<PAGE> 1
FORM 10-Q
____________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended
JUNE 30, 1994
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 of Incorporation) (I.R.S. Employer Identification No.)
75 STATE STREET 02109-1806
BOSTON, MASSACHUSETTS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 345-0100
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, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---------- --------------
Indicate the number of shares outstanding of each of the classes of Common
Stock, as of the latest practicable date.
AS OF JUNE 30, 1994, THE COMPANY HAD 18,798,647 SHARES OF COMMON
STOCK, PAR VALUE $1 PER SHARE, OUTSTANDING.
-1-
<PAGE> 2
CABOT CORPORATION
INDEX TO FINANCIAL STATEMENTS
Part I. Financial Information Page No.
--------
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income
Three Months Ended June 30, 1994 and 1993 3
Consolidated Statements of Income
Nine Months Ended June 30, 1994 and 1993 4
Consolidated Balance Sheets
June 30, 1994 and September 30, 1993 5
Consolidated Statements of Cash Flows
Nine Months Ended June 30, 1994 and 1993 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Part II. Other Information
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
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<PAGE> 3
<TABLE>
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30, 1994 and 1993
(Dollars in thousands, except per share amounts)
UNAUDITED
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Revenues:
Net sales and other operating revenues $ 428,805 $ 418,780
Interest and dividend income 1,248 787
------------ -----------
Total revenues 430,053 419,567
------------ -----------
Costs and expenses:
Cost of sales 312,277 311,553
Selling and administrative expenses 56,127 51,761
Research and technical service 11,620 11,009
Interest expense 10,806 11,230
Other (income) expense, net 7,204 2,798
------------ -----------
Total costs and expenses 398,034 388,351
------------ -----------
Income before income taxes 32,019 31,216
Provision for income taxes (12,167) (12,648)
Equity in net income (loss) of affiliated companies 2,151 (119)
------------ -----------
Net income 22,003 18,449
------------- -------------
Dividends on preferred stock, net of tax
benefit of $482 and $473, respectively (895) (918)
-------------- --------------
Income applicable to primary common shares $ 21,108 $ 17,531
============= =============
Weighted average common shares outstanding (000)
(See Note D for information on effective stock split):
Primary 19,093 18,705
Fully diluted (Note A) 20,648 20,331
Income per common share:
Primary $ 1.11 $ 0.94
============== ==============
Fully diluted (Note A) $ 1.04 $ 0.88
============== ==============
Dividends per common share $ 0.26 $ 0.26
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 4
<TABLE>
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended June 30, 1994 and 1993
(Dollars in thousands, except per share amounts)
UNAUDITED
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Revenues:
Net sales and other operating revenues $ 1,262,140 $ 1,222,464
Interest and dividend income 3,282 3,139
------------ -----------
Total revenues 1,265,422 1,225,603
------------ -----------
Costs and expenses:
Cost of sales 928,349 917,855
Selling and administrative expenses 160,011 152,565
Research and technical service 35,527 31,513
Interest expense 31,370 33,719
Other (income) expense, net 17,135 13,785
------------ -----------
Total costs and expenses 1,172,392 1,149,437
------------ -----------
Income before income taxes 93,030 76,166
Provision for income taxes (35,351) (31,113)
Equity in net income (loss) of affiliated companies 2,630 (721)
------------ -----------
Income before cumulative effect of accounting changes 60,309 44,332
Cumulative effect of accounting changes - (26,109)
------------ -----------
Net income 60,309 18,223
------------ -----------
Dividends on preferred stock, net of tax
benefit of $1,449 and $1,420, respectively (2,691) (2,758)
------------ -----------
Income applicable to primary common shares $ 57,618 $ 15,465
============= =============
Weighted average common shares outstanding (000)
(See Note D for information on effective stock split):
Primary 19,096 18,660
Fully diluted (Note A) 20,650 20,294
Income (loss) per common share:
Primary
Continuing operations $ 3.02 $ 2.23
Cumulative effect of accounting changes - (1.40)
-------------- -------------
Income per share $ 3.02 $ 0.83
============== ==============
Fully diluted (Note A)
Continuing operations $ 2.83 $ 2.23
Cumulative effect of accounting changes - (1.40)
-------------- --------------
Income per share $ 2.83 $ 0.83
============== ==============
Dividends per common share $ 0.78 $ 0.78
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 5
<TABLE>
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 1994 and September 30, 1993
(Dollars in thousands)
ASSETS
<CAPTION>
June 30 September 30
1994 1993
(Unaudited)
------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 41,356 $ 40,267
