UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): August 6, 2018
|
Cabot Corporation |
|
(Exact name of Registrant as Specified in Its Charter) |
| Delaware | 1-5667 | 04-2271897 |
|
(State or Other Jurisdiction
of Incorporation) |
(Commission File Number) |
(IRS Employer
Identification No.) |
| 2 Seaport Lane, Suite 1300, Boston, MA | 02210-2019 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (617) 345-0100
Not Applicable
(Former Name or Former Address, if Changed
Since Last Report)
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ⃞
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ⃞
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 Instructions A.2. below):
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On August 6, 2018, Cabot Corporation issued a press release announcing operating results for its fiscal quarter ended June 30, 2018. A copy of the press release is furnished herewith as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press release issued by Cabot Corporation on August 6, 2018
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 |
||
|
Name: |
James P. Kelly |
||
|
Title: |
Vice President and Controller |
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Date: August 6, 2018
Exhibit 99.1
Cabot Corp Reports Third Quarter Fiscal 2018 Results
Diluted EPS of $1.40 and Adjusted EPS of $1.06
BOSTON--(BUSINESS WIRE)--August 6, 2018--Cabot Corporation (NYSE: CBT) today announced results for its third quarter of fiscal year 2018.
Key Highlights
- Diluted EPS of $1.40, compared to $0.73 in the same period of the prior year; Adjusted EPS of $1.06, up 28% year-over-year
- Reinforcement Materials EBIT improved 45% versus prior year driven by strong commercial execution that delivered volume growth and higher unit margins
- Performance Chemicals EBIT up 22% year-over-year from robust sales volumes and pricing gains in Specialty Carbons and Formulations
- Continued commitment to returning cash to shareholders with $64 million of dividends and share repurchases in the quarter
| (In millions, except per share amounts) | Three Months Ended | Nine Months Ended | ||||||||||||||||
|
6/30/18 |
6/30/17 |
6/30/18 |
6/30/17 |
|||||||||||||||
| Net sales | $ | 854 | $ | 705 | $ | 2,392 | $ | 1,994 | ||||||||||
| Net income attributable to Cabot Corporation | $ | 88 | $ | 47 | $ | (207 | ) | $ | 176 | |||||||||
| Net earnings per share attributable to Cabot Corporation | $ | 1.40 | $ | 0.73 | $ | (3.36 | ) |
$ |
2.78 |
|||||||||
| Less: Certain items after tax per share | $ | 0.34 | $ | (0.10 | ) | $ | (6.39 | ) | $ | 0.22 | ||||||||
| Adjusted EPS | $ | 1.06 | $ | 0.83 | $ | 3.03 | $ | 2.56 | ||||||||||
Commenting on the results, Cabot President and CEO Sean Keohane said, “I am very pleased with the strong operating results this quarter as we continue to drive our growth strategy. Reinforcement Materials delivered another strong quarter with 45% growth in EBIT on a year-over-year basis driven by expanded unit margins from our leadership position in Asia and the delivery of volume growth and price improvements in our 2018 customer agreements. Performance Chemicals results improved compared to the prior year quarter due to 17% higher sales volumes in Specialty Carbons and Formulations and the successful realization of price increases across the segment. Purification Solutions EBIT was lower than the prior year quarter due to continued competitive intensity in mercury removal applications, while results in Specialty Fluids benefited from the ramp-up of projects in the Middle East and Africa.” Keohane continued, “In addition, we raised the dividend by 5% in May, repurchased shares in the amount of $43 million during the quarter and announced 300,000 metric tons of advantaged capacity additions throughout the carbon black network.”
Financial Detail
For the third quarter of fiscal 2018, net income attributable to Cabot Corporation was $88 million ($1.40 per diluted common share). Net income includes an after-tax charge of $5 million from certain items, principally reflecting charges associated with executive transition costs and restructuring activities during the quarter. Tax-related certain items included a discrete tax benefit of $26 million. Adjusted EPS for the third quarter of fiscal 2018 was $1.06 per share.
Segment Results
Reinforcement Materials -- Third quarter fiscal 2018 EBIT in Reinforcement Materials increased by $23 million compared to the third quarter of fiscal 2017. The increase in EBIT was principally driven by continued strong volume growth globally, expanded unit margins in Asia, and improved pricing and product mix from 2018 customer agreements. Globally, volumes increased 6% year over year, with above-market growth in all regions as indicated in the table below.
|
Third Quarter |
|||
| Changes in Global Reinforcement Materials Volumes | 6% | ||
| Asia | 8% | ||
| Europe, Middle East, Africa | 3% | ||
| Americas | 5% | ||
Performance Chemicals -- Third quarter fiscal 2018 EBIT in Performance Chemicals increased by $10 million compared to the third quarter of fiscal 2017 driven by strong commercial execution in both pricing and volume growth. Volumes increased by 17% in the Specialty Carbons and Formulations business and decreased 2% in the Metal Oxides business year-over-year. The strong growth in Specialty Carbons & Formulations was driven by above market growth in all product lines.
Purification Solutions – Third quarter fiscal 2018 EBIT in Purification Solutions decreased by $4 million compared to the third quarter of fiscal 2017 due to lower volumes and margins resulting from continued competitive intensity in mercury removal and other North American powdered activated carbon applications, partially offset by lower fixed costs as a result of restructuring actions taken earlier in the year.
Specialty Fluids – Third quarter fiscal 2018 EBIT in Specialty Fluids decreased by $1 million compared to the third quarter of fiscal 2017 due to the mix of business compared to the prior year.
Cash Performance - The Company ended the third quarter of fiscal 2018 with a cash balance of $131 million. During the third quarter of fiscal 2018, cash flows from operating activities were $62 million, which included a $72 million increase in net working capital. Capital expenditures for the third quarter of fiscal 2018 were $58 million. Additional uses of cash during the third quarter included $21 million for dividends and $43 million for repurchases of common stock.
Taxes – During the third quarter of fiscal 2018, the Company recorded a tax benefit of $4 million for an effective tax rate of (3%) and an operating tax rate of 21%. The benefit includes a $24 million net benefit of certain items and discrete tax items primarily related to the discrete benefit arising from a change in a valuation allowance.
Outlook
Commenting on the outlook for the Company,
Keohane said, “We are very pleased to deliver another excellent quarter,
reflecting the strength of our global competitive position and we remain
positive about the current business environment. Looking ahead to the
fourth quarter, we anticipate that Reinforcement Materials will continue
its robust performance supported by our advantaged leadership position
and our strong operational and commercial execution. In Performance
Chemicals, we expect to maintain margins and continued strong volumes in
Specialty Carbons and Formulations, while we anticipate some impact on
volumes and fixed costs in Metal Oxides due to coordinated turnarounds
with two of our fumed silica feedstock providers in the quarter.
Although the ongoing competitive pressures will continue to impact
results in the Purification Solutions segment, we expect higher seasonal
volumes in the fourth quarter to improve results sequentially. In the
Specialty Fluids segment, we are expecting the continued ramp up of
drilling activity on recently awarded projects to drive improved results
in the fourth quarter. We continue to execute on our strategy and are
poised to deliver a very successful 2018 fiscal year.”
