UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 2, 2006
CABOT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
1-5667 |
04-2271897 |
(Commission File Number) |
(IRS Employer Identification No.) |
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TWO
SEAPORT LANE, SUITE 1300, |
02210-2019 |
(Address of Principal Executive Offices) |
(Zip Code) |
(617) 345-0100
(Registrants Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On August 2, 2006 Cabot Corporation issued a press release announcing its operating results for the fiscal quarter ended June 30, 2006. A copy of the press release, together with third quarter supplemental business information, is furnished herewith as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press release issued by Cabot Corporation on August 2, 2006, together with Third Quarter Fiscal Year 2006 Supplemental Business Information
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CABOT CORPORATION |
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By: |
/s/ James P. Kelly |
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Name: James P. Kelly |
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Title: Controller |
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Date: August 2, 2006 |
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3
EXHIBIT INDEX
Exhibit |
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Number |
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Title |
99.1 |
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Press release issued by Cabot Corporation on August 2, 2006, together with Third Quarter Fiscal Year 2006 Supplemental Business Information |
4
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Contact: |
Susannah R. Robinson |
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Director, Investor Relations |
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(617) 342-6129 |
BOSTON, MA (August 2, 2006) Cabot Corporation (NYSE:CBT) today announced net income of $25 million ($0.37 per diluted common share) for the third quarter of fiscal year 2006 ended June 30, 2006, compared to net income of $26 million ($0.39 per diluted common share) for the year ago quarter. The third fiscal quarter 2006 results included $2 million pre-tax of charges ($0.02 per diluted common share after tax) from certain items compared to $4 million pre-tax of charges ($0.04 per diluted common share after tax) from certain items in the third quarter of fiscal year 2005. Further details concerning certain items are included in Exhibit I of the press release.
In commenting on the results, Kennett F. Burnes, Cabots Chairman and CEO, said, We were, of course, not satisfied with our results for the quarter as we fell short of our own expectations. This shortfall was disappointing given the strong volume performance in all businesses. In particular, despite our Carbon Black Business having strong volumes, our inability to return to a more historic margin level unfavorably impacted performance. In addition, we had three cost issues during the quarter, higher utility costs, higher maintenance costs at Cabot Japan, and our aggressive initiative to reduce inventory levels, thereby reducing production levels, resulting in higher fixed costs per unit. Also, and as expected, the transition to market-based pricing and higher ore costs in the Supermetals Business reduced Cabots overall profitability. We were pleased, however, to have our new capacity for our Carbon Black and Metal Oxides
1
Businesses in China, and our inkjet colorants capacity expansion all successfully come on line during the quarter, particularly in a period of such strong demand.
The Carbon Black Business reported operating profits of $23 million compared to $26 million in both the third quarter of 2005 and the second quarter of 2006. Our carbon black product lines had solid volumes during the quarter. Rubber blacks volumes increased by 2% compared to the third quarter of 2005 and by 3% sequentially, and performance products returned to its more historic volume level with a 13% increase sequentially. Progress was made in restoring total variable margin during the quarter with margins in the third quarter of fiscal 2006 equivalent to those in the third quarter of fiscal 2005, but still below the levels seen prior to the recent period of continuously rising feedstock costs. In addition, quarterly operating costs were higher than we have experienced recently and three specific issues combined to reduce profitability by $9 million. First, higher utility costs impacted us by $2 million. Second, we made substantial progress in reducing operating working capital with a $38 million total improvement driven by a $28 million reduction in inventory. This resulted in a $4 million unfavorable impact on earnings from higher fixed costs per unit due to lower production levels. Third, Cabot Japan had higher maintenance costs, which unfavorably impacted us by $3 million.
The inkjet colorants product line continued to experience solid volume growth in both the OEM and aftermarket segments with a 40% increase over the third quarter of 2005 and a 4% increase over the second quarter of 2006. The transition from research to commercial grades, when compared to the third quarter of 2005, and some margin erosion, caused revenues to grow at a slower rate than volumes. Additionally, costs
2
related to the new production capacity that is not yet being commercially utilized caused profitability to be lower both year over year and sequentially.
The Metal Oxides Business reported operating profits of $6 million during the quarter. This was $2 million higher than the third quarter of 2005 and $1 million higher than the second quarter of 2006. Fumed metal oxides continued to experience high capacity utilization and solid increases in demand, which led to higher profitability. Total volumes increased 11% compared to the third quarter of 2005, with higher electronics and niche volumes, and 3% sequentially. Favorable price mix and strong plant utilization more than offset increased year over year raw material and energy costs.
