Cabot Corp Reports Second Quarter Fiscal 2017 Results
Diluted EPS of
Key Highlights
- Diluted EPS up 55% over prior year; Adjusted EPS up 24%
- Stronger volumes across all segments drove significant improvement in year-over-year operating results
- Reinforcement Materials EBIT up 59% year over year; strongest EBIT quarter since 2014
-
Returned cash to shareholders:
$19 million in dividends and$15 million in share repurchases
(In millions, except per share amounts) | Second Quarter | |||||||
2017 | 2016 | |||||||
Net sales | $ | 678 | $ | 568 | ||||
Net income (loss) attributable to Cabot Corporation | $ | 74 | $ | 48 | ||||
Net income (loss) per diluted share attributable to |
$ |
1.18 |
$ |
0.76 |
||||
Cabot Corporation |
||||||||
Less: Certain items after tax per share | $ | 0.31 | $ | 0.06 | ||||
Adjusted EPS | $ | 0.87 | $ | 0.70 | ||||
Commenting on the results, Cabot President and CEO
Financial Detail
For the second
quarter of fiscal 2017, net income attributable to
Segment Results
Reinforcement
Materials – Second quarter fiscal 2017 EBIT in Reinforcement
Materials increased by
Global and regional volume changes for Reinforcement Materials for the second quarter of fiscal 2017 as compared to the same quarter of the prior year and the first quarter of fiscal 2017 are included in the table below:
Second Quarter
Year over Year Change |
Second Quarter
Sequential Change |
|||||
Changes in Global Reinforcement |
6% |
6% |
||||
Asia | 3% | (3%) | ||||
Europe, Middle East, Africa | 2% | 18% | ||||
Americas | 11% | 13% | ||||
Performance Chemicals – Second quarter fiscal 2017 EBIT in
Performance Chemicals decreased by
Purification Solutions – Second quarter fiscal 2017 EBIT in
Purification Solutions increased by
Specialty Fluids – Second quarter fiscal 2017 EBIT in Specialty
Fluids increased by
Cash Performance – The Company ended the second quarter of
fiscal 2017 with a cash balance of
Taxes – During the second quarter of fiscal 2017, the Company
recorded a tax benefit of
Outlook
Commenting on the
outlook for the company, Keohane said, “We are very pleased with our
second quarter results and remain focused on delivering a strong second
half of the fiscal year. We expect Reinforcement Materials volumes in
line with the second quarter while the business will experience a higher
level of planned maintenance activity. While demand in our Performance
Chemicals end markets remains robust, the segment will continue to see
some year-over-year impact from higher feedstock costs. We expect
Purification Solutions will benefit from volume growth in the third
quarter which will be offset by inventory drawdowns and costs associated
with turnaround activities. Overall, we remain focused on delivering
shareholder value by growing our annual adjusted EPS by 7-10% over time
and expect to be toward the high end of that range this year."
Earnings Call
The Company will
host a conference call with industry analysts at
About
Forward-Looking Statements -- This earnings release contains
forward-looking statements. All statements that address expectations or
projections about the future, including our expectations for volumes in
the remaining quarters of fiscal 2017 and the factors that we expect
will impact volumes, demand for our products, margins, and adjusted
earnings per share growth are forward-looking statements. These
statements are not guarantees of future performance and are subject to
risks, uncertainties, potentially inaccurate assumptions, and other
factors, some of which are beyond our control and difficult to predict.
If known or unknown risks materialize, or should underlying assumptions
prove inaccurate, our actual results could differ materially from past
results and from those expressed or implied by forward-looking
statements. Important factors that could cause our results to differ
materially from those expressed or implied in the forward-looking
statements include, but are not limited to volatility in the price of
energy and raw materials; competition from other specialty chemical
companies; safety, health and environmental requirements; a significant
adverse change in a customer relationship; negative or uncertain
worldwide or regional economic conditions; unanticipated delays in site
development projects; and fluctuations in foreign currency exchange and
interest rates . These factors are discussed more fully in the reports
we file with the
Use of Non-GAAP Financial Measures
To supplement Cabot’s
consolidated financial statements presented on a generally accepted
accounting principles (“GAAP”) basis, the preceding discussion of our
results and the accompanying financial tables report Adjusted EPS and
our operating tax rate, both of which are non-GAAP financial measures.
These non-GAAP financial measures are not computed in accordance with,
or as an alternative to, GAAP. A reconciliation of Adjusted EPS to net
income (loss) per share attributable to
Management believes these non-GAAP measures provide investors with greater transparency to the information used by Cabot management in its financial and operational decision-making, allow investors to see Cabot’s results through the eyes of management, and better enable Cabot’s investors to understand Cabot’s operating performance and financial condition.
