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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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 OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
75 STATE STREET, 02109-1806
BOSTON, MASSACHUSETTS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(617) 345-0100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK, $1.00 PAR VALUE PER SHARE:
36,298,492 SHARES OUTSTANDING BOSTON STOCK EXCHANGE
AT NOVEMBER 30, 1995 NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the registrant's common stock held
beneficially or of record by shareholders who are not directors or executive
officers of the registrant at November 30, 1995, was approximately
$1,547,609,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for its 1996 Annual
Meeting of Stockholders (the "Proxy Statement") are incorporated by reference in
Part III.
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PART I
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ITEM 1. BUSINESS
GENERAL
Cabot's business was founded in 1882 and incorporated in the State of
Delaware in 1960. The Company has businesses in specialty chemicals and
materials and in energy. The Company and its affiliates have manufacturing
facilities in the United States and 21 other countries.
The term "Cabot" as used in this Report refers to Cabot Corporation. The
terms "Company" and "Registrant" mean Cabot and its consolidated subsidiaries.
The description of the Company's businesses is as of September 30, 1995,
unless otherwise noted. Information regarding the revenues and operating profits
of the Company's business segments and geographic areas appears on pages 15 and
F-19 and F-20 of this Report.
On November 10, 1995, Cabot's Board of Directors authorized a two-for-one
stock split of Cabot's common stock, $1.00 par value per share ("Common Stock"),
in the form of a stock dividend, subject to stockholder approval of an amendment
to Cabot's Certificate of Incorporation to increase the authorized number of
shares of Common Stock from 80,000,000 to 200,000,000 shares. If the
stockholders approve such increase at the Company's Annual Meeting, scheduled
for March 7, 1996, the record date for the split is expected to be March 15,
1996. In addition, the Board of Directors replaced the Company's Shareholder
Rights Plan, which had been adopted in 1986, with a new Shareholder Rights Plan,
which will expire in 2005. The rights under the old plan were redeemed at a
price of $0.05 per share and the rights under the new plan were distributed on
November 24, 1995 to persons who were stockholders at the close of business on
that date.
On September 8, 1995, the quarterly cash dividend paid on shares of Cabot's
Common Stock was increased to $0.18 per share from $0.14 per share. In September
1995, Cabot commenced a program to repurchase up to 3,000,000 shares of its
Common Stock in an effort to reduce the total number of shares of Common Stock
outstanding. Pursuant to that program, Cabot purchased approximately 2,318,000
shares through December 15, 1995. Prior to that program, Cabot had previously
purchased approximately 944,000 shares and options in private and open market
transactions during fiscal 1995 for the purpose of replacing shares issued under
the Company's employee incentive programs.
On July 11, 1995, the Company restructured the ownership of its safety and
specialty composite materials business into a new corporation owned by the
Company, Vestar Equity Partners, L.P. and the management of the newly formed
Cabot Safety Corporation. This transaction yielded approximately $128 million in
after-tax proceeds to the Company. The Company has an approximately 42.5%
ownership position in the new corporation.
Additional information regarding significant events affecting the Company
in its fiscal year ended September 30, 1995, appears in this Report at pages 12
through 21.
SPECIALTY CHEMICALS AND MATERIALS
The Specialty Chemicals and Materials Group manufactures carbon black;
fumed silica; thermoplastic concentrates and specialty compounds; and electronic
materials and refractory metals. The Company also owns an approximately 42.5%
interest in Cabot Safety Corporation, which manufactures and sells personal
safety products and specialty composite materials.
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CARBON BLACK DIVISIONS
The Company's Carbon Black Divisions manufacture and sell carbon black, a
very fine black powder used as a reinforcing agent in tires (tire blacks) and
industrial rubber products such as extruded profiles, hoses and molded goods
(industrial rubber blacks). Non-rubber grades of carbon black, known as special
blacks, are used to provide pigmentation, conductivity and ultraviolet
protection and for other purposes in many specialty applications such as inks,
plastics, cables and coatings. The Company believes that it is the leading
manufacturer of carbon black in the world. It estimates that it has about one
quarter of the worldwide production capacity and market share of carbon black.
The Company competes in the manufacture of carbon black with three companies
having an international presence and with at least 20 other companies in various
regional markets in which it operates (see "General" on pages 3 and 4 of this
Report).
The Company's carbon black business is operated through a matrix of four
regional Divisions, European, North American, Pacific Asia and South American,
and three sectors, industrial rubber blacks, special blacks and tire blacks.
Carbon black plants owned by Cabot or a subsidiary are located in Argentina,
Australia, Brazil, Canada, England, France (two plants), Indonesia, Italy,
Japan, The Netherlands, Spain and the United States (four plants). Affiliates of
the Company own carbon black plants in Colombia, the Czech Republic, India,
Japan (two plants), Malaysia, Mexico, The People's Republic of China and
Venezuela. During fiscal year 1995, an affiliate of the Company closed one of
its carbon black plants in Japan. The Company also announced plans to increase
its carbon black capacity in North America and South America (see Item 2
"Properties" at page 7 of this Report, and Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations" at pages 16 and 17 of
this Report). The Company consolidated the operations of its affiliates in the
Czech Republic and India effective October 1, 1995.
The principal raw materials used in the manufacture of carbon black are
carbon black oils derived from petroleum refining operations and from the
distillation of coal tars and the production of ethylene throughout the world.
The availability of raw materials has not been and is not expected to be a
significant factor for the business. Raw material costs are influenced by the
cost and availability of oil worldwide and the availability of various types of
carbon black oils.
Sales are generally made by Company employees in the countries where carbon
black plants are located. Export sales are generally made through distributors
or sales representatives in conjunction with Company employees. Sales are made
under various trademarks owned by Cabot, of which Cabot(R), Black Pearls(R),
Elftex(R), Mogul(R), Monarch(R), Regal(R), Spheron(TM), Sterling(R) and
Vulcan(R) are the best known.
CAB-O-SIL DIVISION
The Company's Cab-O-Sil Division manufactures and sells fumed silica and
dispersions thereof under various trademarks including Cab-O-Sil(R). Fumed
silica is an ultra-fine, high-purity silica produced by a flame process for use
as a reinforcing, thickening, thixotropic, suspending or anti-caking agent in a
wide variety of products for the automotive and construction industries and
consumer industries, including adhesives, cosmetics, inks, lubricants, paints
and pharmaceuticals. The Company also manufactures and sells high-purity
polishing compounds, made from fumed metal oxides and a variety of chemistries,
used in the manufacture of wafers, chips and other electronic devices by the
semiconductor industry. The headquarters of the Cab-O-Sil Division is located in
Aurora, Illinois, and its North American manufacturing plant is located in
Tuscola, Illinois (see Item 2 "Properties" at page 7 of this Report for a
discussion on an additional manufacturing facility planned to be constructed in
Midland, Michigan). A subsidiary of Cabot owns a manufacturing plant in Wales,
and an affiliate of Cabot owns a manufacturing plant in Germany. Raw materials
for the production of fumed silica are various chlorosilane feedstocks. The
feedstocks are either purchased or toll converted for owners of the materials.
The Division has long-term procurement contracts in place which it believes will
enable it to meet its raw material requirements. Sales of fumed silica products
are made by Company employees and through distributors and sales
representatives. There are five principal producers of fumed silica in the world
(see "General" on pages 3 and 4 of this Report). The Company believes it is the
leading producer and seller of this chemical in the United States and second
worldwide.
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PLASTICS DIVISION
The Company's Plastics Division produces black and white thermoplastic
concentrates and specialty compounds for sale to plastic resin producers and the
plastics processing industry. Major applications for these materials include
pipe and tubing, packaging and agricultural film, automotive components, cable
sheathing and special packaging for use in the electronics industry. The
plastics business is operated through four sectors: polymer producers, specialty
compounds, proprietary products in Europe and proprietary products in Asia.
Sales are made by Company employees and through sales representatives and
distributors primarily in Europe and Asia. This business has manufacturing
facilities in Belgium (two plants), England, Hong Kong and Italy. In Europe, the
Company is one of the three leading producers of thermoplastic concentrates. The
main raw materials used in this business are carbon black, titanium dioxide,
thermoplastic resins and mineral fillers. Raw materials are in general readily
available. The Company also operates a small plastics recycling facility in
Belgium.
PERFORMANCE MATERIALS DIVISION
The Cabot Performance Materials Division serves the electronic materials
and refractory metals industries and produces tantalum, niobium (columbium),
niobium titanium, cesium, germanium, rubidium and tellurium and their compounds.
Tantalum is produced in various forms including powder, wire, sheet and foil for
electrolytic capacitors. Tantalum and niobium and their alloys are also produced
in wrought form for non-electronic applications such as chemical process
equipment and the production of superalloys, and for various other industrial,
aerospace and medical applications. Tantalum is also used in ballistic munitions
by the defense industry. The headquarters and the principal manufacturing
facility of this business are in Boyertown, Pennsylvania. Subsidiaries in Canada
hold leasehold interests in land and certain mineral rights with respect to such
land in Manitoba, Canada. (See Item 2 "Properties" at page 7 of this Report for
additional manufacturing facilities planned to be constructed in Boyertown,
Pennsylvania and Manitoba, Canada.) The subsidiaries mine and sell tantalite,
spodumene, lepidolite and pollucite. An affiliate of the Company has a
manufacturing plant in Japan. Raw materials are currently in adequate supply.
The Company is presently seeking new sources of supply to support future demand.
Raw materials are obtained from ores mined principally in Africa, Australia,
Brazil and Canada and from by-product tin slags from tin smelting mainly in
Malaysia and Thailand. Sales in the United States are made by personnel of the
Company with export sales to Europe handled by Company employees and independent
European sales representatives. Sales in Europe are made by an affiliate of the
Company. Sales to Japan and other parts of Asia are handled primarily through
employees of the Company's Japanese affiliate. There are currently three
principal groups producing tantalum and niobium in the western world. The
Company believes that it, together with its Japanese affiliate, is the leading
producer of electronic grade tantalum powder and wire products with competitors
having greater production in some other product lines (see "General" below).
OTHER
The Company maintained an approximately 42.5% ownership interest in Cabot
Safety Corporation, after the restructuring of the Company's safety products and
specialty composites business in July 1995, and has two representatives serving
on the Board of Directors of Cabot Safety Corporation. Cabot Safety Corporation
manufactures and sells personal safety products, as well as energy absorbing,
vibration damping and impact absorbing products for industrial noise control and
environmental enhancement.