Accounts and notes receivable
(net of reserve for doubtful
accounts of $6,954 and $6,321) 284,945 258,057
Inventories:
Raw materials 51,092 45,589
Work in process 33,119 36,923
Finished goods 96,287 77,747
Other 37,603 35,091
------------- ------------
Total inventories 218,101 195,350
Prepaid expenses 12,568 8,771
Deferred income taxes 28,420 41,761
------------- ------------
Total current assets 585,390 544,206
------------- ------------
Investments:
At equity 157,129 166,669
At cost 1,783 7,911
------------- ------------
Total investments 158,912 174,580
------------- ------------
Property, plant and equipment:
At cost 1,310,902 1,250,228
Accumulated depreciation and amortization (660,133) (603,708)
------------- ------------
Net property, plant and equipment 650,769 646,520
Other assets:
Intangible assets, net of amortization 74,477 78,873
Deferred income taxes 5,697 5,752
Other assets 33,021 39,542
------------- ------------
Total other assets 113,195 124,167
------------- ------------
Total assets $ 1,508,266 $ 1,489,473
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 6
<TABLE>
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 1994 and September 30, 1993
(Dollars in thousands)
LIABILITIES & STOCKHOLDERS' EQUITY
<CAPTION>
June 30 September 30
1994 1993
(Unaudited)
-------------- ---------------
<S> <C> <C>
Current liabilities:
Notes payable to banks $ 33,022 $ 1,501
Current portion of long-term debt 157,444 29,205
Accounts payable and accrued liabilities 268,907 297,201
U.S. and foreign income taxes payable 17,140 25,029
Deferred income taxes 1,216 1,285
------------ ------------
Total current liabilities 477,729 354,221
Long-term debt 293,364 459,275
Deferred income taxes 94,832 86,344
Other liabilities 136,163 147,360
Commitments and contingencies (Note C)
Stockholders' Equity: (Note D)
Preferred stock:
Authorized: 2,000,000 shares of $1 par value
Series A Junior Participating Preferred Stock
Issued and outstanding: none
Series B ESOP Convertible Preferred Stock 7.75% Cumulative
Issued: 75,336 shares (aggregate redemption value
$73,832 and $74,982) 75,336 75,336
Less cost of shares of preferred treasury stock (3,716) (3,003)
Common stock (See Note D for information on effective stock split):
Authorized: 80,000,000 shares of $1 par value
Issued: 33,887,484 shares 33,887 33,887
Additional paid-in capital 39,721 33,621
Retained earnings 904,768 861,803
Less cost of common treasury stock
(including unearned amounts of $9,933 and $7,321) (483,607) (483,184)
Deferred employee benefits (67,758) (68,781)
Foreign currency translation adjustments 7,547 (7,406)
------------ ------------
Total stockholders' equity 506,178 442,273
------------ ------------
Total liabilities and stockholders' equity $ 1,508,266 $ 1,489,473
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE> 7
<TABLE>
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended June 30, 1994 and 1993
(Dollars in thousands)
UNAUDITED
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 60,309 $ 18,223
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 63,949 63,055
Deferred tax provision 9,352 2,609
Gain on sale of investments - (2,841)
Effects of accounting changes - 26,109
Equity in net income/loss of affiliated companies,
net of dividends received 1,312 5,338
Other, net 3,099 1,990
Changes in assets and liabilities:
Increase in accounts receivable (20,886) (35,547)
(Increase) decrease in inventory (17,765) 5,694
(Decrease) increase in accounts payable and accruals (34,181) 8,373
Decrease in prepayments and intangible assets 2,366 11,379
Other, net 1,208 (1,019)
---------- ----------
Cash provided by operating activities 68,763 103,363
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (46,984) (45,186)
Investments and acquisitions (284) (40,405)
Sales of investments and property, plant and equipment 545 3,065
---------- ----------
Cash used by investing activities (46,723) (82,526)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - 8,866
Reduction in long-term debt (16,387) (5,013)
Increase (decrease) in short-term debt 9,390 (19,678)
Sales of treasury stock, net 2,365 7,646
Cash dividends paid to stockholders (17,344) (17,183)
---------- ----------
Cash used by financing activities (21,976) (25,362)
Effect of exchange rate changes on cash 1,025 (3,951)
---------- ----------
Increase (decrease) in cash and cash equivalents 1,089 (8,476)
Cash and cash equivalents at beginning of period 40,267 30,656
---------- ----------
Cash and cash equivalents at end of period $ 41,356 $ 22,180
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE> 8
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1994
A. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Cabot
Corporation and all majority-owned and controlled domestic and foreign
subsidiaries. Investments in majority-owned affiliates where control
is temporary and investments in 20 percent- to 50 percent-owned
affiliates are accounted for on the equity method. All significant
intercompany transactions have been eliminated.
