BUCKEYE RETIREMENT PLAN
Financial Statements
and Supplemental Schedule
For the Year Ended June 30, 2004
BUCKEYE RETIREMENT PLAN
Contents
Page
Independent Auditor's Report 2
Statements of Net Assets Available for Benefits 3
Statements of Changes in Net Assets Available for Benefits 4
Notes to Financial Statements 5-9
Supplemental Schedule
Schedule of Assets Held for Investment Purposes at End of Year 10
Independent Auditor's Report
To the Buckeye Investment Committee
Buckeye Retirement Plan
Memphis, Tennessee
We have audited the accompanying statements of net assets available for benefits
of Buckeye Retirement Plan as of June 30, 2004 and 2003, and the related
statements of changes in net assets available for benefits for the years then
ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of Buckeye
Retirement Plan at June 30, 2004 and 2003, and the changes in its net assets
available for benefits for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule of
assets held for investment purposes at end of year as of June 30, 2004 is
presented for the purpose of complying with the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974, and is not a required part of the basic financial
statements. The supplemental schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
December 3, 2004
2
BUCKEYE RETIREMENT PLAN
Statements of Net Assets Available for Benefits
June 30, 2004 and 2003
2004 2003
----------- -----------
Assets
Investments
Mutual funds $ 70,947,498 $61,860,656
Common stock of Buckeye Technologies Inc. 23,119,863 14,057,741
Loans to participants 314,503 290,505
----------- -----------
94,381,864 76,208,902
Receivables
Employer contributions 5,751,972 5,640,930
Due from broker for unsettled trades - 79,518
----------- -----------
5,751,972 5,720,448
----------- -----------
Net assets available for benefits $100,133,836 $81,929,350
=========== ===========
The accompanying notes are an integral
part of these financial statements.
3
BUCKEYE RETIREMENT PLAN
Statements of Changes in Net Assets Available for Benefits
For the Years Ended June 30, 2004 and 2003
2004 2003
------------ -----------
Additions to net assets attributed to:
Investment income (loss)
Net appreciation (depreciation) in fair value
of investments $ 18,255,370 $(5,485,830)
Interest and dividends 1,005,881 856,162
----------- ----------
19,261,251 (4,629,668)
Contributions
Employer 5,780,032 5,452,730
Participants 3,130,880 3,195,577
Rollovers from other plans 124,689 6,027
----------- -----------
9,035,601 8,654,334
----------- -----------
Total additions 28,296,852 4,024,666
Deductions from net assets attributed to:
Benefits paid to participants 10,042,064 2,364,089
Administrative expenses 50,302 38,663
----------- ----------
Total deductions 10,092,366 2,402,752
----------- ----------
Net increase in net assets 18,204,486 1,621,914
Net assets available for benefits
Beginning of year 81,929,350 80,307,436
---------- ----------
End of year $100,133,836 $81,929,350
=========== ==========
The accompanying notes are an integral
part of these financial statements.
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BUCKEYE RETIREMENT PLAN
Notes to Financial Statements
June 30, 2004 and 2003
Note 1 - Description of Plan
The following description of Buckeye Retirement Plan provides only general
information. Readers should refer to the Plan Agreement for a more complete
description of the Plan's provisions.
General
Buckeye Retirement Plan (the "Plan") is a defined contribution plan covering all
full-time salaried and hourly employees of Buckeye Technologies Inc. and its
wholly-owned subsidiaries (collectively the "Company"). Employees, as defined in
the Plan Agreement, are eligible upon completion of 1,000 hours of service
during their first year of employment or during any plan year (July 1 to June
30). The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
Contributions
Participants may defer up to 20% of their annual compensation and may also
contribute a portion or all of incentive compensation, subject to Internal
Revenue Service limitations.
Foundation contributions, as defined in the Plan Agreement, made annually by the
Company are computed based upon the following formula:
Contribution = (A+B)C
A = 1%, B = .5% multiplied by number of years service not to
exceed twenty (20) years. C = Plan year compensation. The
minimum contribution is 1 1/2% of eligible compensation and the
maximum contribution is 11% of compensation.
Foundation contributions are generally funded in the six month period following
the Plan's year end.
The Company may also make a premium contribution, determined annually by the
Board of Directors, that is based upon the Company's financial performance. As
required by the Plan Agreement, subsequent to June 30, 1996, all Company premium
contributions are invested in the common stock of Buckeye Technologies Inc. The
Company did not make a premium contribution to the Plan for the years ended June
30, 2004 or 2003.
