Cabot Announces Fourth Quarter and Full Fiscal Year 2009 Operating Results
Business Profit Improves on Higher Sequential Volumes and Lower Year Over Year Costs
(Logo: http://www.newscom.com/cgi-bin/prnh/20000323/CABOTLOGO )
Key Highlights
-- Quarterly volumes increase 15-30% sequentially as downstream markets
continue to improve in all regions; fiscal 2009 volume levels 20-30%
below fiscal 2008
-- New Business Segment ends fiscal 2009 with positive cash flow; full
year cash generation improves by $43 million on 16% higher revenues
-- Restructuring ahead of schedule and at substantially lower cost than
forecast; lower operating expenses benefit fourth quarter and full year
results
-- Cash and liquidity remain solid, ending the year with a cash balance of
$304 million ; strong balance sheet and credit rating enable bond
offering on favorable terms
-------------------------------------------------------------------------
(In millions, except per
share amounts) 2009 2008
-----------------------------------------
Fourth Fiscal Fourth Fiscal
Quarter Year Quarter Year
------- ------ ------- --------
Net sales $610 $2,243 $854 $3,191
Net (loss)/ income $(11) $(77) $12 $86
Diluted (loss)/ earnings per
share from continuing
operations $(0.17) $(1.21) $0.18 $1.34
Less: Certain items per
share (0.47) (1.37) (0.04) (0.15)
Adjusted earnings per share $0.30 $0.16 $0.22 $1.49
-------------------------------------------------------------------------
For the fourth quarter of fiscal 2009, the Company reported a net loss of
Commenting on the results,
For the year, however, volumes remained more than 20% below the peak levels experienced in 2008. Profitability was also negatively affected by
Financial Detail
Segment Results
Core Segment- Fourth quarter 2009 profitability in the Rubber Blacks Business increased by
Fourth quarter 2009 profitability in the Supermetals Business decreased by
Performance Segment- When compared to the third quarter of fiscal 2009, profitability in the Performance Segment increased by
Specialty Fluids Segment- Profitability in the Specialty Fluids Segment for the fourth quarter of fiscal 2009 decreased by
New Business Segment- The New Business Segment finished fiscal 2009 having generated positive cash flow, improving cash generation by
Cash Performance- During fiscal 2009, the Company generated
Taxes- During the fourth quarter of fiscal 2009, the Company recorded a tax provision of
Outlook
Commenting on the outlook for the Company, Prevost said, "The volume improvements we experienced in the last two quarters of fiscal 2009 give us some optimism for the coming year. Although the progress has been very positive, a full recovery to pre-downturn levels will most likely occur at a moderate pace. Our restructuring efforts have positioned us well to benefit from the recovery and we are confident in our ability to achieve our long-term financial targets. While feedstock volatility continues to be a concern, we have taken steps to lessen its impact on our business results. Our strong balance sheet, cash position and access to liquidity give us additional flexibility through the economic recovery."
