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
December 31, 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 | 04-2271897 | |
| (State of Incorporation) | (I.R.S. Employer Identification No.) | |
| Two Seaport Lane | 02210-2019 | |
| 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 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 February 9, 2004 the Company had 61,737,955 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 (unaudited) for the Three Months Ended December 31, 2003 and 2002 | 3 | |||||||||||
| Consolidated Balance Sheets as of December 31, 2003 (unaudited) and September 30, 2003 | 4 | |||||||||||
| Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended December 31, 2003 and 2002 | 6 | |||||||||||
Consolidated
Statement of Changes in Stockholders’ Equity (unaudited) for the
Three Months Ended December 31, 2003 |
7 | |||||||||||
| Notes to Consolidated Financial Statements | 8 | |||||||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | ||||||||||
| Item 3. | Quantitative and Qualitative Discussion About Market Risk | 23 | ||||||||||
| Item 4. | Controls and Procedures | 23 | ||||||||||
Part II. |
Other Information | |||||||||||
| Item 1. | Legal Proceedings | 23 | ||||||||||
| Item 6. | Exhibits and Reports on Form 8-K | 24 | ||||||||||
-2-
Part I. Financial Information
Item 1. Financial Statements
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended December 31, 2003 and 2002
(In millions, except per share amounts)
UNAUDITED
| 2003 | 2002 | ||||||||||
Net sales and other operating revenues |
$ | 446 | $ | 410 | |||||||
Cost of sales |
339 | 293 | |||||||||
Gross profit |
107 | 117 | |||||||||
Selling and administrative expenses |
51 | 52 | |||||||||
Research and technical expense |
12 | 11 | |||||||||
Income from operations |
44 | 54 | |||||||||
Other income and expense |
|||||||||||
Interest and dividend income |
1 | 1 | |||||||||
Interest expense |
(7 | ) | (7 | ) | |||||||
Other income (expense) |
(1 | ) | (3 | ) | |||||||
Income from continuing operations before income taxes |
37 | 45 | |||||||||
Provision for income taxes |
(8 | ) | (11 | ) | |||||||
Equity in net income of affiliated companies, net of tax |
2 | 1 | |||||||||
Minority interest in net income, net of tax |
(1 | ) | (2 | ) | |||||||
Net income from continuing operations |
30 | 33 | |||||||||
Discontinued operations |
|||||||||||
Loss from operations of discontinued businesses, net of income taxes |
(1 | ) | — | ||||||||
Net income |
29 | 33 | |||||||||
Dividends on preferred stock, net of tax benefit |
(1 | ) | (1 | ) | |||||||
Income available to common shares |
$ | 28 | $ | 32 | |||||||
Weighted-average common shares outstanding: |
|||||||||||
Basic |
59 | 59 | |||||||||
Diluted |
68 | 70 | |||||||||
Income (loss) per common share: |
|||||||||||
Basic |
|||||||||||
Continuing operations |
$ | 0.49 | $ | 0.56 | |||||||
Discontinued operations |
|||||||||||
Loss from operations of a discontinued business |
(0.01 | ) | — | ||||||||
Net income (loss) per share |
$ | 0.48 | $ | 0.56 | |||||||
Diluted |
|||||||||||
Continuing operations |
$ | 0.43 | $ | 0.48 | |||||||
Discontinued operations |
|||||||||||
Loss from operations of a discontinued business |
(0.01 | ) | — | ||||||||
Net income (loss) per share |
$ | 0.42 | $ | 0.48 | |||||||
Dividends per common share |
$ | 0.15 | $ | 0.13 | |||||||
The accompanying notes are an integral part of these financial statements.
3
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2003 and September 30, 2003
(In millions)
ASSETS
| December 31, | September 30, | ||||||||||
| 2003 | 2003 | ||||||||||
| (Unaudited) | |||||||||||
Current assets: |
|||||||||||
Cash and cash equivalents |
$ | 252 | $ | 247 | |||||||
Accounts and notes receivable, net of reserve for doubtful
accounts of $4 and $3 |
333 | 333 | |||||||||
Inventories: |
|||||||||||
Raw materials |
128 | 129 | |||||||||
Work in process |
156 | 155 | |||||||||
Finished goods |
170 | 159 | |||||||||
Other |
46 | 42 | |||||||||
Total inventories |
500 | 485 | |||||||||
Prepaid expenses |
43 | 35 | |||||||||
Deferred income taxes |
42 | 40 | |||||||||
Total current assets |
1,170 | 1,140 | |||||||||
Investments: |
|||||||||||
Equity |
53 | 50 | |||||||||
Other |
32 | 27 | |||||||||
Total investments |
85 | 77 | |||||||||
Property, plant and equipment |
2,295 | 2,202 | |||||||||
Accumulated depreciation and amortization |
(1,366 | ) | (1,289 | ) | |||||||
Net property, plant and equipment |
929 | 913 | |||||||||
Other assets: |
|||||||||||
Goodwill |
114 | 110 | |||||||||
Other intangible assets, net of accumulated amortization of $6 and $6 |
9 | 9 | |||||||||
Deferred income taxes |
23 | 17 | |||||||||
Other assets |
41 | 42 | |||||||||
Total other assets |
187 | 178 | |||||||||
Total assets |
$ | 2,371 | $ | 2,308 | |||||||
The accompanying notes are an integral part of these financial statements.
