UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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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
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
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 |
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The |
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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
The Company had
INDEX
Part I. |
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Item 1. |
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3 |
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4 |
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5 |
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7 |
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8 |
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10 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
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Item 3. |
31 |
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Item 4. |
31 |
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Part II. |
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Item 2. |
32 |
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Item 6. |
33 |
2
Part I. Financial Information
Item 1. |
Financial Statements |
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
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Three Months Ended June 30 |
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Nine Months Ended June 30 |
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2022 |
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2021 |
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2022 |
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2021 |
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(In millions, except per share amounts) |
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Net sales and other operating revenues |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling and administrative expenses |
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Research and technical expenses |
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Loss on sale of business and asset impairment charge (Note D) |
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— |
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— |
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Gain on bargain purchase of a business (Note C) |
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— |
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— |
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( |
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— |
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Income (loss) from operations |
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Interest and dividend income |
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— |
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Interest expense |
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Other income (expense) |
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Income (loss) before income taxes and equity in earnings of affiliated companies |
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(Provision) benefit for income taxes |
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( |
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Equity in earnings of affiliated companies, net of tax |
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Net income (loss) |
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Net income (loss) attributable to noncontrolling interests, net of tax |
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Net income (loss) attributable to Cabot Corporation |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares outstanding: |
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Basic |
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Diluted |
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Earnings (loss) per common share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
3
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
UNAUDITED
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Three Months Ended June 30 |
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Nine Months Ended June 30 |
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2022 |
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2021 |
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2022 |
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2021 |
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(In millions) |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax |
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Foreign currency translation adjustment, net of tax |
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( |
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( |
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Derivatives: net investment hedges |
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(Gains) losses reclassified to interest expense, net of tax |
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( |
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(Gains) losses excluded from effectiveness testing and amortized to interest expense, net of tax |
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— |
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— |
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Pension and other postretirement benefit liability adjustments, net of tax |
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— |
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Other comprehensive income (loss), net of tax of |
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( |
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( |
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Comprehensive income (loss) |
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Net income (loss) attributable to noncontrolling interests, net of tax |
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Foreign currency translation adjustment attributable to noncontrolling interests, net of tax |
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( |
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( |
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Comprehensive income (loss) attributable to noncontrolling interests |
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— |
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Comprehensive income (loss) attributable to Cabot Corporation |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
4
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
UNAUDITED
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June 30, 2022 |
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September 30, 2021 |
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(In millions) |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts and notes receivable, net of reserve for doubtful accounts of $ |
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Inventories: |
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Raw materials |
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Finished goods |
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Other |
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Total inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Equity affiliates |
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Intangible assets, net |
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Deferred income taxes |
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Other assets |
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Total assets |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
5
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
UNAUDITED
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June 30, 2022 |
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September 30, 2021 |
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(In millions, except share |
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and per share amounts) |
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Current liabilities: |
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Short-term borrowings |
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$ |
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$ |
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Accounts payable and accrued liabilities |
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Income taxes payable |
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Current portion of long-term debt |
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Total current liabilities |
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Long-term debt |
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Deferred income taxes |
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Other liabilities |
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Contingencies (Note G) |
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Stockholders' equity: |
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Preferred stock: |
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Authorized: |
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Common stock: |
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Authorized: |
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Less cost of |
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( |
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( |
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Additional paid-in capital |
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— |
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Retained earnings |
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Accumulated other comprehensive income (loss) |
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( |
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( |
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Total Cabot Corporation stockholders' equity |
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Noncontrolling interests |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
6
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
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Nine Months Ended June 30 |
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2022 |
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2021 |
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(In millions) |
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Cash Flows from Operating Activities: |
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Net income (loss) |
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$ |
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$ |
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Adjustments to reconcile net income (loss) to cash provided by operating activities: |
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Depreciation and amortization |
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Loss on sale of business and asset impairment charge |
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— |
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Gain on bargain purchase of a business |
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( |
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— |
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Gain on sale of land |
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( |
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— |
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Deferred tax provision (benefit) |
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( |
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Employee benefit plan settlement |
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— |
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Equity in earnings of affiliated companies |
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( |
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( |
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Non-cash compensation |
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Other non-cash (income) expense |
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Cash dividends received from equity affiliates |
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Changes in assets and liabilities: |
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Accounts and notes receivable |
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( |
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( |
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Inventories |
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( |
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( |
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Prepaid expenses and other assets |
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( |
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( |
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Accounts payable and accrued liabilities |
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Income taxes payable |
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Other liabilities |
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( |
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Cash provided (used) by operating activities |
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( |
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Cash Flows from Investing Activities: |
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Additions to property, plant and equipment |
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( |
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Proceeds from sale of business |
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— |
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Cash paid for acquisition of business, net of cash acquired of $ |
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( |
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— |
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Proceeds from sale of land |
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— |
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Other |
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Cash provided (used) by investing activities |
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( |
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( |
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Cash Flows from Financing Activities: |
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Proceeds from short-term borrowings |
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— |
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Proceeds from issuance (repayments) of commercial paper, net |
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Proceeds from long-term debt, net of issuance costs |
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Repayments of long-term debt |
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( |
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Purchases of common stock |
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( |
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Proceeds from sales of common stock |
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Cash dividends paid to noncontrolling interests |
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( |
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Cash dividends paid to common stockholders |
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( |
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( |
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Cash provided (used) by financing activities |
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( |
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Effects of exchange rate changes on cash |
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( |
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Increase (decrease) in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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June 30, 2022 |
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June 30, 2021 |
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(In millions) |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash classified within Prepaid expenses and other current assets |
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— |
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Cash, cash equivalents and restricted cash |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
7
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
UNAUDITED
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Common Stock, Net of Treasury Stock |
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Additional Paid-in |
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Retained |
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Accumulated Other Comprehensive |
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Total Cabot Corporation Stockholders’ |
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Noncontrolling |
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Total Stockholders’ |
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Shares |
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Cost |
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Capital |
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Earnings |
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Income (Loss) |
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Equity |
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Interests |
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Equity |
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(In millions, except share amounts) |
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Balance at September 30, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Net income (loss) |
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( |
) |
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( |
) |
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( |
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Total other comprehensive income (loss) |
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( |
) |
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( |
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( |
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Cash dividends paid: |
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Common stock, $ |
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( |
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( |
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( |
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Issuance of stock under equity compensation plans |
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— |
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— |
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— |
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— |
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Amortization of share-based compensation |
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Purchase and retirement of common stock |
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( |
) |
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— |
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( |
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— |
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( |
) |
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( |
) |
Balance at December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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|
|
$ |
|
|
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Cash dividends declared to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of stock under equity compensation plans |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase and retirement of common stock |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Balance at March 31, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Cash dividends declared to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Issuance of stock under equity compensation plans |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase and retirement of common stock |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Balance at June 30, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
8
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, 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Cash dividends declared to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of stock under equity compensation plans |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase and retirement of common stock |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Amount reclassified to retained earnings in excess of additional paid in capital |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Balance at December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Cash dividend declared to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Issuance of stock under equity compensation plans |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase and retirement of common stock |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Amount reclassified to retained earnings in excess of additional paid in capital |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Balance at March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Cash dividend declared to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of stock under equity compensation plans |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase and retirement of common stock |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Amount reclassified to retained earnings in excess of additional paid in capital |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Balance at June 30, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
9
CABOT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
UNAUDITED
A. Basis of Presentation
The consolidated financial statements have been prepared in conformity with accounting policies generally accepted in the United States (“U.S.”) and include the accounts of Cabot Corporation (“Cabot” or the “Company”) and its wholly-owned subsidiaries and majority-owned and controlled U.S. and non-U.S. subsidiaries. Additionally, Cabot considers consolidation of entities over which control is achieved through means other than voting rights. Intercompany transactions have been eliminated in consolidation.
The unaudited consolidated financial statements have been prepared in accordance with the requirements of Form 10-Q and consequently do not include all disclosures required by Form 10-K. Additional information may be obtained by referring to Cabot’s Annual Report on Form 10-K for its fiscal year ended September 30, 2021 (“2021 10-K”).
The financial information submitted herewith is unaudited and reflects all adjustments which are, in the opinion of management, necessary to provide a fair statement of the results for the interim periods ended June 30, 2022 and 2021. All such adjustments are of a normal recurring nature. The results for interim periods are not necessarily indicative of the results to be expected for the fiscal year.
As discussed in Note C, on February 28, 2022, the Company acquired Tokai Carbon (Tianjin) Co. (“Tokai Carbon”). The results of operations and cash flows of Tokai Carbon are included in the Company’s consolidated financial statements from the date of acquisition.
