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Cabot Corp Reports Third Quarter Fiscal 2021 Results

Strong Diluted EPS of $1.48 and Adjusted EPS of $1.35

BOSTON--(BUSINESS WIRE)--Aug. 9, 2021-- Cabot Corporation (NYSE: CBT) today announced results for its third quarter of fiscal year 2021.

Key Highlights

  • GAAP EPS of $1.48, compared to a loss of $0.12 in the prior fiscal year third quarter. Adjusted EPS of $1.35, compared to a loss of $0.07 in the prior fiscal year third quarter
  • Exceptional operating results for the third consecutive quarter in the fiscal year
  • Robust demand across our diverse set of applications and geographies
  • Continued momentum in our energy materials business with new adoptions by leading lithium-ion battery customers
  • Liquidity remained strong at approximately $1.3 billion; Debt to EBITDA ratio of 1.9 times as of June 30, 2021

(In millions, except per share amounts)

     

Three Months Ended

 

 

Nine Months Ended

 

     

6/30/21

 

6/30/20

 

 

6/30/21

 

6/30/20

 

                     

Net sales

     

$

917

 

$

518

   

$

2,505

 

$

1,955

Net income (loss) attributable to Cabot Corporation

     

$

86

 

$

(6)

   

$

221

 

$

34

 

     

 

 

 

   

 

 

 

                       

Net earnings (loss) per share attributable to Cabot Corporation

     

$

1.48

 

$

(0.12)

   

$

3.84

 

$

0.59

Less: Certain items after tax per share

     

$

0.13

 

$

(0.05)

   

$

(0.07)

 

$

(0.81)

Adjusted EPS

     

$

1.35

 

$

(0.07)

   

$

3.91

 

$

1.40

“I am very pleased with the exceptional operating results this quarter, as we delivered another quarter of strong volumes and earnings growth,” said Cabot President and Chief Executive Officer, Sean Keohane. “Our extensive global network of plants and strong execution enabled us to support our customers’ needs, while also managing the external factors related to both the COVID-19 pandemic and global supply chain challenges. We have been successfully implementing price increases to maintain robust margins as raw material costs have continued to increase. In addition, we realized higher sales from our targeted growth initiatives, including new adoptions at leading battery customers.”

Keohane continued, “Cash flow from operations was $71 million for the third quarter and $157 million year-to-date, which includes an increase in growth-related working capital and the impact of higher raw material costs on inventory and accounts receivable balances. Our balance sheet remains strong with approximately $1.3 billion of liquidity and a total debt to EBITDA ratio of 1.9 times as of June 30, 2021.”

 

Financial Detail
For the third quarter of fiscal 2021, net income attributable to Cabot Corporation was $86 million ($1.48 per diluted common share). Net income reflects an after-tax per share benefit from certain items of $0.13. Adjusted EPS for the third quarter of fiscal 2021 was $1.35 per share.

Segment Results

Reinforcement Materials – Third quarter fiscal 2021 EBIT in Reinforcement Materials increased by $90 million compared to the third quarter of fiscal 2020. The increase in EBIT was driven by significantly higher volumes across all regions, and strong pricing in Asia. Higher volumes were driven by demand increases across all regions compared to the same quarter last year, which was significantly impacted by COVID-19 shutdowns.

Global and regional volume changes for Reinforcement Materials for the third quarter of fiscal 2021 as compared to the same quarter of the prior year are set forth in the table below:

 

     

Third Quarter
Year-over-Year Change

Global Reinforcement Materials Volumes

     

71%

Asia

     

30%

Europe, Middle East, Africa

     

100%

Americas

     

146%

Performance Chemicals – Third quarter fiscal 2021 EBIT in Performance Chemicals increased by $33 million compared to the third quarter of fiscal 2020, primarily due to higher volumes and improved product mix driven by higher sales into automotive applications and our target growth initiatives. Year-over-year, volumes increased by 17% in the Performance Additives business and 20% in the Formulated Solutions business driven by higher demand across all product lines.

Purification Solutions – Third quarter fiscal 2021 EBIT in Purification Solutions increased by $4 million compared to the third quarter of fiscal 2020. The increase in EBIT was largely due to higher volumes in specialty applications and the benefit from insurance proceeds related to a plant outage that occurred in the first quarter of this fiscal year.

Cash Performance The Company ended the third quarter of fiscal 2021 with a cash balance of $173 million. During the third quarter of fiscal 2021, cash flows from operating activities were a source of $71 million. Capital expenditures for the third quarter of fiscal 2021 were $46 million. Additional uses of cash during the third quarter included $20 million for the payment of dividends.

Taxes – During the third quarter of fiscal 2021, the Company recorded a tax provision of $30 million for an effective tax rate of 24%. The provision reflected a $2 million net benefit from non-GAAP tax adjustments, which include the tax impact on certain items. The year-to-date operating tax rate was 28% through the third quarter of fiscal 2021. We expect our operating tax rate for fiscal 2021 to be in the range of 27% to 28%. 

