OT**, Could be an interesting situation. Another spin-off ... If you like CMP Slurry ...
Cabot Corporation Announces Value Enhancement Initiatives
Wednesday July 28, 8:37 am Eastern Time
Company Press Release
SOURCE: Cabot Corporation
- Initial Public Offering of its Microelectronic Materials Business
- Alternative Ownership Structures for its LNG and Tantalum Materials Businesses
- Cost Reductions of $30 Million to $35 Million Beginning In Fiscal 2000
- Company Also Announces Third Quarter Earnings of $0.40 Per Share Before Special Items
BOSTON, July 28 /PRNewswire/ -- Cabot Corporation (NYSE: CBT - news) today reported that its Board of Directors has authorized management to develop several initiatives designed to enhance shareholder value by achieving proper recognition for the inherent strengths and prospects of several portfolio businesses and by reducing costs in core operations. Management's current plans include an initial public offering of approximately 15% of the Company's microelectronic materials business, the issuance of a targeted stock for the liquefied natural gas (LNG) business and the exploration of alternative ownership structures for the Company's tantalum materials business (CPM). Additionally, the plan calls for $30 million to $35 million of annual cost reductions to be derived from a continuous improvement program initiated across the Company's core businesses.
''Over the past several months,'' commented Samuel Bodman, Chairman and Chief Executive Officer of Cabot Corporation, ''our management team performed an intensive review of our businesses. Our review came about as part of a continuous improvement program, and was aimed at improving the Company's earnings performance and addressing shareholder value creation opportunities that we felt were available. We remain committed to our dual strategy of cost and capacity management and new product and new business development. We believe that the initiatives announced today will produce an increase in shareholder value and will allow us to refocus managerial resources on our core businesses.''
Capital Structure Initiatives
The Company's management believes that an initial public offering of the microelectronic materials business will put that business in a position to be more competitive in its markets. An initial public offering of the microelectronic materials business would be made only by means of a prospectus. Similarly, the Company stated that a targeted stock tied to the performance of Cabot's LNG business will allow investors to more readily see the value of that business. Finally, Cabot's management will explore several possible ownership structures for its CPM business.
Stated Bodman, ''We have concluded that our CPM business operates in an industry where merger, consolidation or vertical integration opportunities will best enhance CPM's competitiveness and value. Similarly, we have decided that our LNG operation should eventually be separated from Cabot Corporation to allow Cabot LNG to more readily pursue opportunities in its energy markets. The possible creation of a targeted stock would be a step toward that eventual separation.''
Share Repurchase Program
Over the past several years Cabot's management has demonstrated a commitment to a share repurchase plan through the use of proceeds from the sale of non-core assets. The Company intends to use cash generated from the capital structure initiatives announced today in its continued commitment to the share repurchase program.
Cost Reduction Initiative
Cabot announced a cost reduction initiative that involves each of the Company's core businesses and will result in a simplification of the Company's strategic business unit structure and a consolidation of certain production capacity. The Company recorded a $16 million earnings charge during the June quarter to reflect changes made in the Australian carbon black business and the European plastics operation. Management expects to recognize a charge of similar magnitude related to certain of its other chemical operations in the September quarter. We anticipate that, overall, the cost reduction initiative will eliminate approximately 250 positions throughout the Company and will provide ongoing annual cost savings of $30 million to $35 million starting in fiscal 2000.
Commenting on the value enhancement initiatives, Bodman said, ''Our management plan represents definitive actions to help improve the Company's earnings performance immediately and add substantially to the short-term and long-term value of the Company.''
Third Quarter Operating Results
Cabot also reported operating earnings, before certain special items, of $62.1 million ($0.40 per diluted common share) for its fiscal third quarter ended June 30, 1999 compared to operating earnings, before special items, of $58.6 million ($0.40 per diluted common share) in the third quarter of 1998. Net income for the quarter just ended was $22.4 million ($0.30 per diluted share) and included $11.0 million ($0.10 per diluted share) of special charges related to a cost reduction program partially offset by a gain on the sale of investments in equity securities. Third quarter 1998 net income was $33.3 million ($0.44 per share), and included a $5.3 million ($0.04 per share) gain from special items.
Operating profit before special items for the 1999 third quarter reflected reduced earnings in the Company's Specialty Chemicals and Materials Group, offset by improved results in the liquefied natural gas (LNG) business. Within the Specialty Chemicals and Materials Group, there were improved year- to-year quarterly earnings in the microelectronic materials business and CPM business but overall earnings for the group reflected weaker operating conditions in the carbon black and fumed silica businesses. Operating results in the LNG business contributed an incremental $5.3 million to the Company's year-to-year earnings comparison.
Specialty Chemicals and Materials Group
The Company's Specialty Chemicals and Materials Group reported operating profit, before special items, of $62.2 million for the quarter, compared with $64.0 million for the same quarter a year ago. Global volumes increased in each of the Company's chemical businesses compared with the year ago quarter. Overall volumes for the Group increased 8%. The positive effects of these improved volumes were more than offset by lower average prices in the Company's carbon black business. Carbon black volumes increased 4% globally, driven by a 20% Asia Pacific volume improvement. Volumes increased in the CPM, plastics masterbatch, fumed silica and MMD businesses by 9%, 9%, 3% and 46%, respectively.
Energy Group
Cabot's Energy Group, consisting of the Company's LNG business, reported a $0.1 million operating loss, compared to a $5.4 million operating loss in the same quarter last year. The LNG business is seasonal, and historically reports operating losses in the third and fourth quarters. Commencement of shipments from the new Trinidad supply during the June quarter caused the Company's LNG volumes to increase 158% compared with the same quarter last year, and allowed Cabot LNG to realize lower year-to-year gas costs. However, lower year-to-year natural gas prices partially offset the earnings effects of the improved volumes and gas costs. Most of Cabot LNG's earnings improvement in the third quarter came from the buyout of a customer's contract related to their closing of a small power plant.
Forward Looking Information: Included above are statements relating to management's projections of future profits, the possible achievement of the Company's financial goals and objectives and management's expectations for shareholder value creation initiatives and for the Company's product development program. Actual results may differ materially from the results anticipated in the statements included herein due to a variety of factors including market supply and demand conditions, fluctuations in currency exchange rates, costs of raw materials, patent rights of others, stock market conditions, demand for our customers' products and competitors' reactions to market conditions. Timely commercialization of products under development by the Company 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. |
