steve, you still there?
Operator
One moment, while we try to recall him.
John Crowe
Okay.
Operator
Steve, your line is back open.
Steve Chercover
Sorry, can you hear me?
John Crowe
We do now.
Steve Chercover
Great. Could you quantify the potential accretion of closing Americana, King and Delta?
Because you told us, I guess what the impact is in Q4.
Doug Dowdell
Well, the impact of closing Americana and King, in the last earnings call, the last couple, I showed you sort of what the run rate was there. Essentially what you're losing is, we're losing about $50 million in annual sales, and close to nothing in terms of operating income.
So, we're improving our margin percent, we're improving our return on invested capital with that. It's not like there was a big loss that goes away either.
In the case of Delta, obviously we're going to monetize the value of the assets there, and invest those into higher return areas. We're going to see an improvement in margin as a result of consolidating as much as that volume as we can into the remaining facilities.
It's going to take some time to build profits though, because we're going to lose some sales and rebuild as we transition more and more of that volume to our existing plants. It's going to take a few years before you see any significant plus.
Steve Chercover
So the kind of EBITD that we're seeing from the absorbance is going to be kind of the same, from the air lay business, for the next couple of quarters. I guess clarifying the motivation for Chris's departure and congratulations on the promotions.
Are we going to see any expenses associated with his departure, and I guess, are there any implications for John’s tenure?
Steve Dean
It will be minor in expenses, and it probably be in our restructuring. But, I know Chris appreciates the recognition, as he moves on to other interests.
I know the two gentlemen here that were promoted appreciate your comments there. As for me, I'm still a young man.
Steve Chercover
I agree. We enjoy being with you.
Doug Dowdell
Steve, the one thing I would add, is in terms of the financial impact. It would be in the million dollar range that you're going to see hit restructuring in quarter one.
Steve Chercover
That's in your guidance, obviously.
Doug Dowdell
Yeah.
Steve Chercover
Okay, that's all I have. Thank you.
Steve Dean
Thank you, Steve.
Operator
We'll take our next question from Paul Quinn, with RBC Capital Markets.
Paul Quinn
Yeah, thanks. Good morning.
Just a question on direct costs, you showed on slide 6, that 3.6 million quarter-over-quarter. Can you give us some more detail on that?
John Crowe
I think that probably had, it was at Foley, and we see fluctuations each quarter-over-quarter; as the year goes along. It has to do with when we have planned outages, and that sort of thing.
It does not have any result from the outages in there, we've isolated that. So, it doesn't represent a big up trend, it's more just the timing of when we spend maintenance expense there.
Paul Quinn
Okay, that was helpful. Then, just maybe you could dive in a little more detail, on how you're looking at your strategic plan.
You've got pretty decent size goals going into 2015. Revenue $1.5 billion, EBITDA $375.
Maybe you could go through sort of what you're looking at, at least in the high level?
John Crowe
Actually, I can't reveal, other than to tell you that we have several things that we are looking at, we've looked at several things. Some of them we've decided not to take any more movement on, because they didn't meet our strict criteria of rapid accretion and return on invested capital, at the right levels.
So, it would be very difficult for me to speak at, at this point in time. I can assure you that there are several things out there that we can look at.
Several of them would address the vision that we share, that you just repeated. The top-line growth that is profitable and sustainable, but most important is to continue to maintain high margins.
Our margins goal is greater than 25%, as you see the progress we've made that we're approaching that now. We finished this year right at the 24% gross margin.
So whatever we did, it would be with the synergies that would come from matching up against our assets and our core competencies. We would see the synergies helping us maintain that kind of margin and that kind of EBITDA deliverance.
I just can't tell you what they are.
Paul Quinn
Is it fair to say that you're biased towards specialty fibers?
John Crowe
Most of the opportunities we're looking at right now are related to the specialty end of our business, yes.
Paul Quinn
Okay. That's all I had.
Thanks, guys.
John Crowe
Thank you.
Operator
At this time, we do have one question remaining in the queue. (Operator Instructions) We'll take our next question from Stuart Benway with S&P Capital IQ.
