<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 quarterly period ended
JUNE 30, 1995
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 issuer's classes of
Common Stock, as of the latest practicable date.
AS OF JUNE 30, 1995, THE COMPANY HAD 37,945,616 SHARES OF COMMON
STOCK, PAR VALUE $1 PER SHARE, OUTSTANDING.
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<PAGE> 2
<TABLE>
CABOT CORPORATION
INDEX
<CAPTION>
Part I. Financial Information Page No.
--------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Income
Three Months Ended June 30, 1995 and 1994 3
Consolidated Statements of Income
Nine Months Ended June 30, 1995 and 1994 4
Consolidated Balance Sheets
June 30, 1995 and September 30, 1994 5
Consolidated Statements of Cash Flows
Nine Months Ended June 30, 1995 and 1994 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
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<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30, 1995 and 1994
(Dollars in thousands, except per share amounts)
UNAUDITED
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenues:
Net sales and other operating revenues $494,817 $428,805
Interest and dividend income 2,182 1,248
-------- --------
Total revenues 496,999 430,053
-------- --------
Costs and expenses:
Cost of sales 336,139 312,277
Selling and administrative expenses 63,441 56,727
Research and technical service 15,180 11,620
Interest expense 8,567 10,806
Other charges, net 7,945 6,604
-------- --------
Total costs and expenses 431,272 398,034
-------- --------
Income before income taxes 65,727 32,019
Provision for income taxes (24,358) (12,167)
Equity in net income of affilated companies 5,656 2,151
-------- --------
Net income 47,025 22,003
Dividends on preferred stock, net of tax
benefit of $477 and $482 (886) (895)
-------- --------
Income applicable to primary common shares $ 46,139 $ 21,108
======== ========
Weighted average common shares outstanding (000):
Primary 38,990 38,186
Fully diluted (Note A) 42,188 41,296
Income per common share:
Primary $ 1.18 $ 0.55
======== ========
Fully diluted (Note A) $ 1.10 $ 0.52
======== ========
Dividends per common share $ 0.14 $ 0.13
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 4
<TABLE>
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended June 30, 1995 and 1994
(Dollars in thousands, except per share amounts)
UNAUDITED
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenues:
Net sales and other operating revenues $1,404,117 $1,262,140
Interest and dividend income 6,623 3,282
---------- ----------
Total revenues 1,410,740 1,265,422
---------- ----------
Costs and expenses:
Cost of sales 962,388 928,349
Selling and administrative expenses 181,469 162,711
Research and technical service 41,684 35,527
Interest expense 27,475 31,370
Other charges, net 15,938 14,435
---------- ----------
Total costs and expenses 1,228,954 1,172,392
---------- ----------
Income before income taxes 181,786 93,030
Provision for income taxes (67,129) (35,351)
Equity in net income of affilated companies 12,655 2,630
---------- ----------
Net income 127,312 60,309
Dividends on preferred stock, net of tax
benefit of $1,435 and $1,449 (2,665) (2,691)
---------- ----------
Income applicable to primary common shares $ 124,647 $ 57,618
========== ==========
Weighted average common shares outstanding (000):
Primary 38,839 38,192
Fully diluted (Note A) 42,155 41,300
Income per common share:
Primary $ 3.21 $ 1.51
========== ==========
Fully diluted (Note A) $ 2.98 $ 1.41
========== ==========
Dividends per common share $ 0.42 $ 0.39
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
<TABLE>
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 1995 and September 30, 1994
(Dollars in thousands)
ASSETS
<CAPTION>
June 30 September 30
1995 1994
(Unaudited)
----------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 34,453 $ 80,917
Accounts and notes receivable
(net of reserve for doubtful
accounts of $9,231 and $7,697) 339,597 272,787
Inventories
Raw Materials 72,353 52,564
Work in process 40,180 33,139
Finished goods 120,260 94,363
Other 42,356 36,816
---------- ----------
Total inventories 275,149 216,882
Prepaid expenses 8,367 13,293
Deferred income taxes 23,615 22,509
---------- ----------
Total current assets 681,181 606,388
---------- ----------
Investments:
Equity 92,825 86,164
Other 112,316 115,768
---------- ----------