Earnings Call
The Company will host a conference call
with industry analysts at 2:00 p.m. Eastern time on Tuesday, August 7,
2018. The call can be accessed through Cabot’s investor relations
website at http://investor.cabot-corp.com
About Cabot Corporation
Cabot Corporation (NYSE: CBT)
is a global specialty chemicals and performance materials company,
headquartered in Boston, Massachusetts. The company is a leading
provider of rubber and specialty carbons, activated carbon, inkjet
colorants, cesium formate drilling fluids, masterbatches and conductive
compounds, fumed silica, and aerogel. For more information on Cabot,
please visit the company’s website at: http://www.cabotcorp.com.
The Company encourages investors and potential investors to consult the
Cabot website regularly.
Forward-Looking Statements -- This earnings release contains forward-looking statements. All statements that address expectations or projections about the future, including with respect to our performance in the fourth quarter of fiscal 2018 and the factors that we expect will impact volumes, demand for our products, fixed costs and margins are forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, potentially inaccurate assumptions, and other factors, some of which are beyond our control and difficult to predict. If known or unknown risks materialize, or should underlying assumptions prove inaccurate, our actual results could differ materially from past results and from those expressed or implied by forward-looking statements. Important factors that could cause our results to differ materially from those expressed or implied in the forward-looking statements include, but are not limited to volatility in the price of energy and raw materials; competition from other specialty chemical companies; safety, health and environmental requirements; a significant adverse change in a customer relationship; negative or uncertain worldwide or regional economic conditions; unanticipated delays in site development projects; fluctuations in foreign currency exchange and interest rates; and changes in global trade policies. These factors are discussed more fully in the reports we file with the Securities and Exchange Commission, particularly under the heading “Risk Factors” in our annual report on Form 10-K for our fiscal year ended September 30, 2017, filed with the SEC at www.sec.gov. We assume no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.
Use of Non-GAAP Financial Measures
To supplement Cabot’s
consolidated financial statements presented on a generally accepted
accounting principle (“GAAP”) basis, the preceding discussion of our
results and the accompanying financial tables report Adjusted EPS and
our operating tax rate, both of which are non-GAAP financial measures.
These non-GAAP financial measures are not computed in accordance with,
or as an alternative to, GAAP. A reconciliation of Adjusted EPS to net
income (loss) per share attributable to Cabot Corporation, the most
directly comparable GAAP financial measure, and a reconciliation of
operating tax rate to effective tax rate, the most directly comparable
GAAP financial measure, are provided in the table titled “Certain Items
and Reconciliation of Adjusted EPS and Operating Tax Rate.”
Management believes these non-GAAP measures provide investors with greater transparency to the information used by Cabot management in its financial and operational decision-making, allow investors to see Cabot’s results through the eyes of management, and better enable Cabot’s investors to understand Cabot’s operating performance and financial condition.
Adjusted EPS. In calculating Adjusted EPS, we exclude from our net income (loss) per share from continuing operations items of expense and income that management does not consider representative of the Company’s business operations. Accordingly, reporting earnings on an adjusted basis supplements the GAAP measure of performance and provides additional information related to the underlying performance of the business. For example, certain of the items we exclude are items that we are required by GAAP to recognize in one period that relate to activities extending over several periods or relate to single events that management considers to be unusual and infrequent, although not necessarily non-recurring. We refer to these items as “certain items.” Management believes excluding these items facilitates operating performance comparisons from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis and evaluates the Company’s operating performance without the impact of these costs or benefits. Management also uses Adjusted EPS as a key measure in evaluating management performance for incentive compensation purposes.
The items of income and expense that we have excluded from our calculations of Adjusted EPS, as applicable, but that have been included in our GAAP net income (loss) per share, as applicable, are described below.
- Asset impairment charges, which primarily included charges associated with an impairment of goodwill or other long-lived assets.
- Inventory Reserve Adjustment, which resulted from an evaluation performed as part of an impairment analysis.
- Global restructuring activities, which included costs or benefits associated with cost reduction initiatives or plant closures and were primarily related to (i) employee termination costs, (ii) asset impairment charges associated with restructuring actions, (iii) costs to close facilities, including environmental costs and contract termination penalties, and (iv) gains realized on the sale of land or equipment associated with restructured plants or locations.
- Legal and environmental reserves and matters, which consisted of costs or benefits for matters typically related to former businesses or that were otherwise incurred outside of the ordinary course of business.
- Gains (losses) on sale of investments, which primarily related to the sale of investments accounted for under the cost-method.
- Executive transition costs, which included incremental charges, including stock compensation charges, associated with the retirement or termination of employment of senior executives of the Company.
- Acquisition and integration-related charges, which included transaction costs, redundant costs incurred during the period of integration, and costs associated with transitioning certain management and business processes to Cabot’s processes.
- Non-recurring gains (losses) on foreign currency, which primarily related to the impact of continued currency devaluations on our net monetary assets denominated in that currency.
Cabot does not provide a target GAAP EPS growth rate range or reconciliation of the Adjusted EPS growth rate range with a GAAP EPS growth rate range because, without unreasonable effort, we are unable to predict with reasonable certainty the matters we would allocate to “certain items,” including unusual gains and losses, costs associated with future restructurings, acquisition-related expenses and litigation outcomes. These items are uncertain, depend on various factors, and could have a material impact on GAAP EPS in future periods.
Operating Tax Rate. Our “operating tax rate” represents the tax rate on our recurring operating results. This rate excludes discrete tax items, which are unusual or infrequent items that are excluded from the estimated annual effective tax rate and other tax items, including the impact of the timing of losses in certain jurisdictions, cumulative tax rate adjustments and the impact of the items of expense and income we identify as certain items on both our operating income and the tax provision. Management believes that the operating tax rate is useful supplemental information because it helps our investors compare our tax rate year to year on a consistent basis and to understand what our tax rate on current operations would be without the impact of these items.
Explanation of Terms Used
Product Mix. The term “product mix” refers to the mix of types and grade of products sold or the mix of geographic regions where products are sold, and the positive or negative impact this has on the revenue or profitability of the business or segment.
Net Working Capital. The term “net working capital” includes accounts receivable, inventory and accounts payable and accrued liabilities.
| CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| Periods ended June 30 | Three Months | Nine Months | ||||||||||||||||||
| Dollars in millions, except per share amounts (unaudited) | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
| Net sales and other operating revenues | $ | 854 | $ | 705 | $ | 2,392 | $ | 1,994 | ||||||||||||
| Cost of sales (A) | 654 | 544 | 1,824 | 1,505 | ||||||||||||||||
| Gross profit | 200 | 161 | 568 | 489 | ||||||||||||||||
| Selling and administrative expenses | 74 | 63 | 221 | 191 | ||||||||||||||||
| Research and technical expenses | 17 | 14 | 48 | 40 | ||||||||||||||||
| Long-lived assets impairment charge | — | — | 162 | — | ||||||||||||||||
| Goodwill impairment charge | — | — | 92 | — | ||||||||||||||||
| Income (loss) from operations | 109 | 84 | 45 | 258 | ||||||||||||||||
| Other income (expense) | ||||||||||||||||||||
| Interest and dividend income | 2 | 3 | 8 | 7 | ||||||||||||||||
| Interest expense | (14 | ) | (13 | ) | (41 | ) | (39 | ) | ||||||||||||
| Other income (expense) | (2 | ) | (6 | ) | 4 | (5 | ) | |||||||||||||
| Total other income (expense) | (14 | ) | (16 | ) | (29 | ) | (37 | ) | ||||||||||||
| Income (loss) from continuing operations before income taxes and equity in | ||||||||||||||||||||
| earnings of affiliated companies | 95 | 68 | 16 | 221 | ||||||||||||||||
| (Provision) benefit for income taxes (A)(B) | 4 | (16 | ) | (194 | ) | (33 | ) | |||||||||||||
| Equity in earnings of affiliated companies, net of tax | — | 3 | 2 | 6 | ||||||||||||||||
| Net income (loss) | 99 | 55 | (176 | ) | 194 | |||||||||||||||
| Net income (loss) attributable to noncontrolling interests | 11 | 8 | 31 | 18 | ||||||||||||||||
| Net income (loss) attributable to Cabot Corporation | $ | 88 | $ | 47 | $ | (207 | ) | $ | 176 | |||||||||||
| Diluted earnings per share of common stock | ||||||||||||||||||||
| attributable to Cabot Corporation | ||||||||||||||||||||
| Net income (loss) attributable to Cabot Corporation (A)(C) | $ | 1.40 | $ | 0.73 | $ | (3.36 | ) | $ | 2.78 | |||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||
| Diluted (C) | 62.3 | 62.7 | 61.8 | 62.8 | ||||||||||||||||
| (A)Fiscal 2017 amounts have been recast to reflect the retrospective application of the Company’s election to change its inventory valuation method of accounting for its U.S. carbon black inventories from the last-in, first-out (“LIFO”) method to the first-in, first-out (“FIFO”) method, which resulted in a decrease in Cost of sales of $2 million, an increase to the (Provision) benefit for income taxes of less than $(1) million and an increase in Net income (loss) attributable to Cabot Corporation per diluted common share of $0.02 per share for the three months ended June 30, 2017. For more detail on the transition from the LIFO method to the FIFO method, please refer to the Company's 10-Q filings. | ||||||||||||||||||||
| (B)Included within the (Provision) benefit for income taxes for the three and nine months ended June 30, 2018, respectively, is a tax (charge) benefit in the amount of $(2) million and $28 million associated with the long-lived asset impairment charge that was recorded in the second quarter of fiscal 2018. | ||||||||||||||||||||
| (C)The weighted average common shares outstanding used to calculate earnings per share for the nine months ended June 30, 2018 excludes approximately 1 million shares as those shares would be antidilutive due to the Company’s net loss position. | ||||||||||||||||||||
| CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS | ||||||||||||||||||||
| Periods ended June 30 | Three Months | Nine Months | ||||||||||||||||||
| Dollars in millions, except per share amounts (unaudited) | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
| Sales | ||||||||||||||||||||
| Reinforcement Materials | $ | 466 | $ | 367 | $ | 1,307 | $ | 1,014 | ||||||||||||
| Performance Chemicals | 274 | 229 | 771 | 662 | ||||||||||||||||
| Specialty Carbons and Formulations | 195 | 154 | 548 | 454 | ||||||||||||||||
| Metal Oxides | 79 | 75 | 223 | 208 | ||||||||||||||||
| Purification Solutions | 70 | 71 | 206 | 207 | ||||||||||||||||
| Specialty Fluids | 12 | 12 | 24 | 30 | ||||||||||||||||
| Segment sales | 822 | 679 | 2,308 | 1,913 | ||||||||||||||||
| Unallocated and other (A) | 32 | 26 | 84 | 81 | ||||||||||||||||
| Net sales and other operating revenues | $ | 854 | $ | 705 | $ | 2,392 | $ | 1,994 | ||||||||||||
| Segment Earnings Before Interest and Taxes (B) | ||||||||||||||||||||
| Reinforcement Materials | $ | 74 | $ | 51 | $ | 215 | $ | 145 | ||||||||||||
| Performance Chemicals | 56 | 46 | 160 | 146 | ||||||||||||||||
| Purification Solutions | (6 | ) | (2 | ) | (6 | ) | 4 | |||||||||||||
| Specialty Fluids | 3 | 4 | (2 | ) | 6 | |||||||||||||||
| Total Segment Earnings Before Interest and Taxes | 127 | 99 | 367 | 301 | ||||||||||||||||
| Unallocated and Other | ||||||||||||||||||||
| Interest expense | (14 | ) | (13 | ) | (41 | ) | (39 | ) | ||||||||||||
| Certain items (C) | (3 | ) | (2 | ) | (260 | ) | (2 | ) | ||||||||||||
| Unallocated corporate costs | (15 | ) | (11 | ) | (45 | ) | (37 | ) | ||||||||||||
| General unallocated income (expense) (D)(E) | — | (2 | ) | (3 | ) | 4 | ||||||||||||||
| Less: Equity in earnings of affiliated companies | — | (3 | ) | (2 | ) | (6 | ) | |||||||||||||
| Income (loss) from continuing operations before income taxes and equity in | ||||||||||||||||||||
| earnings of affiliated companies | 95 | 68 | 16 | 221 | ||||||||||||||||
| (Provision) benefit for income taxes (including tax certain items) (D) | 4 | (16 | ) | (194 | ) | (33 | ) | |||||||||||||
| Equity in earnings of affiliated companies | — | 3 | 2 | 6 | ||||||||||||||||
| Net income (loss) | 99 | 55 | (176 | ) | 194 | |||||||||||||||
| Net income attributable to noncontrolling interests | 11 | 8 | 31 | 18 | ||||||||||||||||
| Net income (loss) attributable to Cabot Corporation | $ | 88 | $ | 47 | $ | (207 | ) | $ | 176 | |||||||||||
| Diluted earnings per share of common stock | ||||||||||||||||||||
| attributable to Cabot Corporation | ||||||||||||||||||||
| Net income (loss) attributable to Cabot Corporation (D)(F) | $ | 1.40 | $ | 0.73 | $ | (3.36 | ) | $ | 2.78 | |||||||||||
| Adjusted earnings per share | ||||||||||||||||||||
| Adjusted EPS (D)(G) | $ | 1.06 | $ | 0.83 | $ | 3.03 | $ | 2.56 | ||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||
| Diluted (F) | 62.3 | 62.7 | 61.8 | 62.8 | ||||||||||||||||
| (A)Unallocated and Other reflects royalties, other operating revenues, external shipping and handling fees, the impact of the corporate adjustment for unearned revenue, the removal of 100% of the sales of an equity method affiliate, and discounting charges for certain Notes receivable. | ||||||||||||||||||||
