SEC Filing | Cabot Corporation

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10-Q

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, 2023


☐	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, Suite 1400
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 55,430,710 shares of common stock, $1.00 par value per share, outstanding as of February 6, 2024.

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	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
	Item 4.	Controls and Procedures	26

Part II.	Other Information

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
	Item 6.	Exhibits	27

Part I. Financial Information

Item 1. Financial Statements

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED


	Three Months Ended December 31
	2023			2022
	(In millions, except per share amounts)
Net sales and other operating revenues	$	958		$	965
Cost of sales		740			784
Gross profit		218			181
Selling and administrative expenses		67			60
Research and technical expenses		15			13
Loss on sale of business		—			3
Income (loss) from operations		136			105
Interest and dividend income		9			6
Interest expense		(22	)		(22	)
Other income (expense)		(29	)		(5	)
Income (loss) from operations before income taxes and equity in earnings of affiliated companies		94			84
(Provision) benefit for income taxes		(34	)		(20	)
Equity in earnings of affiliated companies, net of tax		1			2
Net income (loss)		61			66
Net income (loss) attributable to noncontrolling interests, net of tax		11			12
Net income (loss) attributable to Cabot Corporation	$	50		$	54

Weighted-average common shares outstanding:
Basic		55.3			56.3
Diluted		55.8			56.7

Earnings (loss) per common share:
Basic	$	0.88		$	0.94
Diluted	$	0.88		$	0.93

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

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

UNAUDITED


	Three Months Ended December 31
	2023			2022
	(In millions)
Net income (loss)	$	61		$	66
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment, net of tax		62			88
Derivatives: net investment hedges
(Gains) losses reclassified to interest expense, net of tax		(1	)		(1	)
Other comprehensive income (loss), net of tax of $ 1 and $ —		61			87
Comprehensive income (loss)		122			153
Net income (loss) attributable to noncontrolling interests, net of tax		11			12
Foreign currency translation adjustment attributable to noncontrolling interests, net of tax		4			6
Comprehensive income (loss) attributable to noncontrolling interests		15			18
Comprehensive income (loss) attributable to Cabot Corporation	$	107		$	135

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

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

UNAUDITED


	December 31, 2023			September 30, 2023
	(In millions)
Current assets:
Cash and cash equivalents	$	244		$	238
Accounts and notes receivable, net of reserve for doubtful accounts of $3 and $2		726			695
Inventories:
Raw materials		154			148
Finished goods		398			374
Other		65			63
Total inventories		617			585
Prepaid expenses and other current assets		105			108
Total current assets		1,692			1,626
Property, plant and equipment		3,936			3,827
Accumulated depreciation		(2,492	)		(2,415	)
Net property, plant and equipment		1,444			1,412
Goodwill		138			134
Equity affiliates		21			20
Intangible assets, net		61			60
Deferred income taxes		166			180
Other assets		173			172
Total assets	$	3,695		$	3,604

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

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

UNAUDITED


	December 31, 2023			September 30, 2023
	(In millions, except share
	and per share amounts)
Current liabilities:
Short-term borrowings	$	206		$	174
Accounts payable and accrued liabilities		585			600
Income taxes payable		31			40
Current portion of long-term debt		8			8
Total current liabilities		830			822
Long-term debt		1,098			1,094
Deferred income taxes		51			50
Other liabilities		241			231
Contingencies (Note E)
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: 55,560,648 and 55,379,636 shares, Outstanding: 55,424,816 and 55,243,804 shares		55			55
Less cost of 135,832 and 135,832 shares of common treasury stock		(3	)		(3	)
Additional paid-in capital		—			—
Retained earnings		1,582			1,574
Accumulated other comprehensive income (loss)		(305	)		(362	)
Total Cabot Corporation stockholders' equity		1,329			1,264
Noncontrolling interests		146			143
Total stockholders' equity		1,475			1,407
Total liabilities and stockholders' equity	$	3,695		$	3,604