Participant accounts
Each participant's account is credited with the participant's deferred
contribution, an allocation of the Company's foundation contributions, and an
allocation of the Company's discretionary premium contribution, if any, plus a
proportionate interest in the investment earnings or losses of the funds in
which the contributions are invested. Allocations are based upon the
participant's earnings or account balances, as defined by the Plan Agreement.
The benefit to which a participant is entitled is the benefit that can be
provided from the participant's account.
5
BUCKEYE RETIREMENT PLAN
Notes to Financial Statements (Continued)
June 30, 2004 and 2003
Note 1 - Description of Plan (continued)
Vesting
Participants are immediately vested in their deferral contributions and Company
discretionary premium contributions plus earnings thereon. Participants are 100%
vested in the Company foundation contributions after completion of five years of
credited service. In the event of death, disability, normal retirement age (65),
or if the Plan is discontinued, participants become 100% vested in their
foundation account balances.
Payment of benefits
Participants may choose to receive account distributions either in the form of a
lump sum payment or installments over a period of time as defined in the Plan
Agreement. However, if the participant's vested balance does not exceed $5,000,
there Plan may distribute funds in the form of a lump sum payment without the
consent of the participant.
Forfeitures
If an employee terminates before his or her account has become fully vested,
such portion of the account is forfeited. Participant forfeitures are used to
reduce future employer contributions. Forfeitures used to reduce employer
contributions totaled $44,074 in 2004 and $77,746 in 2003.
Plan termination
Although it has not expressed any intent to do so, the Company has the right to
modify or terminate the Plan at any time subject to the provisions of ERISA and
the Plan Agreement. In the event of termination, the Plan provides that all
affected participants' interests will become fully vested and nonforfeitable.
Note 2 - Summary of significant accounting policies
Investments
Investments are stated at fair value based upon quoted market prices. Purchases
and sales of securities are recorded on a trade-date basis. Interest income is
recorded on the accrual basis and dividends are recorded on the ex-dividend
date.
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BUCKEYE RETIREMENT PLAN
Notes to Financial Statements (Continued)
June 30, 2004 and 2003
Note 2 - Summary of significant accounting policies (continued)
Benefit payments
Benefit payments to participants are recorded upon distribution.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the plan administrator to make estimates and
assumptions which affect certain reported amounts and disclosures. Actual
results may differ from those estimates.
Note 3 - Investments
The Plan generally allows participants to direct their contributions and account
balances among the different investment options offered by Fidelity Management
Trust Company. The Plan currently allows participants to invest in nineteen
different mutual funds offered by Fidelity Management Trust Company and Buckeye
Technologies Inc. common stock.
The fair value of the individual investments which represent five percent (5%)
or more of the Plan's net assets available for benefits as of June 30, 2004 and
2003 is as follows:
2004 2003
----------- -----------
Fidelity Growth & Income Portfolio $23,963,758 $22,252,887
Buckeye Technologies Inc. common stock 23,119,863 14,057,741
Spartan U.S. Equity Index Fund 12,727,896 10,611,873
Neuberger Berman Genesis Fund 7,208,301 4,116,827
Fidelity Puritan Fund 5,934,577 5,310,893
Fidelity Retirement Money Market Portfolio 5,627,576 6,020,316
Davis New York Venture Fund, Inc. 5,615,796 -
During 2004 and 2003, the Plan's investments (including investments bought, sold
and held during the year) appreciated (depreciated) in value as follows:
2004 2003
----------- ----------
Mutual funds $ 8,740,167 $ (505,529)
Common stock of Buckeye Technologies Inc. 9,515,203 (4,980,301)
----------- ------------
$18,255,370 $(5,485,830)
=========== ============
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BUCKEYE RETIREMENT PLAN
Notes to Financial Statements (Continued)
June 30, 2004 and 2003
Note 4 - Nonparticipant-directed investments
Information about the net assets and the significant components of the changes
in net assets relating to the nonparticipant-directed investments is as follows:
2004 2003
---------- ---------
Net assets:
Common stock of Buckeye Technologies Inc. $6,419,482 $ 4,147,379
Changes in net assets:
Net appreciation (depreciation) in fair value
of investments $2,737,799 $(1,913,462)
Benefits paid to participants (461,703) (130,981)
Administrative expenses (3,993) (205)
Note 5 - Loans to participants
Participants that qualify for in-service hardship withdrawals, as defined in the
Plan Agreement, may borrow up to the lesser of their deferral contributions
account or $50,000. Any such hardship loan must be for at least $1,000 or the
balance of the participant's deferral contributions account, if less. Loan
repayment periods range from one to five years. The loans are collateralized by
the balance in the participant's account and bear interest at a rate
commensurate with local prevailing rates as determined by the plan
administrator. As of June 30, 2004, interest rates on loans to participants
ranged from 5.0% to 9.75%. Principal and interest is repaid ratably through
payroll deductions.