 

Outlook
Commenting on the outlook for the Company, Keohane said, “Given the exceptional year to date results and our expectations for the fourth quarter, we are increasing our outlook for the year, and we expect adjusted earnings per share for fiscal year 2021 to be in the range of $4.85 to $5.05. As we look ahead to the fourth quarter of the fiscal year, we expect demand to remain strong across the segments. We are also anticipating an elevated level of fixed costs as compared to the third quarter due to the timing of maintenance activities, unfavorable impacts associated with plant outages, and higher feedstock differentials.”

Keohane continued, “I am excited about the strong fundamentals of our businesses and performance momentum we have demonstrated. Looking forward, these factors and our growth investments position us well for fiscal 2022 and the coming years.”

Earnings Call
The Company will host a conference call with industry analysts at 8:00 a.m. Eastern time on Tuesday, August 10, 2021. 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, masterbatches and conductive compounds, fumed silica, and aerogel. For more information on Cabot, please visit the company’s website at: http://www.cabotcorp.com. The Company encourages investors and potential investors to consult the Cabot website regularly.

Forward-Looking Statements – This earnings release contains forward-looking statements. All statements that address expectations or projections about the future, including with respect to our expectations for our performance in fiscal year 2021, including our expectations for adjusted earnings per share and the strength of demand, the factors that we expect will impact our results of operations, and our expected operating tax rate for fiscal 2021, 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, competition from other specialty chemical companies; volatility in the price of energy and raw materials; a significant adverse change in a customer relationship; safety, health and environmental requirements; unanticipated delays in, or increased cost of, site development projects; negative or uncertain worldwide or regional economic conditions and market opportunities, including from trade relations or global health matters; and fluctuations in foreign currency exchange and interest rates. These factors are discussed more fully in the reports we file with the Securities and Exchange Commission (“SEC”), particularly under the heading “Risk Factors” in our annual report on Form 10-K for our fiscal year ended September 30, 2020, filed with the SEC at www.sec.gov. 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.

Use of Non-GAAP Financial Measures
To supplement Cabot’s consolidated financial statements presented on a generally accepted accounting principle (“GAAP”) basis, the preceding discussion of our results and the accompanying financial tables report Adjusted EPS, Total Segment EBIT, Total Segment EBITDA, Adjusted EBITDA, our operating tax rate, Free Cash Flow and Discretionary Free Cash Flow, all of which are non-GAAP financial measures. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, GAAP, and the definitions of these measures may not be comparable to those used by other companies. Reconciliations of Adjusted EPS to net income (loss) per share attributable to Cabot Corporation, the most directly comparable GAAP financial measure, Total Segment EBIT, Total Segment EBITDA, and Adjusted EBITDA to income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, the most directly comparable GAAP financial measure of each such non-GAAP measure, operating tax rate to effective tax rate, the most directly comparable GAAP financial measure and Free Cash Flow and Discretionary Free Cash Flow to Cash flow from operating activities, the most directly comparable GAAP financial measure, are provided in the tables titled “Cabot Corporation Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate” and “Cabot Corporation Reconciliation of Non-GAAP Financial Measures.”

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) attributable to Cabot Corporation 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 but that are included in our GAAP net income (loss) per share, as applicable in a particular reporting period, include, but are not limited to, the following:

  • 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 currency, which are primarily related to the impact of continued currency devaluations on our 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.
  • Gains (losses) on sale of investments, which primarily relate to the sale of investments accounted for under the cost-method.
  • Inventory reserve adjustment, which generally results from an evaluation performed as part of an impairment analysis.
  • Indirect tax settlement credits, which includes favorable settlements resulting in the recoveries of indirect taxes.
  • Gains (losses) on sale of a business.
  • Employee benefit plan settlements, which consist of either charges or benefits associated with the termination of a pension plan or the transfer of a pension plan to a multi-employer plan.

Cabot does not provide an expected GAAP EPS range or reconciliation of the Adjusted EPS range with an expected GAAP EPS 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 three 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 corporate projects and initiatives.

Total Segment EBITDA. Total Segment EBITDA is equal to Total Segment EBIT (as defined above), but further adjusted for depreciation and amortization.

Adjusted EBITDA. Adjusted EBITDA reflects Total Segment EBITDA and is further adjusted for unallocated corporate costs, which include unallocated corporate overhead expenses such as certain corporate salaries and headquarter expenses, plus costs related to corporate projects and initiatives.

Free Cash Flow. To calculate “Free Cash Flow” we deduct Additions to property, plant and equipment from cash flow from operating activities.

Discretionary Free Cash Flow. To calculate “Discretionary Free Cash Flow” we deduct sustaining and compliance capital expenditures and changes in Net Working Capital from cash flow from operating activities.

