Cabot Corporation Reports Fiscal 2012 EPS of $6.01, Adjusted EPS of $3.34
Cabot Corporation Reports Fiscal 2012 EPS of $6.01, Adjusted EPS of $3.34
Fourth quarter EPS of $0.58, Adjusted EPS of $0.75
- Strong fiscal year-over-year performance continues with 37% adjusted EPS improvement
- Value pricing drives 16% improvement in fiscal year Total Segment EBIT despite lower volumes
- Integration of Norit proceeding well
- Macroeconomic environment remains challenging
|(In millions, except per share amounts)||Fiscal 2012||Fiscal 2011|
|Net income attributable to Cabot Corporation||$||37||$||389||$||50||$||236|
|Net earnings per share attributable to Cabot Corporation||$||0.58||$||6.01||$||0.76||$||3.57|
|Net income per share from discontinued operations||$||0.02||$||3.16||$||0.12||$||0.80|
|Certain items per share||$||(0.19||)||$||(0.49||)||$||0.09||$||0.34|
Commenting on the results, Patrick Prevost, Cabot's President and CEO, said, "In 2012, we continued our transformation to a higher margin, specialty chemicals focused company, delivering adjusted EPS of $3.34 and a 16% Total Segment EBIT improvement. We delivered a record $508 million of adjusted EBITDA in fiscal 2012, despite a challenging economic environment. We achieved this performance with our ongoing focus on value pricing, operational efficiency and improvement in our product mix. We completed strategic capacity expansions in Reinforcement Materials, Performance Materials and Advanced Technologies and launched a number of innovative new products to the market. In addition, we transformed our portfolio of businesses with the acquisition of Norit, a global leader in purification solutions, and the divestiture of the tantalum business. We are well positioned for the future with an attractive group of leading businesses."
"As compared to the prior year, results in the fourth quarter continued to benefit from our ongoing value pricing initiatives and the utilization of our new fumed silica and specialty compounds capacity in China. We are pleased with the fourth quarter performance of Advanced Technologies, where we experienced strong results from our Specialty Fluids, Inkjet Colorants and Elastomer Composites businesses," Prevost said. "However, the macroeconomic environment impacted Reinforcement Materials with continued volume weakness across most geographies, except China."
For the fourth quarter of fiscal 2012, net income attributable to Cabot Corporation was $37 million ($0.58 per diluted common share), which includes a per share charge of $0.19, principally for restructuring, acquisition related expenses and tax related certain items. Adjusted EPS for the fourth quarter of fiscal 2012 was $0.75 per share.
Reinforcement Materials -- Fourth quarter fiscal 2012 EBIT in Reinforcement Materials increased by $3 million compared to the same quarter of fiscal 2011 as higher prices and lower manufacturing costs were partially offset by 5% lower volumes. Sequentially, EBIT decreased $18 million due to lower unit margins driven equally by the unfavorable impacts of high cost feedstock moving through our supply chain, additional sourcing costs from a raw material supply disruption and a more competitive environment in China. These unfavorable impacts were partially offset by 1% higher volumes. While the significant destocking we experienced through earlier quarters this fiscal year seems to be abating, underlying demand remains weak across most geographies, which is reflected in our volumes this quarter.
Global and regional volume changes for Reinforcement Materials for the fourth quarter of fiscal 2012 as compared to the same quarter of the prior year and the third quarter of fiscal 2012 are included in the table below:
Year over Year Change
|Europe, Middle East, Africa||(13%)||1%|
Performance Materials -- Fourth quarter fiscal 2012 EBIT in Performance Materials increased by $7 million compared to the fourth quarter of fiscal 2011. The increase was driven by higher volumes and lower manufacturing costs. Volumes in Fumed Metal Oxides increased 12% driven by growth in demand for electronics applications and higher sales from our new capacity in China, while Specialty Carbons and Compounds volumes increased 3%. Sequentially, Performance Materials EBIT decreased by $4 million, principally due to seasonally lower volumes in Specialty Carbons and Compounds, which decreased 11%. Volumes in Fumed Metal Oxides increased by 5% sequentially.
