Cabot Corp Reports Third Quarter Fiscal 2017 Results
Diluted EPS of
Key Highlights
- Reinforcement Materials EBIT up 46% year over year, supported by favorable pricing and product mix
-
Announced investment in new Fumed Silica plant in
Carrollton, KY -
Strong cash flow generation with third quarter cash flows from
operations of
$132 million -
Returned cash to shareholders:
$19 million in dividends and$13 million in share repurchases
(In millions, except per share amounts) | Third Quarter | |||||||||
2017 | 2016 | |||||||||
Net sales | $ | 705 | $ | 621 | ||||||
Net income (loss) attributable to Cabot Corporation | $ | 45 | $ | 56 | ||||||
Net income (loss) per diluted share attributable to Cabot Corporation |
$ |
0.71 |
$ |
0.88 |
||||||
Less: Certain items after tax per share | $ | (0.10 | ) | $ | (0.05 | ) | ||||
Adjusted EPS | $ | 0.81 | $ | 0.93 | ||||||
Commenting on the results, Cabot President and CEO
Keohane continued, “In the quarter, the tax rate benefited from a change
in the geographic mix of earnings. This benefit was largely offset by FX
losses in the emerging market currencies and a negative LIFO adjustment.
In keeping with our capital allocation strategy, we continued to invest
in growth projects, including the announcement of our new Fumed Silica
plant, and returned
Financial Detail
For the third quarter of fiscal 2017, net income attributable to
Segment Results
Reinforcement Materials – Third quarter fiscal 2017 EBIT in
Reinforcement Materials increased by
Global and regional volume changes for Reinforcement Materials for the third quarter of fiscal 2017 as compared to the same quarter of the prior year and the second quarter of fiscal 2017 are provided in the table below:
Third Quarter
|
Third Quarter
|
|||||
Changes in Global Reinforcement Materials Volumes |
(1%) |
(1%) |
||||
Asia | (7%) | (4%) | ||||
Europe, Middle East, Africa | 4% | -% | ||||
Americas | 5% | 3% | ||||
Performance Chemicals – Third quarter fiscal 2017 EBIT in
Performance Chemicals decreased by
Purification Solutions – Third quarter fiscal 2017 EBIT in
Purification Solutions decreased by
Specialty Fluids – Third quarter fiscal 2017 EBIT in Specialty
Fluids decreased by
Cash Performance – The Company ended the third quarter of
fiscal 2017 with a cash balance of
Taxes – During the third quarter of fiscal 2017, the Company
recorded a tax provision of
Outlook
Commenting on the
outlook for the Company, Keohane said, “While we faced challenges in the
quarter from higher costs and unplanned downtime, we remain confident in
the underlying strength of the businesses. We believe that Reinforcement
Materials will continue to generate strong results, although we expect
to see modestly higher fixed costs in the fourth quarter. We expect the
end markets in Performance Chemicals to remain robust and for the
segment’s volumes and product mix to improve with the resolution of the
unplanned downtime. Purification Solutions is expected to benefit from
seasonal volume growth and lower fixed costs in the fourth quarter. We
remain focused on delivering shareholder value by growing our annual
Adjusted EPS by 7-10% over time and expect to be toward the high end of
that range this year."
Earnings Call
The Company will
host a conference call with industry analysts at
About
Forward-Looking Statements -- This earnings release contains
forward-looking statements. All statements that address expectations or
projections about the future, including our expectations for adjusted
EPS growth, volumes and costs in the remaining quarter of fiscal 2017,
and the factors that we expect will impact volumes, demand for our
products, margins, and adjusted EPS 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 or implied by
forward-looking statements. Important factors that could cause our
results to differ materially from those expressed or implied in the
forward-looking statements include, but are not limited to, volatility
in the price of energy and raw materials; competition from other
specialty chemical companies; safety, health and environmental
requirements; a significant adverse change in a customer relationship;
negative or uncertain worldwide or regional economic conditions;
unanticipated disruptions or delays in plant operations or development
projects; and fluctuations in foreign currency exchange and interest
rates. These factors are discussed more fully in the reports we file
with the
Use of Non-GAAP Financial Measures
To supplement Cabot’s
consolidated financial statements presented on a generally accepted
accounting principles (“GAAP”) basis, the preceding discussion of our
results and the accompanying financial tables report Adjusted EPS, total
segment EBIT, and our operating tax rate, which are non-GAAP financial
measures. These non-GAAP financial measures are not computed in
accordance with, or as an alternative to, GAAP. The table titled
“Certain Items and Reconciliation of Adjusted EPS and Operating Tax
Rate” provides a reconciliation of Adjusted EPS to net income (loss) per
share attributable to
Management believes these non-GAAP measures provide investors with greater transparency to the information used by Cabot management in its financial and operational decision-making, allow investors to see Cabot’s results through the eyes of management, and better enable Cabot’s investors to understand Cabot’s operating performance and financial condition.
