Cabot Corp Reports Third Quarter Adjusted EPS of $0.88 and Diluted EPS of $0.78

Year over year earnings growth driven by volume improvement

BOSTON--()--Cabot Corporation (NYSE: CBT) today announced results for its third quarter of fiscal year 2014.

Key Highlights

  • Reinforcement Materials quarterly EBIT increased 24% year-over year
  • Performance Materials quarterly EBIT increased 17% year-over-year
  • Strengthened balance sheet through repayment of $256 million of debt during the quarter
  • Continued strong fiscal 2014 performance with year-to-date adjusted EPS 20% higher than year-to-date fiscal 2013
                 
(In millions, except per share amounts)       Fiscal 2014       Fiscal 2013
Third     First       Third     First

Quarter

9 Months

Quarter

9 Months

 
Net sales $ 940 $ 2,736 $ 901 $ 2,560
Net income attributable to Cabot Corporation $ 52 $ 168 $ 59 $ 106
 
Net earnings per share attributable to Cabot Corporation $ 0.78 $ 2.55 $ 0.90 $ 1.63
Less Adjustments:
Net (loss) income per share from discontinued operations $ (0.01) $ (0.03) $ 0.03 $ (0.02)
Certain items per share $ (0.09) $ - $ 0.03 $ (0.50)
Adjusted EPS       $ 0.88     $ 2.58       $ 0.84     $ 2.15
 

Commenting on the results, Cabot President and CEO Patrick Prevost, said, “We achieved another strong quarter of business performance. Volumes increased as compared to the prior year quarter in both the Reinforcement Materials and Performance Materials segments as demand in our key end markets improved, most notably in China, and we commercialized new capacity and new products. The Purification Solutions results suffered from higher fixed costs due to continued operational difficulties and spending related to upgrading assets and processes. On the corporate side, we strengthened our balance sheet through the repayment of $256 million of debt and Standard and Poor’s reaffirmed our BBB+ investment grade debt rating.”

Financial Detail
For the third quarter of fiscal 2014, net income attributable to Cabot Corporation was $52 million ($0.78 per diluted common share). Net income includes a per share charge of $0.01 for discontinued operations. Net income also includes a per share charge of $0.09 from certain items, principally reflecting charges associated with restructuring actions and the impact of a foreign exchange devaluation. Adjusted EPS for the third quarter of fiscal 2014 was $0.88 per share.

Segment Results
Reinforcement Materials -- Third quarter fiscal 2014 EBIT in Reinforcement Materials increased by $12 million compared to the third quarter of fiscal 2013 principally due to 13% higher volumes from improved demand, the addition of new capacity in China, and our acquisition in Mexico. Raw material purchasing savings and benefits from energy efficiency investments also contributed to the improvement in earnings. Sequentially, EBIT was consistent with our second fiscal quarter as 6% higher volumes were offset by higher maintenance spending due to the timing of plant turnarounds. Additionally, one-time benefits in the second quarter of fiscal 2014 did not reoccur in the third quarter of fiscal 2014.

Global and regional volume changes for Reinforcement Materials for the third quarter of fiscal 2014 as compared to the same quarter of the prior year and the second quarter of fiscal 2014 are included in the table below:

                 
     

Third Quarter

Year over Year Change*

     

Third Quarter

Sequential Change

Global, including NHUMO 13% 6%
Global, excluding NHUMO       5%       Not applicable
Japan 3% 5%
Southeast Asia 4% (8%)
China 11% 26%
Europe, Middle East, Africa 2% (5%)
North America 7% 0%
South America       (4%)       11%

*Regional volumes exclude NHUMO sales.

 

Performance Materials -- Third quarter fiscal 2014 EBIT in Performance Materials increased by $6 million compared to the third quarter of fiscal 2013 due to 5% higher volumes in both Specialty Carbons and Compounds and Fumed Metal Oxides as demand improved in our key end markets. Sequentially, Performance Materials EBIT decreased by $6 million primarily due to a less favorable product mix, higher maintenance spending, and 5% lower volumes in Specialty Carbons and Compounds. This was partially offset by 7% higher volumes in Fumed Metal Oxides due to strengthening underlying demand and successful commercialization efforts.

