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Press release from Business Wire

Cabot Corp Reports Second Quarter Adjusted EPS of $0.63 and Diluted EPS of $0.42

<p class='bwalignc'> <i>Second quarter results in-line with first quarter of fiscal 2013 due to challenging economic environment.</i> </p>

Tuesday, April 30, 2013

Cabot Corp Reports Second Quarter Adjusted EPS of $0.63 and Diluted EPS of $0.42

16:06 EDT Tuesday, April 30, 2013

BOSTON (Business Wire) -- Cabot Corporation (NYSE: CBT) today announced results for its second quarter of fiscal 2013.

Key Highlights

  • Demand remained soft, but signs of improvement with higher sequential volumes
  • Performance Materials segment delivered strong results
  • Asset optimization efforts result in closure of Malaysian carbon black joint venture
  • Adjusted EPS target of $5.00 now expected to be delivered in fiscal 2015
                 
(In millions, except per share amounts)   Fiscal 2013   Fiscal 2012
Second   First   Second   First

Quarter

6 Months

Quarter

6 Months

 
Net sales $ 842 $ 1,662 $ 844 $ 1,606
Net income attributable to Cabot Corporation $ 27 $ 47 $ 240 $ 286
 
Net earnings per share attributable to Cabot Corporation $ 0.42 $ 0.73 $ 3.70 $ 4.41
Less Adjustments:
Net income per share from discontinued operations $ - $ (0.02) $ 2.92 $ 3.08
Certain items per share $ (0.21) $ (0.54) $ (0.18) $ (0.26)
Adjusted EPS   $ 0.63   $ 1.29   $ 0.96   $ 1.59
 

Commenting on the results, Cabot President and CEO Patrick Prevost, said, “The global macroeconomic environment remained challenging this quarter. Our second quarter results, which included a Reinforcement Materials plant disruption in Japan, were in-line with our first quarter of fiscal 2013. The plant disruption in Japan led to reduced volumes and impacted the business by $8 million pre-tax. We continue to pursue opportunities to improve our global efficiencies and we have announced the closure of our Malaysian carbon black operation. In light of the uncertain global economic environment, we remain focused on prudent cost and cash management.”

Prevost continued, “We experienced a sequential improvement in demand in many of our businesses and we are pleased that our investments in fumed silica capacity are contributing to stronger results for our Performance Materials segment. We also saw a sequential increase in Specialty Fluids EBIT and the pipeline of new projects is improving. The Company remains focused on its value pricing initiatives and continues to see positive contributions from this effort.”

Financial Detail

For the second quarter of fiscal 2013, net income attributable to Cabot Corporation was $27 million ($0.42 per diluted common share). Net income includes a per share charge of $0.21, principally for restructuring costs. Adjusted EPS for the second quarter of fiscal 2013 was $0.63 per share.

Segment Results

Reinforcement Materials -- Second quarter fiscal 2013 EBIT in Reinforcement Materials decreased by $31 million compared to the same quarter of fiscal 2012 due to 9% lower volumes, a plant disruption in Japan and a more competitive environment in China and Europe. Sequentially, EBIT decreased $9 million primarily due to the plant disruption in Japan, which unfavorably affected the quarter by $8 million. Excluding the impact from the Japan plant disruption, sequential volumes increased 1%. The second quarter also included the unfavorable seasonal impact of Chinese New Year.

Global and regional volume changes for Reinforcement Materials for the second quarter of fiscal 2013 as compared to the same quarter of the prior year and the first quarter of fiscal 2013 are included in the table below:

         
 

Second Quarter

Year over Year Change

 

Second Quarter

Sequential Change

Global   (9%)   (1%)
Japan* (18%) (11%)
Southeast Asia (16%) (3%)
China (3%) (12%)
Europe, Middle East, Africa (10%) 14%
North America (9%) 1%
South America   (5%)   8%

*Includes the impact from the plant disruption in the second quarter of fiscal 2013.

