Exhibit 99.1
Contact: James P. Kelly
Director, Investor Relations
(617) 342-6244
FOR IMMEDIATE RELEASE
CABOT ANNOUNCES THIRD QUARTER OPERATING RESULTS
EPS ($0.07) VERSUS $0.28 IN PRIOR YEAR, INCLUDING $0.49 OF CERTAIN CHARGES AND
DISCONTINUED OPERATIONS, VERSUS $0.06
BOSTON, MA (July 23, 2003) - Cabot Corporation (CBT/NYSE) today announced a loss
of $5 million, or ($0.07) per diluted common share, for the third quarter ended
June 30, 2003, compared with a profit of $19 million, or $0.28 per diluted
common share for the year ago quarter. These results contained $46 million, or
$0.49 per diluted common share, of certain charges and income from discontinued
operations for the quarter, compared to $6 million, or $0.06 per diluted common
share, for the year ago quarter. Cabot reported segment profit of $43 million
for the quarter, compared with $36 million for the same quarter of fiscal year
2002.
Kennett F. Burnes, Cabot Chairman and CEO, said, "Despite the improvement
in segment profit from last year's third quarter, this was a difficult quarter
for us. The weak economic environment continued to impact our businesses, which
are also being hurt by rising oil and natural gas prices. As anticipated, our
volumes decreased sequentially in our tantalum business due to the timing of
shipments of contracted intermediate and finished products."
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For the quarter ended June 30, 2003, operating profit for the Chemical
Businesses increased year over year by $3 million, from $27 million in the third
quarter of fiscal year 2002 to $30 million in the third quarter of fiscal year
2003. Sequentially, operating profit increased by $7 million from $23 million in
the prior quarter. The year over year comparison benefited from favorable
exchange impacts which more than offset a decline in volumes of 4% as well as
lower margins. Sequentially, volumes improved by 2%, although product mix was
unfavorable. Due to the weakening of the U.S. dollar, the translation of foreign
operating earnings provided a benefit during the quarter of $12 million year
over year and $1 million sequentially.
Within the Chemical Businesses segment, carbon black's operating profit
was the same as the prior year's quarter and $6 million higher than the second
fiscal quarter of 2003. Carbon black volumes decreased by 4% year over year but
increased by 2% sequentially, with continued strength in the Asia Pacific
region. In the third quarter, Cabot's fumed metal oxides business reported
operating profit that was $5 million higher than the same quarter last year and
$2 million higher than the second quarter of 2003. This business experienced 1%
lower volumes compared to the same quarter of fiscal 2002 and 2% higher volumes
compared to the second quarter of fiscal 2003. The inkjet colorants business
continues to perform extremely well, with volumes increasing by 42% compared to
the prior year quarter and by 23% sequentially. The transition of the business
to its new manufacturing plant is progressing well despite adding temporarily to
costs while the business consolidates its operations. Looking forward, given the
continued economic weakness in North America and Europe and the recent rise in
oil and natural gas prices, the Company is concerned about the outlook for the
Chemical Businesses segment
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due to volume pressure and the challenge of maintaining margins in the
non-contracted portion of the business.
Cabot Supermetals' third quarter operating profit increased by $4 million,
from $10 million in 2002 to $14 million in 2003, but decreased by $23 million
from the second quarter. Volumes were higher than the year ago quarter by 78%
due to a combination of contracted tantalum powder, wire and intermediate
product sales and some improvement in Asia Pacific volumes. Average selling
prices declined compared to the prior year due to the re-negotiation of certain
customer contracts during calendar year 2002, resulting in lower prices but
extended contract terms. Volumes decreased sequentially from the second quarter
of 2003 by 12% due to decreases in shipments of intermediate materials and the
timing of shipments of contracted finished products.
In the third quarter of fiscal 2003, Cabot Specialty Fluids (CSF) reported
a $1 million operating loss, which was equal to the third quarter of 2002 and $1
million better than the second quarter of 2003. Business activity remained low
during the quarter.
During the quarter, the Company recorded certain charges from
continuing operations and income from discontinued operations of $46 million.
Certain charges from continuing operations included $14 million related to the
acquisition of Superior Micropowders, which is included in R&D expense, and $17
million of restructuring costs incurred in Europe, of which $9 million are
included in cost of goods sold and $8 million are in selling and administrative
expense. In addition, the Company received $5 million in insurance recoveries,
of
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which $1 million are from continuing operations, recorded in selling and
administrative expense, and $4 million are from discontinued operations.
