Cabot Corp 10-Q for FY2020 Q1

Cabot Corp (CBT)

10-Q 2020-02-06 For: 2019-12-31

Added on April 10, 2026

About this 10-Q

Cabot Corp filed this 10-Q on February 6, 2020, covering the quarter ended December 31, 2019 (FY2020 Q1).

Headline figures

Quarter ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $727M; down 11.4% from $821M a year earlier
Net income: $41M; down 40.6% from net income of $69M a year earlier
Diluted EPS: $0.70; down 38.6% from $1.14 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

Part I.	Financial Information

	Item 1.	Financial Statements (unaudited)
		Consolidated Statements of Operations	3
		Consolidated Statements of Comprehensive Income	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	29
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
	Item 4.	Controls and Procedures	39

Part II.	Other Information
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
	Item 6.	Exhibits	40

	Three Months Ended December 31
	2019			2018
	(In millions, except per share amounts)
Net sales and other operating revenues	$	727		$	821
Cost of sales		586			655
Gross profit		141			166
Selling and administrative expenses		64			73
Research and technical expenses		14			16
Income (loss) from operations		63			77
Interest and dividend income		3			2
Interest expense		(14	)		(15	)
Other income (expense)		(2	)		6
Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies		50			70
(Provision) benefit for income taxes		(4	)		7
Equity in earnings of affiliated companies, net of tax		—			—
Net income (loss)		46			77
Net income (loss) attributable to noncontrolling interests, net of tax		5			8
Net income (loss) attributable to Cabot Corporation	$	41		$	69

Weighted-average common shares outstanding:
Basic		56.9			59.9
Diluted		57.0			60.1

Earnings per common share:
Basic	$	0.71		$	1.14
Diluted	$	0.70		$	1.14

	Three Months Ended December 31
	2019			2018
	(In millions)
Net income (loss)	$	46		$	77
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment, net of tax (provision) benefit of $(1) and $2		43			(24	)
Derivatives: net investment hedges
(Gains) losses reclassified to interest expense, net of tax provision (benefit) of $— and $—		(1	)		(1	)
Pension and other postretirement benefit liability adjustments
Pension and other postretirement benefit liability adjustments arising during the period, net of tax		1			22
Other comprehensive income (loss)		43			(3	)
Comprehensive income (loss)		89			74
Net income (loss) attributable to noncontrolling interests, net of tax		5			8
Foreign currency translation adjustment attributable to noncontrolling interests, net of tax		3			—
Comprehensive income (loss) attributable to noncontrolling interests, net of tax		8			8
Comprehensive income (loss) attributable to Cabot Corporation	$	81		$	66


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


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

	December 31, 2019		September 30, 2019
	(In millions)
Current assets:
Cash and cash equivalents	$	173	$	169
Accounts and notes receivable, net of reserve for doubtful accounts of $3 and $3		485		530
Inventories:
Raw materials		110		107
Finished goods		313		305
Other		56		54
Total inventories		479		466
Prepaid expenses and other current assets		59		45
Total current assets		1,196		1,210
Property, plant and equipment, net		1,395		1,348
Goodwill		92		90
Equity affiliates		39		39
Intangible assets, net		97		96
Deferred income taxes		161		163
Other assets		171		58
Total assets	$	3,151	$	3,004

	December 31, 2019			September 30, 2019
	(In millions, except share
	and per share amounts)
Current liabilities:
Short-term borrowings	$	4		$	33
Accounts payable and accrued liabilities		544			537
Income taxes payable		19			22
Current portion of long-term debt		7			7
Total current liabilities		574			599
Long-term debt		1,095			1,024
Deferred income taxes		41			41
Other liabilities		289			206
Commitments and 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: 56,825,282 and 57,250,454 shares
Outstanding: 56,655,417 and 57,080,589 shares		57			57
Less cost of 169,865 and 169,865 shares of common treasury stock		(5	)		(5	)
Additional paid-in capital		—			—
Retained earnings		1,329			1,337
Accumulated other comprehensive income (loss)		(354	)		(391	)
Total Cabot Corporation stockholders' equity		1,027			998
Noncontrolling interests		125			136
Total stockholders' equity		1,152			1,134
Total liabilities and stockholders' equity	$	3,151		$	3,004