Operating Tax Rate. Our “operating tax rate” is calculated based upon management's forecast of the annual operating tax rate for the fiscal year applied to adjusted pre-tax earnings. The operating tax rate excludes income tax (expense) benefit on certain items, discrete tax items and, on a quarterly basis the timing of losses in certain jurisdictions. The income tax (expense) benefit on certain items is determined using the applicable rates in the taxing jurisdictions in which the certain items occurred and includes both current and deferred income tax (expense) benefit based on the nature of the certain items. Discrete tax items include, but are not limited to, changes in valuation allowance, uncertain tax positions, and other tax items, such as the tax impact of legislative changes. Management believes that this non-GAAP financial measure 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.

Cabot does not provide a forward-looking reconciliation of the operating tax rate range with an effective tax 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 the effective tax rate in future periods.

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.

Net Working Capital. The term “net working capital” includes accounts receivable, inventory and accounts payable and accrued expenses.

 
Third Quarter Earnings Announcement, Fiscal 2021              
                   
                   
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS            
                   
                   
Periods ended June 30

Three Months

 

Nine Months

Dollars in millions, except per share amounts (unaudited)

2021

 

2020

 

2021

 

2020

                   
Net sales and other operating revenues

$

917

 

$

518

 

$

2,505

 

$

1,955

Cost of sales

 

703

 

 

449

 

 

1,884

 

 

1,592

Gross profit

 

214

 

 

69

 

 

621

 

 

363

Selling and administrative expenses

 

68

 

 

52

 

 

200

 

 

230

Research and technical expenses

 

12

 

 

13

 

 

41

 

 

41

Specialty Fluids loss on sale and asset impairment charge

 

 

 

 

 

 

 

1

Income (loss) from operations

 

134

 

 

4

 

 

380

 

 

91

Other income (expense)              
Interest and dividend income

 

2

 

 

1

 

 

6

 

 

7

Interest expense

 

(12)

 

 

(13)

 

 

(37)

 

 

(41)

Other income (expense)

 

(1)

 

 

(3)

 

 

(9)

 

 

(6)

Total other income (expense)

 

(11)

 

 

(15)

 

 

(40)

 

 

(40)

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

123

   

(11)

   

340

   

51

(Provision) benefit for income taxes

 

(30)

 

 

5

 

 

(93)

 

 

(9)

Equity in earnings of affiliated companies, net of tax

 

2

 

 

1

 

 

3

 

 

2

Net income (loss)

 

95

 

 

(5)

 

 

250

 

 

44

Net income (loss) attributable to noncontrolling interests

 

9

 

 

1

 

 

29

 

 

10

Net income (loss) attributable to Cabot Corporation

$

86

 

$

(6)

 

$

221

 

$

34

                   
Diluted earnings (loss) per share of common stock attributable to Cabot Corporation $

1.48

  $

(0.12)

  $

3.84

  $

0.59

                   
Diluted weighted average common shares outstanding

 

57.0

 

 

56.5

 

 

56.8

 

 

56.7

 
Third Quarter Earnings Announcement, Fiscal 2021              
                   
                   
CABOT CORPORATION SUMMARY RESULTS BY SEGMENT              
                   
                   
Periods ended June 30    

Three Months

 

Nine Months

Dollars in millions, except per share amounts (unaudited)  

2021

 

2020

 

2021

 

2020

Sales                
Reinforcement Materials

$

479

 

$

197

 

$

1,288

 

$

931

Performance Chemicals

 

303

 

 

220

 

 

864

 

 

707

Performance Additives

 

208

 

 

151

 

 

595

 

 

489

Formulated Solutions

 

95

 

 

69

 

 

269

 

 

218

Purification Solutions

 

69

 

 

63

 

 

191

 

 

186

Segment sales

 

851

 

 

480

 

 

2,343

 

 

1,824

Unallocated and other (A)

 

66

 

 

38

 

 

162

 

 

131

Net sales and other operating revenues

$

917

 

$

518

 

$

2,505

 

$

1,955

                   
Segment Earnings Before Interest and Taxes (B)              
Reinforcement Materials

$

85

 

$

(5)

 

$

262

 

$

103

Performance Chemicals

 

54

 

 

21

 

 

166

 

 

93

Purification Solutions

 

6

 

 

2

 

 

6

 

 

3

Total Segment Earnings Before Interest and Taxes

 

145

 

 

18

 

 

434

 

 

199

                   
Unallocated and Other              
Interest expense

 

(12)

 

 

(13)

 

 

(37)

 

 

(41)

Certain items (C)

 

5

 

 

(7)

 

 

(7)

 

 

(74)

Unallocated corporate costs

 

(14)

 

 

(10)

 

 

(43)

 

 

(32)

General unallocated income (expense) (D)

 

1

 

 

2

 

 

(4)

 

 

1

Less: Equity in earnings of affiliated companies

 

2

 

 

1

 

 

3

 

 

2

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

 

123

 

 

(11)

 

 

340

 

 

51

(Provision) benefit for income taxes (including tax certain items)

 

(30)

 

 

5

 

 

(93)

 

 

(9)

Equity in earnings of affiliated companies

 

2

 

 

1

 

 

3

 

 

2

Net income (loss)

 

95

 

 

(5)

 

 

250

 

 

44

Net income (loss) attributable to noncontrolling interests

 

9

 

 

1

 

 

29

 

 

10

Net income (loss) attributable to Cabot Corporation

$

86

 

$

(6)

 

$

221

 

$

34

                   
Diluted earnings (loss) per share of common stock attributable to Cabot Corporation

$

1.48

 

$

(0.12)

 

$

3.84

 

$

0.59

                   
Adjusted earnings (loss) per share (E)

$

1.35

 

$

(0.07)

 

$

3.91

 

$

1.40

                   
Diluted weighted average common shares outstanding

 

57.0

 

 

56.5

 

 

56.8

 

 

56.7

  (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, discounting charges for certain Notes receivable, and indirect tax settlement credits.
     