Stuart Benway
Thank you. You said that shipment mix was favorable in the fourth quarter, versus the third quarter.
Can you tell us what categories helped you there?
John Crowe
Can you repeat the first part of the question again?
Stuart Benway
You said that the mix was favorable in the fourth quarter versus the third quarter.
John Crowe
Stuart, basically that was at the Foley mill in our wood business. We just basically had a higher percentage of our shipments were high end specialty, as opposed to fluff pulp.
Stuart Benway
Okay. Then you said shipments were up 20% in non-wovens, then quarter-to-quarter.
Can you tell us what the overall (inaudible) have been so far in the current quarter?
Marko Rajamaa
Stuart, we are expecting this quarter to be more or less the level of the same quarter last year. We are not going to repeat the fourth quarter shipment levels, where we had the inventory build ups by some of our customers going on.
Stuart Benway
Okay. Regarding the lower growth projections in the LED TV market, I don't know if that was for your internal projections or someone else.
Do you think that is due to the economy or is it more of a broader trend, where everyone already owns an LCD TV?
John Crowe
Actually, that's actually really industry guidance. The forecast for four, we're in the 10-15% range annual growth, and they moderated those to 0%-5%.
I think a lot of it is economic activity out there, but there is some saturation in the TV market.
Stuart Benway
You didn't mention any energy cost savings for the quarter. I thought that was one of the major goals of the Foley project.
Is that, the lower savings due to the fact that energy costs in general are lower now?
John Crowe
We've implemented and completed that project, so we are getting full vantage of the $8 million annually, and that's about $2 million a quarter. That's kind of a base number now, in there.
With an outage, we had to purchase some power, so with the steam drum failure, we probably Denton, you'll see some impact from having to purchase during that. But, ongoing it's $2 million a quarter.
And then as we bring the expansion project up, it's part of allowing us to do that, without reducing the size per mill, we're going to be making more specialty than commodity fluff. So, we're going to be depending on that project that allows us to burn more [linter] in our recovery boilers, and generate more electricity.
So that's the opportunity there. The energy savings is base-line now.
Stuart Benway
Okay. I guess this is what the accounting rules allow, but you were able to classify the Americana sales as discontinued, yet you had to keep the (inaudible)?
Doug Dowdell
Yeah, that was kind of an unusual outcome. It has to do with the rules, and how much of the cash flows that you're going to continue to realize going forward.
In the case of Americana we didn't really transfer much of that business at all back to the U.S. It was very aimed at different markets.
In the case of King it was a converting business, it was integrated with our air-laid. We've always sold internally air-laid product to King.
We're continuing to sell air-laid to National Tissue, so basically you have the ongoing cash flow that's above the minimum. That's why the difference.
Stuart Benway
Okay, just on share repurchases. Do you work off of an authorization, does that sort of get continually renewed, or how does that work?
Then, when you buy shares, is it on a regular basis or more opportunistic?
John Crowe
We do have authorization for another $4 million shares repurchased, that the board created, authorization around $6 million, two or three years ago. I'm going to let Steve address the technical part of that question.
Steve Dean
So, we've been purchasing against that authorization, and that's going to last us for a while longer. It's an opportunistic approach that we've taken to share repurchases.
We do have a target to sort of balance between the money, like we were talking earlier, the investment in higher return projects and return to shareholders. We sort of used the share repurchase as the way to get up to that balanced level.
So I would see that continuing, but we don't have a set amount of shares that we say that we're going to buy back every quarter.
Stuart Benway
Okay. Thank you.
Steve Dean
All right. Thank you.
Operator
It does appear that there are no further questions at this time. I would now like to turn the call back over to our speakers for any additional or closing remarks.
John Crowe
This is John, and we appreciate you listening to our earnings call. We look forward to sharing the results of our first quarter with you in October.
Have a great day.
Operator
This does conclude today's Buckeye Technologies fourth quarter and fiscal year 2012 earnings results conference call. Thank you again, for your participation.