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

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED


	Three Months Ended December 31
	2023			2022
	(In millions)
Cash Flows from Operating Activities:
Net income (loss)	$	61		$	66
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization		41			35
Loss on sale of business		—			3
Gain on sale of land		—			(1	)
Deferred tax provision (benefit)		7			—
Equity in earnings of affiliated companies		(1	)		(2	)
Share-based compensation		6			6
Other non-cash (income) expense		37			(4	)
Cash dividends received from equity affiliates		1			2
Changes in assets and liabilities:
Accounts and notes receivable		(7	)		80
Inventories		(19	)		(14	)
Prepaid expenses and other assets		(2	)		(12	)
Accounts payable and accrued liabilities		(20	)		(100	)
Income taxes payable		(10	)		(10	)
Other liabilities		11			3
Cash provided by (used in) operating activities		105			52
Cash Flows from Investing Activities:
Additions to property, plant and equipment		(54	)		(35	)
Proceeds from sale of land		—			7
Proceeds from sale of business		—			6
Other		—			5
Cash provided by (used in) investing activities		(54	)		(17	)
Cash Flows from Financing Activities:
Proceeds from short-term borrowings		—			11
Proceeds from issuance (repayments) of commercial paper, net		32			(48	)
Repayments of long-term debt		(1	)		(6	)
Purchases of common stock		(33	)		(17	)
Proceeds from sales of common stock		7			3
Cash dividends paid to noncontrolling interests		(12	)		(14	)
Cash dividends paid to common stockholders		(22	)		(21	)
Cash provided by (used in) financing activities		(29	)		(92	)
Effects of exchange rate changes on cash		(16	)		41
Increase (decrease) in cash and cash equivalents		6			(16	)
Cash and cash equivalents at beginning of period		238			206
Cash and cash equivalents at end of period	$	244		$	190

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

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

UNAUDITED


	Common Stock, Net of Treasury Stock					Additional Paid-in			Retained			Accumulated Other Comprehensive			Total Cabot Corporation Stockholders’			Noncontrolling			Total Stockholders’
	Shares			Cost		Capital			Earnings			Income (Loss)			Equity			Interests			Equity
	(In millions, except share amounts)
Balance at September 30, 2023		55,244		$	52	$	—		$	1,574		$	(362	)	$	1,264		$	143		$	1,407
Net income (loss)										50						50			11			61
Total other comprehensive income (loss)													57			57			4			61
Cash dividends paid:
Common stock, $0.40 per share										(22	)					(22	)					(22	)
Cash dividends declared to noncontrolling interests																—			(12	)		(12	)
Issuance of stock under equity compensation plans		441			—		7									7						7
Share-based compensation							6									6						6
Purchase and retirement of common stock		(260	)		—		(13	)		(20	)					(33	)					(33	)
Balance at December 31, 2023		55,425		$	52	$	-		$	1,582		$	(305	)	$	1,329		$	146		$	1,475

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

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

UNAUDITED


	Common Stock, Net of Treasury Stock					Additional Paid-in			Retained			Accumulated Other Comprehensive			Total Cabot Corporation Stockholders’			Noncontrolling			Total Stockholders’
	Shares			Cost		Capital			Earnings			Income (Loss)			Equity			Interests			Equity
	(In millions, except share amounts)
Balance at September 30, 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.

CABOT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

UNAUDITED

A. Basis of Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S.”) (“GAAP”) 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, 2023 (the “2023 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 December 31, 2023 and 2022. 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.

B. Significant Accounting Policies

Full detail on the Company’s significant accounting policies may be obtained by referring to Note A in the 2023 10-K.