| (B)Segment EBIT is a measure used by Cabot's Chief Operating Decision-Maker to measure consolidated operating results, assess segment performance and allocate resources. Segment EBIT includes equity in earnings of affiliated companies, royalty income, and allocated corporate costs. | ||||||||||||||||||||
| (C)Details of Certain items are presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table. | ||||||||||||||||||||
| (D)Fiscal 2017 amounts have been recast to reflect the retrospective application of the Company’s election to change its inventory valuation method of accounting for its U.S. carbon black inventories from the LIFO method to the FIFO method, which resulted in a decrease in General unallocated income (expense) of $2 million, an increase to the (Provision) benefit for income taxes of less than $(1) million, an increase in Net income (loss) attributable to Cabot Corporation per diluted common share of $0.02 per share and an increase in Adjusted earnings per share of $0.02 per share for the three months ended June 30, 2017. For more detail on the transition from the LIFO method to the FIFO method, please refer to the Company's 10-Q filings. | ||||||||||||||||||||
| (E)General unallocated income includes foreign currency transaction gains (losses), interest income, dividend income and the profit related to the corporate adjustment for unearned revenue. | ||||||||||||||||||||
| (F)The weighted average common shares outstanding used to calculate earnings per share for the nine months ended June 30, 2018 excludes approximately 1 million shares as those shares would be antidilutive due to the Company’s net loss position. | ||||||||||||||||||||
| (G)Adjusted EPS is a non-GAAP measure, and a reconciliation of Adjusted EPS to GAAP EPS is presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table. | ||||||||||||||||||||
| CABOT CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||||
| June 30, | September 30, | |||||||
| Dollars in millions (unaudited) | 2018 | 2017 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 131 | $ | 280 | ||||
| Accounts and notes receivable, net of reserve for doubtful accounts of $9 and $9 | 664 | 527 | ||||||
| Inventories: (A) | ||||||||
| Raw materials | 122 | 93 | ||||||
| Work in process | 3 | 2 | ||||||
| Finished goods | 311 | 293 | ||||||
| Other | 46 | 45 | ||||||
| Total inventories | 482 | 433 | ||||||
| Prepaid expenses and other current assets | 65 | 59 | ||||||
| Total current assets | 1,342 | 1,299 | ||||||
| Property, plant and equipment, net | 1,248 | 1,305 | ||||||
| Goodwill | 92 | 154 | ||||||
| Equity affiliates | 51 | 56 | ||||||
| Intangible assets, net | 96 | 137 | ||||||
| Assets held for rent | 116 | 104 | ||||||
| Deferred income taxes (A) | 68 | 237 | ||||||
| Other assets | 44 | 46 | ||||||
| Total assets | $ | 3,057 | $ | 3,338 | ||||
|
(A)Fiscal 2017 amounts have been recast to reflect the retrospective application of the Company’s election to change its inventory valuation method of accounting for its U.S. carbon black inventories from the LIFO method to the FIFO method, which resulted in an increase in Total inventories of $37 million and a decrease in Deferred income taxes of $13 million. |
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| CABOT CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||||||
|
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| June 30, | September 30, | |||||||||
| Dollars in millions, except share and per share amounts (unaudited) | 2018 | 2017 | ||||||||
| Current liabilities: | ||||||||||
| Short-term borrowings | $ | 312 | $ | 7 | ||||||
| Accounts payable and accrued liabilities | 491 | 457 | ||||||||
| Income taxes payable | 25 | 22 | ||||||||
| Current portion of long-term debt | 36 | 256 | ||||||||
| Redeemable preferred stock | 26 | — | ||||||||
| Total current liabilities | 890 | 742 | ||||||||
| Long-term debt | 630 | 661 | ||||||||
| Deferred income taxes | 1 | 38 | ||||||||
| Other liabilities | 247 | 245 | ||||||||
| Redeemable preferred stock | — | 27 | ||||||||
| Stockholders' equity: | ||||||||||
| Preferred stock: | ||||||||||
| Authorized: 2,000,000 shares of $1 par value | ||||||||||
| Issued and Outstanding: None and none | — | — | ||||||||
| Common stock: | ||||||||||
| Authorized: 200,000,000 shares of $1 par value | ||||||||||
| Issued: 61,759,181 and 62,087,627 shares | ||||||||||
| Outstanding: 61,558,577 and 61,884,347 shares | 62 | 62 | ||||||||
| Less cost of 200,604 and 203,280 shares of common treasury stock | (7 | ) | (6 | ) | ||||||
| Additional paid-in capital | — | — | ||||||||
| Retained earnings (A) | 1,417 | 1,707 | ||||||||
| Accumulated other comprehensive income | (313 | ) | (259 | ) | ||||||
| Total Cabot Corporation stockholders' equity | 1,159 | 1,504 | ||||||||
| Noncontrolling interests | 130 | 121 | ||||||||
| Total stockholders' equity | 1,289 | 1,625 | ||||||||
| Total liabilities and stockholders' equity | $ | 3,057 | $ | 3,338 | ||||||
|
(A)Fiscal 2017 amounts have been recast to reflect the retrospective application of the Company’s election to change its inventory valuation method of accounting for its U.S. carbon black inventories from the LIFO method to the FIFO method, which resulted in an increase in Retained earnings of $24 million. |
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| CABOT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||
| Periods ended June 30 | Three Months | Nine Months | ||||||||||||||||||
| Dollars in millions (unaudited) | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||||||||||
| Net income (loss) (A) | $ | 99 | $ | 55 | $ | (176 | ) | $ | 194 | |||||||||||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||||||||||
| Depreciation and amortization | 38 | 39 | 117 | 115 | ||||||||||||||||
| Other non-cash charges, net (A)(B) | (22 | ) | — | 402 | (23 | ) | ||||||||||||||
| Changes in assets and liabilities: | ||||||||||||||||||||
| Changes in certain working capital items (A)(C) | (72 | ) | 29 | (187 | ) | (91 | ) | |||||||||||||
| Changes in other assets and liabilities, net | 18 | 7 | (21 | ) | (13 | ) | ||||||||||||||
| Cash dividends received from equity affiliates | 1 | 3 | 8 | 9 | ||||||||||||||||
| Cash provided by (used in) operating activities | 62 | 133 | 143 | 191 | ||||||||||||||||
| Cash Flows from Investing Activities: | ||||||||||||||||||||
| Additions to property, plant and equipment | (58 | ) | (41 | ) | (167 | ) | (86 | ) | ||||||||||||
| Cash paid for acquisition of business, net of cash acquired of $1 | — | — | (64 | ) | — | |||||||||||||||
| Other investing activities, net | 4 | (1 | ) | 20 | (3 | ) | ||||||||||||||
| Cash used in investing activities | (54 | ) | (42 | ) | (211 | ) | (89 | ) | ||||||||||||
| Cash Flows from Financing Activities: | ||||||||||||||||||||
