SEC Filing | Cabot Corporation

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cbt-10q_20220630.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, 2022

☐	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 56,299,241 shares of common stock, $1.00 par value per share, outstanding as of August 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 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
	Item 6.	Exhibits	33

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
	2022			2021			2022			2021
	(In millions, except per share amounts)
Net sales and other operating revenues	$	1,149		$	917		$	3,209		$	2,505
Cost of sales		914			703			2,544			1,884
Gross profit		235			214			665			621
Selling and administrative expenses		51			68			196			200
Research and technical expenses		14			12			41			41
Loss on sale of business and asset impairment charge (Note D)		2			—			206			—
Gain on bargain purchase of a business (Note C)		—			—			(24	)		—
Income (loss) from operations		168			134			246			380
Interest and dividend income		—			2			7			6
Interest expense		(15	)		(12	)		(38	)		(37	)
Other income (expense)		(1	)		(1	)		(9	)		(9	)
Income (loss) before income taxes and equity in earnings of affiliated companies		152			123			206			340
(Provision) benefit for income taxes		(49	)		(30	)		(73	)		(93	)
Equity in earnings of affiliated companies, net of tax		3			2			7			3
Net income (loss)		106			95			140			250
Net income (loss) attributable to noncontrolling interests, net of tax		9			9			25			29
Net income (loss) attributable to Cabot Corporation	$	97		$	86		$	115		$	221

Weighted-average common shares outstanding:
Basic		56.3			56.7			56.5			56.7
Diluted		56.8			57.0			56.9			56.8

Earnings (loss) per common share:
Basic	$	1.70		$	1.48		$	2.00		$	3.85
Diluted	$	1.69		$	1.48		$	1.99		$	3.84

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
	2022			2021			2022			2021
	(In millions)
Net income (loss)	$	106		$	95		$	140		$	250
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment, net of tax		(102	)		71			(84	)		89
Derivatives: net investment hedges
(Gains) losses reclassified to interest expense, net of tax		(1	)		(1	)		(4	)		(4	)
(Gains) losses excluded from effectiveness testing and amortized to interest expense, net of tax		—			—			1			1
Pension and other postretirement benefit liability adjustments, net of tax		—			2			2			6
Other comprehensive income (loss), net of tax of $ —, $1, ($1), and ($2)		(103	)		72			(85	)		92
Comprehensive income (loss)		3			167			55			342
Net income (loss) attributable to noncontrolling interests, net of tax		9			9			25			29
Foreign currency translation adjustment attributable to noncontrolling interests, net of tax		(9	)		3			(6	)		8
Comprehensive income (loss) attributable to noncontrolling interests		—			12			19			37
Comprehensive income (loss) attributable to Cabot Corporation	$	3		$	155		$	36		$	305

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

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

UNAUDITED

	June 30, 2022		September 30, 2021
	(In millions)
Current assets:
Cash and cash equivalents	$	208	$	168
Accounts and notes receivable, net of reserve for doubtful accounts of $3 and $4		876		645
Inventories:
Raw materials		184		168
Finished goods		424		300
Other		56		55
Total inventories		664		523
Prepaid expenses and other current assets		123		89
Total current assets		1,871		1,425
Property, plant and equipment, net		1,273		1,376
Goodwill		136		140
Equity affiliates		18		40
Intangible assets, net		67		100
Deferred income taxes		57		53
Other assets		146		172
Total assets	$	3,568	$	3,306

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

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

UNAUDITED

	June 30, 2022			September 30, 2021
	(In millions, except share
	and per share amounts)
Current liabilities:
Short-term borrowings	$	291		$	72
Accounts payable and accrued liabilities		738			667
Income taxes payable		49			35
Current portion of long-term debt		22			373
Total current liabilities		1,100			1,147
Long-term debt		1,097			717
Deferred income taxes		73			73
Other liabilities		255			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: 56,436,645 and 56,870,237 shares, Outstanding: 56,298,570 and 56,726,818 shares		56			57
Less cost of 138,075 and 143,419 shares of common treasury stock		(3	)		(4	)
Additional paid-in capital		—			24
Retained earnings		1,210			1,159
Accumulated other comprehensive income (loss)		(368	)		(289	)
Total Cabot Corporation stockholders' equity		895			947
Noncontrolling interests		148			143
Total stockholders' equity		1,043			1,090
Total liabilities and stockholders' equity	$	3,568		$	3,306

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
	2022			2021
	(In millions)
Cash Flows from Operating Activities:
Net income (loss)	$	140		$	250
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization		111			117
Loss on sale of business and asset impairment charge		206			—
Gain on bargain purchase of a business		(24	)		—
Gain on sale of land		(17	)		—
Deferred tax provision (benefit)		(39	)		4
Employee benefit plan settlement		—			7
Equity in earnings of affiliated companies		(7	)		(3	)
Non-cash compensation		17			16
Other non-cash (income) expense		15			10
Cash dividends received from equity affiliates		1			2
Changes in assets and liabilities:
Accounts and notes receivable		(286	)		(198	)
Inventories		(231	)		(125	)
Prepaid expenses and other assets		(35	)		(15	)
Accounts payable and accrued liabilities		127			97
Income taxes payable		18			12
Other liabilities		(1	)		(17	)
Cash provided (used) by operating activities		(5	)		157
Cash Flows from Investing Activities:
Additions to property, plant and equipment		(121	)		(115	)
Proceeds from sale of business		79			—
Cash paid for acquisition of business, net of cash acquired of $5 and $-		(9	)		—
Proceeds from sale of land		18			—
Other		2			5
Cash provided (used) by investing activities		(31	)		(110	)
Cash Flows from Financing Activities:
Proceeds from short-term borrowings		26			—
Proceeds from issuance (repayments) of commercial paper, net		193			46
Proceeds from long-term debt, net of issuance costs		394			150
Repayments of long-term debt		(357	)		(167	)
Purchases of common stock		(48	)		(2	)
Proceeds from sales of common stock		6			5
Cash dividends paid to noncontrolling interests		(22	)		(20	)
Cash dividends paid to common stockholders		(63	)		(60	)
Cash provided (used) by financing activities		129			(48	)
Effects of exchange rate changes on cash		(49	)		23
Increase (decrease) in cash, cash equivalents and restricted cash		44			22
Cash, cash equivalents and restricted cash at beginning of period		170			151
Cash, cash equivalents and restricted cash at end of period	$	214		$	173

	June 30, 2022		June 30, 2021
	(In millions)
Cash and cash equivalents	$	208	$	173
Restricted cash classified within Prepaid expenses and other current assets		6		—
Cash, cash equivalents and restricted cash	$	214	$	173

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, 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