SEC Filing | Cabot Corporation

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cbt-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-5667

Cabot Corporation

(Exact name of registrant as specified in its charter)

Delaware

04-2271897

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Two Seaport Lane

Boston, Massachusetts

02210-2019

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 345-0100

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $1 par value per share	CBT	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The Company had 56,461,543 shares of common stock, $1.00 par value per share, outstanding as of August 4, 2020.

INDEX

Part I.	Financial Information

	Item 1.	Financial Statements (unaudited)
		Consolidated Statements of Operations	3
		Consolidated Statements of Comprehensive Income (Loss)	4
		Consolidated Balance Sheets	5
		Consolidated Statements of Cash Flows	7
		Consolidated Statements of Changes in Stockholders’ Equity	8
		Notes to the Consolidated Financial Statements	10

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
	Item 4.	Controls and Procedures	42

Part II.	Other Information
	Item 6.	Exhibits	43

Part I. Financial Information

Item 1.

Financial Statements

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

	Three Months Ended June 30						Nine Months Ended June 30
	2020			2019			2020			2019
	(In millions, except per share amounts)
Net sales and other operating revenues	$	518		$	845		$	1,955		$	2,510
Cost of sales		449			675			1,592			1,996
Gross profit		69			170			363			514
Selling and administrative expenses		52			65			230			208
Research and technical expenses		13			16			41			47
Specialty Fluids loss on sale and asset impairment		—			8			1			28
Income (loss) from operations		4			81			91			231
Interest and dividend income		1			2			7			6
Interest expense		(13	)		(14	)		(41	)		(43	)
Other income (expense)		(3	)		—			(6	)		(6	)
Income (loss) before income taxes and equity in earnings of affiliated companies		(11	)		69			51			188
(Provision) benefit for income taxes		5			(30	)		(9	)		(43	)
Equity in earnings of affiliated companies, net of tax		1			1			2			1
Net income (loss)		(5	)		40			44			146
Net income (loss) attributable to noncontrolling interests, net of tax		1			8			10			22
Net income (loss) attributable to Cabot Corporation	$	(6	)	$	32		$	34		$	124

Weighted-average common shares outstanding:
Basic		56.5			58.2			56.7			59.1
Diluted		56.5			58.4			56.7			59.2

Earnings (loss) per common share:
Basic	$	(0.12	)	$	0.55		$	0.59		$	2.08
Diluted	$	(0.12	)	$	0.55		$	0.59		$	2.08

The accompanying notes are an integral part of these consolidated financial statements.

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

UNAUDITED

	Three Months Ended June 30						Nine Months Ended June 30
	2020			2019			2020			2019
	(In millions)
Net income (loss)	$	(5	)	$	40		$	44		$	146
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment, net of tax		31			1			(4	)		(15	)
Derivatives: net investment hedges
(Gains) losses reclassified to interest expense, net of tax		(1	)		(1	)		(3	)		(3	)
(Gains) losses excluded from effectiveness testing and amortized to interest expense, net of tax		—			1			1			1
Pension and other postretirement benefit liability adjustments, net of tax		1			1			2			23
Other comprehensive income (loss)		31			2			(4	)		6
Comprehensive income (loss)		26			42			40			152
Net income (loss) attributable to noncontrolling interests, net of tax		1			8			10			22
Foreign currency translation adjustment attributable to noncontrolling interests, net of tax		2			(2	)		2			—
Comprehensive income (loss) attributable to noncontrolling interests, net of tax		3			6			12			22
Comprehensive income (loss) attributable to Cabot Corporation	$	23		$	36		$	28		$	130

The accompanying notes are an integral part of these consolidated financial statements.

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

UNAUDITED

	June 30, 2020		September 30, 2019
	(In millions)
Current assets:
Cash and cash equivalents	$	162	$	169
Accounts and notes receivable, net of reserve for doubtful accounts of $2 and $3		362		530
Inventories:
Raw materials		88		107
Finished goods		250		305
Other		55		54
Total inventories		393		466
Prepaid expenses and other current assets		66		45
Total current assets		983		1,210
Property, plant and equipment, net		1,412		1,348
Goodwill		130		90
Equity affiliates		36		39
Intangible assets, net		102		96
Deferred income taxes		181		163
Other assets		175		58
Total assets	$	3,019	$	3,004

The accompanying notes are an integral part of these consolidated financial statements.

