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): April 25, 2007
CABOT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE |
1-5667 |
04-2271897 |
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(State or Other Jurisdiction |
(Commission |
(IRS Employer |
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of Incorporation) |
File Number) |
Identification No.) |
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TWO SEAPORT LANE, SUITE 1300, |
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(Address of Principal Executive Offices) |
(Zip Code) |
(Registrant’s Telephone Number, Including Area Code) (617) 345-0100
(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 April 25, 2007, Cabot Corporation issued a press release announcing its operating results for the fiscal quarter ended March 31, 2007. A copy of the press release, together with supplemental business information for the second quarter of Cabot’s 2007 fiscal year, are furnished herewith as Exhibits 99.1 and 99.2.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press release issued by Cabot Corporation on April 25, 2007
99.2 Second Quarter Fiscal Year 2007 Supplemental Business Information
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.
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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: April 25, 2007 |
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Exhibit |
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Number |
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Title |
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99.1 |
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Press release issued by Cabot Corporation on April 25, 2007 |
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99.2 |
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Second Quarter Fiscal Year 2007 Supplemental Business Information |
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Exhibit 99.1
Contact: Susannah
R. Robinson
Director, Investor Relations
(617) 342-6129
CABOT ANNOUNCES SECOND QUARTER OPERATING RESULTS
BOSTON, MA (April 25, 2007) — Cabot Corporation (NYSE:CBT) today announced net income of $37 million after-tax ($0.54 per diluted common share) for the second quarter of 2007, including $5 million after-tax ($0.08 per diluted common share) of charges from certain items, compared to net income of $12 million after-tax ($0.17 per diluted common share) for the second quarter of fiscal 2006, including $20 million after-tax ($0.29 per diluted common share) of charges from certain items. Details of financial results and certain items included in net income are provided in the accompanying tables.
In commenting on the results, Kennett F. Burnes, Cabot’s Chairman and CEO, said, “We are very pleased with our second quarter financial results. We had strong volume growth in most of our businesses, and we continued to benefit during the quarter from our recent capacity additions in China in both carbon black and fumed silica. In addition, lower carbon black feedstock costs and the timing of pricing adjustments in our supply contracts favorably impacted results, in rubber blacks and performance products during the quarter, albeit not as significantly as in the first quarter of 2007. Inkjet colorants’ results improved significantly as a strong increase in volumes led to a recovery from a weak first quarter of 2007. Specialty Fluids maintained a solid utilization level compared to the prior year but declined somewhat following a strong first quarter of 2007. These strong results were dampened a bit by weaker than anticipated performance in the Supermetals Business as the expiration of our final significant long-term supply contract and some unanticipated costs led to a slight loss in this Business for the quarter.”
Product Line Performance
Unit margins in both rubber blacks and performance products increased when compared to the second quarter of 2006, in part because of the time lag in our feedstock related pricing adjustments on contracted business. Volume increases in both product lines, 3% in rubber blacks and 7% in performance products, combined with lower feedstock and natural gas costs and favorable foreign currency translation to more than offset increased fixed costs of new capacity, leading to improved performance when compared to the second quarter of 2006. Sequentially, the impact of strong volume growth, 7% in rubber blacks and 10% in performance products, was almost entirely offset by lower unit margins as price declines driven by our contracted business outpaced raw material cost decreases. Therefore, in combination with a small increase in operating costs and administrative expenses, profitability declined slightly compared to the first quarter of 2007.
In inkjet colorants, volumes increased by 7% compared to the same quarter a year ago, and by 31% compared to the first quarter of 2007. Volumes in both the aftermarket and OEM market segments improved compared to the first quarter of 2007, leading to a significant increase in profitability. However, softness in the aftermarket and increased competition in the small office home office (SOHO) market segment continues to impact the product line. Costs associated with new production capacity, which is not yet fully commercially utilized, and increased R&D expenses unfavorably impacted the results of the product line compared to the second quarter of 2006.
Fumed silica volumes grew by 7% and 4% when compared to the second quarter of 2006 and the first quarter of 2007, respectively, as growth in the silicones and niche segments more than offset declines in the electronics segment when compared to both periods. When compared to the second quarter of 2006, the profitability of the product line improved as strong volumes, lower average feedstock costs from our new fumed silica capacity in China and lower hydrogen costs more than offset increased R&D and administrative expenses and higher fixed manufacturing costs related to new capacity. Sequentially, profitability decreased slightly as the
positive impact of increased volumes was offset by higher raw material costs and increased R&D and administrative expenses.
