Diluted earnings per share (“EPS”) of $1.43 and
Adjusted EPS of $1.42
Cabot Corporation (NYSE: CBT) today announced results for its
third quarter of fiscal year 2023.
Key Highlights
- Third quarter Diluted EPS of $1.43; Adjusted EPS of
$1.42
- Record Reinforcement Materials segment EBIT in the third
fiscal quarter of $132 million, up 17% year-over-year
- Strong Cash Flows from Operations of $243 million supported
return of $38 million in the quarter to shareholders through
dividends and share repurchases
- Liquidity remains strong at approximately $1.3 billion; Net
Debt to EBITDA of 1.7 times as of June 30, 2023
- Year to date effective and operating tax rate increased from
25% to 28%; third quarter impact of $0.17 on adjusted EPS
(In millions, except per share
amounts)
Three Months Ended
Nine Months Ended
6/30/23
6/30/22
6/30/23
6/30/22
Net sales and other operating revenues
$
968
$
1,149
$
2,966
$
3,209
Net income (loss) attributable to Cabot
Corporation
$
82
$
97
$
211
$
115
Net earnings (loss) per share attributable
to Cabot Corporation
$
1.43
$
1.69
$
3.65
$
1.99
Less: Certain items after tax per
share
$
0.01
$
(0.04
)
$
(0.08
)
$
(2.75
)
Adjusted EPS
$
1.42
$
1.73
$
3.73
$
4.74
Sean Keohane, Cabot President and Chief Executive Officer,
commented on the quarter: “Despite a weak demand environment and an
increase in our operating tax rate, adjusted EPS was up 7%
sequentially in the third quarter. Reinforcement Materials
delivered record EBIT of $132 million driven by year-over-year
improvement in pricing and product mix from our calendar year 2023
customer agreements, despite volume declines across all regions. As
we communicated in June, the market environment remained
challenging for Performance Chemicals during the quarter as demand
across all product lines, excluding battery materials, continued to
be weak and the pace of recovery in China remained slow.”
Keohane continued, “During the third quarter, we delivered
strong operating cash flow of $243 million and we returned cash to
our shareholders with $23 million of dividends and $15 million of
share repurchases. Our balance sheet remains solid with Net Debt to
EBITDA at 1.7x and liquidity of $1.3 billion.”
Financial Detail
For the third quarter of fiscal 2023, net income attributable to
Cabot Corporation was $82 million ($1.43 per diluted common share).
Net income reflects an after-tax per share benefit from certain
items of $0.01. Adjusted EPS for the third quarter of fiscal 2023
was $1.42 per share.
Segment Results
Reinforcement Materials – Third quarter fiscal 2023 EBIT
in Reinforcement Materials increased by $19 million compared to the
third quarter of fiscal 2022. The increase in EBIT was principally
driven by improved unit margins from better pricing and product mix
in our calendar year 2023 customer agreements, partially offset by
lower volumes. Lower volumes were experienced across all regions
driven by lower replacement tire demand.
Global and regional volume changes for Reinforcement Materials
for the third quarter of fiscal 2023 as compared to the same
quarter of the prior year are set forth in the table below:
Third Quarter
Year-over-Year Change
Global Reinforcement Materials
Volumes
(8%)
Asia
(5%)
Europe, Middle East, Africa
(12%)
Americas
(10%)
Performance Chemicals – Third quarter fiscal 2023 EBIT in
Performance Chemicals decreased by $31 million compared to the
third quarter of fiscal 2022 primarily due to a decrease in volumes
and a less favorable product mix in our specialty carbons and
battery materials product lines. Lower volumes were driven by
continued softness in key end markets, with the most significant
volume decline in our fumed metal oxides product line. While
overall segment volumes declined 9% year-over-year, we delivered
50% volume growth in products sold to battery materials
applications.
Cash Performance – The Company ended the third
quarter of fiscal 2023 with a cash balance of $220 million. During
the third quarter of fiscal 2023, cash flows from operating
activities were a source of $243 million. Capital expenditures for
the third quarter of fiscal 2023 were $80 million. Additional uses
of cash during the third quarter included $23 million for the
payment of dividends and $15 million for share repurchases.
Taxes – During the third quarter of fiscal 2023, the
Company recorded a tax expense of $41 million, with an effective
tax rate of 32%. The operating tax rate for the third quarter of
2023 was 33%, which reflected non-GAAP tax adjustments of $2
million, and included a catch-up of expense for the first half of
the fiscal year. The effective and operating tax rate for the nine
months ended June 30, 2023 was 28% and our expectation for the
operating tax rate for fiscal year 2023 is now between 27% and 29%
The increase in our expected operating tax rate was driven by a
change in the geographic mix of earnings anticipated for fiscal
year 2023.
