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Cabot Corp Reports First Quarter Adjusted EPS of $0.86 and Diluted EPS of $1.23

Cabot Corporation (NYSE: CBT) today announced results for its first quarter of fiscal year 2014.

Key Highlights

  • Double-digit year over year volume growth in Reinforcement Materials and Performance Materials
  • Strong quarter for Advanced Technologies
  • Completion of NHUMO acquisition strengthens leadership position in carbon black
  • Commercialization of new China carbon black plant progressing well
           
(In millions, except per share amounts)         First Quarter

2014

     

2013

 
Net sales $ 899 $ 820
Net income attributable to Cabot Corporation $ 80 $ 20
 
Net earnings per share attributable to Cabot Corporation $ 1.23 $ 0.31
Less Adjustments:
Net loss per share from discontinued operations $ - $ (0.02)
Certain items per share $ 0.37 $ (0.33)
Adjusted EPS         $ 0.86       $ 0.66
 

Commenting on the results, Cabot President and CEO Patrick Prevost, said, “I am pleased with our strong start in fiscal 2014. We delivered our second best quarter in the history of our Reinforcement Materials segment along with strong performance in Advanced Technologies and Performance Materials.” Prevost continued, “In addition to recovery in global demand, our volumes grew year over year through the successful commercialization of new capacity and the addition of our Mexican carbon black acquisition. However, I was disappointed by another difficult quarter in Purification Solutions as we continued to face operational issues that resulted in lower volumes and cost increases. On the strategic front, the integration of the NHUMO acquisition and the commercialization of our new China carbon black plant are progressing well.”

Financial Detail
For the first quarter of fiscal 2014, net income attributable to Cabot Corporation was $80 million ($1.23 per diluted common share). Net income includes a per share benefit of $0.37 from certain items, principally related to a gain recognized on our existing investment in our Mexican joint venture as a result of the acquisition. Adjusted EPS for the first quarter of fiscal 2014 was $0.86 per share.

Segment Results
Reinforcement Materials -- First quarter fiscal 2014 EBIT in Reinforcement Materials increased by $14 million compared to the same quarter of fiscal 2013 due to 15% higher volumes from improved demand in all regions and the addition of new capacity in China and Mexico. Higher costs associated with the new capacity and lower pricing in Asia and Europe were offset by raw material purchasing savings and one-time benefits that lowered fixed costs in the quarter. Sequentially, EBIT increased by $17 million due to 7% higher volumes, improved margins from raw material purchasing savings, and one-time benefits that lowered fixed costs in the quarter.

Global and regional volume changes for Reinforcement Materials for the first quarter of fiscal 2014 as compared to the same quarter of the prior year and the fourth quarter of fiscal 2013 are included in the table below:

        First Quarter         First Quarter

Year over Year Change

Sequential Change

 

 

 

 

 

 

Global, including NHUMO 15% 7%
Global, excluding NHUMO         10%         2%
Japan 7% (5%)
Southeast Asia 4% -
China 9% 7%
Europe, Middle East, Africa 15% 1%
North America 7% 2%
South America         16%         (1%)

*Regional volumes exclude NHUMO sales.

 

Performance Materials -- First quarter fiscal 2014 EBIT in Performance Materials increased by $7 million compared to the first quarter of fiscal 2013. Volumes in Specialty Carbons and Compounds increased 16% and volumes in Fumed Metal Oxides increased 5%. Sequentially, Performance Materials EBIT increased by $1 million. Volumes decreased 8% sequentially in both Specialty Carbons and Compounds and Fumed Metal Oxides due to normal seasonal patterns. These volume declines were offset by lower costs associated with the increase in inventory levels in the first quarter of fiscal 2014 as compared to the decrease in inventory levels in the fourth quarter of fiscal 2013.