Adjusted EPS. In calculating Adjusted EPS, we exclude from our net income (loss) per share from continuing operations items of expense and income that management does not consider representative of the Company’s business operations. Accordingly, reporting earnings on an adjusted basis supplements the GAAP measure of performance and provides additional information related to the underlying performance of the business. For example, certain of the items we exclude are items that we are required by GAAP to recognize in one period that relate to activities extending over several periods or relate to single events that management considers to be unusual and infrequent, although not necessarily non-recurring. We refer to these items as “certain items.” Management believes excluding these items facilitates operating performance comparisons from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis and evaluates the Company’s operating performance without the impact of these costs or benefits. Management also uses adjusted EPS as a key measure in evaluating management performance for incentive compensation purposes.
The items of income and expense that we exclude from our calculations of Adjusted EPS, as applicable, but that are included in our GAAP net income (loss) per share, as applicable, are described below.
- 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.
-
Foreign currency loss on devaluation, which represents the impact of
controlled currency devaluations on the Company’s net monetary assets
denominated in that currency. In fiscal 2016 this has applied to
currency exchange rate changes in
Argentina andVenezuela . - 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.
- Employee benefit plan settlement charges, which consist of the costs associated with transferring the obligations and assets held by one of the Company’s defined benefit plans to a multi-employer plan.
Cabot does not provide a target GAAP EPS growth rate range or reconciliation of the adjusted EPS growth rate range with a GAAP EPS growth rate range because, without unreasonable effort, we are unable to predict with reasonable certainty the matters we would allocate to “certain items,” including unusual gains and losses, costs associated with future restructurings, acquisition-related expenses and litigation outcomes. These items are uncertain, depend on various factors, and could have a material impact on GAAP EPS in future periods.
Operating Tax Rate. Our “operating tax rate” represents the tax rate on our recurring operating results. This rate excludes discrete tax items, which are unusual or infrequent items that are excluded from the estimated annual effective tax rate and other tax items, including the impact of the timing of losses in certain jurisdictions, cumulative tax rate adjustments and the impact of the items of expense and income we identify as certain items on both our operating income and the tax provision. Management believes that the operating tax rate is useful supplemental information because it helps our investors compare our tax rate year to year on a consistent basis and to understand what our tax rate on current operations would be without the impact of these items.
Explanation of Terms Used
Product Mix. The term “product mix” refers to the mix of types and grade of products sold or the mix of geographic regions where products are sold, and the positive or negative impact this has on the revenue or profitability of the business or segment.
Second Quarter Earnings Announcement, Fiscal 2017 | ||||||||||||||||
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
Periods ended March 31 | Three Months | Six Months | ||||||||||||||
Dollars in millions, except per share amounts (unaudited) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales and other operating revenues | $ | 678 | $ | 568 | $ | 1,289 | $ | 1,171 | ||||||||
Cost of sales | 509 | 418 | 963 | 922 | ||||||||||||
Gross profit | 169 | 150 | 326 | 249 | ||||||||||||
Selling and administrative expenses | 65 | 62 | 128 | 133 | ||||||||||||
Research and technical expenses | 14 | 11 | 26 | 27 | ||||||||||||
Income (loss) from operations | 90 | 77 | 172 | 89 | ||||||||||||
Other income (expense) | ||||||||||||||||
Interest and dividend income | 2 | 2 | 4 | 3 | ||||||||||||
Interest expense | (13 | ) | (14 | ) | (26 | ) | (27 | ) | ||||||||
Other income (expense) | (1 | ) | (3 | ) | 1 | (11 | ) | |||||||||
Total other income (expense) | (12 | ) | (15 | ) | (21 | ) | (35 | ) | ||||||||
Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies |
78 | 62 | 151 | 54 | ||||||||||||
(Provision) benefit for income taxes | 1 | (11 | ) | (16 | ) | (6 | ) | |||||||||
Equity in earnings of affiliated companies, net of tax | 1 | 1 | 3 | 1 | ||||||||||||
Net income (loss) | 80 | 52 | 138 | 49 | ||||||||||||
Net income (loss) attributable to noncontrolling interests | 6 | 4 | 10 | 8 | ||||||||||||
Net income (loss) attributable to Cabot Corporation | $ | 74 | $ | 48 | $ | 128 | $ | 41 | ||||||||
Diluted earnings per share of common stock attributable to Cabot Corporation |
||||||||||||||||
Net income (loss) attributable to Cabot Corporation | $ | 1.18 | $ | 0.76 | $ | 2.03 | $ | 0.65 | ||||||||
Weighted average common shares outstanding | ||||||||||||||||
Diluted | 62.8 | 62.8 | 62.8 | 62.9 | ||||||||||||
Second Quarter Earnings Announcement, Fiscal 2017 | ||||||||||||||||
CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS |
||||||||||||||||
Periods ended March 31 | Three Months | Six Months | ||||||||||||||
Dollars in millions, except per share amounts (unaudited) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Sales | ||||||||||||||||
Reinforcement Materials | $ | 352 | $ | 261 | $ | 647 | $ | 549 | ||||||||
Performance Chemicals | 228 | 216 | 433 | 423 | ||||||||||||
Specialty Carbons and Formulations | 162 | 145 | 300 | 285 | ||||||||||||
Metal Oxides | 66 | 71 | 133 | 138 | ||||||||||||
Purification Solutions | 67 | 67 | 136 | 133 | ||||||||||||
Specialty Fluids | 7 | 6 | 18 | 13 | ||||||||||||
Segment sales | 654 | 550 | 1,234 | 1,118 | ||||||||||||
Unallocated and other (A) | 24 | 18 | 55 | 53 | ||||||||||||
Net sales and other operating revenues | $ | 678 | $ | 568 | $ | 1,289 | $ | 1,171 | ||||||||
Segment Earnings Before Interest and Taxes (B) | ||||||||||||||||
Reinforcement Materials | $ | 54 | $ | 34 | $ | 94 | $ | 60 | ||||||||
Performance Chemicals | 51 | 58 | 100 | 108 | ||||||||||||
Purification Solutions | 2 | (2 | ) | 6 | (7 | ) | ||||||||||
Specialty Fluids | - | (2 | ) | 2 | (2 | ) | ||||||||||
Total Segment Earnings Before Interest and Taxes | 107 | 88 | 202 | 159 | ||||||||||||
Unallocated and Other | ||||||||||||||||
Interest expense | (13 | ) | (14 | ) | (26 | ) | (27 | ) | ||||||||
Certain items (C) | - | 1 | - | (57 | ) | |||||||||||
Unallocated corporate costs | (14 | ) | (12 | ) | (26 | ) | (25 | ) | ||||||||
General unallocated income (expense) (D) | (1 | ) | - | 4 | 5 | |||||||||||
Less: Equity in earnings of affiliated companies | (1 | ) | (1 | ) | (3 | ) | (1 | ) | ||||||||
Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies |
78 | 62 | 151 | 54 | ||||||||||||
(Provision) benefit for income taxes (including tax certain items) | 1 | (11 | ) | (16 | ) | (6 | ) | |||||||||
Equity in earnings of affiliated companies | 1 | 1 | 3 | 1 | ||||||||||||
Net income (loss) | 80 | 52 | 138 | 49 | ||||||||||||
Net income attributable to noncontrolling interests | 6 | 4 | 10 | 8 | ||||||||||||
Net income (loss) attributable to Cabot Corporation | $ | 74 | $ | 48 | $ | 128 | $ | 41 | ||||||||
Diluted earnings per share of common stock attributable to Cabot Corporation |
||||||||||||||||
Net income (loss) attributable to Cabot Corporation | $ | 1.18 | $ | 0.76 | $ | 2.03 | $ | 0.65 | ||||||||
Adjusted earnings per share | ||||||||||||||||
Adjusted EPS (E) |
$ | 0.87 | $ | 0.70 | $ | 1.71 | $ | 1.21 | ||||||||
Weighted average common shares outstanding | ||||||||||||||||
Diluted | 62.8 | 62.8 | 62.8 | 62.9 | ||||||||||||
(A) Unallocated and other reflects royalties, other operating revenues, external shipping and handling fees, the impact of the corporate adjustment for unearned revenue, the removal of 100% of the sales of an equity method affiliate, and discounting charges for certain Notes receivable.
(B) Segment EBIT is a measure used by Cabot's Chief Operating Decision-Maker to measure consolidated operating results, assess segment performance and allocate resources. Segment EBIT includes equity in earnings of affiliated companies, royalty income, and allocated corporate costs.
(C) Details of certain items are presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.
(D) General unallocated income includes foreign currency transaction gains (losses), interest income, dividend income, the profit related to the corporate adjustment for unearned revenue, and the impact of LIFO accounting.
(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.
