Cabot Announces Second Quarter 2009 Operating Results
Operations generate
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Key Highlights
- Carbon black volumes remain soft due to tire, automotive and construction market weaknesses but have improved on a monthly basis since December lows
- Unit margins remain compressed affecting results by
$38 million as costs reflect inventory lag - New Business progress continues with a
$10 million year over year improvement in cash performance - Cash flows strong with a
$232 million decrease in working capital and a quarter-end cash balance of$220 million , after debt reduction of$85 million - Restructuring proceeding as planned and on track to deliver fixed cost
improvements of at least
$80 million on a fiscal 2010 run rate basis
(In millions, except per share
amounts) 2009 2008
Second First Second First
Quarter 6 months Quarter 6 months
Net sales $470 $1,122 $786 $1,497
Diluted earnings per share $(0.90) $(0.83) $0.17 $0.73
Less: Certain items per share (0.63) (0.65) (0.13) (0.02)
Adjusted earnings per share $(0.27) $(0.18) $0.30 $0.75
Commenting on the results,
Financial Detail
Summary of Results- For the second quarter of fiscal 2009, the Company
reported a net loss of
Segment Results
Core Segment- Rubber Blacks second quarter fiscal 2009 profitability
decreased by
Profitability in the Supermetals Business for the second quarter of fiscal
2009 decreased by
Performance Segment- Profitability decreased by
Specialty Fluids Segment- Profitability declined by
New Business Segment- Revenues improved when compared to the second
quarter of fiscal 2008. These increased revenues and lower costs improved the
cash performance of the Segment by
Cash Performance- During the second quarter of fiscal 2009, operations
generated
Taxes- During the second quarter of fiscal 2009, the Company recorded a
tax benefit of
Outlook
Commenting on the outlook for the business, Prevost said, "We are
encouraged by the monthly volume increases in many of our key businesses.
While this may be an early indication that customer de-stocking is coming to
an end, we remain cautious in the near term. Having said that, we are
particularly pleased with our volume improvement in
Prevost continued, "Due to the non-discretionary nature of many of our customers' products, I am confident in the resilience and recovery of our markets. Our leadership positions and continued investment in efficiency improvement projects and high value technology products will allow us to emerge an even stronger company post recovery. Our balance sheet and cash positions are robust and will allow us the flexibility to capture potential opportunities arising from the economic downturn."
Earnings Call
The Company will host a conference call with industry analysts at
Other Information
Explanation of Terms Used- When explaining factors affecting our
performance, we use several terms. The term "fixed costs" means fixed
manufacturing costs, including utilities. The term "LIFO benefit" 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 benefit in the second quarter of fiscal
2009 is comprised of
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 our restructuring initiative,
demand for our products and our liquidity position), 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
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.
Second Quarter Earnings Announcement, Fiscal 2009
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------------
Periods ended March 31
Dollars in millions, except per Three Months Six Months
share amounts (unaudited) 2009 2008 2009 2008
------------------------------------------------------------------
Net sales and other operating
revenues $470 $786 $1,122 $1,497
Cost of sales 470 668 1,030 1,263
--- --- ----- -----
Gross profit - 118 92 234
Selling and administrative expenses 54 66 110 123
Research and technical expenses 19 19 37 35
--- --- --- ---
(Loss) income from operations (73) 33 (55) 76
Other income and expense
Interest and dividend income 1 1 2 2
Interest expense (8) (9) (17) (18)
Other expense (4) (2) (13) (4)
--- --- --- ---
Total other income and expense (11) (10) (28) (20)
--- --- --- ---
(Loss) Income from operations before
income taxes (84) 23 (83) 56
Benefit (provision) for income taxes 27 (11) 26 (5)
Equity in net income of affiliated
companies, net of tax - 2 2 4
Minority interest in net income,
net of tax 1 (3) 3 (8)
--- --- --- ---
Net (loss) income (56) 11 (52) 47
Diluted earnings per share of
common stock
Diluted $(0.90) $0.17 $(0.83) $0.73
------ ----- ------ -----
Weighted average common shares
outstanding
Diluted 63 64 63 64
Second Quarter Earnings Announcement, Fiscal 2009
CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS
-------------------------------------------------------------------------
Periods ended March 31
Dollars in millions, except per share Three Months Six Months
amounts (unaudited) 2009 2008 2009 2008
-------------------------------------------------------------------------
SALES
Core Segment $295 $511 $739 $974
Rubber blacks 272 454 671 864
Supermetals 23 57 68 110
Performance Segment 132 236 289 447