 

Performance Materials -- Second quarter fiscal 2013 EBIT in Performance Materials increased by $2 million compared to the second quarter of fiscal 2012. The increase was driven by 13% higher volumes in Fumed Metal Oxides from new product introductions and the successful commercialization of new capacity. These benefits were partially offset by 1% lower Specialty Carbons and Compounds volumes. Sequentially, Performance Materials EBIT increased by $11 million, principally due to 30% higher volumes in Specialty Carbons and Compounds and 6% higher volumes in Fumed Metal Oxides. These increases were partially offset by higher costs from a reduction in inventory levels.

Advanced Technologies -- For the second quarter of fiscal 2013, EBIT in Advanced Technologies decreased by $8 million compared to the second quarter of fiscal 2012. The EBIT decrease resulted principally from comparatively lower rental activity in Specialty Fluids. Sequentially, Advanced Technologies EBIT increased by $1 million principally due to improved performance in Specialty Fluids, which was partially offset by lower volumes in Inkjet Colorants, Aerogel and Elastomer Composites. Elastomer Composites received a technology milestone payment during the first quarter that did not repeat in the second quarter of fiscal 2013.

Purification Solutions -- On July 31, 2012, we completed the acquisition of Norit N.V. For the second quarter of fiscal 2013, EBIT in Purification Solutions was $3 million.

Stand-alone Purification Solutions financial results, excluding purchase accounting impacts, for the three months ended March 31, 2013, resulted in adjusted EBITDA of $16 million, which is a decrease of $9 million compared to the same quarter of fiscal 2012. The decrease in adjusted EBITDA was due to a 7% decline in volumes driven by lower sales to the gas and air purification end markets and the timing of $3 million in royalty fees that we expect to receive in the third quarter of fiscal 2013. Sequentially, adjusted EBITDA decreased $4 million as compared to the three months ended December 31, 2012. The decrease was driven by 13% lower volumes primarily due to the seasonality of sales to the water purification end market.

Cash Performance -- The Company ended the second quarter of fiscal 2013 with a cash balance of $85 million, a decrease of $6 million from the first quarter of fiscal 2013. The Company spent $64 million on capital expenditures and received an additional $11 million of proceeds from the sale of the Supermetals business.

Taxes -- During the second quarter of fiscal 2013, the Company recorded a net tax provision of $16 million for an effective tax rate of 43%. Excluding the impact of certain items, the operating tax rate on continuing operations for the second quarter of fiscal 2013 was 27%.

Outlook

“We are anticipating a moderate demand recovery during calendar year 2013. We have seen some positive signs in a number of our markets around the globe, with the exception of Europe. We remain well positioned to capture volume growth as global demand returns to more normal levels,” Prevost said, commenting on the outlook for the Company. “In addition, we continue to pursue opportunities to reduce our costs, improve the efficiency of our asset base and build upon our strong positions across our portfolio.”

Prevost continued, “We are now halfway through our three-year plan to achieve our adjusted EPS target of $5.00 in fiscal 2014. Our plan assumed mid-cycle economic conditions and growth in emerging markets. Due to the ongoing weakness in Europe and reduced growth rates in emerging markets, we believe it will take an additional year to meet our objectives and we are targeting $5.00 of adjusted EPS in fiscal 2015. We continue to implement our strategic plan and remain focused on our value pricing strategy, investments in operational excellence and technology, completing our capacity expansion in China, and the introduction of new products.”

Earnings Call

The Company will host a conference call with industry analysts at 2:00 p.m. Eastern time on Wednesday, May 1, 2013. 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, fumed silica, aerogel, and elastomer composites. For more information on Cabot, please visit the company's website at: http://www.cabotcorp.com.

Forward-Looking Statements -- This earnings release contains forward-looking statements based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including our ability to meet our long-term financial targets, actions that will drive earnings growth, and demand for our products, including when we expect demand to recover and expectations for growth, are forward-looking statements. Some of the forward-looking statements may be identified by words like “expects,” “anticipates,” “plans,” “intends,” “projects,” “indicates,” and similar expressions. Forward-looking statements are based on our current expectations, assumptions, estimates and projections about Cabot's businesses and strategies, market trends and conditions, economic conditions and other factors. 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 in the forward-looking statement. Important factors that could cause our results to differ materially from those expressed in the forward-looking statements include, but are not limited to changes in raw material costs; lower than expected demand for our products; the loss of one or more of our important customers; our inability to complete capacity expansions as planned; the timing of implementation of environmental regulations; our failure to develop new products or to keep pace with technological developments; patent rights of others; the timely commercialization of products under development (which may be disrupted or delayed by technical difficulties, market acceptance, competitors' new products, as well as difficulties in moving from the experimental stage to the production stage); demand for our customers' products; competitors' reactions to market conditions; delays in the successful integration of structural changes, including acquisitions or joint ventures; the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries where we do business; and severe weather events that cause business interruptions, including plant and power outages or disruptions in supplier or customer operations. These factors are discussed more fully in the reports we file with the Securities and Exchange Commission, particularly our latest annual report on Form 10-K.

Explanation of Terms Used and Use of Non-GAAP Financial Measures -- The preceding discussion of our results and the accompanying financial tables report adjusted EPS, operating tax rate and adjusted EBITDA, which are non-GAAP financial measures. Our chief operating decision-maker uses these non-GAAP financial measures to evaluate the performance of the Company in terms of profitability. We believe that these measures also assist our investors in evaluating the changes in our results and the Company's performance.

In calculating adjusted EPS, we exclude from our net income per share from continuing operations certain items of expense and income that management does not consider representative of the Company's ongoing operations. Adjusted EPS should be considered as supplemental to, and not as a replacement for, EPS determined in accordance with GAAP. A reconciliation of adjusted EPS to EPS from continuing operations, the most directly comparable GAAP financial measure, and the certain items that are excluded from our calculation of adjusted EPS, are provided in the table titled "Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate.”

The term “operating tax rate” is a non-GAAP financial measure and 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 rate adjustment and the impact of certain items on both operating income and tax provision. A reconciliation of operating tax rate to effective tax rate , the most directly comparable GAAP financial measure is provided in the table titled "Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate.”

“Adjusted EBITDA” is a non-GAAP financial measure and refers to earnings before interest, taxes, depreciation and amortization, excluding items that management does not consider representative of the fundamental segment results. A reconciliation of Adjusted EBITDA from segment EBIT for the second quarter of fiscal 2013 is provided on the investor portion of our website at http://investor.cabot-corp.com, under the Non-GAAP Reconciliations section.

 

 
                 
     

CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS

                 
                 
Periods ended March 31 Three Months Six Months
Dollars in millions, except per share amounts (unaudited)     2013       2012       2013       2012  
 
Net sales and other operating revenues $ 842 $ 844 $ 1,662 $ 1,606
 
Cost of sales   698     671     1,371     1,290  
 
Gross profit 144

 

173 291 316
 
 
Selling and administrative expenses 77 66 150 131
 
Research and technical expenses   18     20     37     37  
Income from operations 49 87 104 148
 
 
Other income and (expense)
 
Interest and dividend income 1 1 2 2
 
Interest expense (16 ) (9 ) (32 ) (19 )
 
Other income (expense) 2 (3 ) 3
       
Total other income and (expense)   (13 )   (11 )   (27 )   (17 )
 

Income from continuing operations before income taxes and equity in net earnings of affiliated companies

36 76 77 131
 
Provision for income taxes (16 ) (23 ) (35 ) (39 )
 
Equity in net earnings of affiliated companies, net of tax 3 3 6 4
 
       
Income from continuing operations 23 56 48 96
 
Income (loss) from discontinued operations, net of tax (A) - 189 (1 ) 200
       
Net income 23 245 47 296
 
Net (loss) income attributable to noncontrolling interests, net of tax (4 ) 5 - 10
       
Net income attributable to Cabot Corporation $ 27   $ 240   $ 47   $ 286  
 
 
 

Diluted earnings per share of common stock attributable to Cabot Corporation

 
Continuing operations $ 0.42 $ 0.78 $ 0.75 $ 1.33
 
Discontinued operations (A) - 2.92 (0.02 ) 3.08
       
Net income attributable to Cabot Corporation $ 0.42 $ 3.70 $ 0.73 $ 4.41
 
Weighted average common shares outstanding
Diluted 64.4 64.0 64.3 64.1
 
 

(A) Amounts relate to the divesture of the Supermetals Business.