	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, 2019		57,081		$	52	$	—		$	1,337		$	(391	)	$	998		$	136		$	1,134
Adoption of accounting standards										3		$	(3	)		—						—
Net income (loss)										41						41			5			46
Total other comprehensive income (loss)													40			40			3			43
Cash dividends paid:
Common stock, $0.35 per share										(20	)					(20	)					(20	)
Cash dividends declared to noncontrolling interests																			(19	)		(19	)
Issuance of stock under equity compensation plans		273			—		1									1						1
Amortization of share-based compensation							1									1						1
Purchase and retirement of common stock		(699	)		—		(2	)		(32	)					(34	)					(34	)
Balance at December 31, 2019		56,655		$	52	$	—		$	1,329		$	(354	)	$	1,027		$	125		$	1,152

	Reinforcement Materials		Performance Chemicals		Total
	(In millions)
Balance at September 30, 2019	$	50	$	40	$	90
Foreign currency impact		1		1		2
Balance at December 31, 2019	$	51	$	41	$	92

	December 31, 2019							September 30, 2019
	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	$	51	$	(5	)	$	46	$	50	$	(5	)	$	45
Trademarks		8		—			8		8		—			8
Customer relationships		58		(15	)		43		57		(14	)		43
Total intangible assets	$	117	$	(20	)	$	97	$	115	$	(19	)	$	96

	Currency Translation Adjustment			Unrealized Gains on Investments			Pension and Other Postretirement Benefit Liability Adjustments			Total
	(In millions)
Balance at September 30, 2019, attributable to Cabot Corporation	$	(338	)	$	1		$	(54	)	$	(391	)
Other comprehensive income (loss) before reclassifications		43			—			—			43
Amounts reclassified from AOCI		(1	)		—			1			—
Adoption of accounting standards		(3	)		(1	)		1			(3	)
Less: Other comprehensive income (loss) attributable to noncontrolling interests		3			—			—			3
Balance at December 31, 2019, attributable to Cabot Corporation	$	(302	)	$	—		$	(52	)	$	(354	)

	Affected Line Item in the Consolidated	Three Months Ended December 31
	Statements of Operations	2019			2018
		(In millions)
Derivatives: net investment hedges
(Gains) losses reclassified to interest expense	Interest expense	$	(1	)	$	(1	)
Pension and other postretirement benefit liability adjustment
Amortization of actuarial losses	Net Periodic Benefit Cost - see Note D for details		1			1
Settlement and curtailment gain	Net Periodic Benefit Cost - see Note D for details		—			(6	)
Total before tax			—			(6	)
Tax impact	Provision (benefit) for income taxes		—			(3	)
Total after tax		$	—		$	(9	)

	Payments Due by Fiscal Year
	Remainder of Fiscal 2020		2021		2022		2023		2024		Thereafter		Total
	(In millions)
Reinforcement Materials	$	174	$	132	$	117	$	107	$	106	$	1,211	$	1,847
Performance Chemicals		50		57		55		36		31		405		634
Purification Solutions		3		1		—		—		—		—		4
Total	$	227	$	190	$	172	$	143	$	137	$	1,616	$	2,485

Description	December 31, 2019
Weighted-average remaining lease term (years):
Operating leases		16
Finance leases		13
Weighted-average discount rate:
Operating leases		2.29	%
Finance leases		4.55	%

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

		Notional Amount
Description	Borrowing	December 31, 2019	September 30, 2019	Hedge Designation
Cross-Currency Swaps	3.4% Notes	USD 250 million swapped to EUR 223 million	USD 250 million swapped to EUR 223 million	Net investment
Forward Foreign Currency Contracts ⁽¹⁾	N/A	USD 43 million	USD 54 million	No designation