As discussed in Note D, on March 1, 2022, the Company completed the sale of its Purification Solutions business to an affiliate of funds advised by One Equity Partners (“OEP”). The sale of the Purification Solutions business did not meet the criteria to be reported as a discontinued operation as it did not constitute a significant strategic business shift for the Company, and has no major effect on operations. Therefore, prior periods’ consolidated financial statements and disclosures have not been retroactively restated to reflect the impact of the sale of the Purification Solutions business.
B. Significant Accounting Policies
Recently Adopted Accounting Standards
In December 2019, the FASB issued a new standard Simplifying the Accounting for Income Taxes. The new guidance simplifies the accounting for income taxes by removing several exceptions in the current standard and adding guidance that reduces complexity in certain areas. The new standard is effective for fiscal years beginning after December 15, 2020. The Company adopted this standard on October 1, 2021. The adoption of this standard did not materially impact the Company’s consolidated financial statements.
Recent Accounting Pronouncements
In March 2020, the FASB issued a new standard on Reference Rate Reform, which provides temporary optional expedients and exceptions to the existing guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The standard was effective upon issuance and may generally be applied through December 31, 2022 to any new or amended contracts, hedging relationships, and other transactions that reference LIBOR. The Company is currently evaluating the timing of adoption and the impact of the adoption of this standard on its consolidated financial statements.
C. Acquisition
Tokai Carbon (Tianjin) Co.
On February 28, 2022, the Company purchased
10
The provisional estimates of the fair value of assets and liabilities acquired as of February 28, 2022 are set forth below along with the calculation of the Gain on bargain purchase of a business based on the cash consideration.
|
|
(In millions) |
|
|
Fair value of asset acquired |
|
|
|
|
Cash |
|
$ |
|
|
Accounts and notes receivable |
|
|
|
|
Inventories |
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
Property, plant and equipment |
|
|
|
|
Amounts attributable to assets acquired |
|
|
|
|
|
|
|
|
|
Fair value of liabilities assumed |
|
|
|
|
Accounts payable and accrued liabilities |
|
|
( |
) |
Amounts attributable to liabilities assumed |
|
|
( |
) |
|
|
|
|
|
Total identifiable net assets |
|
|
|
|
|
|
|
|
|
Cash consideration |
|
|
|
|
|
|
|
|
|
Gain on bargain purchase of a business |
|
$ |
|
|
The excess of the fair value of the net assets over the purchase price was recorded as a gain of $
Cabot paid the $
D. Divestitures
Sale of Purification Solutions Business
On March 1, 2022, the Company completed the sale of its Purification Solutions business, a reporting segment of the Company, to OEP for total expected cash proceeds of approximately $
The Company recognized a pre-tax impairment charge on the Purification Solutions business of $
Sale of Marshall Mine
In September 2020, the Company entered into an agreement to sell its lignite mine located in Marshall, Texas to ADA Carbon Solutions, LLC (“ADACS”) for a nominal amount. As part of the transaction, the Company agreed to fund a portion of the costs ADACS expects to incur to close the mine. Additionally, in conjunction with the sale of the mine, the Purification Solutions business entered into a long-term supply agreement with ADACS, a producer of lignite-based activated carbon, which included an agreement for the Company to fund certain capital expenditures. These liabilities totaled $
11
E. Goodwill and Intangible Assets
The carrying amount of goodwill attributable to each reportable segment with goodwill balances and the changes in those balances during the nine months ended June 30, 2022 are as follows:
|
|
Reinforcement Materials |
|
|
Performance Chemicals |
|
|
Total |
|
|||
|
|
(In millions) |
|
|||||||||
Balance at September 30, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Foreign currency impact |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at June 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The following table provides information regarding the Company’s intangible assets:
|
|
June 30, 2022 |
|
|
September 30, 2021 |
|
||||||||||||||||||
|
|
Gross Carrying Value |
|
|
Accumulated Amortization |
|
|
Net Intangible Assets |
|
|
Gross Carrying Value |
|
|
Accumulated Amortization |
|
|
Net Intangible Assets |
|
||||||
|
|
(In millions) |
|
|||||||||||||||||||||
Intangible assets with finite lives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed technologies |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Trademarks |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Customer relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Total intangible assets |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Intangible assets are amortized over their estimated useful lives, which range between ten and
12
F. Accumulated Other Comprehensive Income (Loss) (“AOCI”)
Comprehensive income combines net income (loss) and other comprehensive income items, which are reported as components of stockholders’ equity in the accompanying Consolidated Balance Sheets.
Changes in each component of AOCI, net of tax, were as follows:
|
|
Currency Translation Adjustment |
|
|
Pension and Other Postretirement Benefit Liability Adjustments |
|
|
Total |
|
|||
|
|
(In millions) |
|
|||||||||
Balance at September 30, 2021, attributable to Cabot Corporation |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss) before reclassifications |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Amounts reclassified from AOCI |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Less: Other comprehensive income (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
— |
|
|
|
|
|
Balance at December 31, 2021, attributable to Cabot Corporation |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive income (loss) before reclassifications |
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from AOCI |
|
|
|
|
|
|
— |
|
|
|
|
|
Less: Other comprehensive income (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
— |
|
|
|
|
|
Balance at March 31, 2022, attributable to Cabot Corporation |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss) before reclassifications |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amounts reclassified from AOCI |
|
|
( |
) |
|
|
|
|
|
|
— |
|
Less: Other comprehensive income (loss) attributable to noncontrolling interests |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at June 30, 2022, attributable to Cabot Corporation |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The amounts reclassified out of AOCI and into the Consolidated Statements of Operations in each of the three and nine months ended June 30, 2022 and 2021 were as follows:
|
|
Affected Line Item in the Consolidated |
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
Statements of Operations |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|||||
Derivatives: net investment hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gains) losses reclassified to interest expense |
|
Interest expense |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(Gains) losses excluded from effectiveness testing and amortized to interest expense |
|
Interest expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Release of currency translation adjustment |
|
Loss on sale of business and asset impairment charge |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Pension and other postretirement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Release of actuarial losses and prior service cost (credit) |
|
Loss on sale of business and asset impairment charge |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Amortization of actuarial losses and prior service cost (credit) |
|
Net Periodic Benefit Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement charge |
|
Net Periodic Benefit Cost |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total before tax |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
13
G. Contingencies
Respirator Liabilities
Cabot has exposure in connection with a safety respiratory products business that a subsidiary acquired from American Optical Corporation (“AO”) in an April 1990 asset purchase transaction. The subsidiary manufactured respirators under the AO brand and disposed of that business in July 1995. In connection with its acquisition of the business, the subsidiary agreed, in certain circumstances, to assume a portion of AO’s liabilities, including costs of legal fees together with amounts paid in settlements and judgments, allocable to AO respiratory products used prior to the 1990 purchase by the Cabot subsidiary. In exchange for the subsidiary’s assumption of certain of AO’s respirator liabilities, AO agreed to provide to the subsidiary the benefits of: (i) AO’s insurance coverage for the period prior to the 1990 acquisition and (ii) a former owner’s indemnity of AO holding it harmless from any liability allocable to AO respiratory products used prior to May 1982. As more fully described in the 2021 10-K, the respirator liabilities generally involve claims for personal injury, including asbestosis, silicosis and coal worker’s pneumoconiosis, allegedly resulting from the use of respirators that are alleged to have been negligently designed and/or labeled. At no time did this respiratory product line represent a significant portion of the respirator market. In addition to Cabot’s subsidiary, other parties are responsible for significant portions of the costs of these respirator liabilities (as defined in the 2021 10-K, the “Payor Group”).
Cabot has a reserve to cover its expected share of liabilities for pending and future respirator liability claims, which is included in Other liabilities and Accounts payable and accrued liabilities on the Consolidated Balance Sheets. The Company expects these liabilities to be incurred over a number of years. The reserve balance decreased from $
The Company’s current estimate of the cost of its share of pending and future respirator liability claims is based on facts and circumstances existing at this time, including the number and nature of the remaining claims. Developments that could affect the Company’s estimate include, but are not limited to, (i) significant changes in the number of future claims, (ii) changes in the rate of dismissals without payment of pending claims, (iii) significant changes in the average cost of resolving claims, including potential settlements of groups of claims, (iv) significant changes in the legal costs of defending these claims, (v) changes in the nature of claims received or changes in our assessment of the viability of these claims, (vi) trial and appellate outcomes, (vii) changes in the law and procedure applicable to these claims, (viii) the financial viability of the parties that contribute to the payment of respirator claims, (ix) exhaustion or changes in the recoverability of the insurance coverage maintained by certain members of the Payor Group, or a change in the availability of the indemnity provided by a former owner of AO, (x) changes in the allocation of costs among the various parties paying legal and settlement costs, and (xi) a determination that the assumptions that were used to estimate Cabot’s share of liability are no longer reasonable. The Company cannot determine the impact of these potential developments on its current estimate of its share of liability for existing and future claims. On July 26, 2022, Aearo Technologies (“Aearo”), one of the members of the Payor Group, filed for Chapter 11 bankruptcy protection. The Company is assessing the impact of this development on its potential liability for these respirator claims. Because reserves are limited to amounts that are probable and estimable as of a relevant measurement date, and there is inherent difficulty in projecting the impact of potential developments on Cabot’s share of liability for these existing and future claims, it is reasonably possible that the liabilities for existing and future claims could change in the near term and that change could be material.