 

 

                 
       
CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS
                 
                 
Periods ended March 31 Three Months Six Months
Dollars in millions, except per share amounts (unaudited)     2013       2012       2013       2012  
 
Sales
 
Reinforcement Materials $ 459 $ 534 $ 934 $ 1,023
 
Performance Materials 243 235 439 440

 

 

Specialty Carbons and Compounds

173 173 305 324

 

Fumed Metal Oxides

70 62 134 116
 
Advanced Technologies 41 57 79 96

 

Inkjet Colorants

12 15 28 30

 

Aerogel

3 5 8 9

 

Security Materials

2 3 3 5

 

Elastomer Composites

4 7 12 11

 

Specialty Fluids

20 27 28 41
 
Purification Solutions (A)   79     -     172     -  
 

 

Segment sales

822

 

826 1,624

 

1,559
 
Unallocated and other (B)   20     18     38     47  
 

 

Net sales and other operating revenues

$ 842   $ 844   $ 1,662   $ 1,606  
 
Segment Earnings Before Interest and Taxes
 
Reinforcement Materials $ 41 $ 72 $ 91 $ 127
 
Performance Materials 37 35 63 56
 
Advanced Technologies 8 16 15 21
 
Purification Solutions (A)   3     -     10     -  
 

 

Total Segment Earnings Before Interest and Taxes (C)

89 123 179 204

 

Unallocated and Other
 
Interest expense (16 ) (9 ) (32 ) (19 )
Certain items (D) (20 ) (9 ) (40 ) (14 )
Unallocated corporate costs (16 ) (18 ) (29 ) (32 )
General unallocated income (expense) (E) 2 (8 ) 5 (4 )
Less: Equity in net earnings of affiliated companies, net of tax   (3 )   (3 )   (6 )   (4 )
 
Income from continuing operations before income taxes and equity in

 

net earnings of affiliated companies

36 76 77 131
 
Provision for income taxes (including tax certain items) (16 ) (23 ) (35 ) (39 )
 
Equity in net earnings of affiliated companies, net of tax 3 3 6 4
       

 

Income from continuing operations

23 56 48 96
 

Income (loss) from discontinued operations, net of tax (F)

- 189 (1 ) 200
       

 

Net income

23 245 47 296
 
Net (loss) income attributable to noncontrolling interests, net of tax (4 ) 5 - 10
       

 

Net income attributable to Cabot Corporation

$ 27   $ 240   $ 47   $ 286  
 
Diluted earnings per share of common stock
attributable to Cabot Corporation
 

 

Continuing operations

$ 0.42 $ 0.78 $ 0.75 $ 1.33
 

 

Discontinued operations (F)

- 2.92 (0.02 ) 3.08

 

       

 

Net income attributable to Cabot Corporation

$ 0.42 $ 3.70 $ 0.73 $ 4.41
 
Adjusted earnings per share
 

 

Adjusted EPS (G)

$ 0.63 $ 0.96 $ 1.29 $ 1.59
 
Weighted average common shares outstanding
 

 

Diluted

64.4 64.0 64.3 64.1
 
 
(A)

The Company acquired Norit N.V. on July 31, 2012, which became Cabot's Purification Solutions business. Accordingly, there are no results reported for Purification Solutions for the second quarter and first six months of fiscal 2012.

(B) Unallocated and other reflects royalties paid by equity affiliates, other operating revenues, external shipping and handling fees, the impact of unearned revenue and the removal of 100% of the sales of an equity method affiliate.
(C) 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 net earnings of affiliated companies, royalty income, and allocated corporate costs.
(D) Details of certain items are presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.
(E) General unallocated income (expense) includes foreign currency transaction gains (losses), interest income, dividend income, the profit related to unearned revenue, and the impact of LIFO accounting.
(F) Amounts relate to the divesture of the Supermetals business.
(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 STATEMENT OF FINANCIAL POSITION
         
         
March 31, September 30,
2013 2012
Dollars in millions, except share and per share amounts   (unaudited)   (audited)
 
Current assets:
 