Outlook
Commenting on the fourth quarter and fiscal year outlook for the
Company, Keohane said, “While volumes in Reinforcement Materials
are expected to remain relatively consistent sequentially except
for some seasonal decline in Europe, we continue to expect strong
year over year EBIT growth driven by the pricing and product mix
benefits in our calendar year 2023 customer agreements. In the
Performance Chemicals segment, we anticipate relatively stable
volumes sequentially across the larger product lines and moderate,
sequential volume improvement in our battery materials and inkjet
growth vectors. We anticipate pricing pressures in the EV value
chain in China will impact battery materials results in the
near-term and expect EBITDA results in fiscal 2023 to be below our
previously communicated forecast range. Overall for the company, we
expect adjusted earnings per share for the fourth fiscal quarter to
be in the range of $1.40 to $1.55, which would bring our full year
range between $5.13 to $5.28. ”
Keohane continued, “Despite the challenges brought on by the
weak macro-economic environment, we are delivering strong operating
cash flow and remain focused on reducing costs and driving
disciplined commercial execution. While the current economic
environment is weaker than we expected at the beginning of our
fiscal year, I am pleased with how the Cabot team is responding to
this challenging environment and I believe the expected fourth
quarter adjusted earnings per share exit rate range will set us up
well as we look to fiscal 2024.”
Earnings Call
The Company will host a conference call with industry analysts
at 8:00 a.m. Eastern time on Tuesday, August 8, 2023. The call can
be accessed through Cabot’s investor relations website at
http://investor.cabot-corp.com
About Cabot Corporation
Cabot Corporation (NYSE: CBT) is a global specialty chemicals
and performance materials company headquartered in Boston,
Massachusetts. The company is a leading provider of reinforcing
carbons, specialty carbons, battery materials, engineered elastomer
composites, inkjet colorants, masterbatches and conductive
compounds, fumed metal oxides and aerogel. For more information on
Cabot, please visit the company’s website at cabotcorp.com. The
Company regularly posts important information on its website and
encourages investors and potential investors to consult the Cabot
website regularly.
Forward-Looking Statements – This earnings release
contains forward-looking statements. All statements that address
expectations or projections about the future, including with
respect to our expectations for our performance in fourth quarter
of fiscal year 2023, including our expectations for adjusted
earnings per share for the fiscal year 2023, our expectations for
volumes across our business in the fourth quarter of fiscal year
2023, and our expected operating tax rate for fiscal 2023, 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,
disruption to our operations from the COVID-19 pandemic, industry
capacity utilization and competition from other specialty chemical
companies; safety, health and environmental requirements and
related constraints imposed on our business; regulatory and
financial risks related to climate change developments; volatility
in the price and availability of energy and raw materials,
including with respect to the Russian invasion of Ukraine; a
significant adverse change in a customer relationship or the
failure of a customer to perform its obligations under agreements
with us; failure to achieve growth expectations from new products,
applications and technology developments; failure to realize
benefits from acquisitions, alliances, or joint ventures or achieve
our portfolio management objectives; unanticipated delays in, or
increased cost of site development projects; negative or uncertain
worldwide or regional economic conditions and market opportunities,
including from trade relations, global health matters or
geo-political conflicts; litigation or legal proceedings; tax rates
and fluctuations in foreign currency exchange and interest rates;
and the accuracy of the assumptions we used in establishing
reserves for our share of liability for respirator claims. These
factors are discussed more fully in the reports we file with the
Securities and Exchange Commission (“SEC”), particularly under the
heading “Risk Factors” in our annual report on Form 10-K for our
fiscal year ended September 30, 2022, filed with the SEC at
www.sec.gov. We assume no obligation to provide revisions to any
forward-looking statements should circumstances change, except as
otherwise required by securities and other applicable laws.
Use of Non-GAAP Financial Measures
To supplement Cabot’s consolidated financial statements
presented on a generally accepted accounting principle (“GAAP”)
basis, the preceding discussion of our results and the accompanying
financial tables report Adjusted EPS, Total Segment EBIT, Total
Segment EBITDA, Adjusted EBITDA, our operating tax rate, Free Cash
Flow and Discretionary Free Cash Flow, all of which are non-GAAP
financial measures. These non-GAAP financial measures are not
computed in accordance with, or as an alternative to, GAAP, and the
definitions of these measures may not be comparable to those used
by other companies. Reconciliations of Adjusted EPS to net income
(loss) per share attributable to Cabot Corporation, the most
directly comparable GAAP financial measure, Total Segment EBIT,
Total Segment EBITDA, and Adjusted EBITDA to income (loss) from
continuing operations before income taxes and equity in earnings of
affiliated companies, the most directly comparable GAAP financial
measure of each such non-GAAP measure, operating tax rate to
effective tax rate, the most directly comparable GAAP financial
measure and Free Cash Flow and Discretionary Free Cash Flow to Cash
flow from operating activities, the most directly comparable GAAP
financial measure, are provided in the tables titled “Cabot
Corporation Certain Items and Reconciliation of Adjusted EPS and
Operating Tax Rate” and “Cabot Corporation Reconciliation of
Non-GAAP Financial Measures.”