  (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) consists of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, Interest and dividend income, the profit or loss related to the corporate adjustment for unearned revenue, the impact of including the full operating results of a contractual joint venture in Purification Solutions Segment EBIT and unrealized holding gains (losses) for equity securities.
     
  (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 2021      
           
           
CABOT CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION    
           
           
      June 30,   September 30,
Dollars in millions (unaudited)

2021

 

2020

           
Current assets:      
Cash and cash equivalents

$

173

 

$

151

Accounts and notes receivable, net of reserve for doubtful accounts of $3 and $2

 

633

 

 

418

Inventories:      
Raw materials

 

141

 

 

82

Finished goods

 

293

 

 

225

Other

 

53

 

 

52

Total inventories

 

487

 

 

359

Prepaid expenses and other current assets

 

77

 

 

50

Total current assets

 

1,370

 

 

978

           
Property, plant and equipment, net

 

1,359

 

 

1,314

           
Goodwill

 

142

 

 

134

Equity affiliates

 

41

 

 

39

Intangible assets, net

 

103

 

 

103

Deferred income taxes

 

46

 

 

53

Other assets

 

164

 

 

160

Total assets

$

3,225

 

$

2,781

 
Third Quarter Earnings Announcement, Fiscal 2021      
           
           
CABOT CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION    
           
           
      June 30,   September 30,
Dollars in millions, except share and per share amounts (unaudited)

2021

 

2020

           
Current liabilities:      
Short-term borrowings

$

59

 

 

$

14

 

Accounts payable and accrued liabilities

 

602

 

 

 

488

 

Income taxes payable

 

34

 

 

 

20

 

Current portion of long-term debt

 

9

 

 

 

7

 

Total current liabilities

 

704

 

 

 

529

 

           
Long-term debt

 

1,088

 

 

 

1,094

 

Deferred income taxes

 

58

 

 

 

58

 

Other liabilities

 

281

 

 

 

286

 

           
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: 56,866,956 and 56,616,030 shares
Outstanding: 56,723,495 and 56,466,638 shares

 

57

 

 

 

57

 

 
Less cost of 143,461 and 149,392 shares of common treasury stock

 

(4

)

 

 

(4

)

Additional paid-in capital

 

 

 

 

 

Retained earnings

 

1,169

 

 

 

989

 

Accumulated other comprehensive income (loss)

 

(267

)

 

 

(351

)

Total Cabot Corporation stockholders' equity

 

955

 

 

 

691

 

Noncontrolling interests

 

139

 

 

 

123

 

Total stockholders' equity

 

1,094

 

 

 

814

 

Total liabilities and stockholders' equity

$

3,225

 

 

$

2,781

 

 
Third Quarter Earnings Announcement, Fiscal 2021                                          
                                           
                                           
CABOT CORPORATION QUARTERLY RESULTS BY SEGMENT                                                  
                                           
           
   

Fiscal 2020

 

Fiscal 2021

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  

$

379

 

 

$

355

 

 

$

197

 

 

$

325

 

 

$

1,256

 

 

$

375

 

 

$

434

 

 

$

479

 

 

$

 

$

1,288

 

Performance Chemicals    

242

 

   

245

 

 

 

220

 

   

226

 

 

 

933

 

   

267

 

 

 

294

 

   

303

 

 

 

 

 

864

 

Performance Additives    

170

 

   

168

 

   

151

 

   

156

 

   

645

 

 

 

184

 

   

203

 

   

208

 

   

   

595

 

Formulated Solutions    

72

 

   

77

 

   

69

 

   

70

 

   

288

 

   

83

 

   

91

 

   

95

 

 

 

   

269

 

Purification Solutions    

59

 

   

64

 

   

63

 

   

67

 

   

253

 

 

 

59

 

   

63

 

   

69

 

   

   

191

 

Segment sales    

680

 

   

664

 

   

480

 

 

 

618

 

   

2,442

 

   

701

 

   

791

 

   

851

 

   

   

2,343

 

Unallocated and other (A)    

47

 

   

46

 

   

38

 

   

41

 

   

172

 

   

45

 

   

51

 

   

66

 

 

 

   

162

 

Net sales and other operating revenues  

$

727

 

 

$

710

 

 

$

518

 

 

$

659

 

 

$

2,614

 

 

$

746

 

 

$

842

 

 

$

917

 

 

$

 

$

2,505

 

