Exhibit 99.2
CABOT CORPORATION
FOURTH QUARTER AND FULL FISCAL YEAR 2006
SUPPLEMENTAL BUSINESS INFORMATION
(Unaudited)
Business Segment Analysis
The impact of various factors on sales for the fourth quarter of 2006 when compared to the fourth quarter of 2005 are as follows:
Impact on Sales
(Dollars in millions) | | Carbon Black
Business | | Metal Oxides
Business | | Supermetals
Business | |
Volumes | | $ | 11 | | $ | 11 | | $ | (14 | ) |
Prices | | 73 | | 1 | | (10 | ) |
Foreign Currency Translation | | 13 | | 1 | | — | |
Cabot Japan | | 33 | | — | | — | |
| | | | | | | | | | |
The impact of various factors on sales for the fourth quarter of 2006 when compared to the third quarter of 2006 are as follows:
Impact on Sales
(Dollars in millions) | | Carbon Black
Business | | Metal Oxides
Business | | Supermetals
Business | |
Volumes | | $ | (10 | ) | $ | 5 | | $ | (4 | ) |
Prices | | 12 | | (1 | ) | 3 | |
Foreign Currency Translation | | 3 | | — | | — | |
Cabot Japan | | 1 | | — | | — | |
| | | | | | | | | | |
The impact of various factors on PBT for the fourth quarter of 2006 when compared to the fourth quarter of 2005 are as follows:
Impact on PBT
(Dollars in millions) | | Carbon Black
Business | | Metal Oxides
Business | | Supermetals
Business | |
Volumes | | $ | 4 | | $ | 7 | | $ | (8 | ) |
Change in Raw Material Costs vs. Change in Prices | | 18 | | (2 | ) | (11 | )* |
Fixed Costs | | 1 | | (1 | ) | 10 | |
Inventory Change and Other Inventory Charges | | 15 | ** | — | | (1 | ) |
Selling, Technical and Administrative | | (5 | ) | — | | 13 | |
Cabot Japan | | 2 | | — | | — | |
| | | | | | | | | | |
* the impact on PBT of pricing was an unfavorable $10 million; the impact of raw material costs was an unfavorable $1 million
** during fourth quarter of 2005 Inventory Change and Other Inventory Charges had an unfavorable impact of $16 million; there was not a similar expense in the fourth quarter of 2006, leading to a favorable comparison
The impact of various factors on PBT for the fourth quarter of 2006 when compared to the third quarter of 2006 are as follows:
Impact on PBT
(Dollars in millions) | | Carbon Black
Business | | Metal Oxides
Business | | Supermetals
Business | |
Volumes | | $ | (5 | ) | $ | 3 | | $ | (2 | ) |
Change in Raw Material Costs vs. Change in Prices | | 10 | | (2 | ) | 4 | * |
Fixed Costs | | (4 | ) | (2 | ) | (3 | ) |
Inventory Change and Other Inventory Charges | | 8 | | — | | — | |
Selling, Technical and Administrative | | — | | — | | 2 | |
Cabot Japan | | (1 | ) | — | | — | |
| | | | | | | | | | |
* the impact on PBT of pricing was a favorable $3 million; the impact of raw material costs was a favorable $1 million
Business Segment Volume Changes
Volume changes for the fourth quarter of 2006 compared to the fourth quarter of 2005 and the third quarter of 2006, and for the full fiscal year 2006 compared to 2005 were as follows:
Business Segment | | Q4 2006 vs Q4 2005 | | Q4 2006 vs Q3 2006 | | FY 2006 vs FY 2005 | |
Carbon Black Business | | | | | | | |
Rubber Blacks * | | 5 | % | -1 | % | 4 | % |
Performance Products | | -2 | % | -8 | % | -5 | % |
Inkjet Colorants | | 21 | % | -5 | % | 36 | % |
Metal Oxides Business | | | | | | | |
Fumed Metal Oxides | | 20 | % | 7 | % | 9 | % |
Supermetals Business | | -16 | % | -7 | % | -1 | % |
* volume changes in the Carbon Black Business exclude Cabot Japan volumes
Rubber Blacks Regional Volume Changes
Volume changes by region for the fourth quarter of 2006 compared to the fourth quarter of 2005 and the third quarter of 2006, and the full fiscal year 2006 compared to 2005 were as follows:
Region | | Q4 2006 vs Q4 2005 | | Q4 2006 vs Q3 2006 | | FY 2006 vs FY 2005 | |
North America | | -1 | % | -2 | % | 0 | % |
South America | | 4 | % | -3 | % | 1 | % |
Europe | | 7 | % | -6 | % | 5 | % |
Asia Pacific * | | -4 | % | 15 | % | -4 | % |
China | | 18 | % | 5 | % | 20 | % |
* volume changes in the Asia Pacific region exclude Cabot Japan volumes; during 2006 Cabot closed its carbon black manufacturing facility in Australia, volumes associated with which are included in Asia Pacific for fiscal 2005
Capital Expenditures
Cabot invested approximately $233 million in capital expenditures in fiscal year 2006 compared to $186 million in fiscal year 2005. This included approximately $45 million related to the purchase price and assumption of debt associated with the acquisition of Cabot Japan. The debt was subsequently paid off during fiscal year 2006.
Share Repurchases
| | Q1 FY06 | | Q2 FY06 | | Q3 FY06 | | Q4 FY06 | |
Total Shares Repurchased | | 85,733 | | 76,316 | | 246,309 | | 1,050,665 | |
Open Market Shares Repurchased | | — | | — | | — | | 999,943 | |
Cash Cost of Open Market Purchases | | — | | — | | — | | $ | 31,560,858 | |
| | | | | | | | | | |
Approximately 1.7 million shares remain available for purchase under the current Board of Directors’ authorization.
Working Capital
During the fourth quarter of 2006 working capital decreased by $35 million on a constant dollar basis ($38 million at actual exchange rates) driven by decreased Supermetals inventory levels, a decrease in the value of carbon black inventory due to lower feedstock costs and increased payables, partially offset by an increase in receivables due to strong volumes and price increases.
Effective Tax Rate
The Company’s effective tax rate for net income from continuing operations was a 19% benefit for the fourth quarter of fiscal 2006 and a 9% provision for the full fiscal year 2006. During the fourth quarter and full fiscal year, the Company recorded tax benefits in continuing operations from the settlement of various tax audits of $14 million and $22 million, respectively. Additionally, during the fourth quarter, the Company recorded a translation charge of $7 million related to the liquidation of the entity in Australia that was not tax benefited. Excluding the tax benefit from the settlements and the currency translation charge, the Company’s effective tax rate for the quarter would have been approximately 32% for the fourth quarter and approximately 29% for the full fiscal year 2006.