GENERAL
The Company owns and is a licensee of various patents, which expire from
time to time, covering many products, processes and product uses of the
Specialty Chemicals and Materials Group. Although the rights of the Company and
the products made and sold under these patents and licenses are important to the
Specialty Chemicals and Materials Group, the loss of any particular patent or
license would not materially affect the businesses of this Group, taken as a
whole. Products of this Group are also sold by the Company under a
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variety of trademarks, the loss of any one of which would similarly not
materially affect the businesses of this Group, taken as a whole.
The Group's businesses are generally not seasonal in nature, although they
experience some decline in sales in the fourth fiscal quarter due to European
holiday plant shutdowns. Backlog orders for the Group believed to be firm as of
September 30, 1995 were approximately $169 million, compared to firm backlog
orders as of September 30, 1994, of approximately $108 million. All of the 1995
backlog orders are expected to be filled during fiscal year 1996.
Six major tire and rubber companies operating worldwide, one special blacks
customer operating in Europe and the United States, and one fumed silica
customer operating in Europe and the United States represent a material portion
of the Group's total net sales and operating revenues; the loss of one or more
of these customers might materially adversely affect the Group. The Cab-O-Sil
Division's largest customer, Dow Corning Corp., filed for protection against its
creditors under the bankruptcy laws in 1995. That filing is not expected to have
a material adverse affect on the Cab-O-Sil Division.
The Company's specialty chemicals and materials are used in many end-uses
associated with the automotive industry such as tires, extruded profiles, hoses,
molded goods, capacitors and paints. The Company's financial results are
affected by the cyclical nature of the automotive industry, although a large
portion of the market is for replacement tires and other parts which are less
subject to automobile industry cycles. During fiscal year 1995, the Company
entered into long-term carbon black supply contracts with certain of its North
American tire customers. These contracts are designed to provide such customers
with a secure supply of carbon black and reduce the volatility in the Company's
carbon black volumes and margins caused, in part, by automobile industry cycles.
Competition exists on the basis of price, service, quality, product
performance and technical innovation in the businesses of this Group.
Competitive conditions in the European market for carbon black were also
affected by sales of carbon black produced in Russia, Hungary and Croatia.
Competitive conditions also result in the need to carry an inventory of raw
materials and finished goods in order to meet the customers' needs for prompt
delivery of products. Competition in quality, service, product performance and
technical innovation is particularly significant for the fumed silica,
industrial rubber blacks, special blacks and tantalum businesses. Competition
affecting the businesses of the non-carbon black parts of the Group comes from
different firms for each product group.
ENERGY
The Company's energy businesses are conducted through two subsidiaries. The
businesses include importing, transporting, terminalling and marketing of
liquefied natural gas (through Cabot LNG Corporation, a wholly-owned subsidiary)
and coal handling and distribution (by TUCO INC., a wholly-owned subsidiary).
The headquarters of these companies are located as follows: Cabot LNG
Corporation, Boston, Massachusetts, and TUCO INC., Amarillo, Texas. The Company
also owns a 15% interest (17% assuming exercise of warrants) in K N Energy, Inc.
("KNE"), a natural gas services and utility company.
LIQUEFIED NATURAL GAS
The Company, through a subsidiary, purchases liquefied natural gas ("LNG")
from Sonatrading, an affiliate of Sonatrach, the Algerian national oil and gas
company, under a long-term and a medium-term supply contract. Cabot and
Sonatrach have each agreed to assure performance of the obligations of their
respective affiliates under these agreements. The LNG is stored and resold in
the northeastern United States from a terminal facility in Everett,
Massachusetts. The Company has received authorizations from the U.S. Department
of Energy to import LNG under the contracts with Sonatrading, as well as blanket
authorization to import LNG from other foreign suppliers on a short-term basis.
The Company has also received authorization from the Federal Energy Regulatory
Commission for sales services. The supply of LNG is currently limited to volumes
contracted for with Sonatrading/Sonatrach.
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In 1993, the Company was notified by Sonatrach that the renovation of
Sonatrach's Algerian LNG production facilities would likely result in a
temporary reduction of LNG deliveries to its customers, including the Company.
The Company expects the curtailment of LNG from its Algerian supplier to
continue through fiscal year 1996. The Company has been able to continue to meet
its firm sales obligations to customers and is exploring additional sources of
supply. The Company is not able to predict, at this time, what, if any, impact
the political instability in Algeria may have on the future supply of LNG from
its Algerian supplier, but to date, no direct adverse effect has been
experienced. The loss of supply from the Algerian supplier could have a material
adverse effect on the business of the Energy Group until additional sources of
supply are obtained.
A consortium of companies consisting of Amoco Trinidad (LNG) B.V., British
Gas Trinidad LNG Limited, Cabot Trinidad LNG Limited ("Cabot Trinidad," a
wholly-owned subsidiary of Cabot LNG Corporation) and NGC Trinidad and Tobago
LNG Limited have formed Atlantic LNG Company of Trinidad and Tobago ("Atlantic
LNG") to construct, own and operate a new LNG plant in the Republic of Trinidad
and Tobago designed to export 385 million cubic feet of natural gas per day in
the form of LNG. Repsol International Finance B.V., a wholly-owned subsidiary of
Repsol S.A., has elected to exercise an option to acquire a shareholding in
Atlantic LNG. Cabot Trinidad owns ten percent of Atlantic LNG. Cabot LNG
Corporation and ENAGAS, S.A., the largest importer and wholesaler of natural gas
in Spain, have entered into sales contracts with Atlantic LNG under which Cabot
LNG will purchase 60% and ENAGAS will purchase the remaining 40% of the LNG to
be produced by Atlantic LNG's new plant. The plant is expected to be completed
and deliveries of LNG to commence in fiscal year 1999. In November 1995, the
Company received authorization from the U.S. Department of Energy to import up
to 100 billion cubic feet of LNG per year from Trinidad and other countries for
a period of 40 years.
In 1992, a subsidiary of the Company entered into a long-term contract with
Nigeria LNG Limited for the supply of LNG from a project to be constructed. Amid
delays in the implementation of the LNG project, the subsidiary did not agree to
extend the contract, and Nigeria LNG Limited has sent notice of termination of
the contract.
COAL HANDLING AND DISTRIBUTION
TUCO INC. ("TUCO") purchases coal mined in Wyoming pursuant to long-term
and short-term (spot) contracts and has it transported by rail to Texas where it
is processed and sold to Southwestern Public Service Company ("SPS") pursuant to
long-term sales contracts for use in generating electricity. The loss of SPS as
a customer of TUCO would have a material adverse effect on the Energy Group. The
supply of coal is regarded as adequate.
In August 1995, the Company entered into an agreement to sell TUCO to SPS
for consideration approximating $77 million. That sale is subject to regulatory
approvals, which are presently being sought.
OTHER
The Company acquired its investment in KNE in connection with the merger of
American Oil and Gas Corporation with a subsidiary of KNE in July 1994. The
Company has reflected its investment in the common stock of KNE at its fair
market value on September 30, 1995.
GENERAL
The Energy Group is not materially dependent upon any patent, trademark or
intellectual property license. Backlog orders are not significant to this Group.
Sales by the coal business are stronger in the summer months because of
electrical demands for air conditioning and agricultural purposes in the Texas
Panhandle area, while sales by the LNG business are stronger in the winter
months because of heating demands in New England. No significant working capital
is required by this Group other than for coal inventories.
Price competition characterizes the markets served by the LNG business. The
Group has numerous competitors including natural gas suppliers and suppliers of
alternative fuels.
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OTHER INFORMATION
EMPLOYEES
As of September 30, 1995, the Company had approximately 4,100 employees.
Approximately 600 employees in the United States are covered by collective
bargaining agreements. The Company believes that its relations with its
employees are satisfactory.
RESEARCH AND DEVELOPMENT
The Company's Specialty Chemicals and Materials Group develops new and
improved products and processes and greater operating efficiencies through
Company-sponsored research and technical service activities including those
initiated in response to customer requests. Expenditures by the Company for such
activities are shown on page F-1 of this Report.
ENVIRONMENT, SAFETY AND HEALTH
The Company's operations are subject to various environmental laws and
regulations. Over the past several years, the Company has expended considerable
sums to add, improve, maintain and operate facilities for environmental
protection. Expenditures for equipment or facilities intended solely for
environmental protection are estimated to have been approximately $6 million in
fiscal year 1995 and are expected not to exceed $30 million in fiscal year 1996.
Expenditures of at least $65 million in the aggregate for such equipment and
facilities are forecast to be spent in fiscal years 1996, 1997 and 1998 to
enable Cabot's U.S. plants to comply with the Clean Air Act.
The Company has been named as a potentially responsible party under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(the "Superfund law") with respect to several sites (see Item 3, "Legal
Proceedings," on pages 7 through 9 of this Report for a description of various
environmental proceedings). During the next several years, as remediation for
various environmental sites is carried out, the Company expects to spend a
significant portion of its $51.6 million environmental reserve for costs
associated with such remediation. Additions are made to the reserve based on the
Company's continuing analysis of its share of costs likely to be incurred at
each site. The sites are primarily associated with divested businesses.
In October 1995, a working group of the International Agency for Research
on Cancer ("IARC") recommended that IARC's classifications of carbon black be
changed from Category 3 (insufficient evidence to make a determination regarding
carcinogenicity) to Category 2B (known animal carcinogen, possible human
carcinogen), based on results of studies of rat inhalation of carbon black. The
Company has communicated this recommended change in IARC classification to its
customers and employees. If the working group's recommendation is confirmed by
IARC's director, the Company will make changes to its material safety data
sheets and elsewhere, as appropriate. The Company continues to believe that
available evidence, taken as a whole, indicates that carbon black is not
carcinogenic to humans, and does not present a health hazard when handled in
accordance with good housekeeping and safe workplace practices as described in
the Company's material safety data sheets.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
Industry segment financial data are set forth in tables on pages 15 and
F-19 and F-20 of this Report. A significant portion of the Company's revenues
and operating profits is derived from overseas operations. The profitability of
the Specialty Chemicals and Materials businesses is affected by fluctuations in
the value of the U.S. dollar relative to foreign currencies. The Company's
overseas operations do not currently include any energy-related businesses. (See
Note N of the Notes to Consolidated Financial Statements for further information
relating to sales and profits by geographic area, on pages F-19 and F-20 of this
Report, and Management's Discussion and Analysis of Financial Condition and
Results of Operations, appearing in Item 7 on pages 12 through 21 of this
Report.) Currency fluctuations and nationalization and expropriation of assets
are risks inherent in international operations. The Company has taken steps it
deems prudent in its
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international operations to diversify and otherwise to protect against these
risks, including the purchase of forward foreign currency contracts and options
to reduce the risk associated with changes in the value of certain foreign
currencies compared to the U.S. dollar.
