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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

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

For the quarterly period ended December 31, 2022

or

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

For the transition period from to

Commission file number 1-5667

 

Cabot Corporation

(Exact name of registrant as specified in its charter)

 

 

Delaware

04-2271897

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

Two Seaport Lane

Boston, Massachusetts

02210-2019

(Address of principal executive offices)

(Zip Code)

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

 

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $1 par value per share

CBT

The New York Stock Exchange

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

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

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

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

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

The Company had 56,323,556 shares of common stock, $1.00 par value per share, outstanding as of February 6, 2023.

 

 


 

INDEX

 

Part I.

Financial Information

 

 

 

 

 

 

Item 1.

Financial Statements (unaudited)

 

 

 

Consolidated Statements of Operations

3

 

 

Consolidated Statements of Comprehensive Income (Loss)

4

 

 

Consolidated Balance Sheets

5

 

 

Consolidated Statements of Cash Flows

7

 

 

Consolidated Statements of Changes in Stockholders’ Equity

8

 

 

Notes to the Consolidated Financial Statements

10

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

 

Item 4.

Controls and Procedures

28

 

 

 

Part II.

Other Information

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

 

Item 6.

Exhibits

29

 

2


 

Part I. Financial Information

Item 1. Financial Statements

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

 

 

 

Three Months Ended December 31

 

 

 

2022

 

 

2021

 

 

 

(In millions, except per share amounts)

 

Net sales and other operating revenues

 

$

965

 

 

$

968

 

Cost of sales

 

 

784

 

 

 

770

 

Gross profit

 

 

181

 

 

 

198

 

Selling and administrative expenses

 

 

60

 

 

 

71

 

Research and technical expenses

 

 

13

 

 

 

13

 

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

 

 

3

 

 

 

197

 

Income (loss) from operations

 

 

105

 

 

 

(83

)

Interest and dividend income

 

 

6

 

 

 

3

 

Interest expense

 

 

(22

)

 

 

(12

)

Other income (expense)

 

 

(5

)

 

 

(1

)

Income (loss) before income taxes
   and equity in earnings of affiliated companies

 

 

84

 

 

 

(93

)

(Provision) benefit for income taxes

 

 

(20

)

 

 

12

 

Equity in earnings of affiliated companies, net of tax

 

 

2

 

 

 

1

 

Net income (loss)

 

 

66

 

 

 

(80

)

Net income (loss) attributable to noncontrolling interests, net
   of tax

 

 

12

 

 

 

9

 

Net income (loss) attributable to Cabot Corporation

 

$

54

 

 

$

(89

)

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

56.3

 

 

 

56.8

 

Diluted

 

 

56.7

 

 

 

56.8

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

Basic

 

$

0.94

 

 

$

(1.57

)

Diluted

 

$

0.93

 

 

$

(1.57

)

 

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

3


 

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

UNAUDITED

 

 

 

Three Months Ended December 31

 

 

 

2022

 

 

2021

 

 

 

(In millions)

 

Net income (loss)

 

$

66

 

 

$

(80

)

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

Foreign currency translation adjustment, net of tax

 

 

88

 

 

 

(28

)

Derivatives: net investment hedges

 

 

 

 

 

 

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

 

 

(1

)

 

 

(1

)

Pension and other postretirement benefit liability adjustments, net of tax

 

 

 

 

 

1

 

Other comprehensive income (loss), net of tax of $ — and $ —

 

 

87

 

 

 

(28

)

Comprehensive income (loss)

 

 

153

 

 

 

(108

)

Net income (loss) attributable to noncontrolling interests, net
   of tax

 

 

12

 

 

 

9

 

Foreign currency translation adjustment attributable to
   noncontrolling interests, net of tax

 

 

6

 

 

 

2

 

Comprehensive income (loss) attributable to noncontrolling interests

 

 

18

 

 

 

11

 

Comprehensive income (loss) attributable to Cabot Corporation

 

$

135

 

 

$

(119

)