Other Matters
The Company has various other lawsuits, claims and contingent liabilities arising in the ordinary course of its business and with respect to its divested businesses. The Company does not believe that any of these matters will have a material adverse effect on its financial position; however, litigation is inherently unpredictable. Cabot could incur judgments, enter into settlements or revise its expectations regarding the outcome of certain matters, and such developments could have a material impact on its results of operations in the period in which the amounts are accrued or its cash flows in the period in which the amounts are paid.
H. Insurance Recoveries
Pepinster, Belgium
In July 2021, the Company’s Specialty Compounds manufacturing and research and development facility in Pepinster, Belgium experienced significant flooding. Full production, which was temporarily halted, resumed in the second quarter of fiscal 2022. During fiscal 2021, the Company recorded expenses of $
For the three and nine months ended June 30, 2022, the Company recorded additional expenses of $
14
policy deductibles. The flood-related expenses and loss recoveries are both included within Cost of sales in the Consolidated Statements of Operations for the three and nine months ended June 30, 2022.
During fiscal 2021, the Company received insurance proceeds of $
I. Income Tax
Effective Tax Rate
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||||
|
|
(Dollars in millions) |
|
|||||||||||||||
(Provision) benefit for income taxes |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
||
Effective tax rate |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
For the three and nine months ended June 30, 2022, the (Provision) benefit for income taxes included a net discrete tax expense of $
In the second quarter of fiscal 2022, Cabot generated a U.S. tax benefit of $
Income tax in Interim Periods
The Company records its tax provision or benefit on an interim basis using an estimated annual effective tax rate. This rate is applied to the current period ordinary income or loss to determine the income tax provision or benefit allocated to the interim period. The income tax effects of unusual or infrequent items are excluded from the estimated annual effective tax rate and are recognized in the impacted interim period. Losses from jurisdictions for which no benefit can be recognized are excluded from the overall computations of the estimated annual effective tax rate and a separate estimated annual effective tax rate is computed and applied to ordinary income or loss in the loss jurisdiction.
Valuation allowances are provided against the future tax benefits that arise from the deferred tax assets in jurisdictions for which no benefit can be recognized. The estimated annual effective tax rate may be significantly impacted by nondeductible expenses and the Company’s projected earnings mix by tax jurisdiction. Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised.
Uncertainties
Cabot and certain subsidiaries are under audit in a number of jurisdictions. In addition, certain statutes of limitations are scheduled to expire in the near future. It is reasonably possible that a change in the unrecognized tax benefits may also occur within the next twelve months related to the settlement of one or more of these audits or the lapse of applicable statutes of limitations. However, an estimated range of the impact on the unrecognized tax benefits cannot be quantified at this time.
Cabot files U.S. federal and state and non-U.S. income tax returns in jurisdictions with varying statutes of limitations. The
During the three and nine months ended June 30, 2022, Cabot released uncertain tax positions of a nil amount and $
15
J. Earnings Per Share
The following tables summarize the components of the basic and diluted earnings (loss) per common share (“EPS”) computations:
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions, except per share amounts) |
|
|||||||||||||
Basic EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Cabot Corporation |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Less: Dividends and dividend equivalents to participating securities |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Undistributed earnings allocated to participating securities(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) allocated to common shareholders (numerator) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares and participating securities outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Participating securities(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted average common shares (denominator) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share - basic: |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) allocated to common shareholders |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Plus: Earnings allocated to participating securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Adjusted earnings allocated to participating securities(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) allocated to common shareholders (numerator) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issuable(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted average common shares (denominator) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share - diluted: |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
Participating securities consist of shares underlying all outstanding and achieved performance-based restricted stock units and all unvested time-based restricted stock units. The holders of these units are entitled to receive dividend equivalents payable in cash to the extent dividends are paid on the Company’s outstanding common stock and equal in value to the dividends that would have been paid in respect of the shares underlying such units. |
16
Undistributed earnings are the earnings which remain after dividends declared during the period are assumed to be distributed to the common and participating shareholders. Undistributed earnings are allocated to common and participating shareholders on the same basis as dividend distributions. The calculation of undistributed earnings is as follows:
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Calculation of undistributed earnings (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Cabot Corporation |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Less: Dividends declared on common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Dividends declared on participating securities |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed earnings (loss) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of undistributed earnings (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed earnings (loss) allocated to common shareholders |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Undistributed earnings allocated to participating shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed earnings (loss) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(2) |
Undistributed earnings are adjusted for the assumed distribution of dividends to the dilutive securities, which are described in (3) below, and then reallocated to participating securities. |
(3) |
Represents incremental shares of common stock from the (i) assumed exercise of stock options issued under Cabot’s equity incentive plans; and (ii) assumed issuance of shares to employees pursuant to the Company’s Deferred Compensation and Supplemental Retirement Plan. For the three and nine months ended June 30, 2022, |
K. Financial Instruments and Fair Value Measurements
The FASB authoritative guidance on fair value measurements defines fair value, provides a framework for measuring fair value, and requires certain disclosures about fair value measurements. The required disclosures focus on the inputs used to measure fair value. The guidance establishes the following hierarchy for categorizing these inputs:
Level 1 |
|
— |
|
Quoted market prices in active markets for identical assets or liabilities |
|
|
|
|
|
Level 2 |
|
— |
|
Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs) |
|
|
|
|
|
Level 3 |
|
— |
|
Significant unobservable inputs |
There were
At June 30, 2022 and September 30, 2021, Cabot had derivatives relating to foreign currency risks, including a net investment hedge and forward foreign currency contracts, carried at fair value. At June 30, 2022, the fair value of these derivatives was a net asset of less than $
17
At June 30, 2022 and September 31, 2021, the fair value of guaranteed investment contracts included in Other assets on the Consolidated Balance Sheets was $
At June 30, 2022 and September 30, 2021, the fair values of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued liabilities, and short-term borrowings and variable rate debt approximated their carrying values due to the short-term nature of these instruments. The carrying value and fair value of the long-term fixed rate debt were $
In June 2022, Cabot issued $
Also in June 2022, Cabot settled $
L. Financial Information by Segment
The Company identifies a product line as an operating segment if: i) it engages in business activities from which it may earn revenues and incur expenses; ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Cabot’s President and Chief Executive Officer, to make decisions about resources to be allocated to the segment and assess its performance; and iii) it has available discrete financial information. The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. Operating segments are aggregated into a reportable segment if the operating segments are determined to have similar economic characteristics and if the operating segments are similar in the following areas: i) nature of products and services; ii) nature of production processes; iii) type or class of customer for their products and services; iv) methods used to distribute the products or provide services; and v) if applicable, the nature of the regulatory environment.
The Company has
The Reinforcement Materials segment combines the reinforcing carbons and engineered elastomer composites product lines.
The Performance Chemicals segment combines the specialty carbons, fumed metal oxides, battery materials and aerogel product lines into the Performance Additives business, and combines the specialty compounds and inkjet colorants product lines into the Formulated Solutions business. These businesses are similar in terms of economic characteristics, nature of products, processes, customer class and product distribution methods, and therefore have been aggregated into
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Performance Additives |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Formulated Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Performance Chemicals |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The Purification Solutions segment consisted of the Company’s activated carbon business.
Income (loss) before income taxes (“Segment EBIT”) is presented for each reportable segment in the table below. Segment EBIT excludes Interest expense, general unallocated income (expense), unallocated corporate costs, and certain items, meaning items management does not consider representative of on-going operating segment results. In addition, Segment EBIT includes Equity in earnings of affiliated companies, net of tax, the full operating results of a contractual joint venture in Purification Solutions, royalties, Net income attributable to noncontrolling interests, net of tax, and discounting charges for certain Notes receivable.