Earnings Call
The Company will host a conference call with industry analysts at
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 expectations concerning the annualized fixed cost savings we expect from, and the costs associated with, our restructuring initiative and demand for our products), strategy for growth, market position, and expected financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the
Explanation of Terms Used- When explaining factors affecting our performance, we use several terms. The term "LIFO benefit" or "LIFO impact" includes two factors: (i) the impact of current inventory costs being recognized immediately in cost of goods sold ("COGS") under a last-in first-out method, compared to the older costs that would have been included in COGS under a first-in first-out method ("COGS impact"); and (ii) the impact of reductions in inventory quantities, causing historical inventory costs to flow through COGS ("liquidation impact"). The LIFO impact for fiscal 2009 was a favorable
Use of Non-GAAP Financial Measures- The preceding discussion of our results and the accompanying financial tables report adjusted EPS and also include information on our reportable segment sales and segment (or business) operating profit before taxes ("PBT"). Adjusted EPS and segment PBT are non-GAAP financial measures and are not intended to replace EPS and income (loss) from continuing operations before taxes, equity in net income of affiliated companies and minority interest, respectively, the most directly comparable GAAP financial measures. Both EPS and adjusted EPS are calculated on a diluted share basis. In calculating adjusted EPS and segment PBT, we exclude certain items, meaning items that are significant and unusual or infrequent and not believed to reflect the true underlying business performance, and, therefore, are not allocated to a segment's results or included in adjusted EPS. Further, in calculating segment PBT we include equity in net income of affiliated companies, royalties paid by equity affiliates, minority interest and allocated corporate costs but exclude interest expense, foreign currency translation gains and losses, interest income, dividend income and unallocated corporate costs. Our chief operating decision-maker uses adjusted EPS to evaluate the underlying earnings power of the Company. Segment PBT is used to evaluate changes in the operating results of each segment before non-operating factors and before certain items and to allocate resources to the segments. We believe that these non-GAAP measures also assist our investors in evaluating the changes in our results and the Company's performance. A reconciliation of adjusted EPS to EPS is shown in the table titled Certain Items and Reconciliation of Adjusted EPS, and a reconciliation of total segment PBT to income (loss) from operations before taxes, equity in net income of affiliated companies and minority interest is shown in the table titled Summary Results by Segments. The certain items that are excluded from our calculation of adjusted EPS and segment PBT are detailed in the table titled Certain Items and Reconciliation of Adjusted EPS.
Fourth Quarter Earnings Announcement, Fiscal 2009
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Periods ended September 30
Dollars in millions, except per share Three Months Twelve Months
amounts (unaudited) 2009 2008 2009 2008
------------------------------------- ---- ---- ---- ----
Net sales and other operating revenues $610 $854 $2,243 $3,191
Cost of sales 538 742 2,016 2,707
--- --- ----- -----
Gross profit 72 112 227 484
Selling and administrative expenses 50 56 210 246
Research and technical expenses 18 19 71 74
-- -- -- --
Income (loss) from operations 4 37 (54) 164
Other income and expense
Interest and dividend income - 2 2 4
Interest expense (7) (11) (30) (38)
Other income (expense) (7) (12) (20) (18)
--- --- --- ---
Total other income and expense (14) (21) (48) (52)
--- --- --- ---
(Loss) income from operations before
income taxes (10) 16 (102) 112
(Provision) benefit for income taxes (1) (1) 22 (14)
Equity in net income of affiliated
companies, net of tax 3 2 5 8
Minority interest in net income, net of
tax (3) (5) (2) (20)
-- -- -- ---
(Loss) income from continuing
operations (11) 12 (77) 86
Loss from discontinued operations, net
of tax (A) - - - -
---- --- ---- ---
Net (loss) income $(11) $12 $(77) $86
---- --- ---- ---
Diluted (loss) earnings per share of
common stock
Continuing operations $(0.17) $0.18 $(1.21) $1.34
Discontinued operations (A) - - (0.01) -
--- --- ----- ---
Net (loss) income per share $(0.17) $0.18 $(1.22) $1.34
Weighted average common shares outstanding
Diluted 64 64 63 64
(A) Amounts relate to legal settlements in connection with our
discontinued operations.
