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): October 31, 2007
CABOT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
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1-5667 |
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04-2271897 |
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(Commission File Number) |
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(IRS Employer Identification No.) |
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TWO SEAPORT LANE, SUITE 1300, BOSTON, MASSACHUSETTS |
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02210-2019 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
(617) 345-0100
(Registrant’s 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 October 31, 2007, Cabot Corporation issued a press release announcing its operating results for the fourth quarter and fiscal year ended September 30, 2007. A copy of the press release, together with fourth quarter and full fiscal year supplemental business information, 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 October 31, 2007
99.2 Fourth Quarter and Full Fiscal Year 2007 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.
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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 |
Date: October 31, 2007
3
EXHIBIT INDEX
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Exhibit Number |
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Title |
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99.1 |
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Press release issued by Cabot Corporation on October 31, 2007 |
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99.2 |
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Fourth Quarter and Full Fiscal Year 2007 Supplemental Business Information |
4
Exhibit 99.1
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Contact: |
Susannah R. Robinson |
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Director, Investor Relations |
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(617) 342-6129 |
CABOT ANNOUNCES FOURTH QUARTER AND FISCAL YEAR OPERATING RESULTS
BOSTON, MA (October 31, 2007) – Cabot Corporation (NYSE:CBT) today announced net income of $24 million ($0.36 per diluted common share) for the fourth quarter of 2007, including $5 million after-tax ($0.07 per diluted common share) of charges from certain items and discontinued operations. For the full fiscal year 2007, the Company announced net income of $129 million ($1.90 per diluted common share), including $22 million after-tax ($0.32 per diluted common share) of charges from certain items and discontinued operations. This is compared to net income of $27 million ($0.39 per diluted common share) for the fourth quarter of fiscal 2006, which included $16 million after-tax ($0.25 per diluted common share) of charges from certain items, discontinued operations and the cumulative effect of an accounting change. For the full fiscal year 2006, the Company reported net income of $88 million ($1.28 per diluted common share), which included $36 million after-tax ($0.54 per diluted common share) of charges from certain items, discontinued operations and the cumulative effect of accounting changes. Details of financial results, certain items, discontinued operations and the cumulative effect of accounting changes 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 pleased to have delivered improved financial results for the fiscal year, capitalizing on the favorable conditions existing in some of our businesses and managing through difficult circumstances in others. We were able to manage the significant volatility in feedstock costs that occurred during the year in our carbon black product lines and were successful at growing profitability through volume increases and cost discipline. We grew our fumed metal oxides product line to record profitability during the fiscal year due to strong demand in our niche market segment and the incremental margin generated from operating our facility in China. The
1
Specialty Fluids Business experienced a significant increase in profitability and we made progress in expanding our global presence during the year, seeing the first real signs of expansion outside of the North Sea. We also took steps to improve our capital structure through our share repurchase program. Less favorably, the inkjet colorants product line experienced weak financial results during the year, amidst a significant downturn in the aftermarket segment. The Supermetals Business faced difficult conditions with the expiration during the year of the last of our fixed price, fixed volume supply contracts, operating at or near breakeven for a majority of the year, but continued its strong cash generation performance.
Given the increases in feedstock costs during the fourth quarter of 2007, our carbon black product lines performed very solidly. We experienced solid Metal Oxides and strong Specialty Fluids results during the quarter, however we continued to see weak financial results in the Supermetals Business and inkjet colorants product line.”
Product Line Performance
During the fourth quarter of 2007, volumes in the rubber blacks product line grew in all regions outside of North America, but could not offset the impact of lower unit margins. Unit margins declined in our contracted business compared to the fourth quarter of 2006 due to lower pricing from the feedstock related pricing mechanism in our contracts as compared to raw material costs. This time lag of our feedstock related contract pricing mechanism negatively impacted our profitability by $13 million during the quarter with an additional $1 million negative impact from the immediate recognition of feedstock costs in North America. These factors more than offset higher unit margins in our non-contracted business. Solid volume growth in the performance products product line and higher unit margins from higher selling prices combined to improve the performance of the product line during the fourth quarter of 2007, when compared to the same period of 2006. For the full fiscal year 2007, performance in both product lines improved significantly when compared to fiscal 2006 due to strong volumes,
2
particularly in emerging markets, the impact of cost reduction efforts and price management in our non-contracted business throughout the year as feedstock costs rose.
Performance in our inkjet colorants product line was significantly weaker in both the fourth quarter and full year of 2007. Growth in the high speed and OEM market segments was offset by continued softness in the aftermarket segment, with volumes in the aftermarket segment down by 37% for the fourth quarter of 2007 and by 34% for the full year, compared to the same periods of 2006. Additionally, increased spending related to future high speed inkjet opportunities, including the costs of our new production unit, unfavorably impacted performance.
When compared to the fourth quarter of 2006, fumed metal oxides volumes declined slightly as growth in the niche segment was more than offset by declines in both the silicones and electronics segments. Additionally, lower utilization due to the timing of plant shutdowns unfavorably impacted performance during the period. For the full fiscal year, profitability improved significantly primarily due to strong volumes supported by our new capacity in China.