18
Financial information by reportable segment is as follows:
|
|
Reinforcement Materials |
|
|
Performance Chemicals |
|
|
Purification Solutions |
|
|
Segment Total |
|
|
Unallocated and Other(1) |
|
|
Consolidated Total |
|
||||||
|
|
(In millions) |
|
|||||||||||||||||||||
Three Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers(2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Income (loss) before income taxes(3) |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers(2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Income (loss) before income taxes(3) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers(2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Income (loss) before income taxes(3) |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers(2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Income (loss) before income taxes(3) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
(1) |
Unallocated and Other includes certain items and eliminations necessary to reflect management’s reporting of operating segment results. These items are reflective of the segment reporting presented to the CODM. |
(2) |
Consolidated Total Revenues from external customers reconciles to Net sales and other operating revenues on the Consolidated Statements of Operations. Revenues from external customers that are categorized as Unallocated and Other reflects royalties, external shipping and handling fees, the impact of unearned revenue, the removal of |
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Shipping and handling fees |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
By-product sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
19
(3) |
Consolidated Total Income (loss) before income taxes reconciles to Income (loss) before income taxes and equity in earnings of affiliated companies on the Consolidated Statements of Operations. Income (loss) before income taxes that are categorized as Unallocated and Other includes: |
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Interest expense |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Certain items(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on bargain purchase of a business (Note C) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Gain on sale of land |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Loss on sale of business and asset impairment charge (Note D) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Legal and environmental matters and reserves |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Divestiture related charges |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Acquisition and integration-related charges |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Global restructuring activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Employee benefit plan settlement and other charges |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Indirect tax settlement credits |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Other |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
Total certain items, pre-tax |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Unallocated corporate costs(b) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
General unallocated income (expense)(c) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Less: Equity in earnings of affiliated companies, net of tax(d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
(a) |
Certain items are items of expense and income that management does not consider representative of the Company’s fundamental on-going segment results and they are, therefore, excluded from Segment EBIT. |
|
(b) |
Unallocated corporate costs are costs that are not controlled by the segments and primarily benefit corporate interests. |
|
(c) |
General unallocated income (expense) consists of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, Interest and dividend income, the profit or loss related to the corporate adjustment for unearned revenue, the impact of including the full operating results of a contractual joint venture in Purification Solutions Segment EBIT and unrealized holding gains (losses) for investments. |
|
(d) |
Equity in earnings of affiliated companies, net of tax, is included in Segment EBIT and is removed in Unallocated and other to reconcile to Income (loss) from operations before income taxes and equity in earnings from affiliated companies. |
The Company’s segments operate globally. In addition to presenting Revenue from external customers by reportable segment, the following tables further disaggregate Revenues from external customers by geographic region.
|
|
Three Months Ended June 30, 2022 |
|
|||||||||||||
|
|
Reinforcement Materials |
|
|
Performance Chemicals |
|
|
Purification Solutions |
|
|
Consolidated Total |
|
||||
|
|
(In millions) |
|
|||||||||||||
Americas |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Europe, Middle East and Africa |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Segment revenues from external customers |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Unallocated and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and other operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
20
|
|
Three Months Ended June 30, 2021 |
|
|||||||||||||
|
|
Reinforcement Materials |
|
|
Performance Chemicals |
|
|
Purification Solutions |
|
|
Consolidated Total |
|
||||
|
|
(In millions) |
|
|||||||||||||
Americas |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East and Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenues from external customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and other operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
Nine Months Ended June 30, 2022 |
|
|||||||||||||
|
|
Reinforcement Materials |
|
|
Performance Chemicals |
|
|
Purification Solutions |
|
|
Consolidated Total |
|
||||
|
|
(In millions) |
|
|||||||||||||
Americas |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East and Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenues from external customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and other operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
Nine Months Ended June 30, 2021 |
|
|||||||||||||
|
|
Reinforcement Materials |
|
|
Performance Chemicals |
|
|
Purification Solutions |
|
|
Consolidated Total |
|
||||
|
|
(In millions) |
|
|||||||||||||
Americas |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East and Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenues from external customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and other operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
21
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Critical Accounting Policies
Our critical accounting policies have not substantially changed from those described in the 2021 10-K.
Recently Issued Accounting Pronouncements
Refer to the discussion under the headings “Recently Adopted Accounting Standards” and “Recent Accounting Pronouncements” in Note B of our Notes to the Consolidated Financial Statements.
Results of Operations
The Company has two reportable segments: Reinforcement Materials and Performance Chemicals. The Company’s former Purification Solutions business was a separate reporting segment prior to divestiture in the second quarter of fiscal 2022. Cabot is also organized for operational purposes into three geographic regions: the Americas; Europe, Middle East and Africa (“EMEA”); and Asia Pacific. The discussion of our results of operations for the periods presented reflects these structures.
Our analysis of our financial condition and operating results should be read with our consolidated financial statements and accompanying notes.
Definition of Terms and Non-GAAP Financial Measures
When discussing our results of operations, we use several terms as described below.
The term “product mix” refers to the mix of types and grades of products sold or the mix of geographic regions where products are sold, and the positive or negative impact this has on the revenue or profitability of the business and/or segment.
Our discussion under the heading “(Provision) Benefit for Income Taxes and Reconciliation of Effective Tax Rate to Operating Tax Rate” includes a discussion and reconciliation of our “effective tax rate” and our “operating tax rate” for the periods presented, as well as management’s projection of our operating tax rate range for the full fiscal year. Our operating tax rate is a non-GAAP financial measure and should not be considered as an alternative to our effective tax rate, the most comparable GAAP financial measure. The operating tax rate is calculated based upon management's forecast of the annual operating tax rate for the fiscal year applied to adjusted pre-tax earnings. The operating tax rate excludes income tax (expense) benefit on certain items, discrete tax items and, on a quarterly basis the timing of losses in certain jurisdictions. The income tax (expense) benefit on certain items is determined using the applicable rates in the taxing jurisdictions in which the certain items occurred and includes both current and deferred income tax (expense) benefit based on the nature of the certain items. Discrete tax items include, but are not limited to, changes in valuation allowance, uncertain tax positions, and other tax items, such as the tax impact of legislative changes and tax accruals on historic earnings due to changes in indefinite reinvestment assertions. Our definition of the operating tax rate may not be comparable to the definition used by other companies. Management believes that this non-GAAP financial measure is useful supplemental information because it helps our investors compare our tax rate year to year on a consistent basis and to understand what our tax rate on current operations would be without the impact of these items.
Our discussion under the heading “Third Quarter of Fiscal 2022 versus Third Quarter of Fiscal 2021—By Business Segment” includes a discussion of Total segment EBIT, which is a non-GAAP financial measure defined as Income (loss) before income taxes and equity in earnings from affiliated companies less certain items and other unallocated items. Our Chief Operating Decision Maker, who is our President and Chief Executive Officer, uses segment EBIT to evaluate the operating results of each segment and to allocate resources to the segments. We believe Total segment EBIT, which reflects the sum of EBIT from our reportable segments, provides useful supplemental information for our investors as it is an important indicator of our operational strength and performance, allows investors to see our results through the eyes of management, and provides context for our discussion of individual business segment performance. Our definition of Total segment EBIT may not be comparable to the definition used by other companies and it should not be considered an alternative for Income (loss) before income taxes and equity in earnings of affiliated companies, which is the most directly comparable GAAP financial measure. A reconciliation of Total segment EBIT to Income (loss) before income taxes and equity in earnings of affiliated companies is provided under the heading “Third quarter of Fiscal 2022 versus Third quarter of Fiscal 2021—By Business Segment”. Investors should consider the limitations associated with this non-GAAP measure, including the potential lack of comparability of this measure from one company to another.
In calculating Total segment EBIT, we exclude from our Income (loss) before income taxes and equity in earnings of affiliated companies (i) items of expense and income that management does not consider representative of our fundamental on-going segment results, which we refer to as “certain items”, and (ii) items that, because they are not controlled by the business segments and primarily benefit corporate objectives, are not allocated to our business segments, such as interest expense and other corporate costs, which include unallocated corporate overhead expenses such as certain corporate salaries and headquarter expenses, plus
22
costs related to special projects and initiatives, which we refer to as “other unallocated items”. Management believes excluding the items identified as certain items facilitates operating performance comparisons from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis and also facilitates an evaluation of our operating performance without the impact of these costs or benefits. The items of income and expense that we exclude from Total segment EBIT but that are included in our GAAP Income (loss) before income taxes and equity in earnings of affiliated companies, as applicable in a particular reporting period, include, but are not limited to, the following:
|
• |
Asset impairment charges, which primarily include charges associated with an impairment of goodwill, other long-lived assets or assets held for sale. |
|
• |
Charges related to the divestiture of our Purification Solutions business, which include accelerated costs associated with the change in control and employee incentive compensation. |
|
• |
Legal and environmental reserves and matters, which consist of costs or benefits for matters typically related to former businesses or that are otherwise incurred outside of the ordinary course of business. |
|
• |
Global restructuring activities, which include costs or benefits associated with cost reduction initiatives or plant closures and are primarily related to (i) employee termination costs, (ii) asset impairment charges associated with restructuring actions, (iii) costs to close facilities, including environmental costs and contract termination penalties, and (iv) gains realized on the sale of land or equipment associated with restructured plants or locations. |
|
• |
Acquisition and integration-related charges, which include transaction costs, redundant costs incurred during the period of integration, and costs associated with transitioning certain management and business processes to Cabot’s processes. |
|
• |
Indirect tax settlement credits, which includes favorable settlements resulting in the recoveries of indirect taxes. |
|
• |
Gains (losses) on sale of a business. |
|
• |
Employee benefit plan settlements, which consist of either charges or benefits associated with the termination of a pension plan or the transfer of a pension plan to a multi-employer plan. |
|
• |
Gain associated with the bargain purchase of a business. |
|
• |
Gain realized on the sale of land. |
Overview
During the third quarter of fiscal 2022, Income (loss) before income taxes and equity in earnings of affiliated companies increased compared to the third quarter of fiscal 2021. The increase was driven by increased earnings across our Reinforcement Materials and Performance Chemicals segments.
