BUCKEYE TECHNOLOGIES INC | 2013 | FY | 3


NOTE 14: INSURANCE RECOVERIES


On June 17, 2012, our Foley Plant experienced a significant failure of a steam drum on the fluff pulp machine, causing damage to multiple drums and structural damage to the paper machine building and structure. This resulted in an unplanned, complete shutdown of the facility. On June 22, 2012, the specialty pulp production line was restarted and was operated at target rates, since optimum rates could not be achieved until the fluff pulp machine was back in operation. On July 4, 2012, the fluff pulp machine was restarted and on July 5, 2012 the Foley facility was back to full operation. We received a total of $18,923 in payments from the insurance company, which is net of our $2,000 deductible. We recognized $3,984 of the payments as an offset to cost of goods sold in 2012 and $10,662 as an offset to cost of goods sold in 2013, related to our claim for business interruption. The remaining $4,277 was recorded as a gain in other operating income in our consolidated statements of operations, as it was related to the insured value of the damaged equipment. These proceeds were used to fund capital expenditures to replace the damaged equipment.


In February 2012, our Foley Plant experienced a power failure and electrical surge triggered by a malfunction in a high voltage electrical line and subsequent transformer failure in its power house. This resulted in an unplanned, complete shutdown of the facility. In June 2012, we reached an agreement with our insurance carrier that determined our loss to be $3,701, including property damage and business interruption. We received a settlement of $1,701, net of our deductible, which we recorded as a reduction to cost of goods sold in 2012.   


In September 2010, one of the turbine generators at our Foley Plant suffered a winding insulation failure and the entire plant lost power. We experienced approximately 19 hours of downtime on our production lines. In December 2010, we reached an agreement with our insurance carrier that determined our loss to be $2,353, including property damage and business interruption. We received a settlement of $353, net of our deductible, which we recorded as a reduction to cost of goods sold during 2011.


On June 17, 2010, our Foley Plant experienced a failure on our utility provider’s incoming line that sent a voltage surge to most of our electrical components, resulting in losses of variable frequency drives and other electrical control components. This power failure caused an unplanned, complete shutdown of the facility. Both production lines were returned to full production by June 23, 2010. In July 2010, we experienced 27 hours of downtime on one of our production lines and 12 hours of downtime on our other production line when additional electrical control components damaged by the voltage surge failed. In December 2010, we reached an agreement with our insurance carrier that determined our loss to be $5,719, including business interruption and property damage. After satisfying our $2,000 deductible, we received a settlement of $3,719 which we recorded as a reduction to cost of goods sold in 2011.



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