Total investments 205,141 201,932
---------- ----------
Property, plant and equipment 1,502,538 1,381,576
Accumulated depreciation and amortization (770,637) (687,068)
---------- ----------
Net property, plant and equipment 731,901 694,508
---------- ----------
Other assets:
Intangible assets, net of amortization 68,729 74,089
Deferred income taxes 7,052 6,722
Other assets 33,923 33,117
---------- ----------
Total other assets 109,704 113,928
---------- ----------
Total assets $1,727,927 $1,616,756
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 6
<TABLE>
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 1995 and September 30, 1994
(Dollars in thousands)
LIABILITIES & STOCKHOLDERS' EQUITY
<CAPTION>
June 30 September 30
1995 1994
(Unaudited)
---------- ------------
<S> <C> <C>
Current liabilities:
Notes payable to banks $ 120,617 $ 26,480
Current portion of long-term debt 17,098 159,724
Accounts payable and accrued liabilities 281,184 281,342
U. S. and foreign income taxes payable 17,613 3,626
Deferred income taxes 4,137 3,943
---------- ----------
Total current liabilities 440,649 475,115
---------- ----------
Long-term debt 313,903 307,828
Deferred income taxes 130,392 124,286
Other liabilities 146,646 147,038
Commitments and contingencies (Note B)
Stockholders' Equity (Note C):
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 of $72,576 and $73,577) 75,336 75,336
Less cost of shares of preferred treasury stock (4,616) (4,003)
Common stock:
Authorized: 80,000,000 shares of $1 par value
Issued: 67,774,968 shares 67,775 67,775
Additional paid-in capital 15,602 3,783
Retained earnings 1,025,598 916,942
Less cost of common treasury stock
(including unearned amounts of $11,823 and $7,884) (488,390) (475,055)
Deferred employee benefits (66,292) (67,403)
Unrealized gain on marketable securities 27,265 28,787
Foreign currency transalation adjustment 44,059 16,327
---------- ----------
Total stockholders' equity 696,337 562,489
---------- ----------
Total liabilities and stockholders' equity $1,727,927 $1,616,756
========== ==========
</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, 1995 and 1994
(Dollars in thousands)
UNAUDITED
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $127,312 $60,309
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 71,686 63,949
Deferred tax provision 4,736 9,352
Equity in net income of affiliated companies,
net of dividends received (4,245) 1,312
Other, net 4,779 3,099
Changes in assets and liabilities:
Increase in accounts receivable (58,343) (20,886)
Increase in inventory (53,297) (17,765)
Decrease in accounts payable and accruals (5,299) (34,181)
Increase in prepayments and intangible assets 5,332 2,366
Other, net 14,490 1,208
-------- -------
Cash provided by operating activities 107,151 68,763
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (86,348) (46,984)
Investments (20) (284)
Sales of property, plant and equipment 136 545
-------- -------
Cash used by investing activities (86,232) (46,723)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 17,385 0
Repayments of long-term debt (156,114) (38,619)
Net increase in short-term debt 94,133 31,622
Net (purchases)/sales of treasury stock (6,301) 2,365
Cash dividends paid to stockholders (18,656) (17,344)
-------- -------
Cash used by financing activities (69,553) (21,976)
Effects of exchange rate changes on cash 2,170 1,025
-------- -------
(Decrease)/increase in cash and cash equivalents (46,464) 1,089
Cash and cash equivalents at beginning of period 80,917 40,267
-------- -------
Cash and cash equivalents at end of period $ 34,453 $41,356
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE> 8
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
A. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Cabot
Corporation and majority-owned and controlled domestic and foreign
subsidiaries. Investments in majority-owned affiliates where
control does not exist and investments in 20 percent to 50
percent-owned affiliates are accounted for on the equity method.
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, 1994.
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, 1995 and 1994. 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.
On August 17, 1994, a two-for-one stock split in the form of a
stock dividend was effected. Common share and per share amounts in
fiscal 1994 have been restated to reflect the split.
