Cabot Announces Fourth Quarter Operating Results EPS $0.23 versus
$0.40 and Fiscal Year EPS $1.82 versus $1.14 BOSTON, Oct. 27
/PRNewswire-FirstCall/ -- Cabot Corporation (CBT/NYSE) today
announced earnings of $15 million ($0.23 per diluted common share)
for the fourth quarter ended September 30, 2004, compared with $28
million ($0.40 per diluted common share) for the year ago quarter.
These results include $11 million ($0.16 per diluted common share)
of after tax charges from certain items and discontinued operations
in the fourth quarter ended September 30, 2004, compared with $2
million ($0.02 per diluted common share) of after tax income from
certain items and discontinued operations for the same quarter of
fiscal year 2003. For the fiscal year ended September 30, 2004, the
Company earned $124 million ($1.82 per diluted common share)
compared with $80 million ($1.14 per diluted common share) for the
prior year. The full year results included $14 million ($0.20 per
diluted common share) of after tax charges for certain items and
discontinued operations, compared with $47 million ($0.67 per
diluted common share) of after tax charges from certain items and
discontinued operations for the prior year. Included in the fourth
quarter and fiscal year 2004 certain items is a previously
announced impairment charge of approximately $12 million related to
the Company's investment in Sons of Gwalia. Additionally, the
Company recorded a tax charge of $4 million due to the uncertain
realization of a tax asset. This asset and the related impairment
charge of $21 million for Sons of Gwalia were previously recorded
in the third quarter of fiscal year 2003. With the charge taken in
the current quarter, the Company has now completely written off its
investment in Sons of Gwalia. Further details concerning charges
from certain items and discontinued operations, which are not
included in the business segment results discussed later in this
release, are included in Exhibit I to this press release. Kennett
F. Burnes, Cabot's Chairman and CEO, said, "We are pleased to
report strong earnings for the Company for fiscal year 2004 across
all businesses. These results were driven by the success of
numerous initiatives in both our core and developing businesses as
well as continued cost improvements and an improved economic
environment." Burnes continued, "The Chemical Business rebounded
from a difficult fiscal year 2003. Improved market conditions, new
contracts with existing customers and cost improvements led to
improved earnings in carbon black and fumed metal oxides. The
Supermetals Business was successful in recovering from the
expiration of the intermediate product portion of a customer
contract at the end of fiscal year 2003 and also succeeded in
extending contracts with two large customers. The Specialty Fluids
Business performed very well due to an increase in the number and
size of jobs completed during the year. We also achieved our
targeted cost savings across the Company resulting from our
"excellence" program which we began implementing last year to
improve our overall operating performance." Fourth Quarter
Comparisons Chemical Business -- For the quarter ended September
30, 2004, the Chemical Business segment had 9% volume growth and
reported a 55% increase in year over year segment profit, from $11
million in the fourth quarter of fiscal year 2003 to $17 million in
the fourth quarter of fiscal year 2004. Within the Chemical
Business segment, carbon black's profit was equal to the fourth
quarter last year. Volumes increased by 9% and costs were slightly
down. However, this was offset by the earnings impact of inventory
changes between periods. While the fiscal year 2003 quarterly
results included costs related to decreases in inventory levels, a
greater inventory decline and the related earnings impact occurred
in the current quarter. Sequentially, profit declined by $28
million due primarily to a combination of seasonal business
factors, including lower volumes and the cost of planned
maintenance shutdowns. The decline was also caused by reduced
margins resulting from increased raw material prices as well as the
impact of changes in inventory, as noted above. In the fourth
quarter, profits in Cabot's fumed metal oxides business were $6
million higher than the same quarter last year due mainly to volume
growth and improved product mix. Sequentially, although volumes
remained strong, profits were $2 million lower primarily due to
planned maintenance costs and the timing of other operating costs.
During the fourth quarter, the inkjet colorants business continued
to deliver strong growth in the OEM and after-market segments.
Sales volumes for this business were 56% higher in the fourth
quarter of fiscal 2004 than in the same quarter last year, and 10%
higher sequentially. Profits improved significantly compared to the
fourth quarter of fiscal 2003. Supermetals Business -- In the
fourth quarter of fiscal 2004, the Cabot Supermetals Business
earned $22 million of segment profit, which represents a $5 million
decrease in segment profit compared to the same period of 2003.