Profitability declined significantly in the Supermetals Business during both the fourth quarter and full year of 2007, when compared to the same periods of 2006, due to the transition from fixed price, fixed volume supply contracts to market based sales, which was completed in December 2006. Additionally, we were unfavorably impacted during the year by higher raw material costs under our long term ore agreement. Although its first quarter’s performance enabled the Business to be solidly profitable for the full fiscal year 2007, lower volumes, primarily with one customer, and a less profitable product mix resulted in the Business operating at a breakeven level for the fourth quarter. Despite these difficulties, the Business was successful at generating significant cash during the year, contributing $36 million in 2007, led by a $30 million reduction in inventory.
The increase in profitability in the Specialty Fluids Business during the fourth quarter of 2007, when compared to the fourth quarter of 2006, was driven by an increase in drilling activity in the North Sea. For the full fiscal year 2007, a significant increase in rental revenue drove
3
strong performance when compared to 2006. Specifically, our fluid utilization rate rose to 15% for fiscal 2007, compared to 12% in 2006, and our fluid was used in 31 wells in 2007, compared with 23 in 2006. We also made progress in expanding our drilling activity beyond the North Sea, completing 6 wells outside of the North Sea in 2007, up from 2 wells in 2006.
Outlook
With respect to the future, Burnes said, “We are pleased to have continued strong volumes in our carbon black product lines outside of North America and look forward to the added volume from our new performance products unit in China. We are watching the significant increases in oil prices closely, as we know they inevitably raise our carbon black feedstock costs and affect the performance of our business in the short term. In fumed metal oxides, demand remains strong and we are optimistic that the high plant utilization we have experienced will continue. We remain cautious about the outlook for the Supermetals Business as we face a complex ore situation and a highly competitive market environment.
We remain encouraged with our new business prospects as we have achieved significant milestones during the course of the fiscal year that we believe will provide a strong platform for future growth. Although we remain concerned about continued near term volume weakness in the aftermarket segment of the inkjet colorants product line, we are confident that we are well positioned to benefit from an eventual rebound in the aftermarket and from growth in the high speed market. We are optimistic that the success we had in 2007 at expanding our Specialty Fluids Business outside of the North Sea will continue in the coming years. We continue to be pleased with the progress made by Superior MicroPowders in product development activities and by the many opportunities for future revenue generation that exist in that business.”
For those interested in more detailed information regarding Cabot’s fourth quarter and full fiscal year 2007 results, please see the accompanying Supplemental Business Information.
4
This press release includes forward-looking statements, particularly under the outlook section, relating to management’s expectations regarding volume growth in our carbon black product lines; demand for our fumed silica products; raw material costs; performance in the Supermetals Business and profitability of that Business; markets for our inkjet products; growth prospects for our Specialty Fluids Business; and Superior MicroPowders business development opportunities. 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 and other raw material costs; lower than expected demand for our products; our inability to achieve savings from cost reduction activities; our inability to participate in the growth in emerging inkjet applications; the success of the Specialty Fluids 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); a disruption or delay in the commercialization of new products from Superior MicroPowders. 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. The Company’s website is: http://www.cabot-corp.com.
5
Fourth Quarter Earnings Announcement, Fiscal 2007
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
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Periods ended September 30 |
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Three Months |
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Twelve 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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$ |
675 |
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$ |
663 |
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$ |
2,616 |
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$ |
2,543 |
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Cost of sales |
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564 |
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550 |
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2,111 |
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2,124 |
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Gross profit |
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111 |
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113 |
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505 |
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419 |
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Selling and administrative expenses |
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66 |
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59 |
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249 |
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235 |
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Research and technical expenses |
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20 |
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17 |
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69 |
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58 |
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Income from operations |
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25 |
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37 |
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187 |
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126 |