The 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 the Company's Form 10-K for the year ended
September 30, 1993.
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, 1994 and 1993. All such adjustments are of a normal
recurring nature, except for adjustments discussed in Note B. The
results for interim periods are not necessarily indicative of the
results to be expected for the fiscal year. During the fourth quarter
of fiscal 1993, the Company adopted two new accounting standards
related to postretirement benefits and income taxes. Both of these
standards were adopted as of October 1, 1992, and as a result, the
income statement and the statement of cash flows for the nine months
ending June 30, 1993 were restated.
Earnings Per Share
The computation of fully diluted earnings per share considers the
conversion of the Company's Series B ESOP Convertible Preferred Stock
held by the Company's Employee Stock Ownership Plan, and also includes
the potentially dilutive effects of the Company's Equity Incentive
Plan.
B. SPECIALTY CHEMICALS AND MATERIALS ASSET IMPAIRMENT
AND RESTRUCTURING RESERVE
Previously reported unfavorable conditions in Japan have worsened
resulting in ongoing significant losses at the Company's Japanese
carbon black equity affiliate. Operating losses are expected to
continue into the foreseeable future. As a result, the Company has
determined that its investment in this affiliate has been permanently
impaired. The Company has recorded a $6,150,000 charge for the
impairment of its investment in its Japanese affiliate. In addition,
the Company has revised its Specialty Chemicals and Materials
restructuring reserves, recorded in 1993, downward based on actual
cost incurred during the closing of a carbon black plant in Germany on
June 30, 1994 and revised estimates of remaining costs. The Company
will continue to evaluate its remaining reserve as new data become
available. A $4,000,000 benefit from the revision of the 1993
estimated restructuring reserve was recorded.
C. CONTINGENCIES
The Company is a defendant in various lawsuits and is involved in
other gas contract issues and environmental proceedings wherein
substantial amounts are claimed. In the opinion of the Company's
management, these suits and claims should not result in final
judgments or settlements which, in the aggregate, would have a
material adverse effect on the Company's financial condition.
Fumed silica supplied by Cabot was used by others in the manufacture
of silicone breast implant envelopes. There are currently pending
more than 10,000 lawsuits in state and federal courts alleging
injuries arising from the use of silicone breast implants. The
federal cases have been consolidated in the Multi-District
Litigation pending in the United States District Court for
the Northern District of Alabama. Generally, the various
state cases have been similarly consolidated in each jurisdiction.
In addition, arrangements have been made for consolidated
discovery in all actions. Cabot has been named as a defendant
in fewer than 100 of those lawsuits, although additional
lawsuits have been threatened and are expected to be brought in due
-8-
<PAGE> 9
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
June 30, 1994
course. Cabot believes that it has adequate defenses in each of the
lawsuits in which it is a defendant.
However, the scientific, legal and societal issues raised by these
cases are complex and the outcome is uncertain. Cabot is still
evaluating the litigation and therefore cannot predict with any
assurance the course this litigation will take, the number of cases to
which Cabot will be added as a defendant, the amount of damages, if
any, that may be assessed against Cabot or the defense costs that will
be incurred by Cabot.
<TABLE>
D. STOCKHOLDERS' EQUITY
On July 27, 1994, the executive committee of the board of directors
authorized a two-for-one stock split, in the form of a stock dividend.