                                           
Segment Earnings Before Interest and Taxes (B)                                          
Reinforcement Materials  

$

47

 

 

$

61

 

 

$

(5

)

 

$

59

 

 

$

162

 

 

$

88

 

 

$

89

 

 

$

85

 

 

$

 

$

262

 

Performance Chemicals    

41

 

   

31

 

   

21

 

   

25

 

   

118

 

   

54

 

   

58

 

   

54

 

   

   

166

 

Purification Solutions    

(2

)

   

3

 

   

2

 

   

 

   

3

 

   

(2

)

   

2

 

   

6

 

   

   

6

 

Total Segment Earnings Before Interest and Taxes    

86

 

   

95

 

   

18

 

   

84

 

   

283

 

   

140

 

   

149

 

   

145

 

   

   

434

 

Unallocated and Other                                          
Interest expense    

(14

)

   

(14

)

   

(13

)

   

(12

)

   

(53

)

   

(12

)

   

(13

)

   

(12

)

   

   

(37

)

Certain items (C)    

(11

)

   

(56

)

   

(7

)

   

(144

)

   

(218

)

   

(11

)

   

(1

)

   

5

 

   

   

(7

)

Unallocated corporate costs    

(10

)

   

(12

)

   

(10

)

   

(9

)

   

(41

)

   

(13

)

   

(16

)

   

(14

)

   

   

(43

)

General unallocated income (expense) (D)    

(1

)

   

 

   

2

 

   

(2

)

   

(1

)

   

(5

)

   

 

   

1

 

   

   

(4

)

Less: Equity in earnings of affiliated companies    

 

   

1

 

   

1

 

 

 

1

 

 

 

3

 

   

 

   

1

 

   

2

 

   

   

3

 

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

 

50

 

 

 

12

 

 

 

(11

)

 

 

(84

)

 

 

(33

)

 

 

99

 

 

 

118

 

 

 

123

 

 

 

 

 

340

 

(Provision) benefit for income taxes (including tax certain items)  

 

(4

)

 

 

(10

)

 

 

5

 

 

 

(182

)

 

 

(191

)

 

 

(29

)

 

 

(34

)

 

 

(30

)

 

 

 

 

(93

)

Equity in earnings of affiliated companies  

 

 

 

 

1

 

 

 

1

 

 

 

1

 

 

 

3

 

 

 

 

 

 

1

 

 

 

2

 

 

 

 

 

3

 

Net income (loss)    

46

     

3

 

   

(5

)

   

(265

)

   

(221

)

   

70

     

85

     

95

   

 

   

250

 

Net income (loss) attributable to noncontrolling interests  

 

5

 

 

 

4

 

 

 

1

 

 

 

7

 

 

 

17

 

 

 

10

 

 

 

10

 

 

 

9

 

 

 

 

 

29

 

Net income (loss) attributable to Cabot Corporation  

$

41

 

 

$

(1

)

 

$

(6

)

 

$

(272

)

 

$

(238

)

 

$

60

 

 

$

75

 

 

$

86

 

 

$

 

$

221

 

Diluted earnings (loss) per share of common stock                                          
attributable to Cabot Corporation  

$

0.70

 

 

$

(0.01

)

 

$

(0.12

)

 

$

(4.81

)

 

$

(4.21

)

 

$

1.06

 

 

$

1.30

 

 

$

1.48

 

 

$

 

$

3.84

 

Adjusted earnings (loss) per share (E)

$

0.69

 

 

$

0.77

 

 

$

(0.07

)

 

$

0.68

 

 

$

2.08

 

 

$

1.18

 

 

$

1.38

 

 

$

1.35

 

 

$

 

$

3.91

 

Diluted weighted average common shares outstanding  

 

57.0

 

 

 

56.6

 

 

 

56.5

 

 

 

56.5

 

 

 

56.6

 

 

 

56.6

 

 

 

56.7

 

 

 

57.0

 

 

 

 

 

56.8

 

  (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, discounting charges for certain Notes receivable, and indirect tax settlement credits.
     
  (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) consists of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, Interest and dividend income, the profit or loss related to the corporate adjustment for unearned revenue, the impact of including the full operating results of a contractual joint venture in Purification Solutions Segment EBIT and unrealized holding gains (losses) for equity securities.
     
  (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 2021              
               
               
CABOT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS              
               
               
Periods ended June 30 Three Months   Nine Months
Dollars in millions (unaudited)

2021

 

2020

 

2021

 

2020

               
Cash Flows from Operating Activities:              
Net income (loss)

$

95

 

 

$

(5

)

 

$

250

 

 

$

44

 

Adjustments to reconcile net income to cash provided by operating activities:              
Depreciation and amortization

 

40

 

 

 

39

 

 

 

117

 

 

 

117

 

Other non-cash charges, net

 

(1

)

 

 

4

 

 

 

34

 

 

 

(13

)

Cash dividends received from equity affiliates

 

1

 

 

 

 

 

 

2

 

 

 

1

 

Changes in assets and liabilities:              
Changes in certain working capital items (A)

 