ITEM 2. PROPERTIES
The Company owns, operates and leases office, manufacturing, production,
terminalling, storage, marketing and research and development facilities in the
United States and in foreign countries.
The principal facilities of the Company's business units are described
generally in Item 1 above.
The principal facilities owned by the Company in the United States are: (i)
the administrative offices and manufacturing plants of its carbon black
operations in Louisiana, Massachusetts, Texas and West Virginia (comprising
approximately 84,800 square yards); (ii) its research and development facilities
in Illinois, Massachusetts, Pennsylvania and Texas and its applications
development facility in Georgia (comprising approximately 24,700 square yards);
(iii) administrative offices and manufacturing plants of its Cab-O-Sil and Cabot
Performance Materials business units in Illinois and Pennsylvania (comprising
approximately 56,400 square yards); and (iv) its LNG terminalling and storage
facility in Massachusetts (comprising approximately 3,250 square yards).
Portions of plants in Louisiana referred to above are constructed on long-term
ground leases.
The Company's principal foreign facilities are owned by subsidiaries and
together they comprise approximately 433,600 square yards of manufacturing
facilities, 3,900 square yards of research and development facilities, and
63,500 square yards of administrative facilities.
The principal facilities leased by the Company in the United States are its
corporate headquarters and the administrative offices of the LNG companies in
Boston, Massachusetts, the carbon black operations in Georgia and the
administrative offices of the Cabot Performance Materials business in
Pennsylvania (comprising approximately 17,900 square yards).
The principal facilities leased by subsidiaries in locations outside of the
United States are the administrative offices and manufacturing facilities of the
carbon black operations in France and Spain and the Plastics business in Belgium
as well as the leasehold interests of the Cabot Performance Materials business
in Canada (comprising approximately 89,000 square yards).
The Company's administrative offices are generally suitable and adequate
for their intended purposes, except that additional administrative offices are
planned at the Company's research and development facility in Billerica,
Massachusetts. Existing manufacturing facilities of the Company are not
sufficient to meet the Company's increased requirements for the future and are
being supplemented by additional production facilities in several locations in
the U.S. and outside the U.S. A new plant to produce fumed silica is planned to
be constructed in Midland, Michigan; projects to expand carbon black production
capacity are being undertaken in North America, South America and Indonesia; a
slurry manufacturing facility, together with laboratory space, is under
construction in Aurora, Illinois; projects to expand tantalum powder and wire
capacity are being undertaken in Boyertown, Pennsylvania; and a cesium formate
plant is planned for Manitoba, Canada.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits and environmental
proceedings wherein substantial amounts are claimed. The following is a
description of the significant proceedings pending as of September 30, 1995:
Environmental Proceedings
In 1994, Cabot and the State of Florida signed a settlement of a 1983 state
court lawsuit requiring Cabot to pay the State $650,000 in past costs associated
with a site in Gainesville, Florida. The site included a parcel of land on which
Cabot previously owned and operated a pine tar distillation plant. In 1995,
Cabot completed
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installation of a groundwater collection system and removed the contaminated
soil from an old coal tar lagoon near its former property. Cabot has filed a
cost recovery suit against other responsible parties at the site seeking
reimbursement of their share of response costs.
In April 1985, Cabot and five other companies entered into a consent order
with the U.S. Environmental Protection Agency ("EPA") under the Superfund law to
perform a remedial investigation and feasibility study with respect to the King
of Prussia Technical Corp. site in Winslow Township, New Jersey. A Record of
Decision ("ROD") was issued by the EPA specifying a combination of remedial
actions for the site at an estimated cost of almost $15 million. The EPA issued
an administrative order directing Cabot and four other companies to design and
complete the remedial measures; most of the work on site remediation has been
completed. Cabot and the other companies involved have reached a tentative
agreement on the portions of the costs to be borne by each company.
Beginning in May 1986, the Department of Environmental Protection of the
State of New Jersey ("NJDEP") issued directives under the New Jersey Spill
Compensation and Control Act to Cabot and other potentially responsible parties
("PRPs") to fund a remedial investigation for the cleanup of hazardous waste at
the Old Bridge Township landfill near Perth Amboy, New Jersey. Cabot and other
parties contributed funds for a remedial investigation and feasibility study
which was conducted by a consultant to the NJDEP. In September 1992, the EPA
issued a ROD specifying certain remedial actions and indicating that a second
ROD would be issued following further study. Preliminary action on the first ROD
has been taken by the NJDEP. A group of companies, including Cabot, has reached
a tentative agreement with the NJDEP to perform an additional study of the site
and to handle minor remedial work. Until the study is complete, it will not be
possible to identify what the remediation costs for this site will be or what
Cabot's portion of such costs will be.
In 1989, the United States filed a claim in the U.S. District Court for the
Eastern District of Pennsylvania against 18 defendants under the Superfund law
for recovery of the EPA's cleanup costs at Moyer's Landfill in Collegeville,
Pennsylvania, estimated to be $48 million. For several years, Moyer's Landfill
was used for the disposal of municipal and industrial wastes by numerous
parties, including Cabot. More than 100 additional parties, including Cabot,
were brought into the litigation by means of a third-party complaint. Recently,
the EPA reached settlements in principle with certain parties, including Cabot,
and settlement documents are now being completed.
In 1989 and 1990, respectively, Cabot completed a remedial investigation
and feasibility study of its former beryllium processing plant in Hazleton,
Pennsylvania, and submitted the study to the Pennsylvania Department of
Environmental Resources ("DER"). An environmental consultant retained by Cabot
has designed and implemented certain of the remedial measures described in the
study. In April 1991, the DER issued a wastewater discharge permit to Cabot but
included certain limitations to which Cabot objected by filing an appeal with
the Pennsylvania Environmental Hearing Board. In August 1993, DER and Cabot
resolved the issues on appeal in a manner satisfactory to both parties and the
appeal was withdrawn. Source control remediation efforts by Cabot are continuing
and are scheduled for completion in late 1996.
Cabot is one of approximately 25 parties identified by the EPA as PRPs
under the Superfund law with respect to the cleanup of Fields Brook (the
"Brook"), a tributary of the Ashtabula River in northeastern Ohio. From 1963 to
1972, Cabot owned two manufacturing facilities located beside the Brook. The EPA
has specified a remedy for the site but continues to assess the condition of the
Brook. Cleanup is expected to begin in 1997 or 1998. Pursuant to an EPA
administrative order, 15 companies, including Cabot, are performing the design
and other preliminary work relating to sediment cleanup. Concurrently, the
companies and the EPA are evaluating remedial alternatives for the floodplain
and wetlands areas adjacent to the Brook. The EPA has not selected the remedy
for these areas. Consequently, it is not possible to determine future remedial
costs for the floodplain and wetlands. The EPA's cost recovery claims through
the end of 1989 have been settled; the companies, including Cabot, that have
paid for work at the site are seeking to recover a share of those costs from
other responsible parties. At one of the plants formerly operated by Cabot, two
subsequent owners are working with Cabot in evaluating site conditions and
potential remedies. The EPA has not selected the remedy for this plant site or
any other plant along the Brook; it is not possible at this time to determine
future
8
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remedial costs or Cabot's share of those costs. The State of Ohio has also
notified Cabot and several other companies that it will seek damages for injury
to natural resources at the Brook. Cabot is also participating in arbitration
proceedings with succeeding plant owners regarding costs associated with
remediation of the Brook and the plant site.
In 1994, Detrex Chemical Industries, Inc. filed third-party complaints
against eight companies, including Cabot, in connection with material allegedly
sent to the Koski/RES landfill in Ashtabula, Ohio. Cabot and other third-party
defendants filed complaints against five additional companies that sent waste to
the site. It is not possible at this time to determine future remedial costs or
Cabot's share, if any, of such costs.
In 1994, five plaintiffs filed suit in the U.S. District Court for the
Eastern District of Pennsylvania against 18 defendants, including Cabot, under
the Superfund law and State law seeking recovery of remediation costs at the
Berks Landfill site, which is located in the vicinity of Reading, Pennsylvania.
The plaintiffs claim that a beryllium alloy plant formerly owned by Cabot and
located in Reading, Pennsylvania sent waste to the Berks Landfill. The EPA has
not selected a remedy for the site. It is not possible at this time to determine
future remedial costs or the amount of those costs which Cabot may share with
the current owner.
In 1994, the EPA issued a Unilateral Administrative Order to Cabot and 11
other respondents pursuant to the Superfund law with respect to the Revere
Chemical Site (a/k/a Echo Site) in Nockamixon Township, Bucks County,
Pennsylvania (the "Revere Site"). The Order requires the respondents to design
and implement several remedial measures at the Revere Site, estimated to cost
approximately $15 million. Cabot's portion of that cost, if any, has not yet
been determined. Cabot has responded to the EPA's Order by indicating that it
should not have been named as a respondent and by raising several objections to
the Order.
Cabot has received various requests for information and notifications that
it may be a PRP at several other Superfund sites.
As of September 30, 1995, approximately $51.6 million was accrued for
environmental matters by the Company. The amount represents the Company's
current best estimate of its share of costs likely to be incurred based on its
analysis of the extent of cleanup required, alternative cleanup methods
available, abilities of other responsible parties to contribute and its
interpretation of laws and regulations applicable to each site.
Breast Implant Litigation
Fumed silica supplied by Cabot was used by others in the manufacture of
silicone breast implant envelopes. There are currently pending more than 10,000
lawsuits in state and federal courts alleging injuries against various parties
arising from the use of silicone breast implants. Cabot had been named as a
defendant in fewer than 100 breast implant lawsuits. As a result of voluntary
dismissals (some without prejudice to the right of the plaintiff to refile a
complaint) and summary judgments granted to Cabot, Cabot is currently a
defendant in only one such lawsuit. Cabot has not made any settlement payments
in connection with any breast implant suits. Cabot believes that it has adequate
defenses in the lawsuit in which it is known to be a defendant. However, the
scientific, legal and societal issues raised by these cases are complex and the
outcome is uncertain. Cabot, therefore, cannot predict with any assurance the
course this lawsuit will take, the number of cases to which Cabot will be added
as a defendant, the amount of damages, if any, that may be assessed against
Cabot or the defense costs that will be incurred by Cabot.