The Supermetals Business had a stronger than expected quarter, reporting $9 million in operating profits compared to $13 million in the third quarter of 2005 and $12 million in the second quarter of 2006. The continued transition from fixed price, fixed volume contracts to market-based arrangements and higher year over year raw material costs continue to unfavorably impact the business. However, the business is experiencing significant benefits from its previous cost reduction initiatives. We continue to make progress in reducing inventory levels, which have decreased by $46 million year to date.
During the third quarter of 2006, the Specialty Fluids Business reported operating profits of $5 million, equal to the third quarter of 2005, and $1 million higher than the second quarter of 2006. Utilization of our total available fluid decreased both year over year and sequentially but was offset by higher pricing on the quarters activity. A labor strike at one of our large North Sea customers during the quarter, that has since been settled, caused delays in their drilling operations during the quarter and could impact our profitability for the full year by as much as $2 million. We were, however, extremely
3
pleased to be awarded two appraisal wells in Argentina that we anticipate will begin to be drilled in the fourth quarter. If successful, this work could lead to the use of our fluid in additional wells and our first significant expansion outside of the North Sea.
With respect to the future, Burnes said, Looking forward, we believe that our shortfall in performance during the third quarter will put us at the lower end of where we had hoped to be for the full year. We remain cautious given the energy costs we have all experienced over the past months and the potential impact of political instability in certain regions of the world. Given this uncertainty and our recent performance, we are taking a very close look at all of our costs and are looking for ways to further improve margins to ensure that the Carbon Black Business continues to earn an acceptable return. On a more positive note, we have recently seen an improvement in cash generation and a reduction in our net debt position. The contract transition in the Supermetals Business will continue to impact our overall financial performance and we remain focused on replacing lost contract volumes with market volumes and continuing our inventory reduction progress. We look forward to the strong utilization of our new capacity to serve growing demand in new markets and developing regions of the world and remain optimistic about the prospects for continued strong demand in our core businesses and ongoing growth in our new businesses.
Additional information regarding Cabots third quarter fiscal year 2006 results, is included in the Supplemental Business Information attached to the press release.
Included above are forward-looking statements relating to managements expectations regarding performance of our rubber blacks and performance products product lines; Cabots overall business performance and prospects; our ability to replace lost contract
4
volumes with open market volumes in the Supermetals Business; growth in inkjet colorants; the expansion of the Specialty Fluids Business outside of the North Sea; utilization of new capacity for rubber blacks, fumed metal oxides and inkjet colorants; and carbon black feedstock and natural gas prices. The following are some of the factors that could cause Cabots actual results to differ materially from those expressed in the forward-looking statements: a continuing rise in feedstock costs and a higher than expected increase in natural gas prices; lower than expected demand for our products; Cabots ability to generate cost savings and implement restructuring initiatives; the Companys ability to maintain and grow its position in the small office, home office printing market and to participate in the growth in emerging inkjet applications for black colorants and to develop and commercialize colored pigments (which may be disrupted or delayed by technical difficulties, market acceptance, competitors new products or difficulties in moving from the experimental stage to the manufacturing stage); unexpected delays in drilling operations at wells recently awarded to the Specialty Fluids Business and the success of this Business in gaining wider acceptance by the energy industry of cesium formate as a drilling fluid and to penetrate new markets (including development of the required logistics to reach remote markets); and the timely customer acceptance of products from recent capacity expansion projects. Other factors and risks are discussed in the Companys 2005 Annual Report on Form 10-K with the Securities and Exchange Commission.
Cabot Corporation is a global specialty chemicals and materials company headquartered in Boston, MA. Cabots major products are carbon black, fumed silica, inkjet colorants, capacitor materials, and cesium formate drilling fluids.