| Change in debt, net | 44 | (9 | ) | 53 | (2 | ) | ||||||||||||||
| Cash dividends paid to common stockholders | (21 | ) | (19 | ) | (60 | ) | (57 | ) | ||||||||||||
| Other financing activities, net (B) | (41 | ) | (24 | ) | (62 | ) | (35 | ) | ||||||||||||
| Cash used in financing activities | (18 | ) | (52 | ) | (69 | ) | (94 | ) | ||||||||||||
| Effect of exchange rates on cash | (38 | ) | 26 | (12 | ) | (10 | ) | |||||||||||||
| Increase (decrease) in cash and cash equivalents | (48 | ) | 65 | (149 | ) | (2 | ) | |||||||||||||
| Cash and cash equivalents at beginning of period | 179 | 133 | 280 | 200 | ||||||||||||||||
| Cash and cash equivalents at end of period | $ | 131 | $ | 198 | $ | 131 | $ | 198 | ||||||||||||
| (A)Fiscal 2017 amounts have been recast to reflect the retrospective application of the Company’s election to change its inventory valuation method of accounting for its U.S. carbon black inventories from the LIFO method to the FIFO method, which resulted in an increase in Net income (loss) of $2 million, an increase in Other non-cash charges, net of less than $1 million and a decrease in Changes in certain working capital items of $2 million for the three months ended June 30, 2017. | ||||||||||||||||||||
| (B)Fiscal 2017 amounts have been recast to reflect the retrospective change related to cash flow presentation of excess tax benefits from stock based compensation under the new stock compensation guidance adopted in the first quarter of fiscal 2018, which resulted in the reclassification of $1 million and $8 million for tax benefits from stock based compensation awards from cash flows from financing activities to cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows for the three and nine months ended June 30, 2017, respectively. | ||||||||||||||||||||
| (C)Includes Accounts and notes receivable, Inventories, and Accounts payable and accrued liabilities. | ||||||||||||||||||||
| CABOT CORPORATION | |||||||||||||||||||||||||||||||||||||||||||||||||
| Fiscal 2017 | Fiscal 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Dollars in millions, | |||||||||||||||||||||||||||||||||||||||||||||||||
| except per share amounts (unaudited) | Dec. Q. | Mar. Q. | June Q. | Sept. Q. | FY | Dec. Q. | Mar. Q. | June Q. | Sept. Q. | FY | |||||||||||||||||||||||||||||||||||||||
| Sales | |||||||||||||||||||||||||||||||||||||||||||||||||
| Reinforcement Materials | $ | 295 | $ | 352 | $ | 367 | $ | 367 | $ | 1,381 | $ | 387 | $ | 454 | $ | 466 |
$ |
— |
$ | 1,307 | |||||||||||||||||||||||||||||
| Performance Chemicals | 205 | 228 | 229 | 246 | 908 | 229 | 268 | 274 |
— |
771 | |||||||||||||||||||||||||||||||||||||||
| Specialty Carbons and Formulations | 138 | 162 | 154 | 169 | 623 | 160 | 193 | 195 | — | 548 | |||||||||||||||||||||||||||||||||||||||
| Metal Oxides | 67 | 66 | 75 | 77 | 285 | 69 | 75 | 79 | — | 223 | |||||||||||||||||||||||||||||||||||||||
| Purification Solutions | 69 | 67 | 71 | 74 | 281 | 70 | 66 | 70 | — | 206 | |||||||||||||||||||||||||||||||||||||||
| Specialty Fluids | 11 | 7 | 12 | 11 | 41 | 6 | 6 | 12 | — | 24 | |||||||||||||||||||||||||||||||||||||||
| Segment Sales | 580 | 654 | 679 | 698 | 2,611 | 692 | 794 | 822 | — | 2,308 | |||||||||||||||||||||||||||||||||||||||
| Unallocated and other (A) | 31 | 24 | 26 | 25 | 106 | 28 | 24 | 32 | — | 84 | |||||||||||||||||||||||||||||||||||||||
| Net sales and other operating revenues | $ | 611 | $ | 678 | $ | 705 | $ | 723 | $ | 2,717 | $ | 720 | $ | 818 | $ | 854 |
$ |
— |
$ | 2,392 | |||||||||||||||||||||||||||||
| Segment Earnings Before Interest and Taxes (B) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Reinforcement Materials | $ | 40 | $ | 54 | $ | 51 | $ | 48 | $ | 193 | $ | 62 | $ | 79 | $ | 74 |
$ |
— |
$ | 215 | |||||||||||||||||||||||||||||
| Performance Chemicals | 49 | 51 | 46 | 55 | 201 | 47 | 57 | 56 | — | 160 | |||||||||||||||||||||||||||||||||||||||
| Purification Solutions | 4 | 2 | (2 | ) | 2 | 6 | 6 | (6 | ) | (6 | ) | — | (6 | ) | |||||||||||||||||||||||||||||||||||
| Specialty Fluids | 2 | — | 4 | 3 | 9 | (2 | ) | (3 | ) | 3 | — | (2 | ) | ||||||||||||||||||||||||||||||||||||
| Total Segment Earnings Before Interest and Taxes | 95 | 107 | 99 | 108 | 409 | 113 | 127 | 127 | — | 367 | |||||||||||||||||||||||||||||||||||||||
| Unallocated and Other | |||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | (13 | ) | (13 | ) | (13 | ) | (14 | ) | (53 | ) | (13 | ) | (14 | ) | (14 | ) | — | (41 | ) | ||||||||||||||||||||||||||||||
| Certain items (C) | — | — | (2 | ) | (1 | ) | (3 | ) | 7 | (264 | ) | (3 | ) | — | (260 | ) | |||||||||||||||||||||||||||||||||
| Unallocated corporate costs | (12 | ) | (14 | ) | (11 | ) | (13 | ) | (50 | ) | (14 | ) | (16 | ) | (15 | ) | — | (45 | ) | ||||||||||||||||||||||||||||||
| General unallocated income (expense) (D)(E) | 7 | (1 | ) | (2 | ) | (1 | ) | 3 | — | (3 | ) | — | — | (3 | ) | ||||||||||||||||||||||||||||||||||
| Less: Equity in earnings of affiliated companies | (2 | ) | (1 | ) | (3 | ) | (1 | ) | (7 | ) | (1 | ) | (1 | ) | — | — | (2 | ) | |||||||||||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes and | |||||||||||||||||||||||||||||||||||||||||||||||||
| equity in earnings of affiliated companies | 75 | 78 | 68 | 78 | 299 | 92 | (171 | ) | 95 | — | 16 | ||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| (Provision) benefit for income taxes (including tax certain items) (D) | (18 | ) | 1 | (16 | ) | — | (33 | ) | (205 | ) | 7 | 4 | — | (194 | ) | ||||||||||||||||||||||||||||||||||
| Equity in earnings of affiliated companies | 2 | 1 | 3 | 1 | 7 | 1 | 1 | — | — | 2 | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 59 | 80 | 55 | 79 | 273 | (112 | ) | (163 | ) | 99 | — | (176 | ) | ||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests | 4 | 6 | 8 | 7 | 25 | 10 | 10 | 11 |
— |
31 | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Cabot Corporation | $ | 55 | $ | 74 | $ | 47 | $ | 72 | $ | 248 | $ | (122 | ) | $ | (173 | ) | $ | 88 |
$ |
— |
|
$ |
(207 | ) | |||||||||||||||||||||||||
| Diluted earnings per share of common stock | |||||||||||||||||||||||||||||||||||||||||||||||||
| attributable to Cabot Corporation | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Cabot Corporation (D)(F) | $ | 0.86 | $ | 1.19 | $ | 0.73 | $ | 1.13 | $ | 3.91 | $ | (1.98 | ) | $ | (2.80 | ) | $ | 1.40 | $ | — | $ | (3.36 | ) | ||||||||||||||||||||||||||
| Adjusted earnings per share | |||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EPS (D)(G) | $ | 0.85 | $ | 0.88 | $ | 0.83 | $ | 0.98 | $ | 3.54 | $ | 0.93 | $ | 1.04 | $ | 1.06 | $ | — | $ | 3.03 | |||||||||||||||||||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted (F) | 62.8 | 62.8 | 62.7 | 62.5 | 62.7 | 61.9 | 61.8 | 62.3 |
— |
61.8 | |||||||||||||||||||||||||||||||||||||||