Advanced Technologies -- Third quarter fiscal 2014 EBIT in Advanced Technologies decreased by $14 million compared to the third quarter of fiscal 2013. The EBIT decrease was driven by lower volumes in the Specialty Fluids business and a royalty payment in the Aerogel business in the third quarter of fiscal 2013 that did not reoccur this year. Sequentially, Advanced Technologies EBIT increased by $2 million as compared to the second quarter of fiscal 2014 driven by higher volumes in Inkjet Colorants.

Purification Solutions -- Third quarter fiscal 2014 EBIT in Purification Solutions decreased by $6 million compared to the third quarter of fiscal 2013. The EBIT decrease was driven by lower volumes, most notably in the gas and air and water sectors, and higher fixed costs. Sequentially, Purification Solutions EBIT decreased by $3 million driven by a less favorable product mix and higher costs. Overall volumes increased 1% sequentially driven by higher volumes in the water sector.

Cash Performance -- The Company ended the third quarter of fiscal 2014 with a cash balance of $101 million, an increase of $12 million from the second quarter of fiscal 2014. During the third quarter of fiscal 2014, the Company generated adjusted EBITDA of $145 million and reduced net working capital by $6 million. The Company received cash proceeds of $215 million during the third quarter of fiscal 2014 from the final payment of notes receivable related to the sale of the Supermetals business, which was used for the repayment of debt. Uses of cash during the third quarter included $256 million for the repayment of debt and $45 million for capital expenditures.

Taxes -- During the third quarter of fiscal 2014, the Company recorded a net tax provision of $20 million for an effective tax rate of 25%. This included a tax benefit on certain items of $1 million. Excluding the impact of certain items, the operating tax rate on continuing operations for the third quarter of fiscal 2014 was 27%.

Outlook
“We were pleased to see another strong quarter with the continuation of positive demand trends in our Reinforcement Materials and Performance Materials segments. Over the last year, the global economic environment has improved in the developed world and in China, however, we are still seeing weakness in South America. We believe that we should experience moderate demand growth through the remainder of 2014 and into 2015. We expect to benefit from this growth and we are well positioned with our global capacity to capture it,” Prevost said, commenting on the outlook for the Company. “In the Purification Solutions segment, we are getting closer to the implementation of the Mercury and Air Toxics Standards (MATS) regulation. The regulation is scheduled to take effect in April 2015, which will drive significant growth in the North American activated carbon market. All in all, the company has delivered year-over-year increases in adjusted EBITDA since 2009 and we are confident in our ability to drive continued earnings growth for our shareholders.”

Earnings Call
The Company will host a conference call with industry analysts at 2:00 p.m. Eastern time on Thursday, July 31, 2014. The call can be accessed through Cabot’s investor relations website at http://investor.cabot-corp.com.

About Cabot Corporation
Cabot Corporation (NYSE: CBT) is a global specialty chemicals and performance materials company, headquartered in Boston, Massachusetts. The company is a leading provider of rubber and specialty carbons, activated carbon, inkjet colorants, cesium formate drilling fluids, fumed silica, aerogel, and elastomer composites. For more information on Cabot, please visit the company’s website at: http://www.cabotcorp.com.

Forward-Looking Statements -- This earnings release contains forward-looking statements based on management’s current expectations, estimates and projections. All statements that address expectations or projections about the future, including our actions that will drive earnings growth, demand for our products, and expectations for growth are forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, potentially inaccurate assumptions, and other factors, some of which are beyond our control and difficult to predict. If known or unknown risks materialize, or should underlying assumptions prove inaccurate, our actual results could differ materially from past results and from those expressed in the forward-looking statement. Important factors that could cause our results to differ materially from those expressed in the forward-looking statements include, but are not limited to economic, competitive, legal, governmental, and technological factors. These factors are discussed more fully in the reports we file with the Securities and Exchange Commission, particularly our latest annual report on Form 10-K. We assume no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

Explanation of Terms Used and Use of Non-GAAP Financial Measures -- The preceding discussion of our results and the accompanying financial tables report adjusted EPS, total segment earnings before interest and taxes, “Total Segment EBIT”, operating tax rate and adjusted EBITDA, which are non-GAAP financial measures. Our chief operating decision-maker uses these non-GAAP financial measures to evaluate the performance of the Company in terms of profitability. We believe that these measures also assist our investors in evaluating the changes in our results and the Company's performance.