5
Third Quarter Earnings Announcement, Fiscal 2006
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Periods ended June 30 |
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Three Months |
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Nine Months |
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Dollars in millions, except per share amounts (unaudited) |
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2006 |
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2005 |
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2006 |
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2005 |
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||||
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Net sales and other operating revenues |
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$ |
666 |
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$ |
545 |
|
$ |
1,880 |
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$ |
1,567 |
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Cost of sales |
|
551 |
|
427 |
|
1,574 |
|
1,202 |
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||||
Gross profit |
|
$ |
115 |
|
$ |
118 |
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$ |
306 |
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$ |
365 |
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|
|
|
|
|
|
|
|
|
|
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Selling and administrative expenses |
|
59 |
|
63 |
|
176 |
|
173 |
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Research and technical expenses |
|
14 |
|
14 |
|
41 |
|
43 |
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Goodwill asset impairment |
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|
|
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|
90 |
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||||
Income from operations |
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$ |
42 |
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$ |
41 |
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$ |
89 |
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$ |
59 |
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Other income and expense |
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Interest and dividend income |
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2 |
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3 |
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5 |
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Interest expense |
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(6 |
) |
(8 |
) |
(19 |
) |
(24 |
) |
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Other income (expense) |
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(2 |
) |
1 |
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5 |
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Total other income and expense |
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(8 |
) |
(5 |
) |
(16 |
) |
(14 |
) |
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Income from continuing operations before income taxes |
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34 |
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36 |
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73 |
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45 |
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Provision for income taxes |
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(8 |
) |
(9 |
) |
(13 |
) |
(30 |
) |
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Equity in net income of affiliated companies, net of tax |
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1 |
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2 |
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8 |
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6 |
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Minority interest in net income, net of tax |
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(2 |
) |
(3 |
) |
(9 |
) |
(9 |
) |
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Net income from continuing operations |
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25 |
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26 |
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59 |
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12 |
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||||
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|
|
|
|
|
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|
||||
Cumulative effect of an accounting change, net of tax |
|
|
|
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2 |
|
|
|
||||
|
|
|
|
|
|
|
|
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|
||||