Other Proceedings
Cabot has been named as one of many defendants in a lawsuit, now pending in
the U.S. District Court in Oklahoma, brought by a large group of plaintiffs
claiming personal injury due to exposure to and contact with certain chemicals
and materials allegedly manufactured by the defendants. Plaintiffs seek actual
and punitive damages against all defendants, jointly and severally, in the
aggregate amount of $1.25 billion. Cabot has reached a settlement agreement with
the plaintiffs, pursuant to which it will pay a nominal amount in settlement of
all claims against Cabot.
The Company has various other lawsuits, claims and contingent liabilities
arising in the ordinary course of its business. In the opinion of the Company,
although final disposition of all of its suits and claims may impact
9
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the Company's financial statements in a particular period, it should not, in the
aggregate, have a material adverse effect on the Company's financial position.
(See Note L of the Notes to the Company's Consolidated Financial Statements on
pages F-17 and F-18 of this Report).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below, as of November 30, 1995, for each executive officer of
Cabot is information regarding his age, position(s) with Cabot, the periods
during which he served as an officer and his business experience during at least
the past five years:
OFFICES HELD/BUSINESS
NAME AGE EXPERIENCE DATES HELD
- ---- --- --------------------- ----------
Samuel W. Bodman.... 57 Cabot Corporation
Chairman of the Board October 1988 to present
President February 1991 to February 1995
January 1987 to October 1988
Chief Executive Officer February 1988 to present
Kennett F. Burnes... 52 Cabot Corporation
President February 1995 to present
Executive Vice President October 1988 to February 1995
Kenyon C. Gilson.... 51 Cabot Corporation
Chief Financial Officer October 1995 to present
Vice President August 1989 to present
Paul J. Gormisky.... 42 Cabot Corporation
Controller April 1995 to present
Vice President February 1994 to present
Director of Finance,
Carbon Black May 1993 to April 1995
Director of Corporate
Planning May 1990 to May 1993
Robert Rothberg..... 46 Cabot Corporation
Vice President and
General Counsel October 1993 to present
Choate, Hall & Stewart
(law firm), Partner January 1982 to October 1993
10
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- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Cabot's common stock is listed for trading (symbol CBT) on the New York,
Boston and Pacific Stock Exchanges. As of September 30, 1995, there were
approximately 2,100 holders of record of Cabot's common stock. The price range
in which the stock has traded, as reported on the composite tape, and the
quarterly cash dividends for the past two fiscal years are shown below, restated
to reflect a two-for-one stock split in August 1994.
STOCK PRICE AND DIVIDEND DATA
DECEMBER MARCH JUNE SEPTEMBER YEAR
-------- ------- ------ --------- ------
FISCAL 1995
Cash dividends per share........................... $ 0.14 $ 0.14 $ 0.14 $ 0.18 $ 0.60
Price range of common stock:
High............................................. $28.75 $37.13 $52.75 $57.88 $57.88
Low.............................................. $25.63 $28.13 $36.88 $48.13 $25.63
Close............................................ $28.38 $36.88 $52.75 $53.13 $53.13
DECEMBER MARCH JUNE SEPTEMBER YEAR
-------- ------- ------ --------- ------
FISCAL 1994
Cash dividends per share........................... $ 0.13 $ 0.13 $ 0.13 $ 0.14 $ 0.53
Price range of common stock:
High............................................. $29.19 $28.00 $26.63 $28.38 $29.19
Low.............................................. $26.13 $25.56 $24.44 $25.13 $24.44
Close............................................ $26.94 $27.00 $25.56 $27.25 $27.25
ITEM 6. SELECTED FINANCIAL DATA
Cabot Corporation Selected Financial Data:
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Financial Highlights
Net sales and other operating
revenues from continuing
operations.................... $1,830,393 $1,679,819 $1,614,315 $1,556,986 $1,482,089
---------- ---------- ---------- ---------- ----------
Income from continuing
operations.................... $ 171,932 $ 78,691 $ 37,410 $ 62,223 $ 39,825
---------- ---------- ---------- ---------- ----------
Long-term debt................... $ 306,443 $ 307,828 $ 459,275 $ 479,882 $ 369,609
Minority interest................ $ -- $ -- $ -- $ 9,756 $ --
Stockholders' equity............. $ 685,000 $ 562,489 $ 442,273 $ 492,955 $ 426,863
---------- ---------- ---------- ---------- ----------
Total capitalization.......... $ 991,443 $ 870,317 $ 901,548 $ 982,593 $ 796,472
---------- ---------- ---------- ---------- ----------
Total assets....................... $1,654,333 $1,616,756 $1,489,473 $1,554,529 $1,462,396
---------- ---------- ---------- ---------- ----------
Per Share:
Income from continuing
operations.................... $ 4.35 $ 1.96 $ 0.90(a) $ 1.59 $ 0.85
Net income....................... $ 4.35 $ 1.96 $ 0.20(b) $ 1.59 $ 2.90
Cash dividends................... $ 0.60 $ 0.53 $ 0.52 $ 0.52 $ 0.52
---------- ---------- ---------- ---------- ----------
Average shares outstanding --
thousands........................ 38,726 38,249 37,438 36,802 42,556
- ---------------
(a) Includes charge of $0.83 per share for the restructuring of the Company's
Specialty Chemicals and Materials businesses and a favorable energy accrual
adjustment of $0.23 per share. (see Item 7 of this Report)
(b) Includes a charge of $0.70 per share for the cumulative effect of required
accounting changes. (see Item 7 of this Report)
11
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Building on global economic strength that began in late 1994, Cabot
achieved strong financial results in each of its specialty chemicals businesses,
and in each of the four geographic regions in which it operates. Cabot had
earnings from continuing operations of $171.9 million ($4.35 per common share),
more than doubling 1994 earnings. Operating profit increased 63% in 1995 to
$299.5 million. The increase was primarily due to margin improvement and higher
volumes in the Specialty Chemicals and Materials Group.
The following analysis of financial condition and operating results should
be read in conjunction with the Company's Consolidated Financial Statements and
accompanying Notes.
RESULTS OF OPERATIONS
Net sales and other operating revenues increased 9% in 1995 over 1994,
compared to a gain of 4% in 1994 over 1993. The improvement came from the
Specialty Chemicals and Materials Group. Sales benefited from strong global
economies and strength in the automotive and tire markets. Europe realized the
most significant improvement over 1994. Demand for Cabot products was
exceptional. Price increases in many businesses further enhanced sales. In the
Energy Group, the Company's liquefied natural gas (LNG) business experienced
sales declines as a result of a low level of supplies of LNG due to the
refurbishment of the liquefaction facilities of the Company's Algerian supplier.
Revenues
Specialty Chemicals and Materials vs. Energy ($ millions)
[BAR GRAPH] 91 92 93 94 95
- -------------------------------------------------------------------------------
Specialty Chemicals & Materials $1,129 $1,181 $1,192 $1,241 $1,488
- -------------------------------------------------------------------------------
Energy $ 354 $ 376 $ 423 $ 439 $ 343
- -------------------------------------------------------------------------------
The 4% increase in the Company's net sales and other operating revenues in
1994 versus 1993 included improvement in both the Specialty Chemicals and
Materials Group and the Energy Group. The Specialty Chemicals and Materials
Group benefited from improving economies in several parts of the world,
particularly in North and South America, and the resulting improvement in the
tire and automotive industries. In the Energy Group, revenue gains from 1994
over 1993 were mostly due to the Company's LNG business, which benefited from an
unusually cold winter in the northeastern United States, prompting increased
demand and higher natural gas prices.
The Company has announced plans to add capacity to its North American tire
blacks business as a result of entering into long-term supply contracts with
certain tire customers. The Company has also announced plans to add capacity to
its South American carbon black operations and to build a new North American
fumed silica plant.
Cost of sales as a percentage of net sales improved in 1995 to 69%, from
73% in 1994, and 75% in 1993. The decrease in 1995 results from better pricing
and higher capacity utilization in many of the Company's Specialty Chemicals and
Materials businesses, more than offsetting higher material costs. The
improvement in 1994 was mainly due to better capacity utilization and lower
material costs.
Selling, research, and administrative expenses increased 9%, or $23
million, in 1995 versus an increase of 8%, or $20 million, in 1994. The 1995
increase is largely a result of additional research and development dedicated to
developing new, higher value products and processes, higher incentive
compensation and additional selling expenses associated with increased volumes.
These increases were partially offset by reduced
12
14
expenses in the Company's safety products and specialty composites business as a
result of the July 1995 ownership restructuring. The 1994 increase relates to
increased investment in systems and marketing development, increased incentive
compensation and additional research and development as cited above.
OPERATING PROFIT
Operating profit was $299.5 million in 1995, $184.3 million in 1994, and
$118.4 million in 1993. Operating profit in 1993 included a $47.4 million
restructuring charge to rationalize European production capacity. Operating
margins as a percentage of sales were 16% in 1995, 11% in 1994, and 10% before
the restructuring charge in 1993.
Operating profit increased 63% in 1995 over 1994 as a result of significant
improvement in the Specialty Chemicals and Materials Group, slightly dampened by
declines in the Energy Group.
Operating Margins
Specialty Chemicals and Materials
(percent)
[BAR GRAPH] 91 92 93* 94 95
- --------------------------------------------------------------------------------
Operating Margins 9.1% 13.1% 8.5% 13.4% 19.3%
- --------------------------------------------------------------------------------
* includes $47.4 million restructuring charge.
The most significant increases in operating profit were seen in the
Company's European Specialty Chemicals businesses, as the full effect of
economic recovery in that region was realized. In addition, better pricing
conditions, improved product mix and higher capacity utilization significantly
improved margins in all Specialty Chemicals businesses.
In the Energy Group, operating profit in fiscal year 1995 was down
primarily due to reduced supplies of LNG in the Company's LNG business.
Included in 1994 operating profit was a $4.0 million reversal of the 1993
Specialty Chemicals and Materials Group restructuring charge based on lower
actual costs incurred during the closing of a carbon black plant in Europe. Also
during 1994, a $6.2 million charge was taken to write off the Company's
investment in its Japanese carbon black affiliate as a result of significant
ongoing losses.