In calculating adjusted EPS, we exclude from our net income per share from continuing operations certain items of expense and income that management does not consider representative of the Company's ongoing operations. Adjusted EPS should be considered as supplemental to, and not as a replacement for, EPS determined in accordance with GAAP. A reconciliation of adjusted EPS to EPS from continuing operations, the most directly comparable GAAP financial measure, and the certain items that are excluded from our calculation of adjusted EPS, are provided in the table titled "Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate.”

Total Segment EBIT is a non-GAAP performance measure, and should not be considered an alternative for Income from continuing operations before taxes, the most directly comparable GAAP financial measure. In calculating Total Segment EBIT, we exclude “certain items”, meaning items that management does not consider representative of our fundamental segment results, as well as items that are not allocated to our business segments, such as interest expense and other corporate costs. Our Chief Operating Decision Maker uses segment EBIT to evaluate the operating results of each segment and to allocate resources to the segments. We believe that this non-GAAP measure provides useful supplemental information for our investors as it is an important indicator of the Company’s operational strength and performance. Investors should consider the limitations associated with this non-GAAP measure, including the potential lack of comparability of this measure from one company to another. A reconciliation of Total Segment EBIT to Income from continuing operations before income taxes and equity in (loss) net earnings of affiliate companies is provided in the table titled, “Summary Results by Segments.”

The term “operating tax rate” is a non-GAAP financial measure and represents the tax rate on our recurring operating results. This rate excludes discrete tax items, which are unusual or infrequent items that are excluded from the estimated annual effective tax rate and other tax items, including the impact of the timing of losses in certain jurisdictions, cumulative rate adjustment and the impact of certain items on both operating income and tax provision. A reconciliation of operating tax rate to effective tax rate, the most directly comparable GAAP financial measure is provided in the table titled "Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate.”

“Adjusted EBITDA” is a non-GAAP financial measure and refers to earnings before interest, taxes, depreciation and amortization, excluding items that management does not consider representative of the fundamental segment results. A reconciliation of Adjusted EBITDA from segment EBIT for the third quarter of 2014 is provided on the investor portion of our website at http://investor.cabot-corp.com, under the Non-GAAP Reconciliations section.

 

                             
                   
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
                             
                             
Periods ended June 30 Three Months Nine Months
Dollars in millions, except per share amounts (unaudited)       2014     2013       2014     2013
 
Net sales and other operating revenues $ 940 $ 901 $ 2,736 $ 2,560
 
Cost of sales   756     725     2,197     2,094  
 
Gross profit 184 176 539 466
 
 
Selling and administrative expenses 76 72 245 222
 
Research and technical expenses   15     17     46     50  
Income from operations 93 87 248 194
 
 
Other income (expense)
 
Interest and dividend income 1 2 3 4
 
Interest expense (14 ) (15 ) (41 ) (47 )
 
Other income (A) - - 27 3
       
Total other income (expense)   (13 )   (13 )   (11 )   (40 )
 

Income from continuing operations before income taxes and equity in (loss) earnings of affiliated companies

80 74 237 154
 
Provision for income taxes (20 ) (16 ) (51 ) (52 )
 
Equity in (loss) earnings of affiliated companies, net of tax (2 ) 3 (2 ) 9
 
       
Income from continuing operations 58 61 184 111
 
(Loss) income from discontinued operations, net of tax (B) (1 ) 1 (2 ) (2 )
       
Net income 57 62 182 109
 
Net income attributable to noncontrolling interests 5 3 14 3
       
Net income attributable to Cabot Corporation $ 52   $ 59   $ 168   $ 106  
 
 

Diluted earnings per share of common stock attributable to Cabot Corporation

 
Continuing operations $ 0.79 $ 0.87 $ 2.58 $ 1.65
 
Discontinued operations (B) (0.01 ) 0.03 (0.03 ) (0.02 )
       
Net income attributable to Cabot Corporation $ 0.78 $ 0.90 $ 2.55 $ 1.63
 
Weighted average common shares outstanding
Diluted 65.2 64.5 65.0 64.3
 

(A) Other income for the first nine months of fiscal 2014 includes a $29 million non-cash gain on Cabot's existing investment in its Mexican joint venture (NHUMO) recognized upon acquiring our former joint venture partner's common stock in NHUMO, which represented approximately 60% of the common equity of the joint venture.
(B) Amounts relate primarily to the pending divestiture of the Security Materials Business and the divestiture of the Supermetals Business.