One additional share of common stock is expected to be distributed
on August 17, 1994, for each share of common stock of the Company
held by stockholders of record on August 9, 1994. Once effective,
the Company will reclassify $33,887,484 from the additional paid in
capital account to the common stock account. Proforma earnings per
share, weighted average common shares outstanding, and cash
dividends per share restated to reflect the stock split are as follows:
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
6/30/94 6/30/93 6/30/94 6/30/93
------- ------- ------- -------
<S> <C> <C> <C> <C>
Income (loss) per common share:
Primary
Continuing operations $ 0.55 $ 0.47 $ 1.51 $ 1.11
Cumulative effect of accounting changes - - - (0.70)
-------- ------- ------- -------
Income per share $ 0.55 $ 0.47 $ 1.51 $ 0.41
======= ======= ======= ========
Fully Diluted
Continuing operations $ 0.52 $ 0.44 $ 1.42 $ 1.11
Cumulative effect of accounting changes - - - (0.70)
-------- ------- ------- -------
Income per share $ 0.52 $ 0.44 $ 1.42 $ 0.41
======= ======= ======= ========
Weighted average common shares outstanding (000):
Primary 38,186 37,410 38,192 37,320
Fully diluted 41,296 40,662 41,300 40,588
Dividends per common share $ 0.13 $ 0.13 $ 0.39 $ 0.39
======= ======= ======= =======
</TABLE>
-9-
<PAGE> 10
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
June 30, 1994
UNAUDITED
<TABLE>
D. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes the changes in stockholders' equity for the nine months ended June 30, 1994.
(Dollars in thousands)
<CAPTION>
Preferred Stock Preferred Common Stock
--------------- Treasury Stock ------------ Additional
Shares --------------- Shares Paid-In Retained
Issued Value Shares Cost Issued Value Capital Earnings
------- ----- ------ ---- ------ ----- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 75,336 $75,336 3,686 $(3,003) 33,887,484 $33,887 $33,621 $861,803
Net income 60,309
Common stock dividends paid (14,653)
Net issuance of treasury stock under
employee compensation plans 5,467
Purchase of treasury stock-preferred 572 (713)
Sale of treasury stock to Profit
Sharing and Savings Plan 633
Preferred stock dividends paid to
Employee Stock Ownership Plan,
net of tax (2,691)
Principal payment by Employee Stock
Ownership Plan under guaranteed
loan
Amortization of unearned compensation
Foreign currency translation adjustments
------ ------- ----- -------- ---------- ------- ------- --------
Balance at June 30, 1994 75,336 $75,336 4,258 $(3,716) 33,887,484 $33,887 $39,721 $904,768
====== ======= ===== ======== ========== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Common Foreign Total
Treasury Stock Deferred Currency Stock-
--------------------- Unearned Employee Translation holders'
Shares Cost Compensation Benefits Adjustments Equity
---------- --------- ------------ --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 15,161,103 $(475,863) $(7,321) $(68,781) $(7,406) $ 442,273
Net income 60,309
Common stock dividends paid (14,653)
Net issuance of treasury stock under
employee compensation plans (52,476) 1,564 (5,211) 1,820
Purchase of treasury stock-preferred (713)
Sale of treasury stock to Profit
Sharing and Savings Plan (19,790) 625 1,258
Preferred stock dividends paid to
Employee Stock Ownership Plan,
net of tax (2,691)
Principal payment by Employee Stock
Ownership Plan under guaranteed
loan 1,023 1,023
Amortization of unearned compensation 2,599 2,599
Foreign currency translation adjustments 14,953 14,953
---------- ---------- -------- --------- -------- ---------
Balance at June 30, 1994 15,088,837 $(473,674) $(9,933) $(67,758) $ 7,547 $ 506,178
========== ========== ======== ========= ======== =========
</TABLE>
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<PAGE> 11
CABOT CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
I. RESULTS OF OPERATIONS
Sales and operating profit by industry segment are shown in the accompanying
table on page 13.
Three Months Ended June 30, 1994 versus
Three Months Ended June 30, 1993
Net income for the third quarter of fiscal year 1994 was $22.0 million ($1.11
per primary common share), compared with $18.4 million ($0.94 per primary
common share) in the same quarter a year ago. Net sales and other operating
revenues rose 2.4% to $428.8 million from $418.8 million in the year-ago
quarter. Total operating profit of $49.5 million is flat compared to $49.4
million in the prior year. Operating profit includes a $6.2 million write off
of the Company's interest in its Japanese carbon black affiliate, and a $4.0
million favorable reserve adjustment associated with the closing of its carbon
black plant in Germany. Total operating profit before these one-time
adjustments was $51.7 million, a 4.7% increase from the same period a year ago.