Net income |
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25 |
|
26 |
|
61 |
|
12 |
|
||||
Dividends on preferred stock, net of tax |
|
(1 |
) |
(1 |
) |
(2 |
) |
(2 |
) |
||||
Net income available to common shares |
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$ |
24 |
|
$ |
25 |
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$ |
59 |
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$ |
10 |
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|
|
|
|
|
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Diluted income per common share |
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|
|
|
|
|
|
|
|
||||
Income from continuing operations |
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$ |
0.37 |
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$ |
0.39 |
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$ |
0.85 |
|
$ |
0.18 |
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Cumulative effect of an accounting change, net of tax |
|
$ |
|
|
$ |
|
|
$ |
0.04 |
|
$ |
|
|
Net income |
|
$ |
0.37 |
|
$ |
0.39 |
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$ |
0.89 |
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$ |
0.18 |
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|
|
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|
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|
|
|
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|
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Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
69 |
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69 |
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69 |
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69 |
|
6
Third Quarter Earnings Announcement, Fiscal 2006
CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS
Periods ended June 30 |
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Three Months |
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Nine Months |
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Dollars in millions, except per share amounts (unaudited) |
|
2006 |
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2005 |
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2006 |
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2005 |
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||||
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SALES |
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|
|
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Carbon Black Business |
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$ |
514 |
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$ |
387 |
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$ |
1,409 |
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$ |
1,101 |
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Rubber blacks |
|
367 |
|
252 |
|
1,011 |
|
712 |
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Performance products |
|
134 |
|
123 |
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360 |
|
356 |
|
||||
Inkjet colorants |
|
12 |
|
10 |
|
35 |
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28 |
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Superior MicroPowders |
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1 |
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2 |
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3 |
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5 |
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Metal Oxides Business |
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66 |
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57 |
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185 |
|
175 |
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||||
Fumed metal oxides |
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65 |
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57 |
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184 |
|
175 |
|
||||
Aerogels |
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1 |
|
|
|
1 |
|
|
|
||||
Supermetals Business |
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66 |
|
93 |
|
226 |
|
256 |
|
||||
Specialty Fluids |
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12 |
|
11 |
|
33 |
|
26 |
|
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Segment sales (A) |
|
658 |
|
548 |
|
1,853 |
|
1,558 |
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Unallocated and other (B) |
|
8 |
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(3 |
) |
27 |
|
9 |
|
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Net sales and other operating revenues |
|
$ |
666 |
|
$ |
545 |
|
$ |
1,880 |
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$ |
1,567 |