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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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2 |
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10 |
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5 |
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Interest expense |
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(8 |
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(8 |
) |
(34 |
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(27 |
) |
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Other income (expense) |
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1 |
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(7 |
) |
5 |
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(7 |
) |
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Total other income and expense |
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(5 |
) |
(13 |
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(19 |
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(29 |
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Income from continuing operations before income taxes |
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20 |
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24 |
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168 |
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97 |
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Benefit (provision) for income taxes |
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2 |
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4 |
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(38 |
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(9 |
) |
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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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12 |
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12 |
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Minority interest in net income, net of tax |
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(4 |
) |
(3 |
) |
(15 |
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(12 |
) |
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Income from continuing operations |
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21 |
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29 |
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127 |
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88 |
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Discontinued operations, net of tax (A) |
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3 |
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2 |
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2 |
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2 |
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Cumulative effect of an accounting change, net of tax (B) |
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— |
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(4 |
) |
— |
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(2 |
) |
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Net income |
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24 |
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27 |
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129 |
|
88 |
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Dividends on preferred stock, net of tax benefit |
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— |
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— |
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(1 |
) |
(2 |
) |
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Net income available to common shares |
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$ |
24 |
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$ |
27 |
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$ |
128 |
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$ |
86 |
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Diluted earnings per share of common stock |
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Income from continuing operations |
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$ |
0.32 |
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$ |
0.43 |
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$ |
1.87 |
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$ |
1.28 |
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Discontinued operations, net of tax (A) |
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0.04 |
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0.03 |
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0.03 |
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0.03 |
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Cumulative effect of an accounting change, net of tax (B) |
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— |
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(0.07 |
) |
— |
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(0.03 |
) |
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Net income |
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$ |
0.36 |
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$ |
0.39 |
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$ |
1.90 |
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$ |
1.28 |
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Weighted average common shares outstanding |
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Diluted |
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66 |
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68 |
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68 |
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68 |
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(A) |
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Amount relates to legal and tax settlements in connection with our discontinued operations. |
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(B) |
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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 ($0.07). |
Fourth Quarter Earnings Announcement, Fiscal 2007
CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS
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Periods ended September 30 |
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Three Months |
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Twelve Months |
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Dollars in millions, except per share amounts (unaudited) |