Advanced Technologies -- Advanced Technologies EBIT increased by $17 million from the first quarter of fiscal 2013. The EBIT increase was driven by higher rental activity in Specialty Fluids, and higher royalties and a $4 million technology milestone payment in Elastomer Composites. Sequentially, Advanced Technologies EBIT decreased $2 million as compared to the fourth quarter of fiscal 2013 due to lower sales in Specialty Fluids. This was partially offset by the technology milestone payment in Elastomer Composites.

Purification Solutions -- For the first quarter of fiscal 2014, Purification Solutions EBIT decreased by $14 million compared to the same quarter of fiscal 2013. The EBIT decrease was driven by lower volumes from declines in the air and gas end market, the timing of water projects, and supply constraints due to operational issues. The segment also experienced higher costs associated with increased maintenance activity and a higher allocation of functional and indirect costs. Sequentially, Purification Solutions EBIT decreased $1 million. Volumes declined due to seasonal impacts and supply constraints as a result of operational issues. The segment also experienced higher costs associated with increased maintenance activity and a higher allocation of functional and indirect costs. These unfavorable impacts were partially offset by higher prices and lower costs associated with maintaining relatively flat inventory levels in the first quarter of fiscal 2014 as compared to the decrease in inventory levels in the fourth quarter of fiscal 2013.

Cash Performance -- The Company ended the first quarter of fiscal 2014 with a cash balance of $105 million, an increase of $10 million from the fourth quarter of fiscal 2013. During the first quarter of fiscal 2014, the Company generated adjusted EBITDA of $150 million. Uses of cash during the first quarter include $42 million for capital expenditures and an increase in net working capital of $164 million. The Company also completed the acquisition of NHUMO, which resulted in a cash payment of $66 million, net of a $14 million special dividend received from the Mexican joint venture prior to the closing of the transaction.

Taxes -- During the first quarter of fiscal 2014, the Company recorded a net tax provision of $24 million for an effective tax rate of 22%. Excluding the impact of certain items, the operating tax rate on continuing operations for the first quarter of fiscal 2014 was 28%.

Outlook
“We are increasingly optimistic about fiscal 2014 after seeing the recent positive demand trends in our Reinforcement Materials and Performance Materials segments,” Prevost said, commenting on the outlook for the Company. “We expect tire and automotive industry demand to improve in 2014 along with infrastructure-related spending, albeit at a modest pace. In our Specialty Fluids business, the longer-term pipeline of projects remains strong, however, in the coming months, we expect to see a lower level of activity as compared to recent quarters. In the Purification Solutions segment, we are focused on improving our operational performance to restore profitability and preparing for growth in the North American market. Overall, we remain focused on executing our strategy and we are confident in our ability to deliver earnings growth to our shareholders.”

Earnings Call
The Company will host a conference call with industry analysts at 2:00 p.m. Eastern time on Thursday, January 30, 2014. 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 rubber and specialty carbons, activated carbon, inkjet colorants , cesium formate drilling fluids, 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 actions that will drive earnings growth, demand for our products, and 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 lower than expected demand for our products; the loss of one or more of our important customers; our inability to complete capacity expansions or other development projects, including at our mine in Manitoba, 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); changes in raw material costs; 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 adjusted 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 and Operating Tax Rate.”

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. A reconciliation of operating tax rate to effective tax rate , the most directly comparable GAAP financial measure is provided in the table titled "Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate.”

“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. A reconciliation of Adjusted EBITDA from segment EBIT for the first quarter of 2014 is provided on the investor portion of our website at http://investor.cabot-corp.com, under the Non-GAAP Reconciliations section.