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.
Reclassification
Certain amounts in fiscal 1994 have been reclassified to conform to
the fiscal 1995 presentation.
B. COMMITMENTS AND CONTINGENCIES
The Company has various lawsuits, claims and contingent
liabilities. In the opinion of the Company, although final
disposition of all of its suits and claims may impact the Company's
financial statements in a particular period, they should not, in
the aggregate, have a material adverse effect on the Company's
financial position.
During the third quarter of fiscal 1995, the Company entered into
long-term supply agreements of more than six years with certain
North American tire customers. The contracts are designed to
provide such customers with a secure carbon black supply and reduce
the volatility in carbon black margins and the Company's earnings.
In July of 1995, the Company agreed to participate as a 10% owner
in a proposed liquefied natural gas plant in Trinidad, and to
purchase 60 percent of the gas produced by the plant. Once the
plant is operational, it is estimated that it will produce 3.3
trillion cubic feet of gas over a period of 20 years. All costs
related to this project to date have been charged to expense as
incurred. Gas from the project is not expected to be available
until fiscal year 1999, at the earliest.
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<PAGE> 9
<TABLE>
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
June 30, 1995
UNAUDITED
C. STOCKHOLDERS' EQUITY
The following table summarizes the changes in stockholders' equity for the nine months ended June 30, 1995.
(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, 1994 75,336 $75,336 4,504 $(4,003) 67,774,968 $67,775 $ 3,783 $ 916,942
Net income 127,312
Common stock dividends paid (15,991)
Issuance of treasury stock under
employee compensation plans 8,784
Purchase of treasury stock - common
Purchase of treasury stock - preferred 438 (613)
Sale of treasury stock to Cabot Retirement
Incentive Savings Plan 3,035
Preferred stock dividends paid to Employee
Stock Ownership Plan, net of tax (2,665)
Principal payment by Employee Stock
Ownership Plan under guaranteed loan
Amortization of unearned compensation
Unrealized gain/(loss), net of deferred tax
Foreign currency translation adjustments
------ ------- ----- ------- ---------- ------- ------- ----------
Balance at June 30, 1995 75,336 $75,336 4,942 $(4,616) 67,774,968 $67,775 $15,602 $1,025,598
====== ======= ===== ======= ========== ======= ======= ==========
<CAPTION>
Common Unrealized Foreign
Treasury Stock Deferred Gain/(Loss) Currency Total
-------------- Unearned Employee Marketable Translation Stockholders'
Shares Cost Compensation Benefits Securities Adjustments Equity
------ ---- ------------ -------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 29,783,722 $(467,171) $ (7,884) $(67,403) $28,787 $16,327 $562,489
Net income 127,312
Common stock dividends paid (15,991)
Issuance of treasury stock under
employee compensation plans (71,034) 846 (8,111) 1,519
Purchase of treasury stock - common 375,500 (14,339) (14,339)
Purchase of treasury stock - preferred (613)
Sale of treasury stock to Cabot Retirement
Incentive Savings Plan (258,836) 4,097 7,132
Preferred stock dividends paid to Employee
Stock Ownership Plan, net of tax (2,665)
Principal payment by Employee Stock
Ownership Plan under guaranteed loan 1,111 1,111
Amortization of unearned compensation 4,172 4,172
Unrealized gain/(loss), net of deferred tax (1,522) (1,522)
Foreign currency translation adjustments 27,732 27,732
---------- --------- -------- -------- ------- ------- --------
Balance at June 30, 1995 29,829,352 $(476,567) $(11,823) $(66,292) $27,265 $44,059 $696,337
========== ========= ======== ======== ======= ======= ========
</TABLE>
-9-
<PAGE> 10
CABOT CORPORATION
Item 2. 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, 1995 versus
Three Months Ended June 30, 1994
Net income for the third quarter of fiscal year 1995 was $47.0 million
($1.18 per primary common share), compared with $22.0 million ($0.55 per
primary common share) in the same quarter a year ago. Net sales and other
operating revenues rose 15% to $494.8 million from $428.8 million in the
year ago quarter. Total operating profit increased 64% to a record $81.1
million from $49.5 million last year. Last year's results include a $6.2
million write-off of the Company's Japanese carbon black affiliate, and a
$4.0 million favorable reserve adjustment associated with the closing of its
carbon black plant in Germany. The significant improvement in the results
reflects improved margins and modest sales volume growth in the specialty
chemicals businesses, partially offset by a small operating loss in the
Company's Energy Group. The Company benefited from favorable currency
translations due to the relative weakness of the U.S. dollar, particularly
compared to European currencies.