The performance of the Supermetals Business decreased significantly when compared to both the second quarter of 2006 and the first quarter of 2007. When compared to both periods, the Business experienced lower volumes and pricing as the transition from contracted to market based sales was completed in December 2006. Compared to the second quarter of 2006, we have replaced nearly 70% of contracted volumes with market based sales. Sequentially, volumes decreased by 25% as the Business experienced the effects of both the loss of contracted volumes and some weakness in the electronics industry. Unfavorable product mix, the timing of certain costs and an unanticipated increase in a number of expenses also reduced profitability during the quarter.
In the Specialty Fluids Business, profitability decreased when compared to both the second quarter of 2006 and the first quarter of 2007. When compared to the second quarter of 2006, the Business maintained its fluid utilization level, with an increase in rental revenue offset by a lower volume of fluid sold. Increased engineering and global marketing costs caused profitability to decline slightly. Sequentially, normal seasonality in rental revenue and volume of fluid sold caused a decrease in the fluid utilization rate from an exceptionally strong first quarter of 2007.
Outlook
With respect to the future, Burnes said, “We anticipate that the benefit associated with the timing of pricing adjustments in our carbon black contracts has been realized, and we continue to watch feedstock costs closely as their volatility inevitably impacts our results. We are optimistic about carbon black volume growth outside of North America, but remain cautious about demand in North America. We anticipate continued solid performance from our fumed silica product line, particularly in the silicones and niche markets, and from our new capacity in China. Despite a weak second quarter and some concerns over market volumes for the remainder of the year, we
expect the Supermetals Business to improve from this quarter’s results and be profitable for the balance of the year. We also continue to develop additional cost reduction opportunities to improve performance in this Business. We optimistically await the results of near term customer launches in the high-speed segment of the inkjet market and will monitor progress over the second half of the year to ensure that we are well positioned to commission new capacity in a timely manner to serve demand. Our new businesses continue to make progress in market development and operational activities and we remain optimistic about their growth for the remainder of this year and beyond.”
For those interested in more detailed information regarding Cabot’s second quarter 2007 results, please see the Supplemental Business Information available on the Company’s website in the Investor Relations section: http://investor.cabot-corp.com.
This press release includes forward-looking statements, particularly under the outlook section, relating to management’s expectations regarding volume growth of our carbon black business outside of the North American region, performance in the fumed silica product line, improvement in results in the Supermetals Business and profitability of that Business, and growth in the new businesses. The following are some of the factors that could cause Cabot’s actual results to differ materially from those expressed in the forward-looking statements: changes in feedstock costs; lower than expected demand for our products; our inability to achieve savings from cost reduction activities; our inability to maintain and grow our position in the small office, home office printing market and to participate in the growth in emerging inkjet applications; unexpected delays in drilling operations at wells 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 Company’s 2006 Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission.
Cabot Corporation is a global specialty chemicals and materials company headquartered in Boston, MA. Cabot’s major products are carbon black, fumed silica, inkjet colorants, capacitor materials, and cesium formate drilling fluids.
Second Quarter Earnings Announcement, Fiscal 2007
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
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Periods ended March 31 |
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Three Months |
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Six Months |
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Dollars in millions, except per share amounts (unaudited) |
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2007 |
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2006 |
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2007 |
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2006 |
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Net sales and other operating revenues |
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$ |
637 |
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$ |
627 |
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$ |
1,292 |
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$ |
1,214 |
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Cost of sales |
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499 |
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542 |
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1,005 |
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1,023 |
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Gross profit |
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138 |
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85 |
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287 |
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191 |
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Selling and administrative expenses |
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63 |
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59 |
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117 |
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117 |
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Research and technical expenses |
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17 |
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14 |
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32 |
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27 |
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Income from operations |
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58 |
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12 |
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138 |
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47 |
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Other income and expense |
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Interest and dividend income |
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3 |
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1 |
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5 |
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3 |
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Interest expense |
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(9 |
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(7 |
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(18 |
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(13 |
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Other income (expense) |
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(1 |
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6 |
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1 |
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2 |
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Total other income and expense |
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(7 |
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— |
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(12 |
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(8 |
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Income from continuing operations before income taxes |
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51 |
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12 |
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126 |
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39 |
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Provision for income taxes |
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(15 |
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(1 |
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(34 |
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(5 |
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Equity in net income of affiliated companies, net of tax |
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3 |
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4 |
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6 |
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7 |
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Minority interest in net income, net of tax |
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(2 |
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(3 |
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(7 |
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(7 |
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Net income from continuing operations |
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37 |
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12 |
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91 |
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34 |
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Cumulative effect of an accounting change, net of tax |
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— |
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— |
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— |
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2 |
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Net income |
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37 |
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12 |
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91 |
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36 |
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Dividends on preferred stock, net of tax benefit |
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(1 |
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— |
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(1 |
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(1 |
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Net income available to common shares |
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$ |
36 |
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$ |
12 |
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$ |
90 |
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$ |
35 |
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Diluted earnings per share of common stock |
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Income from continuing operations |
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$ |
0.54 |
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$ |
0.17 |
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$ |
1.33 |
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$ |
0.48 |
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Cumulative effect of an accounting change, net of tax |
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— |
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— |
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— |
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0.04 |
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Net income |
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$ |
0.54 |
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$ |
0.17 |
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$ |
1.33 |
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$ |
0.52 |
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Weighted average common shares outstanding |
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Diluted |
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69 |