This decrease reflects lower sales of intermediate products offset
in part by higher volumes in other product areas. In addition, the
business sold a greater proportion of its capacitor products at
market prices rather than at fixed contract prices during the
quarter. Both operating and administrative costs improved compared
with the same period last year. Sequentially, segment profit was $4
million higher than the third quarter of 2004 mainly due to higher
volumes and lower operating costs offset partly by a shift in mix
toward greater market price sales. Specialty Fluids Business -- In
the fourth quarter of fiscal 2004, Cabot Specialty Fluids completed
nine jobs, most of which were begun in the third quarter. Segment
profit was $4 million more than in the fourth quarter of 2003 due
to the increased activity. Sequentially, segment profit was $5
million more than the prior quarter, reflecting the completion of a
greater number of jobs in the current quarter. Fiscal Year
Comparisons For the fiscal year ended September 30, 2004, Cabot
reported revenues of $1.934 billion compared to $1.795 billion for
2003. The year over year revenue increase was primarily due to
higher volumes in the Chemical Business and favorable translation
of foreign revenues, offset partially by lower sales of
intermediate products in Supermetals as well as unfavorable mix in
Chemicals and greater non-contracted volumes in the Supermetals
Businesses. In fiscal 2004, Cabot earned $124 million of net income
as compared to $80 million in 2003. The Chemical Business reported
a $44 million increase in segment profit, driven primarily by
higher volumes and lower operating costs offset partly by regional
and product mix which resulted in lower average pricing. In
addition, while fiscal year 2003 results benefited from the cost
impact of increased inventories during the year, this benefit
reversed in fiscal year 2004 as inventories declined. The
Supermetals Business profit decreased by $31 million due to the
absence of intermediate product sales partially offset by higher
sales of other products and lower operating costs. The Specialty
Fluids Business reported segment profit of $6 million, compared to
a loss of $2 million in the prior year, due to an increase in both
the number and size of wells using cesium formate during the year.
Outlook With respect to the future, Burnes said, "We view these
results as another solid step in our efforts to improve our
operating performance and we are encouraged by the outlook for
fiscal year 2005. In carbon black, we anticipate continued strong
volumes and we are working to manage our margins in the face of
high raw material costs. We are also executing our strategy of
geographic migration as many of our customers move their
manufacturing to emerging, lower cost regions. In fumed metal
oxides, we expect continued strong demand, with our plants running
at near capacity levels, and are pursuing our market development
and capacity expansion plans in China. In Supermetals we are
working to improve our cost competitiveness as sales transition
from fixed contract prices to market based prices. Concerning our
new businesses, in inkjet we continue to be very excited about the
strength of our chemically treated pigment technology and its
ability to enhance the quality and capability of inkjet printing.
This technology will require our continued investment in research
and development as well as manufacturing capability. In Specialty
Fluids we are focusing our efforts on being the drilling fluid of
choice in North Sea high pressure, high temperature wells and
expanding our presence in other geographic areas, including the
Gulf of Mexico and Saudi Arabia. We continue to invest cash and
intellectual resources to develop our aerogels business and new
business opportunities applying the SMP technology platforms and
core competencies. We are monitoring these activities closely and
are pleased with our continued progress in developing a robust new
product pipeline. Given all of this, I am very optimistic about the
long-term prospects for the Company." For those interested in more
detailed information on Cabot's Fourth Quarter and Fiscal Year 2004
results, please see the Supplemental Business Information available
today on the Company's website in the Investor Relations section:
http://w3.cabot-corp.com/earnings.cfm. Cabot Corporation is a
global specialty chemicals and materials company headquartered in
Boston, MA. Cabot's major products are carbon black, fumed silica,
inkjet colorants, capacitor materials, and cesium formate drilling
fluids. Forward-Looking Information: Included above are
forward-looking statements relating to management's expectations
regarding future profits, new business growth, the Company's
product development program and the possible achievement of the
Company's financial goals. Actual results may differ materially
from the results anticipated in the forward-looking statements
included in this press release due to a variety of factors,
including domestic and global economic conditions, such as market
supply and demand, prices and costs and availability of raw
materials; fluctuations in currency exchange rates; patent rights
of others; stock market conditions; the timely commercialization of
products under development by the Company (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); the Company's
ability to successfully manage acquisitions; demand for our
customers' products; competitors' reactions to market conditions;
the accuracy of the assumptions used by the Company in establishing
a reserve for its share of liability for respirator claims; and the
outcome of pending litigation and governmental investigations.