In the Specialty Chemicals and Materials Group, net sales grew 26% to $413.9
million from $328.9 million and operating profit grew by 68% to $81.8
million from $48.6 million. Margins improved significantly from the year
ago quarter owing to price increases by several of the Group's businesses
during recent months and improved capacity utilization in many businesses
and regions. These increases more than offset higher raw material costs.
Volumes were up modestly in most businesses and in each of the four
geographic regions in which Cabot operates. The most significant
improvement during the quarter was realized in the Company's European
specialty chemicals businesses. Equity in net income of affiliates
increased to $5.7 million from $2.1 million last year mainly due to the
contributions from the new carbon black plant in the Czech Republic and
continued improvement in the Mexican affiliate's results.
As previously announced, on July 11, 1995, the Company restructured the
ownership of its safety business into a new corporation owned by the
Company, Vestar Equity Partners and Cabot Safety management. This
transaction yielded approximately $128 million in after-tax proceeds to the
Company. Cabot has a 42.5% ownership position in the new corporation and,
beginning in the fourth quarter of fiscal 1995, will account for this
investment using the equity method. The Company also purchased certain
assets of Rippey Corporation related to the sale and distribution of
high-purity polishing compounds for the semiconductor industry in an effort
to further develop and expand the Company's activities in this industry.
The Energy Group reported a sales decline of 19% to $80.9 million from $99.9
million, and an operating loss of $0.7 million, compared to a modest profit
of $0.9 million in last year's third quarter. The Company's liquefied
natural gas ("LNG") business continues to be negatively affected by reduced
supplies of LNG caused by the refurbishment of the liquefaction facilities
of the Company's Algerian supplier and depressed selling prices of gas.
During the quarter, the Company announced a plan to sell its TUCO subsidiary
to Southwestern Public Service Company for approximately $75 million. The
transaction is subject to regulatory approvals and is expected to be
completed around September 30, 1995.
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<PAGE> 11
CABOT CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Nine Months Ended June 30, 1995 versus
Nine Months Ended June 30, 1994
For the nine months ended June 30, 1995, net income was $127.3 million
($3.21 per primary common share) compared to $60.3 million ($1.51 per
primary common share) in the same period a year ago. Net sales increased
11% to $1,404.1 million from $1,262.2 million last year.
In the Specialty Chemicals and Materials Group, revenues increased 26%
during the first nine months to $1,148.2 million from $912.9 million last
year and operating profit rose 76% to $219.3 million from $124.8 million.
The improvement is due, in part, to an overall 12% growth in sales volumes
representing gains in each of the businesses and double digit gains in
Europe and South America. The most significant volume increases were a 15%
increase in carbon black volumes and a 9% increase in fumed silica. Margins
for the Group also improved due to better pricing and higher capacity
utilization, more than offsetting increased raw material costs. The Company
does not expect to achieve significant volume improvements from current
levels in the near-term as capacity is tight in many businesses and regions.
The Company has announced plans to add capacity to its North American tire
black business as a result of entering into long-term supply contracts with
certain tire customers. The contracts are designed to provide such
customers with a secure carbon black supply and reduce the volatility in
carbon black margins and the Company's earnings. Subsequent to quarter-end,
the Company also announced plans to add capacity to its South American
carbon black operations and to build a new North American fumed silica
plant. The Company continues to explore the possibility of adding new
capacity in strategic locations or regions where volumes and margins can be
sustained throughout the economic cycle, and it continues to add incremental
capacity through debottlenecking projects.
