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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 March 31, 2022

or

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 56,433,688 shares of common stock, $1.00 par value per share, outstanding as of May 4, 2022.

 

 

 


 

 

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

22

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

 

Item 4.

Controls and Procedures

31

 

 

 

Part II.

Other Information

 

 

Item 1A.

Risk Factors

32

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

33

 

Item 6.

Exhibits

34

 

2

 


 

 

Part I. Financial Information

Item 1.

Financial Statements

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

 

 

 

Three Months Ended March 31

 

 

Six Months Ended March 31

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In millions, except per share amounts)

 

Net sales and other operating revenues

 

$

1,092

 

 

$

842

 

 

$

2,060

 

 

$

1,588

 

Cost of sales

 

 

860

 

 

 

628

 

 

 

1,630

 

 

 

1,181

 

Gross profit

 

 

232

 

 

 

214

 

 

 

430

 

 

 

407

 

Selling and administrative expenses

 

 

74

 

 

 

71

 

 

 

145

 

 

 

132

 

Research and technical expenses

 

 

14

 

 

 

15

 

 

 

27

 

 

 

29

 

Loss on sale of business and asset impairment charge (Note D)

 

 

7

 

 

 

 

 

 

204

 

 

 

 

Gain on bargain purchase of a business (Note C)

 

 

(24

)

 

 

 

 

 

(24

)

 

 

 

Income (loss) from operations

 

 

161

 

 

 

128

 

 

 

78

 

 

 

246

 

Interest and dividend income

 

 

4

 

 

 

2

 

 

 

7

 

 

 

4

 

Interest expense

 

 

(11

)

 

 

(13

)

 

 

(23

)

 

 

(25

)

Other income (expense)

 

 

(7

)

 

 

1

 

 

 

(8

)

 

 

(8

)

Income (loss) before income taxes

   and equity in earnings of affiliated companies

 

 

147

 

 

 

118

 

 

 

54

 

 

 

217

 

(Provision) benefit for income taxes

 

 

(36

)

 

 

(34

)

 

 

(24

)

 

 

(63

)

Equity in earnings of affiliated companies, net of tax

 

 

3

 

 

 

1

 

 

 

4

 

 

 

1

 

Net income (loss)

 

 

114

 

 

 

85

 

 

 

34

 

 

 

155

 

Net income (loss) attributable to noncontrolling interests, net

   of tax

 

 

7

 

 

 

10

 

 

 

16

 

 

 

20

 

Net income (loss) attributable to Cabot Corporation

 

$

107

 

 

$

75

 

 

$

18

 

 

$

135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

56.6

 

 

 

56.6

 

 

 

56.5

 

 

 

56.6

 

Diluted

 

 

57.1

 

 

 

56.7

 

 

 

56.9

 

 

 

56.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.86

 

 

$

1.31

 

 

$

0.30

 

 

$

2.37

 

Diluted

 

$

1.84

 

 

$

1.30

 

 

$

0.30

 

 

$

2.36

 

 

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

3

 


 

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

UNAUDITED

 

 

 

Three Months Ended March 31

 

 

Six Months Ended March 31

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In millions)

 

Net income (loss)

 

$

114

 

 

$

85

 

 

$

34

 

 

$

155

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, net of tax

 

 

46

 

 

 

(76

)

 

 

18

 

 

 

18

 

Derivatives: net investment hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Gains) losses reclassified to interest expense, net of tax

 

 

(2

)

 

 

(2

)

 

 

(3

)

 

 

(3

)

(Gains) losses excluded from effectiveness testing and amortized to interest expense, net of tax

 

 

1

 

 

 

1

 

 

 

1

 

 

 

1

 

Pension and other postretirement benefit liability adjustments, net of tax

 

 

1

 

 

 

1

 

 

 

2

 

 

 

4

 

Other comprehensive income (loss), net of tax of $‒, $‒, $(1), and $(3)

 

 

46

 

 

 

(76

)

 

 

18

 

 

 

20

 

Comprehensive income (loss)

 

 

160

 

 

 

9

 

 

 

52

 

 

 

175

 

Net income (loss) attributable to noncontrolling interests, net

   of tax

 

 

7

 

 

 

10

 

 

 

16

 

 

 

20

 

Foreign currency translation adjustment attributable to

   noncontrolling interests, net of tax

 

 

1

 

 

 

(2

)

 

 

3

 

 

 

5

 

Comprehensive income (loss) attributable to noncontrolling interests

 

 

8

 

 

 

8

 

 

 

19

 

 

 

25

 

Comprehensive income (loss) attributable to Cabot Corporation

 

$

152

 

 

$

1

 

 

$

33

 

 

$

150

 

 

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

4

 


 

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

UNAUDITED

 

 

 

March 31, 2022

 

 

September 30, 2021

 

 

 

(In millions)

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

215

 

 

$

168

 

Accounts and notes receivable, net of reserve for doubtful

   accounts of $3 and $4

 

 

791

 

 

 

645

 

Inventories:

 

 

 

 

 

 

 

 

Raw materials

 

 

193

 

 

 

168

 

Finished goods

 

 

386

 

 

 

300

 

Other

 

 

54

 

 

 

55

 

Total inventories

 

 

633

 

 

 

523

 

Prepaid expenses and other current assets

 

 

139

 

 

 

89

 

Total current assets

 

 

1,778

 

 

 

1,425

 

Property, plant and equipment, net

 

 

1,291

 

 

 

1,376

 

Goodwill

 

 

141

 

 

 

140

 

Equity affiliates

 

 

16

 

 

 

40

 

Intangible assets, net

 

 

70

 

 

 

100

 

Deferred income taxes

 

 

63

 

 

 

53

 

