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-
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-
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-
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-
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-
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-
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-
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-
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-
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-
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-
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-
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-
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-
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-
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-