 

                   
                             
 
CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS
                             
                             
Periods ended June 30 Three Months Nine Months
Dollars in millions, except per share amounts (unaudited)       2014     2013       2014     2013
 
Sales
 
Reinforcement Materials $ 534 $ 486 $ 1,555 $ 1,420
 
Performance Materials 243 233 709 672
Specialty Carbons and Compounds 165 159 485 464
Fumed Metal Oxides 78 74 224 208
 
Advanced Technologies 47 67 159 143
Inkjet Colorants 17 18 46 46
Aerogel 2 9 8 17
Elastomer Composites 4 5 28 17
Specialty Fluids 24 35 77 63
 
Purification Solutions (A)   78     81     230     244  
 
Segment sales 902 867 2,653 2,479
 
Unallocated and other (A) (B)   38     34     83     81  
 
Net sales and other operating revenues $ 940   $ 901   $ 2,736   $ 2,560  
 
Segment Earnings Before Interest and Taxes (C) (D)
 
Reinforcement Materials $ 61 $ 49 $ 186 $ 141
 
Performance Materials 41 35 122 99
 
Advanced Technologies 14 28 51 44
 
Purification Solutions   (7 )   (1 )   (20 )   4  
 
Total Segment Earnings Before Interest and Taxes (D) 109 111 339 288
 
Unallocated and Other
 
Interest expense (14 ) (15 ) (41 ) (47 )
Certain items (E) (7 ) (4 ) (19 ) (43 )
Unallocated corporate costs (D) (14 ) (12 ) (43 ) (37 )
General unallocated income (expense) (F) 2 (3 ) (1 ) 2
Less: Equity in loss (earnings) of affiliated companies   4     (3 )   2     (9 )
 

Income from continuing operations before income taxes and equity in (loss) earnings of affiliated companies

80 74 237 154
 
Provision for income taxes (including tax certain items) (20 ) (16 ) (51 ) (52 )
 
Equity in (loss) earnings of affiliated companies (2 ) 3 (2 ) 9
       
Income from continuing operations 58 61 184 111
 
(Loss) income from discontinued operations, net of tax (G) (1 ) 1 (2 ) (2 )
       
Net income 57 62 182 109
 
Net income attributable to noncontrolling interests 5 3 14 3
       
Net income attributable to Cabot Corporation $ 52   $ 59   $ 168   $ 106  
 

Diluted earnings per share of common stock attributable to Cabot Corporation

 
Continuing operations $ 0.79 $ 0.87 $ 2.58 $ 1.65
 
Discontinued operations (G) (0.01 ) 0.03 (0.03 ) (0.02 )
       
Net income attributable to Cabot Corporation $ 0.78 $ 0.90 $ 2.55 $ 1.63
 
Adjusted earnings per share
 
Adjusted EPS (H) $ 0.88 $ 0.84 $ 2.58 $ 2.15
 
Weighted average common shares outstanding
 
Diluted 65.2 64.5 65.0 64.3
 

(A)Beginning in the second quarter of fiscal 2014, a reclassification between Purification Solutions and Unallocated and other sales has been made in the table above in order to align the presentation of shipping and handling fees on customer sales with the rest of Cabot’s businesses. Historical periods have been adjusted to reflect this reclassification.
(B)Unallocated and other reflects royalties, other operating revenues, external shipping and handling fees, the impact of unearned revenue, the removal of 100% of the sales of an equity method affiliate and discounting charges for certain Notes receivable.
(C)Segment EBIT is a measure used by Cabot's Chief Operating Decision-Maker to measure consolidated operating results, assess segment performance and allocate resources. Segment EBIT includes equity in (loss) earnings of affiliated companies, royalty income, and allocated corporate costs.
(D)Fiscal 2013 Segment EBIT and unallocated corporate costs have been recast from the reporting of the first three quarters of fiscal 2013 to reflect an allocation of costs to the Purification Solutions segment for corporate administrative and functional support. These allocations were previously reflected in Unallocated corporate costs and other segment results. The recast results for each quarter of fiscal 2013 are consistent with those that were presented in conjunction with Cabot's year end fiscal 2013 earnings release.
(E)Details of certain items are presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.
(F)General unallocated income (expense) includes foreign currency transaction gains (losses), interest income, dividend income, the profit related to unearned revenue, and the impact of LIFO accounting.
(G)Amounts relate primarily to the pending divestiture of the Security Materials Business and the divestiture of the Supermetals Business.
(H)Adjusted EPS is a non-GAAP measure, and a reconciliation of Adjusted EPS to GAAP EPS is presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.