OTHER EXPENSES
Interest expense for 1995, 1994 and 1993 was $35.6 million, $41.7 million
and $44.0 million, respectively. The decrease in 1995 is primarily due to lower
average total debt and the results of refinancing fixed-rate, high coupon debt
with short-term floating-rate debt at lower interest rates during the year. The
improvement in 1994 was attributable to lower average debt than in 1993.
Unallocated corporate expenses were $27.7 million in 1995 as compared with
$23.4 million in 1994 and $20.7 million in 1993. Increases resulted from higher
incentive compensation and environmental expenses, partially offset by higher
interest and dividend income. Except for these items, unallocated corporate
expenses have been relatively flat from 1993 to 1995.
"Adjustments of reserves related to divested businesses" includes charges
related to environmental matters of $12.5 million in 1995 and $11.0 million in
1994. These adjustments are based on the Company's
13
15
estimates of additional costs likely to be incurred at various environmental
sites. The Company is now in the implementation stage of remediation on certain
sites, and its ability to accurately estimate its share of those costs has
improved significantly. In 1994, the Company also reversed $10.2 million of
energy reserves based on the settlement of a significant case during that year.
This compares to a $14.2 million reversal of energy reserves in 1993.
PROVISION FOR INCOME TAXES
The effective tax rates on income from continuing operations were 39% in
1995, 38% in 1994 and 44% in 1993. The increased tax rate in 1995 resulted from
the sale of a majority interest in the Company's safety business. The Company's
fiscal year 1995 effective tax rate would have been 37% without that
transaction. A more detailed analysis of income taxes is presented in Note K to
the Consolidated Financial Statements.
NET INCOME
Reported income in 1995 was $171.9 million ($4.35 per common share),
compared with $78.7 million ($1.96 per common share) in 1994, and $37.4 million
($0.90 per common share) before accounting changes in 1993. Income in 1995
includes a before-tax gain of $32.6 million ($0.37 per common share) associated
with the sale of a majority interest of Cabot Safety Corporation, and a
before-tax charge of $12.5 million ($0.20 per common share) due to an additional
adjustment in environmental reserves. Income in 1994 included a $10.2 million
($0.16 per common share) gain due to the reversal of energy reserves and an
$11.0 million ($0.18 per common share) expense due to an additional adjustment
in environmental reserves. Income in 1993 included a $47.4 million before-tax
restructuring charge, a $14.2 million before-tax favorable energy reserve
adjustment and a $26.1 million after-tax charge for required accounting changes.
Without these adjustments, income from operations would have been $165.3 million
($4.18 per common share) in 1995, $79.2 million ($1.98 per common share) in
1994, and $59.8 million ($1.50 per common share) in 1993.
SPECIALTY CHEMICALS AND MATERIALS GROUP
The Specialty Chemicals and Materials Group includes the Company's global
specialty chemicals operations. These operations manufacture carbon black, a
very fine black powder used as a reinforcing agent in tires and most industrial
rubber products, and also widely used as an agent in many specialty applications
such as inks, plastics, cables and coatings; fumed silica, a specialty chemical
used as a thickening, dispersing and reinforcing agent in hundreds of products
such as silicone rubber and polyester resins; thermoplastic concentrates and
specialty compounds; and tantalum capacitor materials and other metals and
alloys for the semiconductor, aerospace, defense and medical markets. On July
11, 1995, the Company restructured the ownership of its safety products and
specialty composites business into a new corporation owned by the Company,
Vestar Partners and Cabot Safety management. Effective with the restructuring,
the Company's interest in the results of the new corporation is reflected in
"Equity in net income of affiliated companies."
Sales for the Specialty Chemicals and Materials Group were up 20% in 1995
and 4% in 1994. All businesses reported double-digit revenue growth in 1995
versus 1994. Each of the four geographic regions had increased sales. Most
notable was a 41% increase in European revenues, reflecting the economic
recovery in that region. Sales growth for the Group was driven by an overall 10%
increase in volumes, most of which occurred during the first half of the year,
and much improved pricing in many businesses. Sales growth in 1994 was primarily
driven by volume improvement and economic recovery in North and South America.
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SELECTED FINANCIAL DATA BY INDUSTRY SEGMENT
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
NET SALES AND OTHER OPERATING REVENUES
Specialty Chemicals and Materials...... $1,487.8 $1,241.1 $1,191.8 $1,181.0 $1,128.6
Energy................................. 342.6 438.7 422.5 376.0 353.5
-------- -------- -------- -------- --------
Net sales and other operating
revenues................... $1,830.4 $1,679.8 $1,614.3 $1,557.0 $1,482.1
======== ======== ======== ======== ========
OPERATING PROFIT
Specialty Chemicals and Materials(a)... $ 286.8 $ 165.9 $ 101.7 $ 155.0 $ 103.2
Energy................................. 12.7 18.4 16.7 18.2 9.5
-------- -------- -------- -------- --------
Total operating profit....... 299.5 184.3 118.4 173.2 112.7
-------- -------- -------- -------- --------
Interest expense....................... 35.6 41.7 44.0 41.7 38.6
Unallocated corporate expenses, net(b). 27.7 23.4 20.7 14.9 11.7
Gain on sale of safety business........ (32.6) -- -- -- --
Adjustment of reserves related to
divested businesses.................. 12.5 0.8 (14.2) -- --
-------- -------- -------- -------- --------
Income from continuing
operations before income
taxes...................... $ 256.3 $ 118.4 $ 67.9 $ 116.6 $ 62.4
======== ======== ======== ======== ========
DEPRECIATION AND AMORTIZATION
Specialty Chemicals and Materials...... $ 91.2 $ 83.3 $ 81.5 $ 80.5 $ 70.8
Energy................................. 2.8 2.8 2.8 2.7 17.9
General corporate...................... 0.2 0.2 0.2 0.9 0.5
-------- -------- -------- -------- --------
Total........................ $ 94.2 $ 86.3 $ 84.5 $ 84.1 $ 89.2
======== ======== ======== ======== ========
FIXED ASSET ADDITIONS
Specialty Chemicals and Materials...... $ 130.4 $ 70.7 $ 63.9 $ 76.5 $ 138.0
Energy................................. 0.8 2.9 0.7 1.3 59.4
General corporate...................... -- -- 0.4 0.3 0.6
-------- -------- -------- -------- --------
Total........................ $ 131.2 $ 73.6 $ 65.0 $ 78.1 $ 198.0
======== ======== ======== ======== ========
IDENTIFIABLE ASSETS
Specialty Chemicals and Materials...... $1,167.9 $1,172.2 $1,117.4 $1,191.2 $1,059.6
Energy................................. 133.8 127.4 116.1 132.6 159.4
General corporate(c)................... 253.7 231.0 89.3 79.9 83.5
Equity in affiliates -- Specialty
Chemicals and Materials.............. 98.9 86.2 103.1 91.0 100.1
Equity in affiliates -- Energy......... -- -- 63.6 59.8 59.8
-------- -------- -------- -------- --------
Total........................ $1,654.3 $1,616.8 $1,489.5 $1,554.5 $1,462.4
======== ======== ======== ======== ========
- ---------------
(a) Includes a $47.4 restructuring charge in 1993.
(b) Unallocated corporate expenses, net, include corporate management costs
reduced by investment income.
(c) General corporate assets include cash, temporary cash investments,
investments other than equity basis, income taxes receivable, deferred taxes
and headquarters' assets.
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Specialty Chemicals and Materials Revenues
by Geographic Region (percent)
1994 [PIE CHART]
------------------------------------------
Pacific Asia 17%
------------------------------------------
North America 40%
------------------------------------------
Europe 35%
------------------------------------------
South America 8%
------------------------------------------
1995 [PIE CHART]
------------------------------------------
Pacific Asia 16%
------------------------------------------
North America 37%
------------------------------------------
Europe 39%
------------------------------------------
South America 8%
------------------------------------------
Revenues include 100% of equity affiliate sales
revenues. Region reflects sales destination point.
In 1995, 63% of Specialty Chemicals and Materials sales made by the Company
and its affiliates were to customers outside North America, compared with 60% in
1994, and 62% in 1993.
Operating profit for the Specialty Chemicals and Materials Group grew 73%,
or $120.9 million, in 1995 over 1994, compared to an increase of 63%, or $64.2
million, in 1994 over 1993. Operating profit in 1993 included a restructuring
charge of $47.4 million. Before this restructuring charge, operating profit grew
11%, or $16.8 million, in 1994 from 1993. In 1995, significantly stronger
pricing, volume growth, higher capacity utilization and an improved product mix
all contributed to the substantial margin improvement. The Company also received
a significant benefit from favorable currency translations, especially versus
European currencies, due to the relative weakness of the dollar. The improvement
in 1994 was a result of volume growth and improved product mix.
Financial results from affiliates are reported in the income statement as
"Equity in net income of affiliated companies." In 1995, equity in net income of
affiliates was $16.7 million, compared with $5.3 million in 1994. The
significant improvement is due to contributions from the new carbon black plant
in the Czech Republic that began operation in late 1994, improved earnings in
the Company's Mexican carbon black affiliate and the absence of losses from the
Company's Japanese carbon black affiliate, the investment in which was written
off in the third quarter of 1994.
The Company is the world's only global manufacturer of carbon black. In
1995, 66% of carbon black volumes sold by the Company and its affiliates were to
customers outside North America, compared with 65% in 1994 and 67% in 1993.
Carbon black is manufactured on five continents in 25 plants in 19 countries.
Many carbon black facilities are wholly owned by the Company, while others are
affiliates managed by the Company or by local partners in the specific regions.
The Carbon Black Divisions serve three main market sectors, and each is affected
in varying degrees by fluctuating economic conditions. Sales to tire
manufacturers represent the largest percentage of carbon black volumes. This
sector is dependent on both new automobile tire sales and, to a greater degree,
the replacement tire market. The makers of industrial rubber products, such as
hoses and gaskets, represent a second market for carbon black. The third market
is made up of manufacturers of inks and other specialty applications that use
very high grade carbon blacks.
During 1995, the Company entered into long-term carbon black supply
agreements of more than six years with several of its tire customers in North
America. The contracts are designed to share the Company's investment risks with
customers, which, in turn, will allow Cabot to provide a secure carbon black
supply to its contract customers and reduce the volatility of the Company's
carbon black margins and earnings. These contracts, coupled with the Company's
long-term strategy of product differentiation, are aimed at building a less
cyclical carbon black business and reducing the Company's susceptibility to
economic cycles. In conjunction with the signing of these contracts, the Company
announced plans to add manufacturing capacity to its North American tire black
business in order to meet the increasing supply obligations outlined in the
contracts. In addition, the Company announced plans to add tire black capacity
to its South American carbon
16
18
black operations to meet growing demand in that region. The Company expects to
invest approximately $230 million in these two expansion programs and in
equipment and facilities designed to meet Clean Air Act requirements. The
Company's previously announced carbon black expansion in Indonesia is expected
to be completed in 1996.