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2007 |
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2006 |
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2007 |
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2006 |
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SALES |
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Carbon Black Business (A) |
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$ |
521 |
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$ |
508 |
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$ |
2,005 |
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$ |
1,917 |
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Rubber blacks |
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368 |
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367 |
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1,416 |
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1,378 |
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Performance products |
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142 |
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128 |
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541 |
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488 |
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Inkjet colorants |
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10 |
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12 |
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46 |
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47 |
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Superior MicroPowders |
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1 |
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1 |
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2 |
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4 |
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Metal Oxides Business |
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71 |
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69 |
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271 |
|
254 |
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Fumed metal oxides |
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71 |
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69 |
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270 |
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253 |
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Aerogel |
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— |
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— |
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1 |
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1 |
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Supermetals Business |
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55 |
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66 |
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233 |
|
292 |
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Specialty Fluids Business |
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16 |
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11 |
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58 |
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44 |
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Segment sales |
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663 |
|
654 |
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2,567 |
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2,507 |
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||||
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Unallocated and other (B) |
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12 |
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9 |
|
49 |
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36 |
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Net sales and other operating revenues |
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$ |
675 |
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$ |
663 |
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$ |
2,616 |
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$ |
2,543 |
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SEGMENT PROFIT |
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|
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Carbon Black Business (C) |
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$ |
20 |
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$ |
31 |
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$ |
156 |
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$ |
101 |
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Metal Oxides Business (C) |
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8 |
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9 |
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36 |
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22 |
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Supermetals Business |
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1 |
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9 |
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15 |
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41 |
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Specialty Fluids Business |
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7 |
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3 |
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25 |
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16 |
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Total Segment Profit (D) |
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36 |
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52 |
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232 |
|
180 |
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||||
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||||
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Interest expense |
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(8 |
) |
(8 |
) |
(34 |
) |
(27 |
) |
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General unallocated expense (E) |
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(5 |
) |
(16 |
) |
(18 |
) |
(44 |
) |
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Less: Equity in net income of affiliated companies, net of tax |
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(3 |
) |
(4 |
) |
(12 |
) |
(12 |
) |