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SEGMENT PROFIT |
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|
|
|
|
|
|
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Carbon Black Business |
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$ |
23 |
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$ |
26 |
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$ |
70 |
|
$ |
97 |
|
Metal Oxides Business |
|
6 |
|
4 |
|
13 |
|
15 |
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Supermetals Business |
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9 |
|
13 |
|
32 |
|
45 |
|
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Specialty Fluids |
|
5 |
|
5 |
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13 |
|
11 |
|
||||
Total Segment Profit (C) |
|
43 |
|
48 |
|
128 |
|
168 |
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||||
|
|
|
|
|
|
|
|
|
|
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Interest expense |
|
(6 |
) |
(8 |
) |
(19 |
) |
(24 |
) |
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General unallocated income (expense) (D) |
|
(2 |
) |
(2 |
) |
(28 |
) |
(93 |
) |
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Less: Equity in net income of affiliated companies, net of tax |
|
(1 |
) |
(2 |
) |
(8 |
) |
(6 |
) |
||||
Income from continuing operations before income taxes |
|
34 |
|
36 |
|
73 |
|
45 |
|
||||
Provision for income taxes |
|
(8 |
) |
(9 |
) |
(13 |
) |
(30 |
) |
||||
Equity in net income of affiliated companies, net of tax |
|
1 |
|
2 |
|
8 |
|
6 |
|
||||
Minority interest in net income, net of tax |
|
(2 |
) |
(3 |
) |
(9 |
) |
(9 |
) |
||||
Income from continuing operations |
|
25 |
|
26 |
|
59 |
|
12 |
|
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Cumulative effect of an accounting change, net of tax (E) |
|
|
|
|
|
2 |
|
|
|
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Net income |
|
25 |
|
26 |
|
61 |
|
12 |
|
||||
Dividends on preferred stock, net of tax |
|
(1 |
) |
(1 |
) |
(2 |
) |
(2 |
) |
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Net income available to common shares |
|
$ |
24 |
|
$ |
25 |
|
$ |
59 |
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$ |
10 |
|
|
|
|
|
|
|
|
|
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|
||||
Diluted earnings per common share |
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations |
|
$ |
0.37 |
|
$ |
0.39 |
|
$ |
0.85 |
|
$ |
0.18 |
|
Cumulative effect of an accounting change, net of tax (E) |
|
$ |
|
|
$ |
|
|
$ |
0.04 |
|
$ |
|
|
Net income |
|
$ |
0.37 |
|
$ |
0.39 |
|
$ |
0.89 |
|
$ |
0.18 |
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
69 |
|
69 |
|
69 |
|
69 |
|
(A) Segment sales for certain operating segments within the Carbon Black Business include 100% of sales of one equity affiliate and transfers of materials at cost and at market-based prices.
(B) Unallocated and other reflects an elimination for sales of one equity affiliate offset by royalties paid by equity affiliates and external shipping and handling fees.
(C) Segment profit is a measure used by Cabot's operating decision-makers to measure consolidated operating results and assess segment performance. Segment profit includes equity in net income of afflilated companies, royalties paid by equity affiliates, minority interest and allocated corporate costs.
(D) General unallocated income (expense) includes foreign currency transaction gains (losses), interest income, dividend income, and the certain items listed in Exhibit I, including charges in the Supermetals Business of $90 million of goodwill impairment in the second quarter of 2005 and the $27 million Gwalia settlement payment in the second quarter of 2006.
(E) Amounts related to the cumulative benefit resulting from the adoption of FAS 123(R) in the first quarter of 2006, net of tax.
7
Third Quarter Earnings Announcement, Fiscal 2006
CABOT CORPORATION CONDENSED CONSOLIDATED FINANCIAL POSITION
|
|
June 30, |
|
September 30, |
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|
2006 |
|
2005 |
|
||
Dollars in millions |
|
(unaudited) |
|
|
|
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|
|
|
|
|
|
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Current assets: |
|
|
|
|
|
||
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
114 |
|
$ |
181 |
|
Short-term marketable securities investments |
|
1 |
|
30 |
|
||
Accounts and notes receivable, net of reserve for doubtful accounts of $7 and $4 |
|
541 |
|
430 |
|
||
Inventories: |
|
|
|
|
|
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Raw materials |
|
144 |
|
169 |
|
||
Work in process |
|
120 |
|
134 |
|
||
Finished goods |
|
145 |
|
151 |
|
||
Other |
|
39 |
|
39 |
|
||
Total inventories |
|
448 |
|
493 |