Also included in certain charges is a $20 million reserve to record the
Company's estimated share of liability with respect to existing and future
respirator product liability claims arising from exposure to asbestos and other
materials. As previously disclosed, Cabot and certain third parties and their
insurers, have product liability exposure in connection with a safety respirator
products business that a subsidiary of Cabot acquired in 1990 and disposed of in
1995. Since December 2002, these parties have been in negotiations to fix the
allocation of these liabilities among themselves. However, as no agreement has
yet been reached, the Company is utilizing a leading expert, Hamilton,
Rabinovitz & Alschuler, Inc, to assist in estimating these liabilities and the
Company' share of those liabilities. The current estimate indicates that Cabot's
share of these liabilities is approximately $20 million. This estimate is based
upon a number of assumptions, including an assessment of Cabot's contractual
obligations and the assumption that these other parties meet their obligations.
Further refinements to this analysis may be made, and may cause the Company to
make adjustments to its estimate. The $20 million charge is included in selling
and administrative expense.
Burnes stated, "Today's operating environment continues to be extremely
challenging. Competition in the carbon black market is intense, and we are
currently experiencing downward price pressure at the same time as our raw
material costs are increasing. While there are signs of improvement in the
electronics market, our tantalum business is not yet benefiting from this due to
high inventory levels in the supply chain, and we expect that earnings of this
business will
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decline significantly beginning in fiscal 2004 as a customer's obligation to
purchase intermediate products expires."
"On the positive side" Burnes concluded, "our developing businesses -
inkjet colorants, cesium formate and aerogels - continue to make progress toward
their goals. Inkjet volumes continue to grow sequentially at a double-digit
rate, with successes in both the printer manufacturer market as well as the
cartridge refill market. In cesium formate, we recently announced a significant
event in the signing of a letter of intent with a major oil company to supply
drilling fluids in both drill-in and completion applications over a several year
period. We continue to refine the manufacturing process in our aerogels
semi-works plant. We have also added a new platform for growth with the recent
acquisition of Superior Micropowders (SMP). I am particularly excited about this
acquisition because it may allow Cabot to develop new technology for areas that
complement our existing markets, such as capacitor materials. It will also
provide possibilities for future new business growth in high value-added areas
such as electronic displays and fuel cells. I believe that the combination of
our new business efforts and SMP provides a strong foundation for the long-term
future of the Company."
For those interested in more detailed information on Cabot's Third Quarter
2003 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 company headquartered in
Boston, MA. Cabot's major products are carbon black, fumed silica, inkjet
colorants, capacitor materials, and cesium formate drilling fluids.
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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 2002 Annual Report on Form 10-K.
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THIRD QUARTER EARNINGS ANNOUNCEMENT, FISCAL 2003
CABOT CORPORATION SUMMARY RESULTS BY SEGMENTS
Periods ended June 30 Three Months Nine Months
Dollars in millions, except per share amounts (unaudited) 2003 2002 2003 2002
------- ------- ------- -------
SALES
Chemical Businesses ........................................... $ 366 $ 318 $ 1,028 $ 895
Supermetals Business .......................................... 92 65 294 195
Specialty Fluids .............................................. 7 5 13 20
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Segment sales (A) ........................................... 465 388 1,335 1,110
Unallocated and other (B) ..................................... 3 2 9 7
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Net sales and other operating revenues ...................... $ 468 $ 390 $ 1,344 $ 1,117
======= ======= ======= =======
SEGMENT PROFIT (LOSS)
Chemical Businesses ........................................... $ 30 $ 27 $ 76 $ 84
Supermetals Business .......................................... 14 10 83 55
Specialty Fluids .............................................. (1) (1) (3) (1)
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TOTAL SEGMENT PROFIT (C) .................................... 43 36 156 138
Interest expense .............................................. (7) (7) (21) (21)
General unallocated income (expense) (D) ...................... (48) (4) (70) --
Less: Equity in net income of affiliated companies ............ (2) (2) (3) (4)
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INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .. (14) 23 62 113
Provision for income taxes .................................... 6 (6) (11) (31)
Equity in net income of affiliated companies .................. 2 2 3 4
Minority interest in net income ............................... (2) (1) (5) (3)
------- ------- ------- -------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS .................. (8) 18 49 83
DISCONTINUED OPERATIONS:
Income from operations of discontinued business, net of tax (E) 3 1 3 1
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NET INCOME (LOSS) ............................................. (5) 19 52 84
Dividends on preferred stock .................................. -- -- (2) (2)
------- ------- ------- -------
NET INCOME (LOSS) AVAILABLE TO COMMON SHARES .................. $ (5) $ 19 $ 50 $ 82
======= ======= ======= =======
DILUTED EARNINGS PER SHARE OF COMMON STOCK
Net income (loss) from continuing operations ................. ($ 0.11) $ 0.27 $ 0.70 $ 1.16
Income from operations of discontinued business (E) .......... $ 0.04 0.01 $ 0.04 0.01
------- ------- ------- -------
Net income (loss)........................................... $ (0.07) $ 0.28 $ 0.74 $ 1.17
======= ======= ======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Diluted ...................................................... 70 71 70 71
(A) Segment sales for certain operating segments within the Chemical
Businesses 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 adjustment for sales of one equity
affiliate, interoperating segment revenues, 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. It
includes equity in net income of affiliated companies, royalties paid by
equity affiliates, minority interest and corporate governance costs, and
excludes interest expense, foreign currency transaction gains (losses),
interest income, dividend income and items not used by Cabot's operating
decision-makers in the analysis of segment operating results.