Note 6 - Related party transactions
The Plan purchased $4,160,849 and sold $5,380,925 of the Plan Sponsor's common
stock during the year ended June 30, 2004. During the year ended June 30, 2003,
the Plan purchased $3,854,625 and sold $2,242,636 of the Plan Sponsor's common
stock. The stock held by the Plan at June 30, 2004 and 2003 had a market value
of $23,119,863 and $14,057,741, respectively.
Plan investments include interests in certain mutual funds managed by Fidelity
Investments Institutional Operations Company, Inc. An affiliate of Fidelity
Investments Institutional Operations Company, Inc. is the trustee as defined by
the Plan and, therefore, these investments and related investment transactions
qualify as party-in-interest. Fees paid to Fidelity totaled $50,302 and $38,663
for the years ended June 30, 2004 and 2003, respectively.
The Company provides the Plan with certain management and administrative
services for which no fees are charged.
8
BUCKEYE RETIREMENT PLAN
Notes to Financial Statements (Continued)
June 30, 2004 and 2003
Note 7 - Tax status
The Plan has received a determination letter from the Internal Revenue Service
stating that the Plan qualifies under the applicable sections of the Internal
Revenue Code (IRC) and is, therefore, not subject to tax under present income
tax law. The Plan, which has been amended since receiving the determination
letter, is required to operate in conformity with the IRC to maintain its
qualification. Management is not aware of any course of action or series of
events that have occurred that might adversely affect the Plan's qualified
status.
Note 8 - Concentration of market risk
The Plan has invested a significant portion of its assets in Buckeye
Technologies Inc. common stock. This investment in Buckeye Technologies Inc.
common stock approximates 23% of the Plan's net assets available for benefits as
of June 30, 2004. As a result of this concentration, any significant reduction
in the market value of this stock could adversely affect individual participant
accounts and the net assets of the Plan.
9
SUPPLEMENTAL SCHEDULE
BUCKEYE RETIREMENT PLAN
Schedule of Assets Held for Investment Purposes at End of Year
EIN: 62-1518973 / Plan Number: 001
June 30, 2004
Current
(a) (b)(c) Identity of Issue/Description (d) Cost (e) Value
Mutual funds
* Fidelity Growth & Income Portfolio $** $23,963,758
* Spartan U.S. Equity Index Fund ** 12,727,896
Neuberger Berman Genesis Fund ** 7,208,301
* Fidelity Puritan Fund ** 5,934,577
* Fidelity Retirement Money Market Portfolio ** 5,627,576
Davis New York Venture Fund, Inc. ** 5,615,796
* Fidelity Diversified International Fund ** 2,869,754
PIMCo Capital Appreciation Fund ** 2,400,806
Strong Government Securities Fund ** 2,353,098
* Fidelity Freedom 2010 Fund ** 571,070
* Fidelity Freedom 2015 Fund ** 432,256
* Fidelity Freedom Appreciation Fund ** 347,732
* Fidelity Freedom 2020 Fund ** 286,445
* Fidelity Freedom 2025 Fund ** 206,375
* Fidelity Freedom 2030 Fund ** 165,515
* Fidelity Freedom 2040 Fund ** 128,828
* Fidelity Freedom Income Fund ** 51,302
* Fidelity Freedom 2035 Fund ** 44,328
* Fidelity Freedom 2005 Fund ** 12,085
----------
70,947,498
* Buckeye Technologies Inc. common stock 27,238,080 23,119,863
Loans to participants
Participant loans, interest rates
ranging from 5.0% to 9.75% - 314,503
----------- -----------
Total assets held for investment
purposes at end of year $27,238,080 $94,381,864
=========== ===========
* Represents a party-in-interest.
** Cost omitted for participant-directed investments.
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