Management believes these non-GAAP measures provide investors
with greater transparency to the information used by Cabot
management in its financial and operational decision-making, allow
investors to see Cabot’s results through the eyes of management,
and better enable Cabot’s investors to understand Cabot’s operating
performance and financial condition. In addition, adjusted EPS and
Discretionary Free Cash Flow are two of the financial measures used
to determine payouts under the Company’s executive incentive
compensation awards.
Adjusted EPS. In calculating Adjusted EPS, we exclude
from our net income (loss) attributable to Cabot Corporation items
of expense and income that management does not consider
representative of the Company’s business operations. 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 an evaluation of the Company’s
operating performance without the impact of these costs or
benefits.
The items of income and expense that we exclude from our
calculations of Adjusted EPS but that are included in our GAAP net
income (loss) per share, as applicable in a particular reporting
period, include, but are not limited to, the following:
- Asset impairment charges, which primarily include charges
associated with an impairment of goodwill, other long-lived assets
or assets held for sale.
- Charges related to the divestiture of our Purification
Solutions business, which include accelerated costs associated with
the change in control and employee incentive compensation.
- 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.
- 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.
- Acquisition and integration-related charges, which include
transaction costs, redundant costs incurred during the period of
integration, and costs associated with transitioning certain
management and business processes to Cabot’s processes.
- Gains (losses) on sale of a business.
- Gain associated with the bargain purchase of a business.
- Gains realized on the sale of land.
Cabot does not provide an expected GAAP EPS range or
reconciliation of the Adjusted EPS range with an expected GAAP EPS
range because, without unreasonable effort, we are unable to
predict with reasonable certainty the matters we would allocate to
“certain items,” including unusual gains and losses, costs
associated with future restructurings, acquisition-related expenses
and litigation outcomes. These items are uncertain, depend on
various factors, and could have a material impact on GAAP EPS in
future periods.
Total Segment EBIT. Total segment EBIT reflects the sum
of EBIT from our two reportable segments. In calculating Total
segment EBIT we exclude from our income (loss) from continuing
operations before income taxes and equity in earnings of affiliated
companies, certain items and items that, because they are not
controlled by the business segments and primarily benefit corporate
objectives, are not allocated to our business segments, such as
interest expense and other corporate costs, which include
unallocated corporate overhead expenses such as certain corporate
salaries and headquarter expenses, plus costs related to corporate
projects and initiatives.
Total Segment EBITDA. Total Segment EBITDA is equal to
Total Segment EBIT (as defined above), but further adjusted for
depreciation and amortization.
Adjusted EBITDA. Adjusted EBITDA reflects Total Segment
EBITDA and is further adjusted for unallocated corporate costs,
which include unallocated corporate overhead expenses such as
certain corporate salaries and headquarter expenses, plus costs
related to corporate projects and initiatives.
Free Cash Flow. To calculate “Free Cash Flow” we deduct
Additions to property, plant and equipment from cash flow from
operating activities.
Discretionary Free Cash Flow. To calculate “Discretionary
Free Cash Flow” we deduct sustaining and compliance capital
expenditures and changes in Net Working Capital from cash flow from
operating activities.
Operating Tax Rate. Our “operating tax rate” is
calculated based upon management's forecast of the annual operating
tax rate for the fiscal year applied to adjusted pre-tax earnings.
The operating tax rate excludes income tax (expense) benefit on
certain items, discrete tax items and, on a quarterly basis the
timing of losses in certain jurisdictions. The income tax (expense)
benefit on certain items is determined using the applicable rates
in the taxing jurisdictions in which the certain items occurred and
includes both current and deferred income tax (expense) benefit
based on the nature of the certain items. Discrete tax items
include, but are not limited to, changes in valuation allowance,
uncertain tax positions, and other tax items, such as the tax
impact of legislative changes. Management believes that this
non-GAAP financial measure is useful supplemental information
because it helps our investors compare our tax rate year to year on
a consistent basis and to understand what our tax rate on current
operations would be without the impact of these items.