Adjusted EPS. In calculating Adjusted EPS, we exclude from our net income (loss) per share from continuing operations items of expense and income that management does not consider representative of the Company’s business operations. Accordingly, reporting earnings on an adjusted basis supplements the GAAP measure of performance and provides additional information related to the underlying performance of the business. For example, certain of the items we exclude are items that we are required by GAAP to recognize in one period that relate to activities extending over several periods or relate to single events that management considers to be unusual and infrequent, although not necessarily non-recurring. We refer to these items as “certain items.” Management believes excluding these items facilitates operating performance comparisons from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis and evaluates the Company’s operating performance without the impact of these costs or benefits. Management also uses Adjusted EPS as a key measure in evaluating management performance for incentive compensation purposes.
The items of income and expense that we exclude from our calculations of Adjusted EPS, as applicable, but that are included in our GAAP net income (loss) per share, as applicable, are described below.
- Global restructuring activities, which include costs or benefits associated with cost reduction initiatives or plant closures and are primarily related to (i) employee termination costs, (ii) asset impairment charges associated with restructuring actions, (iii) costs to close facilities, including environmental costs and contract termination penalties, and (iv) gains realized on the sale of land or equipment associated with restructured plants or locations.
- Non-recurring gains (losses) on foreign exchange, which primarily relate to the impact of controlled currency devaluations on the Company’s net monetary assets denominated in that currency.
- Legal and environmental reserves and matters, which consist of costs or benefits for matters typically related to former businesses or that are otherwise incurred outside of the ordinary course of business.
- Executive transition costs, which include incremental charges, including stock compensation charges, associated with the retirement or termination of employment of senior executives of the Company.
- Asset impairment charges, which primarily include charges associated with an impairment of goodwill or other long-lived assets.
- Acquisition and integration-related charges, which include transaction costs, redundant costs incurred during the period of integration, and costs associated with transitioning certain management and business processes to Cabot’s processes.
- Employee benefit plan settlement charges, which consist of the costs associated with transferring the obligations and assets held by one of the Company’s defined benefit plans to a multi-employer plan.
Cabot does not provide a target GAAP EPS growth rate range or reconciliation of the Adjusted EPS growth rate range with a GAAP EPS growth rate range because, without unreasonable effort, we are unable to predict with reasonable certainty the matters we would allocate to “certain items,” including unusual gains and losses, costs associated with future restructurings, acquisition-related expenses and litigation outcomes. These items are uncertain, depend on various factors, and could have a material impact on GAAP EPS in future periods.
Total Segment EBIT. Total segment EBIT reflects the sum of EBIT from our four reportable segments. In calculating total segment EBIT we exclude from our income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, certain items and items that, because they are not controlled by the business segments and primarily benefit corporate objectives, are not allocated to our business segments, such as interest expense and other corporate costs, which include unallocated corporate overhead expenses such as certain corporate salaries and headquarter expenses, plus costs related to special projects and initiatives.
Operating Tax Rate. Our “operating tax rate” 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 tax rate adjustments and the impact of the items of expense and income we identify as certain items on both our operating income and the tax provision. Management believes that the operating tax rate is useful supplemental information because it helps our investors compare our tax rate year to year on a consistent basis and to understand what our tax rate on current operations would be without the impact of these items.
Explanation of Terms Used
Product Mix. The term “product mix” refers to the mix of types and grade of products sold or the mix of geographic regions where products are sold, and the positive or negative impact this has on the revenue or profitability of the business or segment.
Third Quarter Earnings Announcement, Fiscal 2017 | |||||||||||||||||
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||
Periods ended June 30 | Three Months | Nine Months | |||||||||||||||
Dollars in millions, except per share amounts (unaudited) | 2017 | 2016 | 2017 | 2016 | |||||||||||||