The Carbon Black Divisions' total sales for 1995 increased significantly
compared to a moderate increase in 1994. Each of the four geographic regions had
revenue increases of more than 15%. The increase resulted from continued
strength in the North and South American tire and automotive industries, the
effect of a full year's economic recovery in Europe, and growing economies in
the Pacific Asian region. During most of 1995, worldwide carbon black
manufacturing capacity was extremely tight. Prices, most notably in North
America, and margins increased during the year. Operating profit reflected the
improved prices that more than offset higher raw material costs. The Divisions
expect the strong performance to continue into 1996 although economic slowdowns
could inhibit further growth.
Carbon Black Sales Volumes
by Geographic Region (percent)
1994 [PIE CHART]
-------------------------------------
Pacific Asia 22%
-------------------------------------
North America 35%
-------------------------------------
Europe 30%
-------------------------------------
South America 13%
-------------------------------------
1995 [PIE CHART]
-------------------------------------
Pacific Asia 21%
-------------------------------------
North America 34%
-------------------------------------
Europe 32%
-------------------------------------
South America 13%
-------------------------------------
Volumes include 100% of equity affiliates sales
volumes. Region reflects sales destination point.
In 1994, the moderate increase in carbon black sales was due to the
improved North and South American tire and automotive industries, and the
beginning of a recovery in the European economy during the second half of the
year.
The Cab-O-Sil Division reported a 19% revenue gain in 1995 compared to
1994, with improvement in both North America and Europe. Operating profit also
increased significantly in 1995, reflecting modest volume growth, improved
product mix and favorable margins from better pricing and higher capacity
utilization. The Division expects continued growth in 1996. In 1994, the
Division reported significant improvements in profitability due to strong volume
growth, cost management and higher capacity utilization. During 1995, the
Company purchased certain assets of the Rippey Corporation related to the sale
and distribution of high-purity polishing compounds in an effort to further
expand the rapidly developing semiconductor segment of the business. The Company
also announced plans to build a new fumed silica plant in Midland, Michigan, to
meet the growing demand for new and differentiated silica products. The new
plant is estimated to cost $50 million, and is expected to begin commercial
operation in the first quarter of 1999.
In the Plastics Division, both revenues and operating profit were up
significantly in 1995 compared with 1994. Market conditions that began to
improve in late 1994 continued improving into 1995, enabling the Division to
improve margins through higher pricing and an improved product mix. Overall
volumes for the Division were down slightly year-over-year, reflecting some
softening in Europe late in 1995. The Company expects the volume softness to
carry into the early part of fiscal 1996 with some pricing pressure. In 1994,
the Division's operating profit grew moderately as a result of careful cost
management and restructuring initiatives undertaken in 1993, as well as
improving economic conditions in Europe.
Cabot Performance Materials reported a 15% increase in revenues and a
similar increase in profits in 1995 versus 1994. The improved results reflect
the continued strong performance of the tantalum capacitor business, partially
offset by continued operating problems, primarily related to yield and
throughput. The
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Division expects continued growth in 1996 driven by the tantalum capacitor
business. The Company has begun making significant investments in this business
to expand capacity and improve operating efficiency, of which at least $35
million will be spent in 1996. Part of this capital investment program will
include the construction of a new $10 million cesium formate production
facility. In 1994, performance of the Division was negatively impacted by the
operating problems mentioned previously.
On July 11, 1995, the Company restructured the ownership of its safety and
specialty composite materials business into a new corporation owned by the
Company, Vestar Equity Partners and the management of the newly formed Cabot
Safety Corporation. This transaction yielded approximately $128 million in
after-tax proceeds to the Company. Cabot has an approximately 42.5% ownership
position in the new corporation. The performance of the business prior to the
sale of the majority interest is included as part of the Specialty Chemicals and
Materials Group. During the first three quarters of fiscal 1995, the Company's
safety business reported a 26% increase in operating profit over the first three
quarters of 1994, due primarily to higher volumes. In 1994, the business
reported a slight decrease in profitability due to higher costs associated with
marketing programs and one-time expenses. As of the date of the transaction, the
Company began accounting for this affiliate using the equity method. As a
result, future sales and operating profit of the Specialty Chemical and
Materials Group will not include the results of Cabot Safety Corporation. The
Company's safety business recorded approximately $155 million of sales and $17
million of operating profit in fiscal 1995 prior to the transaction.
THE ENERGY GROUP
The Energy Group includes two operating businesses: Cabot LNG Corporation,
a liquefied natural gas importing, transporting, terminalling, and marketing
operation; and TUCO INC. (TUCO), a coal fuel services business. Until July 13,
1994, the Company owned a 34.4% interest in American Oil and Gas Corporation
(AOG), the earnings of which were reflected in "Equity in net income of
affiliated companies." At that time, AOG was merged into a subsidiary of KN
Energy, Inc. (KNE), and Cabot became a 17% owner, including warrants, of KNE.
The Company's investment in KNE is now accounted for on a cost basis, and
dividends from this investment are included in interest and dividend income.
Energy Group sales were $342.6 million in 1995, $438.7 million in 1994 and
$422.5 million in 1993. Operating profit fell to $12.7 million in 1995 from
$18.4 million last year. Declines in 1995 revenue and profit are primarily
attributable to the Company's LNG business, which has been negatively impacted
by reduced supplies of LNG caused by the refurbishment of the liquefaction
facilities of the Company's Algerian supplier. The LNG business was able to
reduce the impact of the supply curtailments by purchasing available domestic
gas at competitive prices. In addition, the overall impact was mitigated by an
unseasonably warm 1994-1995 winter in the northeastern United States. Profit in
the Company's TUCO business was flat in 1995 compared to 1994 with price
improvements offsetting slightly lower volumes.
Improved Energy Group results in 1994 were due to strong performance in the
Company's LNG business, where an unusually cold winter in the northeastern
United States boosted demand and resulted in higher natural gas prices. During
1994, TUCO's profit was lower as a result of disruptions in coal transportation
from flooding in the midwestern U.S. that significantly reduced inventories of
coal. This, in turn, reduced TUCO's service margins under a contractual formula.
The Company expects reduced supplies of LNG to impair the Energy Group's
performance during fiscal 1996. The extent of the impact will depend on the
actual number and timing of LNG shipments received, weather patterns and other
factors. The Algerian supplier's refurbishment program is expected to be
completed in 1996. The Company also cannot predict at this time, what, if any,
impact the political instability in Algeria may have on the deliveries of LNG to
the Company, but to date, no direct adverse effect has been experienced. The
Company continues to explore other short-term LNG supply opportunities. The
Company is a 10% shareholder in a company developing a proposed liquefaction
plant in Trinidad, and has agreed to purchase 60% of the LNG produced by that
plant. LNG from this project is expected to be available during fiscal year
1999. During the fourth quarter of this year, the Company announced plans to
sell the stock of its
18
20
TUCO subsidiary to Southwestern Public Service Company for approximately $77
million before taxes. The transaction is subject to regulatory approvals and is
expected to be completed in fiscal 1996.
CASH FLOW AND LIQUIDITY
Cash generated in 1995 from the Company's operating activities increased
27% to $182.0 million from $143.8 million in 1994. The increase primarily
resulted from higher net income than the year-ago period and an increase in
taxes payable. This is partially offset by an increase in accounts receivable
related to the increase in sales, most notably in Europe, and an increase in
inventories in the Company's TUCO, Performance Materials and Carbon Black
businesses.
Capital spending on property, plant and equipment was $131.2 million in
1995, $73.6 million in 1994 and $65.0 million in 1993. The increased spending in
1995 includes costs associated with capacity expansions in the Company's North
American carbon black operations, capital expenditures associated with the
Performance Materials and Cab-O-Sil businesses, and the expansion of the
Company's Indonesian carbon black subsidiary. Additional costs are expected to
be incurred over several years and include an estimated $200 million in North
American carbon black (including Clean Air Act compliance costs), $30 million in
South American carbon black, and $50 million for a new North American fumed
silica plant.
The Company expects capital spending to more than double in 1996 as it
continues to invest in new business opportunities.
Sources and Uses of Cash
Fiscal years 1994, 1995 ($ millions)
Sources of Cash [BAR GRAPH] 94 95
--------------------------------------------------------
Operations $144 $182
--------------------------------------------------------
Sales of Assets $ 1 $170
--------------------------------------------------------
Uses of Cash [BAR GRAPH] 94 95
--------------------------------------------------------
Capital Expenditures and Investments $74 $145
--------------------------------------------------------
Dividends $24 $ 26
--------------------------------------------------------
Financing and Other $ 6 $171
--------------------------------------------------------
These expenditures include a portion of the ones mentioned previously, the
Company's share of the Trinidad LNG project, additional expenses for the
Performance Materials business, and an amount to further develop the special
blacks business. Over the next several years, as the remediation of various
environmental sites is carried out, the Company also expects to spend a
significant portion of its $51.6 million reserve for costs associated with such
remediation. These sites are associated primarily with divested businesses.
19
21
Research and technical service spending was $59.2 million, $48.7 million,
and $45.7 million in 1995, 1994 and 1993, respectively. The Company has been
increasing the amount of spending to develop new, differentiated products for
its specialty chemicals businesses. The Company anticipates research and
technical service spending to increase to approximately $80 million in 1996 for
these and other initiatives.
Research and Technical Service
Specialty Chemicals and Materials Group ($ millions)
[BAR GRAPH]
91 92 93 94 95
- -----------------------------------------------------------------------
Dollars $37.7 $37.5 $45.7 $48.7 $59.2
- -----------------------------------------------------------------------
Spending as a percent of sales 3.3% 3.2% 3.8% 3.9% 4.0%
- -----------------------------------------------------------------------
Cabot decreased its borrowings by $114 million and increased cash by $10
million in 1995. Early in the fiscal year, the Company replaced $115 million of
9.875% coupon debt with short-term floating rate debt at lower interest rates. A
portion of this debt has been repaid with proceeds from the Cabot Safety
transaction.