Cabot does not provide a forward-looking reconciliation of the
operating tax rate range with an effective tax rate range because,
without unreasonable effort, we are unable to predict with
reasonable certainty the matters we would allocate to “certain
items,” including unusual gains and losses, costs associated with
future restructurings, acquisition-related expenses and litigation
outcomes. These items are uncertain, depend on various factors, and
could have a material impact on the effective tax rate in future
periods.
Explanation of Terms Used
Product Mix. The term “product mix” refers to the mix of
types and grade of products sold or the mix of geographic regions
where products are sold, and the positive or negative impact this
has on the revenue or profitability of the business or segment.
Net Working Capital. The term “net working capital”
includes accounts receivable, inventory and accounts payable and
accrued expenses.
Third Quarter Earnings Announcement, Fiscal 2023
CABOT CORPORATION CONSOLIDATED STATEMENTS OF
OPERATIONS Periods ended June 30
Three Months
Nine Months
Dollars in millions, except per share amounts (unaudited)
2023
2022
2023
2022
Net sales and other operating revenues
$
968
$
1,149
$
2,966
$
3,209
Cost of sales
745
914
2,352
2,544
Gross profit
223
235
614
665
Selling and administrative expenses
58
51
184
196
Research and technical expenses
15
14
43
41
Loss on sale of business and asset impairment charge
—
2
3
206
Gain on bargain purchase of a business
—
—
—
(24
)
Income (loss) from operations
150
168
384
246
Other income (expense) Interest and dividend income
7
—
22
7
Interest expense
(24
)
(15
)
(69
)
(38
)
Other income (expense)
(3
)
(1
)
(13
)
(9
)
Total other income (expense)
(20
)
(16
)
(60
)
(40
)
Income (loss) before income taxes and equity in earnings
of affiliated companies
130
152
324
206
(Provision) benefit for income taxes
(41
)
(49
)
(90
)
(73
)
Equity in earnings of affiliated companies, net of tax
1
3
4
7
Net income (loss)
90
106
238
140
Net income (loss) attributable to noncontrolling interests
8
9
27
25
Net income (loss) attributable to Cabot Corporation
$
82
$
97
$
211
$
115
Diluted earnings (loss) per share of common stock
attributable to Cabot Corporation
$
1.43
$
1.69
$
3.65
$
1.99
Diluted weighted average common shares outstanding
56.5
56.8
56.7
56.9
Third Quarter Earnings Announcement, Fiscal 2023 CABOT
CORPORATION SUMMARY RESULTS BY SEGMENT Periods ended June 30
Three Months
Nine Months
Dollars in millions, except per share amounts (unaudited)
2023
2022
2023
2022
Sales (A) Reinforcement Materials
$
624
$
730
$
1,939
$
1,947
Performance Chemicals
307
376
919
1,045
Purification Solutions
—
—
—
97
Segment sales
931
1,106
2,858
3,089
Unallocated and other (B)
37
43
108
120
Net sales and other operating revenues
$
968
$
1,149
$
2,966
$
3,209
Segment Earnings Before Interest and Taxes (C)
Reinforcement Materials
$
132
$
113
$
348
$
299
Performance Chemicals
32
63
89
185
Purification Solutions
—
—
—
—
Total Segment Earnings Before Interest and Taxes
164
176
437
484
Unallocated and Other Interest expense
(24
)
(15
)
(69
)
(38
)
Certain items (D)
(1
)
12
(7
)
(185
)
Unallocated corporate costs
(11
)
(15
)
(42
)
(45
)
General unallocated income (expense) (E)
3
(3
)
9
(3
)
Less: Equity in earnings of affiliated companies
1
3
4
7
Income (loss) before income taxes and equity inearnings of
affiliated companies
130
152
324
206
(Provision) benefit for income taxes (including tax certain items)
(41
)
(49
)
(90
)
(73
)
Equity in earnings of affiliated companies
1
3
4
7
Net income (loss)
90
106
238
140
Net income (loss) attributable to noncontrolling interests
8
9
27
25
Net income (loss) attributable to Cabot Corporation
$
82
$
97
$
211
$
115
Diluted earnings (loss) per share of common
stockattributable to Cabot Corporation
$
1.43
$
1.69
$
3.65
$
1.99
Adjusted earnings (loss) per share (F)
$
1.42
$
1.73
$
3.73
$
4.74
Diluted weighted average common shares outstanding
56.5
56.8
56.7
56.9
(A) Beginning in fiscal 2023, the Company began allocating energy
center revenue to the applicable segment’s Sales. The Company
recast prior period financial information to conform to the new
presentation. The allocation of such revenue resulted in an
increase of $23 million and $72 million in the Reinforcement
Materials segment and $4 million and $11 million in the Performance
Chemicals segment, with an offsetting decrease in Unallocated and
Other revenue for the three months and nine months ended June 30,
2022, respectively. There was no impact to the consolidated total
Net sales and other operating revenues. (B) Unallocated and
other reflects royalties, other by-product revenue, external
shipping and handling fees, the impact of the corporate adjustment
for unearned revenue, and discounting charges for certain Notes
receivable. (C) 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. (D) Details of
Certain items are presented in the Certain Items and Reconciliation
of Adjusted EPS and Operating Tax Rate table. (E) General
unallocated income (expense) consists of gains (losses) arising
from foreign currency transactions, net of other foreign currency
risk management activities, Interest and dividend income, the
profit or loss related to the corporate adjustment for unearned
revenue, and unrealized holding gains (losses) for investments.
