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Cabot Corp Reports Fourth Quarter Diluted EPS of $0.50 and Adjusted EPS of $1.11

Fiscal Year 2021 Diluted EPS of $4.34 and Adjusted EPS of $5.02

BOSTON--(BUSINESS WIRE)--Nov. 8, 2021-- Cabot Corporation (NYSE: CBT) today announced results for its fourth quarter and full fiscal year 2021.

Key Highlights

  • GAAP EPS of $4.34 and record full year Adjusted EPS of $5.02 driven by record Reinforcement Materials EBIT of $329 million and strong Performance Chemicals EBIT of $211 million
  • Solid fourth quarter results with year over year increases across all segments
  • Battery Materials revenue doubled year over year and fiscal 2021 financial results in line with expectations
  • Liquidity remained strong at approximately $1.3 billion; Net Debt to EBITDA ratio of 1.6 times as of September 30, 2021

(In millions, except per share amounts)

Three Months Ended

Twelve Months Ended

 

9/30/21

9/30/20

9/30/21

9/30/20

 

Net sales

$

904

 

$

659

 

$

3,409

 

$

2,614

 

Net income (loss) attributable to Cabot Corporation

$

29

 

$

(272

)

$

250

 

$

(238

)

 

 

 

 

 

 

Net earnings (loss) per share attributable to Cabot Corporation

$

0.50

 

$

(4.81

)

$

4.34

 

$

(4.21

)

Less: Certain items after tax per share

$

(0.61

)

$

(5.49

)

$

(0.68

)

$

(6.29

)

Adjusted EPS

$

1.11

 

$

0.68

 

$

5.02

 

$

2.08

 

Commenting on the results, Cabot President and CEO Sean Keohane said, “I am very pleased that we delivered record Adjusted EPS in fiscal 2021, with significant year over year growth across the segments. Reinforcement Materials led the way delivering an increase in EBIT of $167 million while Performance Chemicals also recorded strong results across all major product lines with an increase in segment EBIT of $93 million. The Cabot team executed extraordinarily well during the fiscal year as we navigated through the continuing COVID-19 pandemic. In addition, discretionary free cash flow reached a historical high of $353 million in the fiscal year and we paid $80 million in dividends to shareholders. We also reduced our net debt to EBITDA ratio from 2.5 times at the end of fiscal 2020 to 1.6 times at the end of fiscal 2021.”

Keohane continued, “In the fourth quarter, we delivered 63% growth year over year in Adjusted EPS from higher volumes and improved margins. We delivered these results while managing through plant outages, global supply chain disruptions, and the impact to our businesses from the semiconductor chip shortage on automotive production.”

Keohane concluded, “Our record fiscal 2021 financial performance demonstrates the strength of our businesses and successful execution of our corporate strategy. Furthermore, the investments that we have made throughout the year have laid the foundation for advantaged growth in the future.”

Financial Detail

For the fourth quarter of fiscal 2021, net income attributable to Cabot Corporation was $29 million ($0.50 per diluted common share). Net income reflects an after-tax per share charge from certain items of $0.61. Adjusted EPS for the fourth quarter of fiscal 2021 was $1.11 per share.

Segment Results

Reinforcement Materials – Fourth quarter fiscal 2021 EBIT in Reinforcement Materials increased by $8 million compared to the fourth quarter of fiscal 2020. The increase in EBIT was driven by higher volumes and strong pricing in Asia. Higher volumes were driven by demand increases across all regions compared to the same quarter last year, which was still recovering from COVID-19 customer shutdowns in fiscal 2020.

Global and regional volume changes for Reinforcement Materials for the fourth quarter of fiscal 2021 as compared to the same quarter of the prior year are set forth in the table below:

 

Fourth Quarter

Year-over-Year Change

Global Reinforcement Materials Volumes

6

%

Asia

7

%

Europe, Middle East, Africa

5

%

Americas

6

%

Performance Chemicals – Fourth quarter fiscal 2021 EBIT in Performance Chemicals increased by $20 million compared to the fourth quarter of fiscal 2020, primarily due to improved product mix driven by higher sales into automotive and conductive applications in our specialty carbons product line and higher pricing in our fumed silica product line. Performance Additives volumes increased 2% as compared to the fourth quarter of the prior year and Formulated Solutions decreased 8% as compared to the fourth quarter of the prior year, with both comparisons reflecting the impact of plant outages on sales volumes.

Purification Solutions – Fourth quarter fiscal 2021 EBIT in Purification Solutions increased by $4 million compared to the fourth quarter of fiscal 2020. The increase in EBIT was largely due to higher prices in our specialty applications and lower fixed costs resulting from the sale of our mine in Texas and the related long-term activated carbon supply agreement.

Cash Performance The Company ended the fourth quarter of fiscal 2021 with a cash balance of $168 million. During the fourth quarter of fiscal 2021, cash flows from operating activities were a source of $100 million. Capital expenditures for the fourth quarter of fiscal 2021 were $80 million. Additional uses of cash during the fourth quarter included $20 million for the payment of dividends.