|
||
Prepaid expenses and other current assets |
|
92 |
|
66 |
|
||
Assets held for sale |
|
|
|
5 |
|
||
Deferred income taxes |
|
50 |
|
41 |
|
||
Total current assets |
|
1,246 |
|
1,246 |
|
||
|
|
|
|
|
|
||
Investments: |
|
|
|
|
|
||
Equity affiliates |
|
57 |
|
63 |
|
||
Long-term marketable securities and cost investments |
|
3 |
|
6 |
|
||
Total investments |
|
60 |
|
69 |
|
||
|
|
|
|
|
|
||
Property, plant and equipment |
|
2,479 |
|
2,264 |
|
||
Accumulated depreciation and amortization |
|
(1,530 |
) |
(1,430 |
) |
||
Net property, plant and equipment |
|
949 |
|
834 |
|
||
|
|
|
|
|
|
||
Other assets: |
|
|
|
|
|
||
Goodwill |
|
35 |
|
25 |
|
||
Intangible assets, net of accumulated amortization of $9 and $9 |
|
5 |
|
6 |
|
||
Assets held for rent |
|
39 |
|
37 |
|
||
Deferred income taxes |
|
106 |
|
108 |
|
||
Other assets |
|
58 |
|
49 |
|
||
|
|
|
|
|
|
||
Total other assets |
|
243 |
|
225 |
|
||
|
|
|
|
|
|
||
Total assets |
|
$ |
2,498 |
|
$ |
2,374 |
|
8
Third Quarter Earnings Announcement, Fiscal 2006
CABOT CORPORATION CONDENSED CONSOLIDATED FINANCIAL POSITION
|
|
June 30, |
|
September 30, |
|
||
|
|
2006 |
|
2005 |
|
||
Dollars in millions, except for share and per share amounts |
|
(unaudited) |
|
|
|
||
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
||
|
|
|
|
|
|
||
Notes payable to banks |
|
$ |
44 |
|
$ |
34 |
|
Accounts payable and accrued liabilities |
|
369 |
|
321 |
|
||
Income taxes payable |
|
44 |
|
30 |
|
||
Deferred income taxes |
|
1 |
|
1 |
|
||
Current portion of long-term debt |
|
39 |
|
47 |
|
||
Total current liabilities |
|
497 |
|
433 |
|
||
|
|
|
|
|
|
||
Long-term debt |
|
458 |
|
463 |
|
||
Deferred income taxes |
|
13 |
|
15 |
|
||
Other liabilities |
|
292 |
|
307 |
|
||
|
|
|
|
|
|
||
Commitments and Contingencies |
|
|
|
|
|
||
Minority interest |
|
64 |
|
57 |
|
||
|
|
|
|
|
|
||
Stockholders' equity: |
|
|
|
|
|
||
Preferred stock: |
|
|
|
|
|
||
Authorized: 2,000,000 shares of $1 par value |
|
|
|
|
|
||
Series B ESOP Convertible Preferred Stock 7.75% Cumulative issued: |
|
|
|
|
|
||
75,336 shares; outstanding: 57,043 and 61,068 shares (aggregate per share |
|
|
|
|
|
||
Redemption value of $40 and $44) |
|
57 |
|
61 |
|
||
Less cost of shares of preferred treasury stock |
|
(38 |
) |
(38 |
) |
||
Common stock: |
|
|
|
|
|
||
Authorized: 200,000,000 shares of $1 par value |
|
|
|
|
|
||
Issued and outstanding: 63,452,646 and 62,971,872 |
|
63 |
|
63 |
|
||
Less cost of shares of common treasury stock |
|
(5 |
) |
(5 |
) |
||
Additional paid-in capital |
|
21 |
|
32 |
|
||
Retained earnings |
|
1,144 |
|
1,127 |
|
||
Unearned compensation |
|
|
|
(41 |
) |
||
Deferred employee benefits |
|
(39 |
) |
(42 |
) |
||
Notes receivable for restricted stock |
|
(15 |
) |
(19 |
) |
||
Accumulated other comprehensive loss |
|
(14 |
) |
(39 |
) |
||
Total stockholders' equity |
|
1,174 |
|
1,099 |
|
||
|
|
|
|
|
|
||
Total liabilities and stockholders' equity |
|
$ |
2,498 |
|
$ |
2,374 |
|
9
CABOT CORPORATION
|
|
Fiscal 2005 |
|
Fiscal 2006 |
|
|||||||||||||||||||||||||
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Carbon Black Business |
|
$ |
345 |
|
$ |
369 |
|
$ |
387 |
|
$ |
389 |
|
$ |
1,490 |
|
$ |
419 |
|
$ |
476 |
|
$ |
514 |
|
|
|
$ |
1,409 |
|
Rubber blacks |
|
225 |
|
235 |
|
252 |
|
264 |
|
976 |
|
298 |
|
346 |
|
367 |
|
|
|
1,011 |
|
|||||||||
Performance products |
|
110 |
|
123 |
|
123 |
|
113 |
|
469 |
|
109 |
|
117 |
|
134 |
|
|
|
360 |
|
|||||||||
Inkjet colorants |
|
9 |
|
9 |
|
10 |
|
11 |
|
39 |
|
11 |
|
12 |
|
12 |
|
|
|
35 |
|
|||||||||
Superior MicroPowders |
|
1 |
|
2 |
|
2 |
|
1 |
|
6 |
|
1 |
|
1 |
|
1 |
|
|
|
3 |
|
|||||||||
Metal Oxides Business |
|
60 |
|
58 |
|
57 |
|
56 |
|
231 |
|
57 |
|
62 |
|
66 |
|
|
|
185 |
|
|||||||||
Fumed metal oxides |
|
60 |
|
58 |
|
57 |
|
56 |
|
231 |
|
57 |
|
62 |
|
65 |
|
|
|
184 |
|
|||||||||
Aerogels |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
|||||||||
Supermetals Business |
|
77 |
|
86 |
|
93 |
|
90 |
|
346 |
|
93 |
|
67 |
|
66 |
|
|
|
226 |
|
|||||||||
Specialty Fluids Business |
|
7 |
|
8 |
|
11 |
|
14 |
|
40 |
|
10 |
|
11 |
|
12 |
|
|
|
33 |
|
|||||||||
Segment Sales (A) |
|
489 |
|
521 |
|
548 |
|
549 |
|
2,107 |
|
579 |
|
616 |
|
658 |
|
|
|
1,853 |
|
|||||||||
Unallocated and other (B) |
|
6 |
|
6 |
|
(3 |
) |
9 |
|
18 |
|
8 |
|
11 |
|
8 |
|
|
|
27 |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net sales and other operating revenues |
|
$ |
495 |
|
$ |
527 |
|
$ |
545 |
|
$ |
558 |
|
$ |
2,125 |
|
$ |
587 |
|
$ |
627 |
|
$ |
666 |
|
|
|
$ |
1,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Segment Profit (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Carbon Black Business |
|
$ |
30 |
|
$ |
41 |
|
$ |
26 |
|
$ |
(4 |