Second Quarter Earnings Announcement, Fiscal 2017 | ||||||
CABOT CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||||||
March 31, | September 30, | |||||
2017 | 2016 | |||||
Dollars in millions | (unaudited) | (audited) | ||||
Current assets: | ||||||
Cash and cash equivalents | $ | 133 | $ | 200 | ||
Accounts and notes receivable, net of reserve for doubtful accounts of $10 and $8 | 520 | 456 | ||||
Inventories: | ||||||
Raw materials | 88 | 66 | ||||
Work in process | 2 | 1 | ||||
Finished goods | 265 | 237 | ||||
Other | 40 | 38 | ||||
Total inventories | 395 | 342 | ||||
Prepaid expenses and other current assets (A) | 56 | 49 | ||||
Total current assets | 1,104 | 1,047 | ||||
Property, plant and equipment, net | 1,237 | 1,290 | ||||
Goodwill | 151 | 152 | ||||
Equity affiliates | 54 | 53 | ||||
Intangible assets, net | 134 | 140 | ||||
Assets held for rent | 101 | 97 | ||||
Deferred income taxes (A) | 254 | 216 | ||||
Other Assets (A) | 46 | 40 | ||||
Total assets | $ | 3,081 | $ | 3,035 | ||
(A) Effective
Second Quarter Earnings Announcement, Fiscal 2017 | ||||||||
CABOT CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||||||||
March 31, | September 30, | |||||||
2017 | 2016 | |||||||
Dollars in millions, except share and per share amounts | (unaudited) | (audited) | ||||||
Current liabilities: | ||||||||
Notes payable | $ | 15 | $ | 7 | ||||
Accounts payable and accrued liabilities | 377 | 364 | ||||||
Income taxes payable | 32 | 25 | ||||||
Current portion of long-term debt | 251 | 1 | ||||||
Total current liabilities | 675 | 397 | ||||||
Long-term debt (A) | 664 | 914 | ||||||
Deferred income taxes (A) | 47 | 41 | ||||||
Other liabilities | 270 | 285 | ||||||
Redeemable preferred stock | 27 | 26 | ||||||
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: 62,675,606 and 62,449,425 shares | ||||||||
Outstanding: 62,470,543 and 62,210,711 shares | 63 | 62 | ||||||
Less cost of 205,063 and 238,714 shares of common treasury stock | (7 | ) | (7 | ) | ||||
Additional paid-in capital | - | - | ||||||
Retained earnings | 1,638 | 1,544 | ||||||
Accumulated other comprehensive income | (389 | ) | (325 | ) | ||||
Total Cabot Corporation stockholders' equity | 1,305 | 1,274 | ||||||
Noncontrolling interests | 93 | 98 | ||||||
Total stockholders' equity | 1,398 | 1,372 | ||||||
Total liabilities and stockholders' equity | $ | 3,081 | $ | 3,035 | ||||
(A) Effective
CABOT CORPORATION | ||||||||||||||||||||||||||||||||||||||
Fiscal 2016 | Fiscal 2017 | |||||||||||||||||||||||||||||||||||||
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 | $ | 288 | $ | 261 | $ | 270 | $ | 289 | $ | 1,108 | $ | 295 | $ | 352 | $ | - | $ | - | $ | 647 | ||||||||||||||||||
Performance Chemicals | 207 | 216 | 228 | 214 | 865 | 205 | 228 | - | - | 433 | ||||||||||||||||||||||||||||
Specialty Carbons and Formulations | 140 | 145 | 152 | 141 | 578 | 138 | 162 | - | - | 300 | ||||||||||||||||||||||||||||
Metal Oxides | 67 | 71 | 76 | 73 | 287 | 67 | 66 | - | - | 133 | ||||||||||||||||||||||||||||
Purification Solutions | 66 | 67 | 77 | 80 | 290 | 69 | 67 | - | - | 136 | ||||||||||||||||||||||||||||
Specialty Fluids | 7 | 6 | 19 | 15 | 47 | 11 | 7 | - | - | 18 | ||||||||||||||||||||||||||||
Segment Sales | 568 | 550 | 594 | 598 | 2,310 | 580 | 654 | - | - | 1,234 | ||||||||||||||||||||||||||||
Unallocated and other (A) | 35 | 18 | 27 | 21 | 101 | 31 | 24 | - | - | 55 | ||||||||||||||||||||||||||||
Net sales and other operating revenues | $ | 603 | $ | 568 | $ | 621 | $ | 619 | $ | 2,411 | $ | 611 | $ | 678 | $ | - | $ | - | $ | 1,289 | ||||||||||||||||||
Segment Earnings Before Interest and Taxes (B) | ||||||||||||||||||||||||||||||||||||||
Reinforcement Materials | $ | 26 | $ | 34 | $ | 35 | $ | 42 | $ | 137 | $ | 40 | $ | 54 | $ | - | $ | - | $ | 94 | ||||||||||||||||||
Performance Chemicals | 50 | 58 | 59 | 58 | 225 | 49 | 51 | - | - | 100 | ||||||||||||||||||||||||||||
Purification Solutions | (5 | ) | (2 | ) | - | 2 | (5 | ) | 4 | 2 | - | - | 6 | |||||||||||||||||||||||||