 

           
                 
 
CABOT CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                 
                 
June 30, September 30,
2014 2013
Dollars in millions       (unaudited)       (audited)
 
Current assets:
 
Cash and cash equivalents $ 101 $ 95
Accounts and notes receivable, net of reserve for doubtful accounts of $11 and $8 724 633
Inventories:
Raw materials 119 100
Work in process 2 2
Finished goods 366 309
Other   45   44
Total inventories 532 455
Prepaid expenses and other current assets 104 58
Notes receivable from sale of business - 214
Deferred income taxes 37 36
Current assets held for sale (A)   4   4
Total current assets   1,502   1,495
 
Property, plant and equipment, net 1,616 1,600
 
Goodwill 555 502
Equity affiliates 71 119
Intangible assets, net of accumulated amortization of $29 and $16 354 308
Assets held for rent 55 49
Deferred income taxes 80 68
Other assets 56 83
Non-current assets held for sale (A) 9 9
   
Total assets $ 4,298 $ 4,233
 

(A)Includes amounts related to the pending sale of the Security Materials Business.

 

           
                 
 
CABOT CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                 
                 
June 30, September 30,
2014 2013
Dollars in millions, except share and per share amounts       (unaudited)       (audited)
 
Current liabilities:
 
Notes payable $ 119 $ 264
Accounts payable and accrued liabilities 537 534
Income taxes payable 39 30
Deferred income taxes 2 2
Current portion of long-term debt   18     14  
Total current liabilities   715     844  
 
Long-term debt 1,026 1,020
Deferred income taxes 49 21
Other liabilities 272 265
Redeemable preferred stock 29 -
 
Stockholders' equity:
Preferred stock:
Authorized: 2,000,000 shares of $1 par value
Issued and Outstanding: None and none - -
Common stock:
Authorized: 200,000,000 shares of $1 par value
Issued: 64,832,912 and 64,223,985 shares
Outstanding: 64,580,371 and 63,970,502 shares 65 64
Less cost of 252,541 and 253,483 shares of common treasury stock (8 ) (8 )
Additional paid-in capital 57 39
Retained earnings 1,884 1,755
Deferred employee benefits - (2 )
Accumulated other comprehensive income   90     103  
Total Cabot Corporation stockholders' equity 2,088 1,951
Noncontrolling interests   119     132  
Total stockholders' equity   2,207     2,083  
Total liabilities and stockholders' equity $ 4,298   $ 4,233  
 
 

CABOT CORPORATION
                                                                 
      Fiscal 2013       Fiscal 2014
Dollars in millions,                                
except per share amounts (unaudited)       Dec. Q.     Mar. Q.     June Q.     Sept. Q.     FY Dec. Q.     Mar. Q.     June Q.     Sept. Q.     FY
 
Sales
Reinforcement Materials 475 459 486 482 1,902 517 504 534 - 1,555
Performance Materials 196 243 233 232 904 217 249 243 - 709
Specialty Carbons and Compounds 132 173 159 158 622 148 172 165 - 485
Fumed Metal Oxides 64 70 74 74 282 69 77 78 - 224
Advanced Technologies 37 39 67 72 215 64 48 47 - 159
Inkjet Colorants 16 12 18 18 64 15 14 17 - 46
Aerogel 5 3 9 4 21 5 1 2 - 8
Elastomer Composites 8 4 5 12 29 16 8 4 - 28
Specialty Fluids 8 20 35 38 101 28 25 24 - 77
Purification Solutions (A)         88         75         81         84         328     72         80         78         -       230  
Segment Sales 796 816 867 870 3,349 870 881 902 - 2,653
Unallocated and other (A) (B)         23         24         34         26         107     28         17         38         -       83  
 
Net sales and other operating revenues       $ 819       $ 840       $ 901       $ 896       $ 3,456   $ 898       $ 898       $ 940       $ -     $ 2,736  
 
Segment Earnings Before Interest and Taxes (C) (D)
Reinforcement Materials 50 42 49 47 188 64 61 61 - 186
Performance Materials 27 37 35 33 132 34 47 41 - 122
Advanced Technologies 8 8 28 26 70 25 12 14 - 51
Purification Solutions         5         -         (1 )       (8 )       (4 )   (9 )       (4 )       (7 )       -       (20 )-
Total Segment Earnings Before Interest and Taxes (D) 90 87 111 98 386 114 116 109 - 339
 
