<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
MARCH 31, 1996
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 MARCH 31, 1996, THE COMPANY HAD 71,435,808 SHARES OF COMMON
STOCK, PAR VALUE $1 PER SHARE, OUTSTANDING.
-1-
<PAGE> 2
CABOT CORPORATION
INDEX
Part I. Financial Information Page No.
-------
Item 1. Financial Statements
Consolidated Statements of Income
Three Months Ended March 31, 1996 and 1995 3
Consolidated Statements of Income
Six Months Ended March 31, 1996 and 1995 4
Consolidated Balance Sheets
March 31, 1996 and September 30, 1995 5
Consolidated Statements of Cash Flows
Six Months Ended March 31, 1996 and 1995 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 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
-2-
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1.
CABOT CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1996 and 1995
(Dollars in thousands)
UNAUDITED
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues:
Net sales and other operating revenues $491,272 $481,340
Interest and dividend income 2,254 1,906
-------- --------
Total revenues 493,526 483,246
-------- --------
Costs and expenses:
Cost of sales 345,298 329,421
Selling and administrative expenses 53,722 62,460
Research and technical service 17,302 13,664
Interest expense 11,213 8,872
Other charges, net 3,494 4,129
-------- --------
Total costs and expenses 431,029 418,546
-------- --------
Income before income taxes 62,497 64,700
Provision for income taxes (23,124) (23,939)
Equity in net income of affiliated companies 4,933 5,316
Minority interest (1,389) 303
-------- --------
Net income 42,917 46,380
Dividends on preferred stock, net of tax
benefit of $475 and $478, respectively (881) (889)
-------- --------
Income applicable to primary common shares $ 42,036 $ 45,491
======== ========
Weighted average common shares outstanding (000):
Primary 72,799 77,730
Fully diluted (Note A) 78,937 84,026
Income per common share:
Primary $ 0.58 $ 0.59
======== ========
Fully diluted (Note A) $ 0.54 $ 0.54
======== ========
Dividends per common share $ 0.09 $ 0.07
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 4
CABOT CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended March 31, 1996 and 1995
(Dollars in thousands)
UNAUDITED
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues:
Net sales and other operating revenues $934,303 $909,299
Interest and dividend income 4,715 4,441
-------- --------
Total revenues 939,018 913,740
-------- --------
Costs and expenses:
Cost of sales 650,432 626,250
Selling and administrative expenses 100,353 118,028
Research and technical service 31,579 26,503
Interest expense 20,634 18,908
Other charges, net 8,766 8,454
-------- --------
Total costs and expenses 811,764 798,143
-------- --------
Income before income taxes 127,254 115,597
Provision for income taxes (47,084) (42,771)
Equity in net income of affiliated companies 8,656 6,998
Minority Interest (2,558) 463
-------- --------
Net income 86,268 80,287
Dividends on preferred stock, net of tax
benefit of $950 and $958, respectively (1,764) (1,778)
-------- --------
Income applicable to primary common shares $ 84,504 $ 78,509
======== ========
Weighted average common shares outstanding (000):
Primary 73,861 77,480
Fully diluted (Note A) 80,050 83,910
Income per common share:
Primary $ 1.14 $ 1.01
======== ========
Fully diluted (Note A) $ 1.06 $ 0.94
======== ========
Dividends per common share $ 0.18 $ 0.14
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 5
CABOT CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and September 30, 1995
(Dollars in thousands)
<CAPTION>
ASSETS
March 31 September 30
1996 1995
(Unaudited)
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 40,978 $ 90,792
Accounts and notes receivable
(net of reserve for doubtful
accounts of $5,134 and $5,207) 333,661 292,777
Inventories:
Raw materials 69,719 64,830
Work in process 66,092 47,058
Finished goods 99,738 97,597
Other 44,464 43,625
---------- ----------
Total inventories 280,013 253,110
Prepaid expenses 23,099 13,499
Deferred income taxes 30,072 27,681
---------- ----------
Total current assets 707,823 677,859
---------- ----------
Investments:
Equity 74,856 98,866
Other 136,744 119,866
---------- ----------
Total investments 211,600 218,732
---------- ----------
Property, plant and equipment, at cost 1,631,884 1,447,653
Accumulated depreciation (796,392) (741,132)
---------- ----------
Net property, plant and equipment 835,492 706,521
---------- ----------
Other assets:
Intangible assets, net of amortization 31,293 13,922
Deferred income taxes 7,549 6,949
Other assets 25,872 30,350