Specialty Fluids | - | (2 | ) | 10 | 5 | 13 | 2 | - | - | - | 2 | |||||||||||||||||||||||||||
Total Segment Earnings Before Interest and Taxes | 71 | 88 | 104 | 107 | 370 | 95 | 107 | - | - | 202 | ||||||||||||||||||||||||||||
Unallocated and Other | ||||||||||||||||||||||||||||||||||||||
Interest expense | (13 | ) | (14 | ) | (13 | ) | (14 | ) | (54 | ) | (13 | ) | (13 | ) | - | - | (26 | ) | ||||||||||||||||||||
Certain items (C) | (58 | ) | 1 | (6 | ) | (18 | ) | (81 | ) | - | - | - | - | - | ||||||||||||||||||||||||
Unallocated corporate costs | (13 | ) | (12 | ) | (11 | ) | (9 | ) | (45 | ) | (12 | ) | (14 | ) | - | - | (26 | ) | ||||||||||||||||||||
General unallocated income (expense) (D) | 5 | - | 1 | 1 | 7 | 5 | (1 | ) | - | - | 4 | |||||||||||||||||||||||||||
Less: Equity in earnings of affiliated companies | - | (1 | ) | (1 | ) | (1 | ) | (3 | ) | (2 | ) | (1 | ) | - | - | (3 | ) | |||||||||||||||||||||
Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies |
(8 | ) | 62 | 74 | 66 | 194 | 73 | 78 | - | - | 151 | |||||||||||||||||||||||||||
(Provision) benefit for income taxes (including tax certain items) | 5 | (11 | ) | (15 | ) | (13 | ) | (34 | ) | (17 | ) | 1 | - | - | (16 | ) | ||||||||||||||||||||||
Equity in earnings of affiliated companies | - | 1 | 1 | 1 | 3 | 2 | 1 | - | - | 3 | ||||||||||||||||||||||||||||
Income (loss) from continuing operations | (3 | ) | 52 | 60 | 54 | 163 | 58 | 80 | - | - | 138 | |||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax (E) | - | - | - | 1 | 1 | - | - | - | - | - | ||||||||||||||||||||||||||||
Net income (loss) | (3 | ) | 52 | 60 | 55 | 164 | 58 | 80 | - | - | 138 | |||||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | 4 | 4 | 4 | 3 | 15 | 4 | 6 | - | - | 10 | ||||||||||||||||||||||||||||
Net income (loss) attributable to Cabot Corporation | $ | (7 | ) | $ | 48 | $ | 56 | $ | 52 | $ | 149 | $ | 54 | $ | 74 | $ | - | $ | - | $ | 128 | |||||||||||||||||
Diluted earnings per share of common stock attributable to Cabot Corporation |
||||||||||||||||||||||||||||||||||||||
Continuing operations | $ | (0.11 | ) | $ | 0.76 | $ | 0.88 | $ | 0.81 | $ | 2.34 | $ | 0.85 | $ | 1.18 | $ | - | $ | - | $ | 2.03 | |||||||||||||||||
Discontinued operations (E) | - | - | - | 0.02 | 0.02 | - | - | - | - | - | ||||||||||||||||||||||||||||
Net income (loss) attributable to Cabot Corporation (F) | $ | (0.11 | ) | $ | 0.76 | $ | 0.88 | $ | 0.83 | $ | 2.36 | $ | 0.85 | $ | 1.18 | $ | - | $ | - | $ | 2.03 | |||||||||||||||||
Adjusted earnings per share | ||||||||||||||||||||||||||||||||||||||
Adjusted EPS (G) | $ | 0.51 | $ | 0.70 | $ | 0.93 | $ | 1.00 | $ | 3.14 | $ | 0.84 | $ | 0.87 | $ | - | $ | - | $ | 1.71 | ||||||||||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||||||||||||||||||||
Diluted (F) | 62.5 | 62.8 | 62.9 | 62.9 | 62.9 | 62.8 | 62.8 | - | - | 62.8 | ||||||||||||||||||||||||||||
(A) Unallocated and other reflects royalties, other operating revenues, external shipping and handling fees, the impact of the corporate adjustment for unearned revenue, the removal of 100% of the sales of an equity method affiliate and discounting charges for certain Notes receivable.
(B) Segment EBIT is a measure used by Cabot's Chief Operating Decision-Maker to measure consolidated operating results, assess segment performance and allocate resources. Segment EBIT includes equity in earnings of affiliated companies, royalty income, and allocated corporate costs.
(C) Details of certain items are presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.
(D) General unallocated income (expense) includes foreign currency transaction gains (losses), interest income, dividend income, the profit related to the corporate adjustment for unearned revenue, and the impact of LIFO accounting.
(E) Amounts relate primarily to the previously divested Supermetals and Security Materials businesses.
(F) The weighted average common shares outstanding used to
calculate earnings per share for the three months ended
(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.