 
Unallocated and Other
Interest expense (16 ) (16 ) (15 ) (15 ) (62 ) (14 ) (13 ) (14 ) - (41 )
Certain items (E) (19 ) (20 ) (4 ) (11 ) (54 ) 24 (36 ) (7 ) - (19 )
Unallocated corporate costs (D) (12 ) (13 ) (12 ) (11 ) (48 ) (13 ) (16 ) (14 ) - (43 )
General unallocated income (expense) (F) 3 2 (3 ) (3 ) (1 ) - (3 ) 2 - (1 )
Less: Equity in (earnings) loss of affiliated companies         (3 )       (3 )       (3 )       (2 )       (11 )   (2 )       -         4         -       2  
 

Income from continuing operations before income taxes and equity in earnings (loss) of affiliated companies

43 37 74 56 210 109 48 80 - 237
 
Provision for income taxes (including tax certain items) (20 ) (16 ) (16 ) (8 ) (60 ) (24 ) (7 ) (20 ) - (51 )
Equity in earnings (loss) of affiliated companies         3         3         3         2         11     2         (2 )       (2 )       -       (2 )
 
Income from continuing operations 26 24 61 50 161 87 39 58 - 184
(Loss) income from discontinued operations, net of tax (G)         (2 )       (1 )       1         1         (1 )   (1 )       -         (1 )       -       (2 )
 
Net income 24 23 62 51 160 86 39 57 - 182
 
Net income (loss) attributable to noncontrolling interests         4         (4 )       3         4         7     6         3         5         -       14  
 
Net income attributable to Cabot Corporation $ 20 $ 27 $ 59 $ 47 $ 153 $ 80 $ 36 $ 52 $ - $ 168
 

Diluted earnings per share of common stock attributable to Cabot Corporation

 
Continuing operations $ 0.35 $ 0.43 $ 0.87 $ 0.72 $ 2.37 $ 1.24 $ 0.55 $ 0.79 $ - $ 2.58
Discontinued operations (G)         (0.04 )       (0.01 )       0.03         0.01         (0.01 )   (0.01 )       (0.01 )       (0.01 )       -       (0.03 )
Net income attributable to Cabot Corporation $ 0.31 $ 0.42 $ 0.90 $ 0.73 $ 2.36 $ 1.23 $ 0.54 $ 0.78 $ - $ 2.55
 
Adjusted earnings per share
 
Adjusted EPS (H)       $ 0.67       $ 0.64       $ 0.84       $ 0.78       $ 2.93   $ 0.87       $ 0.83       $ 0.88       $ -     $ 2.58  
 
Weighted average common shares outstanding
Diluted         64.1         64.4         64.5         64.7         64.5     64.8         65.1         65.2         -       65.0  
 

(A) Beginning in the second quarter of fiscal 2014, a reclassification between Purification Solutions and Unallocated and other sales has been made in the table above in order to align the presentation of shipping and handling fees on customer sales with the rest of Cabot’s businesses. Historical periods have been adjusted to reflect this reclassification.
(B) Unallocated and other reflects royalties, other operating revenues, external shipping and handling fees, the impact of unearned revenue, the removal of 100% of the sales of an equity method affiliate and discounting charges for certain Notes receivable.
(C) Segment EBIT is a measure used by Cabot's Chief Operating Decision-Maker to measure consolidated operating results, assess segment performance and allocate resources. Segment EBIT includes equity in earnings (loss) of affiliated companies, royalty income, and allocated corporate costs.
(D) The first three quarters of fiscal 2013 Segment EBIT and unallocated corporate costs have been recast to reflect an allocation of costs to the Purification Solutions segment for corporate administrative and functional support. These allocations were previously reflected in Unallocated corporate costs and other segment results. The recast results for each quarter of fiscal 2013 are consistent with those that were presented in conjunction with Cabot's year end fiscal 2013 earnings release.
(E) Details of certain items are presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.
(F) General unallocated income (expense) includes foreign currency transaction gains (losses), interest income, dividend income, the profit related to unearned revenue, and the impact of LIFO accounting.
(G) Amounts relate primarily to the pending divestiture of the Security Materials Business and the divestiture of the Supermetals Business.
(H) Adjusted EPS is a non-GAAP measure, and a reconciliation of Adjusted EPS to GAAP EPS is presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.