||||
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Income from continuing operations before income taxes |
|
20 |
|
24 |
|
168 |
|
97 |
|
||||
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Benefit (provision) for income taxes |
|
2 |
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4 |
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(38 |
) |
(9 |
) |
||||
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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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12 |
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12 |
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||||
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Minority interest in net income, net of tax |
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(4 |
) |
(3 |
) |
(15 |
) |
(12 |
) |
||||
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Income from continuing operations |
|
21 |
|
29 |
|
127 |
|
88 |
|
||||
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Discontinued operations, net of tax (F) |
|
3 |
|
2 |
|
2 |
|
2 |
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||||
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Cumulative effect of an accounting change, net of tax (G) |
|
— |
|
(4 |
) |
— |
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(2 |
) |
||||
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Net income |
|
24 |
|
27 |
|
129 |
|
88 |
|
||||
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Dividends on preferred stock, net of tax benefit |
|
— |
|
— |
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(1 |
) |
(2 |
) |
||||
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Net income available to common shares |
|
$ |
24 |
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$ |
27 |
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$ |
128 |
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$ |
86 |
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|
|
|
|
|
|
|
|
|
|
|
||||
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Diluted earnings per share of common stock |
|
|
|
|
|
|
|
|
|
||||
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Income from continuing operations |
|
$ |
0.32 |
|
$ |
0.43 |
|
$ |
1.87 |
|
$ |
1.28 |
|
|
Discontinued Operations, net of tax (F) |
|
0.04 |
|
0.03 |
|
0.03 |
|
0.03 |
|
||||
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Cumulative effect of an accounting change, net of tax (G) |
|
— |
|
(0.07 |
) |
— |
|
(0.03 |
) |
||||
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Net income |
|
$ |
0.36 |
|
$ |
0.39 |
|
$ |
1.90 |
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$ |
1.28 |
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
||||
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Diluted |
|
66 |
|
68 |
|
68 |
|
68 |
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||||
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(A) |
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Segment sales for certain operating segments within the Carbon Black Business include 100% of sales of one equity affiliate at market-based prices. |
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|
|
|
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(B) |
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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. |
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|
|
|
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(C) |
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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. |
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|
|
|
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(D) |
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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. |
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|
|
|
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(E) |
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General unallocated expense includes foreign currency transaction gains (losses), interest income, dividend income, and the certain items listed in Exhibit I. The amount for the twelve months ended September 30, 2006 also includes the $27 million settlement payment to the Sons of Gwalia. |
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|
|
|
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(F) |
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Amounts relate to legal and tax settlements in connection with our discontinued operations. |
|
|
|
|
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(G) |
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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). |
Fourth Quarter Earnings Announcement, Fiscal 2007
CABOT CORPORATION CONDENSED CONSOLIDATED FINANCIAL POSITION
|
|
|
September 30 |
|
September 30, |
|
||
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Dollars in millions, except share and per share amounts |
|
2007 |
|
2006 |
|
||
|
|
|
(unaudited) |
|
(audited) |
|
||
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Current assets: |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
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Cash and cash equivalents |
|
$ |
154 |
|
$ |
189 |
|
|
Short-term marketable securities |
|
2 |
|
1 |
|
||
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Accounts and notes receivable, net of reserve for doubtful accounts of $6 and $6 |
|
576 |
|
534 |
|
||
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Inventories: |
|
|
|
|
|
||
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Raw materials |
|
154 |
|
131 |
|
||
|
Work in process |
|
77 |
|
109 |
|
||
|
Finished goods |
|
173 |
|
139 |
|
||
|
Other |
|
27 |
|
41 |
|
||
|
Total inventories |
|
431 |
|
420 |
|
||
|
Prepaid expenses and other current assets |
|
79 |
|
75 |
|
||
|
Deferred income taxes |
|
35 |
|
36 |
|
||
|
Total current assets |
|
1,277 |
|
1,255 |
|
||
|
|
|
|
|
|
|
||
|
Investments: |
|
|
|
|
|
||
|
Equity affiliates |
|
65 |
|
59 |
|
||
|
Long-term marketable securities and cost investments |
|
3 |
|
3 |
|
||
|
Total investments |
|
68 |
|
62 |
|
||
|
|
|
|
|
|
|
||
|
Property, plant and equipment |
|
2,823 |
|
2,531 |
|
||
|
Accumulated depreciation and amortization |
|
(1,807 |
) |
(1,567 |
) |
||
|
Net property, plant and equipment |
|
1,016 |
|
964 |
|
||
|
|
|
|
|
|
|
||
|
Other assets: |
|
|
|
|
|
||
|
Goodwill |
|
34 |
|
31 |
|
||
|
Intangible assets, net of accumulated amortization of $11 and $10 |