Cash and cash equivalents $ 85 $ 120
Accounts and notes receivable, net of reserve for doubtful accounts of $8 and $5 670 687
Inventories:
Raw materials 114 131
Work in process 4 5
Finished goods 397 351
Other   44   46
Total inventories 559 533
Prepaid expenses and other current assets 71 71
Notes receivable for sale of business 223 -
Deferred income taxes   38   32
Total current assets   1,646   1,443
 
Net property, plant and equipment 1,544 1,552
 
Goodwill 493 480
Equity affiliates 116 115
Intangible assets, net 316 330
Assets held for rent 51 46
Notes receivable for sale of business - 242
Deferred income taxes 104 94
Other assets 92 97
   
Total assets $ 4,362 $ 4,399
 

 

         
   
CABOT CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION
         
         
March 31, September 30,
2013 2012
Dollars in millions, except share and per share amounts   (unaudited)   (audited)
 
Current liabilities:
 
Notes payable $ 324 $ 62
Accounts payable and accrued liabilities 501 606
Income taxes payable 26 59
Deferred income taxes 7 7
Current portion of long-term debt   187     185  
Total current liabilities   1,045     919  
 
Long-term debt 1,002 1,172
Deferred income taxes 56 55
Other liabilities 308 314
 
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: 64,034,868 and 63,600,928 shares
Outstanding: 63,781,302 and 63,347,362 shares 64 64
Less cost of 253,565 and 253,565 shares of common treasury stock (8 ) (8 )
Additional paid-in capital 27 20
Retained earnings 1,675 1,653
Deferred employee benefits (5 ) (8 )
Accumulated other comprehensive income   76     92  
Total Cabot Corporation stockholders' equity 1,829 1,813
Noncontrolling interests   122     126  
Total equity   1,951     1,939  
Total liabilities and equity $ 4,362   $ 4,399  
 

CABOT CORPORATION
                                           
  Fiscal 2012 Fiscal 2013
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 489 534 517 479 2,019 475 459 - - 934
Performance Materials 205 235 247 227 914 196 243 - - 439
Specialty Carbons and Compounds 151 173 181 159 664 132 173 - - 305

Fumed Metal Oxides

54 62 66 68 250 64 70 - - 134
Advanced Technologies 39 57 57 57 210 38 41 - - 79

Inkjet Colorants

15 15 18 18 66 16 12 - - 28
Aerogel 4 5 3 6 18 5 3 - - 8
Security Materials 2 3 2 2 9 1 2 - - 3
Elastomer Composites 4 7 6 6 23 8 4 - - 12
Specialty Fluids 14 27 28 25 94 8 20 - - 28
Purification Solutions (A)   -       -       -       61       61     93       79       -     -     172  
Segment Sales 733 826 821 824 3,204 802 822 - - 1,624

Unallocated and other (B)

    29       18       25       24       96     18       20       -     -     38  

 

 

-
Net sales and other operating revenues   $ 762     $ 844     $ 846     $ 848     $ 3,300   $ 820     $ 842     $ -   $ -   $ 1,662  
 
Segment Earnings Before Interest and Taxes
Reinforcement Materials 55 72 59 41 227 50 41 - - 91
Performance Materials 21 35 38 34 128 26 37 - - 63
Advanced Technologies 5 16 12 16 49 7 8 - - 15
Purification Solutions (A)     -       -       -       5       5     7       3       -     -     10  
Total Segment Earnings Before Interest and Taxes (C) 81 123 109 96 409 90 89 - - 179
 
 
Unallocated and Other
Interest expense (10 ) (9 ) (11 ) (16 ) (46 ) (16 ) (16 ) - - (32 )
Certain items (D) (5 ) (9 ) (7 ) (30 ) (51 ) (20 ) (20 ) - - (40 )
Unallocated corporate costs (14 ) (18 ) (12 ) (12 ) (56 ) (13 ) (16 ) - - (29 )
General unallocated income (expense) (E) 4 (8 ) 3 1 - 3 2 - - 5
Less: Equity in net earnings of affiliated companies, net of tax     (1 )     (3 )     (4 )     (3 )     (11 )   (3 )     (3 )     -     -     (6 )
 