 

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

4


 

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

UNAUDITED

 

 

 

December 31, 2022

 

 

September 30, 2022

 

 

 

(In millions)

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

190

 

 

$

206

 

Accounts and notes receivable, net of reserve for doubtful
   accounts of $
3 and $3

 

 

779

 

 

 

836

 

Inventories:

 

 

 

 

 

 

Raw materials

 

 

172

 

 

 

182

 

Finished goods

 

 

471

 

 

 

427

 

Other

 

 

61

 

 

 

55

 

Total inventories

 

 

704

 

 

 

664

 

Prepaid expenses and other current assets

 

 

127

 

 

 

114

 

Total current assets

 

 

1,800

 

 

 

1,820

 

Property, plant and equipment, net

 

 

1,304

 

 

 

1,270

 

Goodwill

 

 

133

 

 

 

129

 

Equity affiliates

 

 

21

 

 

 

20

 

Intangible assets, net

 

 

63

 

 

 

63

 

Deferred income taxes

 

 

44

 

 

 

45

 

Other assets

 

 

170

 

 

 

178

 

Total assets

 

$

3,535

 

 

$

3,525

 

 

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

5


 

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

UNAUDITED

 

 

 

December 31, 2022

 

 

September 30, 2022

 

 

 

(In millions, except share

 

 

 

and per share amounts)

 

Current liabilities:

 

 

 

 

 

 

Short-term borrowings

 

$

312

 

 

$

347

 

Accounts payable and accrued liabilities

 

 

630

 

 

 

707

 

Income taxes payable

 

 

35

 

 

 

44

 

Current portion of long-term debt

 

 

7

 

 

 

7

 

Total current liabilities

 

 

984

 

 

 

1,105

 

Long-term debt

 

 

1,091

 

 

 

1,089

 

Deferred income taxes

 

 

65

 

 

 

65

 

Other liabilities

 

 

236

 

 

 

234

 

Contingencies (Note G)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock:

 

 

 

 

 

 

Authorized: 2,000,000 shares of $1 par value, Issued and Outstanding: None and none

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

Authorized: 200,000,000 shares of $1 par value, Issued: 56,453,279 and 56,385,963 shares, Outstanding: 56,315,875 and 56,248,559 shares

 

 

57

 

 

 

56

 

Less cost of 137,404 and 137,404 shares of common treasury stock

 

 

(4

)

 

 

(4

)

Additional paid-in capital

 

 

 

 

 

1

 

Retained earnings

 

 

1,314

 

 

 

1,284

 

Accumulated other comprehensive income (loss)

 

 

(358

)

 

 

(439

)

Total Cabot Corporation stockholders' equity

 

 

1,009

 

 

 

898

 

Noncontrolling interests

 

 

150

 

 

 

134

 

Total stockholders' equity

 

 

1,159

 

 

 

1,032

 

Total liabilities and stockholders' equity

 

$

3,535

 

 

$

3,525

 

 

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

6


 

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 

 

 

Three Months Ended December 31

 

 

 

2022

 

 

2021

 

 

 

(In millions)

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income (loss)

 

$

66

 

 

$

(80

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

35

 

 

 

39

 

Purification Solutions loss on sale and asset impairment charge

 

 

3

 

 

 

197

 

Gain on sale of land

 

 

(1

)

 

 

 

Deferred tax provision (benefit)

 

 

 

 

 

(36

)

Equity in earnings of affiliated companies

 

 

(2

)

 

 

(1

)

Share-based compensation

 

 

6

 

 

 

6

 

Other non-cash (income) expense

 

 

(4

)

 

 

5

 

Cash dividends received from equity affiliates

 

 

2

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts and notes receivable

 

 

80

 

 

 

(57

)

Inventories

 

 

(14

)

 

 

(95

)

Prepaid expenses and other assets

 

 

(12

)

 

 

(27

)

Accounts payable and accrued liabilities

 

 

(100

)

 

 

9

 