Net sales and other operating revenues | $ | 705 | $ | 621 | $ | 1,994 | $ | 1,792 | |||||||||
Cost of sales | 546 | 461 | 1,509 | 1,383 | |||||||||||||
Gross profit | 159 | 160 | 485 | 409 | |||||||||||||
Selling and administrative expenses | 63 | 64 | 191 | 197 | |||||||||||||
Research and technical expenses | 14 | 13 | 40 | 40 | |||||||||||||
Income (loss) from operations | 82 | 83 | 254 | 172 | |||||||||||||
Other income (expense) | |||||||||||||||||
Interest and dividend income | 3 | 1 | 7 | 4 | |||||||||||||
Interest expense | (13 | ) | (13 | ) | (39 | ) | (40 | ) | |||||||||
Other income (expense) | (6 | ) | 3 | (5 | ) | (8 | ) | ||||||||||
Total other income (expense) | (16 | ) | (9 | ) | (37 | ) | (44 | ) | |||||||||
Income (loss) from continuing operations before income taxes and equity in | |||||||||||||||||
earnings of affiliated companies | 66 | 74 | 217 | 128 | |||||||||||||
(Provision) benefit for income taxes | (16 | ) | (15 | ) | (32 | ) | (21 | ) | |||||||||
Equity in earnings of affiliated companies, net of tax | 3 | 1 | 6 | 2 | |||||||||||||
Net income (loss) | 53 | 60 | 191 | 109 | |||||||||||||
Net income (loss) attributable to noncontrolling interests | 8 | 4 | 18 | 12 | |||||||||||||
Net income (loss) attributable to Cabot Corporation | $ | 45 | $ | 56 | $ | 173 | $ | 97 | |||||||||
Diluted earnings per share of common stock | |||||||||||||||||
attributable to Cabot Corporation | |||||||||||||||||
Net income (loss) attributable to Cabot Corporation | $ | 0.71 | $ | 0.88 | $ | 2.74 | $ | 1.53 | |||||||||
Weighted average common shares outstanding | |||||||||||||||||
Diluted | 62.7 | 62.9 | 62.8 | 62.9 | |||||||||||||
Third Quarter Earnings Announcement, Fiscal 2017 | |||||||||||||||
CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS | |||||||||||||||
Periods ended June 30 | Three Months | Nine Months | |||||||||||||
Dollars in millions, except per share amounts (unaudited) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Sales | |||||||||||||||
Reinforcement Materials | $ | 367 | $ | 270 | $ | 1,014 | $ | 819 | |||||||
Performance Chemicals | 229 | 228 | 662 | 651 | |||||||||||
Specialty Carbons and Formulations | 154 | 152 | 454 | 437 | |||||||||||
Metal Oxides | 75 | 76 | 208 | 214 | |||||||||||
Purification Solutions | 71 | 77 | 207 | 210 | |||||||||||
Specialty Fluids | 12 | 19 | 30 | 32 | |||||||||||
Segment sales | 679 | 594 | 1,913 | 1,712 | |||||||||||
Unallocated and other (A) | 26 | 27 | 81 | 80 | |||||||||||
Net sales and other operating revenues | $ | 705 | $ | 621 | $ | 1,994 | $ | 1,792 | |||||||
Segment Earnings Before Interest and Taxes (B) | |||||||||||||||
Reinforcement Materials | $ | 51 | $ | 35 | $ | 145 | $ | 95 | |||||||
Performance Chemicals | 46 | 59 | 146 | 167 | |||||||||||
Purification Solutions | (2 | ) | - | 4 | (7 | ) | |||||||||
Specialty Fluids | 4 | 10 | 6 | 8 | |||||||||||
Total Segment Earnings Before Interest and Taxes | 99 | 104 | 301 | 263 | |||||||||||
Unallocated and Other | |||||||||||||||
Interest expense | (13 | ) | (13 | ) | (39 | ) | (40 | ) | |||||||
Certain items (C) | (2 | ) | (6 | ) | (2 | ) | (63 | ) | |||||||
Unallocated corporate costs | (11 | ) | (11 | ) | (37 | ) | (36 | ) | |||||||
General unallocated income (expense) (D) | (4 | ) | 1 | - | 6 | ||||||||||
Less: Equity in earnings of affiliated companies | (3 | ) | (1 | ) | (6 | ) | (2 | ) | |||||||
Income (loss) from continuing operations before income taxes and equity in | |||||||||||||||
earnings of affiliated companies | 66 | 74 | 217 | 128 | |||||||||||
(Provision) benefit for income taxes (including tax certain items) | (16 | ) | (15 | ) | (32 | ) | (21 | ) | |||||||
Equity in earnings of affiliated companies | 3 | 1 | 6 | 2 | |||||||||||
Net income (loss) | 53 | 60 | 191 | 109 | |||||||||||
Net income attributable to noncontrolling interests | 8 | 4 | 18 | 12 | |||||||||||
Net income (loss) attributable to Cabot Corporation | $ | 45 | $ | 56 | $ | 173 | $ | 97 | |||||||
Diluted earnings per share of common stock | |||||||||||||||
attributable to Cabot Corporation | |||||||||||||||
Net income (loss) attributable to Cabot Corporation | $ | 0.71 | $ | 0.88 | $ | 2.74 | $ | 1.53 | |||||||
Adjusted earnings per share | |||||||||||||||
Adjusted EPS (E) |
$ | 0.81 | $ | 0.93 | $ | 2.52 | $ | 2.14 | |||||||
Weighted average common shares outstanding | |||||||||||||||
Diluted | 62.7 | 62.9 | 62.8 | 62.9 | |||||||||||
(A)Unallocated and other reflects royalties, other operating revenues, external shipping and handling fees, the impact of the corporate adjustment for unearned revenue, the removal of 100% of the sales of an equity method affiliate, and discounting charges for certain Notes receivable.
(B)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 of affiliated companies, royalty income, and allocated corporate costs.
(C)Details of certain items are presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.
(D)General unallocated income includes foreign currency transaction gains (losses), interest income, dividend income, the profit related to the corporate adjustment for unearned revenue, and the impact of LIFO accounting.
(E)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.