Taxes – During the fourth quarter of fiscal 2021, the Company recorded a tax provision of $30 million for an effective tax rate of 48%. The provision reflected a $7 million net charge for non-GAAP tax adjustments. The operating tax rate for fiscal year 2021 was 27%. We expect our operating tax rate for fiscal 2022 to be in the range of 27% to 29%.

Outlook

Commenting on the outlook for the Company, Keohane said, “Looking forward to fiscal 2022, we believe robust end-market demand will continue and the benefits from our growth investments will support another year of strong results. In our Reinforcement Materials segment, we expect to benefit from higher volumes driven by strong forecasted levels of tire production and higher pricing in our calendar year 2022 customer agreements as customers are placing a premium on supply security. In our Performance Chemicals segment, we anticipate continued demand growth across our broad set of applications, with particular strength in battery materials and inkjet packaging. While external challenges, such as rising input costs, global supply chain disruptions and the semi-conductor chip shortage, are likely to remain in the short-term, we expect they will moderate as we move through the fiscal year. Consistent with this outlook, we expect fiscal year 2022 adjusted earnings per share to be in the range of $5.20 to $5.60.

Keohane continued, “Overall, we are excited about the outlook for our high growth investments, particularly in batteries as electrification of the car fleet continues to build momentum. At the same time, we remain focused on generating strong discretionary free cash flow and returning cash to shareholders. We will share more about our long-term strategic and financial outlook at our upcoming Investor Day on December 2, 2021.”

Earnings Call

The Company will host a conference call with industry analysts at 8:00 a.m. Eastern time on Tuesday, November 9, 2021. 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 reinforcement bber and specialty carbons, activated carbon, inkjet colorants, 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 expectations for our performance in fiscal year 2022, including our expectations for adjusted earnings per share and the strength of demand and the benefits of our investments, the factors that we expect will impact our results of operations, and our expected operating tax rate for fiscal 2022, 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, competition from other specialty chemical companies; volatility in the price of energy and raw materials; a significant adverse change in a customer relationship; safety, health and environmental requirements; unanticipated delays in, or increased cost of, site development projects; negative or uncertain worldwide or regional economic conditions and market opportunities, including from trade relations or global health matters; and fluctuations in foreign currency exchange and interest rates. These factors are discussed more fully in the reports we file with the Securities and Exchange Commission (“SEC”), particularly under the heading “Risk Factors” in our annual report on Form 10-K for our fiscal year ended September 30, 2020, 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, Total Segment EBIT, Total Segment EBITDA, Adjusted EBITDA, our operating tax rate, Free Cash Flow and Discretionary Free Cash Flow, all of which are non-GAAP financial measures. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, GAAP, and the definitions of these measures may not be comparable to those used by other companies. Reconciliations of Adjusted EPS to net income (loss) per share attributable to Cabot Corporation, the most directly comparable GAAP financial measure, Total Segment EBIT, Total Segment EBITDA, and Adjusted EBITDA to income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, the most directly comparable GAAP financial measure of each such non-GAAP measure, operating tax rate to effective tax rate, the most directly comparable GAAP financial measure and Free Cash Flow and Discretionary Free Cash Flow to Cash flow from operating activities, the most directly comparable GAAP financial measure, are provided in the tables titled “Cabot Corporation Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate” and “Cabot Corporation Reconciliation of Non-GAAP Financial Measures.”

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) attributable to Cabot Corporation 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 exclude from our calculations of Adjusted EPS but that are included in our GAAP net income (loss) per share, as applicable in a particular reporting period, include, but are not limited to, the following:

  • Global restructuring activities, which include costs or benefits associated with cost reduction initiatives or plant closures and are 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.
  • Non-recurring gains (losses) on foreign currency, which are primarily related to the impact of continued currency devaluations on our net monetary assets denominated in that currency.
  • Legal and environmental reserves and matters, which consist of costs or benefits for matters typically related to former businesses or that are otherwise incurred outside of the ordinary course of business.
  • Executive transition costs, which include incremental charges, including stock compensation charges, associated with the retirement or termination of employment of senior executives of the Company.
  • Asset impairment charges, which primarily include charges associated with an impairment of goodwill or other long-lived assets.
  • Acquisition and integration-related charges, which include transaction costs, redundant costs incurred during the period of integration, and costs associated with transitioning certain management and business processes to Cabot’s processes.
  • Gains (losses) on sale of investments, which primarily relate to the sale of investments accounted for under the cost-method.
  • Inventory reserve adjustment, which generally results from an evaluation performed as part of an impairment analysis.
  • Indirect tax settlement credits, which includes favorable settlements resulting in the recoveries of indirect taxes.
  • Gains (losses) on sale of a business.
  • Employee benefit plan settlements, which consist of either charges or benefits associated with the termination of a pension plan or the transfer of a pension plan to a multi-employer plan.

Cabot does not provide an expected GAAP EPS range or reconciliation of the Adjusted EPS range with an expected GAAP EPS 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.