In the Specialty Chemicals and Materials Group, net sales and other operating
revenues rose 3.0% in the third quarter to $328.9 million from $319.3 million
last year. Operating profit of $50.8 million, before the one-time adjustments
mentioned above, advanced 10.2% from last year's $46.1 million. The improved
operating profit reflects volume growth in all businesses except performance
materials (tantalum), with average volume growth of 7%. Stronger margins in
some businesses also contributed to the improved profits. Globally, the Group
benefitted from continuing strength in North and South America, and an
improving European economy. With the exception of Japan, the comparison in the
Pacific region was also favorable.
In the Company's Energy Group, sales of $99.9 million were flat with last
year's $99.5 million and operating profit declined to $0.9 million from $3.3
million. The prior year's operating profits were unusually strong, reflecting
higher prices than were experienced in the third quarter this year.
Nine Months Ended June 30, 1994 versus
Nine Months Ended June 30, 1993
For the nine months ended June 30, 1994 net income was $60.3 million ($3.02 per
primary common share) compared to $18.2 million ($0.83 per primary common
share) in the same period a year ago. Net income for the nine months, before
one-time adjustments, was $61.7 million ($3.09 per primary common share)
compared to $44.3 million, before accounting changes, ($2.23 per primary common
share) last year. Net sales and other operating revenues increased 3.2% to
$1,262.2 million from $1,222.5 million last year.
In the Specialty Chemicals and Materials Group, revenues increased
slightly during the first nine months to $912.9 million from $903.9 million
last year. Operating profits, before one-time adjustments, grew 12.7% to $127.0
million reflecting volume growth in most business segments. Of particular note
was a 17% volume increase in the Company's Cab-O-Sil (fumed silica) division,
and positive comparisons in the Company's European carbon black division. In
addition, favorable material costs improved margins in many of the Specialty
Chemicals and Materials businesses. Performance in Japan continues to be
adversely affected by recession and high costs in that region. The Company
does not believe that conditions will improve soon. Therefore, the Company has
written off its $6.2 million equity investment in its Japanese carbon black
affiliate.
In the Company's Energy Group, sales for the first nine months of fiscal year
1994 grew 9.6% to $349.3 million from $318.6 million in the same period a year
ago. Operating profit increased 31.0% to $18.6 million from $14.2 million.
The improvement is primarily due to a strong second quarter in the Company's
LNG business where an unusually cold winter in the northeast boosted energy
demand and prices.
-11-
<PAGE> 12
CABOT CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Equity in net income of affiliated companies was $2.6 million compared to a
loss of $0.7 million for the first nine months of fiscal 1993, due primarily to
better performance at several of the Company's carbon black affiliates.
The Company maintained its effective income tax rate at 38%.
The Company is encouraged by economic improvement in the U.S. and Europe and
confident it is positioned to participate in further economic recovery in those
regions. The Company's LNG business may experience reductions in supplies of
LNG over the next year or so due to the previously announced refurbishment of
its Algerian supplier's liquefaction facility. The effect on the Company will
depend on the extent and timing of reductions. Other gas supply opportunities
are being explored. The political uncertainties in Algeria have not, to date,
adversely affected the Company's LNG supplies.
On June 30, 1994, the Company owned a 34.4% interest in American Oil and Gas
Corporation (AOG/NYSE), whose operating results are reflected in Cabot's equity
in net income of affiliates. On July 13, 1994, American Oil and Gas
Corporation ("AOG") was merged into a subsidiary of K N Energy, Inc. ("KNE").
As a result, all outstanding shares of AOG were converted into shares of KNE
common stock at a rate of 0.47 shares of KNE for each share of AOG. On
completion of the merger, Cabot was the largest stockholder of KNE with 15.2%
of the outstanding common stock. Cabot's investment in KNE will be accounted
for on a cost basis.
The Company has also announced a two-for-one stock split and an approximately
8% increase in its quarterly common stock dividend, from $0.26 per share to
$0.28 per share on a pre-split basis. On August 17, 1994, the Company is
expected to distribute one additional share of common stock for each share of
common stock held by stockholders of record on August 9, 1994. The next
quarterly dividend on the split shares will be $0.14 per share payable on
September 9, 1994 to stockholders of record on August 26, 1994.