Fourth Quarter Earnings Announcement, Fiscal 2009
CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS
Periods ended September 30
Dollars in millions, except per share Three Months Twelve Months
amounts (unaudited) 2009 2008 2009 2008
------------------------------------- ---- ---- ---- ----
SALES
Core Segment $377 $553 $1,426 $2,064
Rubber blacks 343 505 1,286 1,868
Supermetals 34 48 140 196
Performance Segment 183 237 621 931
Performance products 118 165 411 645
Fumed metal oxides 65 72 210 286
New Business Segment 19 20 67 58
Inkjet colorants 14 13 46 43
Aerogel(A) 4 5 15 10
Superior MicroPowders 1 2 6 5
Specialty Fluids Segment 14 19 59 68
-- -- -- --
Segment sales 593 829 2,173 3,121
Unallocated and other (A), (B) 17 25 70 70
-- -- -- --
Net sales and other operating revenues $610 $854 $2,243 $3,191
---- ---- ------ ------
SEGMENT PROFIT
Core Segment $16 $18 $33 $107
Rubber blacks 16 21 34 108
Supermetals - (3) (1) (1)
Performance Segment 28 24 40 119
New Business Segment (2) (5) (10) (35)
Specialty Fluids Segment 4 6 21 24
-- -- -- --
Total Segment Profit (C) 46 43 84 215
Interest expense (7) (11) (30) (38)
Certain items (D) (36) (3) (103) (13)
Unallocated corporate costs (E) (6) (3) (28) (28)
General unallocated expense (F) (4) (8) (20) (16)
Less: Equity in net income of affiliated
companies, net of tax (3) (2) (5) (8)
-- -- -- --
(Loss) income from continuing operations
before income taxes, equity in net
income of affiliated companies and
minority interest (10) 16 (102) 112
(Provision) benefit for income taxes (1) (1) 22 (14)
Equity in net income of affiliated
companies, net of tax 3 2 5 8
Minority interest in net income, net of tax (3) (5) (2) (20)
-- -- -- ---
(Loss) income from continuing
operations $(11) $12 $(77) $86
Loss from discontinued operations, net
of tax (G) - - - -
---- --- ---- ---
Net (loss) income $(11) $12 $(77) $86
---- --- ---- ---
Diluted (loss) earnings per share of
common stock
Continuing operations $(0.17) $0.18 $(1.21) $1.34
Discontinued operations (G) - - (0.01) -
-- -- ----- --
Net (loss) income per share $(0.17) $0.18 $(1.22) $1.34
Weighted average common shares outstanding
Diluted 64 64 63 64
Note: During the third quarter of fiscal 2008, management changed the
way it manages the Company's businesses. Accordingly, the segment
results for all periods presented have been revised to reflect these
changes.
(A) Royalty income received by the Aerogel business, which has been
included in Unallocated and other in prior periods, has been
reclassified to Segment sales for all periods presented above.
(B) Unallocated and other reflects an elimination for sales of one
equity affiliate, prior to the consolidation of its results
beginning April 1, 2008 , offset by royalties paid by equity
affiliates and other operating revenues and external shipping and
handling fees.
( C ) Segment profit is a measure used by Cabot's Chief Operating
Decision-Maker to measure consolidated operating results, assess
segment performance and allocate resources. Segment profit
includes equity in net income of affiliated companies, royalty
income, minority interest and allocated corporate costs.
(D) Details of certain items are presented in the Certain Items and
Reconciliation of Adjusted EPS table.
(E) During the first quarter of fiscal 2009, management changed the
allocation method of its corporate costs to its segments. Under
this new method, costs that are not controlled by the segments and
which primarily benefit corporate interests are not allocated to
the segments. Prior periods have been recast to conform to the new
allocation method.
(F) General unallocated expense includes foreign currency transaction
gains (losses), interest income, and dividend income.
(G) Amounts relate to legal settlements in connection with our
discontinued operations.
Fourth Quarter Earnings Announcement, Fiscal 2009
CABOT CORPORATION CONSOLIDATED FINANCIAL POSITION
September 30, September 30,
Dollars in millions, except share and per 2009 2008
share amounts (unaudited) (audited)