) |
$ |
94 |
|
$ |
21 |
|
$ |
26 |
|
$ |
23 |
|
|
|
$ |
70 |
|
Metal Oxides Business |
|
6 |
|
5 |
|
4 |
|
1 |
|
16 |
|
2 |
|
5 |
|
6 |
|
|
|
13 |
|
|||||||||
Supermetals Business |
|
16 |
|
16 |
|
13 |
|
7 |
|
52 |
|
11 |
|
12 |
|
9 |
|
|
|
32 |
|
|||||||||
Specialty Fluids |
|
2 |
|
4 |
|
5 |
|
7 |
|
17 |
|
4 |
|
4 |
|
5 |
|
|
|
13 |
|
|||||||||
|
54 |
|
66 |
|
48 |
|
11 |
|
179 |
|
38 |
|
47 |
|
43 |
|
|
|
128 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net Income (Loss) Available to Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest expense |
|
(8 |
) |
(8 |
) |
(8 |
) |
(5 |
) |
(29 |
) |
(6 |
) |
(7 |
) |
(6 |
) |
|
|
(19 |
) |
|||||||||
General unallocated income (expense)(D) |
|
1 |
|
(91 |
) |
(2 |
) |
(139 |
) |
(231 |
) |
(2 |
) |
(24 |
) |
(2 |
) |
|
|
(28 |
) |
|||||||||
Less: Equity in net income of affiliated companies, net of tax |
|
(2 |
) |
(2 |
) |
(2 |
) |
(6 |
) |
(12 |
) |
(3 |
) |
(4 |
) |
(1 |
) |
|
|
(8 |
) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Income (Loss) from Continuing Operations before income taxes |
|
45 |
|
(35 |
) |
36 |
|
(139 |
) |
(93 |
) |
27 |
|
12 |
|
34 |
|
|
|
73 |
|
|||||||||
(Provision) benefit for income taxes |
|
(9 |
) |
(13 |
) |
(9 |
) |
76 |
|
45 |
|
(4 |
) |
(1 |
) |
(8 |
) |
|
|
(13 |
) |
|||||||||
Equity in net income of affiliated companies, net of tax |
|
2 |
|
2 |
|
2 |
|
6 |
|
12 |
|
3 |
|
4 |
|
1 |
|
|
|
8 |
|
|||||||||
Minority interest in net income, net of tax |
|
(3 |
) |
(4 |
) |
(3 |
) |
(2 |
) |
(12 |
) |
(4 |
) |
(3 |
) |
(2 |
) |
|
|
(9 |
) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Income (Loss) from Continuing Operations |
|
35 |
|
(50 |
) |
26 |
|
(59 |
) |
(48 |
) |
22 |
|
12 |
|
25 |
|
|
|
59 |
|
|||||||||
Cumulative effect of an accounting change, net of tax (E) |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
|
35 |
|
(50 |
) |
26 |
|
(59 |
) |
(48 |
) |
24 |
|
12 |
|
25 |
|
|
|
61 |
|
|||||||||
Dividends on preferred stock, net of tax |
|
(1 |
) |
|
|
(1 |
) |
(1 |
) |
(3 |
) |
(1 |
) |
|
|
(1 |
) |
|
|
(2 |
) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) available to common shares |
|
$ |
34 |
|
$ |
(50 |
) |
$ |
25 |
|
$ |
(60 |
) |
$ |
(51 |
) |
$ |
23 |
|
$ |
12 |
|
$ |
24 |
|
|
|
$ |
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Diluted income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from Continuing Operations |
|
$ |
0.51 |
|
$ |
(0.84 |
) |
$ |
0.39 |
|
$ |
(1.02 |
) |
$ |
(0.84 |
) |
$ |
0.31 |
|
$ |
0.17 |
|
$ |
0.37 |
|
|
|
$ |
0.85 |
|
Cumulative Effects of an accounting change, net of tax (E) |
|
|
|
|
|
|
|
|
|
|
|
0.04 |
|
|
|
|
|
|
|
0.04 |
|
|||||||||
Net income (loss) |
|
$ |
0.51 |
|
$ |
(0.84 |
) |
$ |
0.39 |
|
$ |
(1.02 |
) |
$ |
(0.84 |
) |
$ |
0.35 |
|
$ |
0.17 |
|
$ |
0.37 |
|
|
|
$ |
0.89 |
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Diluted (F) |
|
69 |
|
60 |
|
69 |
|
59 |
|
60 |
|
68 |
|
69 |
|
69 |
|
|
|
69 |
|
(A) Segment sales for certain operating segments within the Carbon Black Business include 100% of sales of one equity affiliate and transfers of materials at cost and at market-based prices.
(B) Unallocated and other reflects an elimination for sales for one equity affiliate offset by royalties paid by equity affiliates, external shipping and handling fees.
(C) Segment profit is a measure used by Cabot's operating decision-makers to measure consolidated operating results and assess segment performance. Segment profit includes equity in net income of affiliated companies and excludes royalties paid by equity affiliates, minority interest and allocated corporate costs.
(D) General unallocated income (expense) includes foreign currency transaction gains (losses), interest income, dividend income and certain items listed in Exhibit I. These amounts also include the following charges in the Supermetals Business: $90 million of goodwill impairment charges recorded in the second quarter of 2005, $121 million of long-lived asset impairment charges recorded in the fourth quarter of fiscal 2005 and the $27 million settlement payment in the second quarter of 2006.
(E) Amounts relate to the cumulative benefit resulting from the adoption of FAS 123(R) in the first quarter of 2006, net of tax.
(F) The weighted average common shares outstanding for the quarter ending March 31, 2005 and the quarter and year ending September 30, 2005 reflects the exclusion of those shares that would be antidilutive due to the Companys net loss position in these periods. The shares excluded totalled approximately 9 million shares for the quarter ending March 31, 2005 and approximately 9 million and 8 million shares, respectively, for the quarter and year ending September 30, 2005.
10
Third Quarter Earnings Announcement, Fiscal 2006