Argentina Devaluation

The Company’s wholly-owned Argentinian subsidiary operates in a highly inflationary economy and, as a result, the functional currency of the subsidiary is Cabot’s reporting currency, the U.S. dollar. During the three months ended December 31, 2023, the Company recorded foreign exchange losses of $40 million related to the revaluation of non-functional currency denominated monetary asset and liability balances, of which $33 million related to a single devaluation action by the newly elected Argentine government. The Company invests cash in money market funds and recorded investment income of $12 million for the three months ended December 31, 2023. The foreign exchange losses and investment gains are recorded in Other income (expense) in the Consolidated Statement of Operations.

Recently Adopted Accounting Standards

In November 2022, the FASB issued a new standard on the disclosure of supplier financing programs. The new standard requires qualitative and quantitative disclosures as to the nature and potential magnitude of such programs in addition to program activity and changes for the periods presented. The Company adopted this standard on October 1, 2023. See Note J for disclosures related to the Company's supplier financing programs. The adoption of this standard did not have a material impact on the Company's Consolidated Financial Statements.

Recent Accounting Pronouncements

In November 2023, the FASB issued a new standard, Improvement to Reportable Segment Disclosures. The new guidance enhances the disclosure of significant reportable segment expenses. The new standard is effective for fiscal years beginning after December 15, 2023, and early adoption is permitted. The Company is currently evaluating the timing of adoption and the impact of the adoption of this standard on the Company’s Consolidated Financial Statements.

In December 2023, the FASB issued a new standard, Improvements to Income Tax Disclosures. The new guidance requires additional disclosures primarily related to the income tax rate reconciliation and income taxes paid. The new standard is effective for fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company is currently evaluating the timing of adoption and the impact of the adoption of this standard on the Company’s Consolidated Financial Statements.

C. Goodwill and Intangible Assets

The carrying amount of goodwill attributable to each reportable segment and the changes in those balances during the three months ended December 31, 2023 are as follows:


	Reinforcement Materials		Performance Chemicals		Total
	(In millions)
Balance at September 30, 2023	$	51	$	83	$	134
Foreign currency impact		2		2		4
Balance at December 31, 2023	$	53	$	85	$	138

The following table provides information regarding the Company’s intangible assets:


	December 31, 2023							September 30, 2023
	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	$	35	$	(11	)		24	$	34	$	(10	)	$	24
Trademarks		2		(1	)		1		2		(1	)		1
Customer relationships		67		(31	)		36		65		(30	)		35
Total intangible assets	$	104	$	(43	)	$	61	$	101	$	(41	)	$	60

Intangible assets are amortized over their estimated useful lives, which range between ten and twenty-five years, with a weighted average amortization period of approximately seventeen years. Amortization expense was $1 million for both the three months ended December 31, 2023 and 2022. Amortization expense is included in Cost of sales, Selling and administrative expenses and Research and technical expenses in the Consolidated Statements of Operations. Total amortization expense is estimated to be approximately $6 million each year for the next five fiscal years.

D. 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, 2023, attributable to Cabot Corporation	$	(353	)	$	(9	)	$	(362	)
Other comprehensive income (loss) before reclassifications		62			—			62
Amounts reclassified from AOCI		(1	)		—			(1	)
Less: Other comprehensive income (loss) attributable to noncontrolling interests		4			—			4
Balance at December 31, 2023, attributable to Cabot Corporation	$	(296	)	$	(9	)	$	(305	)


	Currency Translation Adjustment			Pension and Other Postretirement Benefit Liability Adjustments			Total
	(In millions)
Balance at September 30, 2022, attributable to Cabot Corporation	$	(429	)	$	(10	)	$	(439	)
Other comprehensive income (loss) before reclassifications		88			—			88
Amounts reclassified from AOCI		(1	)		—			(1	)
Less: Other comprehensive income (loss) attributable to noncontrolling interests		6			—			6
Balance at December 31, 2022, attributable to Cabot Corporation	$	(348	)	$	(10	)	$	(358	)

For both the three months ended December 31, 2023 and 2022, the Company reclassified $1 million of gain associated with net investment hedges out of AOCI and into interest expense on the Consolidated Statements of Operations.