Other factors and risks are discussed in the Company's 2003 Annual
Report on Form 10-K. Contact: James P. Kelly Director, Investor
Relations (617) 342-6244 CABOT CORPORATION SUMMARY RESULTS BY
SEGMENTS Three Months Twelve Months Periods ended September 30
Dollars in millions, except per share amounts (unaudited) 2004 2003
2004 2003 SALES Chemical Business $398 $345 $1,546 $1,371
Supermetals Business 80 96 338 390 Specialty Fluids 13 5 27 15
Segment sales (A) 491 446 1,911 1,776 Unallocated and other (B) 5 5
23 19 Net sales and other operating revenues $496 $451 $1,934
$1,795 SEGMENT PROFIT (LOSS) Chemical Business $17 $11 $132 $88
Supermetals Business 22 27 77 108 Specialty Fluids 5 1 6 (2) Total
Segment Profit (C) 44 39 215 194 Interest expense (8) (7) (30) (28)
General unallocated income (expense) (D) (15) 2 (15) (67) Less:
Equity in net income of affiliated companies, net of tax (1) (2)
(6) (5) Income from continuing operations before income taxes 20 32
164 94 Provision for income taxes (5) (7) (39) (17) Equity in net
income of affiliated companies, net of tax 1 2 6 5 Minority
interest in net income, net of tax (2) (1) (9) (7) Net income from
continuing operations 14 26 122 75 Discontinued operations: Income
from operations of discontinued businesses, net of tax (E) 1 2 2 5
Net income 15 28 124 80 Dividends on preferred stock (1) (1) (3)
(3) Net income available to common shares $14 $27 $121 $77 Diluted
earnings per share of common stock Net income from continuing
operations $0.21 $0.38 $1.79 $1.08 Income from operations of
discontinued businesses (E) $0.02 $0.02 $0.03 $0.06 Net income
$0.23 $0.40 $1.82 $1.14 Weighted average common shares outstanding
Diluted (F) 68 70 68 70 (A) Segment sales for certain operating
segments within the Chemical Business include 100% of sales of one
equity affiliate and transfers of materials at cost and at
market-based prices. (B) Unallocated and other reflects an
elimination for sales of one equity affiliate offset by royalties
paid by equity affiliates and external shipping and handling costs.
(C) Segment profit is a measure used by Cabot's operating
decision-makers to measure consolidated operating results and
assess segment performance. Segment profit includes equity in net
income of affiliated companies, royalties paid by equity
affiliates, minority interest and allocated corporate costs. (D)
General unallocated income (expense) includes foreign currency
transaction gains (losses), interest income, dividend income, and
the certain items listed in Exhibit I. (E) Income related to
recoveries from discontinued businesses, net of tax. (F) Commencing
in Fiscal 2004, Cabot has adjusted its calculation of fully diluted
shares outstanding to reflect the number of shares the Company
could repurchase with the assumed proceeds from restricted stock
awards under the Company's Long Term Incentive Program. Prior
periods have not been adjusted because the adjustment would not
have been material. CABOT CORPORATION CONSOLIDATED STATEMENTS OF
OPERATIONS Three Months Twelve Months Periods ended September 30
Dollars in millions, except per share amounts (unaudited) 2004 2003
2004 2003 Net sales and other operating revenues $496 $451 $1,934
$1,795 Cost of sales 386 372 1,457 1,373 Gross profit $110 $79 $477
$422 Selling and administrative expenses 52 63 217 251 Research and
technical expenses 14 13 53 64 Income from operations $44 $3 $207
$107 Other income and expense Interest and dividend income 2 1 6 5