Performance products 90 164 195 305
Fumed metal oxides 42 72 94 142
New Business Segment 16 14 34 24
Inkjet colorants 9 11 22 19
Aerogel(A) 5 2 9 3
Superior MicroPowders 2 1 3 2
Specialty Fluids Segment 11 16 26 32
-- -- -- --
Segment sales 454 777 1,088 1,477
Unallocated and other (A), (B) 16 9 34 20
-- -- -- --
Net sales and other operating revenues
---- ---- ------ ------
SEGMENT PROFIT
Core Segment $(19) $29 $8 $48
Rubber blacks (13) 28 11 44
Supermetals (6) 1 (3) 4
Performance Segment (1) 32 2 63
New Business Segment (1) (9) (4) (21)
Specialty Fluids Segment 4 5 8 12
-- -- -- --
Total Segment (Loss) Profit (C) (17) 57 14 102
Interest expense (8) (9) (17) (18)
General unallocated expense (D) (59) (23) (78) (24)
Less: Equity in net income of affiliated
companies, net of tax - (2) (2) (4)
-- -- -- --
(Loss) income from continuing operations
before income taxes, equity in net
income of affiliated companies and
minority interest (84) 23 (83) 56
Benefit (provision) for income taxes 27 (11) 26 (5)
Equity in net income of affiliated
companies, net of tax - 2 2 4
Minority interest in net income, net of
tax 1 (3) 3 (8)
-- -- -- --
Net (loss) income $(56) $11 $(52) $47
Diluted earnings per share of common stock
Diluted $(0.90) $0.17 $(0.83) $0.73
Weighted average common shares outstanding
Diluted 63 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) Beginning in fiscal 2009, certain administrative functions that have
historically been allocated to business segments have been
reclassified to "General unallocated expense." Fiscal 2008 has been
restated for comparative purposes. General unallocated expense also
includes foreign currency transaction gains (losses), interest income,
dividend income, and the certain items listed in the Certain Items and
Reconciliation of Adjusted EPS table.
Second Quarter Earnings Announcement, Fiscal 2009
CABOT CORPORATION CONSOLIDATED FINANCIAL POSITION
---------------------------------------------------------------------
March 31, September 30,
Dollars in millions, 2009 2008
except share and per share amounts (unaudited) (audited)
---------------------------------------------------------------------
Current assets:
Cash and cash equivalents $220 $129
Short-term marketable securities - 1
Accounts and notes receivable,
net of reserve for doubtful
accounts of $7 and $5 392 646
Inventories:
Raw materials 138 193
Work in process 53 58
Finished goods 138 246
Other 31 26
--- ---
Total inventories 360 523
Prepaid expenses and
other current assets 44 72
Deferred income taxes 37 30
Assets held for sale - 7
--- ---
Total current assets 1,053 1,408
----- -----
Investments:
Equity affiliates 57 53
Long-term marketable securities
and cost investments 1 1
--- ---
Total investments 58 54
--- ---
Property, plant and equipment 2,793 2,921
Accumulated depreciation and amortization (1,797) (1,839)
------ ------
Net property, plant and equipment 996 1,082
--- -----
Other assets:
Goodwill 33 34
Intangible assets, net of accumulated
amortization of $11 and $11 3 3
Assets held for rent 49 45
Deferred income taxes 209 173
Other assets 91 59
--- ---
Total other assets 385 314
--- ---
Total assets $2,492 $2,858
====== ======
Second Quarter Earnings Announcement, Fiscal 2009
CABOT CORPORATION CONSOLIDATED FINANCIAL POSITION
-------------------------------------------------------------------------
March 31, September 30,
Dollars in millions, except share 2009 2008
and per share amounts (unaudited) (audited)
-------------------------------------------------------------------------
Current liabilities:
Notes payable to banks $35 $91
Accounts payable and accrued liabilities 308 426
Income taxes payable 32 38
Deferred income taxes 5 7
Current portion of long-term debt 19 39
--- ---
Total current liabilities 399 601
--- ---
Long-term debt 567 586
Deferred income taxes 14 18
Other liabilities 267 294
Minority interest 101 110
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: 65,365,304 and 65,403,100 shares 65 65
Outstanding: 65,271,207 and 65,277,715 shares
Less cost of 94,097 and 125,385
shares of common treasury stock (3) (4)
Additional paid-in capital 32 21
Retained earnings 1,067 1,143
Deferred employee benefits (27) (30)
Notes receivable for restricted stock (20) (21)
Accumulated other comprehensive income 30 75
--- ---
Total stockholders' equity 1,144 1,249
----- -----
Total liabilities and stockholders' equity
====== ======
CABOT CORPORATION
Fiscal 2008
--------------------------------------------------------------------
In millions,
except per share
amounts (unaudited) Dec. Q. Mar.
--------------------------------------------------------------------
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
--------------------------------------------------------------------
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) (10) (37)
General unallocated
income (expense) (D) (1) (23) (19) (15) (58)
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)
--------------------------------------------------------------------
Net income (loss) 36 11 27 12 86
Diluted earnings per
share of common stock
Net income $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.