(F) 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.
Third Quarter Earnings Announcement, Fiscal 2023
CABOT CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
June 30,
September 30,
Dollars in millions (unaudited)
2023
2022
Current assets: Cash and cash equivalents
$
220
$
206
Accounts and notes receivable, net of reserve for doubtful accounts
of $2 and $3
688
836
Inventories: Raw materials
152
182
Work in process
1
—
Finished goods
370
427
Other
69
55
Total inventories
592
664
Prepaid expenses and other current assets
102
114
Total current assets
1,602
1,820
Property, plant and equipment, net
1,364
1,270
Goodwill
136
129
Equity affiliates
19
20
Intangible assets, net
63
63
Deferred income taxes
36
45
Other assets
167
178
Total assets
$
3,387
$
3,525
Third Quarter Earnings Announcement, Fiscal 2023
CABOT CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
June 30,
September 30,
Dollars in millions, except share and per share amounts (unaudited)
2023
2022
Current liabilities: Short-term borrowings
$
136
$
347
Accounts payable and accrued liabilities
568
707
Income taxes payable
27
44
Current portion of long-term debt
7
7
Total current liabilities
738
1,105
Long-term debt
1,093
1,089
Deferred income taxes
60
65
Other liabilities
230
234
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 valueIssued:
56,072,816 and 56,385,963 sharesOutstanding: 55,936,984 and
56,248,559 shares
56
56
Less cost of 135,832 and 137,404 shares of common treasury stock
(3
)
(4
)
Additional paid-in capital
—
1
Retained earnings
1,407
1,284
Accumulated other comprehensive income (loss)
(329
)
(439
)
Total Cabot Corporation stockholders' equity
1,131
898
Noncontrolling interests
135
134
Total stockholders' equity
1,266
1,032
Total liabilities and stockholders' equity
$
3,387
$
3,525
Third Quarter Earnings Announcement, Fiscal 2023
CABOT CORPORATION QUARTERLY RESULTS BY SEGMENT
Fiscal 2022 Fiscal 2023 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
(A) Reinforcement Materials
$
563
$
654
$
730
$
726
$
2,673
$
643
$
672
$
624
$ ―
$
1,939
Performance Chemicals
306
363
376
343
1,388
286
326
307
—
919
Purification Solutions
61
36
—
—
97
—
—
—
—
—
Segment sales
930
1,053
1,106
1,069
4,158
929
998
931
—
2,858
Unallocated and other (B)
38
39
43
43
163
36
35
37
—
108
Net sales and other operating revenues
$
968
$
1,092
$
1,149
$
1,112
$
4,321
$
965
$
1,033
$
968
$ ―
$
2,966
Segment Earnings Before Interest and Taxes (C)
Reinforcement Materials
$
85
$
101
$
113
$
109
$
408
$
94
$
122
$
132
$ ―
$
348
Performance Chemicals
52
70
63
49
234
29
28
32
—
89
Purification Solutions
—
—
—
—
—
—
—
—
—
—
Total Segment Earnings Before Interest and Taxes
137
171
176
158
642
123
150
164
—
437
Unallocated and Other Interest expense
(12
)
(11
)
(15
)
(18
)
(56
)
(22
)
(23
)
(24
)
—
(69
)
Certain items (D)
(204
)
7
12
2
(183
)
(4
)
(2
)
(1
)
—
(7
)
Unallocated corporate costs
(14
)
(16
)
(15
)
(14
)
(59
)
(15
)
(16
)
(11
)
—
(42
)
General unallocated income (expense) (E)
1
(1
)
(3
)
4
1
4
2
3
—
9
Less: Equity in earnings of affiliated companies
1
3
3
3
10
2
1
1
—
4
Income (loss) before income taxes and equity in earnings of
affiliated companies
(93
)
147
152
129
335
84
110
130
—
324
(Provision) benefit for income taxes (including tax certain items)
12
(36
)
(49
)
(29
)
(102
)
(20
)
(29
)
(41
)
—
(90
)
Equity in earnings of affiliated companies
1
3
3
3
10
2
1
1
—
4
Net income (loss)