Income taxes payable

 

 

(10

)

 

 

3

 

Other liabilities

 

 

3

 

 

 

(12

)

Cash provided (used) by operating activities

 

 

52

 

 

 

(49

)

Cash Flows from Investing Activities:

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(35

)

 

 

(30

)

Proceeds from sale of land

 

 

7

 

 

 

 

Proceeds from sale of Purification Solutions business

 

 

6

 

 

 

 

Other

 

 

5

 

 

 

1

 

Cash provided (used) by investing activities

 

 

(17

)

 

 

(29

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Proceeds from short-term borrowings

 

 

11

 

 

 

 

Proceeds from issuance (repayments) of commercial paper, net

 

 

(48

)

 

 

156

 

Repayments of long-term debt

 

 

(6

)

 

 

(5

)

Purchases of common stock

 

 

(17

)

 

 

(19

)

Proceeds from sales of common stock

 

 

3

 

 

 

 

Cash dividends paid to noncontrolling interests

 

 

(14

)

 

 

(8

)

Cash dividends paid to common stockholders

 

 

(21

)

 

 

(21

)

Cash provided (used) by financing activities

 

 

(92

)

 

 

103

 

Effects of exchange rate changes on cash

 

 

41

 

 

 

(15

)

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

 

 

(16

)

 

 

10

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

206

 

 

 

170

 

Cash, cash equivalents and restricted cash at end of period

 

$

190

 

 

$

180

 

 

 

 

December 31, 2022

 

 

December 31, 2021

 

 

 

(In millions)

 

Cash and cash equivalents

 

$

190

 

 

$

179

 

Restricted cash classified within Prepaid expenses and other current assets

 

 

 

 

 

1

 

Cash, cash equivalents and restricted cash

 

$

190

 

 

$

180

 

 

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

7


 

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

UNAUDITED

 

 

 

Common Stock, Net of Treasury Stock

 

 

Additional
Paid-in

 

 

Retained

 

 

Accumulated Other Comprehensive

 

 

Total Cabot Corporation Stockholders’

 

 

Noncontrolling

 

 

Total Stockholders’

 

 

 

Shares

 

 

Cost

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

 

Interests

 

 

Equity

 

 

 

(In millions, except share amounts)

 

Balance at September 30, 2022

 

 

56,249

 

 

$

52

 

 

$

1

 

 

$

1,284

 

 

$

(439

)

 

$

898

 

 

$

134

 

 

$

1,032

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

54

 

 

 

 

 

 

54

 

 

 

12

 

 

 

66

 

Total other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

81

 

 

 

81

 

 

 

6

 

 

 

87

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.37 per share

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

 

 

 

(21

)

 

 

 

 

 

(21

)

Cash dividends declared to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Issuance of stock under equity compensation plans

 

 

309

 

 

 

1

 

 

 

2

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Share-based compensation

 

 

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

11

 

 

 

 

 

 

11

 

Purchase and retirement of common stock

 

 

(242

)

 

 

 

 

 

(14

)

 

 

(3

)

 

 

 

 

 

(17

)

 

 

 

 

 

(17

)

Balance at December 31, 2022

 

 

56,316

 

 

$

53

 

 

$

-

 

 

$

1,314

 

 

$

(358

)

 

$

1,009

 

 

$

150

 

 

$

1,159

 

 

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, 2021

 

 

56,727

 

 

$

53

 

 

$

24

 

 

$

1,159

 

 

$

(289

)

 

$

947

 

 

$

143

 

 

$

1,090

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(89

)

 

 

 

 

 

(89

)

 

 

9

 

 

 

(80

)

Total other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30

)

 

 

(30

)

 

 

2

 

 

 

(28

)

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.37 per share

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

 

 

 

(21

)

 

 

 

 

 

(21

)

Issuance of stock under equity compensation plans

 

 

202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

Purchase and retirement of common stock

 

 

(349

)

 

 

 

 

 

(19

)

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Balance at December 31, 2021