News Release Details

Third quarter EPS of $1.02, $1.00 Adjusted EPS

Norit acquisition strengthens Cabot's portfolio

BOSTON--(BUSINESS WIRE)--Jul. 31, 2012-- Cabot Corporation (NYSE: CBT) today announced results for its third quarter of fiscal 2012.

Key Highlights

• Strategic acquisition of Norit N.V. completed with attractive financing
• Value pricing and energy efficiency initiatives drive Core Segment results
• Sequential improvement in Performance Segment and Inkjet Colorants Business from higher volumes
• New products launched for adhesives and automotive markets

Commenting on the quarterly results, Cabot President and CEO Patrick Prevost, said, "We are pleased with our third quarter results, considering the challenging macroeconomic environment. We improved our adjusted earnings by 32% as compared to last year. Our Rubber Blacks Business continues to benefit from the implementation of our value pricing initiatives and our investments in yield and energy efficiency technology. We also saw the benefit from improved volumes and new products in our Performance Segment."

Prevost continued, "We are also pleased to announce that today we completed the acquisition of Norit and welcome Norit to the Cabot team. Norit is the global leader in activated carbon with unique technology and strong financial performance. The acquisition of Norit is a natural extension of our product and process technology and applications development competencies and it diversifies Cabot's end market participation into environmental and purification applications. In connection with this acquisition, we successfully raised $600 million from the issuance of long-term bonds at very attractive interest rates. This financing increases our expected earnings per share accretion from this acquisition to $0.40 - $0.50 in 2014. We are committed to a successful integration and look forward to delivering the projected value and growth from this transaction."

Financial Detail

For the third quarter of fiscal 2012, net income attributable to Cabot Corporation was $66 million ($1.02 per diluted common share), which includes $0.06 per share of income from discontinued operations related to the sale of the Supermetals Business. In addition, net income includes a per share charge of $0.04, principally for restructuring and acquisition project costs partially offset by a benefit from tax certain items. Adjusted EPS for the third quarter of fiscal 2012 was $1.00 per share.

Segment EBIT for the third quarter of fiscal 2012 was $109 million as compared to $106 million for the third quarter of fiscal 2011. General unallocated income (expense) was income of $3 million for the third quarter of fiscal 2012 and expense of $15 million for the third quarter of fiscal 2011. The $18 million change in General unallocated income (expense) was primarily driven by lower raw material costs that resulted in a $5 million benefit from LIFO accounting during the third quarter of fiscal 2012 as compared to an expense of $10 million during the third quarter of fiscal 2011.

Segment Results

Core Segment -- Third quarter fiscal 2012 EBIT in the Rubber Blacks Business increased by $2 million compared to the same quarter of fiscal 2011 as higher prices and a favorable product mix were partially offset by 9% lower volumes. Sequentially, EBIT decreased $13 million driven by 5% lower volumes. Volumes in the third fiscal quarter were unfavorably impacted by the weak environment in Europe and slowing economic growth in Asia. In North America, we continue to see strength in the original equipment and off-the-road tire markets, but weakening consumer confidence is unfavorably impacting the replacement tire market.

Global and regional volume changes for the Core Segment for the third quarter of fiscal 2012 as compared to the same quarter of the prior year and the second quarter of fiscal 2012 are included in the table below:

Performance Segment -- Third quarter fiscal 2012 EBIT in the Performance Segment decreased by $5 million compared to the third quarter of fiscal 2011. The decrease was driven principally by higher fixed costs from the start-up of new capacity and increased segment management costs that more than offset higher volumes. Volumes in Fumed Metal Oxides increased 3%, while Performance Products volumes increased 4%. Sequentially, Performance Segment EBIT increased by $3 million, principally due to higher volumes. Volumes in Fumed Metal Oxides increased by 7% sequentially, and volumes in Performance Products increased 4%.

Specialty Fluids -- For the third quarter of fiscal 2012, EBIT in the Specialty Fluids Segment increased by $8 million compared to the third quarter of fiscal 2011. The EBIT increase resulted principally from higher revenues related to the completion of larger and more complex jobs. Sequentially, Specialty Fluids Segment EBIT decreased by $5 million, principally due to a significant product sale during the second quarter that did not repeat in the third quarter of fiscal 2012.

New Business Segment -- For the third quarter of fiscal 2012, EBIT in the New Business Segment decreased by $2 million compared to the third quarter of fiscal 2011 and increased $1 million compared to the second quarter of fiscal 2012. EBIT declined in the third quarter of fiscal 2012 due to lower sales volumes in our Aerogel and Inkjet Colorants Businesses as compared to the record revenue in the third quarter of fiscal 2011. Sequentially, the improvement was due to higher volumes in our Inkjet Colorants Business as we utilized capacity from the recent expansion at our Haverhill, Mass. facility.