|
4 |
|
5 |
|
||
|
Assets held for rent |
|
42 |
|
40 |
|
||
|
Deferred income taxes |
|
115 |
|
100 |
|
||
|
Other assets |
|
78 |
|
77 |
|
||
|
Total other assets |
|
273 |
|
253 |
|
||
|
|
|
|
|
|
|
||
|
Total assets |
|
$ |
2,634 |
|
$ |
2,534 |
|
Fourth Quarter Earnings Announcement, Fiscal 2007
CABOT CORPORATION CONDENSED CONSOLIDATED FINANCIAL POSITION
|
|
|
September 30 |
|
September 30, |
|
||
|
Dollars in millions, except share and per share amounts |
|
2007 |
|
2006 |
|
||
|
|
|
(unaudited) |
|
(audited) |
|
||
|
Current liabilities: |
|
|
|
|
|
||
|
Notes payable to banks |
|
$ |
67 |
|
$ |
58 |
|
|
Accounts payable and accrued liabilities |
|
429 |
|
384 |
|
||
|
Income taxes payable |
|
36 |
|
27 |
|
||
|
Deferred income taxes |
|
2 |
|
2 |
|
||
|
Current portion of long-term debt |
|
15 |
|
34 |
|
||
|
Total current liabilities |
|
549 |
|
505 |
|
||
|
|
|
|
|
|
|
||
|
Long-term debt |
|
503 |
|
459 |
|
||
|
Deferred income taxes |
|
16 |
|
20 |
|
||
|
Other liabilities |
|
307 |
|
286 |
|
||
|
|
|
|
|
|
|
||
|
Minority interest |
|
77 |
|
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: None and 55,895 shares |
|
— |
|
56 |
|
||
|
Outstanding: None and 38,734 shares (aggregate redemption value of $39 at $1,000 per share) |
|
|
|
|
|
||
|
Less cost of zero and 17,161 shares of preferred treasury stock |
|
— |
|
(38 |
) |
||
|
Common stock: |
|
|
|
|
|
||
|
Authorized: 200,000,000 shares of $1 par value |
|
|
|
|
|
||
|
Issued: 65,424,674 and 63,579,040 shares |
|
65 |
|
64 |
|
||
|
Outstanding: 65,279,803 and 63,432,651 shares |
|
|
|
|
|
||
|
Less cost of 144,871 and 146,389 shares of common treasury stock |
|
(5 |
) |
(5 |
) |
||
|
Additional paid-in capital |
|
— |
|
7 |
|
||
|
Retained earnings |
|
1,107 |
|
1,160 |
|
||
|
Deferred employee benefits |
|
(34 |
) |
(38 |
) |
||
|
Notes receivable for restricted stock |
|
(19 |
) |
(20 |
) |
||
|
Accumulated other comprehensive income |
|
68 |
|
10 |
|
||
|
Total stockholders’ equity |
|
1,182 |
|
1,196 |
|
||
|
|
|
|
|
|
|
||
|
Total liabilities and stockholders’ equity |
|
$ |
2,634 |
|
$ |
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 |
|
$ |
506 |
|
$ |
521 |
|
$ |
2,005 |
|
|
Rubber blacks |
|
298 |
|
346 |
|
367 |
|
367 |
|
1,378 |
|
351 |
|
346 |
|
351 |
|
368 |
|
1,416 |
|
||||||||||
|
Performance products |
|
109 |
|
117 |
|
134 |
|
128 |
|
488 |
|
123 |
|
134 |
|
142 |
|
142 |
|
541 |
|
||||||||||
|
Inkjet colorants |
|
11 |
|
12 |
|
12 |
|
12 |
|
47 |
|
10 |
|
13 |
|
13 |
|
10 |
|
46 |
|
||||||||||
|
Superior MicroPowders |
|
1 |
|
1 |
|
1 |
|
1 |
|
4 |
|
1 |
|
— |
|
— |
|
1 |
|
2 |
|
||||||||||
|
Metal Oxides Business |
|
57 |
|
62 |
|
66 |
|
69 |
|
254 |
|
65 |
|
68 |
|
67 |
|
71 |
|
271 |
|
||||||||||
|
Fumed metal oxides |
|
57 |
|
62 |
|
65 |
|
69 |
|
253 |
|
65 |
|
68 |
|
66 |
|
71 |
|
270 |
|
||||||||||
|
Aerogel |
|
— |
|
— |
|
1 |
|
— |
|
1 |
|
— |
|
— |
|
1 |
|
— |
|
1 |
|
||||||||||
|
Supermetals Business |
|
93 |
|
67 |
|
66 |
|
66 |
|
292 |
|
77 |
|
53 |
|
48 |
|
55 |
|
233 |
|
||||||||||
|
Specialty Fluids Business |
|
10 |
|
11 |
|
12 |
|
11 |
|
44 |
|
16 |
|
10 |
|
16 |
|
16 |
|
58 |
|
||||||||||
|
Segment Sales |
|
579 |
|
616 |
|
658 |
|
654 |
|
2,507 |
|
643 |
|
624 |
|
637 |
|
663 |
|
2,567 |
|
||||||||||
|
Unallocated and other (B) |
|
8 |
|
11 |
|
8 |
|
9 |
|
36 |
|
12 |
|
13 |
|
12 |
|
12 |
|
49 |
|
||||||||||
|
Net sales and other operating revenues |
|
$ |
587 |
|
$ |
627 |
|
$ |
666 |
|
$ |
663 |
|
$ |
2,543 |
|
$ |
655 |
|
$ |
637 |
|
$ |
649 |
|
$ |
675 |
|
$ |
2,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Segment Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Carbon Black Business(C) |
|
$ |
21 |
|
$ |
26 |
|
$ |
23 |
|
$ |
31 |
|
$ |
101 |
|
$ |
54 |
|
$ |
57 |
|
25 |
|
$ |
20 |
|
$ |
156 |
|
|
|
Metal Oxides Business(C) |
|
2 |
|
5 |
|
6 |
|
9 |
|
22 |
|
9 |
|
10 |
|
9 |
|
8 |
|
36 |
|
||||||||||
|
Supermetals Business |
|
11 |
|
12 |
|
9 |
|
9 |
|
41 |
|
16 |
|
(2 |
) |
— |
|
1 |
|
15 |
|
||||||||||
|
Specialty Fluids Business |
|
4 |
|
4 |
|
5 |
|
3 |
|
16 |
|
8 |
|
3 |
|
7 |
|
7 |
|
25 |
|
||||||||||
|
Total Segment Profit (D) |
|
38 |
|
47 |
|
43 |
|
52 |
|
180 |
|
87 |
|
68 |
|
41 |
|
36 |
|
232 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Interest expense |
|
(6 |
) |
(7 |
) |
(6 |
) |
(8 |
) |
(27 |
) |
(9 |
) |
(9 |
) |
(8 |
) |
(8 |
) |
(34 |
) |
||||||||||
|
General unallocated income (expense) (E) |
|
(2 |
) |
(24 |
) |
(2 |
) |
(16 |
) |
(44 |
) |
— |
|
(15 |
) |
1 |
|
(5 |
) |
(18 |
) |
||||||||||
|
Less: Equity in net income of affiliated companies, net of tax |
|
(3 |
) |
(4 |
) |
(1 |
) |
(4 |
) |
(12 |
) |
(3 |
) |
(3 |
) |
(3 |
) |
(3 |
) |
(12 |
) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Income from continuing operations before income taxes |
|
27 |
|
12 |
|
34 |
|
24 |
|
97 |
|
75 |
|
41 |
|
31 |
|
20 |
|
168 |
|
||||||||||
|
Benefit (provision) for income taxes |
|
(4 |
) |
(1 |
) |
(8 |
) |
4 |
|
(9 |
) |
(19 |
) |
(11 |
) |
(9 |
) |
2 |
|
(38 |
) |
||||||||||
|
Equity in net income of affiliated companies, net of tax |
|
3 |
|
4 |
|
1 |
|
4 |
|
12 |
|
3 |
|
3 |
|
3 |
|
3 |
|
12 |
|
||||||||||
|
Minority interest in net income, net of tax |
|
(4 |
) |
(3 |
) |
(2 |
) |
(3 |
) |
(12 |
) |
(5 |
) |
(2 |
) |
(4 |
) |
(4 |
) |
(15 |
) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net income from continuing operations |
|
22 |
|
12 |
|
25 |
|
29 |
|
88 |
|
54 |
|
31 |
|
21 |
|
21 |
|
127 |
|
||||||||||
|
Discontinued operations, net of tax (F) |
|
— |
|
— |
|
— |
|
2 |
|
2 |
|
— |
|
— |
|
(1 |
) |
3 |
|
2 |
|
||||||||||
|
Cumulative effect of accounting changes, net of tax (G) |
|
2 |
|
— |
|
— |
|
(4 |
) |
(2 |
) |
— |
|
— |
|
— |
|
— |
|
— |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net income |
|
24 |
|
12 |
|
25 |
|
27 |
|
88 |
|
54 |
|
31 |
|
20 |
|
24 |
|
129 |
|
||||||||||
|
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 |
|
$ |
30 |
|
$ |
20 |
|
$ |
24 |
|
$ |
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Diluted earnings per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net income from continuing operations |
|
$ |
0.31 |
|
$ |
0.17 |
|
$ |
0.37 |
|
$ |
0.43 |
|
$ |
1.28 |
|
$ |
0.79 |
|
$ |
0.45 |
|
$ |
0.31 |
|
$ |
0.32 |
|
$ |
1.87 |
|
|
Discontinued operations, net of tax (F) |
|
— |
|
— |
|
— |
|
0.03 |
|
0.03 |
|
— |
|
— |
|
(0.01 |
) |
0.04 |
|
0.03 |
|
||||||||||
|
Cumulative effects of accounting changes, net of tax (G) |
|
0.04 |
|
— |
|
— |
|
(0.07 |
) |
(0.03 |
) |
— |
|
— |
|
— |