---------- ----------
Total other assets 64,714 51,221
---------- ----------
Total assets $1,819,629 $1,654,333
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 6
CABOT CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and September 30, 1995
(Dollars in thousands)
LIABILITIES & STOCKHOLDERS' EQUITY
<CAPTION>
March 31 September 30
1996 1995
(Unaudited)
----------- ------------
<S> <C> <C>
Current liabilities:
Notes payable to banks $ 211,831 $ 52,437
Current portion of long-term debt 23,368 15,709
Accounts payable and accrued liabilities 254,028 260,879
U.S. and foreign income taxes payable 37,347 69,286
Deferred income taxes 4,419 4,068
---------- ----------
Total current liabilities 530,993 402,379
---------- ----------
Long-term debt 341,489 306,443
Deferred income taxes 109,021 100,353
Other liabilities 148,528 152,747
Commitments and contingencies (Note B)
Minority interest 23,562 7,411
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
of $71,585 and $72,479) 75,336 75,336
Less cost of shares of preferred treasury stock (5,645) (4,836)
Common stock:
Authorized: 200,000,000 and 80,000,000 shares of $1 par value
Issued: 135,549,936 and 67,774,968 shares 135,550 67,775
Additional paid-in capital -- 17,799
Retained earnings 1,082,795 1,062,482
Less cost of common treasury stock
(including unearned amounts of $7,543 and $10,834) (625,963) (539,585)
Deferred employee benefits (65,111) (65,907)
Unrealized gain on marketable securities 42,605 32,023
Foreign currency translation adjustments 26,469 39,913
---------- ----------
Total stockholders' equity 666,036 685,000
---------- ----------
Total liabilities and stockholders' equity $1,819,629 $1,654,333
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
-6-
<PAGE> 7
CABOT CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended March 31, 1996 and 1995
(Dollars in thousands)
UNAUDITED
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 86,268 $ 80,287
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 47,683 47,067
Deferred tax provision 87 2,180
Equity in net income of affiliated companies,
net of dividends received (2,831) (2,413)
Other, net 1,342 2,986
Changes in assets and liabilities, net of consolidation
of equity affiliates:
Increase in accounts receivable (30,185) (46,368)
Increase in inventory (16,590) (39,128)
Decrease in accounts payable and accruals (20,940) (14,207)
Decrease (increase) in prepayments and 652 (210)
intangible assets
Other, net (37,683) 19,243
--------- ---------
Cash provided by operating activities 27,803 49,437
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant, property and equipment (77,747) (56,906)
Investments and acquisitions (49,315) (20)
Cash provided from consolidation of equity affiliates 9,306
Sales of property, plant and equipment 1,786 176
Other 1,223
--------- ---------
Cash used by investing activities (114,747) (56,750)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 8,759
Repayments of long-term debt (11,637) (153,656)
Increase in short-term debt 146,962 121,957
Purchases of treasury stock (96,446) (4,220)
Sales and issuance of treasury stock 6,932 7,593
Cash dividends paid to stockholders (14,761) (12,437)
Redemption of preferred stock purchase rights (1,840)
--------- ---------
Cash provided (used) by financing activities 37,969 (40,763)
--------- ---------
Effect of exchange rate changes on cash (839) 1,228
--------- ---------
Decrease in cash and cash equivalents (49,814) (46,848)
Cash and cash equivalents at beginning of eriod 90,792 80,917
--------- ---------
Cash and cash equivalents at end of period $ 40,978 $ 34,069
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE> 8
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
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. As of October 1, 1995, the Company
changed the accounting for its Czech Republic and Indian carbon black
affiliates from the equity method to the consolidated method upon
achieving control. Intercompany transactions have been eliminated.
The financial statements have been prepared in accordance with the
Securities and Exchange Commission requirements for Form 10-Q and
consequently do not include all information required to be disclosed by
the Securities and Exchange Commission on the Form 10-K. Additional
information may be obtained by referring to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1995.
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 March 31,
1996 and 1995. 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.
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 stock options and rights issued under
the Company's Equity Incentive Plan.
Reclassification
Certain amounts in fiscal 1995 have been reclassified to conform to the
fiscal 1996 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. As of the end of the quarter,
approximately $69 million was committed for various capital projects.
-8-
<PAGE> 9
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(Continued)
C. ACQUISITION
On February 16, 1996, the Company acquired an 80% controlling ownership
interest in an Indonesian carbon black company which was accounted for as
a purchase. Although the purchase accounting for this acquisition has not
been completed, the acquisition cost of approximately $50 million includes
assets and liabilities at their estimated fair values which are subject to
final appraisals. The excess of cost over the estimated fair value of net
assets acquired of approximately $16 million will be amortized on the
straight-line basis over either 40 years or an estimated useful life,
whichever is shorter. Results of operations, subsequent to the acquisition
date have been included in the Consolidated Statements of Income as of
March 31, 1996.
D. STOCKHOLDERS' EQUITY
On November 10, 1995, the board of directors authorized a two-for-one
stock split in the form of a stock dividend contingent upon shareholder
approval of an amendment to the Company's Certificate of Incorporation
increasing the authorized number of shares from 80,000,000 to 200,000,000
shares, which amendment was approved on March 7, 1996. One additional
share of common stock was distributed to stockholders on March 22, 1996,
for each share of common stock of the Company held by stockholders of
record on March 15, 1996. The Company reclassified $18.4 million from the
additional paid in capital account and $49.3 million from the retained
earnings account to the common stock account. All common share and per
share amounts have been restated to reflect the stock split.
-9-
<PAGE> 10
CABOT CORPORATION
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
March 31, 1996
UNAUDITED
<CAPTION>
D. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes the changes in stockholders' equity for the six months ended March 31, 1996.
(Dollars in thousands) 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>
Balance at September 30, 1995 75,336 $75,336 5,036 $(4,836) 67,774,968 $ 67,775 $17,799 $1,062,482
Net income 86,268
Common stock dividends paid (12,997)
Redemption of preferred stock
purchase rights (1,840)
Issuance of treasury stock under
employee compensation plans (460) (11)
Purchase of treasury stock - common
Purchase of treasury
stock - preferred 342 (809)
Sale of treasury stock to Cabot
Retirement Incentive Savings Plan 1,093
Preferred stock dividends paid to Employee
Stock Ownership Plan, net of tax (1,764)
Principal payment by Employee Stock
Ownership Plan under guaranteed loan
Effect of two-for-one stock split
distributed March 22, 1996 67,774,968 67,775 (18,432) (49,343)
Amortization of unearned compensation
Unrealized gain/(loss), net of deferred tax
Foreign currency translation adjustments
------ ------- ----- ------- ----------- -------- -------- ----------
Balance at March 31, 75,336 $75,336 5,378 $(5,645) 135,549,936 $135,550 $ 0 $1,082,795
====== ======= ===== ======= =========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Common Unrealized Foreign
(Dollars in thousands) Treasury Stock Deferred Gain/(Loss) Currency Total
--------------- Unearned Employee Marketable Translation Stockholder
Shares Cost Compensation Benefits Securities Adjustments Equity
------ ---- ------------ -------- ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995 30,392,967 $(528,751) $(10,834) $(65,907) $32,023 $39,913 $685,000
Net income 86,268
Common stock dividends paid (12,997)
Redemption of preferred stock purchase rights (1,840)
Issuance of treasury stock under employee
compensation plans (285,160) 5,355 341 5,225
Purchase of treasury stock - common 1,979,732 (95,637) (95,637)
Purchase of treasury
stock - preferred (809)
Sale of treasury stock to Cabot
Retirement Incentive Savings Plan (32,487) 613 1,706
Preferred stock dividends paid to Employee
Stock Ownership Plan, net of tax (1,764)
Principal payment by Employee Stock
Ownership Plan under guaranteed loan 796 796
Effect of two-for-one stock split
distributed March 22, 1996 32,059,076
Amortization of unearned compensation 2,950 2,950
Unrealized gain/(loss), net of deferred tax 10,582 10,582
Foreign currency translation adjustments (13,444) (13,444)
---------- --------- ------- -------- ------- ------- --------
Balance at March 31, 64,114,128 $(618,420) $(7,543) $(65,111) $42,605 $26,469 $666,036
========== ========= ======= ======== ======= ======= ========
</TABLE>
-10-
<PAGE> 11
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 14.
THREE MONTHS ENDED MARCH 31, 1996 VERSUS
THREE MONTHS ENDED MARCH 31, 1995
Net income for the second quarter of fiscal year 1996 was $42.9 million ($0.54
per fully diluted common share), compared to $46.4 million ($0.54 per fully
diluted common share) in the same quarter a year ago. Net sales and other
operating revenues increased 2% to $491.3 million from last year's $481.3
million. Operating profit decreased 3% to $81.3 million from last year's second
quarter record $83.7 million. Performance in 1996 excluded the results of Cabot
Safety Corporation, which was restructured in July, 1995. Exclusive of Cabot
Safety, revenues increased 14% and operating profit grew 5%.
In the Specialty Chemicals and Materials Group, sales declined 4% to $370.3
million from $384.5 million last year and operating profit decreased 6% to $72.4
million from $77.1 million. The operating profit decrease reflects an overall
2.5% volume decline and increased spending on research and development and new
business initiatives, largely offset by higher margins than a year ago. Volume
increases in North America were offset by declines in the European and South
American businesses. The most significant volume variances versus a year ago
were a 13% increase in performance materials (tantalum) and a 5% decline in
plastics. Results in 1995 included a contribution from Cabot Safety Corporation.
Exclusive of Cabot Safety, sales for the Group were up 11% in 1996 and operating
profit increased $1.3 million compared to last year.
In the Energy Group, sales increased 25% from $96.8 million to $121.0 million,
and operating profit grew 35% to $8.9 million from $6.6 million last year. The
improvement is mainly due to lower business development spending in the Group's
liquefied natural gas (LNG) business. Volumes in the Group's LNG business
improved from a year ago. However, profitability was constrained as higher
pricing did not offset the higher costs associated with buying available
domestic gas to offset the limited supplies from the Company's Algerian
supplier.
During the quarter, the Company increased its ownership interest to 80% in P.T.
Cabot Indonesia, its existing Indonesian carbon black subsidiary. Also, the
Company acquired an 80% ownership interest in P.T. Continental Carbon
Indonesia, the other Indonesian carbon black producer.
Equity in net income of affiliates fell 8% to $4.9 million from $5.3 million in
the second quarter last year. The decline is due to the consolidation of the
results of the Company's Czech Republic carbon black joint venture beginning
October 1, 1995. On a comparable basis, equity in net income of affiliates
improved over 40% versus last year due to the continuing improvement from the
Company's Mexican and Pacific Asia carbon black affiliates and the Japanese
performance materials affiliate.
The Company began to see definite signs of weakened demand during the latter
part of the quarter, particularly in Europe and North and South America. This
led to volume softness in the Company's specialty chemicals businesses which is
anticipated to continue through the balance of the fiscal year. In light of
recent economic conditions and increased spending on research and development
and new business initiatives, the Company is not anticipating earnings growth
in 1996 versus 1995.
-11-
<PAGE> 12
CABOT CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
THREE MONTHS ENDED MARCH 31, 1996 VERSUS
THREE MONTHS ENDED MARCH 31, 1995 (CONTINUED)
The Company has begun to see meaningful sales from the introduction of new
products. A new product as referred to here is a product first sold in
commercial quantities within the last five years. New products accounted for 8%
of Specialty Chemicals and Materials Group revenues during the second quarter.
This compares to 5% last year. These products generally have higher margins than
older products, but are not yet significant enough to offset the effects of a
possible short-term decline in demand for traditional products. It is expected
that these new products will begin to make significant profit contributions
during fiscal 1997.
SIX MONTHS ENDED MARCH 31, 1996 VERSUS
SIX MONTHS ENDED MARCH 31, 1995
For the six months ended March 31, 1996, net income was $86.3 million ($1.06 per
fully diluted common share) compared to $80.3 million ($0.94 per fully diluted
common share) in the same period a year ago. Net sales rose 3% to $934.3 million
from $909.3 million last year.
In the Specialty Chemicals and Materials Group, sales fell 3% to $714.3 million
from $734.2 million due to the absence of Cabot Safety Corporation, which was
deconsolidated in July, 1995, and some volume softness during the latter part of
the second quarter of fiscal 1996. On a comparable basis, sales grew 12% during
the first six months of the fiscal year. Operating profit for the Group
increased 5% to $144.1 million from $137.6 million last year. The increase is a
result of pricing improvement in every business in the Group, which more than
offset raw material cost increases and volume decreases in several sectors. Of
particular note were double digit volume declines in the Plastics and Cab-O-Sil
businesses, and a double digit volume gain in the performance materials
(tantalum) business. Inventory adjustments throughout the U.S. electronics
industry are expected to cause downward pressure on the growth rate of tantalum
products over the next three to six months.
In the Energy Group, sales increased 26% to $220.0 million from $175.1 million
and operating profit grew 34% to $17.3 million. Operating profit in fiscal 1996
included a $3.3 million gain (approximately $0.03 per common share, fully
diluted) associated with the reduction in the Company's ownership position, from
25% to 10%, in the Trinidad natural gas liquefaction plant project. Operating
profit exclusive of this gain improved 9% largely due to reduced development
spending in the Company's LNG business and improved margins in the Company's
TUCO business, partially offset by significantly higher costs for pipeline gas
purchased by the LNG business. Supplies of LNG continued to be curtailed by the
refurbishment efforts of the Company's Algerian supplier. This is expected to
continue through the balance of the fiscal year and will impact the ability of
the business to participate in what is expected to be a strong summer market. As
previously announced, the Company has agreed to sell its TUCO subsidiary to
Southwestern Public Service Company ("SPS") for consideration of approximately
$77 million. The sale is subject to regulatory approval. One such approval,
involving SPS's request for special rate treatment for the transaction, was
recently denied by the Public Utility Commission of Texas and a motion for
rehearing was also denied. SPS is considering what action it will take as a
result of the Commission's actions.
Interest expense increased 9% to $20.6 million from $18.9 million last year. The
increase is due to higher total debt than a year ago as described below.
The Company's effective tax rate remained at 37%.
-12-
<PAGE> 13
CABOT CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
II. CASH FLOWS AND LIQUIDITY
During the first six months of the year, the Company's operations provided $27.8
million of cash compared to $49.4 million last year. The change is primarily due
to the timing of tax payments partially offset by the decrease in inventory
build up as compared to the second quarter of fiscal year 1995.
The Company increased its borrowings by $144.1 million during the first six
months of the year primarily to fund share repurchases and to purchase an 80%
interest in P.T. Continental Carbon Indonesia.
Capital spending for the first six months of the year was $127.1 million. In
addition to the Indonesian acquisition mentioned above, during the second
quarter the Company also began several previously announced capacity expansions,
including a contract-supported carbon black expansion at Ville Platte,
Louisiana. The Company plans to make approximately $300 million of capital
expenditures during the 1996 fiscal year. In light of softened demand in certain
markets, the Company will proceed cautiously with planned expansions and may
delay one or more projects depending on how market forecasts develop over the
balance of the fiscal year. Already, the Company has delayed the construction of
a new carbon black unit in North America and is reevaluating the timetable for a
new North American fumed silica plant.
During the first six months of the year, the Company purchased approximately 1.8
million common shares under an authorization to purchase 3 million shares of
common stock. Approximately 2.4 million shares were repurchased under that
authorization. As a result, the number of outstanding shares was reduced by
approximately 6.5%. Subsequently, during the period the Company effected a
two-for-one stock split in the form of a stock dividend.
The Company's ratio of total debt (including short-term debt net of cash) to
capital increased from 29% at September 30, 1995, to 44% at the end of the
second quarter due to increased borrowings for the share repurchases, capital
expenditures and working capital and due to reductions in capital resulting from
share repurchases.
Management expects cash from operations 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.
-13-
<PAGE> 14
CABOT CORPORATION
<TABLE>
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 Six Months Ended
------------------ -----------------
3/31/96 3/31/95 3/31/96 3/31/95
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Industry Segment Data
- ---------------------
Sales:
Specialty Chemicals and Materials $370.3 $384.5 $714.3 $734.2
Energy 121.0 96.8 220.0 175.1
------ ------ ------ ------
Net sales $491.3 $481.3 $934.3 $909.3
====== ====== ====== ======
Operating profit:
Specialty Chemicals and Materials $ 72.4 $ 77.1 $144.1 $137.6
Energy 8.9 6.6 17.3 12.9
------ ------ ------ ------
Total operating profit 81.3 83.7 161.4 150.5
Interest expense (11.2) (8.9) (20.6) (18.9)
General corporate/other expenses (7.6) (10.1) (13.5) (16.0)
------ ------ ------ ------
Income before income taxes 62.5 64.7 127.3 115.6
Provision for income taxes (23.1) (23.9) (47.1) (42.8)
Equity in net income of affiliated companies 4.9 5.3 8.7 7.0
Minority interest (1.4) 0.3 (2.6) 0.5
------ ------ ------ ------
Net income 42.9 46.4 86.3 80.3
Dividends on preferred stock (0.9) (0.9) (1.8) (1.8)
------ ------ ------ ------
Income applicable to primary common shares $ 42.0 $ 45.5 $ 84.5 $ 78.5
====== ====== ====== ======
Income per common share:
Primary $ 0.58 $ 0.59 $ 1.14 $ 1.01
====== ====== ====== ======
Fully diluted $ 0.54 $ 0.54 $ 1.06 $ 0.94
====== ====== ====== ======
</TABLE>
-14-
<PAGE> 15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
<TABLE>
The Annual Meeting of Stockholders of Cabot Corporation was held on March 7,
1996. An election of Directors was held at which Ms. Jane C. Bradley and
Messrs. Samuel W. Bodman, Authur L. Goldstein, Gerrit Jeelof and John H.
McArthur were nominated and elected to the class of Directors whose terms expire
in 1999. The following votes were cast for or were withheld with respect to
each of the nominees:
<CAPTION>
Director In Favor Of Withheld
-------- ----------- --------
<S> <C> <C>
Samuel W. Bodman 33,176,229 1,213,747
Jane C. Bradley 33,690,421 699,555
Authur L. Goldstein 33,749,601 640,376
Gerrit Jeelof 33,638,627 751,349
John H. McArthur 33,759,884 630,092
</TABLE>
Other Directors whose terms of office as Directors continued after the meeting
are:
Director Term of Office Expires
-------- ----------------------
Kenneth F. Burnes 1998
John G. L. Cabot 1998
Robert P. Henderson 1998
Arnold S. Hiatt 1997
John F. O'Brien 1998
David V. Ragone 1997
Charles P. Siess, Jr. 1998
Morris Tanenbaum 1997
Lydia W. Thomas 1997
The second proposal before the Annual Meeting of Stockholders was the adoption
of the Company's 1996 Equity Incentive Plan. This proposal was approved by the
stockholders. The following votes were cast for or against or abstained from
voting on the Company's 1996 Equity Incentive Plan:
For Against Abstained
--- ------- ---------
29,121,634 4,528,882 187,859
The third proposal before the Annual Meeting of Stockholders was the adoption of
an amendment to the Company's Certificate of Incorporation to increase the
authorized shares of the common stock issuable by the Company from 80,000,000 to
200,000,000 shares. This proposal was adopted. The following votes were cast for
or against or abstained from voting on the amendment to the Company's
Certificate of Incorporation:
For Against Abstained
--- ------- ---------
29,301,095 5,008,380 80,501
Effective March 7, 1996, Robert A. Charpie retired as a member of the Board of
Directors. Additionally, the Company reports with sorrow that Gerrit Jeelof, one
of its Directors, passed away on April 30, 1996.
-15-
<PAGE> 16
PART II. OTHER INFORMATION (CONTINUED)
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.
Exhibit
Number Description
------- -----------
11 Statement 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.)
(b) Reports on Form 8-K
-------------------
No report on Form 8-K was filed by the Company during the three
months ended March 31, 1996.
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: May 14, 1996 /s/ Kenyon C. Gilson
-----------------------------
Kenyon C. Gilson
Executive Vice President and
Chief Financial Officer
Date: May 14, 1996 /s/ Paul J. Gormisky
-----------------------------
Paul J. Gormisky
Vice President and Controller
(Chief Accounting Officer)
-16-
<PAGE> 1
EXHIBIT 11
CABOT CORPORATION AND CONSOLIDATED SUBSIDIARIES
<TABLE>
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
For the three month period ended March 31, 1996
(In thousands, except per share amounts)
<CAPTION>
Primary(a) Fully Diluted(a)
<S> <C> <C>
Shares of common stock outstanding at January 1, 1996,
less treasury stock 71,208 71,208
Plus net weighted shares of treasury stock issued 342 342
Plus common stock equivalents:
Effect of convertible preferred stock conversion 6,119
Effect of equity incentive awards 1,249 1,268
------- -------
Weighted average shares outstanding 72,799 78,937
======= =======
Income applicable to common shares $42,036 $42,036
Dividends on preferred stock 881
Preferred stock conversion compensation shortfall (515)
------- -------
Earnings applicable to common shares $42,036 $42,402
======= =======
Earnings per common share $ 0.58 $ 0.54
======= =======
</TABLE>
(a) All common stock and equivalents reflect, as of the beginning of the fiscal
year, the two-for-one stock split distributed on March 22, 1996.
-17-
<PAGE> 2
EXHIBIT 11
CABOT CORPORATION AND CONSOLIDATED SUBSIDIARIES
<TABLE>
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
For the six month period ended March 31, 1996
(In thousands, except per share amounts)
<CAPTION>
Primary(a) Fully Diluted(a)
---------- ----------------
<S> <C> <C>
Shares of common stock outstanding at October 1, 1995
less treasury stock 74,764 74,764
Plus net weighted shares of treasury stock purchased (2,101) (2,101)
Plus common stock equivalents:
Effect of convertible preferred stock conversion 6,119
Effect of equity incentive awards 1,198 1,268
------- --------
Weighted average shares outstanding 73,861 80,050
======= ========
Income applicable to common shares $84,504 $ 84,504
Dividends on preferred stock 1,764
Preferred stock conversion compensation shortfall (1,032)
------- --------
Earnings applicable to common shares $84,504 $ 85,236
======= ========
Earnings per common share $ 1.14 $ 1.06
======= ========
</TABLE>
(a) All common stock and equivalents reflect, as of the beginning of the fiscal
year, the two-for-one stock split distributed on March 22, 1996.
-18-
<PAGE> 1
EXHIBIT 12
CABOT CORPORATION AND CONSOLIDATED SUBSIDIARIES
<TABLE>
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
<CAPTION>
Six Months Years ended September 30
ended ----------------------------------------------------
March 31, 1996 1995 1994 1993 1992 1991
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pre-tax income from continuing operations $127,254 $256,342 $118,325 $ 67,900 $116,599 $ 62,362
Distributed income of affiliated companies 5,825 11,699 5,638 5,988 5,766 4,688
Add fixed charges:
Interest on indebtedness 20,634 35,639 41,668 44,043 41,714 38,661
Portion of rents representative of
the interest factor 2,278 5,515 5,879 4,838 4,933 5,715
-------- -------- -------- -------- -------- --------
Income as adjusted $155,991 $309,195 $171,510 $122,769 $169,012 $111,426
Fixed charges:
Interest on indebtedness $ 20,634 $ 35,639 $ 41,668 $ 44,043 $ 41,714 $ 38,661
Capitalized interest 3,963 8,745
Portion of rents representative of
the interest factor 2,278 5,515 5,879 4,838 4,933 5,715
-------- -------- -------- -------- -------- --------
Total fixed charges $ 22,912 $ 41,154 $ 47,547 $ 48,881 $ 50,610 $ 53,121
Ratio of earnings to fixed charges 6.81 7.51 3.61 2.51 3.34 2.10
======== ======== ======== ======== ======== ========
</TABLE>
-19-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CABOT CORPORATION FOR THE THREE MONTHS ENDED MARCH
31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 40,978
<SECURITIES> 0
<RECEIVABLES> 338,795
<ALLOWANCES> 5,134
<INVENTORY> 280,013
<CURRENT-ASSETS> 707,823
<PP&E> 1,631,884
<DEPRECIATION> 796,392
<TOTAL-ASSETS> 1,819,629
<CURRENT-LIABILITIES> 530,993
<BONDS> 341,489
<COMMON> 135,550
0
75,336
<OTHER-SE> 1,082,795
<TOTAL-LIABILITY-AND-EQUITY> 1,819,629
<SALES> 491,272
<TOTAL-REVENUES> 493,526
<CGS> 345,298
<TOTAL-COSTS> 345,298
<OTHER-EXPENSES> 20,796
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,213
<INCOME-PRETAX> 62,497
<INCOME-TAX> 23,124
<INCOME-CONTINUING> 42,917
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,917
<EPS-PRIMARY> .58
<EPS-DILUTED> .54
</TABLE>