(D) General unallocated income (expense) includes foreign currency transaction
gains (losses), interest income, dividend income, and items not used by
Cabot's operating decision-makers in the analysis of segment operating
results.
(E) Additional income related to insurance recoveries for discontinued
businesses, net of tax.
THIRD QUARTER EARNINGS ANNOUNCEMENT, FISCAL 2003
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Periods ended June 30 Three Months Nine Months
Dollars in millions, except per share amounts (unaudited) 2003 2002 2003 2002
------- ------- ------- -------
Net sales and other operating revenues ........................... $ 468 $ 390 $ 1,344 $ 1,117
Cost of sales .................................................... 367 292 998 799
------- ------- ------- -------
Gross profit ................................................... $ 101 $ 98 $ 346 $ 318
======= ======= ======= =======
Selling and administrative expenses .............................. 82 62 191 163
Research and technical service ................................... 27 12 51 35
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INCOME (LOSS) FROM OPERATIONS .................................. ($ 8) $ 24 $ 104 $ 120
OTHER INCOME AND EXPENSE
Interest and dividend income ................................... 1 2 3 8
Interest expense ............................................... (7) (7) (21) (21)
Other (charges) income ......................................... -- 4 (24) 6
------- ------- ------- -------
Total other income and expense ............................... (6) (1) (42) (7)
------- ------- ------- -------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ..... (14) 23 62 113
------- ------- ------- -------
Provision for income taxes ....................................... 6 (6) (11) (31)
Equity in net income of affiliated companies ..................... 2 2 3 4
Minority interest in net income .................................. (2) (1) (5) (3)
------- ------- ------- -------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS ..................... (8) 18 49 83
DISCONTINUED OPERATIONS:
Income from operations of discontinued business, net of tax ...... 3 1 3 1
NET INCOME (LOSS) ................................................ (5) 19 52 84
Dividends on preferred stock ..................................... -- -- (2) (2)
------- ------- ------- -------
NET INCOME (LOSS) AVAILABLE TO COMMON SHARES ..................... $ (5) $ 19 $ 50 $ 82
======= ======= ======= =======
DILUTED EARNINGS PER SHARE OF COMMON STOCK
Net income (loss) from continuing operations ................... $ (0.11) $ 0.27 $ 0.70 $ 1.16
Income from operations of discontinued business ................ $ 0.04 0.01 $ 0.04 0.01
------- ------- ------- -------
Net income (loss) ............................................ $ (0.07) $ 0.28 $ 0.74 $ 1.17
======= ======= ======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Diluted ........................................................ 70 71 70 71
THIRD QUARTER EARNINGS ANNOUNCEMENT, FISCAL 2003
CABOT CORPORATION CONDENSED CONSOLIDATED FINANCIAL POSITION
JUNE 30, September 30,
2003 2002
In millions (unaudited)
----------- -------------
Current assets ................................... $1,089 $ 959
Net property, plant and equipment ................ 906 885
Other non-current assets ......................... 211 223
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Total assets ................................. $2,206 $2,067
====== ======
Current liabilities .............................. $ 289 $ 286
Non-current liabilities .......................... 847 804
Stockholders' equity ............................. 1,070 977
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Total liabilities and stockholders' equity ... $2,206 $2,067
====== ======
Working capital .................................. $ 800 $ 673
====== ======
CABOT CORPORATION
FISCAL 2002
---------------------------------------------------------------
In millions,
except per share amounts (unaudited) Dec. Q. Mar. Q. June Q. Sept. Q. FY
------- ------- ------- ------- -------
SALES
Chemical Businesses $ 285 $ 292 $ 318 $ 322 $ 1,217
Supermetals Business 82 48 65 106 301
Specialty Fluids 9 6 5 8 28
------- ------- ------- ------- -------
Segment Sales (A) 376 346 388 436 1,546
Unallocated and other (B) 1 4 2 4 11
------- ------- ------- ------- -------
Net sales and other operating revenues $ 377 $ 350 $ 390 $ 440 $ 1,557
======= ======= ======= ======= =======
SEGMENT PROFIT (LOSS)
Chemical Businesses $ 27 $ 30 $ 27 $ 17 $ 101
Supermetals Business 31 14 10 24 79