|
— |
|
— |
|
||||||||||
|
Net income |
|
$ |
0.35 |
|
$ |
0.17 |
|
$ |
0.37 |
|
$ |
0.39 |
|
$ |
1.28 |
|
$ |
0.79 |
|
$ |
0.45 |
|
$ |
0.30 |
|
$ |
0.36 |
|
$ |
1.90 |
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Diluted |
|
68 |
|
69 |
|
69 |
|
68 |
|
68 |
|
69 |
|
69 |
|
68 |
|
66 |
|
68 |
|
||||||||||
|
(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. These amounts also include the $27 million settlement payment to the Sons of Gwalia in the second quarter of 2006. |
|
|
|
|
|
(F) |
|
Amounts relate to legal and tax settlements in connection with our discontinued operations. |
|
(G) |
|
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). |
Fourth Quarter Earnings Announcement, Fiscal 2007
CABOT CORPORATION CERTAIN ITEMS - Exhibit I
|
|
|
Three Months |
|
Twelve Months |
|
||||||||||||||||||||
|
Periods ended September 30 |
|
2007 |
|
2007 |
|
2006 |
|
2006 |
|
2007 |
|
2007 |
|
2006 |
|
2006 |
|
||||||||
|
Dollars in millions, except per share amounts (unaudited) |
|
$ |
|
per share(A) |
|
$ |
|
per share(A) |
|
$ |
|
per share(A) |
|
$ |
|
per share(A) |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Certain items before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Environmental reserves/settlement |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
(6 |
) |
$ |
(0.07 |
) |
$ |
— |
|
$ |
— |
|
|
Restructuring initiatives - Global |
|
1 |
|
0.01 |
|
(10 |
) |
(0.10 |
) |
(3 |
) |
(0.03 |
) |
(10 |
) |
(0.10 |
) |
||||||||
|
Restructuring initiatives - Altona |
|
— |
|
— |
|
(7 |
) |
(0.11 |
) |
(1 |
) |
(0.01 |
) |
(11 |
) |
(0.15 |
) |
||||||||
|
Cost reduction initiatives |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(3 |
) |
(0.04 |
) |
||||||||
|
Restructuring - North America |
|
(5 |
) |
(0.06 |
) |
— |
|
— |
|
(8 |
) |
(0.09 |
) |
— |
|
— |
|
||||||||
|
Legal reserves/settlements |
|
(2 |
) |
(0.02 |
) |
— |
|
— |
|
(12 |
) |
(0.11 |
) |
— |
|
— |
|
||||||||
|
Acquisition of flamed synthesis technology |
|
(4 |
) |
(0.04 |
) |
— |
|
— |
|
(4 |
) |
(0.04 |
) |
— |
|
— |
|
||||||||
|
Gwalia settlement payment |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(27 |
) |
(0.25 |
) |
||||||||
|
Total certain items |
|
(10 |
) |
(0.11 |
) |
(17 |
) |
(0.21 |
) |
(34 |
) |
(0.35 |
) |
(51 |
) |
(0.54 |
) |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Discontinued operations (B) |
|
3 |
|
0.04 |
|
2 |
|
0.03 |
|
2 |
|
0.03 |
|
2 |
|
0.03 |
|
||||||||
|
Cumulative effect of an accounting change (C) |
|
— |
|
— |
|
(6 |
) |
(0.07 |
) |
— |
|
— |
|
(2 |
) |
(0.03 |
) |
||||||||
|
Total certain items, cumulative effect of an accounting change and discontinued operations |
|
(7 |
) |
(0.07 |
) |
(21 |
) |
(0.25 |
) |
(32 |
) |
(0.32 |
) |
(51 |
) |
(0.54 |
) |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Tax impact of certain items, cumulative effect of an accounting change and discontinued operations |
|
2 |
|
— |
|
5 |
|
— |
|
10 |
|
— |
|
15 |
|
— |
|
||||||||
|
Total certain items, cumulative effect of an accounting change and discontinued operations, after tax |
|
$ |
(5 |
) |
$ |
(0.07 |
) |
$ |
(16 |
) |
$ |
(0.25 |
) |
$ |
(22 |
) |
$ |
(0.32 |
) |
$ |
(36 |
) |
$ |
(0.54 |
) |
|
Periods ended September 30 |
|
Three Months |
|
Twelve Months |
|
||||||||
|
Dollars in millions (unaudited) |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Statement of Operations Line Item |
|
|
|
|
|
|
|
|
|
||||
|
Net sales and other operating revenues |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
1 |
|
|
Cost of sales |
|
(5 |
) |
(5 |
) |
(16 |
) |
(35 |
) |
||||
|
Selling and administrative expenses |
|
(1 |
) |
(4 |
) |
(14 |
) |
(9 |
) |
||||
|
Research and technical expenses |
|
(4 |
) |
— |
|
(4 |
) |
— |
|
||||
|
Other |
|
— |
|
(8 |
) |
— |
|
(8 |
) |
||||
|
Total certain items |
|
$ |
(10 |
) |
$ |
(17 |
) |
$ |
(34 |
) |
$ |
(51 |
) |
|
Certain items by Segment |
|
|
|
|
|
|
|
|
|
||||
|
Carbon Black Business |
|
$ |
(6 |
) |
$ |
(17 |
) |
$ |
(26 |
) |
$ |
(21 |
) |
|
Supermetals Business |
|
(4 |
) |
— |
|
(6 |
) |
(30 |
) |
||||
|
Other |
|
— |
|
— |
|
(2 |
) |
— |
|
||||
|
Total certain items |
|
$ |
(10 |
) |
$ |
(17 |
) |
$ |
(34 |
) |
$ |
(51 |
) |
|
(A) |
|
Per share amounts are calculated after tax. |
|
(B) |
|
Amount relates to legal and tax settlements in connection with our discontinued operations. |
|
(C) |
|
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). |
Exhibit 99.2
CABOT CORPORATION
SUPPLEMENTAL BUSINESS INFORMATION
FOURTH QUARTER AND FULL FISCAL YEAR 2007
The following discussion of our results includes information on our reportable segment sales and operating profit before taxes (“PBT”). We use segment PBT to measure our consolidated operating results and to assess segment performance. When explaining the changes in our PBT period on period, we use several terms. The term “fixed costs” means fixed manufacturing costs, including utilities. The term “inventory related charges” means differences attributable to items such as (i) inventory obsolescence and valuation reserves; (ii) utilization variances; and (iii) other increases or decreases in costs associated with the production of inventory. The term “product mix” refers to the various types and grades of products sold by a particular business or product line during the quarter, and the positive or negative impact of that mix on the variable margin and profitability of the business or product line.
BUSINESS SEGMENT DETAIL
Volume Detail
The following chart details the percentage change in volume by product line for the fourth quarter of 2007 as compared to the fourth quarter of 2006 and the third quarter of 2007, as well as for the full year 2007 compared to the full year 2006.
|
|
|
Fourth quarter 2007 vs. |
|
Fourth quarter 2007 vs. |
|
FY 2007 vs. |
|
|
Rubber Blacks |
|
3 |
% |
(2 |
)% |
4 |
% |
|
North America |
|
(9 |
)% |
(7 |
)% |
(11 |
)% |
|
South America |
|
5 |
% |
2 |
% |
5 |
% |
|
Europe |
|
(4 |
)% |
(11 |
)% |
3 |
% |
|
Asia Pacific |
|
3 |
% |
5 |
% |
6 |
% |
|
China |
|
28 |
% |
9 |
% |
27 |
% |
|
|
|
|
|
|
|
|
|
|
Performance Products |
|
4 |
% |
flat volumes |
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
Inkjet Colorants |
|
(12 |
)% |
(14 |
)% |
(4 |
)% |
|
|
|
|
|
|
|
|
|
|
Fumed Metal Oxides |
|
(1 |
)% |
6 |
% |
5 |
% |
Profit Before Tax (PBT) Detail
Following is a quantification of the key factors impacting PBT for the Business reporting segments for the fourth quarter of 2007, as compared to both the fourth quarter of 2006 and the third quarter of 2007.