In the Company's Energy Group, sales for the first nine months of fiscal
1995 declined 27% to $255.9 million from $349.3 million. Operating profit
declined 34% to $12.2 million from $18.6 million. The decline can be
attributed to the Company's LNG business, which has been negatively impacted
by reduced supplies, offset in part by the unseasonably warm winter in the
Northeastern United States, which significantly reduced the demand and price
of gas. The Company expects the reduced supply to negatively impact the
Energy Group's performance for the remainder of the year and beyond. The
extent of the impact will depend on the number and timing of LNG shipments
received, weather patterns and other factors. The Company also cannot
predict at this time, what, if any, impact the political instability in
Algeria may have on the deliveries of LNG to the Company from its supplier.
The Company continues to explore other short-term and long-term gas supply
opportunities. The Company has recently agreed to participate as a 10%
owner in a proposed LNG plant in Trinidad, and to purchase 60% of the gas
produced by that plant. Gas from this project is not expected to be
available until fiscal year 1999, at the earliest.
Equity in net income of affiliated companies was $12.7 million compared to
$2.6 million last year. The increase is due to contributions from the new
carbon black plant in the Czech Republic, improved earnings in the Company's
Mexican affiliate, and the absence of losses from the Company's Japanese
carbon black affiliate which was written off in the third quarter of fiscal
1994.
Interest expense declined 12% to $27.5 million from $31.4 million last year.
The reduction is due to lower total debt than a year ago and the results of
refinancing long-term debt with short-term floating-rate debt currently at
lower interest rates.
The Company's effective tax rate was 37% in 1995 compared to 38% last year,
but is expected to increase to approximately 39% for the full 1995 fiscal
year as a result of the taxable gain from the Cabot Safety transaction.
-11-
<PAGE> 12
CABOT CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
II. CASH FLOWS AND LIQUIDITY
During the first nine months of the year, the Company's operations provided
$107.2 million of cash compared to $68.8 million last year. The increase
primarily reflects the significantly higher net income than the year ago
period, partially offset by an increase in accounts receivable related to
the increase in sales, most notably in Europe, and increases in inventories
in the Company's coal handling and distribution, performance materials and
plastics businesses.
Capital spending for the first nine months of the fiscal year was $86.4
million. The Company expects a higher rate of capital spending in the
fourth quarter, and in fiscal year 1996. Capital spending in fiscal year
1996 will include a portion of the costs associated with the announced
capacity expansions in the Company's Specialty Chemicals and Materials Group
and the continued capital expenditures associated with the performance
materials business. These costs are expected to be incurred over three
years and are estimated to be $200 million in North American carbon black
(including Clean Air Act compliance costs), $30 million in South American
carbon black and $50 million for a new North American fumed silica plant.
The Company expects to finance these expansions using cash from operations
and some of the proceeds from the Cabot Safety transaction and from the sale
of its energy subsidiary, TUCO, if completed.
In addition, over the next several years, as the remediation for various
environmental sites is carried out, the Company expects to spend a
significant portion of its $40 million reserve for costs associated with
such remediation. Additions are made to the reserve based on the Company's
continuing analysis of costs likely to be incurred at each site. These
sites are primarily associated with divested businesses.
Cabot decreased its borrowings by $44.6 million during the first nine months
of the year. At June 30, 1995, 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 decreased
to 37% from 42% at fiscal year-end. The Company expects to further reduce
its total debt in the fourth quarter of the fiscal year with proceeds from
the Cabot Safety transaction.
Management expects cash from operations, transactions and present financing
arrangements, including the Company's unused line of credit of $250 million,
to be sufficient to meet the Company's cash requirements for the foreseeable
future.
During the quarter, the Company purchased approximately 228,000 shares of
its common stock in open market and private transactions in order to replace
a portion of the shares issued by the Company under its employee incentive
compensation program. The Company intends to purchase additional shares
from time to time based upon market conditions.
On July 14, 1995, the Directors of Cabot approved a 29% increase in the
Company's quarterly common stock dividend to $0.18 per share. The dividend
is payable on September 8, 1995, to stockholders of record on August 25,
1995.