(80
)
114
106
103
243
66
82
90
—
238
Net income (loss) attributable to noncontrolling interests
9
7
9
9
34
12
7
8
—
27
Net income (loss) attributable to Cabot Corporation
$
(89
)
$
107
$
97
$
94
$
209
$
54
$
75
$
82
$ ―
$
211
Diluted earnings (loss) per share of common stock
attributable to Cabot Corporation
$
(1.57
)
$
1.84
$
1.69
$
1.64
$
3.62
$
0.93
$
1.29
$
1.43
$
—
$
3.65
Adjusted earnings (loss) per share (F)
$
1.29
$
1.69
$
1.73
$
1.55
$
6.28
$
0.98
$
1.33
$
1.42
$
—
$
3.73
Diluted weighted average common shares outstanding
56.8
57.1
56.8
56.8
56.9
56.7
56.8
56.5
$
—
56.7
(A) Beginning in the fiscal year 2023, the Company began allocating
energy center revenue to the applicable segment’s Sales. The
Company recast prior period financial information to conform to the
new presentation. (B) Unallocated and other reflects
royalties, other by-product revenue, external shipping and handling
fees, the impact of the corporate adjustment for unearned revenue,
and discounting charges for certain Notes receivable. (C)
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. (D) Details of certain items are
presented in the Certain Items and Reconciliation of Adjusted EPS
and Operating Tax Rate table. (E) General unallocated income
(expense) consists of gains (losses) arising from foreign currency
transactions, net of other foreign currency risk management
activities, Interest and dividend income, the profit or loss
related to the corporate adjustment for unearned revenue, and
unrealized holding gains (losses) for investments. (F)
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.
Third Quarter Earnings Announcement, Fiscal 2023
CABOT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS Periods ended June 30
Three Months
Nine Months
Dollars in millions (unaudited)
2023
2022
2023
2022
Cash Flows from Operating Activities: Net income
(loss)
$
90
$
106
$
238
$
140
Adjustments to reconcile net income to cash provided by operating
activities: Depreciation and amortization
36
36
107
111
Other non-cash charges (gains), net
8
1
14
151
Cash dividends received from
equity affiliates
—
1
2
1
Changes in assets and liabilities: Changes in certain working
capital items (A)
71
(136
)
96
(390
)
Changes in other assets and liabilities, net
38
26
—
(18
)
Cash provided by (used in) operating activities
243
34
457
(5
)
Cash Flows from Investing Activities: Additions to
property, plant and equipment
(80
)
(50
)
(166
)
(121
)
Proceeds from sale of business
—
—
6
79
Cash paid for acquisition of business
—
(14
)
—
(9
)
Other investing activities, net
5
18
21
20
Cash provided by (used in) investing activities
(75
)
(46
)
(139
)
(31
)
Cash Flows from Financing Activities: Change in debt,
net
(123
)
83
(221
)
256
Cash dividends paid to common stockholders
(23
)
(21
)
(65
)
(63
)
Other financing activities, net
(15
)
(18
)
(85
)
(64
)
Cash provided by (used in) financing activities
(161
)
44
(371
)
129
Effect of exchange rates on cash
8
(33
)
67
(49
)
Increase (decrease) in cash and cash equivalents
15
(1
)
14
44
Cash and cash equivalents at beginning of period
205
215
206
170
Cash, cash equivalents and restricted cash at end of period (B)
$
220
$
214
$
220
$
214
(A) Includes Accounts and notes receivable, Inventories, and
Accounts payable and accrued liabilities. (B) Restricted cash was
$6 million as of June 30, 2022. There was no restricted cash as of
June 30, 2023.