E. 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 2023 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 2023 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 was $38 million at both December 31, 2023 and September 30, 2023.

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. 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.

F. Income Tax

Effective Tax Rate


	Three Months Ended December 31
	2023			2022
	(Dollars in millions)
(Provision) benefit for income taxes	$	(34	)	$	(20	)
Effective tax rate		36	%		24	%

For the three months ended December 31, 2023 and 2022, the (Provision) benefit for income taxes included a net discrete tax expense of $7 million and $3 million, respectively.

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 the Company expects that 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 2020 through 2022 tax years generally remain subject to examination by the IRS and various tax years from 2016 through 2022 remain subject to examination by the respective state tax authorities. In foreign jurisdictions, various tax years from 2006 through 2022 remain subject to examination by their respective tax authorities.

During each of the three months ended December 31, 2023 and 2022, Cabot released uncertain tax positions of $1 million due to the expiration of statutes of limitations in various jurisdictions.

G. Earnings Per Share

The following tables summarize the components of the basic and diluted earnings (loss) per common share (“EPS”) computations:


	Three Months Ended December 31
	2023		2022
	(In millions, except per share amounts)
Basic EPS:
Net income (loss) attributable to Cabot Corporation	$	50	$	54
Less: Dividends and dividend equivalents to participating securities		—		—
Less: Undistributed earnings allocated to participating securities(1)		1		1
Earnings (loss) allocated to common stockholders (numerator)	$	49	$	53

Weighted average common shares and participating securities outstanding		56.4		57.6
Less: Participating securities(1)		1.1		1.3
Adjusted weighted average common shares (denominator)		55.3		56.3

Earnings (loss) per common share - basic:	$	0.88	$	0.94

Diluted EPS:
Earnings (loss) allocated to common stockholders	$	49	$	53
Plus: Earnings allocated to participating securities		1		1
Less: Adjusted earnings allocated to participating securities(2)		1		1
Earnings (loss) allocated to common stockholders (numerator)	$	49	$	53

Adjusted weighted average common shares outstanding		55.3		56.3
Effect of dilutive securities:
Common shares issuable(3)		0.5		0.4
Adjusted weighted average common shares (denominator)		55.8		56.7

Earnings (loss) per common share - diluted:	$	0.88	$	0.93

(1)

Participating securities consist of shares underlying unvested time-based restricted stock units (the "TSUs"), earned and unvested performance-based restricted stock units (the "PSUs", and referred to in this note collectively with the TSUs as the "RSUs"), stock units accounted for under the Supplemental 401(k) Plan portion of the Company’s Deferred Compensation and Supplemental Retirement Plan, and stock units and phantom stock units accounted for under the Company’s Non-Employee Directors’ Deferral Plan. The holders of RSUs are entitled to receive dividend equivalents, payable in cash, to the extent dividends are paid on the outstanding shares of Common Stock, and equal in value to the dividends that would have been paid in respect of the Common Stock underlying the RSU. The accounts of holders of stock units and phantom stock units are credited with dividend equivalents, which are payable, in stock or cash, as the case may be, with the distribution of account balances.

Undistributed earnings are the earnings which remain after dividends declared during the period are assumed to be distributed to the common and participating stockholders. Undistributed earnings are allocated to common and participating stockholders on the same basis as dividend distributions. The calculation of undistributed earnings is as follows:


	Three Months Ended December 31
	2023		2022
	(In millions)
Calculation of undistributed earnings (loss):
Net income (loss) attributable to Cabot Corporation	$	50	$	54
Less: Dividends declared on common stock		22		21
Less: Dividends declared on participating securities		—		—
Undistributed earnings (loss)	$	28	$	33

Allocation of undistributed earnings (loss):
Undistributed earnings (loss) allocated to common stockholders	$	27	$	32
Undistributed earnings allocated to participating stockholders		1		1
Undistributed earnings (loss)	$	28	$	33

(2)