-12-
<PAGE> 13
<TABLE>
CABOT CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
(Dollars in millions, except per share amounts)
UNAUDITED
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- ----------------------
06/30/95 06/30/94 06/30/95 06/30/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Industry Segment Data
---------------------
Sales:
Specialty Chemicals and Materials $413.9 $328.9 $1,148.2 $ 912.9
Energy 80.9 99.9 255.9 349.3
------ ------ -------- --------
Net sales $494.8 $428.8 $1,404.1 $1,262.2
====== ====== ======== ========
Operating profit (loss):
Specialty Chemicals and Materials $ 81.8 $ 48.6 $ 219.3 $ 124.8
Energy (0.7) 0.9 12.2 18.6
------ ------ -------- --------
Total operating profit 81.1 49.5 231.5 143.4
Interest expense (8.6) (10.8) (27.5) (31.4)
General corporate expense (6.8) (6.6) (22.3) (19.0)
------ ------ -------- --------
Income before income taxes 65.7 32.1 181.7 93.0
Provision for income taxes (24.4) (12.2) (67.1) (35.3)
Equity in net income of affiliated companies 5.7 2.1 12.7 2.6
------ ------ -------- --------
Net income 47.0 22.0 127.3 60.3
Dividends on preferred stock (0.9) (0.9) (2.7) (2.7)
------ ------ -------- --------
Income applicable to primary common shares $ 46.1 $ 21.1 $ 124.6 $ 57.6
====== ====== ======== ========
Income per common share:
Primary $ 1.18 $ 0.55 $ 3.21 $ 1.51
====== ====== ======== ========
Fully diluted $ 1.10 $ 0.52 $ 2.98 $ 1.41
====== ====== ======== ========
</TABLE>
-13-
<PAGE> 14
Part II. Other Information
Item 1. Legal Proceedings
--------------------------
As previously reported, Cabot had been named as a defendant in
fewer than 100 breast implant lawsuits. As a result of voluntary
dismissals (some without prejudice to the right of the plaintiff to
refile a complaint) and summary judgments granted to Cabot, Cabot
believes that it is currently a defendant in only one such lawsuit.
Cabot has not made any settlement payments in connection with any
breast implant suits. Cabot believes that it has adequate defenses
in the one such lawsuit in which it is known to be a defendant.
However, the scientific, legal and societal issues raised by these
cases are complex and the outcome is uncertain. Cabot, therefore,
cannot predict with any assurance the course this lawsuit 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.
In Cabot's Quarterly Report to the SEC on Form 10-Q for the quarter
ended March 31, 1995, a legal proceeding was reported in which
Cabot had been named as a defendant, along with several others, in
a class action filed in the United States District Court for the
Southern District of Ohio on behalf of a group of owners of
properties in the vicinity of a former metals processing facility
in Cambridge, Ohio. Cabot has been dismissed from the lawsuit
without prejudice to the right of the plaintiffs to refile a
complaint. No settlement payments were made by Cabot.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
--------
The exhibit numbers in the following list correspond 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.
27 Financial Data Schedule, filed herewith. (Not included
with printed copy of the Form 10-Q.)
</TABLE>
(b) Reports on Form 8-K
-------------------
A Current Report on Form 8-K dated July 11, 1995, was filed
with the Securities and Exchange Commission which described
the restructuring of ownership of the Company's safety
business with Vestar Equity Partners and Cabot Safety
management. Pro forma financial statements reflecting the
restructuring are included.