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

UNAUDITED

	June 30, 2020			September 30, 2019
	(In millions, except share
	and per share amounts)
Current liabilities:
Short-term borrowings	$	13		$	33
Accounts payable and accrued liabilities		460			537
Income taxes payable		14			22
Current portion of long-term debt		7			7
Total current liabilities		494			599
Long-term debt		1,164			1,024
Deferred income taxes		41			41
Other liabilities		277			206
Commitments and contingencies (Note G)
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: 56,611,504 and 57,250,454 shares
Outstanding: 56,460,448 and 57,080,589 shares		57			57
Less cost of 151,056 and 169,865 shares of common treasury stock		(4	)		(5	)
Retained earnings		1,277			1,337
Accumulated other comprehensive income (loss)		(400	)		(391	)
Total Cabot Corporation stockholders' equity		930			998
Noncontrolling interests		113			136
Total stockholders' equity		1,043			1,134
Total liabilities and stockholders' equity	$	3,019		$	3,004

The accompanying notes are an integral part of these consolidated financial statements.

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

	Nine Months Ended June 30
	2020			2019
	(In millions)
Cash Flows from Operating Activities:
Net income (loss)	$	44		$	146
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization		117			110
Specialty Fluids loss on sale and asset impairment		—			28
Impairment of investment in equity affiliate		—			11
Deferred tax provision (benefit)		(20	)		(20	)
Employee benefit plan settlement		—			6
Equity in earnings of affiliated companies		(2	)		(1	)
Non-cash compensation		5			11
Other non-cash (income) expense		4			(2	)
Cash dividends received from equity affiliates		1			2
Changes in assets and liabilities:
Accounts and notes receivable		172			6
Inventories		74			(14	)
Prepaid expenses and other assets		(25	)		(1	)
Accounts payable and accrued liabilities		(68	)		(65	)
Income taxes payable		(10	)		(24	)
Other liabilities		(14	)		(27	)
Cash provided (used) by operating activities		278			166
Cash Flows from Investing Activities:
Additions to property, plant and equipment		(162	)		(155	)
Proceeds from sale of business, net of cash held in escrow of $— and $5		—			130
Acquisitions of businesses, net of cash acquired of $1 and $—		(92	)		(3	)
Other		2			(5	)
Cash provided (used) by investing activities		(252	)		(33	)
Cash Flows from Financing Activities:
Borrowings under financing arrangements		—			29
Repayments under financing arrangements		—			(18	)
Proceeds from issuance (repayments) of commercial paper, net		(20	)		(176	)
Proceeds from long-term debt		444			344
Repayments of long-term debt		(334	)		(75	)
Repayments of redeemable preferred stock		—			(25	)
Purchases of common stock		(44	)		(144	)
Proceeds from sales of common stock		3			2
Cash dividends paid to noncontrolling interests		(26	)		(23	)
Cash dividends paid to common stockholders		(60	)		(60	)
Cash provided (used) by financing activities		(37	)		(146	)
Effects of exchange rate changes on cash		4			(15	)
Increase (decrease) in cash and cash equivalents		(7	)		(28	)
Cash and cash equivalents at beginning of period		169			175
Cash and cash equivalents at end of period	$	162		$	147

The accompanying notes are an integral part of these consolidated financial statements.

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

UNAUDITED

	Common Stock, Net of Treasury Stock				Additional Paid-in		Retained			Accumulated Other Comprehensive			Total Cabot Corporation Stockholders’			Noncontrolling		Total Stockholders’
	Shares		Cost		Capital		Earnings			Income (Loss)			Equity			Interests		Equity
	(In millions, except share amounts)
Balance at September 30, 2019		57,081	$	52	$	—	$	1,337		$	(391	)	$	998		$	136	$	1,134
Adoption of accounting standards								3			(3	)		—					—
Net income (loss)								41						41			5		46
Total other comprehensive income (loss)											40			40			3		43
Cash dividends paid:
Common stock, $0.35 per share								(20	)					(20	)				(20	)
Cash dividends declared to noncontrolling interests