FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2003
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
| Delaware (State of Incorporation) |
04-2271897 (I.R.S. Employer Identification No.) |
| Two Seaport Lane Boston, Massachusetts (Address of principal executive offices) |
02210-2019 (Zip Code) |
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 by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). 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 August 6, 2003 the Company had 61,713,448 shares of Common
Stock, par value $1 per share, outstanding.
CABOT CORPORATION
INDEX
| Page | |||||||||
| Part I. | Financial Information |
||||||||
Item 1. Financial Statements |
|||||||||
Consolidated Statements of Operations for the
Three Months Ended June 30, 2003 and 2002 |
3 | ||||||||
Consolidated Statements of Operations for the
Nine Months Ended June 30, 2003 and 2002 |
4 | ||||||||
Consolidated Balance Sheets as of
June 30, 2003 and September 30, 2002 |
5 | ||||||||
Consolidated Statements of Cash Flows for the
Nine Months Ended June 30, 2003 and 2002 |
7 | ||||||||
Consolidated Statement of Changes in Stockholders’ Equity for the
Nine Months Ended June 30, 2003 |
8 | ||||||||
Notes to Consolidated Financial Statements |
9 | ||||||||
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
27 | ||||||||
Item 3. Quantitative and Qualitative Disclosures About
Market Risk |
36 | ||||||||
Item 4. Controls and Procedures |
37 | ||||||||
| Part II. | Other Information |
||||||||
Item 1. Legal Proceedings |
37 | ||||||||
Item 6. Exhibits and Reports on Form 8-K |
39 | ||||||||
- 2 -
Part I. Financial Information
Item 1. Financial Statements
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, 2003 and 2002
(In millions, except per share amounts)
UNAUDITED
| 2003 | 2002 | ||||||||||
Net sales and other operating revenues |
$ | 468 | $ | 390 | |||||||
Cost of sales |
367 | 292 | |||||||||
Gross profit |
101 | 98 | |||||||||
Selling and administrative expenses |
82 | 62 | |||||||||
Research and technical expense |
27 | 12 | |||||||||
Income (loss) from operations |
(8 | ) | 24 | ||||||||
Other income and expense |
|||||||||||
Interest and dividend income |
1 | 2 | |||||||||
Interest expense |
(7 | ) | (7 | ) | |||||||
Other income |
— | 4 | |||||||||
Income (loss) from continuing operations
before income taxes |
(14 | ) | 23 | ||||||||
Benefit (provision) for income taxes |
6 | (6 | ) | ||||||||
Equity in net income of affiliated companies, net of
tax of zero and $1 |
2 | 2 | |||||||||
Minority interest in net income, net of tax of $1 and
zero |
(2 | ) | (1 | ) | |||||||
Net income (loss) from continuing operations |
(8 | ) | 18 | ||||||||
Discontinued operations |
|||||||||||
Income from operations of
discontinued businesses, net of
income taxes |
3 | 1 | |||||||||
Net income (loss) |
(5 | ) | 19 | ||||||||
Dividends on preferred stock, net of tax benefit |
— | — | |||||||||
Income (loss) available to common shares |
$ | (5 | ) | $ | 19 | ||||||
Weighted-average common shares outstanding: |
|||||||||||
Basic |
59 | 59 | |||||||||
Diluted |
59 | 71 | |||||||||
Income (loss) per common share: |
|||||||||||
Basic |
|||||||||||
Continuing operations |
$ | (0.14 | ) | $ | 0.31 | ||||||
Discontinued operations |
|||||||||||
Income from operations of
discontinued businesses |
0.05 | 0.01 | |||||||||
Net income (loss) |
$ | (0.09 | ) | $ | 0.32 | ||||||
Diluted |
|||||||||||
Continuing operations |
$ | (0.14 | ) | $ | 0.27 | ||||||
Discontinued operations |
|||||||||||
Income from operations of
discontinued businesses |
0.05 | 0.01 | |||||||||
Net income (loss) |
$ | (0.09 | ) | $ | 0.28 | ||||||
Dividends per common share |
$ | 0.13 | $ | 0.13 | |||||||
The accompanying notes are an integral part of these financial statements.
- 3 -
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended June 30, 2003 and 2002
(In millions, except per share amounts)
UNAUDITED
| 2003 | 2002 | |||||||||||
Net sales and other operating revenues |
$ | 1,344 | $ | 1,117 | ||||||||
Cost of sales |
998 | 799 | ||||||||||
Gross profit |
346 | 318 | ||||||||||
Selling and administrative expenses |
191 | 163 | ||||||||||
Research and technical expense |
51 | 35 | ||||||||||
Income from operations |
104 | 120 | ||||||||||
Other income and expense |
||||||||||||
Interest and dividend income |
3 | 8 | ||||||||||
Interest expense |
(21 | ) | (21 | ) | ||||||||
Other (charges) income |
(24 | ) | 6 | |||||||||
Income from continuing operations before
income taxes |
62 | 113 | ||||||||||
Provision for income taxes |
(11 | ) | (31 | ) | ||||||||
Equity in net income of affiliated companies, net of
tax of $1 and $2 |
3 | 4 | ||||||||||
Minority interest in net income, net of tax of $2 and $1 |
(5 | ) | (3 | ) | ||||||||
Net income from continuing operations |
49 | 83 | ||||||||||
Discontinued operations |
||||||||||||
Income from operations of
discontinued businesses, net of
income taxes |
3 | 1 | ||||||||||
Net income |
52 | 84 | ||||||||||
Dividends on preferred stock, net of tax benefit |
(2 | ) | (2 | ) | ||||||||
Income available to common shares |
$ | 50 | $ | 82 | ||||||||
Weighted-average common shares outstanding: |
||||||||||||
Basic |
59 | 59 | ||||||||||
Diluted |
70 | 71 | ||||||||||
Income per common share: |
||||||||||||
Basic |
||||||||||||
Continuing operations |
$ | 0.79 | $ | 1.37 | ||||||||
Discontinued operations |
||||||||||||
Income from operations of
discontinued businesses |
0.05 | 0.01 | ||||||||||
Net income |
$ | 0.84 | $ | 1.38 | ||||||||
Diluted |
||||||||||||
Continuing operations |
$ | 0.70 | $ | 1.16 | ||||||||
Discontinued operations |
||||||||||||
Income from operations of
discontinued businesses |
0.04 | 0.01 | ||||||||||
Net income |
$ | 0.74 | $ | 1.17 | ||||||||
Dividends per common share |
$ | 0.39 | $ | 0.39 | ||||||||
The accompanying notes are an integral part of these financial statements.