Total Segment EBIT. Total segment EBIT reflects the sum of EBIT from our three reportable segments. In calculating Total segment EBIT we exclude from our income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, certain items and items that, because they are not controlled by the business segments and primarily benefit corporate objectives, are not allocated to our business segments, such as interest expense and other corporate costs, which include unallocated corporate overhead expenses such as certain corporate salaries and headquarter expenses, plus costs related to corporate projects and initiatives.

Total Segment EBITDA. Total Segment EBITDA is equal to Total Segment EBIT (as defined above), but further adjusted for depreciation and amortization.

Adjusted EBITDA. Adjusted EBITDA reflects Total Segment EBITDA and is further adjusted for unallocated corporate costs, which include unallocated corporate overhead expenses such as certain corporate salaries and headquarter expenses, plus costs related to corporate projects and initiatives.

Free Cash Flow. To calculate “Free Cash Flow” we deduct Additions to property, plant and equipment from cash flow from operating activities.

Discretionary Free Cash Flow. To calculate “Discretionary Free Cash Flow” we deduct sustaining and compliance capital expenditures and changes in Net Working Capital from cash flow from operating activities.

Operating Tax Rate. Our “operating tax rate” is calculated by excluding the income tax (expense) benefit on certain items and discrete tax items. The income tax (expense) benefit on certain items is determined using the applicable rates in the taxing jurisdictions in which the certain items occurred and includes both current and deferred income tax (expense) benefit based on the nature of the certain items. Discrete tax items include, but are not limited to, changes in valuation allowance, uncertain tax positions, and other tax items, such as the tax impact of legislative changes. Management believes that this non-GAAP financial measure 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.

Cabot does not provide a forward-looking reconciliation of the operating tax rate range with an effective tax 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 the effective tax rate in future periods.

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 expenses.

Fourth Quarter Earnings Announcement, Fiscal 2021
 
 
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
Periods ended September 30 Three Months Twelve Months
Dollars in millions, except per share amounts (unaudited)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 
Net sales and other operating revenues

$

904

 

$

659

 

$

3,409

 

$

2,614

 

 
Cost of sales

 

726

 

 

522

 

 

2,610

 

 

2,114

 

 
Gross profit

 

178

 

 

137

 

 

799

 

 

500

 

 
Selling and administrative expenses

 

89

 

 

62

 

 

289

 

 

292

 

 
Research and technical expenses

 

15

 

 

16

 

 

56

 

 

57

 

 
Specialty Fluids loss on sale and asset impairment charge

 

 

 

 

 

 

 

1

 

 
Marshall Mine loss on sale and asset impairment charge

 

 

 

129

 

 

 

 

129

 

 
Income (loss) from operations

 

74

 

 

(70

)

 

454

 

 

21

 

 
Other income (expense)
 
Interest and dividend income

 

2

 

 

1

 

 

8

 

 

8

 

 
Interest expense

 

(12

)

 

(12

)

 

(49

)

 

(53

)

 
Other income (expense)

 

2

 

 

(3

)

 

(7

)

 

(9

)

 
Total other income (expense)

 

(8

)

 

(14

)

 

(48

)

 

(54

)

 
Income (loss) before income taxes and equity in
earnings of affiliated companies

 

66

 

 

(84

)

 

406

 

 

(33

)

 
(Provision) benefit for income taxes

 

(30

)

 

(182

)

 

(123

)

 

(191

)

 
Equity in earnings of affiliated companies, net of tax

 

 

 

1

 

 

3

 

 

3

 

 
Net income (loss)

 

36

 

 

(265

)

 

286

 

 

(221

)

 
Net income (loss) attributable to noncontrolling interests

 

7

 

 

7

 

 

36

 

 

17

 

 
Net income (loss) attributable to Cabot Corporation

$

29

 

$

(272

)

$

250

 

$

(238

)

 
Diluted earnings (loss) per share of common stock
attributable to Cabot Corporation

$

0.50

 

$

(4.81

)

$

4.34

 

$

(4.21

)

 
Diluted weighted average common shares outstanding

 

56.9

 

 

56.5

 

 

56.8

 

 

56.6

 

 
CABOT CORPORATION SUMMARY RESULTS BY SEGMENT
 
 
Periods ended September 30 Three Months Twelve Months
Dollars in millions, except per share amounts (unaudited)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 
Sales
 
Reinforcement Materials

$

493

 

$

325

 

$

1,781

 

$

1,256

 

 
Performance Chemicals

 

284

 

 

226

 

 

1,148

 

 

933

 

 
Performance Additives

 

201

 

 

156

 

 

796

 

 

645

 

 
Formulated Solutions

 

83

 

 

70

 

 

352

 

 

288

 

 
Purification Solutions

 

66

 

 

67

 

 

257

 

 

253

 

 
Segment sales

 

843

 

 

618

 

 

3,186

 

 

2,442

 

 
Unallocated and other (A)

 

61

 

 

41

 

 

223

 

 

172

 

 
Net sales and other operating revenues

$

904

 

$

659

 

$

3,409

 

$

2,614

 

 
Segment Earnings Before Interest and Taxes (B)
 
Reinforcement Materials

$

67

 

$

59

 

$

329

 