Third quarter of Fiscal 2022 versus Third quarter of Fiscal 2021—Consolidated
Net Sales and Other Operating Revenues and Gross Profit
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Net sales and other operating revenues |
|
$ |
1,149 |
|
|
$ |
917 |
|
|
$ |
3,209 |
|
|
$ |
2,505 |
|
Gross profit |
|
$ |
235 |
|
|
$ |
214 |
|
|
$ |
665 |
|
|
$ |
621 |
|
The $232 million increase in net sales and other operating revenues in the third quarter of fiscal 2022 compared to the third quarter of fiscal 2021 was driven by favorable price and product mix (combined $299 million), higher volumes ($32 million) across our Reinforcement Materials and Performance Chemicals segments, and increased energy center by-product revenue ($9 million). These increases were partially offset by the divestiture of our Purification Solutions business ($69 million) and unfavorable impact from foreign currency translation ($35 million).
The $704 million increase in net sales and other operating revenues in the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021 was primarily driven by favorable price and product mix (combined $769 million) in Reinforcement Materials and Performance Chemicals, higher volumes ($41 million) driven by Reinforcement Materials, and increased energy center by-product revenue ($35 million). These increases were partially offset by the divestiture of our Purification Solutions business ($94 million) and the unfavorable impact from foreign currency translation ($54 million).
In both the third quarter and the first nine months of fiscal 2022, the favorable price and product mix was driven by favorable 2022 calendar year tire customer agreements and higher prices from higher feedstock and energy costs that are generally passed
23
through to our customers in the Reinforcement Materials segment, and targeted growth initiatives and price increases to recover rising input costs, including raw material and energy, and other costs, including packaging and transportation, in our Performance Chemicals segment. The increased energy center by-product revenue was due to higher energy prices.
Gross profit increased by $21 million in the third quarter of fiscal 2022 compared to the third quarter of fiscal 2021. Gross profit increased by $44 million in the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021. The gross profit increase in both comparative periods was primarily due to higher unit margins, partially offset by higher fixed costs, in the Reinforcement Materials and Performance Chemicals segments.
Selling and Administrative Expenses
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Selling and administrative expenses |
|
$ |
51 |
|
|
$ |
68 |
|
|
$ |
196 |
|
|
$ |
200 |
|
Selling and administrative expenses decreased by $17 million in the third quarter of fiscal 2022 compared to the same period of fiscal 2021, primarily due to a benefit from the sale of land adjacent to our Billerica, Massachusetts facility in the third quarter of fiscal 2022. Selling and administrative expenses decreased by $4 million in the first nine months of fiscal 2022 compared to the same period of fiscal 2021, primarily due to a benefit from the sale of land adjacent to our Billerica, Massachusetts facility partially offset by a charge related to our legal reserve for respirator matters and divestiture-related charges.
Research and Technical Expenses
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Research and technical expenses |
|
$ |
14 |
|
|
$ |
12 |
|
|
$ |
41 |
|
|
$ |
41 |
|
Research and technical expenses increased by $2 million in the third quarter of fiscal 2022 compared to the same period of fiscal 2021, primarily due to support of our growth vectors. Research and technical expenses remained flat in the first nine months of fiscal 2022 compared to the same period of fiscal 2021.
Interest and Dividend Income, Interest Expense and Other Income (Expense)
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Interest and dividend income |
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
7 |
|
|
$ |
6 |
|
Interest expense |
|
$ |
(15 |
) |
|
$ |
(12 |
) |
|
$ |
(38 |
) |
|
$ |
(37 |
) |
Other income (expense) |
|
$ |
(1 |
) |
|
$ |
(1 |
) |
|
$ |
(9 |
) |
|
$ |
(9 |
) |
Interest and dividend income decreased by $2 million in the third quarter of fiscal 2022 compared to the same period of fiscal 2021, primarily due to changes in investment holdings. For the nine months ended June 30, 2022, Interest and dividend income increased by $1 million compared to the nine months ended June 30, 2021, primarily due to the change in interest rates.
Interest expense increased by $3 million and $1 million in the third quarter of fiscal 2022 and for the nine months ended June 30, 2022, respectively, as compared to the same periods of fiscal 2021, primarily due to higher interest rates.
Other income (expense) remained flat in the third quarter of fiscal 2022 compared to the same periods of fiscal 2021. Included in the fiscal 2022 third quarter balance is $5 million of foreign currency translation losses, primarily from currency devaluation of our monetary assets held in Argentina, partially offset by mark to market benefits on our invested cash balances in Argentina. For the first nine months of fiscal 2022 Other income (expense) remained flat with an unfavorable comparison of foreign currency translation offsetting a charge in fiscal 2021 from the settlement of our U.S. pension plan.
24
(Provision) Benefit for Income Taxes and Reconciliation of Effective Tax Rate to Operating Tax Rate
|
|
Three Months Ended June 30 |
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||
|
|
(Provision) / Benefit for Income Taxes |
|
|
Rate |
|
|
(Provision) / Benefit for Income Taxes |
|
|
Rate |
|
||||
Dollars in millions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
$ |
(49 |
) |
|
|
32 |
% |
|
$ |
(30 |
) |
|
|
24 |
% |
Less: Non-GAAP tax adjustments(1) |
|
|
(15 |
) |
|
|
|
|
|
|
2 |
|
|
|
|
|
Operating tax rate |
|
$ |
(34 |
) |
|
|
24 |
% |
|
$ |
(32 |
) |
|
|
27 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30 |
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||
|
|
(Provision) / Benefit for Income Taxes |
|
|
Rate |
|
|
(Provision) / Benefit for Income Taxes |
|
|
Rate |
|
||||
Dollars in millions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
$ |
(73 |
) |
|
|
35 |
% |
|
$ |
(93 |
) |
|
|
27 |
% |
Less: Non-GAAP tax adjustments(1) |
|
|
29 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
Operating tax rate |
|
$ |
(102 |
) |
|
|
26 |
% |
|
$ |
(96 |
) |
|
|
28 |
% |
(1) |
Non-GAAP tax adjustments made to arrive at the operating tax provision include the income tax (expense) benefit on certain items, discrete tax items, and, on a quarterly basis, the timing of losses in certain jurisdictions, as further described above under the heading “Definition of Terms and Non-GAAP Financial Measures”. |
For the three months ended June 30, 2022, the (Provision) benefit for income taxes was a provision of $49 million compared to $30 million for the same period in 2021, primarily due to higher earnings in the current period and the accrual of withholding taxes due to a change in indefinite reinvestment assertions on certain entities. For the nine months ended June 30, 2022, the (Provision) benefit for income taxes was a provision of $73 million compared to $93 million for the same period in 2021. Included in the (Provision) benefit for income taxes in the nine months ended June 30, 2022 is a net discrete tax benefit of $22 million primarily comprised of a benefit of $36 million related to the divestiture of the Purification Solutions business, and a tax expense of $8 million related to withholding tax accruals on historic earnings due to changes in indefinite reinvestment assertion on certain entities. Our income taxes are affected by the mix of earnings in the tax jurisdictions in which we operate, and by the presence of valuation allowances in certain tax jurisdictions.
For fiscal 2022, the Operating tax rate is expected to be approximately 26%. We are not providing a forward-looking reconciliation of the operating tax rate range with an effective tax rate range because, without unreasonable effort, we are unable to predict with reasonable certainty the matters we would allocate to “certain items,” including unusual gains and losses, costs associated with future restructurings, acquisition-related expenses and litigation outcomes. These items are uncertain, depend on various factors, and could have a material impact on the effective tax rate in future periods.
Net Income (Loss) Attributable to Noncontrolling Interests
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Equity in earnings of affiliated companies, net of tax |
|
$ |
3 |
|
|
$ |
2 |
|
|
$ |
7 |
|
|
$ |
3 |
|
Net income (loss) attributable to noncontrolling interests, net of tax |
|
$ |
9 |
|
|
$ |
9 |
|
|
$ |
25 |
|
|
$ |
29 |
|
Equity in earnings of affiliated companies, net of tax, increased by $1 million and $4 million in the third quarter and for the first nine months of fiscal 2022, respectively, compared to the same periods of fiscal 2021 primarily due to higher profitability at our equity affiliates in India and Venezuela.