(47

)

 

 

126

 

 

 

(226

)

 

 

178

 

Changes in other assets and liabilities, net

 

(17

)

 

 

(15

)

 

 

(20

)

 

 

(49

)

Cash provided by (used in) operating activities

 

71

 

 

 

149

 

 

 

157

 

 

 

278

 

               
Cash Flows from Investing Activities:              
Additions to property, plant and equipment

 

(46

)

 

 

(43

)

 

 

(115

)

 

 

(162

)

Cash paid for acquisition of business, net of cash acquired of $0, $1, $0, and $1

 

 

 

 

(84

)

 

 

 

 

 

(92

)

Other investing activities, net

 

2

 

 

 

1

 

 

 

5

 

 

 

2

 

Cash provided by (used in) investing activities

 

(44

)

 

 

(126

)

 

 

(110

)

 

 

(252

)

               
Cash Flows from Financing Activities:              
Change in debt, net

 

15

 

 

 

(24

)

 

 

29

 

 

 

90

 

Cash dividends paid to common stockholders

 

(20

)

 

 

(20

)

 

 

(60

)

 

 

(60

)

Other financing activities, net

 

(16

)

 

 

(3

)

 

 

(17

)

 

 

(67

)

Cash provided by (used in) financing activities

 

(21

)

 

 

(47

)

 

 

(48

)

 

 

(37

)

Effect of exchange rates on cash

 

17

 

 

 

9

 

 

 

23

 

 

 

4

 

Increase (decrease) in cash and cash equivalents

 

23

 

 

 

(15

)

 

 

22

 

 

 

(7

)

Cash and cash equivalents and restricted cash at beginning of period

 

150

 

 

 

177

 

 

 

151

 

 

 

169

 

Cash and cash equivalents at end of period

$

173

 

 

$

162

 

 

$

173

 

 

$

162

 

  (A) Includes Accounts and notes receivable, Inventories, and Accounts payable and accrued liabilities.
 
Third Quarter Earnings Announcement, Fiscal 2021              
                   
                   
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    
Dollars in millions, except per share amounts (unaudited)  

2021

2020

2021

2020

   
                   
Certain items before and after income taxes              
Indirect tax settlement credits  

$

12

 

$

12

 

3

   
Global restructuring activities  

 

(4)

 

(3)

 

(8)

 

(16)

   
Employee benefit plan settlement and other charges  

 

(1)

 

(2)

 

(6)

 

(5)

   
Acquisition and integration-related charges  

 

(2)

 

(1)

 

(4)

 

(3)

   
Legal and environmental matters and reserves  

 

 

(1)

 

 

(51)

   
Specialty Fluids loss on sale and asset impairment charges  

 

 

 

 

(1)

   
Other certain items  

 

 

 

(1)

 

(1)

   
Total certain items, pre-tax  

 

5

 

(7)

 

(7)

 

(74)

   
                   
Non-GAAP tax adjustments(A)  

 

2

 

4

 

3

 

27

   
Total certain items after tax  

$

7

$

(3)

$

(4)

$

(47)

   
Total certain items after tax per share impact  

$

0.13

$

(0.05)

$

(0.07)

$

(0.81)

   
                   
TABLE 2: CERTAIN ITEMS STATEMENT OF OPERATIONS LINE ITEM          
Periods ended June 30   Three Months Nine Months    
Dollars in millions, Pre-Tax (unaudited)  

2021

2020

2021

2020

   
                   
Statement of Operations Line Item (B)              
Net sales and other operating revenues  

$

9

$ ―

$

9

$ ―    
Cost of sales  

 

(2)

 

(3)

 

(7)

 

(6)

   
Selling and administrative expenses  

 

(3)

 

(3)

 

(4)

 

(62)

   
Research and technical expenses  

 

 

 

(1)

 

   
Other income (expense)  

 

1

 

(1)

 

(4)

 

(5)

   
Specialty Fluids loss on sale and asset impairment charges  

 

 

 

 

(1)

   
Total certain items, pre-tax  

$

5

$

(7)

$

(7)

$

(74)

   
                   
TABLE 3: RECONCILIATION OF EFFECTIVE TAX RATE TO OPERATING TAX RATE          
Three months ended June 30  

2021

2020

   
Dollars in millions (unaudited)   (Provision) /
Benefit for
Income Taxes
Rate (Provision) /
Benefit for
Income Taxes
Rate    
                   
Effective Tax Rate  

$

(30)

 

24%

$

5

 

51%

   
Less: Non-GAAP tax adjustments(A)  

 

2

 

 

4

     
Operating tax rate(C) (D)  

$

(32)

 

27%

$

1

 

29%

   
                   
Nine months ended June 30  

2021

2020

   
Dollars in millions (unaudited)   (Provision) /
Benefit for
Income Taxes
Rate (Provision) /
Benefit for
Income Taxes
Rate    
                   
Effective Tax Rate  

$

(93)

 

27%

$

(9)

 

17%

   
Less: Non-GAAP tax adjustments(A)  

 

3

 

 