$

162

 

 
Performance Chemicals

 

45

 

 

25

 

 

211

 

 

118

 

 
Purification Solutions

 

4

 

 

 

 

10

 

 

3

 

 
Total Segment Earnings Before Interest and Taxes

 

116

 

 

84

 

 

550

 

 

283

 

 
Unallocated and Other
 
Interest expense

 

(12

)

 

(12

)

 

(49

)

 

(53

)

 
Certain items (C)

 

(27

)

 

(144

)

 

(34

)

 

(218

)

 
Unallocated corporate costs

 

(15

)

 

(9

)

 

(58

)

 

(41

)

 
General unallocated income (expense) (D)

 

4

 

 

(2

)

 

 

 

(1

)

 
Less: Equity in earnings of affiliated companies

 

 

 

1

 

 

3

 

 

3

 

 
Income (loss) before income taxes and equity in
earnings of affiliated companies

 

66

 

 

(84

)

 

406

 

 

(33

)

 
(Provision) benefit for income taxes (including tax certain items)

 

(30

)

 

(182

)

 

(123

)

 

(191

)

 
Equity in earnings of affiliated companies

 

 

 

1

 

 

3

 

 

3

 

 
Net income (loss)

 

36

 

 

(265

)

 

286

 

 

(221

)

 
Net income (loss) attributable to noncontrolling interests

 

7

 

 

7

 

 

36

 

 

17

 

 
Net income (loss) attributable to Cabot Corporation

$

29

 

$

(272

)

$

250

 

$

(238

)

 
Diluted earnings (loss) per share of common stock
attributable to Cabot Corporation

$

0.50

 

$

(4.81

)

$

4.34

 

$

(4.21

)

 
Adjusted earnings (loss) per share (E)

$

1.11

 

$

0.68

 

$

5.02

 

$

2.08

 

 
Diluted weighted average common shares outstanding

 

56.9

 

 

56.5

 

 

56.8

 

 

56.6

 

(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, discounting charges for certain Notes receivable, and indirect tax settlement credits.
(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) General unallocated income (expense) consists of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, Interest and dividend income, the profit or loss related to the corporate adjustment for unearned revenue, the impact of including the full operating results of a contractual joint venture in Purification Solutions Segment EBIT and unrealized holding gains (losses) for equity securities.
(E) 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
 
 
September 30, September 30,
Dollars in millions (unaudited)

2021

2020

 
Current assets:
 
Cash and cash equivalents

$

168

$

151

 
Accounts and notes receivable, net of reserve for doubtful accounts of $4 and $2

 

645

 

418

 
Inventories:
 
Raw materials

 

168

 

82

 
Finished goods

 

300

 

225

 
Other

 

55

 

52

 
Total inventories

 

523

 

359

 
Prepaid expenses and other current assets

 

89

 

50

 
Total current assets

 

1,425

 

978

 
Property, plant and equipment, net

 

1,376

 

1,314

 
Goodwill

 

140

 

134

 
Equity affiliates

 

40

 

39

 
Intangible assets, net

 

100

 

103

 
Deferred income taxes

 

53

 

53

 
Other assets

 

172

 

160

 
Total assets

$

3,306

$

2,781

 
CABOT CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 
 
September 30, September 30,
Dollars in millions, except share and per share amounts (unaudited)

2021

2020

 
Current liabilities:
 
Short-term borrowings

$

72

 

$

14

 

 
Accounts payable and accrued liabilities

 

667

 

 

488

 

 
Income taxes payable

 

35

 

 

20

 

 
Current portion of long-term debt

 

373

 

 

7

 

 
Total current liabilities

 

1,147

 

 

529

 

 
Long-term debt

 

717

 

 

1,094

 

 
Deferred income taxes

 

73

 

 

58

 

 
Other liabilities

 

279

 

 

286

 

 
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: 56,870,237 and 56,616,030 shares, Outstanding: 56,726,818 and 56,466,638 shares 57 57
Less cost of 143,419 and 149,392 shares of common treasury stock

 

(4

)

 

(4

)

 
Additional paid-in capital

 

 

 

 

 
Retained earnings

 

1,183

 

 

989

 

 
Accumulated other comprehensive income (loss)

 

(289

)

 

(351

)

 
Total Cabot Corporation stockholders' equity

 

947

 

 

691

 

 
Noncontrolling interests

 

143

 

 

123

 

 
Total stockholders' equity

 

1,090

 

 

814

 

 
Total liabilities and stockholders' equity

$

3,306

 

$

2,781

 

 
CABOT CORPORATION QUARTERLY RESULTS BY SEGMENT
 
 
Fiscal 2020 Fiscal 2021
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

$

379

 

$

355

 

$

197

 

$

325

 

$

1,256

 

$

375

 

$

434

 

$

479

 

$

493

 

$

1,781

 

Performance Chemicals

 

242

 

 

245

 

 

220

 

 

226

 

 

933

 

 

267

 

 

294

 

 

303

 

 

284

 

 

1,148

 

Performance Additives

 

170

 

 

168

 

 

151

 

 