Third Quarter Earnings Announcement, Fiscal 2017 | |||||
CABOT CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||||
Dollars in millions |
June 30, 2017 (unaudited) |
September 30, 2016 (audited) |
|||
Current assets: | |||||
Cash and cash equivalents | $ 198 | $ 200 | |||
Accounts and notes receivable, net of reserve for doubtful accounts of $9 and $8 | 517 | 456 | |||
Inventories: | |||||
Raw materials | 83 | 66 | |||
Work in process | 2 | 1 | |||
Finished goods | 272 | 237 | |||
Other | 41 | 38 | |||
Total inventories | 398 | 342 | |||
Prepaid expenses and other current assets (A) | 51 | 49 | |||
Total current assets | 1,164 | 1,047 | |||
Property, plant and equipment, net | 1,267 | 1,290 | |||
Goodwill | 153 | 152 | |||
Equity affiliates | 55 | 53 | |||
Intangible assets, net | 137 | 140 | |||
Assets held for rent | 103 | 97 | |||
Deferred income taxes (A) | 254 | 216 | |||
Other Assets (A) | 45 | 40 | |||
Total assets | $ 3,178 | $ 3,035 | |||
(A)Effective
Third Quarter Earnings Announcement, Fiscal 2017 | |||||||||
CABOT CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||||||||
Dollars in millions, except share and per share amounts |
June 30, 2017 (unaudited) |
September 30, 2016 (audited) |
|||||||
Current liabilities: | |||||||||
Notes payable | $ | 7 | $ | 7 | |||||
Accounts payable and accrued liabilities | 394 | 364 | |||||||
Income taxes payable | 27 | 25 | |||||||
Current portion of long-term debt | 251 | 1 | |||||||
Total current liabilities | 679 | 397 | |||||||
Long-term debt (A) | 665 | 914 | |||||||
Deferred income taxes (A) | 47 | 41 | |||||||
Other liabilities | 283 | 285 | |||||||
Redeemable preferred stock | 27 | 26 | |||||||
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: 62,433,746 and 62,449,425 shares | |||||||||
Outstanding: 62,229,151 and 62,210,711 shares | 62 | 62 | |||||||
Less cost of 204,595 and 238,714 shares of common treasury stock | (6 | ) | (7 | ) | |||||
Additional paid-in capital | - | - | |||||||
Retained earnings | 1,655 | 1,544 | |||||||
Accumulated other comprehensive income | (338 | ) | (325 | ) | |||||
Total Cabot Corporation stockholders' equity | 1,373 | 1,274 | |||||||
Noncontrolling interests | 104 | 98 | |||||||
Total stockholders' equity | 1,477 | 1,372 | |||||||
Total liabilities and stockholders' equity | $ | 3,178 | $ | 3,035 | |||||
(A)Effective
Third Quarter Earnings Announcement, Fiscal 2017 | |||||||||||||||||
CABOT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||
Periods ended June 30 | Three Months | Nine Months | |||||||||||||||
Dollars in millions | 2017 | 2016 | 2017 | 2016 | |||||||||||||
Cash Flows from Operating Activities: | |||||||||||||||||
Net income (loss) | $ | 53 | $ | 60 | $ | 191 | $ | 109 | |||||||||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||||||||
Depreciation and amortization | 39 | 40 | 115 | 122 | |||||||||||||
Other non-cash (income) charges, net | (1 | ) | (4 | ) | (32 | ) | 24 | ||||||||||
Changes in assets and liabilities: | |||||||||||||||||
Changes in certain working capital items (A) | 31 | (21 | ) | (87 | ) | 47 | |||||||||||
Changes in other assets and liabilities, net | 7 | 29 | (13 | ) | (15 | ) | |||||||||||
Cash dividends received from equity affiliates | 3 | 3 | 9 | 8 | |||||||||||||
Cash provided by (used in) operating activities | 132 | 107 | 183 | 295 | |||||||||||||
Cash Flows from Investing Activities: | |||||||||||||||||
Additions to property, plant and equipment | (41 | ) | (28 | ) | (86 | ) | (80 | ) | |||||||||
Other investing activities, net | (1 | ) | (1 | ) | (3 | ) | 10 | ||||||||||
Cash used in investing activities | (42 | ) | (29 | ) | (89 | ) | (70 | ) | |||||||||
Cash Flows from Financing Activities: | |||||||||||||||||
Change in debt, net | (9 | ) | - | (2 | ) | (15 | ) | ||||||||||
Cash dividends paid to common stockholders | (19 | ) | (19 | ) | (57 | ) | (47 | ) | |||||||||
Other financing activities, net | (23 | ) | (17 | ) | (27 | ) | (35 | ) | |||||||||
Cash used in financing activities | (51 | ) | (36 | ) | (86 | ) | (97 | ) | |||||||||
Effect of exchange rates on cash | 26 | 2 | (10 | ) | 17 | ||||||||||||