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69 |
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69 |
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69 |
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Second Quarter Earnings Announcement, Fiscal 2007
CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS
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Periods ended March 31 |
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Three Months |
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Six Months |
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Dollars in millions, except per share amounts (unaudited) |
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2007 |
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2006 |
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2007 |
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2006 |
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SALES |
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Carbon Black Business (A) |
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$ |
493 |
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$ |
476 |
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$ |
978 |
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$ |
895 |
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Rubber blacks |
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346 |
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346 |
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697 |
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644 |
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Performance products |
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134 |
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117 |
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257 |
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226 |
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Inkjet colorants |
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13 |
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12 |
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23 |
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23 |
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Superior MicroPowders |
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— |
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1 |
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1 |
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2 |
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Metal Oxides Business |
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68 |
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62 |
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133 |
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119 |
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Fumed metal oxides |
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68 |
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62 |
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133 |
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119 |
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Aerogel |
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— |
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— |
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— |
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— |
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Supermetals Business |
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53 |
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67 |
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130 |
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160 |
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Specialty Fluids Business |
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10 |
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11 |
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26 |
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21 |
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Segment sales |
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624 |
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616 |
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1,267 |
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1,195 |
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Unallocated and other (B) |
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13 |
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11 |
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25 |
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19 |
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Net sales and other operating revenues |
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$ |
637 |
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$ |
627 |
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$ |
1,292 |
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$ |
1,214 |
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SEGMENT PROFIT |
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Carbon Black Business |
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$ |
57 |
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$ |
26 |
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$ |
111 |
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$ |
47 |
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Metal Oxides Business |
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10 |
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5 |
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19 |
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7 |
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Supermetals Business |
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(2 |
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12 |
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14 |
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23 |
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Specialty Fluids Business |
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3 |
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4 |
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11 |
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8 |
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Total Segment Profit (C) |
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68 |
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47 |
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155 |
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85 |
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Interest expense |
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(9 |
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(7 |
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(18 |
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(13 |
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General unallocated expense (D) |
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(5 |
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(24 |
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(5 |
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(26 |
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Less: Equity in net income of affiliated companies, net of tax |
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(3 |
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(4 |
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(6 |
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(7 |
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Income from continuing operations before income taxes |
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51 |
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12 |
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126 |
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39 |
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Provision for income taxes |
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(15 |
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(1 |
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(34 |
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(5 |
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Equity in net income of affiliated companies, net of tax |
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3 |
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4 |
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6 |
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7 |
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Minority interest in net income, net of tax |
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(2 |
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(3 |
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(7 |
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(7 |
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Income from continuing operations |
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37 |
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12 |
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91 |
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34 |
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Cumulative effect of an accounting change, net of tax (E) |
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— |
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— |
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— |
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2 |
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Net income |
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37 |
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12 |
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91 |
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36 |
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Dividends on preferred stock, net of tax benefit |
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(1 |
) |
— |
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(1 |
) |
(1 |
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Net income available to common shares |
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$ |
36 |
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$ |
12 |
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$ |
90 |
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$ |
35 |
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Diluted earnings per share of common stock |
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Income from continuing operations |
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$ |
0.54 |
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$ |
0.17 |
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$ |
1.33 |
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$ |
0.48 |
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Cumulative effect of an accounting change, net of tax (E) |
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— |
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— |
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— |
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0.04 |
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Net income |
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$ |
0.54 |
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$ |
0.17 |
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$ |
1.33 |
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$ |
0.52 |
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Weighted average common shares outstanding |
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Diluted |
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69 |
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69 |
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69 |
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69 |
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(A) Segment sales for certain operating segments within the Carbon Black Business include 100% of sales of one equity affiliate 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 affiliated companies and excludes royalties paid by equity affiliates, minority interest and allocated corporate costs.