156

 

 

645

 

 

184

 

 

203

 

 

208

 

 

201

 

 

796

 

Formulated Solutions

 

72

 

 

77

 

 

69

 

 

70

 

 

288

 

 

83

 

 

91

 

 

95

 

 

83

 

 

352

 

Purification Solutions

 

59

 

 

64

 

 

63

 

 

67

 

 

253

 

 

59

 

 

63

 

 

69

 

 

66

 

 

257

 

Segment sales

 

680

 

 

664

 

 

480

 

 

618

 

 

2,442

 

 

701

 

 

791

 

 

851

 

 

843

 

 

3,186

 

Unallocated and other (A)

 

47

 

 

46

 

 

38

 

 

41

 

 

172

 

 

45

 

 

51

 

 

66

 

 

61

 

 

223

 

 
Net sales and other operating revenues

$

727

 

$

710

 

$

518

 

$

659

 

$

2,614

 

$

746

 

$

842

 

$

917

 

$

904

 

$

3,409

 

 
Segment Earnings Before Interest and Taxes (B)
Reinforcement Materials

$

47

 

$

61

 

$

(5

)

$

59

 

$

162

 

$

88

 

$

89

 

$

85

 

$

67

 

$

329

 

Performance Chemicals

 

41

 

 

31

 

 

21

 

 

25

 

 

118

 

 

54

 

 

58

 

 

54

 

 

45

 

 

211

 

Purification Solutions

 

(2

)

 

3

 

 

2

 

 

 

 

3

 

 

(2

)

 

2

 

 

6

 

 

4

 

 

10

 

Total Segment Earnings Before Interest and Taxes

 

86

 

 

95

 

 

18

 

 

84

 

 

283

 

 

140

 

 

149

 

 

145

 

 

116

 

 

550

 

 
Unallocated and Other
Interest expense

 

(14

)

 

(14

)

 

(13

)

 

(12

)

 

(53

)

 

(12

)

 

(13

)

 

(12

)

 

(12

)

 

(49

)

Certain items (C)

 

(11

)

 

(56

)

 

(7

)

 

(144

)

 

(218

)

 

(11

)

 

(1

)

 

5

 

 

(27

)

 

(34

)

Unallocated corporate costs

 

(10

)

 

(12

)

 

(10

)

 

(9

)

 

(41

)

 

(13

)

 

(16

)

 

(14

)

 

(15

)

 

(58

)

General unallocated income (expense) (D)

 

(1

)

 

 

 

2

 

 

(2

)

 

(1

)

 

(5

)

 

 

 

1

 

 

4

 

 

 

Less: Equity in earnings of affiliated companies

 

 

 

1

 

 

1

 

 

1

 

 

3

 

 

 

 

1

 

 

2

 

 

 

 

3

 

 
Income (loss) before income taxes and
equity in earnings of affiliated companies

 

50

 

 

12

 

 

(11

)

 

(84

)

 

(33

)

 

99

 

 

118

 

 

123

 

 

66

 

 

406

 

(Provision) benefit for income taxes (including tax certain items)

 

(4

)

 

(10

)

 

5

 

 

(182

)

 

(191

)

 

(29

)

 

(34

)

 

(30

)

 

(30

)

 

(123

)

Equity in earnings of affiliated companies

 

 

 

1

 

 

1

 

 

1

 

 

3

 

 

 

 

1

 

 

2

 

 

 

 

3

 

 
Net income (loss)

 

46

 

 

3

 

 

(5

)

 

(265

)

 

(221

)

 

70

 

 

85

 

 

95

 

 

36

 

 

286

 

 
Net income (loss) attributable to noncontrolling interests

 

5

 

 

4

 

 

1

 

 

7

 

 

17

 

 

10

 

 

10

 

 

9

 

 

7

 

 

36

 

 
Net income (loss) attributable to Cabot Corporation

$

41

 

$

(1

)

$

(6

)

$

(272

)

$

(238

)

$

60

 

$

75

 

$

86

 

$

29

 

$

250

 

 
Diluted earnings (loss) per share of common stock
attributable to Cabot Corporation

$

0.70

 

$

(0.01

)

$

(0.12

)

$

(4.81

)

$

(4.21

)

$

1.06

 

$

1.30

 

$

1.48

 

$

0.50

 

$

4.34

 

 
Adjusted earnings (loss) per share (E)

$

0.69

 

$

0.77

 

$

(0.07

)

$

0.68

 

$

2.08

 

$

1.18

 

$

1.38

 

$

1.35

 

$

1.11

 

$

5.02

 

 
Diluted weighted average common shares outstanding

 

57.0

 

 

56.6

 

 

56.5

 

 

56.5

 

 

56.6

 

 

56.6

 

 

56.7

 

 

57.0

 

 

56.9

 

 

56.8

 

(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, discounting charges for certain Notes receivable, and indirect tax settlement credits.
(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) General unallocated income (expense) consists of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, Interest and dividend income, the profit or loss related to the corporate adjustment for unearned revenue, the impact of including the full operating results of a contractual joint venture in Purification Solutions Segment EBIT and unrealized holding gains (losses) for equity securities.
 