Increase (decrease) in cash and cash equivalents | 65 | 44 | (2 | ) | 145 | ||||||||||||
Cash and cash equivalents at beginning of period | 133 | 178 | 200 | 77 | |||||||||||||
Cash and cash equivalents at end of period | $ | 198 | $ | 222 | $ | 198 | $ | 222 | |||||||||
(A)Includes Accounts and notes receivable, Inventories, and Accounts payable and accrued liabilities
CABOT CORPORATION | ||||||||||||||||||||||||||||||||||||||||
Fiscal 2016 | Fiscal 2017 | |||||||||||||||||||||||||||||||||||||||
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 | $ | 288 | $ | 261 | $ | 270 | $ | 289 | $ | 1,108 | $ | 295 | $ | 352 | $ | 367 | $ | - | $ | 1,014 | ||||||||||||||||||||
Performance Chemicals | 207 | 216 | 228 | 214 | 865 | 205 | 228 | 229 | - | 662 | ||||||||||||||||||||||||||||||
Specialty Carbons and Formulations | 140 | 145 | 152 | 141 | 578 | 138 | 162 | 154 | - | 454 | ||||||||||||||||||||||||||||||
Metal Oxides | 67 | 71 | 76 | 73 | 287 | 67 | 66 | 75 | - | 208 | ||||||||||||||||||||||||||||||
Purification Solutions | 66 | 67 | 77 | 80 | 290 | 69 | 67 | 71 | - | 207 | ||||||||||||||||||||||||||||||
Specialty Fluids | 7 | 6 | 19 | 15 | 47 | 11 | 7 | 12 | - | 30 | ||||||||||||||||||||||||||||||
Segment Sales | 568 | 550 | 594 | 598 | 2,310 | 580 | 654 | 679 | - | 1,913 | ||||||||||||||||||||||||||||||
Unallocated and other (A) | 35 | 18 | 27 | 21 | 101 | 31 | 24 | 26 | - | 81 | ||||||||||||||||||||||||||||||
Net sales and other operating revenues | $ | 603 | $ | 568 | $ | 621 | $ | 619 | $ | 2,411 | $ | 611 | $ | 678 | $ | 705 | $ | - | $ | 1,994 | ||||||||||||||||||||
Segment Earnings Before Interest and Taxes (B) | ||||||||||||||||||||||||||||||||||||||||
Reinforcement Materials | $ | 26 | $ | 34 | $ | 35 | $ | 42 | $ | 137 | $ | 40 | $ | 54 | $ | 51 | $ | - | $ | 145 | ||||||||||||||||||||
Performance Chemicals | 50 | 58 | 59 | 58 | 225 | 49 | 51 | 46 | - | 146 | ||||||||||||||||||||||||||||||
Purification Solutions | (5 | ) | (2 | ) | - | 2 | (5 | ) | 4 | 2 | (2 | ) | - | 4 | ||||||||||||||||||||||||||
Specialty Fluids | - | (2 | ) | 10 | 5 | 13 | 2 | - | 4 | - | 6 | |||||||||||||||||||||||||||||
Total Segment Earnings Before Interest and Taxes | 71 | 88 | 104 | 107 | 370 | 95 | 107 | 99 | - | 301 | ||||||||||||||||||||||||||||||
Unallocated and Other | ||||||||||||||||||||||||||||||||||||||||
Interest expense | (13 | ) | (14 | ) | (13 | ) | (14 | ) | (54 | ) | (13 | ) | (13 | ) | (13 | ) | - | (39 | ) | |||||||||||||||||||||
Certain items (C) | (58 | ) | 1 | (6 | ) | (18 | ) | (81 | ) | - | - | (2 | ) | - | (2 | ) | ||||||||||||||||||||||||
Unallocated corporate costs | (13 | ) | (12 | ) | (11 | ) | (9 | ) | (45 | ) | (12 | ) | (14 | ) | (11 | ) | - | (37 | ) | |||||||||||||||||||||
General unallocated income (expense) (D) | 5 | - | 1 | 1 | 7 | 5 | (1 | ) | (4 | ) | - | - | ||||||||||||||||||||||||||||
Less: Equity in earnings of affiliated companies | - | (1 | ) | (1 | ) | (1 | ) | (3 | ) | (2 | ) | (1 | ) | (3 | ) | - | (6 | ) | ||||||||||||||||||||||
Income (loss) from continuing operations before income taxes and | ||||||||||||||||||||||||||||||||||||||||
equity in earnings of affiliated companies | (8 | ) | 62 | 74 | 66 | 194 | 73 | 78 | 66 | - | 217 | |||||||||||||||||||||||||||||
- | - | - | ||||||||||||||||||||||||||||||||||||||
(Provision) benefit for income taxes (including tax certain items) | 5 | (11 | ) | (15 | ) | (13 | ) | (34 | ) | (17 | ) | 1 | (16 | ) | - | (32 | ) | |||||||||||||||||||||||
Equity in earnings of affiliated companies | - | 1 | 1 | 1 | 3 | 2 | 1 | 3 | - | 6 | ||||||||||||||||||||||||||||||
Income (loss) from continuing operations | (3 | ) | 52 | 60 | 54 | 163 | 58 | 80 | 53 | - | 191 | |||||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax (E) | - | - | - | 1 | 1 | - | - | - | - | - | ||||||||||||||||||||||||||||||
Net income (loss) | (3 | ) | 52 | 60 | 55 | 164 | 58 | 80 | 53 | - | 191 | |||||||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | 4 | 4 | 4 | 3 | 15 | 4 | 6 | 8 | - | 18 | ||||||||||||||||||||||||||||||