27

     
Operating tax rate(C) (D)  

$

(96)

 

28%

$

(36)

 

29%

   
                   
                   
TABLE 4: RECONCILIATION OF ADJUSTED EPS BY QUARTER FOR FISCAL 2021 and FISCAL 2020      
        Fiscal 2021 (E)
Periods ended (unaudited)   Dec. Q Mar. Q June Q Sept. Q   FY 2021
Reconciliation of Adjusted EPS to GAAP EPS              
Net income (loss) per share attributable to Cabot Corporation  

$

1.06

$

1.30

$

1.48

$

 

$

3.84

Less: Certain items after tax per share  

 

(0.12)

 

(0.08)

 

0.13

 

 

 

(0.07)

Adjusted earnings (loss) per share  

$

1.18

$

1.38

$

1.35

$

 

$

3.91

                   
        Fiscal 2020 (E)
Periods ended (unaudited)   Dec. Q Mar. Q June Q Sept. Q   FY 2020
Reconciliation of Adjusted EPS to GAAP EPS              
Net income (loss) per share attributable to Cabot Corporation  

$

0.70

$

(0.01)

$

(0.12)

$

(4.81)

 

$

(4.21)

Less: Certain items after tax per share  

 

0.01

 

(0.78)

 

(0.05)

 

(5.49)

 

 

(6.29)

Adjusted earnings (loss) per share  

$

0.69

$

0.77

$

(0.07)

$

0.68

 

$

2.08

  (A) Non-GAAP tax adjustments are made to arrive at the operating tax provision. It includes the income tax (expense) benefit on certain items, discrete tax items, and, on a quarterly basis the timing of losses in certain jurisdictions. The income tax (expense) benefit on certain items is determined using the applicable rates in the taxing jurisdictions in which the certain items occurred and includes both current and deferred income tax (expense) benefit based on the nature of the certain items. Discrete tax items include, but are not limited to, changes in valuation allowance, uncertain tax positions, and other tax items, such as the tax impact of legislative changes.
   
  (B) This table indicates the line items where certain items are recorded in the Consolidated Statements of Operations.
  (C) The operating tax rate is calculated based upon management's forecast of the annual operating tax rate for the fiscal year applied to adjusted pre-tax earnings. The operating tax rate excludes income tax (expense) benefit on certain items, discrete tax items and, on a quarterly basis the timing of losses in certain jurisdictions.
  (D) Our operating tax rate for fiscal 2021 is expected to be in the range of 27% to 28%.
  (E) Per share amounts are calculated after tax and, where applicable, noncontrolling interest, net of tax.
 
Third Quarter Earnings Announcement, Fiscal 2021                  
                       
                       
CABOT CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURES            
                       
                       
      Fiscal 2021 (A)
      Dec. Q   Mar. Q   June Q   Sept. Q   FY 2021
Reconciliation of Adjusted EPS to GAAP EPS                  
Net income (loss) per share attributable to Cabot Corporation

$

1.06

 

 

$

1.30

 

 

$

1.48

 

 

$

 

 

$

3.84

 

Less: Certain items after tax per share

 

(0.12

)

 

 

(0.08

)

 

 

0.13

 

 

 

 

 

 

(0.07

)

Adjusted earnings (loss) per share

$

1.18

 

 

$

1.38

 

 

$

1.35

 

 

$

 

 

$

3.91

 

                       
      Fiscal 2020 (A)
      Dec. Q   Mar. Q   June Q   Sept. Q   FY 2020
Reconciliation of Adjusted EPS to GAAP EPS                  
Net income (loss) per share attributable to Cabot Corporation

$

0.70

 

 

$

(0.01

)

 

$

(0.12

)

 

$

(4.81

)

 

$

(4.21

)

Less: Certain items after tax per share

 

0.01

 

 

 

(0.78

)

 

 

(0.05

)

 

 

(5.49

)

 

 

(6.29

)

Adjusted earnings (loss) per share

$

0.69

 

 

$

0.77

 

 

$

(0.07

)

 

$

0.68

 

 

$

2.08

 

                       
(A) Per share amounts are calculated after tax and, where applicable, noncontrolling interest, net of tax.
                       
Dollars in millions Fiscal 2021
      Dec. Q   Mar. Q   June Q   Sept. Q   FY 2021
Reconciliation of Total Segment EBIT, Total Segment EBITDA and Adjusted EBITDA to Net Income and Segment EBITDA Margin                  
Net income (loss) attributable to Cabot Corporation

$

60

 

 

$

75

 

 

$

86

 

  $ ―  

$

221

 

Net income (loss) attributable to noncontrolling interests

 

10

 

 

 

10

 

 

 

9

 

 

 

 

 

 

29

 

Equity in earnings of affiliated companies, net of tax

 

 

 

 

(1

)

 

 

(2

)

 

 

 

 

 

(3

)

Provision (benefit) for income taxes

 

29

 

 

 

34

 

 

 

30

 

 

 

 

 

 

93

 

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

$

99

 

 

$

118

 

 

$

123

 