----------------------------------------- ------------ ----------
Current assets:
Cash and cash equivalents $304 $129
Short-term marketable securities 1 1
Accounts and notes receivable, net of
reserve for doubtful accounts of $6 and $5 452 646
Inventories:
Raw materials 118 193
Work in process 44 58
Finished goods 165 246
Other 31 26
-- --
Total inventories 358 523
Prepaid expenses and other current
assets 42 72
Deferred income taxes 40 30
Assets held for sale - 7
--- ---
Total current assets 1,197 1,408
----- -----
Investments:
Equity affiliates 60 53
Long-term marketable securities and
cost investments 1 1
--- ---
Total investments 61 54
-- --
Property, plant and equipment 2,999 2,921
Accumulated depreciation and amortization (1,987) (1,839)
------ ------
Net property, plant and equipment 1,012 1,082
----- -----
Other assets:
Goodwill 37 34
Intangible assets, net of accumulated
amortization of $12 and $11 2 3
Assets held for rent 43 45
Deferred income taxes 221 173
Other assets 102 59
--- --
Total other assets 405 314
--- ---
Total assets $2,675 $2,858
====== ======
Fourth Quarter Earnings Announcement, Fiscal 2009
CABOT CORPORATION CONSOLIDATED FINANCIAL POSITION
September 30, September 30,
Dollars in millions, except share and per 2009 2008
share amounts (unaudited) (audited)
----------------------------------------- ------------ ----------
Current liabilities:
Notes payable to banks $29 $91
Accounts payable and accrued liabilities 407 426
Income taxes payable 26 38
Deferred income taxes 4 7
Current portion of long-term debt 5 39
--- --
Total current liabilities 471 601
--- ---
Long-term debt 623 586
Deferred income taxes 10 18
Other liabilities 333 294
Minority interest 103 110
Stockholders' equity:
Preferred stock:
Authorized: 2,000,000 shares of $1 par value
Issued: None and none - -
Outstanding: None and none
Common stock:
Authorized: 200,000,000 shares of $1 par value
Issued: 64,115,085 and 65,403,100 shares 64 65
Outstanding: 64,022,755 and 65,277,715 shares
Less cost of 92,329 and 125,385 shares
of common treasury stock (3) (4)
Additional paid-in capital 19 21
Retained earnings 1,019 1,143
Deferred employee benefits (25) (30)
Notes receivable for restricted stock - (21)
Accumulated other comprehensive income 61 75
-- --
Total stockholders' equity 1,135 1,249
----- -----
Total liabilities and stockholders' equity $2,675 $2,858
====== ======
CABOT CORPORATION
Fiscal 2008
------------
In millions,
except per share amounts
(unaudited) Dec. Q. Mar. Q. June Q. Sept. Q. FY
------------------------ ------- ------- ------- -------- --
Sales
Core Segment $463 $511 $537 $553 $2,064
Rubber blacks 410 454 499 505 1,868
Supermetals 53 57 38 48 196
Performance Segment 211 236 247 237 931
Performance products 141 164 175 165 645
Fumed metal oxides 70 72 72 72 286
New Business Segment 10 14 14 20 58
Inkjet colorants 8 11 11 13 43
Aerogel (A) 1 2 2 5 10
Superior MicroPowders 1 1 1 2 5
Specialty Fluids Segment 16 16 17 19 68
------------------------ -- -- -- -- --
Segment Sales 700 777 815 829 3,121
Unallocated and other (A), (B) 11 9 25 25 70
----------------------------- -- --- -- -- --
Net sales and other
operating revenues $711 $786 $840 $854 $3,191
------------------- ---- ---- ---- ---- ------
Segment Profit
Core Segment $19 $29 $41 $18 $107
Rubber blacks 16 28 43 21 108
Supermetals 3 1 (2) (3) (1)
Performance Segment 31 32 32 24 119
New Business Segment (12) (9) (9) (5) (35)
Specialty Fluids Segment 8 5 5 6 24
------------------------ --- --- --- --- --
Total Segment Profit
(Loss) (C) 46 57 69 43 215
Interest expense (9) (9) (9) (11) (38)
Certain items (D) 10 (12) (8) (3) (13)
Unallocated corporate costs
(E) (7) (10) (8) (3) (28)
General unallocated expense
(F) (4) (1) (3) (8) (16)
Less: Equity in net income
of affiliated companies, net
of tax (2) (2) (2) (2) (8)
----------------------------- -- -- -- -- --
Income (loss) before
income taxes, equity in
net income of affiliated
companies and minority
interest 34 23 39 16 112
Benefit (provision) for
income taxes 6 (11) (8) (1) (14)
Equity in net income of