(D) General unallocated expense includes foreign currency transaction gains (losses), interest income, dividend income, and the certain items listed in Exhibit I.
(E) Cumulative benefit of an accounting change for implementation of FAS 123 (R), net of tax.
Second Quarter Earnings Announcement, Fiscal 2007
CABOT CORPORATION CONDENSED CONSOLIDATED FINANCIAL POSITION
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March 31 |
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September 30, |
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|
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2007 |
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2006 |
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Dollars in millions, except share and per share amounts |
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(unaudited) |
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(audited) |
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Current assets: |
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Cash and cash equivalents |
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$ |
248 |
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$ |
189 |
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Short-term marketable securities |
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21 |
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1 |
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Accounts and notes receivable, net of reserve for doubtful accounts of $5 and $6 |
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541 |
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534 |
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Inventories: |
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Raw materials |
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137 |
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131 |
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Work in process |
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99 |
|
109 |
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Finished goods |
|
149 |
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139 |
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||
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Other |
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43 |
|
41 |
|
||
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Total inventories |
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428 |
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420 |
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Prepaid expenses and other current assets |
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78 |
|
75 |
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||
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Deferred income taxes |
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34 |
|
36 |
|
||
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Total current assets |
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1,350 |
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1,255 |
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Investments: |
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Equity affiliates |
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59 |
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59 |
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Long-term marketable securities and cost investments |
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2 |
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3 |
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Total investments |
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61 |
|
62 |
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||
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|
|
|
|
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Property, plant and equipment |
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2,616 |
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2,531 |
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Accumulated depreciation and amortization |
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(1,657 |
) |
(1,567 |
) |
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Net property, plant and equipment |
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959 |
