Yesterday Buckeye Technologies announced net sales grew 12.1% to $221.3 million for the July-September quarter, a new sales record for the company. Net income for the quarter was $8.9 million compared with $13.5 million in the prior year.

Income before taxes, at $14.4 million, was down $4 million compared to the year-ago quarter as a $5.9 million decrease in operating income was partially offset by a $1.7 million reduction in interest expense. In spite of substantial selling price increases across all businesses, Buckeye’s gross margin has declined from 20.6% of sales in the year-ago quarter to 16% in the quarter just completed due to rapidly escalating input costs at all of its plants and lower capacity utilization at its airlaid plants. Compared to the April-June quarter, operating income rose $2.9 million and gross margin improved from 15.2% to 16%.

“We are pleased with the improvement in our operating results compared to the April-June quarter, particularly with the increase in sales and earnings in our Nonwoven Materials segment,” remarked Chairman and CEO John Crowe. “We were also able to hold operating income for our Specialty Fibers segment constant with the April-June quarter. While we only saw a small increase in fluff pulp prices during the quarter, we were able to offset escalating input costs through a combination of surcharges and selling price increases on our specialty products and improved performance at our Perry, FL wood cellulose mill.”

Mr. Crowe added that Buckeye continued to generate strong cash flow and increased its cash balance by $8 million while slightly reducing long-term debt during the quarter. “I believe that all of our efforts in recent years to reduce debt, take out costs, improve our product mix and put a new credit facility in place in July 2007 have positioned us well for these uncertain economic times,” he said. The company plans to continue to focus on maintaining and improving the strength of its balance sheet.