                   
             
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
                   
                   
Periods ended December 31         Three Months
Dollars in millions, except per share amounts (unaudited)         2013       2012
 
Net sales and other operating revenues $ 899 $ 820
 
Cost of sales   720     673  
 
Gross profit 179 147
 
 
Selling and administrative expenses 77 73
 
Research and technical expenses   16     19  
Income from operations 86 55
 
 
Other income (expense)
 
Interest and dividend income 1 1
 
Interest expense (14 ) (16 )
 
Other income (A) 35 1
   
Total other income (expense)   22     (14 )
 

Income from continuing operations before income taxes and equity in earnings of affiliated companies

108 41
 
Provision for income taxes (24 ) (19 )
 
Equity in earnings of affiliated companies 2 3
 
   
Income from continuing operations 86 25
 
Loss from discontinued operations, net of tax (B) - (1 )
   
Net income 86 24
 
Net income attributable to noncontrolling interests 6 4
   
Net income attributable to Cabot Corporation $ 80   $ 20  
 
 
 

Diluted earnings per share of common stock attributable to Cabot Corporation

 
Continuing operations $ 1.23 $ 0.33
 
Discontinued operations (B) - (0.02 )
   
Net income attributable to Cabot Corporation $ 1.23 $ 0.31
 
Weighted average common shares outstanding
Diluted 64.8 64.1
 

(A) Included in the FY 2014 results is $29.1 million related to a non-cash gain on Cabot's existing investment in its Mexican joint venture, NHUMO, as a result of the acquisition of the remaining 60% common equity that the Company did not previously own.

(B) Amounts relate primarily to the divesture of the Supermetals Business.

             
                   
 
CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS
                   
                   
Periods ended December 31 Three Months
Dollars in millions, except per share amounts (unaudited)         2013     2012
 
Sales
 
Reinforcement Materials $ 517 $ 475
 
Performance Materials 217 196
Specialty Carbons and Compounds 148 132
Fumed Metal Oxides 69 64
 
Advanced Technologies 65 38
Inkjet Colorants 15 16
Aerogel 5 5
Security Materials 1 1
Elastomer Composites 16 8
Specialty Fluids 28 8
 
Purification Solutions   77     93  
 
Segment sales 876 802
 
Unallocated and other (A)   23     18  
 
Net sales and other operating revenues $ 899   $ 820  
 
Segment Earnings Before Interest and Taxes (B) (C)
 
Reinforcement Materials $ 64 $ 50
 
Performance Materials 34 27
 
Advanced Technologies 24 7
 
Purification Solutions   (9 )   5  
 
Total Segment Earnings Before Interest and Taxes (C) 113 89
 
Unallocated and Other
 
Interest expense (14 ) (16 )
Certain items (D) 24 (20 )
Unallocated corporate costs (C) (13 ) (12 )
General unallocated income (E) - 3
Less: Equity in earnings of affiliated companies   (2 )   (3 )
 

Income from continuing operations before income taxes and equity in earnings of affiliated companies

108 41
 
Provision for income taxes (including tax certain items) (24 ) (19 )
 
Equity in earnings of affiliated companies 2 3
   
Income from continuing operations 86 25
 
Loss from discontinued operations, net of tax (F) - (1 )
   
Net income 86 24
 
Net income attributable to noncontrolling interests 6 4
   
Net income attributable to Cabot Corporation $ 80   $ 20  
 
Diluted earnings per share of common stock
attributable to Cabot Corporation
 
Continuing operations $ 1.23 $ 0.33
 
Discontinued operations (F) - (0.02 )
   
Net income attributable to Cabot Corporation $ 1.23 $ 0.31
 
Adjusted earnings per share
 
Adjusted EPS (G) $ 0.86 $ 0.66
 
Weighted average common shares outstanding
 
Diluted 64.8 64.1
 

(A) Unallocated and other reflects royalties paid by equity affiliates, other operating revenues, external shipping and handling fees, the impact of unearned revenue and the removal of 100% of the sales of an equity method affiliate.

(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) Fiscal 2013 Segment EBIT and General unallocated (expense) income have been recast from the reporting of the first quarter of fiscal 2013 to reflect an allocation of costs to the Purification Solutions segment for corporate administrative and functional support. These allocations were previously reflected in Unallocated corporate costs and other segment results. The recast results for each quarter of fiscal 2013 are consistent with those that were presented in conjunction with Cabot's year end fiscal 2013 earnings release.

(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 includes foreign currency transaction gains (losses), interest income, dividend income, the profit related to unearned revenue, and the impact of LIFO accounting.