Net income (loss) attributable to Cabot Corporation | $ | (7 | ) | $ | 48 | $ | 56 | $ | 52 | $ | 149 | $ | 54 | $ | 74 | $ | 45 | $ | - | $ | 173 | |||||||||||||||||||
Diluted earnings per share of common stock | ||||||||||||||||||||||||||||||||||||||||
attributable to Cabot Corporation | ||||||||||||||||||||||||||||||||||||||||
Continuing operations | $ | (0.11 | ) | $ | 0.76 | $ | 0.88 | $ | 0.81 | $ | 2.34 | $ | 0.85 | $ | 1.18 | $ | 0.71 | $ | - | $ | 2.74 | |||||||||||||||||||
Discontinued operations (E) | - | - | - | 0.02 | 0.02 | - | - | - | - | - | ||||||||||||||||||||||||||||||
Net income (loss) attributable to Cabot Corporation (F) | $ | (0.11 | ) | $ | 0.76 | $ | 0.88 | $ | 0.83 | $ | 2.36 | $ | 0.85 | $ | 1.18 | $ | 0.71 | $ | - | $ | 2.74 | |||||||||||||||||||
Adjusted earnings per share | ||||||||||||||||||||||||||||||||||||||||
Adjusted EPS (G) | $ | 0.51 | $ | 0.70 | $ | 0.93 | $ | 1.00 | $ | 3.14 | $ | 0.84 | $ | 0.87 | $ | 0.81 | $ | - | $ | 2.52 | ||||||||||||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||||||||||||||||||||||
Diluted (F) | 62.5 | 62.8 | 62.9 | 62.9 | 62.9 | 62.8 | 62.8 | 62.7 | - | 62.8 | ||||||||||||||||||||||||||||||
(A)Unallocated and other reflects royalties, other operating revenues, external shipping and handling fees, the impact of the corporate adjustment for unearned revenue, the removal of 100% of the sales of an equity method affiliate and discounting charges for certain Notes receivable.
(B)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 of affiliated companies, royalty income, and allocated corporate costs.
(C)Details of certain items are presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.
(D)General unallocated income (expense) includes foreign currency transaction gains (losses), interest income, dividend income, the profit related to the corporate adjustment for unearned revenue, and the impact of LIFO accounting.
(E)Amounts relate primarily to the previously divested Supermetals and Security Materials businesses.
(F)The weighted average common shares outstanding used to
calculate earnings per share for the three months ended
(G)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.
Third Quarter Earnings Announcement, Fiscal 2017 | |||||||||||
CABOT CORPORATION CERTAIN ITEMS AND RECONCILIATION OF ADJUSTED EPS AND OPERATING TAX RATE | |||||||||||
TABLE 1: DETAIL OF CERTAIN ITEMS | |||||||||||
Periods ended June 30 | |||||||||||
Dollars in millions, except per share amounts (unaudited) |
Three Months | Nine Months | |||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
$ | $ | $ | $ | ||||||||
Certain items before and after income taxes |
|||||||||||
Global restructuring activities | (1) | (2) | (3) | (45) | |||||||
Non-recurring gains (losses) on foreign exchange | (1) | — | (1) | (11) | |||||||
Legal and environmental matters and reserves | — | (1) | 2 | (4) | |||||||
Executive transition costs | — | (3) | — | (3) | |||||||
Total certain items, pre-tax | (2) | (6) | (2) | (63) | |||||||
Tax impact of certain items (A) | — | 3 | — | 22 | |||||||
Certain items after tax (excluding discrete tax items) | (2) | (3) | (2) | (41) | |||||||
Certain items after tax per share impact (excluding discrete tax items) | $ (0.02) | $ (0.04) | $ (0.01) | $ (0.64) | |||||||
Tax-related certain items | |||||||||||
Discrete tax items | (5) | (1) | 15 | 2 | |||||||
Total tax-related certain items | (5) | (1) | 15 | 2 | |||||||
Total tax-related certain items per share impact | $ (0.08) | $ (0.01) | $ 0.23 | $ 0.03 | |||||||
Total certain items after tax | $ (7) | $ (4) | $ 13 | $ (39) | |||||||
Total certain items after tax per share impact | $ (0.10) | $ (0.05) | $ 0.22 | $ (0.61) | |||||||
TABLE 2: CERTAIN ITEMS STATEMENT OF OPERATIONS LINE ITEM | |||||||||||
Periods ended June 30 | Three Months | Nine Months | |||||||||
Dollars in millions, Pre-Tax (unaudited) |
2017 | 2016 | 2017 | 2016 | |||||||
Statement of Operations Line Item (B) |
|||||||||||
Cost of sales | $ (1) | $ (2) | $ (3) | $ (36) | |||||||
Selling and administrative expenses | — | (4) | 2 | (11) | |||||||
Research and technical expenses | — | — | — | (5) | |||||||