Second Quarter Earnings Announcement, Fiscal 2017 | ||||||||||||||||
CABOT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
Periods ended March 31 | Three Months | Six Months | ||||||||||||||
Dollars in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
Net income (loss) | $ | 80 | $ | 52 | $ | 138 | $ | 49 | ||||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 38 | 41 | 76 | 82 | ||||||||||||
Other non-cash (income) charges, net | (27 | ) | (7 | ) | (31 | ) | 27 | |||||||||
Changes in assets and liabilities: | ||||||||||||||||
Changes in certain working capital items (A) | (134 | ) | 28 | (118 | ) | 68 | ||||||||||
Changes in other assets and liabilities, net | (11 | ) | (11 | ) | (20 | ) | (43 | ) | ||||||||
Cash dividends received from equity affiliates | 3 | 2 | 6 | 5 | ||||||||||||
Cash provided by (used in) operating activities | (51 | ) | 105 | 51 | 188 | |||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
Additions to property, plant and equipment | (23 | ) | (28 | ) | (45 | ) | (52 | ) | ||||||||
Other investing activities, net | (1 | ) | 5 | (2 | ) | 11 | ||||||||||
Cash used in investing activities | (24 | ) | (23 | ) | (47 | ) | (41 | ) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||||||
Change in debt, net | 7 | (1 | ) | 7 | (15 | ) | ||||||||||
Cash dividends paid to common stockholders | (19 | ) | (14 | ) | (38 | ) | (28 | ) | ||||||||
Other financing activities, net | 4 | (5 | ) | (4 | ) | (18 | ) | |||||||||
Cash used in financing activities | (8 | ) | (20 | ) | (35 | ) | (61 | ) | ||||||||
Effect of exchange rates on cash | 27 | 32 | (36 | ) | 15 | |||||||||||
Increase (decrease) in cash and cash equivalents | (56 | ) | 94 | (67 | ) | 101 | ||||||||||
Cash and cash equivalents at beginning of period | 189 | 84 | 200 | 77 | ||||||||||||
Cash and cash equivalents at end of period | $ | 133 | $ | 178 | $ | 133 | $ | 178 | ||||||||
(A) Includes Accounts and notes receivable, Inventories, and Accounts payable and accrued liabilities
Second Quarter Earnings Announcement, Fiscal 2017 | ||||||||||||||||||||
CABOT CORPORATION CERTAIN ITEMS AND RECONCILIATION OF ADJUSTED EPS AND OPERATING TAX RATE | ||||||||||||||||||||
TABLE 1: DETAIL OF CERTAIN ITEMS | ||||||||||||||||||||
Periods ended March 31 | ||||||||||||||||||||
Dollars in millions, except per share amounts (unaudited) | Three Months | Six Months | ||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||
Certain items before and after income taxes |
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Global restructuring activities | (2 | ) | 5 | (2 | ) | (43 | ) | |||||||||||||
Foreign currency loss on devaluation |
— |
(3 | ) | — | (11 | ) | ||||||||||||||
Legal and environmental matters and reserves | 2 | (1 | ) | 2 | (3 | ) | ||||||||||||||
Total certain items, pre-tax | — | 1 | — | (57 | ) | |||||||||||||||
Tax impact of certain items (A) | — | 4 | — | 19 | ||||||||||||||||
Certain items after tax (excluding discrete tax items) | — | 5 | — | (38 | ) | |||||||||||||||
Certain items after tax per share impact (excluding discrete tax items) |
$ |
— |
$ | 0.07 | $ | 0.01 | $ | (0.60 | ) | |||||||||||
Tax-related certain items | ||||||||||||||||||||
Discrete tax items | 20 | — | 20 | 3 | ||||||||||||||||
Total tax-related certain items | 20 | — | 20 | 3 | ||||||||||||||||
Total tax-related certain items per share impact | $ | 0.31 | $ | (0.01 | ) | $ | 0.31 | $ | 0.04 | |||||||||||
Total certain items after tax | $ | 20 | $ | 5 | $ | 20 | $ | (35 | ) | |||||||||||
Total certain items after tax per share impact | $ | 0.31 | $ | 0.06 | $ | 0.32 | $ | (0.56 | ) | |||||||||||
TABLE 2: CERTAIN ITEMS STATEMENT OF OPERATIONS LINE ITEM | ||||||||||||||||||||
Periods ended March 31 | Three Months | Six Months | ||||||||||||||||||
Dollars in millions, Pre-Tax (unaudited) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Statement of Operations Line Item (B) |
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Cost of sales | $ | 2 | $ | 5 | $ | 2 | $ | (34 | ) | |||||||||||