- 4 -
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 2003 and September 30, 2002
(In millions)
ASSETS
| June 30, | September 30, | ||||||||||
| 2003 | 2002 | ||||||||||
| (Unaudited) | |||||||||||
Current assets: |
|||||||||||
Cash and cash equivalents |
$ | 179 | $ | 159 | |||||||
Accounts and notes receivable, net
of reserve for doubtful
accounts of $3 and $4 |
347 | 304 | |||||||||
Inventories: |
|||||||||||
Raw materials |
136 | 120 | |||||||||
Work in process |
146 | 156 | |||||||||
Finished goods |
169 | 124 | |||||||||
Other |
43 | 35 | |||||||||
Total inventories |
494 | 435 | |||||||||
Prepaid expenses |
45 | 41 | |||||||||
Deferred income taxes |
24 | 20 | |||||||||
Total current assets |
1,089 | 959 | |||||||||
Investments: |
|||||||||||
Equity |
48 | 48 | |||||||||
Other |
20 | 32 | |||||||||
Total investments |
68 | 80 | |||||||||
Property, plant and equipment |
2,156 | 2,019 | |||||||||
Accumulated depreciation and amortization |
(1,256 | ) | (1,134 | ) | |||||||
Net property, plant and equipment |
900 | 885 | |||||||||
Other assets: |
|||||||||||
Goodwill |
104 | 105 | |||||||||
Other intangible assets, net of
accumulated amortization of $6 and
$5 |
9 | 8 | |||||||||
Deferred income taxes |
5 | 4 | |||||||||
Other assets |
25 | 26 | |||||||||
Total other assets |
143 | 143 | |||||||||
Total assets |
$ | 2,200 | $ | 2,067 | |||||||
The accompanying notes are an integral part of these financial statements.
- 5 -
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 2003 and September 30, 2002
(In millions, except for share amounts)
LIABILITIES & STOCKHOLDERS’ EQUITY
| June 30, | September 30, | |||||||||||
| 2003 | 2002 | |||||||||||
| (Unaudited) | ||||||||||||
Current liabilities: |
||||||||||||
Notes payable to banks |
$ | 11 | $ | 45 | ||||||||
Current portion of long-term debt |
18 | 5 | ||||||||||
Accounts payable and accrued liabilities |
252 | 233 | ||||||||||
Deferred income taxes |
2 | 3 | ||||||||||
Total current liabilities |
283 | 286 | ||||||||||
Long-term debt |
530 | 495 | ||||||||||
Deferred income taxes |
81 | 104 | ||||||||||
Other liabilities |
197 | 170 | ||||||||||
Commitments and contingencies (Note K) |
||||||||||||
Minority interest |
39 | 35 | ||||||||||
Stockholders’ equity: |
||||||||||||
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, outstanding: 54,662
and 56,273 shares
(aggregate redemption value of
$55 and $56) |
72 | 73 | ||||||||||
Less cost of shares of preferred treasury stock |
(38 | ) | (38 | ) | ||||||||
Common stock: |
||||||||||||
Authorized: 200,000,000 shares of $1 par
value |
||||||||||||
Issued and outstanding: 61,595,850
and 61,615,503 shares |
62 | 62 | ||||||||||
Less cost of shares of common treasury stock |
(6 | ) | (6 | ) | ||||||||
Additional paid-in capital |
— | 5 | ||||||||||
Retained earnings |
1,143 | 1,120 | ||||||||||
Unearned compensation |
(21 | ) | (38 | ) | ||||||||
Deferred employee benefits |
(49 | ) | (51 | ) | ||||||||
Notes receivable for restricted stock |
(19 | ) | (23 | ) | ||||||||
Accumulated other comprehensive loss (Note M) |
(74 | ) | (127 | ) | ||||||||
Total stockholders’ equity |
1,070 | 977 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 2,200 | $ | 2,067 | ||||||||
The accompanying notes are an integral part of these financial statements.
- 6 -
CABOT CORPORATION
(In millions)
UNAUDITED
| 2003 | 2002 | |||||||||||
Cash Flows from Operating Activities: |
||||||||||||
Net income |
$ | 52 | $ | 84 | ||||||||
Adjustments to reconcile net income to cash
used in operating activities: |
||||||||||||
Depreciation and amortization |
103 | 80 | ||||||||||
Deferred tax provision (benefit) |
(33 | ) | 1 | |||||||||
Equity in income of affiliated companies |
(3 | ) | ||||||||||