CABOT CORPORATION CERTAIN ITEMS - Exhibit I
Periods ended June 30 |
|
Three Months |
|
Nine Months |
|
||||||||||||||||||||
Dollars in millions, except per share amounts (unaudited) |
|
2006 |
|
2006 |
|
2005 |
|
2005 |
|
2006 |
|
2006 |
|
2005 |
|
2005 |
|
||||||||
|
|
$ |
|
per share(A) |
|
$ |
|
per share(A) |
|
$ |
|
per share(A) |
|
$ |
|
per share(A) |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Certain items before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Restructuring initiatives |
|
$ |
(1 |
) |
$ |
(0.01 |
) |
$ |
(4 |
) |
$ |
(0.04 |
) |
$ |
(4 |
) |
$ |
(0.04 |
) |
$ |
(12 |
) |
$ |
(0.12 |
) |
Cost reduction initiatives |
|
(1 |
) |
(0.01 |
) |
|
|
|
|
(4 |
) |
(0.04 |
) |
|
|
|
|
||||||||
Gwalia settlement payment |
|
|
|
|
|
|
|
|
|
(27 |
) |
(0.25 |
) |
|
|
|
|
||||||||
Goodwill asset impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
(90 |
) |
(1.30 |
) |
||||||||
Total certain items |
|
(2 |
) |
(0.02 |
) |
(4 |
) |
(0.04 |
) |
(35 |
) |
(0.33 |
) |
(102 |
) |
(1.42 |
) |
||||||||
Cumulative effect of an accounting change (B) |
|
|
|
|
|
|
|
|
|
4 |
|
0.04 |
|
|
|
|
|
||||||||
Total certain items and cumulative effect of an accounting change |
|
(2 |
) |
(0.02 |
) |
(4 |
) |
(0.04 |
) |
(31 |
) |
(0.29 |
) |
(102 |
) |
(1.42 |
) |
||||||||
Tax impact of certain items and cumulative effect of an accounting change (C) |
|
|
|
|
|
1 |
|
|
|
10 |
|
|
|
6 |
|
0.04 |
|
||||||||
Total certain items and cumulative effect of an accounting change, after tax |
|
$ |
(2 |
) |
$ |
(0.02 |
) |
$ |
(3 |
) |
$ |
(0.04 |
) |
$ |
(21 |
) |
$ |
(0.29 |
) |
$ |
(96 |
) |
$ |
(1.38 |
) |
Periods ended June 30 |
|
|
|
|
|
Three Months |
|
Nine Months |
|
|
|
|
|
||||||||
Dollars in millions (unaudited) |
|
|
|
|
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Statement of Operations Line Item |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales and other operating revenues |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
1 |
|
$ |
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
(1 |
) |
(4 |
) |
(31 |
) |
(11 |
) |
|
|
|
|
||||
Selling and administrative expenses |
|
|
|
|
|
(1 |
) |
|
|
(5 |
) |
(1 |
) |
|
|
|
|
||||
Goodwill asset impairment |
|
|
|
|
|
|
|
|
|
|
|
(90 |
) |
|
|
|
|
||||
Total certain items |
|
|
|
|
|
$ |
(2 |
) |
$ |
(4 |
) |
$ |
(35 |
) |
$ |
(102 |
) |
|
|
|
|
(A) Per share amounts are calculated after tax.
(B) Cumulative benefit resulting from adoption of FAS 123(R) in the first quarter of 2006, net of tax.
(C) Represents tax impact of certain items and cumulative effect of an accounting change.
11
CABOT
CORPORATION
THIRD QUARTER FISCAL YEAR 2006
SUPPLEMENTAL BUSINESS INFORMATION
(Unaudited)
Volume changes for the third quarter of 2006 compared to the third quarter of 2005 and the second quarter of 2006 were as follows:
Business Segment |
|
Q3 2006 vs Q3 2005 |
|
Q3 2006 vs Q2 2006 |
|
Carbon Black Business |
|
|
|
|
|
Rubber Blacks* |
|
2% |
|
3% |
|
Performance Products |
|
(3)% |
|
13% |
|
Inkjet Colorants |
|
40% |
|
4% |
|
Metal Oxides Business |
|
|
|
|
|
Fumed Metal Oxides |
|
11% |
|
3% |
|
Supermetals Business |
|
(9)% |
|
8% |
|
* volume changes in the Carbon Black Business exclude Cabot Japan volumes
Rubber Blacks Regional Analysis
Volume changes by region for the third quarter of 2006 compared to the third quarter of 2005 and the second quarter of 2006 were as follows:
Region |
|
Q3 2006 vs Q3 2005 |
|
Q3 2006 vs Q2 2006 |
|
North America |
|
(2)% |
|
(2)% |
|
South America |
|
4% |
|
11% |
|
Europe |
|
3% |
|
(2)% |
|
Asia Pacific * |
|
(7)% |
|
3% |
|
China |
|
17% |
|
13% |
|
* volume changes in Asia Pacific region exclude Cabot Japan volumes
Capital Expenditures
Cabot invested approximately $43 million in capital expenditures during the third quarter of 2006 compared to $45 million during the third quarter of 2005.
Share Repurchases
|
Q1 FY06 |
|
Q2 FY06 |
|
Q3 FY06 |
|
|
Total Shares Repurchased |
|
85,733 |
|
76,316 |
|
246,309 |
|
Open Market Shares Repurchased |
|
|
|
|
|
|
|
Cash Cost of Open Market Purchases |
|
|
|
|
|
|
|
· Approximately 2.7 million shares remain available for purchase under the current Board of Directors authorization.
Working Capital
During the third quarter of 2006 working capital decreased by $53 million on a constant dollar basis ($45 million at actual exchange rates) driven by reduced inventory levels and an increase in payables. The decrease was partially offset by higher accounts receivable levels from strong volumes and price increases, and upward pressure on inventory costs resulting from higher feedstock costs.
Effective Tax Rate
The Companys effective tax rate for both net income and net income from continuing operations was 22% for the third quarter of 2006.