Income from continuing operations before income taxes and
equity in net earnings of affiliated companies 55 76 78 36 245 41 36 - - 77
-
Provision for income taxes (including tax certain items) (16 ) (23 ) (16 ) - (55 ) (19 ) (16 ) - - (35 )
Equity in net earnings of affiliated companies, net of tax     1       3       4       3       11     3       3       -     -     6  
-
Income from continuing operations 40 56 66 39 201 25 23 - - 48
Income (loss) from discontinued operations, net of tax (F)     11       189       4       1       205     (1 )     -       -     -     (1 )
 
Net income 51 245 70 40 406 24 23 - - 47
 
Net income (loss) attributable to noncontrolling interests, net of tax     5       5       4       4       18     4       (4 )     -     -     -  
 
Net income attributable to Cabot Corporation $ 46 $ 240 $ 66 $ 36 $ 388 $ 20 $ 27 $ - $ - $ 47
 
Diluted earnings per share of common stock
attributable to Cabot Corporation
 
Continuing operations $ 0.55 $ 0.78 $ 0.96 $ 0.54 $ 2.83 $ 0.33 $ 0.42 $ - $ - $ 0.75
Discontinued operations (F) 0.16 2.92 0.06 0.02 3.16 (0.02 ) - - - (0.02 )
                                         
Net income attributable to Cabot Corporation $ 0.71 $ 3.70 $ 1.02 $ 0.56 $ 5.99 $ 0.31 $ 0.42 $ - $ - $ 0.73
 
Adjusted earnings per share
 
Adjusted EPS (G)   $ 0.63     $ 0.96     $ 1.00     $ 0.73     $ 3.32   $ 0.66     $ 0.63     $ -   $ -   $ 1.29  
 
Weighted average common shares outstanding
Diluted     64.2       64.0       64.3       64.2       64.2     64.1       64.4       -     -     64.3  
 
(A) Purification Solutions includes two months of results in fiscal 2012 due to the acquisition of Norit N.V. by Cabot Corporation on July 31, 2012.
(B) Unallocated and other reflects royalties paid by equity affiliates, other operating revenues, external shipping and handling fees, the impact of unearned revenue and the removal of 100% of the sales of an equity method affiliate.
(C) 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 net earnings of affiliated companies, royalty income, and allocated corporate costs.
(D) Details of certain items are presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.
(E) General unallocated income (expense) includes foreign currency transaction gains (losses), interest income, dividend income, the profit related to unearned revenue, and the impact of LIFO accounting.
(F) Amounts relate to the divesture of the Supermetals business.
(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 March 31 Three Months   Six Months Three Months   Six Months
Dollars in millions, except per share amounts (unaudited) Dollars in Millions Per Share After Tax
2013 2012 2013 2012 2013 2012 2013 2012
  $       $       $       $         per share (A)   per share (A)   per share (A)   per share (A)
 

Certain items before and after income taxes

 
Global restructuring activities $ (19 ) $ (9 ) $ (25 ) $ (12 ) $ (0.20 ) $ (0.14 ) $ (0.26 ) $ (0.18 )
 
Acquisition related charges (2 ) (16 ) (0.02 ) (0.17 )
Environmental and legal reserves (2 ) (0.02 )
Foreign currency gain on revaluations   1             1           0.01           0.01      
Certain items before tax   (20 )     (9 )     (40 )     (14 )   (0.21 )     (0.14 )     (0.42 )     (0.20 )
 
Tax impact of certain items   (1 )     1       5       2                
Certain items after tax   (21 )     (8 )     (35 )     (12 )   (0.21 )     (0.14 )     (0.42 )     (0.20 )
 
Tax-related certain items
 
Tax impact of certain foreign exchange losses (5 ) (3 ) (12 ) (3 ) (0.08 ) (0.05 ) (0.19 ) (0.05 )
 
Discrete tax items 5 1 5 (1 ) 0.08 0.01 0.07 (0.01 )
                           
 
Total tax-related certain items (2 ) (7 ) (4 ) (0.04 ) (0.12 ) (0.06 )
                           
 
Total certain items after tax   (21 )     (10 )     (42 )     (16 )   (0.21 )     (0.18 )     (0.54 )     (0.26 )
 