| (A)Unallocated and other reflects royalties, other operating revenues, external shipping and handling fees, the impact of the corporate adjustment for unearned revenue, the removal of 100% of the sales of an equity method affiliate and discounting charges for certain Notes receivable. | |||||||||||||||||||||||||||||||||||||||||||||||||
| (B)Segment EBIT is a measure used by Cabot's Chief Operating Decision-Maker to measure consolidated operating results, assess segment performance and allocate resources. Segment EBIT includes equity in earnings of affiliated companies, royalty income, and allocated corporate costs. | |||||||||||||||||||||||||||||||||||||||||||||||||
| (C)Details of certain items are presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table. | |||||||||||||||||||||||||||||||||||||||||||||||||
| (D)Fiscal 2017 full year amounts have been recast to reflect the retrospective application of the Company’s election to change its inventory valuation method of accounting for its U.S. carbon black inventories from the LIFO method to the FIFO method, which resulted in an increase in General unallocated income of $11 million, an increase in (Provision) benefit for income taxes of ($4) million, an increase in Net income (loss) attributable to Cabot Corporation per diluted common share of $0.11 per share and an increase in Adjusted earnings per share of $0.11 per share. For more detail on the transition from the LIFO method to the FIFO method, please refer to the Company's 10-Q filings. | |||||||||||||||||||||||||||||||||||||||||||||||||
| (E)General unallocated income (expense) includes foreign currency transaction gains (losses), interest income, dividend income and the profit related to the corporate adjustment for unearned revenue. | |||||||||||||||||||||||||||||||||||||||||||||||||
| (F)The weighted average common shares outstanding used to calculate earnings per share for all periods in fiscal 2018, except for the three months ended June 30, 2018, excludes approximately 1 million shares as those shares would be antidilutive due to the Company’s net loss position in those periods. | |||||||||||||||||||||||||||||||||||||||||||||||||
| (G)Adjusted EPS is a non-GAAP measure, and a reconciliation of Adjusted EPS to GAAP EPS is presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table. | |||||||||||||||||||||||||||||||||||||||||||||||||
| CABOT CORPORATION CERTAIN ITEMS AND RECONCILIATION OF ADJUSTED EPS AND OPERATING TAX RATE | |||||||||||||||||||||||||
| TABLE 1: DETAIL OF CERTAIN ITEMS | |||||||||||||||||||||||||
| Periods ended June 30 | Three Months | Nine Months | |||||||||||||||||||||||
| Dollars in millions, except per share amounts (unaudited) | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
|
Certain items before and after income taxes |
|||||||||||||||||||||||||
| Impairment of goodwill and long-lived assets |
$ |
— |
$ |
— |
$ | (254 | ) |
$ |
— |
||||||||||||||||
| Inventory reserve adjustment | — | — | (13 | ) |
— |
||||||||||||||||||||
| Global restructuring activities | (1 | ) | (1 | ) | 7 | (3 | ) | ||||||||||||||||||
| Legal and environmental matters and reserves | — | — | (6 | ) | 2 | ||||||||||||||||||||
| Gains (losses) on sale of investments | — | — | 10 | — | |||||||||||||||||||||
| Executive transition costs | (1 | ) | — | (1 | ) | — | |||||||||||||||||||
| Acquisition and integration-related charges | — | — | (1 | ) | — | ||||||||||||||||||||
| Non-recurring gains (losses) on foreign exchange | — | (1 | ) | — | (1 | ) | |||||||||||||||||||
| Other certain items | (1 | ) | — | (2 | ) | — | |||||||||||||||||||
| Total certain items, pre-tax | (3 | ) | (2 | ) | (260 | ) | (2 | ) | |||||||||||||||||
| Tax impact of certain items (A) | (2 | ) | — | 28 | — | ||||||||||||||||||||
| Certain items after tax (excluding discrete tax items) | (5 | ) | (2 | ) | (232 | ) | (2 | ) | |||||||||||||||||
| Certain items after tax per share impact (excluding discrete tax items) | $ | (0.08 | ) | $ | (0.02 | ) | $ | (3.72 | ) | $ | (0.01 | ) | |||||||||||||
| Tax-related certain items | |||||||||||||||||||||||||
| Discrete tax items | 26 | (5 | ) | (164 | ) | 15 | |||||||||||||||||||
| Total tax-related certain items | 26 | (5 | ) | (164 | ) | 15 | |||||||||||||||||||
| Total tax-related certain items per share impact | 0.42 | (0.08 | ) | (2.65 | ) | 0.23 | |||||||||||||||||||
| Total certain items after tax | $ | 21 | $ | (7 | ) | $ | (396 | ) | $ | 13 | |||||||||||||||
| Total certain items after tax per share impact | $ | 0.34 | $ | (0.10 | ) | $ | (6.37 | ) | $ | 0.22 | |||||||||||||||
| TABLE 2: CERTAIN ITEMS STATEMENT OF OPERATIONS LINE ITEM | |||||||||||||||||||||||||
| Periods ended June 30 | Three Months | Nine Months | |||||||||||||||||||||||
| Dollars in millions, Pre-Tax (unaudited) | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
|
Statement of Operations Line Item (B) |
|||||||||||||||||||||||||
| Cost of sales | $ | (3 | ) | $ | (1 | ) | $ | (14 | ) | $ | (3 | ) | |||||||||||||
| Selling and administrative expenses | — | — | (2 | ) | 2 | ||||||||||||||||||||
| Other income (expense) | — | (1 | ) | 10 | (1 | ) | |||||||||||||||||||
| Long-lived assets impairment charge | — | — | (162 | ) | — | ||||||||||||||||||||
| Goodwill impairment charge | — | — | (92 | ) | — | ||||||||||||||||||||
| Total certain items, pre-tax | $ | (3 | ) | $ | (2 | ) | $ | (260 | ) | $ | (2 | ) | |||||||||||||
| TABLE 3: RECONCILIATION OF TAX CERTAIN ITEMS | |||||||||||||||||||||||||
| Periods ended June 30 | Three Months | Nine Months | |||||||||||||||||||||||
| Dollars in millions (unaudited) | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
|
Reconciliation of Provision for income taxes, excluding certain items, to Provision for income taxes |
|||||||||||||||||||||||||
| (Provision) benefit for income taxes (C) | $ | 4 | $ | (16 | ) | $ | (194 | ) | $ | (33 | ) | ||||||||||||||
| Less: Tax impact of certain items | (2 | ) | — | 28 | — | ||||||||||||||||||||
| Less: Tax-related certain items | 26 | (5 | ) | (164 | ) | 15 | |||||||||||||||||||
| (Provision) benefit for income taxes, excluding certain items | $ | (20 | ) | $ | (11 | ) | $ | (58 | ) | $ | (48 | ) | |||||||||||||
| TABLE 4: RECONCILIATION OF OPERATING TAX RATE | |||||||||||||||||||||||||
| Periods ended June 30 | Three Months | Nine Months | Forecast | ||||||||||||||||||||||
| Dollars in millions (unaudited) | 2018 | 2017 | 2018 | 2017 | 2018 | ||||||||||||||||||||
|
Reconciliation of the effective tax rate to the operating tax rate |
|||||||||||||||||||||||||
| (Provision) benefit for income taxes (C) | $ | 4 | $ | (16 | ) | $ | (194 | ) | $ | (33 | ) | N/A | |||||||||||||
| Effective tax rate | (3 | )% | 23 | % | 1202 | % | 14 | % | 200 | % | |||||||||||||||
| 23.00 | |||||||||||||||||||||||||