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964 |
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|
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|
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||
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Other assets: |
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|
|
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Goodwill |
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33 |
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31 |
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Intangible assets, net of accumulated amortization of $10 and $10 |
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4 |
|
5 |
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Assets held for rent |
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42 |
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40 |
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Deferred income taxes |
|
97 |
|
100 |
|
||
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Other assets |
|
79 |
|
77 |
|
||
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Total other assets |
|
255 |
|
253 |
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||
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|
|
|
|
|
|
||
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Total assets |
|
$ |
2,625 |
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$ |
2,534 |
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Second Quarter Earnings Announcement, Fiscal 2007
CABOT CORPORATION CONDENSED CONSOLIDATED FINANCIAL POSITION
|
|
|
March 31 |
|
September 30, |
|
||
|
|
|
2007 |
|
2006 |
|
||
|
Dollars in millions, except share and per share amounts |
|
(unaudited) |
|
(audited) |
|
||
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Current liabilities: |
|
|
|
|
|
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Notes payable to banks |
|
$ |
69 |
|
$ |
58 |
|
|
Accounts payable and accrued liabilities |
|
379 |
|
384 |
|
||
|
Income taxes payable |
|
38 |
|
27 |
|
||
|
Deferred income taxes |
|
2 |
|
2 |
|
||
|
Current portion of long-term debt |
|
18 |
|
34 |
|
||
|
Total current liabilities |
|
506 |
|
505 |
|
||
|
Long-term debt |
|
442 |
|
459 |
|
||
|
Deferred income taxes |
|
19 |
|
20 |
|
||
|
Other liabilities |
|
290 |
|
286 |
|
||
|
|
|
|
|
|
|
||
|
Minority interest |
|
68 |
|
68 |
|
||
|
|
|
|
|
|
|
||
|
Stockholders’ equity: |
|
|
|
|
|
||
|
Preferred stock: |
|
|
|
|
|
||
|
Authorized: 2,000,000 shares of $1 par value |
|
|
|
|
|
||
|
Series B ESOP Convertible Preferred Stock 7.75% Cumulative |
|
|
|
|
|
||
|
Authorized: 200,000 shares |
|
|
|
|
|
||
|
Issued: 50,580 and 55,895 shares |
|
50 |
|
56 |
|
||
|
Outstanding: 33,419 and 38,734 shares (aggregate redemption value of $33 and $39 at $1,000 per share) |
|
|
|
|
|
||
|
Less cost of 17,161 shares of preferred treasury stock |
|
(38 |
) |
(38 |
) |
||
|
Common stock: |
|
|
|
|
|
||
|
Authorized: 200,000,000 shares of $1 par value |
|
|
|
|
|
||
|
Issued: 64,506,134 and 63,579,040 shares |
|
65 |
|
64 |
|
||
|
Outstanding: 64,361,188 and 63,432,651 shares |
|
|
|
|
|
||
|
Less cost of 144,946 and 146,389 shares of common treasury stock |
|
(5 |
) |
(5 |
) |
||
|
Additional paid-in capital |
|
29 |
|
7 |
|
||
|
Retained earnings |
|
1,228 |
|
1,160 |
|
||
|
Deferred employee benefits |
|
(36 |
) |
(38 |
) |
||
|
Notes receivable for restricted stock |
|
(19 |
) |
(20 |
) |
||
|
Accumulated other comprehensive income |
|
26 |
|
10 |
|
||
|
Total stockholders’ equity |
|
1,300 |
|
1,196 |
|
||
|
|
|
|
|
|
|
||
|
Total liabilities and stockholders’ equity |
|
$ |
2,625 |
|
$ |
2,534 |
|
CABOT CORPORATION
|
|
|
Fiscal 2006 |
|
Fiscal 2007 |
|
||||||||||||||||||||||||
|
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 (A) |
|
$ |
419 |
|
$ |
476 |
|
$ |
514 |
|
$ |
508 |
|
$ |
1,917 |
|
$ |
485 |
|
$ |
493 |
|
|
|
|
|
$ |
978 |
|
|
Rubber blacks |
|
298 |
|
346 |
|
367 |
|
367 |
|
1,378 |
|
351 |
|
346 |
|
|
|
|
|
697 |
|
||||||||
|
Performance products |
|
109 |
|
117 |
|
134 |
|
128 |
|
488 |
|
123 |
|
134 |
|
|
|
|
|
257 |
|
||||||||
|
Inkjet colorants |
|
11 |
|
12 |
|
12 |
|
12 |
|
47 |
|
10 |
|
13 |
|
|
|
|
|
23 |
|
||||||||
|
Superior MicroPowders |
|
1 |
|
1 |
|
1 |
|
1 |
|
4 |
|
1 |
|
— |
|
|
|
|
|
1 |
|
||||||||
|
Metal Oxides Business |
|
57 |
|
62 |
|
66 |
|
69 |
|