Other expense | (1) | — | (1) | (11) | |||||||
Total certain items, pre-tax | $ (2) | $ (6) | $ (2) | $ (63) | |||||||
TABLE 3: RECONCILIATION OF TAX CERTAIN ITEMS | |||||||||||
Periods ended June 30 | Three Months | Nine Months | |||||||||
Dollars in millions (unaudited) |
2017 | 2016 | 2017 | 2016 | |||||||
Reconciliation of Provision for income taxes, excluding certain items, to Provision for income taxes |
|||||||||||
(Provision) benefit for income taxes | $ (16) | $ (15) | $ (32) | $ (21) | |||||||
Less: Tax impact of certain items | — | 3 | — | 22 | |||||||
Less: Tax-related certain items | (5) | (1) | 15 | 2 | |||||||
(Provision) benefit for income taxes, excluding certain items | $ (11) | $ (17) | $ (47) | $ (45) | |||||||
TABLE 4: RECONCILIATION OF OPERATING TAX RATE | |||||||||||
Periods ended June 30 | Three Months |
Nine Months |
Forecast | ||||||||
Dollars in millions (unaudited) |
2017 | 2016 | 2017 | 2016 | 2017 | ||||||
Reconciliation of the effective tax rate to the operating tax rate |
|||||||||||
(Provision) benefit for income taxes | $ (16) | $ (15) | $ (32) | $ (21) | N/A | ||||||
Effective tax rate | 22% | 21% | 14% | 17% | 16% | ||||||
Impact of discrete tax items: (C) | |||||||||||
Unusual or infrequent items | (4%) | -% | 7% | 1% | 5% | ||||||
Items related to uncertain tax positions | (2%) | -% | -% | 1% | -% | ||||||
Other discrete tax items | 5% | 1% | -% | -% | -% | ||||||
Impact of certain items | -% | 2% | -% | 5% | -% | ||||||
Operating tax rate | 21% | 24% | 21% | 24% | 21% | ||||||
TABLE 5: RECONCILIATION OF ADJUSTED EPS BY QUARTER FOR FISCAL 2017 and FISCAL 2016 | |||||||||||
NON-GAAP MEASURE: | |||||||||||
Periods ended (unaudited) | Fiscal 2017(D) | ||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 YTD | |||||||
Reconciliation of Adjusted EPS to GAAP EPS |
|||||||||||
Net income (loss) per share attributable to Cabot Corporation | $ 0.85 | $ 1.18 | $ 0.71 | $ ― | $ 2.74 | ||||||
Less: Certain items after tax per share | 0.01 | 0.31 | (0.10) | — | 0.22 | ||||||
Adjusted earnings per share | $ 0.84 | $ 0.87 | $ 0.81 | $ ― | $ 2.52 | ||||||
Periods ended (unaudited) | Fiscal 2016(D) | ||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2016 YTD | |||||||
Reconciliation of Adjusted EPS to GAAP EPS |
|||||||||||
Net income (loss) per share attributable to Cabot Corporation | $ (0.11) | $ 0.76 | $ 0.88 | $ 0.83 | $ 2.36 | ||||||
Less: Net income (loss) per share from discontinued operations(E) | — | — | — | 0.02 | 0.02 | ||||||
Net income (loss) per share from continuing operations | $ (0.11) | $ 0.76 | $ 0.88 | $ 0.81 | $ 2.34 | ||||||
Less: Certain items after tax per share | (0.62) | 0.06 | (0.05) | (0.19) | (0.80) | ||||||
Adjusted earnings per share | $ 0.51 | $ 0.70 | $ 0.93 | $ 1.00 | $ 3.14 | ||||||
|
(A)The tax effect of certain items is determined by (1)
starting with the current and deferred income tax expense or benefit,
included in Net income attributable to
(B)This table indicates the line items where certain items are recorded in the table titled Cabot Corporation Consolidated Statements of Operations.
(C)"The nature of the discrete tax items for the periods
ended
(D)Per share amounts are calculated after tax and, where applicable, noncontrolling interest, net of tax.
(E)Amounts relate primarily to the previously divested Supermetals and Security Materials businesses.
CABOT CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||
All dollar amounts shown below are in millions, except per share information | |||||||||||||||||
Fiscal 2017 (A) | |||||||||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | |||||||||||||
Reconciliation of Adjusted EPS to GAAP EPS |
|||||||||||||||||
Net income (loss) per share attributable to Cabot Corporation | $ | 0.85 | $ | 1.18 | $ | 0.71 | $ | - | $ | 2.74 | |||||||
Less: Certain items after tax | 0.01 | 0.31 | (0.10 | ) | - | 0.22 | |||||||||||
Adjusted earnings per share | $ | 0.84 | $ | 0.87 | $ | 0.81 | $ | - | $ | 2.52 | |||||||
(A) Per share amounts are calculated after tax and, where applicable, noncontrolling interest, net of tax.