(E) 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 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Periods ended September 30 Three Months Twelve Months
Dollars in millions (unaudited)

2021

2020

2021

2020

 
Cash Flows from Operating Activities:
 
Net income (loss)

$

36

 

$

(265

)

$

286

 

$

(221

)

 
Adjustments to reconcile net income to cash provided by operating activities:
 
Depreciation and amortization

 

43

 

 

41

 

 

160

 

 

158

 

 
Other non-cash charges, net

 

19

 

 

290

 

 

53

 

 

277

 

 

Cash dividends received from equity affiliates

 

 

 

 

 

2

 

 

1

 

 
Changes in assets and liabilities:
 
Changes in certain working capital items (A)

 

4

 

 

7

 

 

(222

)

 

185

 

 
Changes in other assets and liabilities, net

 

(2

)

 

26

 

 

(22

)

 

(23

)

 
Cash provided by (used in) operating activities

 

100

 

 

99

 

 

257

 

 

377

 

 
Cash Flows from Investing Activities:
 
Additions to property, plant and equipment

 

(80

)

 

(38

)

 

(195

)

 

(200

)

 
Cash paid for acquisition of business, net of cash acquired of $0, $0, $0, and $1

 

 

 

 

 

 

 

(92

)

 
Other investing activities, net

 

4

 

 

2

 

 

9

 

 

4

 

 
Cash provided by (used in) investing activities

 

(76

)

 

(36

)

 

(186

)

 

(288

)

 
Cash Flows from Financing Activities:
 
Change in debt, net

 

7

 

 

(75

)

 

36

 

 

15

 

 
Cash dividends paid to common stockholders

 

(20

)

 

(20

)

 

(80

)

 

(80

)

 
Other financing activities, net

 

1

 

 

 

 

(16

)

 

(67

)

 
Cash provided by (used in) financing activities

 

(12

)

 

(95

)

 

(60

)

 

(132

)

 
Effect of exchange rates on cash

 

(15

)

 

21

 

 

8

 

 

25

 

 
Increase (decrease) in cash, cash equivalents and restricted cash

 

(3

)

 

(11

)

 

19

 

 

(18

)

 
Cash and cash equivalents and restricted cash at beginning of period

 

173

 

 

162

 

 

151

 

 

169

 

 
Cash, cash equivalents and restricted cash at end of period (B)

$

170

 

$

151

 

$

170

 

$

151

 

(A) Includes Accounts and notes receivable, Inventories, and Accounts payable and accrued liabilities.
(B) Restricted cash was $2 million as of September 30, 2021. There was no restricted cash as of September 30, 2020.
 
CABOT CORPORATION CERTAIN ITEMS AND RECONCILIATION OF ADJUSTED EPS AND OPERATING TAX RATE
 
 
TABLE 1: DETAIL OF CERTAIN ITEMS
Periods ended September 30 Three Months Twelve Months
Dollars in millions, except per share amounts (unaudited)

2021

2020

2021

2020

 
Certain items before and after income taxes
 
Indirect tax settlement credits

$

$

12

3

 
Legal and environmental matters and reserves

 

(25

)

 

(3

)

 

(25

)

 

(54

)

Global restructuring activities

 

(3

)

 

(3

)

 

(11

)

 

(19

)

Acquisition and integration-related charges

 

(1

)

 

(2

)

 

(5

)

 

(5

)

Employee benefit plan settlement and other charges

 

2

 

 

(5

)

 

(4

)

 

(10

)

Marshall Mine loss on sale and asset impairment charge

 

 

 

(129

)

 

 

 

(129

)

Inventory reserve adjustment

 

 

 

(2

)

 

 

 

(2

)

Specialty Fluids loss on sale and asset impairment charges

 

 

 

 

 

 

 

(1

)

Other certain items

 

 

 

 

 

(1

)

 

(1

)

Total certain items, pre-tax

 

(27

)

 

(144

)

 

(34

)

 

(218

)

 
 
Non-GAAP tax adjustments(A)

 

(7

)

 

(166

)

 

(4

)

 

(139

)

 
Total certain items after tax

$

(34

)

$

(310

)

$

(38

)

$

(357

)

Total certain items after tax per share impact

$

(0.61

)

$

(5.49

)

$

(0.68

)

$

(6.29

)

 
TABLE 2: CERTAIN ITEMS STATEMENT OF OPERATIONS LINE ITEM
Periods ended September 30 Three Months Twelve Months
Dollars in millions, Pre-Tax (unaudited)

2021

2020

2021

2020

 
Statement of Operations Line Item (B)
 
Net sales and other operating revenues

$

$

$

9

$

 
Cost of sales

 

(5

)

 

(3

)

 

(12

)

 

(9

)

Selling and administrative expenses

 

(25

)

 

(6

)

 

(29

)

 

(68

)

Research and technical expenses

 

 

 

 

 

(1

)

 

 

Other income (expense)

 

3

 

 

(6

)

 

(1

)

 

(11

)

Specialty Fluids loss on sale and asset impairment charges

 