II. CASH FLOWS AND LIQUIDITY
During the first nine months of fiscal 1994, the Company's operations provided
$68.8 million of cash. This represents a 33.5% decrease from the same period
last year reflecting the continued rebuilding of inventory levels by the
Company's TUCO business and a decrease in accounts payable and accrued expenses
due to the settlement of the last significant, and previously reserved for,
take-or-pay case. Capital spending on investments and acquisitions declined
significantly to $0.3 million from $40.4 million last year. In 1993, the
Company invested $17.8 million in the acquisition of the remaining interest of
its Brazilian subsidiary and smaller amounts in its Czech Republic, Mexican and
Indonesian carbon black affiliates, and to purchase the remaining interest in a
Canadian affiliate. The Company anticipates that spending for property, plant
and equipment will be somewhat higher in the fourth quarter than in the prior
three quarters.
Cabot decreased its borrowings by $7.0 million during the first nine months of
the year. At June 30, 1994, there were no amounts borrowed under a $250
million line of credit available to the Company. The Company's ratio of total
debt (including short term debt net of cash) to capital improved to 46.6% from
50.4% at fiscal 1993 year end.
Management expects cash from operations and present financing arrangements,
including the Company's unused line of credit, to be sufficient to meet the
Company's cash requirements for the foreseeable future.
-12-
<PAGE> 13
<TABLE>
CABOT CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollars in millions, except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
6/30/94 6/30/93 6/30/94 6/30/93
------- ------- ------- -------
<S> <C> <C> <C> <C>
Industry Segment Data
- ---------------------
Sales:
Specialty Chemicals and Materials $ 328.9 $ 319.3 $ 912.9 $ 903.9
Energy 99.9 99.5 349.3 318.6
--------- --------- --------- ---------
Net Sales $ 428.8 $ 418.8 $1,262.2 $1,222.5
========= ========= ========= =========
Operating Profit:
Specialty Chemicals and Materials $ 48.6 $ 46.1 $ 124.8 $ 112.7
Energy 0.9 3.3 18.6 14.2
----------- ----------- ---------- ----------
Total operating profit $ 49.5 $ 49.4 $ 143.4 $ 126.9
Interest expense (10.8) (11.2) (31.4) (33.7)
General corporate expense (6.6) (7.0) (19.0) (17.1)
----------- ---------- ---------- ----------
Income from continuing operations before income taxes 32.1 31.2 93.0 76.1
Provision for income taxes (12.2) (12.7) (35.3) (31.1)
Equity in net income (loss) of affiliated companies 2.1 (0.1) 2.6 (0.7)
----------- ---------- ---------- ----------
Net income before the cumulative effect of
accounting changes 22.0 18.4 60.3 44.3
Cumulative effect of accounting changes - - - (26.1)
----------- ---------- ----------- ----------
Net income $ 22.0 $ 18.4 $ 60.3 $ 18.2
Dividends on preferred stock (0.9) (0.9) (2.7) (2.7)
----------- ---------- ---------- ----------
Income applicable to primary common shares $ 21.1 $ 17.5 $ 57.6 $ 15.5
========== ========= ========== =========
Income per common share:
Primary
Continuing operations $ 1.11 $ 0.94 $ 3.02 $ 2.23
Cumulative effect of accounting changes - - - (1.40)
------------ ----------- ------------ -----------
Income per share $ 1.11 $ 0.94 $ 3.02 $ 0.83
=========== ========== =========== ===========
Fully Diluted
Continuing operations $ 1.04 $ 0.88 $ 2.83 $ 2.23
Cumulative effect of accounting changes - - - (1.40)
------------ ----------- ------------ -----------
Income per share $ 1.04 $ 0.88 $ 2.83 $ 0.83
=========== =========== =========== ==========
</TABLE>
-13-
<PAGE> 14
Part II. Other Information
Item 5. Other Information
- --------------------------
On July 29, 1994, the Company announced a two-for-one stock split of
its common stock in the form of a stock dividend. On August 17, 1994,
the Company expects to distribute one additional share of common stock
for each share of common stock held by stockholders of record on
August 9, 1994. The Company also announced an increase of
approximately 8% in its quarterly common stock dividend. The $0.14
per share dividend on post-split shares will be paid on September 9,
1994 to common stockholders of record on August 26, 1994.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
The Exhibit number corresponds to the number assigned to such
Exhibits in the Exhibit Table of Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
11 Statements regarding Computation of Per Share Earnings
filed herewith.
12 Statement regarding Computation of Ratio of Earnings to
Fixed Charges filed herewith.