| Impact of discrete tax items: (D) | |||||||||||||||||||||||||
| Unusual or infrequent items | 3 | % | (4 | )% | (1143 | )% | 7 | % | (171 | )% | |||||||||||||||
| Items related to uncertain tax positions | (1 | )% | (2 | )% | (13 | )% | — | % | (2 | )% | |||||||||||||||
| Other discrete tax items | 23 | % | 5 | % | 136 | % | — | % | 20 | % | |||||||||||||||
| Impact of certain items | (1 | )% | (1 | )% | (161 | )% | — | % | (26 | )% | |||||||||||||||
| Operating tax rate | 21 | % | 21 | % | 21 | % | 21 | % | 21 | % | |||||||||||||||
| TABLE 5: RECONCILIATION OF ADJUSTED EPS BY QUARTER FOR FISCAL 2018 and FISCAL 2017 | |||||||||||||||||||||||||
| Fiscal 2018(E) | |||||||||||||||||||||||||
| Periods ended (unaudited) | Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2018 | ||||||||||||||||||||
|
Reconciliation of Adjusted EPS to GAAP EPS |
|||||||||||||||||||||||||
| Net income (loss) per share attributable to Cabot Corporation | $ | (1.98 | ) | $ | (2.80 | ) | $ | 1.40 | $ | — | $ | (3.36 | ) | ||||||||||||
| Less: Certain items after tax per share | (2.89 | ) | (3.82 | ) | 0.34 | — | (6.37 | ) | |||||||||||||||||
| Less: Dilutive impact of shares (F) | (0.02 | ) | (0.02 | ) | — | — | (0.02 | ) | |||||||||||||||||
| Adjusted earnings per share | $ | 0.93 | $ | 1.04 | $ | 1.06 | $ | — | $ | 3.03 | |||||||||||||||
| Fiscal 2017(E) | |||||||||||||||||||||||||
| Periods ended (unaudited) | Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | ||||||||||||||||||||
|
Reconciliation of Adjusted EPS to GAAP EPS |
|||||||||||||||||||||||||
| Net income (loss) attributable to Cabot Corporation (C)(G) | $ | 0.86 | $ | 1.19 | $ | 0.73 | $ | 1.13 | $ | 3.91 | |||||||||||||||
| Less: Certain items after tax per share | 0.01 | 0.31 | (0.10 | ) | 0.15 | 0.37 | |||||||||||||||||||
| Adjusted earnings per share (C)(G) | $ | 0.85 | $ | 0.88 | $ | 0.83 | $ | 0.98 | $ | 3.54 | |||||||||||||||
| (A)The tax effect of certain items is determined by (1) starting with the current and deferred income tax expense or benefit, included in Net income attributable to Cabot Corporation, and (2) subtracting the tax expense or benefit on “adjusted earnings”. Adjusted earnings is defined as the pre-tax income attributable to Cabot Corporation excluding certain items. The tax expense or benefit on adjusted earnings is calculated by applying the operating tax rate, which includes both current and deferred taxes, as defined under the section Use of Non-GAAP Financial Measures of the earnings release. | |||||||||||||||||||||||||
| (B)This table indicates the line items where certain items are recorded in the Consolidated Statements of Operations. | |||||||||||||||||||||||||
| (C)Fiscal 2017 amounts have been recast to reflect the retrospective application of the Company’s election to change its inventory valuation method of accounting for its U.S. carbon black inventories from the LIFO method to the FIFO method, which resulted in an increase in Net income (loss) attributable to Cabot Corporation per diluted common share of $0.02 per share and an increase in Adjusted earnings per share of $0.02 per share for the three months ended June 30, 2017. For more detail on the transition from the LIFO method to the FIFO method, please refer to the Company's 10-Q filings. | |||||||||||||||||||||||||
| (D)The nature of the discrete tax items for the periods ended June 30, 2018 and 2017 was as follows: (i) Unusual or infrequent items during the three and nine months ended June 30, 2018 consisted of the net tax impacts resulting from the enactment of H.R. 1, commonly referred to as the Tax Cuts and Jobs Act of 2017 (net tax benefit of $4 million and net tax expense of $185 million, respectively), net tax impacts from cash management activities, foreign exchange gain/loss on the remeasurement of a deferred tax liability, as well as impacts related to stock compensation deductions. Additionally, unusual or infrequent items during the three and nine months ended June 30, 2018 and 2017 included the tax impact of excludible foreign exchange gains and losses in certain jurisdictions. Unusual or infrequent items during the three and nine months ended June 30, 2017 included the net tax impacts from excess foreign tax credits upon repatriation of previously taxed foreign earnings and the accrual of U.S. tax on certain foreign earnings; (ii) Items related to uncertain tax positions during the three and nine months ended June 30, 2018 and 2017 including net tax impacts from the reversal of accruals for uncertain tax positions due to the expiration of statutes of limitations and the settlement of tax audits, the accrual of interest on uncertain tax positions, the refinement of the accrual for existing uncertain tax positions (fiscal 2018 only) and the accrual of a prior year uncertain tax position (fiscal 2017 only); (iii) Other discrete tax items during the three and nine months ended June 30, 2018 included changes in valuation allowances on beginning of year tax balances. Additionally, other discrete tax items during the three and nine months ended June 30, 2018 and 2017 included net tax impacts from various return to provision adjustments related to tax return filings, changes in non-U.S. tax laws and as a result of audit settlements (fiscal 2018 only). | |||||||||||||||||||||||||
| (E)Per share amounts are calculated after tax and, where applicable, noncontrolling interest, net of tax. | |||||||||||||||||||||||||
| (F)Due to the Company’s net loss position, GAAP EPS for all periods in fiscal 2018, except for the three months ended June 30, 2018, has been calculated using basic weighted average shares for both basic and diluted GAAP EPS. However, in order to provide an Adjusted Non-GAAP EPS with a weighted average share figure that is consistent with all other periods presented, the Company has included this reconciling item to quantify the difference between basic and diluted weighted average shares. This reconciling item is applicable to individual periods presented but does not sum cumulatively. The net loss for the nine months ended June 30, 2018 is driven by a discrete tax item and impairment charges, so the Company believes this approach provides the most comparable presentation possible. | |||||||||||||||||||||||||
| (G)Fiscal 2017 full year amounts have been recast to reflect the retrospective application of the Company’s election to change its inventory valuation method of accounting for its U.S. carbon black inventories from the LIFO method to the FIFO method, which resulted in an increase in Net income (loss) attributable to Cabot Corporation per diluted common share of $0.11 per share and an increase in Adjusted earnings per share of $0.11 per share. | |||||||||||||||||||||||||
| CABOT CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||||||||