(F) Amounts relate primarily to the divesture of the Supermetals business.

(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.

 
 
                     
               
CABOT CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                     
                     
December 31, September 30,
2013 2013
Dollars in millions         (unaudited)       (audited)
 
Current assets:
 
Cash and cash equivalents $ 105 $ 95
Accounts and notes receivable, net of reserve for doubtful accounts of $12 and $8 696 634
Inventories:
Raw materials 128 102
Work in process 2 2
Finished goods 339 310
Other   44   44
Total inventories 513 458
Prepaid expenses and other current assets 65 58
Notes receivable from sale of business 215 214
Deferred income taxes   21   36
Total current assets   1,615   1,495
 
Property, plant and equipment, net 1,641 1,605
 
Goodwill 559 504
Equity affiliates 78 119
Intangible assets, net of accumulated amortization of $22 and $18 364 310
Assets held for rent 53 49
Deferred income taxes 62 68
Other assets 83 83
   
Total assets $ 4,455 $ 4,233
 
 

                     
               
CABOT CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                     
                     
December 31, September 30,
2013 2013
Dollars in millions, except share and per share amounts         (unaudited)       (audited)
 
Current liabilities:
 
Notes payable $ 421 $ 264
Accounts payable and accrued liabilities 487 534
Income taxes payable 38 30
Deferred income taxes 4 2
Current portion of long-term debt   19     14  
Total current liabilities   969     844  
 
Long-term debt 1,026 1,020
Deferred income taxes 32 21
Other liabilities 264 265
Redeemable preferred stock 28 -
 
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: 64,612,793 and 64,223,985 shares
Outstanding: 64,360,252 and 63,970,502 shares 65 64
Less cost of 252,541 and 253,483 shares of common treasury stock (8 ) (8 )
Additional paid-in capital 43 39
Retained earnings 1,822 1,755
Deferred employee benefits - (2 )
Accumulated other comprehensive income   83     103  
Total Cabot Corporation stockholders' equity 2,005 1,951
Noncontrolling interests   131     132  
Total stockholders' equity   2,136     2,083  
Total liabilities and stockholders' equity $ 4,455   $ 4,233  
 
 

CABOT CORPORATION
                                                                     
        Fiscal 2013       Fiscal 2014
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 475 459 486 482 1,902 517 - - - 517
Performance Materials 196 243 233 232 904 217 - - - 217
Specialty Carbons and Compounds 132 173 159 158 622 148 - - - 148
Fumed Metal Oxides 64 70 74 74 282 69 - - - 69
Advanced Technologies 38 41 69 74 222 65 - - - 65
Inkjet Colorants 16 12 18 18 64 15 - - - 15
Aerogel 5 3 9 4 21 5 - - - 5
Security Materials 1 2 2 2 7 1 - - - 1
Elastomer Composites 8 4 5 12 29 16 - - - 16
Specialty Fluids 8 20 35 38 101 28 - - - 28
Purification Solutions   93         79         86         90         348     77         -       -       -       77  
Segment Sales 802 822 874 878 3,376 876 - - - 876
Unallocated and other (A)           18         20         29         20         87     23         -       -       -       23  
 
Net sales and other operating revenues         $ 820       $ 842       $ 903       $ 898       $ 3,463   $ 899       $ -     $ -     $ -     $ 899  
 
Segment Earnings Before Interest and Taxes (B) (C)
Reinforcement Materials 50 42 49 47 188 64 - - - 64
Performance Materials 27 37 35 33 132 34 - - - 34
Advanced Technologies 7 8 27 26 68 24 - - - 24
Purification Solutions   5         -         (1 )       (8 )       (4 )   (9 )       -       -       -       (9 )
Total Segment Earnings Before Interest and Taxes (C) 89 87 110 98 384 113 - - - 113
 