Specialty Fluids 1 (1) (1) 3 2
------- ------- ------- ------- -------
Total segment profit (C) 59 43 36 44 182
INCOME (LOSS) AVAILABLE TO COMMON SHARES
Interest expense (8) (6) (7) (7) (28)
General unallocated income (expense) (D) 3 -- (4) (14) (15)
Less: Equity in net income of affiliated companies (2) -- (2) (2) (5)
------- ------- ------- ------- -------
Income (loss) from Continuing Operations before income taxes 52 37 23 21 134
Provision for income taxes (15) (10) (6) 1 (30)
Equity in net income of affiliated companies 2 -- 2 2 5
Minority interest in net income (1) (1) (1) (1) (4)
------- ------- ------- ------- -------
INCOME (LOSS) FROM CONTINUING OPERATIONS 38 26 18 23 105
DISCONTINUED OPERATIONS
Income from Operations of Discontinued Business,
net of income taxes (E) -- -- 1 -- 1
------- ------- ------- ------- -------
Net Income (loss) 38 26 19 23 106
Dividends on preferred stock (1) (1) -- (1) (3)
------- ------- ------- ------- -------
Net income (loss) available to common shares $ 37 $ 25 $ 19 $ 22 $ 103
======= ======= ======= ======= =======
INCOME (LOSS) PER COMMON SHARE
Net income (loss) from Continuing Operations $ 0.53 $ 0.36 $ 0.27 $ 0.32 $ 1.48
Income from Operations of Discontinued Business (E) -- -- 0.01 -- 0.02
------- ------- ------- ------- -------
Total $ 0.53 $ 0.36 $ 0.28 $ 0.32 $ 1.50
------- ------- ------- ------- -------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Diluted 72 71 71 70 71
------- ------- ------- ------- -------
FISCAL 2003
--------------------------------------------------------------
In millions,
except per share amounts (unaudited) Dec. Q. Mar. Q. June Q. Sept. Q. FY
------- ------- ------- ------- -------
SALES
Chemical Businesses $ 309 $ 352 $ 366 $ 1,028
Supermetals Business 96 107 92 294
Specialty Fluids 3 4 7 13
------- ------- ------- ------- -------
Segment Sales (A) 408 463 $ 465 1,335
Unallocated and other (B) 2 3 3 9
------- ------- ------- ------- -------
Net sales and other operating revenues $ 410 $ 466 $ 468 $ 1,344
======= ======= ======= ======= =======
SEGMENT PROFIT (LOSS)
Chemical Businesses $ 24 $ 23 $ 30 $ 76
Supermetals Business 32 37 14 83
Specialty Fluids (1) (2) (1) (3)
------- ------- ------- ------- -------
Total segment profit (C) 55 58 43 156
INCOME (LOSS) AVAILABLE TO COMMON SHARES
Interest expense (7) (7) (7) (21)
General unallocated income (expense) (D) (2) (20) (48) (70)
Less: Equity in net income of affiliated companies (1) (1) (2) (3)
------- ------- ------- ------- -------
Income (loss) from Continuing Operations before income taxes 45 30 (14) 62
Provision for income taxes (11) (6) 6 (11)
Equity in net income of affiliated companies 1 1 2 3
Minority interest in net income (2) (2) (2) (5)
------- ------- ------- ------- -------
INCOME (LOSS) FROM CONTINUING OPERATIONS 33 23 (8) 49
DISCONTINUED OPERATIONS
Income from Operations of Discontinued Business,
net of income taxes (E) -- -- 3 3
------- ------- ------- ------- -------
Net Income (loss) 33 23 (5) 52
Dividends on preferred stock (1) (1) -- (2)
------- ------- ------- ------- -------
Net income (loss) available to common shares $ 32 $ 22 $ (5) $ 50
======= ======= ======= ======= =======
INCOME PER COMMON SHARE
Net income (loss) from Continuing Operations $ 0.48 $ 0.33 $ (0.11) $ 0.70
Income from Operations of Discontinued Business (E) -- -- 0.04 0.04
------- ------- ------- ------- -------
Total $ 0.48 $ 0.33 $ (0.07) 0.74
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Diluted 70 70 70 70
------- ------- ------- ------- -------
(A) Segment sales for certain operating segments within the Chemicals
Businesses 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 adjustment for sales for one equity
affiliate, interoperating segment revenues, 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. It
includes equity in net income of affiliated companies, royalties paid by
equity affiliates, minority interest and corporate governance costs, and
excludes interest expense, foreign currency transaction gains (losses),
interest income, dividend income and items not used by Cabot's operating
decision-makers in the analysis of segment operating results.
(D) General unallocated income (expense) includes foreign currency transaction
gains (losses), interest income, dividend income and items not used by
Cabot's operating decision-makers in the analysis of segment operating
results. In the fourth quarter of fiscal 2002, an $8 million charge was
included for employee benefit plans.
(E) Additional income related to insurance recoveries for discontinued
businesses, net of tax.