</TABLE>
(b) Reports on Form 8-K
-------------------
No report on Form 8-K was filed by the Company during the
three months ended June 30, 1994.
-14-
<PAGE> 15
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 15, 1994 /s/ John G.L. Cabot
----------------------------
John G.L. Cabot Vice Chairman
and Chief Financial Officer
Date: August 15, 1994 /s/ William R. Thompson
-----------------------------
William R. Thompson
Vice President and Controller
(Chief Accounting Officer)
-15-
<PAGE> 1
EXHIBIT 11
<TABLE>
CABOT CORPORATION
Earnings per Common Share for the Three Month Period Ended June 30, 1994
Statement Regarding Computation of Per Share Earnings
(In thousands, except per share amounts)
<CAPTION>
Primary Fully Diluted
------- -------------
<S> <C> <C>
Shares of common stock outstanding at April 1, 1994,
less treasury stock 18,788 18,788
Plus net weighted shares of treasury stock issued 6 7
Plus common stock equivalents:
Effect of convertible preferred stock conversion - 1,554
Effect of equity incentive awards 299 299
--------- ---------
Weighted average shares outstanding 19,093 20,648
========= =========
Income applicable to common shares $ 21,108 $ 21,108
Dividends on preferred stock - 895
Preferred stock conversion compensation shortfall - (623)
--------- ---------
Earnings applicable to common shares $ 21,108 $ 21,380
========= =========
Earnings per common share $ 1.11 $ 1.04
========= =========
</TABLE>
<PAGE> 2
EXHIBIT 11
<TABLE>
CABOT CORPORATION
Earnings per Common Share for the Nine Month Period Ended June 30, 1994
Statement Regarding Computation of Per Share Earnings
(In thousands, except per share amounts)
<CAPTION>
Primary Fully Diluted
------- -------------
<S> <C> <C>
Shares of common stock outstanding at October 1, 1993,
less treasury stock 18,726 18,726
Plus net weighted shares of treasury stock issued 52 52
Plus common stock equivalents:
Effect of convertible preferred stock conversion - 1,554
Effect of equity incentive awards 318 318
--------- ---------
Weighted average shares outstanding 19,096 20,650
========= =========
Income applicable to common shares $ 57,618 $ 57,618
Dividends on preferred stock - 2,691
Preferred stock conversion compensation shortfall - (1,873)
--------- ---------
Earnings applicable to common shares $ 57,618 $ 58,436
========= =========
Earnings per common share $ 3.02 $ 2.83
========= =========
</TABLE>
<PAGE> 1
<TABLE>
EXHIBIT 12
CABOT CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)
<CAPTION>
Nine Months
Ended Years ended September 30
June 30 ------------------------------------------------
1994 1993 1992 1991 1990 1989
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pre-tax income from continuing operations $93,030 $67,900 $116,599 $62,362 $63,983 $(25,480)
Distributed income of affiliated companies 3,942 5,988 5,766 4,688 3,607 1,704
Add fixed charges:
Interest on indebtedness 31,370 44,043 41,714 38,661 41,145 34,059
Portion of rents representative of
the interest factor 3,864 4,838 4,933 5,715 5,226 4,764
-------- -------- -------- -------- -------- --------
Income as adjusted $132,206 $122,769 $169,012 $111,426 $113,961 $ 15,047
Fixed charges:
Interest on indebtedness $31,370 $44,043 $41,714 $38,661 $41,145 $34,059
Capitalized interest -- -- 3,963 8,745 -- --
Portion of rents representative of
the interest factor 3,864 4,838 4,933 5,715 5,226 4,764
-------- -------- -------- -------- -------- --------
Total fixed charges $ 35,234 $ 48,881 $ 50,610 $ 53,121 $ 46,371 $ 38,823
-------- -------- -------- -------- -------- --------
Ratio of earnings to fixed charges 3.75 2.51 3.34 2.10 2.46 *
======== ======== ======== ======== ========
<FN>
* Earnings in fiscal 1989 were inadequate to cover fixed charges by $23,776.
Operating profit for 1989 includes a $71,716 loss associated with the
Energy Group restructuring and aggregate charges of $18,933 related to the
reorganization of the Company's carbon black operations, streamlining of
the ceramic packaging business, and provisions for environmental issues.
Without these charges, the ratio of earnings to fixed charges would be
2.72 for 1989.
</TABLE>