 

                   
                             
 
CABOT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             
                             
Periods ended June 30 Three Months Nine Months
Dollars in millions       2014     2013       2014     2013
 
Cash Flows from Operating Activities:
Net income $ 57 $ 62 $ 182 $ 109
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 50 45 150 144
Other non-cash charges (income), net (6 ) (2 ) (27 ) 29
Changes in assets and liabilities:
Changes in certain working capital items (A) 14 23 (128 ) (102 )
Changes in other assets and liabilities, net - 9 (14 ) (45 )
Cash dividends received from equity affiliates   1     1     22     7  
Cash provided by operating activities   116     138     185     142  
 
Cash Flows from Investing Activities:
Additions to property, plant and equipment (45 ) (68 ) (115 ) (195 )
Receipts from notes receivable from sale of business 215 9 215 39
Cash paid for acquisition of business, net of cash acquired of $7 million - - (73 ) -
Other investing activities, net   -     -     (5 )   (4 )
Cash provided by (used in) investing activities   170     (59 )   22     (160 )
 
Cash Flows from Financing Activities:
Change in debt, net (257 ) (62 ) (136 ) 31
Cash dividends paid to common stockholders (14 ) (13 ) (40 ) (39 )
Other financing activities, net   (6 )   (6 )   (12 )   (4 )
Cash used in financing activities   (277 )   (81 )   (188 )   (12 )
Effect of exchange rates on cash   3     (7 )   (13 )   (14 )
Increase (Decrease) in cash and cash equivalents 12 (9 ) 6 (44 )
Cash and cash equivalents at beginning of period   89     85     95     120  
Cash and cash equivalents at end of period $ 101   $ 76   $ 101   $ 76  
 

(A) Includes Accounts and notes receivable, Inventories, and Accounts payable and accrued liabilities

 

                                                                     
                                                                                               
 
CABOT CORPORATION CERTAIN ITEMS AND RECONCILIATION OF ADJUSTED EPS AND OPERATING TAX RATE
                                                                                               
                                                                                               
TABLE 1: DETAIL OF CERTAIN ITEMS
Periods ended June 30 Three Months       Nine Months Three Months       Nine Months

Dollars in millions, except per share amounts (unaudited)

Dollars in Millions Per Share After Tax
2014 2013 2014 2013 2014 2013 2014 2013
$       $       $     $         per share(A)       per share(A)       per share(A)       per share(A)
 
Certain items before and after income taxes
 
Global restructuring activities $ (3 ) $ (5 ) $ (24 ) $ (29 ) $ (0.04 ) $ (0.05 ) $ (0.25 ) $ (0.30 )
Acquisition and integration-related charges (2 ) (5 ) (18 ) (0.02 ) (0.05 ) (0.19 )
Foreign currency (loss) gain on revaluations (3 ) 3 (3 ) 4 (0.04 ) 0.04 (0.03 ) 0.05
Gain on existing investment in NHUMO 29 0.45
Legal and environmental matters and reserves   (1 )                   (16 )                   (0.01 )                   (0.16 )          
Total certain items, pre-tax   (7 )         (4 )         (19 )       (43 )           (0.09 )         (0.03 )         (0.04 )         (0.44 )
 
Tax impact of certain items   2                     16         5                                      
Certain items after tax   (5 )         (4 )         (3 )       (38 )           (0.09 )         (0.03 )         (0.04 )         (0.44 )  
 
Tax-related certain items
 
Tax impact of certain foreign exchange losses (1 ) (1 ) (12 ) (0.01 ) (0.01 ) (0.19 )
 
Discrete tax items   -           4           3         9             0.01           0.06           0.05           0.13  
 
 
Total tax-related certain items (1 ) 4 2 (3 ) 0.06 0.04 (0.06 )
                                                         
 
Total certain items after tax   (6 )                   (1 )       (41 )           (0.09 )         0.03                     (0.50 )
 
 
Discontinued operations after income taxes (B) (1 ) 1 (2 ) (2 ) (0.01 ) 0.03 (0.03 ) (0.02 )
 
                                             
 
Total discontinued operations after tax $ (1 )       $ 1         $ (2 )     $ (2 )         $ (0.01 )       $ 0.03         $ (0.03 )       $ (0.02 )
 