Carbon Black Business-
• Fourth quarter 2007 vs. fourth quarter 2006: pricing (unfavorable $18 million); currency (unfavorable $2 million); volume (favorable $5 million); inventory related charges and timing of certain costs (favorable $4 million); raw material costs (less than $1 million impact)
• Fourth quarter 2007 vs. third quarter 2007- raw material costs (unfavorable $26 million); volume (unfavorable $3 million); pricing (favorable $16 million); inventory related charges and timing of certain costs (favorable $8 million)
Variability in carbon black feedstock costs significantly impacts financial results for both the Carbon Black Business segment and the Company as a whole on a quarterly basis. The table below quantifies, in
1
millions of dollars, the impact on PBT of both the time lag of our feedstock related pricing adjustments on our contracted rubber blacks business and the immediate recognition of feedstock costs in North America.
|
|
|
Fiscal Year 2005 |
|
Fiscal Year 2006 |
|
Fiscal Year 2007 |
|
|
Quarter 1 |
|
(3 |
) |
(11 |
) |
13 |
|
|
Quarter 2 |
|
4 |
|
1 |
|
5 |
|
|
Quarter 3 |
|
(15 |
) |
(7 |
) |
(16 |
) |
|
Quarter 4 |
|
(19 |
) |
10 |
|
(14 |
) |
|
Full year impact |
|
(33 |
) |
(7 |
) |
(12 |
) |
Metal Oxides Business
• Fourth quarter 2007 vs. fourth quarter 2006: roughly flat with favorable product mix being offset by lower plant utilization
• Fourth quarter 2007 vs. third quarter 2007: roughly flat with increased volumes being offset by inventory related charges and lower plant utilization
Supermetals Business
• Fourth quarter 2007 vs. fourth quarter 2006- pricing (unfavorable $9 million); raw materials (unfavorable $2 million); volumes (unfavorable $2 million); fixed costs (favorable $6 million)
• Fourth quarter 2007 vs. third quarter 2007- volumes (favorable $2 million); product mix (unfavorable $3 million)
Revenue Detail
The following charts quantify, in millions of dollars, the key factors impacting sales revenue for the Business reporting segments for the fourth quarter of 2007, as compared to both the fourth quarter of 2006 and the third quarter of 2007.
|
|
|
Fourth quarter 2007 vs. Fourth quarter 2006 |
|
||||
|
|
|
Volume |
|
Price/ Product Mix |
|
Foreign Currency |
|
|
Carbon Black Business |
|
14 |
|
(24 |
) |
20 |
|
|
Metal Oxides Business |
|
(2 |
) |
2 |
|
2 |
|
|
Supermetals Business |
|
(2 |
) |
(9 |
) |
— |
|
|
|
|
Fourth quarter 2007 vs. Third quarter 2007 |
|
||||
|
|
|
Volume |
|
Price/ Product Mix |
|
Foreign Currency |
|
|
Carbon Black Business |
|
(7 |
) |
15 |
|
4 |
|
|
Metal Oxides Business |
|
3 |
|
1 |
|
— |
|
|
Supermetals Business |
|
10 |
|
(3 |
) |
— |
|
CORPORATE DETAIL
Capital Expenditures- Cabot spent approximately $62 million in capital expenditures during the fourth quarter of 2007. For the full year, capital expenditures were $146 million, compared to $236 million for the full year 2006.
Open Market Share Repurchases- During the fourth quarter and full year 2007, the Company repurchased approximately 4 million and 4.6 million shares, respectively, of its common stock on the open market for a cash cost of approximately $164 million and $190 million, respectively.
2
Working Capital- Working capital decreased by $3 million on a constant dollar basis (an increase of $34 million at actual exchange rates) during fiscal 2007. On a constant dollar basis, the decrease was driven by an increase in payables and accruals partially offset by an increase in receivables.
Effective Tax Rate- The Company’s effective tax rate for net income from continuing operations was a 12% benefit for the fourth quarter and a 23% provision for the full year 2007. During the fourth quarter and full year 2007 the Company recorded tax benefits in continuing operations from the settlement of various tax audits of approximately $5 million ($0.07 per diluted common share) and $3 million ($0.05 per diluted common share), respectively. The Company also recorded a tax benefit of $3 million ($0.04 per diluted common share) during the fourth quarter for the cumulative tax rate adjustment. Excluding the impact of these tax benefits, the Company’s effective tax rate would have been approximately 25% for both the fourth quarter and full fiscal year 2007.
3