Advanced Technologies -- For the fourth quarter of fiscal 2012, EBIT in Advanced Technologies increased by $2 million compared to the fourth quarter of fiscal 2011. The EBIT increase resulted principally from higher volumes in our Inkjet Colorants and Elastomer Composites businesses. Sequentially, Advanced Technologies EBIT increased by $4 million principally due to higher volumes in our Aerogel business as well as favorable Inkjet Colorants product mix from strong demand in office and commercial printing applications.
Purification Solutions -- On July 31, 2012, we completed the acquisition of Norit N.V. Our results for the three and twelve month periods ended September 30, 2012 include two months of results for Norit, which is now called the Purification Solutions segment. For the fourth quarter of fiscal 2012, EBIT in Purification Solutions was $5 million.
Stand-alone Norit financial results, excluding purchase accounting impacts, for the three months ended September 30, 2012, resulted in adjusted EBITDA of $19 million, which is a decrease of $4 million compared to the fourth quarter of fiscal 2011. The decrease in adjusted EBITDA was driven by unfavorable product mix, higher maintenance costs and a 2% decrease in volumes from lower sales to the gas and air end markets partially offset by growth in other end markets. Sequentially, adjusted EBITDA declined $4 million as compared to the third quarter of fiscal 2012. The 7% increase in volumes was more than offset by the unfavorable impact of declining inventory levels and higher maintenance costs.
Cash Performance -- The Company ended the fourth quarter of fiscal 2012 with a cash balance of $120 million, a decrease of $287 million from the third quarter of fiscal 2012. The decrease was driven by the use of cash for the acquisition of Norit and $108 million of capital expenditures. These uses were partially offset by solid operating results and a decrease in net working capital. The Company ended the fourth quarter of fiscal 2012 with a debt balance of $1,419 million, an increase of $720 million from the third quarter of fiscal 2012, due to financing the Norit acquisition.
Taxes -- During the fourth quarter of fiscal 2012, the net tax provision recorded was zero, which included a benefit from tax certain items of $10 million. Excluding the impact of certain items, the operating tax rate on continuing operations for the fourth quarter of fiscal 2012 was 26%. Excluding the impact of certain items, the operating tax rate on continuing operations for fiscal 2012 was 25%.
Commenting on the outlook for the Company, Prevost said, "Due to the uncertainty in the global economy, we are cautious about the near-term as we expect demand to remain soft at least through calendar year 2012. Due to the non-discretionary nature of the products we sell, we anticipate demand to recover in 2013. With the investments we have made in efficient and geographically attractive capacity, we are well positioned to capture volume growth when demand recovers."
Prevost continued, "We are pleased with our fiscal year performance as we continue on our growth trajectory towards our adjusted EPS target of $4.90 to $5.00 in fiscal 2014. We have strengthened our overall competitive position through strategic capacity additions, value pricing and improved product mix initiatives, yield and energy efficiency investments and new product introductions. These actions combined with a return to a more stable macroeconomic environment give us confidence that we will achieve our adjusted EPS target."
The Company will host a conference call with industry analysts at 2 p.m. ET on Wednesday, October 31, 2012. The call can be accessed through Cabot's investor relations website at http://investor.cabot-corp.com.
About Cabot Corporation
Cabot Corporation (NYS: 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 colorantsand 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 at: http://www.cabotcorp.com.