  $ ―  

$

340

 

Interest expense

 

12

 

 

 

13

 

 

 

12

 

 

 

 

 

 

37

 

Certain items

 

11

 

 

 

1

 

 

 

(5

)

 

 

 

 

 

7

 

Unallocated corporate costs

 

13

 

 

 

16

 

 

 

14

 

 

 

 

 

 

43

 

General unallocated (income) expense

 

5

 

 

 

 

 

 

(1

)

 

 

 

 

 

4

 

Less: Equity in earnings of affiliated companies

 

 

 

 

(1

)

 

 

(2

)

 

 

 

 

 

(3

)

Total Segment EBIT

$

140

 

 

$

149

 

 

$

145

 

  $ ―  

$

434

 

Depreciation and amortization

 

39

 

 

 

38

 

 

 

40

 

 

 

 

 

 

117

 

Adjustments to depreciation (B)

 

 

 

 

2

 

 

 

(1

)

 

 

 

 

 

1

 

Total Segment EBITDA

$

179

 

 

$

189

 

 

$

184

 

  $ ―  

$

552

 

Less: Unallocated corporate costs before corporate depreciation

 

13

 

 

 

16

 

 

 

14

 

 

 

 

 

 

43

 

Adjusted EBITDA

$

166

 

 

$

173

 

 

$

170

 

  $ ―  

$

509

 

                       
(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.
                       
Dollars in millions     Dec. Q   Mar. Q   June Q   Sept. Q   FY 2021
Reinforcement Materials EBIT

$

88

 

 

$

89

 

 

$

85

 

  $ ―  

$

262

 

Reinforcement Materials Depreciation and amortization

 

17

 

 

 

18

 

 

 

17

 

 

 

 

 

 

52

 

Reinforcement Materials EBITDA 

$

105

 

 

$

107

 

 

$

102

 

  $ ―  

$

314

 

Reinforcement Materials Sales

$

375

 

 

$

434

 

 

$

479

 

  $ ―  

$

1,288

 

Reinforcement Materials EBITDA Margin 

 

28

%

 

 

25

%

 

 

21

%

 

 

%

 

 

24

%

                       
Dollars in millions Dec. Q   Mar. Q   June Q   Sept. Q   FY 2021
Performance Chemicals EBIT 

$

54

 

 

$

58

 

 

$

54

 

  $ ―  

$

166

 

Performance Chemicals Depreciation and amortization

 

18

 

 

 

19

 

 

 

18

 

 

 

 

 

 

55

 

Performance Chemicals EBITDA

$

72

 

 

$

77

 

 

$

72

 

  $ ―  

$

221

 

Performance Chemicals Sales 

$

267

 

 

$

294

 

 

$

303

 

  $ ―  

$

864

 

Performance Chemicals EBITDA Margin 

 

27

%

 

 

26

%

 

 

24

%

 

 

%

 

 

26

%

                       
Dollars in millions Dec. Q   Mar. Q   June Q   Sept. Q   FY 2021
Purification Solutions EBIT

$

(2

)

 

$

2

 

 

$

6

 

  $ ―  

$

6

 

Purification Solutions Depreciation and amortization

 

4

 

 

 

3

 

 

 

4

 

 

 

 

 

 

11

 

Purification Solutions EBITDA

$

2

 

 

$

5

 

 

$

10

 

  $ ―  

$

17

 

Purification Solutions Sales

$

59

 

 

$

63

 

 

$

69

 

  $ ―  

$

191

 

Purification Solutions EBITDA Margin

 

3

%

 

 

8

%

 

 

14

%

 

 

%

 

 

9

%

                       
Dollars in millions Fiscal 2021
Reconciliation of Free Cash Flow and Discretionary Free Cash Flow to Cash Flow from Operating Activities Dec. Q   Mar. Q   June Q   Sept. Q   FY 2021
Cash flow from operating activities (C)

$

21

 

 

$

65

 

 

$

71

 

  $ ―  

$

157

 

Less: Additions to property, plant and equipment

 

29

 

 

 

40

 

 

 

46

 

 

 

 

 

 

115

 

Free cash flow

$

(8

)

 

$

25

 

 

$

25

 

  $ ―  

$

42

 

Plus: Additions to property, plant and equipment

 

29

 

 

 

40

 

 

 

46

 

 

 

 

 

 

115

 

Less: Changes in net working capital (D)

 

(99

)

 

 

(80

)

 

 

(47

)

 

 

 

 

 

(226

)

Less: Sustaining and compliance capital expenditures

 

21

 

 

 

27

 

 

 

26

 

     

 

74

 

Discretionary free cash flow

$

99

 

 

$

118

 

 

$

92

 

  $ ―  

$

309

 

                       
(C) As provided in the Condensed Consolidated Statements of Cash Flows.                  
(D) Defined as changes in accounts receivable, inventory and accounts payable and accrued liabilities as presented on the Condensed Consolidated Statements of Cash Flows.

 

Investor Contact:
Steve Delahunt
(617) 342-6255

Source: Cabot Corporation