Third Quarter Earnings Announcement, Fiscal
2023 CABOT CORPORATION CERTAIN ITEMS AND
RECONCILIATION OF ADJUSTED EPS AND OPERATING TAX RATE
TABLE 1: DETAIL OF CERTAIN ITEMS Periods ended June 30
Three Months
Nine Months
Dollars in millions, except per share amounts (unaudited)
2023
2022
2023
2022
Certain items before and after income
taxes Gain on bargain purchase of a business
$
― $ ―
$ ―
$
24
Gain on sale of land
—
17
1
17
Loss on sale of business and asset impairment charge
—
(2
)
(3
)
(206
)
Legal and environmental matters and reserves
—
(1
)
(2
)
(9
)
Acquisition and integration-related charges
(1
)
(1
)
(2
)
(4
)
Purification Solutions divestiture related charges
—
—
—
(5
)
Global restructuring activities
—
(1
)
—
(3
)
Other certain items
—
—
(1
)
1
Total certain items, pre-tax
(1
)
12
(7
)
(185
)
Non-GAAP tax adjustments(A)
2
(15
)
3
29
Total certain items after tax
$
1
$
(3
)
$
(4
)
$
(156
)
Total certain items after tax per share impact
$
0.01
$
(0.04
)
$
(0.08
)
$
(2.75
)
TABLE 2: CERTAIN ITEMS STATEMENT OF OPERATIONS LINE
ITEM Periods ended June 30
Three Months
Nine Months
Dollars in millions, Pre-Tax (unaudited)
2023
2022
2023
2022
Statement of Operations Line
Item (B) Gain on bargain
purchase of a business
$ ― $ ―
$ ―
$
24
Cost of sales
(1
)
(2
)
(4
)
(7
)
Selling and administrative expenses
—
15
—
4
Research and technical expenses
—
—
—
—
Other income (expense)
—
1
—
—
Loss on sale of business and asset impairment charge
—
(2
)
(3
)
(206
)
Total certain items, pre-tax
$
(1
)
$
12
$
(7
)
$
(185
)
TABLE 3: RECONCILIATION OF EFFECTIVE TAX RATE TO
OPERATING TAX RATE Three months ended June 30
2023
2022
Dollars in millions (unaudited)
(Provision) / Benefit for Income
Taxes
Rate
(Provision) / Benefit for Income
Taxes
Rate
Effective Tax Rate
$
(41
)
32
%
$
(49
)
32
%
Less: Non-GAAP tax adjustments(A)
2
(15
)
Operating tax rate (C) (D)
$
(43
)
33
%
$
(34
)
24
%
Nine months ended June 30
2023
2022
Dollars in millions (unaudited)
(Provision) / Benefit for Income
Taxes
Rate
(Provision) / Benefit for Income
Taxes
Rate
Effective Tax Rate
$
(90
)
28
%
$
(73
)
35
%
Less: Non-GAAP tax adjustments(A)
3
29
Operating tax rate (C) (D)
$
(93
)
28
%
$
(102
)
26
%
TABLE 4: RECONCILIATION OF ADJUSTED EPS BY QUARTER FOR
FISCAL 2023 and FISCAL 2022
Fiscal 2023 (E)
Periods ended (unaudited)
Dec. Q
Mar. Q
June Q
Sept. Q
FY 2023
Reconciliation of Adjusted EPS to GAAP
EPS Net income (loss) per share attributable to Cabot
Corporation
$
0.93
$
1.29
$
1.43
$
—
$
3.65
Less: Certain items after tax per share
(0.05
)
(0.04
)
0.01
—
(0.08
)
Adjusted earnings (loss) per share
$
0.98
$
1.33
$
1.42
$
—
$
3.73
Fiscal 2022 (E)
Periods ended (unaudited)
Dec. Q
Mar. Q
June Q
Sept. Q
FY 2022
Reconciliation of Adjusted EPS to GAAP
EPS Net income (loss) per share attributable to Cabot
Corporation
$
(1.57
)
$
1.84
$
1.69
$
1.64
$
3.62
Less: Certain items after tax per share
(2.86
)
0.15
(0.04
)
0.09
(2.66
)
Adjusted earnings (loss) per share
$
1.29
$
1.69
$
1.73
$
1.55
$
6.28
(A) Non-GAAP tax adjustments are made to arrive at the operating
tax provision. It includes the income tax (expense) benefit on
certain items, discrete tax items, and, on a quarterly basis the
timing of losses in certain jurisdictions. The income tax (expense)
benefit on certain items is determined using the applicable rates
in the taxing jurisdictions in which the certain items occurred and
includes both current and deferred income tax (expense) benefit
based on the nature of the certain items. Discrete tax items
include, but are not limited to, changes in valuation allowance,
uncertain tax positions, and other tax items, such as the tax
impact of legislative changes and tax accruals on historic earnings
due to changes in indefinite reinvestment assertions. (B)
This table indicates the line items where certain items are
recorded in the Consolidated Statements of Operations. (C)
The operating tax rate is calculated based upon management's
forecast of the annual operating tax rate for the fiscal year
applied to adjusted pre-tax earnings. The operating tax rate
excludes income tax (expense) benefit on certain items, discrete
tax items and, on a quarterly basis the timing of losses in certain
jurisdictions. (D) Our operating tax rate for fiscal 2023 is
expected to be in the range of 27% to 29% (E) Per share
amounts are calculated after tax.