Forward-Looking Statements -- This earnings release contains forward-looking statements based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including our ability to meet our long-term financial targets, strategy for growth, and demand for our products, including expectations for growth, are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. Forward-looking statements are based on our current expectations, assumptions, estimates and projections about Cabot's businesses and strategies, market trends and conditions, economic conditions and other factors. These statements are not guarantees of future performance and are subject to risks, uncertainties, potentially inaccurate assumptions, and other factors, some of which are beyond our control and difficult to predict. If known or unknown risks materialize, or should underlying assumptions prove inaccurate, our actual results could differ materially from past results and from those expressed in the forward-looking statement. Important factors that could cause our results to differ materially from those expressed in the forward-looking statements include, but are not limited to changes in raw material costs; lower than expected demand for our products; the loss of one or more of our important customers; our inability to complete capacity expansions as planned; the timing of implementation of environmental regulations; our failure to develop new products or to keep pace with technological developments; patent rights of others; the timely commercialization of products under development (which may be disrupted or delayed by technical difficulties, market acceptance, competitors' new products, as well as difficulties in moving from the experimental stage to the production stage); demand for our customers' products; competitors' reactions to market conditions; delays in the successful integration of structural changes, including acquisitions or joint ventures; the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries where we do business; and severe weather events that cause business interruptions, including plant and power outages or disruptions in supplier or customer operations. These factors are discussed more fully in the reports we file with the Securities and Exchange Commission, particularly our latest annual report on Form 10-K.
Explanation of Terms Used and Use of Non-GAAP Financial Measures -- The preceding discussion of our results and the accompanying financial tables report adjusted EPS, Total segment earnings before interest and taxes, "Total Segment EBIT", operating tax rate and EBITDA, which are non-GAAP financial measures. Our chief operating decision-maker uses these non-GAAP financial measures to evaluate the performance of the Company in terms of profitability. We believe that these measures also assist our investors in evaluating the changes in our results and the Company's performance.
In calculating adjusted EPS, we exclude from our net income per share from continuing operations certain items of expense and income that management does not consider representative of the Company's ongoing operations. Adjusted EPS should be considered as supplemental to, and not as a replacement for, EPS determined in accordance with GAAP. A reconciliation of adjusted EPS to EPS from continuing operations, the most directly comparable GAAP financial measure, and the certain items that are excluded from our calculation of adjusted EPS, are provided in the table titled "Certain Items and Reconciliation of Adjusted EPS."
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 term "operating tax rate" is a non-GAAP financial measure and represents the tax rate on our recurring operating results. This rate excludes discrete tax items, which are unusual or infrequent items that are excluded from the estimated annual effective tax rate and other tax items, including the impact of the timing of losses in certain jurisdictions, cumulative rate adjustment and the impact of certain items on both operating income and tax provision.
"Adjusted EBITDA" is a non-GAAP financial measure and refers to earnings before interest, taxes, depreciation and amortization, excluding items that management does not consider representative of the fundamental segment results.
|CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS|
|Periods ended September 30||Three Months||Twelve Months|
|Dollars in millions, except per share amounts (unaudited)|
|Net sales and other operating revenues||$||848||$||833||$||3,300||$||3,102|
|Cost of sales||690||692||2,651||2,544|
|Selling and administrative expenses||87||63||286||249|
|Research and technical expenses||19||17||73||66|
|Income from operations||52||61||290||243|
|Other income and (expense)|
|Interest and dividend income||1||—||4||2|
|Other (expense) income||(1||)||(4||)||(3||)||(3||)|
|Total other income and (expense)||(15||)||(14||)||(44||)||(40||)|
|Income from continuing operations before income taxes and equity in net|
|earnings of affiliated companies||37||47||246||203|
|Provision for income taxes||-||(2||)||(55||)||(6||)|
|Equity in net earnings of affiliated companies, net of tax||3||2||11||8|
|Income from continuing operations||40||47||202||205|
|Income from discontinued operations, net of tax (B)||1||8||205||53|
|Net income attributable to noncontrolling interests, net of tax||4||5||18||22|
|Net income attributable to Cabot Corporation||$||37||$||50||$||389||$||236|
|Diluted earnings per share of common stock|
|attributable to Cabot Corporation|
|Discontinued operations (B)||0.02||0.12||3.16||0.80||
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