Interest expense (8) (7) (30) (28) Other income (expense) (18) 35
(19) 10 Total other income and expense (24) 29 (43) (13) Income
from continuing operations before income taxes 20 32 164 94
Provision for income taxes (5) (7) (39) (17) Equity in net income
of affiliated companies, net of tax 1 2 6 5 Minority interest in
net income, net of tax (2) (1) (9) (7) Net income from continuing
operations 14 26 122 75 Discontinued operations: Income from
operations of discontinued businesses, net of tax(A) 1 2 2 5 Net
income 15 28 124 80 Dividends on preferred stock (1) (1) (3) (3)
Net income available to common shares $14 $27 $121 $77 Diluted
earnings per share of common stock Net income from continuing
operations $0.21 $0.38 $1.79 $1.08 Income from operations of
discontinued businesses (A) $0.02 $0.02 $0.03 $0.06 Net income
$0.23 $0.40 $1.82 $1.14 Weighted average common shares outstanding
Diluted(B) 68 70 68 70 (A) Income related to recoveries from
discontinued businesses, net of tax. (B) Commencing in Fiscal 2004,
Cabot has adjusted its calculation of fully diluted shares
outstanding to reflect the number of shares the Company could
repurchase with the assumed proceeds from restricted stock awards
under the Company's Long Term Incentive Program. Prior periods have
not been adjusted because the adjustment would not have been
material. CABOT CORPORATION CONDENSED CONSOLIDATED FINANCIAL
POSITION September 30, September 30, 2004 2003 In millions
(unaudited) Current assets $1,173 $1,111 Net property, plant and
equipment 918 913 Other non-current assets 335 284 Total assets
$2,426 $2,308 Current liabilities $342 $352 Non-current liabilities
893 877 Stockholders' equity 1,191 1,079 Total liabilities and
stockholders' equity $2,426 $2,308 Working capital $831 $759 CABOT
CORPORATION Fiscal 2003 In millions, except per share amounts
(unaudited) Dec. Q. Mar. Q. June Q. Sept. Q. FY Sales Chemical
Business $309 $352 $366 $345 $1,371 Supermetals Business 96 107 92
96 390 Specialty Fluids 2 3 6 5 15 Segment Sales (A) 407 462 464
446 1,776 Unallocated and other (B) 3 4 4 5 19 Net sales and other
operating revenues $410 $466 $468 $451 $1,795 Segment Profit (Loss)
Chemical Business $24 $23 $30 $11 $88 Supermetals Business 32 36 14
27 108 Specialty Fluids (1) (1) (1) 1 (2) Total segment profit
(loss) (C) 55 58 43 39 194 Income (Loss) Available to Common Shares
Interest expense (7) (7) (7) (7) (28) General unallocated income
(expense) (D) (2) (20) (48) 2 (67) Less: Equity in net income of
affiliated companies, net of tax (1) (1) (2) (2) (5) Income (Loss)
from Continuing Operations before income taxes 45 30 (14) 32 94
(Provision) benefit for income taxes (11) (6) 6 (7) (17) Equity in
net income of affiliated companies, net of tax 1 1 2 2 5 Minority
interest in net income, net of tax (2) (2) (2) (1) (7) Income
(Loss) from Continuing Operations 33 23 (8) 26 75 Discontinued
Operations Income (Loss) from Operations of Discontinued
Businesses, net of income taxes (E) - - 3 2 5 Net income (loss) 33
23 (5) 28 80 Dividends on preferred stock (1) (1) - (1) (3) Net
income (loss) available to common shares $32 $22 ($5) $27 $77
Income (Loss) per common share Net income (loss) from Continuing
Operations $0.48 $0.33 $(0.14) $0.38 $1.08 Income (Loss) from
Operations of Discontinued Businesses (E) (F) - - 0.05 0.02 0.06
Total $0.48 $0.33 $(0.09) $0.40 $1.14 Weighted average common
shares outstanding Diluted (G) 70 70 59 70 70 CABOT CORPORATION
Fiscal 2004 In millions, except per share amounts (unaudited) Dec.