Net income (loss) attributable to noncontrolling interests, net of tax, remained flat in the third quarter of fiscal 2022 compared to the same period of fiscal 2021. Net income (loss) attributable to noncontrolling interests, net of tax, decreased by $4 million in the nine months ended June 30, 2022 as compared to the same period of fiscal 2021 primarily due to lower profitability at our China facilities, which were impacted by government required COVID-19-related lock-downs.
25
Net Income Attributable to Cabot Corporation
In the third quarter and first nine months of fiscal 2022, we reported Net income (loss) attributable to Cabot Corporation of $97 million and $115 million, or $1.69 per diluted common share and $1.99 per diluted common share, respectively. This compares to Net income (loss) attributable to Cabot Corporation of $86 million and $221 million, or $1.48 per diluted common share and $3.84 per diluted common share, respectively, in the third quarter and first nine months of fiscal 2021. The higher net income in the third quarter of fiscal 2022 compared with the same period in fiscal 2021 is primarily due to improved Total segment EBIT. The lower net income in the nine months ended June 30, 2022, compared with the same period in fiscal 2022 is primarily due to the Purification Solutions loss on sale and asset impairment charge, partially offset by increased Total segment EBIT.
Third quarter of Fiscal 2022 versus Third quarter of Fiscal 2021—By Business Segment
Income (loss) before income taxes and equity in earnings of affiliated companies, certain items, other unallocated items, and Total segment EBIT for the three and nine months ended June 30, 2022 and 2021 are set forth in the table below. The details of certain items and other unallocated items are shown below and in Note L of our Notes to the Consolidated Financial Statements.
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Income (loss) before income taxes and equity in earnings of affiliated companies |
|
$ |
152 |
|
|
$ |
123 |
|
|
$ |
206 |
|
|
$ |
340 |
|
Less: Certain items |
|
|
12 |
|
|
|
5 |
|
|
|
(185 |
) |
|
|
(7 |
) |
Less: Other unallocated items |
|
|
(36 |
) |
|
|
(27 |
) |
|
|
(93 |
) |
|
|
(87 |
) |
Total segment EBIT |
|
$ |
176 |
|
|
$ |
145 |
|
|
$ |
484 |
|
|
$ |
434 |
|
In the third quarter of fiscal 2022, Income (loss) before income taxes and equity in earnings of affiliated companies increased by $29 million and Total segment EBIT increased by $31 million.
In the first nine months of fiscal 2022, Income (loss) before income taxes and equity in earnings of affiliated companies decreased by $134 million primarily due to the Purification Solutions loss on sale and asset impairment charge of $206 million, partially offset by increased Total segment EBIT of $50 million and gain on the Tokai Carbon acquisition of $24 million.
Certain Items
Details of the certain items for the three and nine months ended June 30, 2022 and 2021 are as follows:
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Gain on bargain purchase of a business (Note C) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
24 |
|
|
$ |
— |
|
Gain on sale of land |
|
|
17 |
|
|
|
— |
|
|
|
17 |
|
|
|
— |
|
Loss on sale of business and asset impairment charge (Note D) |
|
|
(2 |
) |
|
|
— |
|
|
|
(206 |
) |
|
|
— |
|
Legal and environmental matters and reserves |
|
|
(1 |
) |
|
|
— |
|
|
|
(9 |
) |
|
|
— |
|
Divestiture related charges |
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
|
|
— |
|
Acquisition and integration-related charges |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
Global restructuring activities |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
|
|
(8 |
) |
Employee benefit plan settlement and other charges |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(6 |
) |
Indirect tax settlement credits |
|
|
— |
|
|
|
12 |
|
|
|
— |
|
|
|
12 |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
(1 |
) |
Total certain items, pre-tax |
|
|
12 |
|
|
|
5 |
|
|
|
(185 |
) |
|
|
(7 |
) |
Non-GAAP tax adjustments |
|
|
(15 |
) |
|
|
2 |
|
|
|
29 |
|
|
|
3 |
|
Total certain items, after tax |
|
$ |
(3 |
) |
|
$ |
7 |
|
|
$ |
(156 |
) |
|
$ |
(4 |
) |
26
Other Unallocated Items
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Interest expense |
|
$ |
(15 |
) |
|
$ |
(12 |
) |
|
$ |
(38 |
) |
|
$ |
(37 |
) |
Unallocated corporate costs |
|
|
(15 |
) |
|
|
(14 |
) |
|
|
(45 |
) |
|
|
(43 |
) |
General unallocated income (expense) |
|
|
(3 |
) |
|
|
1 |
|
|
|
(3 |
) |
|
|
(4 |
) |
Less: Equity in earnings of affiliated companies, net of tax |
|
|
3 |
|
|
|
2 |
|
|
|
7 |
|
|
|
3 |
|
Total other unallocated items |
|
$ |
(36 |
) |
|
$ |
(27 |
) |
|
$ |
(93 |
) |
|
$ |
(87 |
) |
A discussion of items that we refer to as “other unallocated items” can be found under the heading “Definition of Terms and Non-GAAP Financial Measures”. The balances of unallocated corporate costs are primarily comprised of expenditures related to managing a public company that are not allocated to the segments and corporate business development costs related to ongoing corporate projects. The balances of General unallocated income (expense) consist of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, the profit or loss related to the corporate adjustment for unearned revenue, and the impact of including the full operating results of a contractual joint venture in Purification Solutions segment EBIT and unrealized holding gains (losses) for investments.
Reinforcement Materials
Sales and EBIT for Reinforcement Materials for the third quarter and first nine months of fiscal 2022 and 2021 were as follows:
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Reinforcement Materials Sales |
|
$ |
707 |
|
|
$ |
479 |
|
|
$ |
1,875 |
|
|
$ |
1,288 |
|
Reinforcement Materials EBIT |
|
$ |
113 |
|
|
$ |
85 |
|
|
$ |
299 |
|
|
$ |
262 |
|
Sales in Reinforcement Materials increased by $228 million in the third quarter of fiscal 2022 compared to the same period of fiscal 2021, primarily due to a favorable price and product mix (combined $227 million) and higher volumes ($22 million), partially offset by unfavorable impact from foreign currency translation ($20 million). The favorable price and product mix was primarily due to favorable 2022 calendar year tire customer agreements and higher feedstock and energy costs that are generally passed through to our customers. The higher volumes in fiscal 2022 were driven by stronger demand across all regions, particularly in Europe and the Americas.
In the first nine months of fiscal 2022, sales in Reinforcement Materials increased by $587 million compared to the first nine months of fiscal 2021. The increase was primarily due to a favorable price and product mix (combined $569 million) and higher volumes ($52 million), partially offset by unfavorable impact from foreign currency translation ($33 million). The favorable price and product mix was primarily due to favorable 2022 calendar year customer agreements and higher feedstock and energy costs that are generally passed through to our customers. The higher volumes in fiscal 2022 were driven by stronger demand across all regions.
EBIT in Reinforcement Materials in the third quarter of fiscal 2022 increased by $28 million compared to the same period of fiscal 2021. During the third quarter of fiscal 2022, the segment had higher unit margins ($37 million) and 5% higher volumes ($9 million) partially offset by higher fixed cost ($12 million) and unfavorable impact from foreign currency exchange ($5 million). The higher unit margins were primarily driven by favorable 2022 calendar year tire customer agreements. The higher volume was due to increased demand across all regions, particularly in Europe and the Americas. The higher fixed costs were primarily due to increased costs associated with utilities and maintenance.
EBIT in Reinforcement Materials increased by $37 million in the first nine months of fiscal 2022 compared to the same period of fiscal 2021. The increase was driven by higher unit margins ($61 million) and higher volumes ($24 million) partially offset by higher fixed cost ($39 million) and unfavorable impact from foreign currency exchange ($9 million). The higher unit margins were primarily driven by favorable 2022 calendar year customer agreements and benefit of higher energy prices on our energy center and yield benefits. The higher volume was due to increased demand in all regions. The higher fixed costs were primarily due to increased costs associated with utilities and maintenance.
As we look to the fourth quarter of the fiscal year, we expect demand to remain strong despite seasonally lower volumes in Europe. We also expect an increase in maintenance costs as a result of scheduled annual turnaround activities.