4
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2003 and September 30, 2003
(In millions, except for share and per share amounts)
LIABILITIES & STOCKHOLDERS’ EQUITY
| December 31, | September 30, | ||||||||||
| 2003 | 2003 | ||||||||||
| (Unaudited) | |||||||||||
Current liabilities: |
|||||||||||
Notes payable to banks |
$ | 21 | $ | 15 | |||||||
Current portion of long-term debt |
40 | 40 | |||||||||
Accounts payable and accrued liabilities |
264 | 278 | |||||||||
Income taxes payable |
13 | 16 | |||||||||
Deferred income taxes |
4 | 3 | |||||||||
Total current liabilities |
342 | 352 | |||||||||
Long-term debt |
517 | 516 | |||||||||
Deferred income taxes |
111 | 101 | |||||||||
Other liabilities |
243 | 220 | |||||||||
Commitments and contingencies (Note G) |
|||||||||||
Minority interest |
43 | 40 | |||||||||
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: 51,906 and 53,490 shares
(aggregate per share redemption value of $52 and $53) |
69 | 70 | |||||||||
Less cost of shares of preferred treasury stock |
(38 | ) | (38 | ) | |||||||
Common stock: |
|||||||||||
Authorized: 200,000,000 shares of $1 par value
Issued and outstanding: 61,753,337 and 62,243,010 shares |
62 | 62 | |||||||||
Less cost of shares of common treasury stock |
(5 | ) | (5 | ) | |||||||
Additional paid-in capital |
— | 14 | |||||||||
Retained earnings |
1,174 | 1,160 | |||||||||
Unearned compensation |
(30 | ) | (36 | ) | |||||||
Deferred employee benefits |
(48 | ) | (48 | ) | |||||||
Notes receivable for restricted stock |
(21 | ) | (21 | ) | |||||||
Accumulated other comprehensive loss (Note I) |
(48 | ) | (79 | ) | |||||||
Total stockholders’ equity |
1,115 | 1,079 | |||||||||
Total liabilities and stockholders’ equity |
$ | 2,371 | $ | 2,308 | |||||||
The accompanying notes are an integral part of these financial statements.
5
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended December 31, 2003 and 2002
(In millions)
UNAUDITED
| 2003 | 2002 | ||||||||||
Cash Flows from Operating Activities: |
|||||||||||
Net income |
$ | 29 | $ | 33 | |||||||
Adjustments to reconcile net income to cash provided by
(used in) operating activities: |
|||||||||||
Depreciation and amortization |
32 | 32 | |||||||||
Deferred tax provision |
— | (1 | ) | ||||||||
Equity in income of affiliated companies |
(2 | ) | (1 | ) | |||||||
Non-cash compensation |
6 | 7 | |||||||||
Other non-cash charges, net |
— | 1 | |||||||||
Changes in assets and liabilities |
|||||||||||
Accounts receivable |
12 | (36 | ) | ||||||||
Inventory |
(5 | ) | (38 | ) | |||||||
Accounts payable and accruals |
(20 | ) | (14 | ) | |||||||
Prepayments and other assets |
(1 | ) | (2 | ) | |||||||
Income taxes payable |
(3 | ) | 4 | ||||||||
Other liabilities |
4 | 10 | |||||||||
Other, net |
(4 | ) | 4 | ||||||||
Cash provided by (used in) Operating Activities |
48 | (1 | ) | ||||||||
Cash Flows from Investing Activities: |
|||||||||||
Additions to property, plant and equipment |
(22 | ) | (25 | ) | |||||||
Proceeds from sales of property, plant and equipment |
1 | 1 | |||||||||
Cash used in Investing Activities |
(21 | ) | (24 | ) | |||||||
Cash Flows from Financing Activities: |
|||||||||||
Proceeds from long-term debt |
— | 75 | |||||||||
Repayments of long-term debt |
— | (52 | ) | ||||||||
Increase (decrease) in notes payable to banks |
5 | (35 | ) | ||||||||
Increase (decrease) in short-term debt |
— | 11 | |||||||||
Purchases of common stock |
(21 | ) | — | ||||||||
Sales and issuances of common stock |
1 | 1 | |||||||||
Cash dividends paid to stockholders |
(10 | ) | (9 | ) | |||||||
Cash dividends paid to minority interest stockholders |
— | (1 | ) | ||||||||
Cash used in Financing Activities |
(25 | ) | (10 | ) | |||||||
Effect of exchange rate changes on cash |
3 | 1 | |||||||||
Increase (decrease) in cash and cash equivalents |
5 | (34 | ) | ||||||||
Cash and cash equivalents at beginning of period |
247 | 159 | |||||||||
Cash and cash equivalents at end of period |
$ | 252 | $ | 125 | |||||||
The accompanying notes are an integral part of these financial statements.
6
CABOT CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Three Months Ended December 31, 2003
(In millions)
UNAUDITED
| Preferred | Common | Accumulated | ||||||||||||||||||
| Stock, Net | Stock, Net | Additional | Other | |||||||||||||||||
| of Treasury | of Treasury | Paid-in | Retained | Comprehensive | ||||||||||||||||
| Stock | Stock | Capital | Earnings | Loss | ||||||||||||||||
Balance at September 30, 2003 |
$ | 32 | $ | 57 | $ | 14 | $ | 1,160 | $ | (79 | ) | |||||||||
Net income |
29 | |||||||||||||||||||
Foreign currency translation adjustments |
29 | |||||||||||||||||||
Change in unrealized gain on available-for-
sale securities, net of tax |
3 | |||||||||||||||||||
Change in unrealized loss on derivative instruments,
net of tax |
||||||||||||||||||||