 

 

 

 

 

 

(1

)

Marshall Mine loss on sale and asset impairment charges

 

 

 

(129

)

 

 

 

(129

)

Total certain items, pre-tax

$

(27

)

$

(144

)

$

(34

)

$

(218

)

 
TABLE 3: RECONCILIATION OF EFFECTIVE TAX RATE TO OPERATING TAX RATE
Three months ended September 30

2021

2020

Dollars in millions (unaudited) (Provision) /
Benefit for
Income Taxes
Rate (Provision) /
Benefit for
Income Taxes
Rate
 
Effective Tax Rate

$

(30

)

 

48

%

$

(182

)

 

-217

%

 
Less: Non-GAAP tax adjustments(A)

 

(7

)

 

(166

)

 
Operating tax rate (C)

$

(23

)

 

26

%

$

(16

)

 

28

%

 
Twelve months ended September 30

2021

2020

Dollars in millions (unaudited) (Provision) /
Benefit for
Income Taxes
Rate (Provision) /
Benefit for
Income Taxes
Rate
 
Effective Tax Rate

$

(123

)

 

30

%

$

(191

)

 

-587

%

 
Less: Non-GAAP tax adjustments(A)

 

(4

)

 

(139

)

 
Operating tax rate (C)

$

(119

)

 

27

%

$

(52

)

 

28

%

 
 
TABLE 4: RECONCILIATION OF ADJUSTED EPS BY QUARTER FOR FISCAL 2021 and FISCAL 2020
Fiscal 2021 (D)
Periods ended (unaudited) Dec. Q Mar. Q June Q Sept. Q FY 2021
Reconciliation of Adjusted EPS to GAAP EPS
Net income (loss) per share attributable to Cabot Corporation

$

1.06

 

$

1.30

 

$

1.48

 

$

0.50

 

$

4.34

 

Less: Certain items after tax per share

 

(0.12

)

 

(0.08

)

 

0.13

 

 

(0.61

)

 

(0.68

)

Adjusted earnings (loss) per share

$

1.18

 

$

1.38

 

$

1.35

 

$

1.11

 

$

5.02

 

 
Fiscal 2020 (D)
Periods ended (unaudited) Dec. Q Mar. Q June Q Sept. Q FY 2020
Reconciliation of Adjusted EPS to GAAP EPS
Net income (loss) per share attributable to Cabot Corporation

$

0.70

 

$

(0.01

)

$

(0.12

)

$

(4.81

)

$

(4.21

)

Less: Certain items after tax per share

 

0.01

 

 

(0.78

)

 

(0.05

)

 

(5.49

)

 

(6.29

)

Adjusted earnings (loss) per share

$

0.69

 

$

0.77

 

$

(0.07

)

$

0.68

 

$

2.08

 

(A) Non-GAAP tax adjustments are made to arrive at the operating tax provision. It includes the income tax (expense) benefit on certain items, discrete tax items, and, on a quarterly basis the timing of losses in certain jurisdictions. The income tax (expense) benefit on certain items is determined using the applicable rates in the taxing jurisdictions in which the certain items occurred and includes both current and deferred income tax (expense) benefit based on the nature of the certain items. Discrete tax items include, but are not limited to, changes in valuation allowance, uncertain tax positions, and other tax items, such as the tax impact of legislative changes.
(B) This table indicates the line items where certain items are recorded in the Consolidated Statements of Operations.
(C) Our operating tax rate for fiscal 2022 is expected to be in the range of 27% to 29%.
(D) Per share amounts are calculated after tax.
 
CABOT CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
 
 
Fiscal 2021 (A)
Dec. Q Mar. Q June Q Sept. Q FY 2021
Reconciliation of Adjusted EPS to GAAP EPS
Net income (loss) per share attributable to Cabot Corporation

$

1.06

 

$

1.30

 

$

1.48

 

$

0.50

 

$

4.34

 

Less: Certain items after tax per share

 

(0.12

)

 

(0.08

)

 

0.13

 

 

(0.61

)

 

(0.68

)

Adjusted earnings (loss) per share

$

1.18

 

$

1.38

 

$

1.35

 

$

1.11

 

$

5.02

 

 
Fiscal 2020 (A)
Dec. Q Mar. Q June Q Sept. Q FY 2020
Reconciliation of Adjusted EPS to GAAP EPS
Net income (loss) per share attributable to Cabot Corporation

$

0.70

 

$

(0.01

)

$

(0.12

)

$

(4.81

)

$

(4.21

)

Less: Certain items after tax per share

 

0.01

 

 

(0.78

)

 

(0.05

)

 

(5.49

)

 

(6.29

)

Adjusted earnings (loss) per share

$

0.69

 

$

0.77

 

$

(0.07

)

$

0.68

 

$

2.08

 

 
(A) Per share amounts are calculated after tax.
 
