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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1994 COMMISSION FILE NUMBER
1-56671995
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
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COMMISSION FILE NUMBER 1-5667
CABOT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 04-2271897
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR (IRS EMPLOYER IDENTIFICATION NUMBER) ORGANIZATION)
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IDENTIFICATION NUMBER)
75 STATE STREET, BOSTON, MASSACHUSETTS 02109-1806
BOSTON, MASSACHUSETTS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(617) 345-0100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO
SECTION 12(B) OF THE ACT:
COMMON STOCK, $1 PAR VALUE PER SHARE: BOSTON STOCK EXCHANGE
38,005,607SECURITIES 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
AT NOVEMBER 22, 1994
PACIFIC STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS
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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/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 22, 1994,30, 1995, was approximately
$940,000,000.$1,547,609,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the fiscal year
ended September 30, 1994 (the "Annual Report") are incorporated by reference in
Parts I, II and IV, and portions of the registrant's definitive Proxy Statement for its 19951996 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 is a Fortune 300 Company withhas businesses in specialty chemicals and
materials and in energy. The Company and its affiliates have manufacturing
facilities in the United States and 2221 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, 1994,1995,
unless otherwise noted. Information regarding the revenues and operating profits
of the Company's business segments and geographic areas appears in the Annual
Report aton pages 1915 and
38.F-19 and F-20 of this Report.
On August 17, 1994, Cabot effectedNovember 10, 1995, Cabot's Board of Directors authorized a two-for-one
stock split in the form of a stock dividend of itsCabot'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 on
September 9, 1994, was increased to $0.18 per share from $0.14 per share. In October 1994, Cabot's
Board of Directors authorized the purchase ofSeptember
1995, Cabot commenced a program to repurchase up to 1,500,0003,000,000 shares of its
Common Stock in an effort to reduce the total number of shares of Common Stock
which superseded a previous authorization. Effective September 30, 1994,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 adopted Statementrestructured the ownership of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investmentsits 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
Debt and Equity Securities", requiring itafter-tax proceeds to reflect investmentsthe Company. The Company has an approximately 42.5%
ownership position in equity securities with readily determinable fair
values on the balance sheet at their market values as of September 30, 1994.new corporation.
Additional information regarding significant events affecting the Company
in its fiscal year ended September 30, 1994,1995, appears in the Annualthis Report at pages 1712
through 23.21.
SPECIALTY CHEMICALS AND MATERIALS
The businesses of the Specialty Chemicals and Materials Group manufacturemanufactures carbon black;
fumed silica; thermoplasticsthermoplastic concentrates and specialty compounds; and electronic
materials and refractory metals;metals. The Company also owns an approximately 42.5%
interest in Cabot Safety Corporation, which manufactures and sells personal
safety environmental
enhancementproducts and energy absorbing products.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 is used as a reinforcing agent in tires (tire blacks) and
otherindustrial rubber products such as extruded profiles, hoses and gasketsmolded 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 forof carbon black.
The Company competes in the manufacture of carbon black with twothree 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 and 5)of this
Report).
The Company's carbon black business is operated through a matrix of four
regional divisions,Divisions, European, North American, Pacific Asia and South American,
and three sectors, industrial rubber blacks, special blacks and tire blacks.
Tire blacks and various grades of industrial rubber blacks are produced in most
of the carbon black manufacturing plants owned by the Company and its
affiliates.
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 (three(two plants), Malaysia, Mexico, The People's Republic of China and
Venezuela. During fiscal 1994,year 1995, an affiliate of the Company consolidated the balance
sheet of its Indonesia subsidiary. The Company also completed the closingclosed one of
its carbon black manufacturing facilityplants in Japan. The Company also announced plans to increase
its carbon black capacity in North America and South America (see Item 2
3
Hanau, Germany"Properties" at page 7 of this Report, and began operationItem 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 affiliate-owned plantaffiliates in the
Czech Republic. In addition, because of significant on-going losses expected to
continue into the future, the Company wrote off its equity investment in its
Japanese carbon black manufacturing affiliate. The write-off is not expected to
affect the Company's Japanese special blacks subsidiary.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), Cabot(R),
Elftex(R), Mogul(R), Monarch(R), Regal(R), Spheron(TM), Sterling(R) and
Sterling(R)Vulcan(R) are the best known.
Carbon black research, development and technical service programs conducted
within the carbon black businesses are directed toward development of new and
improved processes and products, improvements in operating efficiencies and
conservation of energy at the Company's plants. The carbon black technology
efforts are concentrated in Billerica, Massachusetts with additional facilities
in Norcross, Georgia, Pampa, Texas and Leiden, The Netherlands (see also the
section headed "Research and Development of the Company" on page 6).
FUMED SILICACAB-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
for
consumers,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 this businessthe Cab-O-Sil Division is located in
Boston,
Massachusetts. ItsAurora, Illinois, and its North American manufacturing plant is located in
Tuscola, Illinois.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 and 5)of this Report). CabotThe 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 CompanyCompany'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 the Far East.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 compounds.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.tellurium and their compounds.