254 |
|
65 |
|
68 |
|
|
|
|
|
133 |
|
||||||||
|
Fumed metal oxides |
|
57 |
|
62 |
|
65 |
|
69 |
|
253 |
|
65 |
|
68 |
|
|
|
|
|
133 |
|
||||||||
|
Aerogel |
|
— |
|
— |
|
1 |
|
— |
|
1 |
|
— |
|
— |
|
|
|
|
|
— |
|
||||||||
|
Supermetals Business |
|
93 |
|
67 |
|
66 |
|
66 |
|
292 |
|
77 |
|
53 |
|
|
|
|
|
130 |
|
||||||||
|
Specialty Fluids Business |
|
10 |
|
11 |
|
12 |
|
11 |
|
44 |
|
16 |
|
10 |
|
|
|
|
|
26 |
|
||||||||
|
Segment Sales |
|
579 |
|
616 |
|
658 |
|
654 |
|
2,507 |
|
643 |
|
624 |
|
|
|
|
|
1,267 |
|
||||||||
|
Unallocated and other (B) |
|
8 |
|
11 |
|
8 |
|
9 |
|
36 |
|
12 |
|
13 |
|
|
|
|
|
25 |
|
||||||||
|
Net sales and other operating revenues |
|
$ |
587 |
|
$ |
627 |
|
$ |
666 |
|
$ |
663 |
|
$ |
2,543 |
|
$ |
655 |
|
$ |
637 |
|
|
|
|
|
$ |
1,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Segment Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Carbon Black Business (C) |
|
$ |
21 |
|
$ |
26 |
|
$ |
23 |
|
$ |
31 |
|
$ |
101 |
|
$ |
54 |
|
$ |
57 |
|
|
|
|
|
$ |
111 |
|
|
Metal Oxides Business (C) |
|
2 |
|
5 |
|
6 |
|
9 |
|
22 |
|
9 |
|
10 |
|
|
|
|
|
19 |
|
||||||||
|
Supermetals Business |
|
11 |
|
12 |
|
9 |
|
9 |
|
41 |
|
16 |
|
(2 |
) |
|
|
|
|
14 |
|
||||||||
|
Specialty Fluids Business |
|
4 |
|
4 |
|
5 |
|
3 |
|
16 |
|
8 |
|
3 |
|
|
|
|
|
11 |
|
||||||||
|
Total Segment Profit (D) |
|
38 |
|
47 |
|
43 |
|
52 |
|
180 |
|
87 |
|
68 |
|
|
|
|
|
155 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Income from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Interest expense |
|
(6 |
) |
(7 |
) |
(6 |
) |
(8 |
) |
(27 |
) |
(9 |
) |
(9 |
) |
|
|
|
|
(18 |
) |
||||||||
|
General unallocated expense (E) |
|
(2 |
) |
(24 |
) |
(2 |
) |
(16 |
) |
(44 |
) |
— |
|
(5 |
) |
|
|
|
|
(5 |
) |
||||||||
|
Less: Equity in net income of affiliated companies, net of tax |
|
(3 |
) |
(4 |
) |
(1 |
) |
(4 |
) |
(12 |
) |
(3 |
) |
(3 |
) |
|
|
|
|
(6 |
) |
||||||||
|
Income from continuing operations before income taxes |
|
27 |
|
12 |
|
34 |
|
24 |
|
97 |
|
75 |
|
51 |
|
|
|
|
|
126 |
|
||||||||
|
(Provision) benefit for income taxes |
|
(4 |
) |
(1 |
) |
(8 |
) |
4 |
|
(9 |
) |
(19 |
) |
(15 |
) |
|
|
|
|
(34 |
) |
||||||||
|
Equity in net income of affiliated companies, net of tax |
|
3 |
|
4 |
|
1 |
|
4 |
|
12 |
|
3 |
|
3 |
|
|
|
|
|
6 |
|
||||||||
|
Minority interest in net income, net of tax |
|
(4 |
) |
(3 |
) |
(2 |
) |
(3 |
) |
(12 |
) |
(5 |
) |
(2 |
) |
|
|
|
|
(7 |
) |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income from continuing operations |
|
22 |
|
12 |
|
25 |
|
29 |
|
88 |
|
54 |
|
37 |
|
|
|
|
|
91 |
|
||||||||
|
Cumulative effect of accounting changes, net of tax (F) |
|
2 |
|
— |
|
— |
|
(4 |
) |
(2 |
) |
— |
|
— |
|
|
|
|
|
— |
|
||||||||
|
Discontinued operations (G) |
|
— |
|
— |
|
— |
|
2 |
|
2 |
|
— |
|
— |
|
|
|
|
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income |
|
24 |
|
12 |
|
25 |
|
27 |
|
88 |
|
54 |
|
37 |
|
|
|
|
|
91 |
|
||||||||
|
Dividends on preferred stock, net of tax benefit |
|
(1 |
) |
— |
|
(1 |
) |
— |
|
(2 |
) |
— |
|
(1 |
) |
|
|
|
|
(1 |
) |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income available to common shares |
|
$ |
23 |
|
$ |
12 |
|
$ |
24 |
|
$ |
27 |
|
$ |
86 |
|
$ |
54 |
|
$ |
36 |
|
|
|
|
|
$ |
90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Diluted earnings per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income from continuing operations |
|
$ |
0.31 |
|
$ |
0.17 |
|
$ |
0.37 |
|
$ |
0.43 |
|
$ |
1.28 |
|
$ |
0.79 |
|
$ |
0.54 |
|
|
|
|
|
$ |
1.33 |
|
|
Cumulative effects of accounting changes, net of tax (F) |
|
0.04 |
|
— |
|
— |
|
(0.07 |
) |
(0.03 |
) |
— |
|
— |
|
|
|
|
|
— |
|
||||||||
|
Discontinued operations (G) |
|
— |
|
— |
|
— |
|
0.03 |
|
0.03 |
|
— |
|
— |
|
|
|
|
|
— |
|
||||||||
|
Net income |
|
$ |
0.35 |
|
$ |
0.17 |
|
$ |
0.37 |
|
$ |
0.39 |
|
$ |
1.28 |
|
$ |
0.79 |
|
$ |
0.54 |
|
|
|
|
|
$ |
1.33 |
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Diluted |
|
68 |
|
69 |
|
69 |
|
68 |
|
68 |
|
69 |
|
69 |
|
|
|
|
|
69 |
|
||||||||
(A) Segment sales for certain operating segments within the Carbon Black Business include 100% of sales of one equity affiliate at market-based prices.
(B) Unallocated and other reflects an elimination for sales for one equity affiliate offset by royalties paid by equity affiliates and external shipping and handling fees.