affiliated companies, net of
tax 2 2 2 2 8
Minority interest in net
income, net of tax (6) (3) (6) (5) (20)
------------------------ -- -- -- -- ---
Income (loss) from
continuing operations 36 11 27 12 86
Loss from discontinued
operations, net of tax (G) - - - - -
Net income 36 11 27 12 86
Diluted earnings (loss) per
share of common stock
Continuing operations $0.56 $0.17 $0.43 $0.18 $1.34
Discontinued operations
(G) - - - - -
----------------------------- ----- ----- ----- ----- -----
Net income (loss) $0.56 $0.17 $0.43 $0.18 $1.34
Weighted average common
shares outstanding
Diluted 64 64 63 64 64
------- -- -- -- -- --
Fiscal 2009
------------
In millions,
except per share amounts
(unaudited) Dec. Q. Mar. Q. June Q. Sept. Q. FY
------------------------ ------- ------- ------- -------- --
Sales
Core Segment $444 $295 $310 $377 $1,426
Rubber blacks 399 272 272 343 1,286
Supermetals 45 23 38 34 140
Performance Segment 157 132 149 183 621
Performance products 105 90 98 118 411
Fumed metal oxides 52 42 51 65 210
New Business Segment 18 16 14 19 67
Inkjet colorants 13 9 10 14 46
Aerogel (A) 4 5 2 4 15
Superior MicroPowders 1 2 2 1 6
Specialty Fluids Segment 15 11 19 14 59
------------------------ -- -- -- -- --
Segment Sales 634 454 492 593 2,173
Unallocated and other (A), (B) 18 16 19 17 70
----------------------------- -- -- -- -- --
Net sales and other
operating revenues $652 $470 $511 $610 $2,243
------------------- ---- ---- ---- ---- ------
Segment Profit
Core Segment $27 $(24) $14 $16 $33
Rubber blacks 24 (17) 11 16 34
Supermetals 3 (7) 3 - (1)
Performance Segment 3 (1) 10 28 40
New Business Segment (3) (1) (4) (2) (10)
Specialty Fluids Segment 4 4 9 4 21
------------------------ --- --- --- --- --
Total Segment Profit
(Loss) (C) 31 (22) 29 46 84
Interest expense (9) (8) (6) (7) (30)
Certain items (D) (2) (46) (19) (36) (103)
Unallocated corporate costs
(E) (7) (8) (7) (6) (28)
General unallocated expense
(F) (10) (7) 1 (4) (20)
Less: Equity in net income
of affiliated companies, net
of tax (2) - - (3) (5)
----------------------------- -- --- --- -- --
Income (loss) before
income taxes, equity in
net income of affiliated
companies and minority
interest 1 (91) (2) (10) (102)
Benefit (provision) for
income taxes (1) 31 (7) (1) 22
Equity in net income of
affiliated companies, net of
tax 2 - - 3 5
Minority interest in net
income, net of tax 2 2 (3) (3) (2)
------------------------ --- --- -- -- --
Income (loss) from
continuing operations 4 (58) (12) (11) (77)
Loss from discontinued
operations, net of tax (G) - - - - -
Net income 4 (58) (12) (11) (77)
Diluted earnings (loss) per share
of common stock
Continuing operations $0.07 $(0.92) $(0.19) $(0.17) $(1.21)
Discontinued operations
(G) - - (0.01) - (0.01)
---------------------------- ----- ------ ------ ------ ------
Net income (loss) $0.07 $(0.92) $(0.20) $(0.17) $(1.22)
Weighted average common shares
outstanding
Diluted 64 63 63 64 63
-------- -- -- -- -- --
Note: During the third quarter of fiscal 2008, management changed
the way it manages the Company's businesses. Accordingly, the
segment results for all periods presented have been revised to
reflect these changes.
(A) Royalty income received by the Aerogel business, which has been
included in Unallocated and other in prior periods, has been
reclassified to Segment sales for all periods presented above.
(B) Unallocated and other reflects an elimination for sales of one
equity affiliate, prior to the consolidation of its results
beginning April 1, 2008 , offset by royalties paid by equity
affiliates and other operating revenues and external shipping and
handling fees.
( C ) Segment profit is a measure used by Cabot's Chief Operating
Decision-Maker to measure consolidated operating results, assess
segment performance and allocate resources. Segment profit includes
equity in net income of affiliated companies, royalty income,
minority interest and allocated corporate costs.
(D) Details of certain items are presented in the Certain Items and
Reconciliation of Adjusted EPS table.