Discontinued operations after income taxes (B)

 
CSM business divestiture after tax 189 (1 ) 200 2.92 (0.02 ) 3.08
 
                           
 
Total discontinued operations after tax $ -     $ 189     $ (1 )   $ 200   $ -     $ 2.92       (0.02 )   $ 3.08  
 
                                               
                                               
TABLE 2: CERTAIN ITEMS STATEMENT OF OPERATIONS LINE ITEM                                            
Periods ended March 31 Three Months Six Months
Dollars in millions, Pre-Tax (unaudited)   2013       2012     2013       2012  
 

Statement of Operations Line Item (C)

 
Cost of sales $ (18 ) $ (9 ) $ (32 ) $ (12 )
 
Selling and administrative expenses (1 ) (6 ) (2 )
 
Research and technical expenses (1 )
Other   (1 )         (1 )      
Total certain items $ (20 )   $ (9 ) $ (40 )   $ (14 )
 
 
                                               
TABLE 3: RECONCILIATION OF TAX CERTAIN ITEMS                                            

Periods ended March 31

Three Months Six Months
Dollars in millions (unaudited)   2013       2012     2013       2012  
 

Reconciliation of Provision for income taxes, excluding

certain items, to Provision for income taxes

 
Provision for income taxes $ (16 ) $ (23 ) $ (35 ) $ (39 )
 
Less: Tax impact of certain items (1 ) 1 5 2
 
Less: Tax related certain items (2 ) (7 ) (4 )
           
Provision for income taxes, excluding certain items $ (15 )   $ (22 ) $ (33 )   $ (37 )
                                               
TABLE 4: RECONCILIATION OF OPERATING TAX RATE                                            

Periods ended March 31

Three Months Six Months
Dollars in millions (unaudited)   2013       2012     2013       2012  
 

Reconciliation of the effective tax rate to the

operating tax rate

 
Provision for income taxes $ (16 ) $ (23 ) $ (35 ) $ (39 )
 
Effective tax rate 43 % 30 % 45 % 30 %
 
Impact of discrete tax items:
Unusual or infrequent items (9 %) - % (13 %) - %
Items related to uncertain tax positions 7 % 1 % 3 % (1 %)
Other discrete tax items 2 % (3 %) - % (2 %)
Impact of certain items   (16 %)     (2 %)   (8 %)     (1 %)
Operating tax rate   27 %     26 %   27 %     26 %
                                               
TABLE 5: RECONCILIATION OF ADJUSTED EPS BY QUARTER FISCAL 2012 and FISCAL 2013                                            
NON-GAAP MEASURE:

 

Fiscal 2012 (A) Fiscal 2013 (A)
 

Periods ended (unaudited)

Dec. Q Mar. Q Jun. Q Sept. Q FY 2012 YTD Dec. Q Mar. Q Jun. Q Sept. Q FY 2013 YTD

Reconciliation of Adjusted EPS to GAAP EPS

Net income per share attributable to Cabot Corporation $ 0.71 $ 3.70 $ 1.02 $ 0.56 $ 5.99 $ 0.31 $ 0.42 $ 0.73
Less: Net income per share from discontinued operations(B)   0.16       2.92       0.06       0.02       3.16     (0.02 )     -               (0.02 )
Net income per share from continuing operations $ 0.55 $ 0.78 $ 0.96 $ 0.54 $ 2.83 $ 0.33 $ 0.42 $ 0.75
Less: Certain items after tax   (0.08 )     (0.18 )     (0.04 )     (0.19 )     (0.49 )   (0.33 )     (0.21 )             (0.54 )
Adjusted earnings per share $ 0.63 $ 0.96 $ 1.00 $ 0.73 $ 3.32 $ 0.66 $ 0.63 $ 1.29
 
                                               
(A) Per share amounts are calculated after tax and, where applicable, noncontrolling interests, net of tax.
(B) Amounts relate to the divesture of the Supermetals Business.
(C) This table indicates the line items where certain items are recorded in the table titled Cabot Corporation Consolidated Statements of Operations.

Investor Contact:
Cabot Corporation
Erica McLaughlin, 617-342-6090

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