During 1995, $76 million of common stock was purchased and is held as
treasury stock. The program to repurchase common stock is described below under
"Common Stock," and is expected to continue in 1996.
Primarily due to the Cabot Safety transaction and the Company's strong
operating performance in 1995, the ratio of total debt (including short-term
debt net of cash) to capital decreased to 29% at the end of 1995 from 42% at the
end of 1994. The Company anticipates an increase in the ratio of total debt to
capital in 1996 due to planned capital investments and the stock repurchase
program.
Total Debt to Capital
(percent)
[BAR GRAPH]
91 92 93 94 95
- -----------------------------------------------------------------------
Total Debt to Capital 55.9% 51.5% 50.4% 42.1% 29.1%
- -----------------------------------------------------------------------
Total debt includes short-term debt net of cash.
Management expects cash from operations, proceeds from the Cabot Safety
transaction and the anticipated TUCO sale, 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.
20
22
COMMON STOCK
In September 1995, the Company announced that it had begun a new share
repurchase program for up to 3,000,000 of its common shares in order to reduce
the total number of shares outstanding. As of September 30, 1995, approximately
581,000 shares of common stock had been repurchased through this program. The
Company also repurchased approximately 944,000 shares in private and open market
transactions during fiscal 1995 for the purpose of replacing shares issued under
its employee incentive programs.
During fiscal year 1995, the Company paid cash dividends of $0.60 per share
reflecting a quarterly dividend of $0.14 per share for the first three quarters
of the year and $0.18 per share in the fourth quarter. The book value per share
of Cabot stock increased 24% to $18.32 at September 30, 1995.
NEW ACCOUNTING STANDARDS
At September 30, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Upon adoption, the Company recorded
an unrealized gain on marketable securities available for sale of $46 million.
The gain was recorded as a separate component of stockholders' equity, net of a
deferred tax liability of $17 million.
The Company adopted two new accounting principles during 1993, effective as
of the beginning of fiscal 1993: SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting for
Income Taxes."
SFAS No. 106 mandates the accrual of certain postretirement health care and
life insurance benefits obligations on an "as-earned" basis. The Company
recognized the entire accumulated benefit obligation in 1993 and, as a result,
recorded a $43.2 million after-tax charge for the cumulative effect of the
change in accounting for postretirement health care and life insurance benefits.
SFAS No. 109 requires an asset and liability approach for financial
accounting and reporting of income taxes. The Company recognized a $17.1 million
benefit in 1993 as the cumulative effect of adoption of SFAS No. 109.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item are
set forth on pages F-1 to F-20 of this Report and are indexed herein under Item
14(a) of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
21
23
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required regarding the executive officers of Cabot is
included on page 10 of this Report in the unnumbered item captioned "Executive
Officers of the Registrant." Certain other information required regarding the
directors of Cabot is contained in the Proxy Statement under the heading
"Certain Information Regarding Directors." All of such information is
incorporated herein by reference.
The information required regarding the filing of reports by directors,
executive officers and 10% stockholders with the Securities and Exchange
Commission relating to transactions in Cabot stock is contained in the Proxy
Statement under the heading "Certain Securities Filings" and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required is contained in the Proxy Statement under the
heading "Executive Compensation." All of such information is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required is contained in the Proxy Statement under the
heading "Beneficial Stock Ownership of Directors, Executive Officers and Persons
Owning More than Five Percent of Common Stock." All of such information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the Proxy Statement
under the heading "Certain Relationships and Related Transactions." All of such
information is incorporated herein by reference.
22
24
- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements. Set forth below is a listing of the Consolidated
Financial Statements of the Company with reference to the page numbers in this
Report at which such statements are disclosed.
PAGE NUMBER
DESCRIPTION OF THIS REPORT
----------- --------------
(1) Consolidated Statements of Income for each of the three fiscal
years in the period ended September 30, 1995.................. F-1
(2) Consolidated Balance Sheets at September 30, 1995 and 1994...... F-2
(3) Consolidated Statements of Cash Flows for each of the three
fiscal years in the period ended September 30, 1995........... F-3
(4) Notes to Consolidated Financial Statements...................... F-4 to F-20
(5) Statement of Management Responsibility for Financial Reporting
and Report of Independent Accountants relating to the
Consolidated Financial Statements listed above................ F-21 to F-22
(b) Reports on Form 8-K. None, except as previously reported in Cabot's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, file
reference 1-5667, filed with the Commission on August 14, 1995.
(c) Exhibits. (not included in copies of the Form 10-K provided upon
request)
The exhibit numbers in the following list correspond to the numbers
assigned to such exhibits in the Exhibit Table of Item 601 of Regulation S-K.
The Company will furnish to any stockholder, upon written request, any exhibit
listed below upon payment by such stockholder to the Company of the Company's
reasonable expenses in furnishing such exhibit.
EXHIBIT
NUMBER DESCRIPTION
------------ -----------
3(a) -- Certificate of Incorporation of Cabot Corporation restated effective
October 24, 1983, as amended February 14, 1985, December 3, 1986, February
19, 1987, November 18, 1988, and November 24, 1995, filed herewith.
3(b) -- The By-laws of Cabot Corporation as of January 11, 1991 (incorporated
herein by reference to Exhibit 3(b) of Cabot's Annual Report on Form 10-K
for the year ended September 30, 1991, file reference 1-5667, filed with
the Commission on December 27, 1991).
4(a) -- Rights Agreement, dated as of November 10, 1995, between Cabot Corporation
and The First National Bank of Boston as Rights Agent (incorporated herein
by reference to Exhibit 1 of Cabot's Registration Statement on Form 8-A,
file reference 1-5667, filed with the Commission on November 13, 1995).
4(b)(i) -- Indenture, dated as of December 1, 1987, between Cabot Corporation and The
First National Bank of Boston, Trustee (incorporated herein by reference to
Exhibit 4 of Amendment No. 1 to Cabot's Registration Statement on Form S-3,
Registration No. 33-18883, filed with the Commission).
4(b)(ii) -- First Supplemental Indenture, dated as of June 17, 1992, to Indenture,
dated as of December 1, 1987, between Cabot Corporation and The First
National Bank of Boston, Trustee (incorporated by reference to Exhibit 4.3
of Cabot's Registration Statement on Form S-3, Registration No. 33-48686,
filed with the Commission).
4(c)(i)+ -- Finance Agreement between P.T. Cabot Chemical and Overseas Private
Investment Corporation, dated September 10, 1991.
4(c)(ii)+ -- Facility Agreement and Acknowledgement of Indebtedness (The Hongkong and
Shanghai Banking Corporation Limited), dated January 10, 1992.
23
25
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4(c)(iii)+ -- Project Completion Agreement between Cabot Corporation, P.T. Cabot Chemical
and The Hongkong and Shanghai Banking Corporation Limited, dated April 28,
1992.
10(a) -- Form of Distribution Agreement between Cabot Corporation and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Merrill Lynch & Co., Goldman Sachs &
Co., and J.P. Morgan Securities Inc. for the issuance and sale of
medium-term notes pursuant to a prospectus supplement dated July 17, 1992
(incorporated herein by reference to Exhibit 1 of Cabot's Current Report on
Form 8-K, dated July 17, 1992, file reference 1-5667, filed with the
Commission).
10(b)(i) -- Credit Agreement, dated as of January 13, 1994, among Cabot Corporation and
11 banks and Morgan Guaranty Trust Company of New York, as agent for the
banks (incorporated by reference to Exhibit 4 of Cabot's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1993, file reference
1-5667, filed with the Commission on February 16, 1993).
10(b)(ii) -- Amendment No. 1, dated January 13, 1995, to Credit Agreement, dated as of
January 13, 1994, among Cabot Corporation and 11 banks and Morgan Guaranty
Trust Company of New York, as agent for the banks, filed herewith.
10(c)* -- Equity Incentive Plan, as amended (incorporated herein by reference to
Exhibit 99 of Cabot's Registration Statement on Form S-8, Registration No.
33-53659, filed with the Commission).
10(d) -- Note Purchase Agreement between John Hancock Mutual Life Insurance Company,
State Street Bank and Trust Company, as trustee for the Cabot Corporation
Employee Stock Ownership Plan, and Cabot Corporation, dated as of November
15, 1988 (incorporated herein by reference to Exhibit 10(c) of Cabot's
Annual Report on Form 10-K for the year ended September 30, 1988, file
reference 1-5667, filed with the Commission on December 29, 1988).
10(e)(i)* -- Supplemental Cash Balance Plan (incorporated herein by reference to Ex-
hibit 10(e)(i) of Cabot's Annual Report on Form 10-K for the year ended
September 30, 1994, file reference 1-5667, filed with the Commission on
December 22, 1994).
10(e)(ii)* -- Supplemental Employee Stock Ownership Plan (incorporated herein by
reference to Exhibit 10(e)(ii) of Cabot's Annual Report on Form 10-K for
the year ended September 30, 1994, file reference 1-5667, filed with the
Commission on December 22, 1994).
10(e)(iii)* -- Supplemental Retirement Incentive Savings Plan (incorporated herein by
reference to Exhibit 10(e)(iii) of Cabot's Annual Report on Form 10-K for
the year ended September 30, 1994, file reference 1-5667, filed with the
Commission on December 22, 1994).
10(e)(iv)* -- Supplemental Employee Benefit Agreement with John G.L. Cabot (incorporated
herein by reference to Exhibit 10(f) of Cabot's Annual Report on Form 10-K
for the year ended September 30, 1987, file reference 1-5667, filed with
the Commission on December 28, 1987).
10(e)(v)* -- Cabot Corporation Deferred Compensation Plan, dated January 1, 1995, filed
herewith.
10(f)* -- Form of severance agreement entered into between Cabot and various managers
(incorporated herein by reference to Exhibit 10(g) of Cabot's Annual Report
on Form 10-K in the year ended September 30, 1991, file reference 1-5667,
filed with the Commission on December 27, 1991).
10(g) -- Group Annuity Contract No. GA-6121 between The Prudential Insurance Company
of America and State Street Bank and Trust Company, dated June 28, 1991
(incorporated herein by reference to Exhibit 10(h) of Cabot's Annual Report
on Form 10-K for the year ended September 30, 1991, file reference 1-5667,
filed with the Commission on December 27, 1991).
10(h)* -- Non-employee Directors' Stock Compensation Plan (incorporated herein by
reference to Exhibit A of Cabot's Proxy Statement for its 1992 Annual
Meeting of Stockholders, file reference 1-5667, filed with the Commission
on December 27, 1991).