27
Performance Chemicals
Sales and EBIT for Performance Chemicals for the third quarter and first nine months of fiscal 2022 and 2021 were as follows:
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Performance Additives Sales |
|
$ |
270 |
|
|
$ |
208 |
|
|
$ |
763 |
|
|
$ |
595 |
|
Formulated Solutions Sales |
|
|
102 |
|
|
|
95 |
|
|
|
271 |
|
|
|
269 |
|
Performance Chemicals Sales |
|
$ |
372 |
|
|
$ |
303 |
|
|
$ |
1,034 |
|
|
$ |
864 |
|
Performance Chemicals EBIT |
|
$ |
63 |
|
|
$ |
54 |
|
|
$ |
185 |
|
|
$ |
166 |
|
Sales in Performance Chemicals increased by $69 million in the third quarter of fiscal 2022 compared to the same period of fiscal 2021, primarily due to favorable price and product mix (combined $72 million) and higher volumes ($11 million), partially offset by unfavorable impact from foreign currency translation ($14 million). The favorable price and product mix was due to increased pricing to recover rising input costs across the segment. The higher volumes were due to continued momentum in sales to battery materials applications.
In the first nine months of fiscal 2022, sales in Performance Chemicals increased by $170 million compared to the same period of fiscal 2021, primarily due to favorable price and product mix (combined $200 million), partially offset by unfavorable impact from foreign currency translation ($21 million) and lower volumes ($11 million). The favorable price and product mix was due to increased pricing to recover rising input costs across the segment. The lower volumes were primarily due to plant downtime of a fence-line partner in our fumed metal oxides product line in the first quarter and a flood-related plant outage at our Belgium specialty compounds site, partially offset by continued momentum in our growth vectors in battery materials and inkjet applications.
EBIT in Performance Chemicals increased by $9 million in the third quarter of fiscal 2022 compared to the third quarter of fiscal 2021 primarily due to higher unit margins ($17 million) and volumes ($5 million), partially offset by higher fixed cost ($10 million) and unfavorable impact from foreign currency exchange ($3 million). Higher unit margins were driven by strong pricing in our specialty carbons, fumed metal oxides and specialty compounds product lines. The higher volumes were due to continued momentum in sales to battery materials applications. Fixed costs increased as a result of the start-up of our new site in Xuzhou, China, higher utilities cost and general inflationary cost increases.
EBIT in Performance Chemicals increased by $19 million in the first nine months of fiscal 2022 compared to the same period of fiscal 2021 primarily due to higher unit margins ($46 million), partially offset by lower volumes ($4 million), higher fixed cost ($19 million) and unfavorable impact from foreign currency exchange ($5 million). Higher unit margins were driven by strong pricing and favorable product mix in our specialty carbons and fumed metal oxides product lines. The lower volumes were primarily due to plant downtime of a fence-line partner in our fumed metal oxides product line in the first quarter and a flood-related plant outage at our Belgium specialty compounds site, partially offset by continued momentum in battery materials applications. Fixed costs increased in support of our growth vectors and higher utilities cost and general inflationary cost increases.
As we look ahead to the fourth quarter of the fiscal year, we expect that unit margins will remain strong and sequential volume growth in battery materials and inkjet applications. However, we anticipate higher fixed costs due to timing of maintenance activities, and related reduction of inventory levels. We continue to expect high utility cost.
Purification Solutions
Sales and EBIT for Purification Solutions for the third quarter and first nine months of fiscal 2022 and 2021 were as follows:
|
|
Three Months Ended June 30 |
|
|
Nine Months Ended June 30 |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In millions) |
|
|||||||||||||
Purification Solutions Sales |
|
$ |
— |
|
|
$ |
69 |
|
|
$ |
97 |
|
|
$ |
191 |
|
Purification Solutions EBIT |
|
$ |
— |
|
|
$ |
6 |
|
|
$ |
— |
|
|
$ |
6 |
|
We divested the Purification Solutions business in March 2022. Refer to Note D of our Notes to the Consolidated Financial Statements.
28
Liquidity and Capital Resources
Overview
Our liquidity position, as measured by cash and cash equivalents plus borrowing availability, decreased by $176 million during the first nine months of fiscal 2022, which was due to a higher outstanding commercial paper balance at the end of the period. The higher commercial paper balance was used to fund an increase in net working capital resulting from the impact of rising raw material costs on our inventory balance and higher prices on our accounts receivables balance. As of June 30, 2022, we had cash and cash equivalents of $208 million and borrowing availability under our revolving credit agreements of $930 million.
As of June 30, 2022, we had access to borrowings under the following two credit agreements:
|
• |
$1 billion unsecured revolving credit agreement (the “U.S. Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Syndication Agent, and the other lenders party thereto, which matures in August 2026, subject to two one-year options to extend the maturity, exercisable on or prior to August 6, 2022 and August 6, 2023. The U.S. Credit Agreement supports our issuance of commercial paper, and borrowings under it may be used for working capital, letters of credit and other general corporate purposes. |
|
• |
€300 unsecured revolving credit agreement (the “Euro Credit Agreement”, and together with the U.S. Credit Agreement, the “Credit Agreements”), with Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto, which matures in May 2024 or earlier if the U.S. Credit Agreement should terminate early. Borrowings under the Euro Credit Agreement may be used for the repatriation of earnings of our foreign subsidiaries to the United States, the repayment of indebtedness of our foreign subsidiaries owing to us or any of our subsidiaries and for working capital and general corporate purposes. |
As of June 30, 2022, we were in compliance with the debt covenants under the Credit Agreements, which, with limited exceptions, require us to comply on a quarterly basis with a leverage test requiring the ratio of consolidated net debt to consolidated EBITDA not to exceed 3.50 to 1.00. Consolidated net debt is defined as consolidated debt offset by the lessor of (i) unrestricted cash and cash equivalents and (ii) $150 million.
A significant portion of our business occurs outside the U.S. and our cash generation does not always align geographically with our cash needs. The vast majority of our cash and cash equivalent holdings tend to be held outside the U.S. We generally use a combination of U.S. earnings, repatriation of certain foreign earnings, commercial paper issuances and borrowings under our U.S. Credit Agreement to meet our U.S. cash needs. With the exception of Argentina, which has currency controls that prevent the distribution of cash, we are generally able to move cash throughout the Company through our cash pooling structures, intercompany accounts and/or distributions, as needed. Although we repatriate certain foreign earnings, cash held by foreign subsidiaries is generally considered permanently reinvested and is used to finance the subsidiaries’ operational activities and future investments. We usually reduce our commercial paper balance and, if applicable, borrowings under our Credit Agreements, at quarter-end using cash derived from customer collections, settlement of intercompany balances and short-term intercompany loans. If additional funds are needed in the U.S., we expect to be able to repatriate cash, including cash from China, while paying any withholding or other taxes. Changes in tax laws in the U.S. or foreign countries could restrict our ability to transfer funds or impose material costs on such transfers.
As of June 30, 2022, we had $264 million of commercial paper outstanding and our borrowings under the Euro Credit Agreement totaled $122 million.
In June 2022, we issued $400 million of notes with a coupon of 5% that mature on June 30, 2032. These notes are unsecured and interest is payable semi-annually on June 30 and December 30, commencing on December 30, 2022. The net proceeds of this offering were $394 million after deducting discounts and issuance costs. We used a portion of these proceeds to repay $350 million of our notes with a coupon of 3.7% that were scheduled to mature on July 15, 2022.
We anticipate sufficient liquidity from (i) cash on hand; (ii) cash flows from operating activities; and (iii) cash available from the Credit Agreements and our commercial paper program to meet our operational and capital investment needs and financial obligations for the foreseeable future. The liquidity we derive from cash flows from operations is, to a large degree, predicated on our ability to collect our receivables in a timely manner, the cost of our raw materials, and our ability to manage inventory levels.
The following discussion of the changes in our cash balance refers to the various sections of our Consolidated Statements of Cash Flows.
29
Cash Flows from Operating Activities
Cash used by operating activities, which consists of net income adjusted for the various non-cash items included in income, changes in working capital and changes in certain other balance sheet accounts, totaled $5 million in the first nine months of fiscal 2022 compared to $157 million of cash provided by operating activities during the same period of fiscal 2021.
Cash used by operating activities in the first nine months of fiscal 2022 was driven by an increase in net working capital of $390 million. The increase in net working capital was driven by an increase in accounts receivable due to higher sales and an increase in inventory driven by a higher cost of raw materials, partially offset by an increase in accounts payable.
Cash provided by operating activities in the first nine months of fiscal 2021 was driven by business earnings excluding the non-cash impact of depreciation and amortization of $117 million, which was partially offset by an increase in net working capital of $226 million. The increase in net working capital was driven by an increase in accounts receivable due to higher sales and an increase in inventory driven by a higher cost of raw materials, partially offset by an increase in accounts payable. Additionally, we made a cash payment of $32.6 million in the first quarter of fiscal 2021 related to a respirator litigation settlement in fiscal 2020.