| Fiscal 2018 (A) | |||||||||||||||||||||||||
| Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2018 | |||||||||||||||||||||
|
Reconciliation of Adjusted EPS to GAAP EPS |
|||||||||||||||||||||||||
| Net income (loss) per share attributable to Cabot Corporation | $ | (1.98 | ) | $ | (2.80 | ) | $ | 1.40 | $ |
— |
$ | (3.36 | ) | ||||||||||||
| Less: Certain items after tax | (2.89 | ) | (3.82 | ) | 0.34 | — | (6.37 | ) | |||||||||||||||||
| Less: Dilutive impact of shares (B) | (0.02 | ) | (0.02 | ) | — | — | (0.02 | ) | |||||||||||||||||
| Adjusted earnings per share | $ | 0.93 | $ | 1.04 | $ | 1.06 | $ | — | $ | 3.03 | |||||||||||||||
| (A)Per share amounts are calculated after tax and, where applicable, noncontrolling interest, net of tax. | |||||||||||||||||||||||||
| (B)Due to the Company’s Net Loss position, GAAP EPS for all periods in fiscal 2018, except for the three months ended June 30, 2018, has been calculated using basic weighted average shares only to avoid anti-dilution. However, in order to provide an Adjusted Non-GAAP EPS with a weighted average share figure that is consistent with all other periods presented, the Company has included this reconciling item to quantify the difference between basic and diluted weighted average shares. This reconciling item is applicable to individual periods presented but does not sum cumulatively. The net loss for the nine months ended June 30, 2018 is driven by a discrete tax item and impairment charges so the Company believes this approach provides the most comparable presentation possible. | |||||||||||||||||||||||||
| Dollars in millions | Fiscal 2018 | ||||||||||||||||||||||||
| Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2018 | |||||||||||||||||||||
|
Reconciliation of Segment EBIT to Net Income and Segment EBITDA Margin |
|||||||||||||||||||||||||
| Net income (loss) attributable to Cabot Corporation | $ | (122 | ) | $ | (173 | ) | $ | 88 |
$ |
— |
$ | (207 | ) | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 10 | 10 | 11 | — | 31 | ||||||||||||||||||||
| Equity in earnings of affiliated companies, net of tax | (1 | ) | (1 | ) | — | — | (2 | ) | |||||||||||||||||
| Income from discontinued operations, net of tax | — | — | — | — | — | ||||||||||||||||||||
| Provision (benefit) for income taxes | 205 | (7 | ) | (4 | ) |
— |
194 | ||||||||||||||||||
| Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies | $ | 92 | $ | (171 | ) | $ | 95 |
$ |
— |
$ | 16 | ||||||||||||||
| Interest expense | 13 | 14 | 14 | — | 41 | ||||||||||||||||||||
| Certain items | (7 | ) | 264 | 3 | — | 260 | |||||||||||||||||||
| Unallocated corporate costs | 14 | 16 | 15 | — | 45 | ||||||||||||||||||||
| General unallocated (income) expense | — | 3 | — | — | 3 | ||||||||||||||||||||
| Equity in earnings of affiliated companies | 1 | 1 | — | — | 2 | ||||||||||||||||||||
| Total Segment EBIT | $ | 113 | $ | 127 | $ | 127 |
$ |
— |
$ | 367 | |||||||||||||||
| Plus: Total Depreciation & Amortization | 39 | 40 | 38 | — | 117 | ||||||||||||||||||||
| Plus: Adjustments to Depreciation (C) | — | 1 | (1 | ) | — | — | |||||||||||||||||||
| Total Segment EBITDA | $ | 152 | $ | 168 | $ | 164 |
$ |
— |
$ | 484 | |||||||||||||||
| Less: Unallocated Corporate Costs | (14 | ) | (16 | ) | (15 | ) | — | (45 | ) | ||||||||||||||||
| Adjusted EBITDA | $ | 138 | $ | 152 | $ | 149 |
$ |
— |
$ | 439 | |||||||||||||||
| (C)Adjustments to depreciation includes the addition of the depreciation expense of a contractual joint venture in Purification Solutions less accelerated depreciation expense not allocated to a business. | |||||||||||||||||||||||||
| Dollars in millions | Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2018 | ||||||||||||||||||||
| Reinforcement Materials EBIT | $ | 62 | $ | 79 | $ | 74 |
$ |
— |
$ | 215 | |||||||||||||||
| Plus: Depreciation & Amortization | 17 | 18 | 18 | — | 53 | ||||||||||||||||||||
| Reinforcement Materials EBITDA | $ | 79 | $ | 97 | $ | 92 |
$ |
— |
$ | 268 | |||||||||||||||
| Reinforcement Materials Sales | $ | 387 | $ | 454 | $ | 466 |
$ |
— |
$ | 1,307 | |||||||||||||||
| Reinforcement Materials EBITDA Margin | 20 | % | 21 | % | 20 | % | — | % | 21 | % | |||||||||||||||
| Dollars in millions | Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2018 | ||||||||||||||||||||
| Performance Chemicals EBIT | $ | 47 | $ | 57 | $ | 56 |
$ |
— |
$ | 160 | |||||||||||||||
| Plus: Depreciation & Amortization | 12 | 12 | 12 | — | 36 | ||||||||||||||||||||
| Performance Chemicals EBITDA | $ | 59 | $ | 69 | $ | 68 |
$ |
— |
$ | 196 | |||||||||||||||
| Performance Chemicals Sales | $ | 229 | $ | 268 | $ | 274 |
$ |
— |
$ | 771 | |||||||||||||||
| Performance Chemicals EBITDA Margin | 26 | % | 26 | % | 25 | % | — | % | 25 | % | |||||||||||||||
| Dollars in millions | Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2018 | ||||||||||||||||||||
| Purification Solutions EBIT | $ | 6 | $ | (6 | ) | $ | (6 | ) |
$ |
— |
$ | (6 | ) | ||||||||||||
| Plus: Depreciation & Amortization | 10 | 10 | 7 | — | 27 | ||||||||||||||||||||
| Purification Solutions EBITDA | $ | 16 | $ | 4 | $ | 1 |
$ |
— |
$ | 21 | |||||||||||||||
| Purification Solutions Sales | $ | 70 | $ | 66 | $ | 70 |
$ |
— |
$ | 206 | |||||||||||||||
| Purification Solutions EBITDA Margin | 23 | % | 6 | % | 1 | % | — | % | 10 | % | |||||||||||||||
| Dollars in millions | Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2018 | ||||||||||||||||||||
| Specialty Fluids EBIT | $ | (2 | ) | $ | (3 | ) | $ | 3 |
$ |
— |
$ | (2 | ) | ||||||||||||
| Plus: Depreciation & Amortization | — | 1 | 1 | — | 2 | ||||||||||||||||||||
| Specialty Fluids EBITDA | $ | (2 | ) | $ | (2 | ) | $ | 4 |
$ |
— |
$ |
— |
|||||||||||||
| Specialty Fluids Sales | $ | 6 | $ | 6 | $ | 12 |
$ |
— |
$ | 24 | |||||||||||||||
| Specialty Fluids EBITDA Margin | (33 | )% | (33 | )% | 33 | % | — | % |
— |
% | |||||||||||||||
| Dollars in millions | Fiscal 2018 | ||||||||||||||||||||||||
|
Reconciliation of Discretionary Free Cash Flow |
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2018 | ||||||||||||||||||||
| Cash flow from operating activities (D) | $ | 45 | $ | 36 | $ | 62 |
$ |
— |
$ | 143 | |||||||||||||||
| Less: Changes in net working capital (E) | (50 | ) | (65 | ) | (72 | ) | — | (187 | ) | ||||||||||||||||
| Less: Sustaining and compliance capital expenditures | 42 | 34 | 39 | — | 115 | ||||||||||||||||||||
| Discretionary Free Cash Flow | $ | 53 | $ | 67 | $ | 95 |
$ |
— |
$ | 215 | |||||||||||||||
| (D)As provided in the Condensed Consolidated Statements of Cash Flows. | |||||||||||||||||||||||||
| (E)Defined as changes in accounts receivable, inventory and accounts payable and accrued liabilities as presented on the Condensed Consolidated Statements of Cash Flows. | |||||||||||||||||||||||||