Description	Balance Sheet Classification	December 31, 2019
		(In millions)
Lease ROU assets:
Operating	Other assets	$	102
Finance	Net property, plant and equipment		46
Total lease ROU assets		$	148

Lease liabilities:
Current:
Operating	Accounts payable and accrued liabilities	$	20
Finance	Current portion of long-term debt		3
Long-term:
Operating	Other liabilities		88
Finance	Long-term debt		29
Total lease liabilities		$	140

Years Ended September 30	Operating leases		Finance leases
	(In millions)
Remainder of fiscal 2020	$	17	$	4
2021		14		4
2022		10		4
2023		9		4
2024		9		4
2025 and thereafter		69		25
Total lease payments		128		45
Less: imputed interest		20		13
Total	$	108	$	32

Years Ended September 30	Operating leases		Capital leases
	(In millions)
2020	$	23	$	3
2021		14		3
2022		9		3
2023		9		3
2024		8		2
2025 and thereafter		68		7
Total lease payments		131		21
Less: imputed interest		—		9
Total	$	131	$	12

	Severance and Employee Benefits			Environmental Remediation		Other			Total
	(In millions)
Reserve at September 30, 2019	$	3		$	4	$	—		$	7
Charges (gain)		7			—		1			8
Cash paid		(2	)		—		(1	)		(3	)
Reserve at December 31, 2019		8			4		—			12

	Reinforcement Materials		Performance Chemicals		Purification Solutions			Specialty Fluids⁽¹⁾		Segment Total		Unallocated and Other⁽²⁾			Consolidated Total
	(In millions)
Three Months Ended December 31, 2019
Revenues from external customers⁽³⁾	$	379	$	242	$	59		$	—	$	680	$	47		$	727
Income (loss) from continuing operations before income taxes⁽⁴⁾	$	47	$	41	$	(2	)	$	—	$	86	$	(36	)	$	50

Three Months Ended December 31, 2018
Revenues from external customers⁽³⁾	$	457	$	231	$	65		$	19	$	772	$	49		$	821
Income (loss) from continuing operations before income taxes⁽⁴⁾	$	62	$	36	$	(3	)	$	10	$	105	$	(35	)	$	70

	Forecast for the Year Ended September 30, 2020
Effective tax rate		24	%
Impact of discrete tax items:
Unusual or infrequent items		2	%
Items related to uncertain tax positions		1	%
Other discrete tax items		1	%
Impact of certain items		(2	)%
Operating tax rate		26	%

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⁾
October 1, 2019 - October 31, 2019		—	$	—		—		5,886,687
November 1, 2019 - November 30, 2019		450,000	$	48.57		450,000		5,436,687
December 1, 2019 - December 31, 2019		172,222	$	47.30		172,222		5,264,465
Total		622,222				622,222

Exhibit No.		Description

Exhibit 3.1		Restated Certificate of Incorporation of Cabot Corporation effective January 9, 2009 (incorporated herein by reference to Exhibit 3.1 of Cabot’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2008, file reference 1-5667, filed with the SEC on February 9, 2009).

Exhibit 3.2		The By-laws of Cabot Corporation as amended January 8, 2016 (incorporated herein by reference to Exhibit 3.1 of Cabot Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2015, file reference 1-5667, filed with the SEC on February 5, 2016).

Exhibit 31.1*		Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.

Exhibit 31.2*		Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.

Exhibit 32**		Certifications of the Principal Executive Officer and the Principal Financial Officer pursuant to 18 U.S.C. Section 1350.

Exhibit 101.INS*		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*		XBRL Taxonomy Extension Schema Document.

Exhibit 101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

Exhibit 101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

Exhibit 101.PRE*		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 December 31, 2019, formatted in Inline XBRL (included in Exhibit 101).

	CABOT CORPORATION

Date: February 6, 2020	By:	/s/ Erica McLaughlin
		Erica McLaughlin
		Senior Vice President and Chief Financial Officer
		(Duly Authorized Officer)


Date: February 6, 2020	By:	/s/ Lisa m. Dumont
		Lisa M. Dumont
		Vice President and Controller (Chief Accounting Officer)