Tantalum is produced in various forms including powder, wire, sheet and foil for
electrolytic
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4 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
produced forby the defense industry. The headquarters and the principal manufacturing
facility of this business are in Boyertown, Pennsylvania. A wholly-owned subsidiary,
Tantalum Mining Corporation ofSubsidiaries in Canada
Limited ("Tanco"), holds ahold leasehold interestinterests in land and certain mineral rights with respect to such
land in Manitoba, Canada. Tanco mines(See Item 2 "Properties" at page 7 of this Report for
additional manufacturing facilities planned to be constructed in Boyertown,
Pennsylvania and sellsManitoba, Canada.) The subsidiaries mine and sell tantalite,
spodumene, lepidolite and pollucite. Showa Cabot Supermetals K.K., anAn affiliate of the Company has a
manufacturing plant in Japan. Raw materials are currently in adequate supply.
TheyThe 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. OneSales in Europe are made by an affiliate of the
companies which is a sales representative for the
Company in Europe is affiliated with Cabot.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).
SAFETY, ENVIRONMENTAL ENHANCEMENT AND ENERGY ABSORBING PRODUCTSOTHER
The Company maintained an approximately 42.5% ownership interest in Cabot
Safety Corporation, ("Cabot Safety"), a wholly-owned subsidiaryafter 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. Included in personal safety equipment are
hearing protection, safety eyewear and respiratory equipment sold to industrial,
consumer and health care markets. The products are made from organic polymers,
inorganic chemicals and various plastic compounds such as propionates,
polyurethanes, polyvinyl chlorides and polycarbonates, supplies of which are
readily available. Cabot Safety is headquartered in Southbridge, Massachusetts.
Its principal manufacturing facilities are in Southbridge, Indianapolis, Indiana
and Newark, Delaware. Significant manufacturing facilities, located in Poynton,
England and Mississauga, Canada are leased by subsidiaries of Cabot. Sales are
made worldwide through sales representatives and distributors and by Company
employees. Cabot Safety competes with a number of companies in its various
product lines. The Company believes Cabot Safety is the world leader in
disposable hearing protection and is among the leading producers in its other
personal safety product lines (see "General" below).
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 taken as a whole, the rights of the Company and
the products made and sold under these patents and licenses are important to the
Company's businesses,Specialty Chemicals and Materials Group, the loss of any particular patent or
license would not materially affect the businesses of this Group.Group, taken as a
whole. Products of this Group are also sold by the Company under a
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5
variety of trademarks, the loss of any one of which would similarly not
materially affect the businesses of this Group.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, 19941995 were approximately $119,000,000,$169 million, compared to firm backlog
orders as of September 30, 1993,1994, of approximately $95,000,000.$108 million. All but
approximately $6,000,000 of the 19941995
backlog orders are expected to be filled during fiscal year 1995.1996.
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 usesend-uses
associated with the automotive industry such as tires, extruded profiles, hoses,
gaskets,molded goods, capacitors and paints. The Company's financial results are
affected by the cyclical nature of the automotive
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5 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 safety 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 transportation,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. In
1992, a subsidiary of the Company entered into a long-term contract with Nigeria
LNG Limited for the supply of LNG. The contract provides for initial deliveries
of LNG commencing in the late 1990s. It is unclear when, if ever, Nigeria LNG
Limited will begin construction of an LNG plant. Cabot has entered into a
limited guaranty of the subsidiary's payment obligations under the contract with
Nigeria LNG Limited for an amount not to exceed $150,000,000 plus the amount of
any prior payments by Cabot under the guaranty in respect of which make-up LNG
has been delivered to the subsidiary. The Company has received authorizations from the U.S. Department
of Energy to import LNG under the contracts with Sonatrading, and Nigeria LNG Limited, 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 at least through fiscal year 1995.1996. The Company has been able to continue to meet
its firm sales obligations to customers and is exploring additional sources of
supply. Political unrest in Algeria continues. 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.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 could beare obtained.
The Company is working withA 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 The
National GasNGC Trinidad and Tobago
LNG Limited have formed Atlantic LNG Company of Trinidad and Tobago toward("Atlantic
LNG") to construct, own and operate a proposalnew 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 constructionsupply of LNG from a liquefactionproject to be constructed. Amid
delays in the implementation of the LNG project, the subsidiary did not agree to
extend the contract, and export facility forNigeria LNG in Trinidad.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 transportshas it transported by rail to Texas where it
processesis processed and sells itsold to Southwestern Public Service Company ("SPS") pursuant to
long-term sales contracts for use in generating electricity. The loss of 5
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SPS as
a customer of TUCO couldwould 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. As a
result of the adoption by the Company of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", on September 30, 1994, theThe
Company has reflected its investment in the common stock of KNE at its fair
market value as of that date.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 in the west Texas area 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.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, 1994,1995, the Company had approximately 5,4004,100 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.