Selling and administrative expenses | (2 | ) | (1 | ) | (2 | ) | (7 | ) | ||||||||||||
Research and technical expenses | — |
— |
— | (5 | ) | |||||||||||||||
Other expense | — | (3 | ) | — | (11 | ) | ||||||||||||||
Total certain items, pre-tax |
$ |
― |
$ | 1 |
$ |
― |
$ | (57 | ) | |||||||||||
TABLE 3: RECONCILIATION OF TAX CERTAIN ITEMS | ||||||||||||||||||||
Periods ended March 31 | Three Months | Six Months | ||||||||||||||||||
Dollars in millions (unaudited) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Reconciliation of Provision for income taxes, excluding certain items, to Provision for income taxes | ||||||||||||||||||||
(Provision) benefit for income taxes | $ | 1 | $ | (11 | ) | $ | (16 | ) | $ | (6 | ) | |||||||||
Less: Tax impact of certain items | — | 4 | — | 19 | ||||||||||||||||
Less: Tax-related certain items | 20 | — | 20 | 3 | ||||||||||||||||
(Provision) benefit for income taxes, excluding certain items | $ | (19 | ) | $ | (15 | ) | $ | (36 | ) | $ | (28 | ) | ||||||||
TABLE 4: RECONCILIATION OF OPERATING TAX RATE | ||||||||||||||||||||
Periods ended March 31 | Three Months | Six Months | Forecast | |||||||||||||||||
Dollars in millions (unaudited) | 2017 | 2016 | 2017 | 2016 | 2017 | |||||||||||||||
Reconciliation of the effective tax rate to the operating tax rate | ||||||||||||||||||||
(Provision) benefit for income taxes | $ | 1 | $ | (11 | ) | $ | (16 | ) | $ | (6 | ) | N/A | ||||||||
Effective tax rate | (1 | %) | 20 | % | 11 | % | 12 | % | 17 | % | ||||||||||
Impact of discrete tax items: (C) | ||||||||||||||||||||
Unusual or infrequent items | 25 | % | (1 | %) | 12 | % | 1 | % | 6 | % | ||||||||||
Items related to uncertain tax positions | (1 | %) | - | % | 1 | % | 3 | % | 1 | % | ||||||||||
Other discrete tax items | 1 | % | 1 | % | - | % | 1 | % | - | % | ||||||||||
Impact of certain items | - | % | 5 | % | - | % | 8 | % | - | % | ||||||||||
Operating tax rate | 24 | % | 25 | % | 24 | % | 25 | % | 24 | % | ||||||||||
TABLE 5: RECONCILIATION OF ADJUSTED EPS BY QUARTER FOR FISCAL 2017 and FISCAL 2016 | ||||||||||||||||||||
NON-GAAP MEASURE: | ||||||||||||||||||||
Periods ended (unaudited) | Fiscal 2017(D) | |||||||||||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 YTD | ||||||||||||||||
Reconciliation of Adjusted EPS to GAAP EPS |
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Net income (loss) per share attributable to Cabot Corporation | $ | 0.85 | $ | 1.18 |
$ |
― |
$ |
― |
$ | 2.03 | ||||||||||
Less: Certain items after tax per share | 0.01 | 0.31 | — |
— |
0.32 | |||||||||||||||
Adjusted earnings per share | $ | 0.84 | $ | 0.87 |
$ |
― |
$ |
― |
$ | 1.71 | ||||||||||
Periods ended (unaudited) | Fiscal 2016(D) | |||||||||||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2016 YTD | ||||||||||||||||
Reconciliation of Adjusted EPS to GAAP EPS |
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Net income (loss) per share attributable to Cabot Corporation | $ | (0.11 | ) | $ | 0.76 | $ | 0.88 | $ | 0.83 | $ | 2.36 | |||||||||
Less: Net income (loss) per share from discontinued operations(E) | — | — | — | 0.02 | 0.02 | |||||||||||||||
Net income (loss) per share from continuing operations | $ | (0.11 | ) | $ | 0.76 | $ | 0.88 | $ | 0.81 | $ | 2.34 | |||||||||
Less: Certain items after tax per share | (0.62 | ) | 0.06 | (0.05 | ) | (0.19 | ) | (0.80 | ) | |||||||||||
Adjusted earnings per share | $ | 0.51 | $ | 0.70 | $ | 0.93 | $ | 1.00 | $ | 3.14 | ||||||||||
(A) The tax effect of certain items is determined by (1)
starting with the current and deferred income tax expense or benefit,
included in Net income attributable to
(B) This table indicates the line items where certain items are recorded in the table titled Cabot Corporation Consolidated Statements of Operations.
(C) The nature of the discrete tax items for the periods
ended
(D) Per share amounts are calculated after tax and, where applicable, noncontrolling interest, net of tax.
(E) Amounts relate primarily to the previously divested Supermetals and Security Materials businesses.