Other assets

 

 

165

 

 

 

172

 

Total assets

 

$

3,524

 

 

$

3,306

 

 

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

5

 


 

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

UNAUDITED

 

 

 

March 31, 2022

 

 

September 30, 2021

 

 

 

(In millions, except share

 

 

 

and per share amounts)

 

Current liabilities:

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

253

 

 

$

72

 

Accounts payable and accrued liabilities

 

 

737

 

 

 

667

 

Income taxes payable

 

 

44

 

 

 

35

 

Current portion of long-term debt

 

 

373

 

 

 

373

 

Total current liabilities

 

 

1,407

 

 

 

1,147

 

Long-term debt

 

 

711

 

 

 

717

 

Deferred income taxes

 

 

73

 

 

 

73

 

Other liabilities

 

 

267

 

 

 

279

 

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: 56,571,822 and 56,870,237 shares, Outstanding: 56,431,554 and 56,726,818 shares

 

 

57

 

 

 

57

 

Less cost of 140,268 and 143,419 shares of common treasury stock

 

 

(4

)

 

 

(4

)

Additional paid-in capital

 

 

4

 

 

 

24

 

Retained earnings

 

 

1,135

 

 

 

1,159

 

Accumulated other comprehensive income (loss)

 

 

(274

)

 

 

(289

)

Total Cabot Corporation stockholders' equity

 

 

918

 

 

 

947

 

Noncontrolling interests

 

 

148

 

 

 

143

 

Total stockholders' equity

 

 

1,066

 

 

 

1,090

 

Total liabilities and stockholders' equity

 

$

3,524

 

 

$

3,306

 

 

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

6

 


 

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 

 

 

Six Months Ended March 31

 

 

 

2022

 

 

2021

 

 

 

(In millions)

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

34

 

 

$

155

 

Adjustments to reconcile net income (loss) to cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

75

 

 

 

77

 

Loss on sale of business and asset impairment charge

 

 

204

 

 

 

 

Gain on bargain purchase of a business

 

 

(24

)

 

 

 

Deferred tax provision (benefit)

 

 

(45

)

 

 

1

 

Employee benefit plan settlement

 

 

 

 

 

6

 

Equity in earnings of affiliated companies

 

 

(4

)

 

 

(1

)

Non-cash compensation

 

 

11

 

 

 

10

 

Other non-cash (income) expense

 

 

8

 

 

 

19

 

Cash dividends received from equity affiliates

 

 

 

 

 

1

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and notes receivable

 

 

(161

)

 

 

(155

)

Inventories

 

 

(177

)

 

 

(80

)

Prepaid expenses and other assets

 

 

(55

)

 

 

(8

)

Accounts payable and accrued liabilities

 

 

84

 

 

 

56

 

Income taxes payable

 

 

10

 

 

 

12

 

Other liabilities

 

 

1

 

 

 

(7

)

Cash provided (used) by operating activities

 

 

(39

)

 

 

86

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(71

)

 

 

(69

)

Proceeds from sale of business

 

 

79

 

 

 

 

Cash assumed from acquisition of business

 

 

5

 

 

 

 

Other

 

 

2

 

 

 

3

 

Cash provided (used) by investing activities

 

 

15

 

 

 

(66

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from short-term borrowings

 

 

13

 

 

 

 

Proceeds from issuance (repayments) of commercial paper, net

 

 

167

 

 

 

31

 

Proceeds from long-term debt

 

 

 

 

 

100

 

Repayments of long-term debt

 

 

(7

)

 

 

(117

)

Purchases of common stock

 

 

(34

)

 

 

(2

)

Proceeds from sales of common stock

 

 

3

 

 

 

2

 

Cash dividends paid to noncontrolling interests

 

 

(15

)

 

 

(1

)

Cash dividends paid to common stockholders

 

 

(42

)

 

 

(40

)

Cash provided (used) by financing activities

 

 

85

 

 

 

(27

)

Effects of exchange rate changes on cash

 

 

(16

)

 

 

6

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

 

45

 

 

 

(1

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

170

 

 

 

151

 

Cash, cash equivalents and restricted cash at end of period

 

$

215

 

 

$

150

 

 

The following table presents the Company’s cash, cash equivalents and restricted cash by category within the Consolidated Balance Sheets:

 

 

March 31, 2022

 

 

March 31, 2021

 

 

 

(In millions)

 

Cash and cash equivalents

 

$

215

 

 

$

146

 

Restricted cash classified within Prepaid expenses and other current assets

 

 

 

 

 

4

 

Cash, cash equivalents and restricted cash

 

$

215

 

 

$

150

 

 

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

 

 

7

 


 

 

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, 2021

 

 

56,727

 

 

$

53

 

 

$

24

 

 

$

1,159

 

 

$

(289

)

 

$

947

 

 

$

143

 

 

$

1,090

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(89

)

 

 

 

 

 

 

(89

)

 

 

9

 

 

 

(80

)

Total other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30

)

 

 

(30

)

 

 

2

 

 

 

(28

)

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.37 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

 

 

 

 

(21

)

 

 

 

 

 

 

(21

)

Issuance of stock under equity compensation plans

 

 

202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of share-based compensation

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

6

 

Purchase and retirement of common stock

 

 

(349

)

 

 

 

 

 

(19

)

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

 

(19

)

Balance at December 31, 2021

 

 

56,580

 

 

$

53

 

 

$

11

 

 

$

1,049

 

 

$

(319

)

 

$

794

 

 

$

154

 

 

$

948

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107

 

 

 

 

 

 

 

107

 

 

 

7

 

 

 

114

 

Total other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45

 

 

 

45

 

 

 

1

 

 

 

46

 

Cash dividends paid: