<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, 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 JUNE 30, 1996, THE COMPANY HAD 71,418,021 SHARES OF COMMON STOCK,
PAR VALUE $1 PER SHARE, OUTSTANDING.
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<PAGE> 2
CABOT CORPORATION
INDEX
Part I. Financial Information Page No.
--------
Item 1. Financial Statements
Consolidated Statements of Income
Three Months Ended June 30, 1996 and 1995 3
Consolidated Statements of Income
Nine Months Ended June 30, 1996 and 1995 4
Consolidated Balance Sheets
June 30, 1996 and September 30, 1995 5
Consolidated Statements of Cash Flows
Nine Months Ended June 30, 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 6. Exhibits and Reports on Form 8-K 15
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1.
<TABLE>
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30, 1996 and 1995
(Dollars in thousands)
UNAUDITED
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues:
Net sales and other operating revenues $457,318 $494,817
Interest and dividend income 2,171 2,182
-------- --------
Total revenues 459,489 496,999
-------- --------
Costs and expenses:
Cost of sales 318,510 336,139
Selling and administrative expenses 50,842 63,441
Research and technical service 21,301 15,180
Interest expense 10,571 8,567
Other charges, net 5,107 7,838
-------- --------
Total costs and expenses 406,331 431,165
-------- --------
Income before income taxes 53,158 65,834
Provision for income taxes (19,668) (24,358)
Equity in net income of affiliated companies 4,091 5,656
Minority interest (1,831) (107)
-------- --------
Net income 35,750 47,025
Dividends on preferred stock, net of tax
benefit of $635 and $477, respectively (715) (886)
-------- --------
Income applicable to primary common shares $ 35,035 $ 46,139
======== ========
Weighted average common shares outstanding (000):
Primary 72,710 77,980
Fully diluted (Note A) 78,808 84,376
Income per common share:
Primary $ 0.48 $ 0.59
======== ========
Fully diluted (Note A) $ 0.45 $ 0.55
======== ========
Dividends per common share $ 0.09 $ 0.07
======== ========
</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, 1996 and 1995
(Dollars in thousands)
UNAUDITED
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues:
Net sales and other operating revenues $1,391,621 $1,404,117
Interest and dividend income 6,886 6,623
---------- ----------
Total revenues 1,398,507 1,410,740
---------- ----------
Costs and expenses:
Cost of sales 968,942 962,388
Selling and administrative expenses 150,120 181,469
Research and technical service 53,955 41,684
Interest expense 31,205 27,475
Other charges, net 13,874 16,294
---------- ----------
Total costs and expenses 1,218,096 1,229,310
---------- ----------
Income before income taxes 180,411 181,430
Provision for income taxes (66,752) (67,129)
Equity in net income of affiliated companies 12,747 12,655
Minority Interest (4,390) 356
---------- ----------
Net income 122,016 127,312
Dividends on preferred stock, net of tax
benefit of $1,585 and $1,435, respectively (2,479) (2,665)
---------- ----------
Income applicable to primary common shares $ 119,537 $ 124,647
========== ==========
Weighted average common shares outstanding (000):
Primary 73,383 77,678
Fully diluted (Note A) 79,481 84,310
Income per common share:
Primary $ 1.63 $ 1.61
========== ==========
Fully diluted (Note A) $ 1.52 $ 1.49
========== ==========
Dividends per common share $ 0.27 $ 0.21
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 5
<TABLE>
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and September 30, 1995
(Dollars in thousands)
ASSETS
<CAPTION>
June 30 September 30
1996 1995
(Unaudited)
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 34,939 $ 90,792
Accounts and notes receivable
(net of reserve for doubtful
accounts of $5,358 and $5,207) 313,671 292,777
Inventories:
Raw materials 70,039 64,830
Work in process 73,952 47,058
Finished goods 111,780 97,597
Other 45,289 43,625
---------- ----------
Total inventories 301,060 253,110
Prepaid expenses 19,341 13,499
Deferred income taxes 26,476 27,681
---------- ----------
Total current assets 695,487 677,859
---------- ----------
Investments:
Equity 74,332 98,866
Other 150,158 119,866
---------- ----------
Total investments 224,490 218,732
---------- ----------
Property, plant and equipment, at cost 1,671,385 1,447,653
Accumulated depreciation (808,991) (741,132)
---------- ----------
Net property, plant and equipment 862,394 706,521
---------- ----------
Other assets:
Intangible assets, net of amortization 33,191 13,922
Deferred income taxes 6,645 6,949
Other assets 25,276 30,350
---------- ----------
Total other assets 65,112 51,221
---------- ----------
Total assets $1,847,483 $1,654,333
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 6
CABOT CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and September 30, 1995
(Dollars in thousands)
LIABILITIES & STOCKHOLDERS' EQUITY
<CAPTION>
June 30 September 30
1996 1995
(Unaudited)
----------- ------------
<S> <C> <C>
Current liabilities:
Notes payable to banks $ 236,473 $ 52,437
Current portion of long-term debt 15,387 15,709
Accounts payable and accrued liabilities 249,908 260,879
U.S. and foreign income taxes payable 26,732 69,286
Deferred income taxes 3,891 4,068
---------- ----------
Total current liabilities 532,391 402,379
---------- ----------
Long-term debt 336,287 306,443
Deferred income taxes 109,317 100,353
Other liabilities 150,400 152,747
Commitments and contingencies (Note B)
Minority interest 25,220 7,411
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 $71,341 and $72,576) 75,336 75,336
Less cost of shares of preferred treasury stock (6,288) (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 13,020 17,799
Retained earnings 1,111,403 1,062,482
Less cost of common treasury stock
(including unearned amounts of $18,265 and $11,823) (641,130) (539,585)
Deferred employee benefits (64,701) (65,907)
Unrealized gain on marketable 48,963 32,023
securities
Foreign currency translation adjustments 21,715 39,913
---------- ----------
Total stockholders' equity 693,868 685,000
---------- ----------
Total liabilities and stockholders' equity $1,847,483 $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
Nine Months Ended June 30, 1996 and 1995
(Dollars in thousands)
UNAUDITED
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 122,016 $ 127,312
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 73,194 71,686
Deferred tax provision 123 4,736
Equity in net income of affiliated companies,
net of dividends received (1,384) (4,245)
Other, net 6,969 4,779
Changes in assets and liabilities, net of consolidation
of equity affiliates:
Increase in accounts receivable (11,703) (58,343)
Increase in inventory (38,635) (53,297)
Decrease in accounts payable and accruals (24,924) (5,299)
Decrease in prepayments and intangible assets 2,029 5,332
Decrease in income taxes payable (44,252) 13,466
Other, net (1,652) 1,024
--------- ---------
Cash provided by operating activities 81,781 107,151
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant, property and equipment (134,871) (86,348)
Investments and acquisitions (52,639) (20)
Cash provided from consolidation of equity affiliates 9,306
Sales of property, plant and equipment 2,621 136
Other 1,223
--------- ---------
Cash used by investing activities (174,360) (86,232)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 11,258 17,385
Repayments of long-term debt (27,568) (156,114)
Increase in short-term debt 170,884 94,133
Purchases of treasury stock (102,709) (14,834)
Sales and issuance of treasury stock 8,828 8,533
Cash dividends paid to stockholders (23,742) (18,656)
--------- ---------
Cash provided (used) by financing activities 36,951 (69,553)
--------- ---------
Effect of exchange rate changes on cash (225) 2,170
--------- ---------
Decrease in cash and cash equivalents (55,853) (46,464)
Cash and cash equivalents at beginning of period 90,792 80,917
--------- ---------
Cash and cash equivalents at end of period $ 34,939 $ 34,453
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE> 8
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 using 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 June 30, 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 Plans.
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 $60 million was committed for various capital projects.
-8-
<PAGE> 9
[Page set horizontally]
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
UNAUDITED
<TABLE>
C. STOCKHOLDERS' EQUITY
The following table summarizes the changes in stockholders' equity for the nine
months ended June 30, 1996.
<CAPTION>
Preferred Stock Preferred Common Stock
--------------- Treasury Stock ------------ Additional
(Dollars in thousands) 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, 1995 75,336 $75,336 5,036 $(4,836) 67,774,968 $ 67,775 $ 17,799 $1,062,482
Net Income 122,016
Common stock dividends paid (19,423)
Redempton of preferred stock purchase
rights (1,840)
Issuance of treasury stock under
employee compensation plans 11,988 (10)
Purchase of treasury stock - common
Purchase of treasury stock - preferred 580 (1,452)
Sale of treasury stock to Cabot
Retirement Incentive Savings Plan 1,665
Preferred stock dividends paid to Employee
Stock Ownership Plan, net of tax (2,479)
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 June 30, 1996 75,336 $75,336 5,616 $(6,288) 135,549,936 $135,550 $ 13,020 $1,111,403
====== ======= ===== ======= =========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Common Unrealized Foreign
Treasury Stock Deferred Gain/(Loss) Currency Total
(Dollars in thousands) -------------- Unearned Employee Marketable Translation Stockholders'
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 122,016
Common stock dividends paid (19,423)
Redempton of preferred stock purchase
rights (1,840)
Issuance of treasury stock under
employee compensation plans (444,375) 6,228 (11,958) 6,248
Purchase of treasury stock - common 2,187,809 (101,257) (101,257)
Purchase of treasury stock - preferred (1,452)
Sale of treasury stock to Cabot
Retirement Incentive Savings Plan (63,562) 915 2,580
Preferred stock dividends paid to Employee
Stock Ownership Plan, net of tax (2,479)
Principal payment by Employee Stock
Ownership Plan under guaranteed loan 1,206 1,206
Effect of two-for-one stock split
distributed March 22, 1996 32,059,076
Amortization of unearned compensation 4,527 4,527
Unrealized gain/(loss), net of deferred tax 16,940 16,940
Foreign currency translation adjustments (18,198) (18,198)
---------- --------- -------- -------- ------- -------- ---------
Balance at June 30, 1996 64,131,915 $(622,865) $(18,265) $(64,701) $48,963 $ 21,715 $ 693,868
========== ========= ======== ======== ======= ======== =========
</TABLE>
-9-
<PAGE> 10
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(Continued)
D. ACQUISITION
On February 16, 1996, the Company acquired an 80% controlling ownership
interest in an Indonesian carbon black company for approximately $50
million which was accounted for as a purchase. The appraisals for the
estimated fair values of assets and liabilities have not yet been
completed. Accordingly, final purchase accounting adjustments may be
required in order to properly state assets and liabilities at their fair
value as of the date of acquisition. Results of operations, subsequent to
the acquisition date have been included in the Consolidated Statements of
Income as of June 30, 1996.
E. SUBSEQUENT EVENTS
On July 31, 1996, the Company sold approximately 1.85 million shares of its
investment in KN Energy, Inc. The Company received cash proceeds of $57.6
million related to the sale.
-10-
<PAGE> 11
ITEM 2. 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 14.
THREE MONTHS ENDED JUNE 30, 1996 VERSUS
THREE MONTHS ENDED JUNE 30, 1995
Net income for the third quarter of fiscal year 1996 was $35.7 million ($0.48
per primary common share and $0.45 per fully diluted common share) compared with
$47.0 million ($0.59 per primary common share and $0.55 per fully diluted common
share) in the same quarter a year ago. Net sales and other operating revenues
fell 8% to $457.3 million from last year's $494.8 million. Operating profit
declined 12% to $71.3 million from $81.1 million last year. Performance in 1996
excluded the results of Cabot Safety Corporation, which was restructured in
July,1995. Exclusive of Cabot Safety, third quarter revenues increased 4% and
operating profit fell 4% from the prior year.
In the Specialty Chemicals and Materials Group, sales declined 13% to $359.7
million from $413.9 million last year and operating profit decreased 16% to
$68.6 million from $81.8 million. The decrease in operating profit reflects an
overall 4% decline in volumes and significantly higher spending on research and
development and new business initiatives, largely offset by better margins than
a year ago. The most significant volume variances by business were a 16% decline
in performance materials (tantalum) and a 10% decline in plastics. Regionally,
the most significant volume declines were in the European specialty chemicals
businesses. Volumes improved in the Pacific Asia region due to the recent
acquisition of the Company's second Indonesian carbon black subsidiary. Results
in 1995 included a contribution from Cabot Safety Corporation. Exclusive of
Cabot Safety, sales for the Group were flat, and operating profit fell 8%.
In the Energy Group, sales increased 21% from $80.9 million to $97.6 million,
and operating profit improved to $2.7 million from a loss of $0.7 million last
year. The improvement was mainly due to higher volumes and lower development
spending in the Group's liquefied natural gas (LNG) business.
The Company experienced weakened demand during the quarter in Europe, North
America and South America. This led to volume declines in most of the Company's
specialty chemicals businesses. In addition, a slowdown in the North American
personal electronics market led to lower sales in Cabot's tantalum business.
This slowdown, coupled with an inventory correction in the electronics industry,
is expected to continue for the next several months. In light of the various
global economic uncertainties, and continued spending on research and
development and new business initiatives, the Company is not anticipating
earnings growth in fiscal year 1996 versus 1995.
New products continue to be the focus of future earnings growth. A new product
as referred to here is a product first sold in commercial quantities within the
last five years. New products are expected to account for over 8% of revenues
and 5% of volumes in 1996. 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. During the quarter, two new business units within the
Company were formed, Ink Jet Colorants and Cabot Specialty Fluids.
The Company plans to incur approximately $15 million of expense on one
particular research and development project during fiscal 1996. The Company has
developed a new dispersion technology which may dramatically change the way in
which reinforcing materials are dispersed in rubber. Using this technology, the
Company is developing a new line of products known as elastomer composites. The
Company is constructing a pilot plant in Malaysia to allow further development
and testing of these new products.
-11-
<PAGE> 12
CABOT CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
NINE MONTHS ENDED JUNE 30, 1996 VERSUS
NINE MONTHS ENDED JUNE 30, 1995
For the nine months ended June 30, 1996, net income was $122.0 million ( $1.63
per primary common share and $1.52 per fully diluted common share) compared with
$127.3 million ($1.61 per primary common share and $1.49 per fully diluted
common share) in the same period a year ago. Net sales slipped 1% to $1,391.6
million from $1,404.1 million last year, and operating profit grew 1% to $232.8
million, from $231.5 million.
In the Specialty Chemicals and Materials Group, revenues decreased 6% during the
first nine months to $1,074.0 million from $1,148.2 million last year and
operating profit fell 3% to $212.8 million from $219.3 million. The decline is
due to the absence of Cabot Safety Corporation, which was restructured in July
1995. On a comparable basis, revenues increased 6% and operating profit grew 5%.
Compared with the same nine month period a year ago, improved pricing was
partially offset by increased raw material costs, volume declines during the
latter part of the period, most notably in the Company's European businesses,
and increased spending on research and development and new business initiatives.
In the Energy Group, sales increased 24% to $317.6 million from $255.9 million
and operating profit grew 64% to $20.0 million from $12.2 million. Operating
profit in fiscal 1996 included a $3.3 million reimbursement of expenses,
accounted for as a gain (approximately $0.03 per fully diluted common share),
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 37%, largely due to reduced development spending
and improved volumes and pricing in the Company's LNG business, partially offset
by significantly higher costs for pipeline gas in that 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 is affecting the ability of the business to participate in a strong summer
refill market.
As previously announced, the Company is a participant in a Trinidad liquefaction
project. During the third quarter, contracts were finalized for the gas supply,
gas sales and the construction of the liquefaction facility. The project
schedule calls for shipments beginning in the Company's fiscal year 2000. As
previously announced, the Company has agreed to sell its subsidiary, TUCO INC.,
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 now working with a third party
in an effort to complete the transaction.
Interest expense increased 13% to $31.2 million from $27.5 million last year.
The increase is due to higher total debt than a year ago, primarily due to the
stock repurchase program described below and the consolidation of the Czech
Republic and Indian carbon black affiliates.
The Company's effective tax rate was at 37% for the nine month periods ended
June 30, 1996 and June 30, 1995.
-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 nine months of the year, the Company's operations provided
$81.8 million of cash compared to $107.2 million last year. The change is
primarily due to the timing of tax payments and a greater decrease in accounts
payable, partially offset by a smaller increase in accounts receivable and
inventory as compared with the same period last year.
The Company increased its borrowings by $154.6 million during the first nine
months of the year. The increase primarily relates to share repurchases, the
purchase of an 80% interest in P.T. Continental Carbon Indonesia and the
consolidation of the Czech Republic and Indian carbon black affiliates.
Capital spending for the first nine months of the year was $187.5 million. In
addition to the Indonesian acquisition mentioned above, the Company has
continued to invest in several previously announced capacity expansions,
including a contract-supported carbon black expansion at Ville Platte,
Louisiana, and capacity expansions in the South American and Pacific Asia carbon
black businesses and the performance materials (tantalum) business. The Company
expects total capital expenditures of approximately $250 million 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. Already, the Company has delayed
construction of a new carbon black unit in North America and a new North
American fumed silica plant.
During the first nine months of the year, the Company repurchased 2.2 million
shares of its common stock. Approximately 0.4 million shares were repurchased
under the Company's current 4 million share authorization. As a result, the
number of outstanding shares was reduced by approximately 5.5%. To the extent
shares are repurchased over the remainder of the year, the Company plans to
finance such repurchases with proceeds from the recent sale of a portion of its
investment in KN Energy, Inc., the pending sale of TUCO INC. or through interim
period borrowings.
The Company's ratio of total debt (including short-term debt, net of cash) to
capital increased from 29% at September 30, 1995, to 43% at the end of the third
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 Nine Months Ended
------------------ -----------------
6/30/96 6/30/95 6/30/96 6/30/95
------- ------- ------- -------
Industry Segment Data
- ---------------------
Sales:
<S> <C> <C> <C> <C>
Specialty Chemicals and Materials $359.7 $413.9 $1,074.0 $1,148.2
Energy 97.6 80.9 317.6 255.9
------ ------ -------- --------
Net sales $457.3 $494.8 $1,391.6 $1,404.1
====== ====== ======== ========
Operating profit:
Specialty Chemicals and Materials $ 68.6 $ 81.8 $ 212.8 $ 219.3
Energy 2.7 (0.7) 20.0 12.2
------ ------ -------- --------
Total operating profit 71.3 81.1 232.8 231.5
Interest expense (10.6) (8.6) (31.2) (27.5)
General corporate/other expenses (7.6) (6.7) (21.2) (22.7)
------ ------ -------- --------
Income before income taxes 53.1 65.8 180.4 181.3
Provision for income taxes (19.7) (24.4) (66.7) (67.1)
Equity in net income of affiliated companies 4.1 5.7 12.7 12.7
Minority interest (1.8) (0.1) (4.4) 0.4
------ ------ -------- --------
Net income 35.7 47.0 122.0 127.3
Dividends on preferred stock (0.7) (0.9) (2.5) (2.7)
------ ------ -------- --------
Income applicable to primary common shares $ 35.0 $ 46.1 $ 119.5 $ 124.6
====== ====== ======== ========
Income per common share:
Primary $ 0.48 $ 0.59 $ 1.63 $ 1.61
====== ====== ======== ========
Fully diluted $ 0.45 $ 0.55 $ 1.52 $ 1.49
====== ====== ======== ========
</TABLE>
-14-
<PAGE> 15
PART II. OTHER INFORMATION
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 June 30, 1996.
-15-
<PAGE> 16
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, 1996 /s/ Kenyon C. Gilson
--------------------
Kenyon C. Gilson
Executive Vice President and
Chief Financial Officer
Date: August 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 June 30, 1996
(In thousands, except per share amounts)
<CAPTION>
Primary Fully Diluted
------- -------------
<S> <C> <C>
Shares of common stock outstanding at April 1, 1996,
less treasury stock 71,436 71,436
Plus net weighted shares of treasury stock issued 120 120
Plus common stock equivalents:
Effect of convertible preferred stock conversion 6,098
Effect of equity incentive awards 1,154 1,154
------- -------
Weighted average shares outstanding 72,710 78,808
======= =======
Income applicable to common shares $35,035 $35,035
Dividends on preferred stock 715
Preferred stock conversion compensation shortfall (514)
------- -------
Earnings applicable to common shares $35,035 $35,236
======= =======
Earnings per common share $ 0.48 $ 0.45
======= =======
</TABLE>
-17-
<PAGE> 2
EXHIBIT 11
CABOT CORPORATION AND CONSOLIDATED SUBSIDIARIES
<TABLE>
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
For the nine month period ended June 30, 1996
(In thousands, except per share amounts)
<CAPTION>
Primary Fully Diluted
------- -------------
<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 (2,528) (2,528)
Plus common stock equivalents:
Effect of convertible preferred stock conversion 6,098
Effect of equity incentive awards 1,147 1,147
-------- --------
Weighted average shares outstanding 73,383 79,481
======== ========
Income applicable to common shares $119,537 $119,537
Dividends on preferred stock 2,479
Preferred stock conversion compensation shortfall (1,547)
-------- --------
Earnings applicable to common shares $119,537 $120,469
======== ========
Earnings per common share $ 1.63 $ 1.52
======== ========
</TABLE>
-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>
Nine Months Years ended September 30
ended ----------------------------------------------------
June 30, 1996 1995 1994 1993 1992 1991
------------- ---- ---- ---- ---- ----
Earnings:
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income from continuing operations $180,411 $256,342 $118,325 $ 67,900 $116,599 $ 62,362
Distributed income of affiliated companies 9,636 11,699 5,638 5,988 5,766 4,688
Add fixed charges:
Interest on indebtedness 31,205 35,639 41,668 44,043 41,714 38,661
Portion of rents representative of
the interest factor 3,418 5,515 5,879 4,838 4,933 5,715
-------- -------- -------- -------- -------- --------
Income as adjusted $224,670 $309,195 $171,510 $122,769 $169,012 $111,426
Fixed charges:
Interest on indebtedness $ 31,205 $ 35,639 $ 41,668 $ 44,043 $ 41,714 $ 38,661
Capitalized interest 3,963 8,745
Portion of rents representative of
the interest factor 3,418 5,515 5,879 4,838 4,933 5,715
-------- -------- -------- -------- -------- --------
Total fixed charges $ 34,623 $ 41,154 $ 47,547 $ 48,881 $ 50,610 $ 53,121
Ratio of earnings to fixed charges 6.49 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 (UNAUDITED) OF CABOT CORPORATION FOR THE NINE MONTHS
ENDED JUNE 30, 1996, 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-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 34,939
<SECURITIES> 0
<RECEIVABLES> 319,029
<ALLOWANCES> 5,358
<INVENTORY> 301,060
<CURRENT-ASSETS> 649,670
<PP&E> 1,671,385
<DEPRECIATION> 808,991
<TOTAL-ASSETS> 1,847,483
<CURRENT-LIABILITIES> 532,391
<BONDS> 336,287
<COMMON> 135,550
0
75,336
<OTHER-SE> 1,111,446
<TOTAL-LIABILITY-AND-EQUITY> 1,847,483
<SALES> 1,391,621
<TOTAL-REVENUES> 1,398,507
<CGS> 968,942
<TOTAL-COSTS> 968,942
<OTHER-EXPENSES> 67,829
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,205
<INCOME-PRETAX> 180,411
<INCOME-TAX> 66,752
<INCOME-CONTINUING> 122,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 122,016
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.52
</TABLE>