CABOT CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
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All dollar amounts shown below are in millions, except per share information | ||||||||||||||||||||
Fiscal 2017 (A) | ||||||||||||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | ||||||||||||||||
Reconciliation of Adjusted EPS to GAAP EPS |
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Net income (loss) per share attributable to Cabot Corporation | $ | 0.85 | $ | 1.18 | $ | - | $ | - | $ | 2.03 | ||||||||||
Less: Certain items after tax | 0.01 | 0.31 | - | - | 0.32 | |||||||||||||||
Adjusted earnings per share | $ | 0.84 | $ | 0.87 | $ | - | $ | - | $ | 1.71 | ||||||||||
(A) Per share amounts are calculated after tax and, where applicable, noncontrolling interest, net of tax. |
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Fiscal 2017 | ||||||||||||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | ||||||||||||||||
Reconciliation of Segment EBIT to Net Income and Segment EBITDA Margin |
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Net income (loss) attributable to Cabot Corporation | $ | 54 | $ | 74 | $ | - | $ | - | $ | 128 | ||||||||||
Net income (loss) attributable to noncontrolling interests | 4 | 6 | - | - | 10 | |||||||||||||||
Equity in earnings of affiliated companies, net of tax | (2 | ) | (1 | ) | - | - | (3 | ) | ||||||||||||
Provision (benefit) for income taxes | 17 | (1 | ) | - | - | 16 | ||||||||||||||
Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies | $ | 73 | $ | 78 | $ | - | $ | - | $ | 151 | ||||||||||
Interest expense | 13 | 13 | - | - | 26 | |||||||||||||||
Certain items | - | - | - | - | - | |||||||||||||||
Unallocated corporate costs | 12 | 14 | - | - | 26 | |||||||||||||||
General unallocated (income) expense | (5 | ) | 1 | - | - | (4 | ) | |||||||||||||
Equity in earnings of affiliated companies | 2 | 1 | - | - | 3 | |||||||||||||||
Total Segment EBIT | $ | 95 | $ | 107 | $ | - | $ | - | $ | 202 | ||||||||||
Plus: Total Depreciation & Amortization | 38 | 38 | - | - | 76 | |||||||||||||||
Plus: Adjustments to Depreciation(B) | - | 1 | - | - | 1 | |||||||||||||||
Total Segment EBITDA | $ | 133 | $ | 146 | $ | - | $ | - | $ | 279 | ||||||||||
Less: Unallocated Corporate Costs | (12 | ) | (14 | ) | - | - | (26 | ) | ||||||||||||
Adjusted EBITDA | $ | 121 | $ | 132 | $ | - | $ | - | $ | 253 | ||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | ||||||||||||||||
Reinforcement Materials EBIT | $ | 40 | $ | 54 | $ | - | $ | - | $ | 94 | ||||||||||
Plus: Depreciation & Amortization | 17 | 17 | - | - | 34 | |||||||||||||||
Reinforcement Materials EBITDA | $ | 57 | $ | 71 | $ | - | $ | - | $ | 128 | ||||||||||
Reinforcement Materials Sales | $ | 295 | $ | 352 | $ | - | $ | - | $ | 647 | ||||||||||
Reinforcement Materials EBITDA Margin | 19 | % | 20 | % | 0 | % | 0 | % | 20 | % | ||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | ||||||||||||||||
Performance Chemicals EBIT | $ | 49 | $ | 51 | $ | - | $ | - | $ | 100 | ||||||||||
Plus: Depreciation & Amortization | 11 | 12 | - | - | 23 | |||||||||||||||
Performance Chemicals EBITDA | $ | 60 | $ | 63 | $ | - | $ | - | $ | 123 | ||||||||||
Performance Chemicals Sales | $ | 205 | $ | 228 | $ | - | $ | - | $ | 433 | ||||||||||
Performance Chemicals EBITDA Margin | 29 | % | 28 | % | 0 | % | 0 | % | 28 | % | ||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | ||||||||||||||||
Purification Solutions EBIT | $ | 4 | $ | 2 | $ | - | $ | - | $ | 6 | ||||||||||
Plus: Depreciation & Amortization | 9 | 10 | - | - | 19 | |||||||||||||||
Purification Solutions EBITDA | $ | 13 | $ | 12 | $ | - | $ | - | $ | 25 | ||||||||||
Purification Solutions Sales | $ | 69 | $ | 67 | $ | - | $ | - | $ | 136 | ||||||||||
Purification Solutions EBITDA Margin | 19 | % | 18 | % | 0 | % | 0 | % | 18 | % | ||||||||||
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | ||||||||||||||||
Specialty Fluids EBIT | $ | 2 | $ | - | $ | - | $ | - | $ | 2 | ||||||||||
Plus: Depreciation & Amortization | 1 | - | - | - | 1 | |||||||||||||||
Specialty Fluids EBITDA | $ | 3 | $ | - | $ | - | $ | - | $ | 3 | ||||||||||
Specialty Fluids Sales | $ | 11 | $ | 7 | $ | - | $ | - | $ | 18 | ||||||||||
Specialty Fluids EBITDA Margin | 27 | % | 0 | % | 0 | % | 0 | % | 17 | % | ||||||||||
Fiscal 2017 | ||||||||||||||||||||
Reconciliation of Discretionary Free Cash Flow |
Dec. Q | Mar. Q | Jun. Q | Sept. Q | FY 2017 | |||||||||||||||
Cash flow from operating activities (C) | 102 | (51 | ) | - | - | 51 | ||||||||||||||
Less: Changes in net working capital (D) | 16 | (134 | ) | - | - | (118 | ) | |||||||||||||
Less: Sustaining and compliance capital expenditures | 21 | 18 | - | - | 39 | |||||||||||||||
Discretionary Free Cash Flow | $ | 65 | $ | 65 | $ | - | $ | - | $ | 130 | ||||||||||
(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. |
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(C) As provided in the Consolidated Statement of Cash Flows. |
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(D) Defined as changes in accounts receivable, inventory and accounts payable and accrued liabilities as presented on the Consolidated Statement of Cash Flows. |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170501006329/en/
Source:
Cabot Corporation
Steve Delahunt, 617-342-6255