24
26
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10(i)(i) -- Amended and Restated Omnibus Acquisition Agreement among American Oil and
Gas Corporation, Cabot Corporation and Cabot Transmission Corporation,
dated as of November 13, 1989 (incorporated herein by reference to Exhibit
(2) of Cabot's Current Report on Form 8-K, dated November 16, 1989, file
reference 1-5667, filed with the Commission).
10(i)(ii) -- Amended and Restated Basket Agreement among American Oil and Gas
Corporation, American Pipeline Company, Cabot Corporation and Cabot
Transmission Corporation, dated as of June 30, 1990 (incorporated herein by
reference to Exhibit 10(n) of Cabot's Annual Report on Form 10-K for the
year ended September 30, 1990, file reference 1-5667, filed with the
Commission on December 24, 1990).
10(i)(iii) -- First Amendment, dated March 31, 1992, to Amended and Restated Omnibus
Acquisition Agreement among American Oil and Gas Corporation, Cabot
Corporation and Cabot Transmission Corporation, dated as of November 13,
1989, and to Amended and Restated Basket Agreement among American Oil and
Gas Corporation, American Pipeline Company, Cabot Corporation and Cabot
Transmission Corporation, dated as of June 30, 1990 (incorporated herein by
reference to Exhibit 10(i)(ii) of Cabot's Annual Report on Form 10-K for
the year ended September 30, 1992, file reference 1-5667, filed with the
Commission on December 24, 1992).
10(j) -- Agreement for the Sale and Purchase of Liquefied Natural Gas and
Transportation Agreement, dated April 13, 1976, between Sonatrach and
Distrigas Corporation, and Amendment No. 3 to said Agreement, dated
February 21, 1988 (incorporated herein by reference to Exhibit 10(j) of
Cabot's Annual Report on Form 10-K for the year ended September 30, 1994,
file reference 1-5667, filed with the Commission on December 22, 1994).
10(k) -- Agreement for the Sale and Purchase of Liquefied Natural Gas and
Transportation Agreement, dated December 11, 1988, between Sonatrading and
Distrigas Corporation (incorporated herein by reference to Exhibit 10(p) of
Cabot's Annual Report on Form 10-K for the year ended September 30, 1989,
file reference 1-5667, filed with the Commission on December 28, 1989).
10(l) -- Contract for sale of vessel GAMMA between Cabot LNG Shipping Corporation
and the United States of America, dated September 18, 1990 (incorporated
herein by reference to Exhibit 10(q) of Cabot's Annual Report on Form 10-K
for the year ended September 30, 1990, file reference 1-5667, filed with
the Commission on December 24, 1990).
10(m) -- Mutual Assurances Agreements among Cabot Corporation, L'Entreprise
Nationale pour la Recherche, la Production, le Transport, la Transformation
et la Commercialisation des Hydrocarbures ("Sonatrach"), Distrigas
Corporation and Sonatrading Amsterdam B.V., dated February 21, 1988 and
December 11, 1988, respectively (incorporated herein by reference to
Exhibit 10.1 of Cabot's Current Report on Form 8-K, dated July 17, 1992,
file reference 1-5667, filed with the Commission).
10(n)(i) -- Agreement between K N Energy, Inc. ("KNE"), American Oil and Gas
Corporation ("AOG") and Cabot Corporation, dated June 27, 1994
(incorporated herein by reference to Exhibit 1 of Cabot's Schedule 13D
relating to KNE, file reference 1-5667, filed with the Commission on July
22, 1994 (the "KNE Schedule 13D")).
10(n)(ii) -- Registration Rights Agreement between KNE and Cabot Corporation, dated July
13, 1994 (incorporated herein by reference to Exhibit 2 of the KNE Schedule
13D).
10(n)(iii) -- Share Transfer and Registration Agreement between KNE and Cabot
Corporation, dated July 13, 1994 (incorporated herein by reference to
Exhibit 3 of the KNE Schedule 13D).
10(n)(iv) -- KNE By-law provision (incorporated herein by reference to Exhibit 10(o)(iv)
of Cabot's Annual Report on Form 10-K for the year ended September 30,
1994, file reference 1-5667, filed with the Commission on December 22,
1994).
25
27
EXHIBIT
NUMBER DESCRIPTION
------------ ---------------------------------------------------------------------------
10(n)(v) -- Request of Cabot for No Action Letter from staff of Securities and Exchange
Commission dated June 28, 1994, and reply dated July 6, 1994 (incorporated
herein by reference to Exhibit 10(o)(v) of Cabot's Annual Report on Form
10-K for the year ended September 30, 1994, file reference 1-5667, filed
with the Commission on December 22, 1994).
10(n)(vi) -- Application of Cabot for Declaration of Non-holding Company Status Pursuant
to Section 2(a)(7) of the Public Utility Holding Company Act of 1935, dated
July 11, 1994 (incorporated herein by reference to Exhibit 10(o)(vi) of
Cabot's Annual Report on Form 10-K for the year ended September 30, 1994,
file reference 1-5667, filed with the Commission on December 22, 1994).
10(o)(i) -- Asset Transfer Agreement, dated as of June 13, 1995, among Cabot Safety
Corporation, Cabot Canada Ltd., Cabot Safety Limited, Cabot Corporation,
Cabot Safety Holdings Corporation and Cabot Safety Acquisition Corporation
(incorporated herein by reference to Exhibit 2(a) of Cabot Corporation's
Current Report on Form 8-K, dated July 11, 1995, file reference 1-5667,
filed with the Commission).
10(o)(ii) -- Stockholders' Agreement, dated as of July 11, 1995, among Vestar Equity
Partners, L.P., Cabot CSC Corporation, Cabot Safety Holdings Corporation,
Cabot Corporation and various other parties thereto (incorporated herein by
reference to Exhibit 2(b) of Cabot Corporation's Current Report on Form
8-K, dated July 11, 1995, file reference 1-5667, filed with the
Commission).
11 -- Statement Re: Computation of Per Share Earnings, filed herewith.
12 -- Statement Re: Computation of Ratio of Earnings to Fixed Charges, filed
herewith.
21 -- List of Significant Subsidiaries, filed herewith.
24 -- Power of attorney for signing of this Annual Report on Form 10-K, filed
herewith.
27 -- Financial Data Schedule, filed herewith.
- ---------------
+ The Registrant agrees to furnish to the Commission upon request a copy of
these instruments with respect to long-term debt (not filed as an exhibit),
none of which relates to securities exceeding 10% of the total assets of the
Registrant and its consolidated subsidiaries.
* Management contract or compensatory plan or arrangement.
(d) Schedules. The Schedules have been omitted for the reason that they
are not required, not applicable, or the required information is included in the
financial statements or notes thereto.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned Registrant undertakes as follows, which undertaking shall be
incorporated by reference into Registrant's Registration Statement on Form S-8,
Registration No. 33-28699 (filed May 12, 1989), the Registrant's Registration
Statement on Form S-8, Registration No. 33-52940 (filed October 5, 1992) and the
Registrant's Registration Statement on Form S-8, Registration No. 33-53659
(filed May 16, 1994):
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
26
28
SIGNATURES
Pursuant to the requirements of Section 13 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 (Registrant)
By /s/ SAMUEL W. BODMAN
---------------------------------
Samuel W. Bodman, Chairman of the
Board and Chief Executive Officer
Date: December 21, 1995
Pursuant to the requirement of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ SAMUEL W. BODMAN Chairman of the Board and December 21, 1995
- ------------------------------------------ Director (Principal Executive
Samuel W. Bodman Officer)
/s/ KENYON C. GILSON Vice President and Chief December 21, 1995
- ------------------------------------------ Financial Officer (Principal
Kenyon C. Gilson Financial Officer)
/s/ PAUL J. GORMISKY Vice President and Controller December 21, 1995
- ------------------------------------------ (Principal Accounting Officer)
Paul J. Gormisky
* Director December 21, 1995
- ------------------------------------------
Jane C. Bradley
* Director December 21, 1995
- ------------------------------------------
Kennett F. Burnes
* Director December 21, 1995
- ------------------------------------------
John G.L. Cabot
* Director December 21, 1995
- ------------------------------------------
Robert A. Charpie
* Director December 21, 1995
- ------------------------------------------
Arthur L. Goldstein
27
29
SIGNATURES TITLE DATE
---------- ----- ----
* Director December 21, 1995
- ------------------------------------------
Robert P. Henderson
* Director December 21, 1995
- ------------------------------------------
Arnold S. Hiatt
* Director December 21, 1995
- ------------------------------------------
Gerrit Jeelof
* Director December 21, 1995
- ------------------------------------------
John H. McArthur
* Director December 21, 1995
- ------------------------------------------
John F. O'Brien
* Director December 21, 1995
- ------------------------------------------
David V. Ragone
* Director December 21, 1995
- ------------------------------------------
Charles P. Siess, Jr.
* Director December 21, 1995
- ------------------------------------------
Morris Tanenbaum
* Director December 21, 1995
- ------------------------------------------
Lydia W. Thomas
*By /s/ CHARLES D. GERLINGER
- ------------------------------------------
Charles D. Gerlinger
as Attorney-in-Fact
28
30
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Cabot Corporation on Form S-3 (File No. 33-48686) and on Forms S-8 (File Nos.
33-28699, 33-52940 and 33-53659) of our report dated October 30, 1995, on our
audit of the consolidated financial statements of Cabot Corporation as of
September 30, 1995 and 1994, and for each of the three years in the period ended
September 30, 1995, which report is included in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 20, 1995
29
31
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30
----------------------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
Revenues:
Net sales and other operating revenues........... $1,830,393 $1,679,819 $1,614,315
Interest and dividend income..................... 10,492 6,742 4,225
---------- ---------- ----------
Total revenues.............................. 1,840,885 1,686,561 1,618,540
========= ========= =========
Costs and expenses:
Cost of sales.................................... 1,258,964 1,234,272 1,211,655
Selling and administrative expenses.............. 234,693 222,069 204,804
Research and technical service................... 59,184 48,701 45,651
Interest expense (Note G)........................ 35,639 41,668 44,043
Specialty Chemicals and Materials Group
restructuring (Note B)......................... -- (4,000) 47,400
Gain on resolution of matters from divested
energy businesses (Note B)..................... -- (10,210) (14,177)
Gain on sale of safety business (Note B)......... (32,625) -- --