Q. Mar. Q. June Q. Sept. Q. FY Sales Chemical Business $351 $399
$398 $398 $1,546 Supermetals Business 87 85 86 80 338 Specialty
Fluids 1 9 4 13 27 Segment Sales (A) 439 493 488 491 1,911
Unallocated and other (B) 7 7 4 5 23 Net sales and other operating
revenues $446 $500 $492 $496 $1,934 Segment Profit (Loss) Chemical
Business $27 $43 $45 $17 $132 Supermetals Business 21 16 18 22 77
Specialty Fluids (2) 3 - 5 6 Total segment profit (loss) (C) 46 62
63 44 215 Income (Loss) Available to Common Shares Interest expense
(7) (7) (8) (8) (30) General unallocated income (expense) (D) - (3)
2 (15) (15) Less: Equity in net income of affiliated companies, net
of tax (2) (1) (2) (1) (6) Income (Loss) from Continuing Operations
before income taxes 37 51 55 20 164 (Provision) benefit for income
taxes (8) (13) (13) (5) (39) Equity in net income of affiliated
companies, net of tax 2 1 2 1 6 Minority interest in net income,
net of tax (1) (3) (3) (2) (9) Income (Loss) from Continuing
Operations 30 36 41 14 122 Discontinued Operations Income (Loss)
from Operations of Discontinued Businesses, net of income taxes (E)
(1) 1 1 1 2 Net income (loss) 29 37 42 15 124 Dividends on
preferred stock (1) (1) - (1) (3) Net income (loss) available to
common shares $28 $36 $42 $14 $121 Income (Loss) per common share
Net income (loss) from Continuing Operations $0.43 $0.53 $0.61
$0.21 $1.79 Income (Loss) from Operations of Discontinued
Businesses (E) (F) (0.01) 0.01 0.01 0.02 0.03 Total $0.42 $0.54
$0.62 $0.23 $1.82 Weighted average common shares outstanding
Diluted (G) 68 69 69 68 68 (A) Segment sales for certain operating
segments within the Chemical Business include 100% of sales of one
equity affiliate and transfers of materials at cost and at
market-based prices. (B) Unallocated and other reflects an
elimination for sales for one equity affiliate offset by royalties
paid by equity affiliates and external shipping and handling costs.
(C) Segment profit is a measure used by Cabot's operating
decision-makers to measure consolidated operating results and
assess segment performance. Segment profit includes equity in net
income of affiliated companies, royalties paid by equity
affiliates, minority interest and allocated corporate costs. (D)
General unallocated income (expense) includes foreign currency
transaction gains (losses), interest income, dividend income and
certain items. (E) Additional income in Fiscal 2003, Q3 2004, and
Q4 2004 related to recoveries from discontinued businesses, net of
tax. (F) Amounts in Q1 2004 and Q2 2004 relate to litigation
associated with a previously divested business, net of tax. (G)
Commencing in Fiscal 2004, Cabot has adjusted its calculation of
fully diluted shares outstanding to reflect the number of shares
the Company could repurchase with the assumed proceeds from
restricted stock awards under the Company's Long Term Incentive
Program. Prior periods have not been adjusted because the
adjustment would not have been material. CABOT CORPORATION CERTAIN
ITEMS - Exhibit I Periods ended September 30 Three Months Dollars
in millions, except per share amounts (unaudited) 2004 2004 2003
2003 $ per share $ per share Certain items before income taxes
Investment impairment charges $(12) $(0.17) $- $- Reserve for
respirator claims 2 0.02 - - Restructuring initiatives (2) (0.02)
(33) (0.36) Insurance recoveries - - 2 0.02 In-process research and
development - - - - Asset impairment charges - - (4) (0.04) Sale of
equity interest - - 35 0.38 Other non-operating items (1) (0.01) -
- Total certain items (13) (0.18) - 0.00 Discontinued operations 1
0.02 3 0.02 Total certain items and discontinued operations pre-tax
(12) (0.16) 3 0.02 Total certain items and discontinued operations
after tax $(11) $(0.16) $2 $0.02 Periods ended September 30 Twelve
Months Dollars in millions, except per share amounts (unaudited)
2004 2004 2003 2003 $ per share $ per share Certain items before
income taxes Investment impairment charges $(12) $(0.17) $(22)
$(0.21) Reserve for respirator claims 2 0.02 (20) (0.22)
Restructuring initiatives (6) (0.06) (51) (0.55) Insurance
recoveries - - 4 0.04 In-process research and development - - (14)
(0.13) Asset impairment charges - - (4) (0.04) Sale of equity
interest - - 35 0.38 Other non-operating items (2) (0.02) - - Total
certain items (18) (0.23) (72) (0.73) Discontinued operations 2
0.03 7 0.06 Total certain items and discontinued operations pre-tax
(16) (0.20) (65) (0.67) Total certain items and discontinued
operations after tax $(14) $(0.20) $(47) $(0.67) Periods ended
September 30 Three Months Twelve Months Dollars in millions, except
per share amounts (unaudited) 2004 2003 2004 2003 Statement of
Operations Line Item Cost of sales (2) (29) (5) (40) Selling and
administrative expenses 3 (5) 2 (31) Research and technical service
- (1) - (14) Other (charges) income (14) 35 (15) 13 Total certain
items (13) - (18) (72) DATASOURCE: Cabot Corporation CONTACT: James
P. Kelly, Director, Investor Relations of Cabot Corporation,
+1-617-342-6244 Web site: http://www.cabot-corp.com/
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