 
Unallocated and Other
Interest expense (16 ) (16 ) (15 ) (15 ) (62 ) (14 ) - - - (14 )
Certain items (D) (20 ) (20 ) (4 ) (12 ) (56 ) 24 - - - 24
Unallocated corporate costs (C) (12 ) (14 ) (12 ) (11 ) (49 ) (13 ) - - - (13 )
General unallocated income (expense) (E) 3 2 (3 ) (3 ) (1 ) - - - - -
Less: Equity in earnings of affiliated companies           (3 )       (3 )       (3 )       (2 )       (11 )   (2 )       -       -       -       (2 )
 

Income from continuing operations before income taxes and equity in earnings of affiliated companies

41 36 73 55 205 108 - - - 108
 
Provision for income taxes (including tax certain items) (19 ) (16 ) (16 ) (7 ) (58 ) (24 ) - - - (24 )
Equity in earnings of affiliated companies           3         3         3         2         11     2         -       -       -       2  
 
Income from continuing operations 25 23 60 50 158 86 - - - 86
(Loss) income from discontinued operations, net of tax (F)           (1 )       -         2         1         2     -         -       -       -       -  
 
Net income 24 23 62 51 160 86 - - - 86
 
Net income (loss) attributable to noncontrolling interests           4         (4 )       3         4         7     6               -       -       6  
 
Net income attributable to Cabot Corporation $ 20 $ 27 $ 59 $ 47 $ 153 $ 80 $ - $ - $ - $ 80
 

Diluted earnings per share of common stock attributable to Cabot Corporation

 
Continuing operations $ 0.33 $ 0.42 $ 0.86 $ 0.71 $ 2.32 $ 1.23 $ - $ - $ - $ 1.23
Discontinued operations (F)   (0.02 )       -         0.04         0.02         0.04     -         -       -       -       -  
Net income attributable to Cabot Corporation $ 0.31 $ 0.42 $ 0.90 $ 0.73 $ 2.36 $ 1.23 $ - $ - $ - $ 1.23
 
Adjusted earnings per share
 
Adjusted EPS (G)         $ 0.66       $ 0.63       $ 0.84       $ 0.78       $ 2.91   $ 0.86       $ -     $ -     $ -     $ 0.86  
 
Weighted average common shares outstanding
Diluted             64.1         64.4         64.5         64.7         64.5     64.8         -       -       -       64.8  
 

(A) Unallocated and other reflects royalties paid by equity affiliates, other operating revenues, external shipping and handling fees, the impact of unearned revenue and the removal of 100% of the sales of an equity method affiliate.

(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) The first three quarters of fiscal 2013 Segment EBIT and General unallocated income (expense) have been recast to reflect an allocation of costs to the Purification Solutions segment for corporate administrative and functional support. These allocations were previously reflected in Unallocated corporate costs and other segment results. The recast results for each quarter of fiscal 2013 are consistent with those that were presented in conjunction with Cabot's year end fiscal 2013 earnings release.

(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) includes foreign currency transaction gains (losses), interest income, dividend income, the profit related to unearned revenue, and the impact of LIFO accounting.

(F) Amounts relate primarily to the divesture of the Supermetals business.

(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.

                                                                 
                                         
CABOT CORPORATION CERTAIN ITEMS AND RECONCILIATION OF ADJUSTED EPS AND OPERATING TAX RATE
                                                                 
                                                                 
TABLE 1: DETAIL OF CERTAIN ITEMS
Periods ended December 31 Three Months
Dollars in millions, except per share amounts (unaudited) Dollars in Millions       Per Share After Tax
2013 2012 2013 2012
  $         $         per share(A)     per share(A)
 

Certain items before and after income taxes

 
Global restructuring activities $ (5 ) $ (6 ) $ (0.05 ) $ (0.06 )
Acquisition and integration-related charges (5 ) (14 ) (0.05 ) (0.15 )
Foreign currency gain on revaluations 6 - 0.06 -
Gain on step-acquisition of Nhumo 29 - 0.45 -
Environmental and legal reserves   (1 )       -           (0.02 )       -  
Certain items before tax   24         (20 )         0.39         (0.21 )
 