(C) The fourth quarter and fiscal year end 2006 amounts include a reclassification of $4 million of profit from the Carbon Black segment to the Metal Oxides segment. This reclassification was deemed to be immaterial for purposes of the annual segment reporting in the September 30, 2006 consolidated financial statements.
(D) 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, royalties paid by equity affiliates, minority interest and allocated corporate costs.
(E) General unallocated expense includes foreign currency transaction gains (losses), interest income, dividend income and certain items listed in Exhibit I.
(F) Amounts relate to the cumulative benefit resulting from the adoption of FAS 123(R) in the first quarter of 2006 of $0.04 and the cumulative expense resulting from the adoption of FIN 47 in the fourth quarter of 2006 of ($0.07).
(G) Amount relates to a favorable tax settlement recognized during the period from our discontinued liquified natural gas business.
Second Quarter Earnings Announcement, Fiscal 2007
CABOT CORPORATION CERTAIN ITEMS - Exhibit I
|
Periods ended March 31 |
|
Three Months |
|
Six Months |
|
||||||||||||||||||||
|
Dollars in millions, except per share amounts (unaudited) |
|
2007 |
|
2007 |
|
2006 |
|
2006 |
|
2007 |
|
2007 |
|
2006 |
|
2006 |
|
||||||||
|
|
|
$ |
|
per |
|
$ |
|
per |
|
$ |
|
per |
|
$ |
|
per |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Certain items before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Environmental reserves/settlement |
|
$ |
(5 |
) |
$ |
(0.06 |
) |
$ |
— |
|
$ |
— |
|
$ |
(5 |
) |
$ |
(0.06 |
) |
$ |
— |
|
$ |
— |
|
|
Restructuring initiatives - Global |
|
(2 |
) |
(0.02 |
) |
— |
|
— |
|
(4 |
) |
(0.04 |
) |
— |
|
— |
|
||||||||
|
Restructuring initiatives - Altona |
|
— |
|
— |
|
(2 |
) |
(0.02 |
) |
(1 |
) |
(0.01 |
) |
(3 |
) |
(0.03 |
) |
||||||||
|
Cost reduction initiatives |
|
— |
|
— |
|
(2 |
) |
(0.02 |
) |
— |
|
— |
|
(3 |
) |
(0.03 |
) |
||||||||
|
Gwalia settlement payment |
|
— |
|
— |
|
(27 |
) |
(0.25 |
) |
— |
|
— |
|
(27 |
) |
(0.25 |
) |
||||||||
|
Total certain items |
|
(7 |
) |
(0.08 |
) |
(31 |
) |
(0.29 |
) |
(10 |
) |
(0.11 |
) |
(33 |
) |
(0.31 |
) |
||||||||
|
Cumulative effect of an accounting change (B) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
4 |
|
0.04 |
|
||||||||
|
Total certain items and cumulative effect of an accounting change |
|
(7 |
) |
(0.08 |
) |
(31 |
) |
(0.29 |
) |
(10 |
) |
(0.11 |
) |
(29 |
) |
(0.27 |
) |
||||||||
|
Tax impact of certain items and cumulative effect of an accounting change |
|
2 |
|
— |
|
11 |
|
— |
|
3 |
|
— |
|
10 |
|
— |
|
||||||||
|
Total certain items and cumulative effect of an accounting change, after tax |
|
$ |
(5 |
) |
$ |
(0.08 |
) |
$ |
(20 |
) |
$ |
(0.29 |
) |
$ |
(7 |
) |
$ |
(0.11 |
) |
$ |
(19 |
) |
$ |
(0.27 |
) |
|
Periods ended March 31 |
|
Three Months |
|
Six Months |
|
||||||||
|
Dollars in millions (unaudited) |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Statement of Operations Line Item |
|
|
|
|
|
|
|
|
|
||||
|
Net sales and other operating revenues |
|
$ |
— |
|
$ |
1 |
|
$ |
— |
|
$ |
1 |
|
|
Cost of sales |
|
6 |
|
(30 |
) |
8 |
|
(30 |
) |
||||
|
Selling and administrative expenses |
|
1 |
|
(2 |
) |
2 |
|
(4 |
) |
||||
|
Total certain items |
|
$ |
7 |
|
$ |
(31 |
) |
$ |
10 |
|
$ |
(33 |
) |
|
Periods ended March 31 |
|
Three Months |
|
Six Months |
|
||||||||
|
Dollars in millions (unaudited) |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Certain items by Segment |
|
|
|
|
|
|
|
|
|
||||
|
Carbon Black Business |
|
$ |
4 |
|
$ |
(2 |
) |
$ |
7 |
|
$ |
(3 |
) |
|
Supermetals Business |
|
2 |
|
(29 |
) |
2 |
|
(30 |
) |
||||
|
Other |
|
1 |
|
— |
|
1 |
|
— |
|
||||
|
Total certain items |
|
$ |
7 |
|
$ |
(31 |
) |
$ |
10 |
|
$ |
(33 |
) |
(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.