-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 14, 1995 /s/ John G.L. Cabot
-----------------------------------------
John G.L. Cabot
Vice Chairman and Chief Financial Officer
Date: August 14, 1995 /s/ Paul J. Gormisky
-----------------------------------------
Paul J. Gormisky
Vice President and Controller
(Chief Accounting Officer)
-15-
<PAGE> 1
<TABLE>
EXHIBIT 11
CABOT CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
For the three month period ended June 30, 1995
(In thousands, except per share amounts)
<CAPTION>
Primary Fully Diluted
------- ------------
<S> <C> <C>
Shares of common stock outstanding at April 1, 1995,
less treasury stock 38,139 38,139
Plus net weighted shares of treasury stock purchased (34) (34)
Plus common stock equivalents:
Effect of convertible preferred stock conversion - 3,079
Effect of equity incentive awards 885 1,004
--------- ---------
Weighted average shares outstanding 38,990 42,188
========= =========
Income applicable to common shares $ 46,139 $ 46,139
Dividends on preferred stock - 886
Preferred stock conversion compensation shortfall - (599)
--------- ---------
Earnings applicable to common shares $ 46,139 $ 46,426
========= =========
Earnings per common share $ 1.18 $ 1.10
========= =========
</TABLE>
<PAGE> 2
<TABLE>
EXHIBIT 11
CABOT CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
For the nine month period ended June 30, 1995
(In thousands, except per share amounts)
<CAPTION>
Primary Fully Diluted
------- -------------
<S> <C> <C>
Shares of common stock outstanding at October 1, 1994,
less treasury stock 37,991 37,991
Plus net weighted shares of treasury stock issued 81 81
Plus common stock equivalents:
Effect of convertible preferred stock conversion - 3,079
Effect of equity incentive awards 767 1,004
---------- ----------
Weighted average shares outstanding 38,839 42,155
========== ==========
Income applicable to common shares $ 124,647 $ 124,647
Dividends on preferred stock - 2,665
Preferred stock conversion compensation shortfall - (1,796)
---------- ----------
Earnings applicable to common shares $ 124,647 $ 125,516
========== ==========
Earnings per common share $ 3.21 $ 2.98
========== ==========
</TABLE>
<PAGE> 1
<TABLE>
EXHIBIT 12
CABOT CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
<CAPTION>
Nine Months
Ended Years ended September 30
June 30 -----------------------------------------------------
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pre-tax income from continuing operations $181,786 $118,325 $ 67,900 $116,599 $ 62,362 $ 63,983
Distributed income of affiliated companies 9,731 5,638 5,988 5,766 4,688 3,607
Add fixed charges:
Interest on indebtedness 27,475 41,668 44,043 41,714 38,661 41,145
Portion of rents representative of
the interest factor 4,011 5,879 4,838 4,933 5,715 5,226
-------- -------- -------- -------- -------- --------
Income as adjusted $223,003 $171,510 $122,769 $169,012 $111,426 $113,961
Fixed charges:
Interest on indebtedness $ 27,475 $ 41,668 $ 44,043 $ 41,714 $ 38,661 $ 41,145
Capitalized interest _ _ _ 3,963 8,745 _
Portion of rents representative of
the interest factor 4,011 5,879 4,838 4,933 5,715 5,226
-------- -------- -------- -------- -------- --------
Total fixed charges $ 31,486 $ 47,547 $ 48,881 $ 50,610 $ 53,121 $ 46,371
Ratio of earnings to fixed charges 7.08 3.61 2.51 3.34 2.10 2.46
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS (UNAUDITED) OF CABOT CORPORATION FOR THE NINE MONTHS ENDED
JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 34,453
<SECURITIES> 0
<RECEIVABLES> 348,828
<ALLOWANCES> 9,231
<INVENTORY> 275,149
<CURRENT-ASSETS> 681,181
<PP&E> 1,502,538
<DEPRECIATION> 770,637
<TOTAL-ASSETS> 1,727,927
<CURRENT-LIABILITIES> 440,649
<BONDS> 313,903
<COMMON> 67,775
0
75,336
<OTHER-SE> 1,041,200
<TOTAL-LIABILITY-AND-EQUITY> 1,727,927
<SALES> 1,404,117
<TOTAL-REVENUES> 1,410,740
<CGS> 962,388
<TOTAL-COSTS> 962,388
<OTHER-EXPENSES> 57,622
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,475
<INCOME-PRETAX> 181,786
<INCOME-TAX> 67,129
<INCOME-CONTINUING> 127,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,312
<EPS-PRIMARY> 3.21
<EPS-DILUTED> 2.98
</TABLE>