Fiscal 2017 | |||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | |||||||
Reconciliation of Segment EBIT to Net Income and Segment EBITDA Margin |
|||||||||||
Net income (loss) attributable to Cabot Corporation | $ 54 | $ 74 | $ 45 | $ - | $ 173 | ||||||
Net income (loss) attributable to noncontrolling interests | 4 | 6 | 8 | - | 18 | ||||||
Equity in earnings of affiliated companies, net of tax | (2) | (1) | (3) | - | (6) | ||||||
Provision (benefit) for income taxes | 17 | (1) | 16 | - | 32 | ||||||
Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies | $ 73 | $ 78 | $ 66 | $ - | $ 217 | ||||||
Interest expense | 13 | 13 | 13 | - | 39 | ||||||
Certain items | - | - | 2 | - | 2 | ||||||
Unallocated corporate costs | 12 | 14 | 11 | - | 37 | ||||||
General unallocated (income) expense | (5) | 1 | 4 | - | - | ||||||
Equity in earnings of affiliated companies | 2 | 1 | 3 | - | 6 | ||||||
Total Segment EBIT | $ 95 | $ 107 | $ 99 | $ - | $ 301 | ||||||
Plus: Total Depreciation & Amortization | 38 | 38 | 39 | - | 115 | ||||||
Plus: Adjustments to Depreciation(B) | - | 1 | - | - | 1 | ||||||
Total Segment EBITDA | $ 133 | $ 146 | $ 138 | $ - | $ 417 | ||||||
Less: Unallocated Corporate Costs | (12) | (14) | (11) | - | (37) | ||||||
Adjusted EBITDA | $ 121 | $ 132 | $ 127 | $ - | $ 380 | ||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | |||||||
Reinforcement Materials EBIT | $ 40 | $ 54 | $ 51 | $ - | $ 145 | ||||||
Plus: Depreciation & Amortization | 17 | 17 | 17 | - | 51 | ||||||
Reinforcement Materials EBITDA | $ 57 | $ 71 | $ 68 | $ - | $ 196 | ||||||
Reinforcement Materials Sales | $ 295 | $ 352 | $ 367 | $ - | $ 1,014 | ||||||
Reinforcement Materials EBITDA Margin | 19% | 20% | 19% | 0% | 19% | ||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | |||||||
Performance Chemicals EBIT | $ 49 | $ 51 | $ 46 | $ - | $ 146 | ||||||
Plus: Depreciation & Amortization | 11 | 12 | 11 | - | 34 | ||||||
Performance Chemicals EBITDA | $ 60 | $ 63 | $ 57 | $ - | $ 180 | ||||||
Performance Chemicals Sales | $ 205 | $ 228 | $ 229 | $ - | $ 662 | ||||||
Performance Chemicals EBITDA Margin | 29% | 28% | 25% | 0% | 27% | ||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | |||||||
Purification Solutions EBIT | $ 4 | $ 2 | $ (2) | $ - | $ 4 | ||||||
Plus: Depreciation & Amortization | 9 | 10 | 10 | - | 29 | ||||||
Purification Solutions EBITDA | $ 13 | $ 12 | $ 8 | $ - | $ 33 | ||||||
Purification Solutions Sales | $ 69 | $ 67 | $ 71 | $ - | $ 207 | ||||||
Purification Solutions EBITDA Margin | 19% | 18% | 11% | 0% | 16% | ||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | |||||||
Specialty Fluids EBIT | $ 2 | $ - | $ 4 | $ - | $ 6 | ||||||
Plus: Depreciation & Amortization | 1 | - | 1 | - | 2 | ||||||
Specialty Fluids EBITDA | $ 3 | $ - | $ 5 | $ - | $ 8 | ||||||
Specialty Fluids Sales | $ 11 | $ 7 | $ 12 | $ - | $ 30 | ||||||
Specialty Fluids EBITDA Margin | 27% | 0% | 42% | 0% | 27% | ||||||
Fiscal 2017 | |||||||||||
Reconciliation of Discretionary Free Cash Flow |
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | ||||||
Cash flow from operating activities (C) | 102 | (51) | 132 | - | 183 | ||||||
Less: Changes in net working capital (D) | 16 | (134) | 31 | - | (87) | ||||||
Less: Sustaining and compliance capital expenditures | 21 | 18 | 30 | - | 69 | ||||||
Discretionary Free Cash Flow | $ 65 | $ 65 | $ 71 | $ - | $ 201 |
(B) Adjustments to depreciation includes the addition of the depreciation expense of a contractual joint venture in Purification Solutions less accelerated depreciation expense not allocated to a business.
(C) As provided in the Consolidated Statement of Cash Flows.
(D) Defined as changes in accounts receivable, inventory and accounts payable and accrued liabilities as presented on the Consolidated Statement of Cash Flows.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170801006731/en/
Source:
Cabot Corporation
Steve Delahunt, 617-342-6255