--------------------------------------------------------------------
Sales
Core Segment $444 $295 $739
Rubber blacks 399 272 671
Supermetals 45 23 68
Performance Segment 157 132 289
Performance products 105 90 195
Fumed metal oxides 52 42 94
New Business Segment 18 16 34
Inkjet colorants 13 9 22
Aerogel (A) 4 5 9
Superior MicroPowders 1 2 3
Specialty Fluids Segment 15 11 26
--------------------------------------------------------------------
Segment Sales 634 454 1,088
Unallocated and other (A),(B) 18 16 34
--------------------------------------------------------------------
Net sales and other
operating revenues $652 $470 $1,122
--------------------------------------------------------------------
Segment Profit
Core Segment $27 $(19) $8
Rubber blacks 24 (13) 11
Supermetals 3 (6) (3)
Performance Segment 3 (1) 2
New Business Segment (3) (1) (4)
Specialty Fluids Segment 4 4 8
--------------------------------------------------------------------
Total Segment Profit
(Loss) (C) 31 (17) 14
Interest expense (9) (8) (17)
General unallocated
income (expense) (D) (19) (59) (78)
Less: Equity in net
income of affiliated
companies, net of tax (2) - (2)
--------------------------------------------------------------------
Income (loss) before income
taxes, equity in net
income of affiliated
companies and minority
interest 1 (84) (83)
Benefit (provision) for
income taxes (1) 27 26
Equity in net income of
affiliated companies,
net of tax 2 - 2
Minority interest in
net income, net of tax 2 1 3
--------------------------------------------------------------------
Net income (loss) 4 (56) (52)
Diluted earnings per share
of common stock
Net income $0.07 $(0.90) $(0.83)
Weighted average common
shares outstanding
Diluted 64 63 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
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) Beginning in fiscal 2009, certain administrative functions that have
historically been allocated to business segments have been
reclassified to "General unallocated expense". Fiscal 2008 has been
restated for comparative purposes. General unallocated expense also
includes foreign currency transaction gains (losses), interest income,
dividend income, and the certain items listed in the Certain Items and
Reconciliation of Adjusted EPS table.
Second Quarter Earnings Announcement, Fiscal 2009
CABOT CORPORATION CERTAIN ITEMS AND RECONCILIATION OF ADJUSTED EPS
--------------------------------------------------------------------------
Periods ended
March 31 Three Months Six Months
Dollars --------------------------- -----------------------------
in millions, 2009 2008 2009 2008
except per per per per per
share amounts 2009 share 2008 share 2009 share 2008 share
(unaudited) $ (A) $ (A) $ (A) $ (A)
------------------------------------------- -----------------------------
Certain items
before income
taxes
--------------
Environmental
reserves and
legal
settlements $- $- $- $- $- $- $(1) $(0.01)
CEO transition
costs - - (4) (0.04) - - (4) (0.04)
Write-down of
impaired
investments (1) (0.01) - - (1) (0.01) - -
Restructuring
initiatives:
- 2008
Global 1 0.01 - - (1) (0.01) - -
- 2009
Global (45) (0.62) - - (45) (0.62) - -
- Altona,
Australia - - - - - - 18 0.20
- North
America (1) (0.01) (7) (0.08) (2) (0.02) (13) (0.15)
- Europe(B) - - (1) (0.01) 1 0.01 (2) (0.02)
---------------------------- ----------------------------
Total
certain
items (46) (0.63) (12) (0.13) (48) (0.65) (2) (0.02)
---------------------------- ----------------------------
Tax impact
of certain
items 6 4 7 1
---------------------------- ----------------------------
Total certain
items $(40) $(0.63) $(8) $(0.13) $(41) $(0.65) $(1) $(0.02)
---------------------------- ----------------------------
---------------------------------------------
Periods ended
March 31 Three Months Six Months
-----------------------
Dollars in millions
(unaudited) 2009 2008 2009 2008
---------------------------------------------
Statement of
Operations Line Item
----------------------
Cost of sales (40) $(8) (41) $3
Selling and
administrative expenses (4) (4) (5) (5)
Research & Development (2) - (2) -
----------------------
Total certain items $(46) $(12) $(48) $(2)
----------------------
NON-GAAP MEASURE:
-----------------------------------------------------------------------
Periods ended
March 31 Three Months Six Months
------------------------------------------------
Dollars in
millions,
except per
share amounts 2009 2008 2009 2008
(unaudited) per share(A) per share(A) per share(A) per share(A)
--------------------------------------------------------------------------
Reconciliation of
Adjusted EPS to
GAAP EPS
-----------------
Diluted EPS $(0.90) $0.17 $(0.83) $0.73
Total certain
items (0.63) (0.13) (0.65) (0.02)
-------------------------------------------------
Adjusted EPS $(0.27) $0.30 $(0.18) $0.75
-------------------------------------------------
(A) Per share amounts are calculated after tax.
(B) Benefit relates to former carbon black facilities.
SOURCE:
CONTACT:
+1-617-342-6129,
susannah_robinson@cabot-corp.com
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