                                                                                       
                                                                                               
TABLE 2: CERTAIN ITEMS STATEMENT OF OPERATIONS LINE ITEM
Periods ended June 30 Three Months Nine Months
Dollars in millions, Pre-Tax (unaudited)   2014       2013 2014         2013
 

Statement of Operations Line Item (C)

 
Cost of sales $ (2 ) $ (4 ) $ (28 ) $ (36 )
 
Selling and administrative expenses (2 ) (3 ) (17 ) (9 )
 
Research and technical expenses (1 ) (1 )
Other income   (3 )         4     26             3  
Total certain items, pre-tax $ (7 )       $ (4 ) $ (19 )         $ (43 )
 
 
                                                                                               
TABLE 3: RECONCILIATION OF TAX CERTAIN ITEMS
Periods ended June 30 Three Months Nine Months
Dollars in millions (unaudited)   2014       2013 2014         2013
 

Reconciliation of Provision for income taxes, excluding certain items, to Provision for income taxes

 
 
Provision for income taxes $ (20 ) $ (16 ) $ (51 ) $ (52 )
 
Less: Tax impact of certain items 2 16 5
 
Less: Tax-related certain items (1 ) 4 2 (3 )
                     
Provision for income taxes, excluding certain items $ (21 )       $ (20 ) $ (69 )         $ (54 )
                                                                                               
TABLE 4: RECONCILIATION OF OPERATING TAX RATE
Periods ended June 30 Three Months Nine Months
Dollars in millions (unaudited)   2014       2013 2014         2013
 

Reconciliation of the effective tax rate to the operating tax rate

 
 
Provision for income taxes $ (20 ) $ (16 ) $ (51 ) $ (52 )
 
Effective tax rate 25 % 22 % 22 % 34 %
 
Impact of discrete tax items:
Unusual or infrequent items (1 %) 4 % (1 %) (5 %)
Items related to uncertain tax positions - % - % 2 % 1 %
Other discrete tax items 1 % 2 % (1 %) 2 %
Impact of certain items   2 %       (1 %)   5 %         (5 %)
Operating tax rate   27 %       27 %   27 %         27 %
                                                                                               
TABLE 5: RECONCILIATION OF ADJUSTED EPS BY QUARTER FISCAL 2013 and FISCAL 2014
NON-GAAP MEASURE:
Periods ended (unaudited) Fiscal 2013(A)               Fiscal 2014(A)
 
Dec. Q       Mar. Q       Jun. Q       Sept. Q       FY 2013 YTD               Dec. Q       Mar. Q       Jun. Q       Sept. Q       FY 2014 YTD

Reconciliation of Adjusted EPS to GAAP EPS

Net income per share attributable to Cabot Corporation $ 0.31 $ 0.42 $ 0.90 $ 0.73 $ 2.36 $ 1.23 $ 0.54 $ 0.78 $ ― $ 2.55
Less: Net (loss) income per share from discontinued operations(B)   (0.04 )         (0.01 )         0.03           0.01           (0.01 )                 (0.01 )         (0.01 )         (0.01 )                   (0.03 )
Net income per share from continuing operations $ 0.35 $ 0.43 $ 0.87 $ 0.72 $ 2.37 $ 1.24 $ 0.55 $ 0.79 $ ― $ 2.58
Less: Certain items after tax per share   (0.32 )         (0.21 )         0.03           (0.06 )         (0.56 )                 0.37           (0.28 )         (0.09 )                    
Adjusted earnings per share $ 0.67 $ 0.64 $ 0.84 $ 0.78 $ 2.93 $ 0.87 $ 0.83 $ 0.88 $ ― $ 2.58
                                                                                               

(A) Per share amounts are calculated after tax and, where applicable, noncontrolling interests, net of tax.
(B) Amounts relate primarily to the pending divestiture of the Security Materials Business and the divesture of the Supermetals Business.
(C) This table indicates the line items where certain items are recorded in the table titled Cabot Corporation Consolidated Statements of Operations.

Contacts

Investor Contact:
Cabot Corporation
Erica McLaughlin, 617-342-6090

Release Summary

Cabot Corp announced results for its third quarter of fiscal 2014. Reinforcement and Performance Materials quarterly EBIT increased year-over year and year-to-date adjusted EPS increased 20%.

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Contacts

Investor Contact:
Cabot Corporation
Erica McLaughlin, 617-342-6090