Tax impact of certain items   1         6                
Certain items after tax   25         (14 )         0.39         (0.21 )
 
Tax-related certain items
 
Tax impact of certain foreign exchange losses - (7 ) - (0.11 )
 
Discrete tax items  

(1

)

      -           (0.02 )       (0.01 )
 
Total tax-related certain items

(1

)

(7 ) (0.02 ) (0.12 )
                     
 
Total certain items after tax   24         (21 )         0.37         (0.33 )
 
 
Discontinued operations after income taxes (B) - (1 ) - (0.02 )
 
                     
 
Total discontinued operations after tax $ -       $ (1 )       $ -       $ (0.02 )
 
                                                                 
                                                                 
TABLE 2: CERTAIN ITEMS STATEMENT OF OPERATIONS LINE ITEM
Periods ended December 31 Three Months
Dollars in millions, Pre-Tax (unaudited) 2013     2012
 

Statement of Operations Line Item (C)

 
Cost of sales $ (8 ) $ (14 )
 
Selling and administrative expenses (3 ) (5 )
 
Research and technical expenses - (1 )
Other income   35         -  
Total certain items $ 24       $ (20 )
 
 
                                                                 
TABLE 3: RECONCILIATION OF TAX CERTAIN ITEMS                                                                
Periods ended December 31 Three Months
Dollars in millions (unaudited) 2013     2012
 

Reconciliation of Provision for income taxes, excluding certain items, to Provision for income taxes

 
 
Provision for income taxes $ (24 ) $ (19 )
 
Less: Tax impact of certain items 1 6
 
Less: Tax related certain items

(1

)

(7 )

 

     
Provision for income taxes, excluding certain items $

(24

)     $ (18 )
                                                                 
TABLE 4: RECONCILIATION OF OPERATING TAX RATE                                                                
Periods ended December 31 Three Months

Dollars in millions (unaudited)

2013     2012
 

Reconciliation of the effective tax rate to the operating tax rate

 
 
Provision for income taxes $ (24 ) $ (19 )
 
Effective tax rate 22 % 47 %
 
Impact of discrete tax items:
Unusual or infrequent items (1 %) (17 %)
Items related to uncertain tax positions 1 % (1 %)
Other discrete tax items (1 %) (2 %)
Impact of certain items   7 %       - %
Operating tax rate   28 %       27 %
                                                                 
TABLE 5: RECONCILIATION OF ADJUSTED EPS BY QUARTER FISCAL 2013 and FISCAL 2014
NON-GAAP MEASURE:
Periods ended (unaudited) Fiscal 2013(A) Fiscal 2014(A)
 
Dec. Q     Mar. Q     Jun. Q     Sept. Q       FY 2013 YTD Dec. Q     Mar. Q     Jun. Q     Sept. Q     FY 2014 YTD

Reconciliation of Adjusted EPS to GAAP EPS

Net income per share attributable to Cabot Corporation $ 0.31 $ 0.42 $ 0.90 $ 0.73 $ 2.36 $ 1.23 $ - $ - $ - $ 1.23
Less: Net (loss) income per share from discontinued operations(B)   (0.02 )       -         0.04         0.02           0.04     -       -       -       -       -
Net income per share from continuing operations $ 0.33 $ 0.42 $ 0.86 $ 0.71 $ 2.32 $ 1.23 $ - $ - $ - $ 1.23
Less: Certain items after tax   (0.33 )       (0.21 )       0.02         (0.07 )         (0.59 )   0.37       -       -       -       0.37
Adjusted earnings per share $ 0.66 $ 0.63 $ 0.84 $ 0.78 $ 2.91 $ 0.86 $ - $ - $ - $ 0.86
 
                                                                 

(A) Per share amounts are calculated after tax and, where applicable, noncontrolling interests, net of tax.

(B) Amounts relate primarily to the divesture of the Supermetals Business.

(C) This table indicates the line items where certain items are recorded in the table titled Cabot Corporation Consolidated Statements of Operations.

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