(E) During the first quarter of fiscal 2009, management changed the
allocation method of its corporate costs to its segments. Under
this new method, costs that are not controlled by the segments and
which primarily benefit corporate interests are not allocated to
the segments. Prior periods have been recast to conform to the
new allocation method.
(F) General unallocated expense includes foreign currency transaction
gains (losses), interest income, and dividend income.
(G) Amounts relate to legal settlements in connection with our
discontinued operations.
Fourth Quarter Earnings Announcement, Fiscal 2009
CABOT CORPORATION CERTAIN ITEMS AND RECONCILIATION OF ADJUSTED EPS
CERTAIN ITEMS:
--------------
Periods ended
September 30 Three Months Twelve Months
------------ -------------
Dollars in
millions, except
per share amounts
(unaudited)
2009 2008 2009 2008
per per per per
2009 share 2008 share 2009 share 2008 share
$ (A) $ (A) $ (A) $ (A)
---- ----- ---- ----- ---- ----- ----- ------
Certain items before
income taxes
--------------------
Executive
transition cost $(4) $(0.04) $- $- $(4) $(0.04) $(4) $(0.04)
Write-down of
impaired
investments - - - - (1) (0.01) - -
Environmental
reserves and legal
settlements (7) (0.07) - (0.01) (7) (0.07) $(3) $(0.05)
Reserve for
respirator claims - - 2 0.03 - - $2 $0.03
Debt issuance costs - - (2) (0.03) - - (2) (0.03)
Restructuring
initiatives:
- 2009 Global (25) (0.36) - - (89) (1.23) - -
- 2008 Global - - (1) (0.01) (1) (0.01) (6) (0.06)
- Altona,
Australia - - - - - - 18 0.20
- North America - - (2) (0.02) (2) (0.02) (16) (0.18)
- Europe (B) - - - - 1 0.01 (2) (0.02)
--- --- --- --- --- ---- --- -----
Total certain
items (36) (0.47) (3) (0.04) (103) (1.37) (13) (0.15)
--- ----- -- ----- ---- ----- --- -----
Discontinued
operations ( C ) - - - - - (0.01) - -
--- --- --- --- --- ----- --- ---
Total certain
items and
discontinued
operations (36) (0.47) (3) (0.04) (103) (1.38) (13) (0.15)
--- ----- -- ----- ---- ----- --- -----
Tax impact of
certain items 7 - 1 - 17 - 3 -
--- --- --- --- --- --- --- ---
Total certain items
and discontinued
operations, after
tax $(29) $(0.47) $(2) $(0.04) $(86) $(1.38) $(10) $(0.15)
---- ------ --- ------ ---- ------ ---- ------
Periods ended September 30 Three Months Twelve Months
Dollars in millions (unaudited) 2009 2008 2009 2008
---- ---- ---- ----
Statement of Operations Line Item
---------------------------------
Cost of sales $(32) $(3) $(91) $(4)
Selling and administrative
expenses (4) 2 (10) (7)
Research and technical expenses - - (2) -
Other income and expense - (2) - (2)
--- --- --- ---
Total certain items $(36) $(3) $(103) $(13)
---- --- ----- ----
NON-GAAP MEASURE:
Periods ended
September 30 Three Months Twelve Months
------------ -------------
Dollars in millions, except per
share amounts (unaudited) 2009 2008 2009 2008
per per per per
share(A) share(A) share(A) share(A)
------- ------- ------- -------
Reconciliation of Adjusted
EPS to GAAP EPS
--------------------------
Total Diluted EPS $(0.17) $0.18 $(1.22) $1.34
Discontinued operations - - (0.01) -
--- --- ----- ---
Continuing operations $(0.17) $0.18 $(1.21) $1.34
Certain items (0.47) (0.04) (1.37) (0.15)
----- ----- ----- -----
Adjusted EPS $0.30 $0.22 $0.16 $1.49
----- ----- ----- -----
(A) Per share amounts are calculated after tax.
(B) Charges relate to former carbon black facilities.
( C ) Amounts relate to legal settlements in connection with our
discontinued operations, net of tax.
SOURCE:
Susannah Robinson,
Director, Investor Relations,
+1-617-342-6129,
susannah_robinson@cabot-corp.com