Dollars in millions Fiscal 2021
Dec. Q Mar. Q June Q Sept. Q FY 2021
Reconciliation of Total Segment EBIT, Total Segment EBITDA and Adjusted EBITDA to Net Income and Segment EBITDA Margin
Net income (loss) attributable to Cabot Corporation

$

60

 

$

75

 

$

86

 

$

29

 

$

250

 

Net income (loss) attributable to noncontrolling interests

 

10

 

 

10

 

 

9

 

 

7

 

 

36

 

Equity in earnings of affiliated companies, net of tax

 

 

 

(1

)

 

(2

)

 

 

 

(3

)

Provision (benefit) for income taxes

 

29

 

 

34

 

 

30

 

 

30

 

 

123

 

Income (loss) before income taxes and equity in earnings of affiliated companies

$

99

 

$

118

 

$

123

 

$

66

 

$

406

 

Interest expense

 

12

 

 

13

 

 

12

 

 

12

 

 

49

 

Certain items

 

11

 

 

1

 

 

(5

)

 

27

 

 

34

 

Unallocated corporate costs

 

13

 

 

16

 

 

14

 

 

15

 

 

58

 

General unallocated (income) expense

 

5

 

 

 

 

(1

)

 

(4

)

 

 

Less: Equity in earnings of affiliated companies

 

 

 

(1

)

 

(2

)

 

 

 

(3

)

Total Segment EBIT

$

140

 

$

149

 

$

145

 

$

116

 

$

550

 

Depreciation and amortization

 

39

 

 

38

 

 

40

 

 

43

 

 

160

 

Adjustments to depreciation (B)

 

 

 

2

 

 

(1

)

 

(2

)

 

(1

)

Total Segment EBITDA

$

179

 

$

189

 

$

184

 

$

157

 

$

709

 

Less: Unallocated corporate costs before corporate depreciation

 

13

 

 

16

 

 

14

 

 

14

 

 

57

 

Adjusted EBITDA

$

166

 

$

173

 

$

170

 

$

143

 

$

652

 

 
(B) 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 June Q Sept. Q FY 2021
Reinforcement Materials EBIT

$

88

 

$

89

 

$

85

 

$

67

 

$

329

 

Reinforcement Materials Depreciation and amortization

 

17

 

 

18

 

 

17

 

 

18

 

 

70

 

Reinforcement Materials EBITDA

$

105

 

$

107

 

$

102

 

$

85

 

$

399

 

Reinforcement Materials Sales

$

375

 

$

434

 

$

479

 

$

493

 

$

1,781

 

Reinforcement Materials EBITDA Margin

 

28

%

 

25

%

 

21

%

 

17

%

 

22

%

 
Dollars in millions Dec. Q Mar. Q June Q Sept. Q FY 2021
Performance Chemicals EBIT

$

54

 

$

58

 

$

54

 

$

45

 

$

211

 

Performance Chemicals Depreciation and amortization

 

18

 

 

19

 

 

18

 

 

18

 

 

73

 

Performance Chemicals EBITDA

$

72

 

$

77

 

$

72

 

$

63

 

$

284

 

Performance Chemicals Sales

$

267

 

$

294

 

$

303

 

$

284

 

$

1,148

 

Performance Chemicals EBITDA Margin

 

27

%

 

26

%

 

24

%

 

22

%

 

25

%

 
Dollars in millions Dec. Q Mar. Q June Q Sept. Q FY 2021
Purification Solutions EBIT

$

(2

)

$

2

 

$

6

 

$

4

 

$

10

 

Purification Solutions Depreciation and amortization

 

4

 

 

3

 

 

4

 

 

5

 

 

16

 

Purification Solutions EBITDA

$

2

 

$

5

 

$

10

 

$

9

 

$

26

 

Purification Solutions Sales

$

59

 

$

63

 

$

69

 

$

66

 

$

257

 

Purification Solutions EBITDA Margin

 

3

%

 

8

%

 

14

%

 

14

%

 

10

%

 
Dollars in millions Fiscal 2021
Reconciliation of Free Cash Flow and Discretionary Free Cash Flow to Cash Flow from Operating Activities Dec. Q Mar. Q June Q Sept. Q FY 2021
Cash flow from operating activities (C)

$

21

 

$

65

 

$

71

 

$

100

 

$

257

 

Less: Additions to property, plant and equipment

 

29

 

 

40

 

 

46

 

 

80

 

 

195

 

Free cash flow

$

(8

)

$

25

 

$

25

 

$

20

 

$

62

 

Plus: Additions to property, plant and equipment

 

29

 

 

40

 

 

46

 

 

80

 

 

195

 

Less: Changes in net working capital (D)

 

(99

)

 

(80

)

 

(47

)

 

4

 

 

(222

)

Less: Sustaining and compliance capital expenditures

 

21

 

 

27

 

 

26

 

 

52

 

 

126

 

Discretionary free cash flow

$

99

 

$

118

 

$

92

 

$

44

 

$

353

 

 
(C) As provided in the Condensed Consolidated Statements of Cash Flows.
(D) Defined as changes in accounts receivable, inventory and accounts payable and accrued liabilities as presented on the Condensed Consolidated Statements of Cash Flows.

 

Investors: Steve Delahunt
(617) 342-6255

Source: Cabot Corporation