Exhibit 99.2
SUPPLEMENTAL
BUSINESS INFORMATION (Unaudited)
SECOND QUARTER FISCAL 2007
Business Segment Variance- Revenue
Sales variance for the Carbon Black Business between Q2 2007 and Q2 2006 was driven by higher volumes ($21 million) and positive foreign currency translation ($21 million) partially offset by lower pricing and unfavorable product mix ($17 million). Sales variance for the Carbon Black Business between Q2 2007 and Q1 2007 was driven by higher volumes ($39 million) and positive foreign currency translation ($5 million) partially offset by lower pricing and unfavorable product mix ($30 million).
Sales variance for the Metal Oxides Business between Q2 2007 and Q2 2006 was driven by higher volumes ($5 million) and positive foreign currency translation ($3 million). Sales variance for the Metal Oxides Business between Q2 2007 and Q1 2007 was driven primarily by higher volumes ($2 million).
Sales variance for the Supermetals Business between Q2 2007 and Q2 2006 was driven by lower volumes ($10 million) and lower pricing and unfavorable product mix ($5 million). Sales variance for the Supermetals Business between Q2 2007 and Q1 2007 was driven by lower volumes ($18 million) and lower pricing ($7 million).
Business Segment Variance- Profit Before Taxes (PBT)
PBT variance for the Carbon Black Business between Q2 2007 and Q2 2006 was driven by the benefit of lower raw material costs that exceeded lower pricing and unfavorable product mix ($28 million), higher volumes ($7 million) and a net benefit of foreign currency translation ($3 million), partially offset by higher R&D and administrative expenses ($8 million) and higher fixed costs of new capacity ($3 million). PBT variance for the Carbon Black Business between Q2 2007 and Q1 2007 was driven by higher volumes ($17 million), partially offset by lower pricing and unfavorable product mix that outpaced the benefit of lower raw material costs ($10 million) and higher administrative expenses ($6 million), due in part to a weaker U.S. dollar.
PBT variance for the Metal Oxides Business between Q2 2007 and Q2 2006 was driven primarily by higher volumes ($3 million) and lower raw material costs ($1 million). PBT variance for the Metal Oxides Business between Q2 2007 and Q1 2007 was driven by higher volumes ($2 million) and lower fixed costs ($2 million), which was offset by higher raw material costs ($2 million) and higher R&D and administrative expenses ($2 million).
PBT variance for the Supermetals Business between Q2 2007 and Q2 2006 was driven by lower volumes ($2 million), lower pricing and unfavorable product mix ($5 million) and the timing of certain costs ($3 million). PBT variance for the Supermetals Business between Q2 2007 and Q1 2007 was driven by lower volumes ($7 million), lower pricing ($7 million), the timing of certain costs ($4 million) and higher selling, technical and administrative expenses ($2 million).
Volume Changes- Rubber Blacks Regional Detail
|
Region |
|
Q2 2007 vs Q2 2006 |
|
Q2 2007 vs Q1 2007 |
|
|
North America |
|
(7 |
%) |
23 |
% |
|
South America |
|
6 |
% |
5 |
% |
|
Europe |
|
4 |
% |
10 |
% |
|
Asia Pacific |
|
(1 |
%) |
(2 |
%) |
|
China |
|
26 |
% |
(2 |
%) |
Capital Expenditures
Cabot invested approximately $23 million in capital expenditures during the second quarter of 2007 compared to $52 million in the second quarter of 2006.
Open Market Share Repurchases
During the quarter, the Company repurchased 86,100 shares for a cash cost of approximately $3.8 million. Approximately 1.5 million shares remain available for repurchase under the current Board of Directors’ authorization.
Working Capital
Working capital has increased by $6 million on a constant dollar basis ($18 million at actual exchange rates) through the second quarter of 2007 driven by a decrease in payables and accruals and an increase in raw material inventory, partially offset by a decrease in receivables.
Effective Tax Rate
The Company’s effective tax rate for net income from continuing operations was 29% for the second quarter of 2007.