Cash Performance -- The Company ended the third quarter of fiscal 2012 with a cash balance of $407 million, an increase of $41 million from the second quarter of fiscal 2012. The increase in cash was driven by strong operating results and a decrease in net working capital. These items were partially offset by capital expenditures of $59 million.

Taxes -- During the third quarter of fiscal 2012, the Company recorded a net tax provision of $16 million, including a benefit from tax certain items of $4 million. The tax rate on continuing operations was 20% for the third quarter of fiscal 2012. Excluding the impact of certain items, the operating tax rate on continuing operations for the third quarter of fiscal 2012 was 25%.

Norit Acquisition -- The $1.1 billion acquisition, which closed today, supports Cabot's strategy to deliver earnings growth through leadership in performance materials and strengthens Cabot's specialty chemicals portfolio with a non-cyclical, high growth and high margin business. Cabot expects the acquisition to be immediately accretive to earnings, excluding acquisition-related charges.

We will report the results of the Norit business as a separate segment beginning in the fourth quarter of fiscal year 2012. The transaction was funded through a combination of cash on hand, borrowing under the existing revolving credit facility and proceeds from our bond offering.

Outlook

Commenting on the outlook for the Company, Prevost said, "We are cautious about the near-term demand outlook due to the uncertainty in Europe and slowing economic growth in Asia. Despite the demand environment, our value pricing and efficiency initiatives continue to support our strong performance. We are also confident that we will deliver on our other performance improvement objectives, such as new product introductions, implementation of yield and energy process technologies and capacity expansions."

Prevost continued, "We remain committed to delivering upon our stated financial objectives. With the addition of Norit, our adjusted EPS target in 2014 has now increased to a range of $4.90 - $5.00. Though the transaction will temporarily reduce our adjusted return on invested capital, we are focused on returns and expect to deliver adjusted ROIC of at least 13% over time. We have a leading portfolio of businesses and the Norit acquisition further strengthens our position as one of the top-tier specialty chemicals and performance materials companies."

Earnings Call

The Company will host a conference call with industry analysts at 2 p.m. ET on Wednesday, Aug. 1, 2012. 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 the world's No. 1 producer of rubber and specialty grade carbon black, activated carbons, inkjet colorants and cesium formate drilling fluids and has market-leading positions in fumed silica, aerogel, and elastomer composites. For more information on Cabot, please visit the company's website is: 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, strategy for growth, demand for our products, the expected benefits of the Norit N.V. acquisition, including expectations for growth, our target for adjusted EPS in fiscal 2014, and our target for adjusted ROIC 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 -- The term "LIFO" includes two factors: (i) the impact of current inventory costs being recognized immediately in cost of goods sold ("COGS") under a last-in first-out ("LIFO") method, compared to the older costs that would have been included in COGS under a first-in first-out ("FIFO") method ("COGS impact"); and (ii) the impact of reductions in inventory quantities, causing historical inventory costs to flow through COGS ("liquidation impact"). The consolidated impact of using the LIFO method to value inventories in the U.S. instead of the FIFO method for the third quarter of fiscal 2012 was a favorable $5 million. This compares to an unfavorable $10 million impact for the third quarter of fiscal 2011 and an unfavorable $4 million impact for the second quarter of fiscal 2012.

The term "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 rate adjustment and the impact of certain items on both operating income and tax provision.

The term "product mix" refers to the various types and grades, or mix, of products sold in a particular Business or Segment during the period, and the positive or negative impact of that mix on the revenue or profitability of the Business or Segment.

Use of Non-GAAP Financial Measures -- The preceding discussion of our results and the accompanying financial tables report adjusted EPS and Total segment earnings before interest and taxes, "Total Segment EBIT", which are non-GAAP financial measures. Our chief operating decision-maker uses adjusted EPS and Total Segment EBIT 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."

Total Segment EBIT is a non-GAAP performance measure, and should not be considered an alternative for Income (loss) from continuing operations before taxes, the most directly comparable GAAP financial measure. In calculating Total Segment EBIT, we exclude "certain items", meaning items that management does not consider representative of our fundamental segment results, as well as items that are not allocated to our business segments, such as interest expense and other corporate costs. Our Chief Operating Decision Maker uses segment EBIT to evaluate the operating results of each segment and to allocate resources to the segments. We believe that this non-GAAP measure provides useful supplemental information for our investors as it is an important indicator of the Company's operational strength and performance. Investors should consider the limitations associated with this non-GAAP measure, including the potential lack of comparability of this measure from one company to another. A reconciliation of Total Segment EBIT to Income (loss) from continuing operations before income taxes and equity in net earnings of affiliate companies is provided in the table titled, "Summary Results by Segments."

The definition of adjusted ROIC is provided in Item 6. of our most recent Annual Report on Form 10K.

Source: Cabot Corporation

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