Third Quarter Earnings
Announcement, Fiscal 2023 CABOT CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Fiscal 2023 (A) Dec. Q Mar. Q June Q Sept. Q FY 2023
Reconciliation of Adjusted EPS to GAAP
EPS Net income (loss) per share attributable to Cabot
Corporation
$
0.93
$
1.29
$
1.43
$
—
$
3.65
Less: Certain items after tax per share
(0.05
)
(0.04
)
0.01
—
(0.08
)
Adjusted earnings (loss) per share
$
0.98
$
1.33
$
1.42
$
—
$
3.73
Fiscal 2022 (A) Dec. Q Mar. Q June Q Sept. Q FY 2022
Reconciliation of Adjusted EPS to GAAP
EPS Net income (loss) per share attributable to Cabot
Corporation
$
(1.57
)
$
1.84
$
1.69
$
1.64
$
3.62
Less: Certain items after tax per share
(2.86
)
0.15
(0.04
)
0.09
(2.66
)
Adjusted earnings (loss) per share
$
1.29
$
1.69
$
1.73
$
1.55
$
6.28
(A)Per share amounts are calculated after tax.
Dollars in millions
Fiscal 2023 Dec. Q Mar. Q June Q Sept. Q
FY 2023
Reconciliation of Total Segment
EBIT, Total Segment EBITDA and AdjustedEBITDA to Net Income and
Segment EBITDA Margin Net income (loss) attributable
to Cabot Corporation
$
54
$
75
$
82
$ ―
$
211
Net income (loss) attributable to noncontrolling interests
12
7
8
—
27
Equity in earnings of affiliated companies, net of tax
(2
)
(1
)
(1
)
—
(4
)
Provision (benefit) for income taxes
20
29
41
—
90
Income (loss) before income taxes and equity in earnings
of affiliated companies
$
84
$
110
$
130
$ ―
$
324
Interest expense
22
23
24
—
69
Certain items
4
2
1
—
7
Unallocated corporate costs
15
16
11
—
42
General unallocated (income) expense
(4
)
(2
)
(3
)
—
(9
)
Less: Equity in earnings of affiliated companies
(2
)
(1
)
(1
)
—
(4
)
Total Segment EBIT
$
123
$
150
$
164
$ ―
$
437
Depreciation and amortization excluding corporate depreciation
34
36
36
—
106
Total Segment EBITDA
$
157
$
186
$
200
$ ―
$
543
Less: Unallocated corporate costs before corporate depreciation
15
16
11
—
42
Adjusted EBITDA
$
142
$
170
$
189
$ ―
$
501
Dollars in millions Dec. Q Mar. Q June Q Sept. Q FY 2023
Reinforcement Materials EBIT
$
94
$
122
$
132
$ ―
$
348
Reinforcement Materials Depreciation and amortization
17
18
17
—
52
Reinforcement Materials EBITDA
$
111
$
140
$
149
$ ―
$
400
Reinforcement Materials Sales
$
643
$
672
$
624
$ ―
$
1,939
Reinforcement Materials EBITDA Margin
17
%
21
%
24
%
—
%
21
%
Dollars in millions Dec. Q Mar. Q June Q Sept. Q FY 2023
Performance Chemicals EBIT
$
29
$
28
$
32
$ ―
$
89
Performance Chemicals Depreciation and amortization
17
18
19
—
54
Performance Chemicals EBITDA
$
46
$
46
$
51
$ ―
$
143
Performance Chemicals Sales
$
286
$
326
$
307
$ ―
$
919
Performance Chemicals EBITDA Margin
16
%
14
%
17
%
—
%
16
%
Dollars in millions
Fiscal 2023 Reconciliation of Free Cash Flow and Discretionary Free
Cash Flow to Cash Flowfrom Operating Activities Dec. Q
Mar. Q June Q Sept. Q FY 2023
Cash flow from operating
activities (B)
$
52
$
162
$
243
$ ―
$
457
Less: Additions to property, plant and equipment
35
51
80
—
166
Free cash flow
$
17
$
111
$
163
$ ―
$
291
Plus: Additions to property, plant and equipment
35
51
80
—
166
Less: Changes in net working capital (C)
(34
)
59
71
—
96
Less: Sustaining and compliance capital expenditures
23
27
44
—
94
Discretionary free cash flow
$
63
$
76
$
128
$ ―
$
267
(B) As provided in the Condensed Consolidated Statements of Cash
Flows. (C) Defined as changes in accounts receivable, inventory and
accounts payable and accrued liabilities as presented on the
Condensed Consolidated Statements of Cash Flows.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230803638234/en/
Investor Contact: Steve Delahunt (617) 342-6255
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