Cash Flows from Investing Activities
Investing activities consumed $31 million of cash in the first nine months of fiscal 2022 compared to $110 million of cash consumed in the first nine months of fiscal 2021. In both periods, investing activities included capital expenditures for sustaining and compliance capital projects at our operating facilities as well as capacity expansion capital expenditures primarily in the Performance Chemicals segment. Capital expenditures totaled $121 million and $115 million in the first nine months of fiscal 2022 and 2021, respectively. In addition, the first nine months of fiscal 2022 includes $79 million of net cash proceeds from the sale of our Purification Solutions business in March 2022, $18 million of proceeds from the sale of land adjacent to our Billerica, Massachusetts facility, and $9 million of cash paid for the acquisition of Tokai Carbon, net of cash assumed of $5 million.
Capital expenditures for fiscal 2022 are expected to be in the range of $200 million to $225 million. Our planned capital spending program for fiscal 2022 is primarily for sustaining, compliance and improvement capital projects at our operating facilities as well as capacity expansion capital expenditures in the Performance Chemicals segment.
Cash Flows from Financing Activities
Financing activities provided $129 million of cash in the first nine months of fiscal 2022 compared to $48 million of cash used during the same period of fiscal 2021. In the first nine months of fiscal 2022, financing activities primarily consisted of the issuance of commercial paper of $193 million, proceeds from short-term borrowings of $26 million, and the June 2022 issuance of $400 million in notes with a coupon of 5% that mature on June 30, 2032, with net proceeds of $394 million after deducting discounts and issuance costs. These proceeds were partially offset by dividend payments to stockholders of $63 million, share repurchases of $48 million, dividend payments to noncontrolling interests of $22 million, and repayments of long-term debt of $357 million. The repayments of long-term debt includes the June 2022 repayment of our $350 million in notes with a coupon of 3.7% that were to mature in July of 2022.
In the first nine months of fiscal 2021, financing activities primarily consisted of dividend payments to stockholders of $60 million, dividend payments to noncontrolling interests of $20 million, and net repayments from borrowings under our revolvers of $15 million, which consisted of proceeds of $150 million less repayments of $165 million, partially offset by net proceeds from the issuance of commercial paper of $46 million.
Forward-Looking Information
This report on Form 10-Q contains “forward-looking statements” under the Federal securities laws. These forward-looking statements address expectations or projections about the future, including our expectations regarding our future business performance and overall prospects; segment growth, volume growth and the assumptions underlying our growth expectations; demand for our products; when we expect to receive the balance of the cash purchase price for our sale of our Purification Solutions business; the sufficiency of our cash on hand, cash provided from operations and cash available under our credit and commercial paper facilities to fund our cash requirements; anticipated capital spending; regulatory developments; expected insurance proceeds related to flooding at our Pepinster, Belgium facility; cash requirements and uses of available cash, including future cash outlays associated with respirator liabilities and the timing of such outlays; exposure to interest rate and foreign exchange risk; amortization expenses; our operating tax rate; and the possible outcome of legal and environmental proceedings. From time to time, we also provide forward-looking statements in other materials we release to the public and in oral statements made by authorized officers.
Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, potentially inaccurate assumptions, and other factors, some of which are beyond our control or difficult to predict. If known or unknown risks materialize, our actual results could differ materially from those expressed in the forward-looking statements. Importantly, as we
30
cannot predict the duration or scope of the COVID‐19 pandemic, the negative impact to our results cannot be estimated. Factors that will influence the impact on our business and operations include the duration and extent of the pandemic, the virulence and spread of different strains of the virus and the level and timing of vaccine distribution around the world and its impact on the stability of economic recovery and growth, the degree of disruption in supply chains from global logistics matters resulting from the COVID‐19 pandemic, impacts to manufacturing operations resulting from government-imposed lockdowns, and other general economic consequences of the pandemic. Further, the COVID-19 pandemic has also contributed to increased costs and decreased availability of labor and materials for construction projects, and these factors have increased the costs of our capital improvement projects and may delay our completion of such projects.
In addition to factors described elsewhere in this report, the following are some of the factors that could cause our actual results to differ materially from those expressed in our forward-looking statements: industry capacity utilization and competition from other specialty chemical companies; safety, health and environmental requirements and related constraints imposed on our business; regulatory and financial risks related to climate change developments; volatility in the price and availability of energy and raw materials, including with respect to the Russian invasion of Ukraine; a significant adverse change in a customer relationship or the failure of a customer to perform its obligations under agreements with us; failure to achieve growth expectations from new products, applications and technology developments; failure to realize benefits from acquisitions, alliances, or joint ventures or achieve our portfolio management objectives; negative or uncertain worldwide or regional economic conditions and market opportunities, including from trade relations, global health matters or geo-political conflicts; litigation or legal proceedings; tax rates and fluctuations in foreign currency exchange and interest rates; our inability to complete capacity expansions or other development projects; and the accuracy of the assumptions we used in establishing reserves for our share of liability for respirator claims. These other factors and risks are discussed more fully in our 2021 10-K and in our subsequent SEC filings.
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
Information about market risks for the period ended June 30, 2022 does not differ materially from that discussed under Item 7A of our 2021 10-K.
Item 4. |
Controls and Procedures |
As of June 30, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of that date.
There were no changes in our internal controls over financial reporting that occurred during our fiscal quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As permitted by the rules and regulations of the Securities and Exchange Commission, we excluded from our assessment the internal controls over financial reporting at Tokai Carbon (Tianjin) Co., which was acquired on February 28, 2022, for the period ended June 30, 2022.
31
Part II. Other Information
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
Issuer Purchases of Equity Securities
The table below sets forth information regarding Cabot’s purchases of its equity securities during the quarter ended June 30, 2022:
Period |
|
Total Number of Shares Purchased(1)(2) |
|
|
Average Price Paid per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) |
|
|
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(1) |
|
||||
April 1, 2022 - April 30, 2022 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
4,518,056 |
|
May 1, 2022 - May 31, 2022 |
|
|
196,522 |
|
|
$ |
68.09 |
|
|
|
196,522 |
|
|
|
4,321,534 |
|
June 1, 2022 - June 30, 2022 |
|
|
200 |
|
|
$ |
71.92 |
|
|
|
200 |
|
|
|
4,321,334 |
|
Total |
|
|
196,722 |
|
|
|
|
|
|
|
196,722 |
|
|
|
|
|
(1) |
On July 13, 2018, Cabot publicly announced that the Board of Directors authorized the Company to repurchase up to an additional ten million shares of its common stock on the open market or in privately negotiated transactions, increasing the balance of shares available for repurchase at that time to approximately eleven million shares. The current authorization does not have a set expiration date. |
(2) |
Total number of shares purchased does not include 2,176 shares withheld to pay taxes on the vesting of equity awards made under the Company's equity incentive plans or to pay the exercise price of options exercised during the period. |
32
Item 6. |
Exhibits |
Exhibit No. |
|
Description |
|
|
|
Exhibit 3.1 |
|
|
|
|
|
Exhibit 3.2 |
|
|
|
|
|
Exhibit 4.1 |
|
|
|
|
|
Exhibit 4.2 |
|
|
|
|
|
Exhibit 31.1* |
|
|
|
|
|
Exhibit 31.2* |
|
|
|
|
|
Exhibit 32** |
|
|
|
|
|
Exhibit 101.INS* |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
Exhibit 101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
Exhibit 101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
Exhibit 101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
Exhibit 101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
Exhibit 101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
Exhibit 104* |
|
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL (included in Exhibit 101). |
* |
Filed herewith. |
** |
Furnished herewith. |
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
CABOT CORPORATION |
|
|
|
|
|
Date: August 8, 2022 |
|
By: |
/s/ Erica McLaughlin |
|
|
|
Erica McLaughlin |
|
|
|
Senior Vice President and Chief Financial Officer |
|
|
|
(Duly Authorized Officer) |
|
|
|
|
|
|
|
|
Date: August 8, 2022 |
|
By: |
/s/ Lisa m. Dumont |
|
|
|
Lisa M. Dumont |
|
|
|
Vice President and Controller (Chief Accounting Officer) |
34
Exhibit 31.1
Principal Executive Officer Certification
I, Sean D. Keohane, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Cabot Corporation; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 8, 2022 |
|
|
/s/ SEAN KEOHANE |
|
|
|
Sean D. Keohane |
|
|
|
President and Chief Executive Officer |
Exhibit 31.2
Principal Financial Officer Certification
I, Erica McLaughlin, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Cabot Corporation; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 8, 2022 |
|
|
/s/ Erica McLaughlin |
|
|
|
Erica McLaughlin |
|
|
|
Senior Vice President and Chief Financial Officer |
Exhibit 32
Certifications Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (the “Report”) by Cabot Corporation (the “Company”), each of the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:
|
1. |
The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934, as amended; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 8, 2022 |
|
/s/ Sean D. Keohane |
|
|
Sean D. Keohane |
|
|
President and Chief Executive Officer |
|
|
|
Date: August 8, 2022 |
|
/s/ Erica McLaughlin |
|
|
Erica McLaughlin |
|
|
Senior Vice President and Chief Financial Officer |