Approximately 620 out of a total of approximately 3,100 employees in the United
States are covered by collective bargaining agreements.
RESEARCH AND DEVELOPMENT
OF THE COMPANY
The CompanyCompany'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 24F-1 of the Annual Report and are incorporated herein
by reference.this Report.
ENVIRONMENT, SAFETY AND HEALTH
The Company's operations are subject to severalvarious environmental laws and
regulations. Over the past fiveseveral years, the Company has expended considerable
sums to add, improve, maintain and operate facilities for environmental
protection. A significant amount of the Company's normal capital projects to
improve or replace manufacturing facilities has provided positive environmental
benefits. Expenditures for equipment or facilities intended solely for
environmental protection are estimated to have been approximately $4,000,000$6 million in
fiscal year 19941995 and are expected not to exceed $10,000,000$30 million in fiscal 1995. In
addition, expendituresyear 1996.
Expenditures of at least $30,000,000$65 million in the aggregate for such equipment and
facilities are forecast to be spent in fiscal years 1995, 1996, 1997 and 19971998 to
enable Cabot's U.S. plants to comply with the Clean Air Act. During the
next several years, the Company expects to utilize a significant portion of its
environmental reserve, currently valued at approximately $44,000,000, to
implement remediation plans for various sites. Compliance with the laws and
regulations relating to the protection of the environment is not expected to
have a material adverse effect on the Company's earnings or competitive position
or the Company's ability to make capital expenditures, in the opinion of the
Company's management.
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. Seesites (see Item 3, "Legal
Proceedings," on pages 7 through 9 of this Report for a description of various
environmental proceedings.
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7proceedings). 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 included on pages 1915 and
38F-19 and F-20 of the Annual Report and are incorporated herein by reference.this Report. A significant portion of the Company's revenues
and operating profits is derived from overseas operations. ProfitabilityThe 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(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, and
Financial Condition, appearing in Item 7 on page 38 and pages 1712 through 23, respectively,
in the Annual Report and incorporated herein by reference.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.
- --------------------------------------------------------------------------------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
manufacturing plantsoperations in Louisiana, Massachusetts, Texas and West Virginia (comprising
approximately 77,50084,800 square yards); (ii) its research and development facilities
in Illinois, Massachusetts, Pennsylvania and Texas and its applications
development facility in Georgia (comprising approximately 29,79024,700 square yards);
(iii) administrative offices and manufacturing plants of its Cab-O-Sil Cabot Safety and Cabot
Performance Materials business units in Delaware, Illinois Indiana and Pennsylvania (comprising
approximately 92,65056,400 square yards); and (iv) its LNG terminalling and storage
facility in Massachusetts (approximately(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 365,000433,600 square yards of manufacturing
facilities, 3,900 square yards of research and development facilities, and
60,50063,500 square yards of administrative facilities.
The principal facilities leased by the Company in the United States are:
(i)are its
corporate headquarters in Boston, Massachusetts 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 15,600 square yards); and (ii) the administrative offices and
manufacturing facilities of Cabot Safety in Delaware, Indiana and Massachusetts
(comprising approximately 53,10017,900 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 Indonesia and Spain and the Plastics business in Belgium
and Cabot Safety in Canada and England as well as the Tanco leasehold interestinterests of the Cabot Performance Materials business
in Canada (comprising approximately 170,50089,000 square yards).
The Company's administrative offices and manufacturing facilities are generally suitable and adequate
for their intended purposes.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 in general adequatenot
sufficient to meet the Company's increased requirements for the Company's requirements.
- --------------------------------------------------------------------------------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, 1994:
7
81995:
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 is scheduled to
installcompleted
7
9
installation of a groundwater extractioncollection system and removeremoved the contaminated
soil found
duringfrom an old coal tar lagoon near its former property. Cabot has filed a
cost recovery suit against other responsible parties at the design phase at an estimated design and implementation costsite seeking
reimbursement of approximately $3,100,000 (including $1,400,000 in costs already spent).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") has beenwas issued by the EPA specifying a combination of remedial
actions for the site at an estimated cost of almost $15,000,000.$15 million. The EPA issued
an administrative order directing Cabot and four other companies to design and
complete the remedial measures; muchmost of the work on site remediation has been
completed. Cabot and the other companies involved have not yet reached a tentative
agreement on the portions of the costs to be borne by each.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. The second RODA 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 been issued. It is notbe
possible at this point 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 United StatesU.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 $48,000,000.$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 announced that it had reached settlements in principle with certain de
minimis parties. Negotiations continue with the other parties, including Cabot.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 Cabot has 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, the 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.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 1996. In March 1989, the1997 or 1998. Pursuant to an EPA issued an
administrative order, under Section 106 of the Superfund law directing 1915 companies, including Cabot, to performare performing the design
and other preliminary work relating to sediment cleanup. Concurrently, the
specifiedcompanies 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 the proposed cleanup of portions of the
Brook. In September 1989, the United States filed suit in the United States
District Courtthese areas. Consequently, it is not possible to determine future remedial
costs for the Northern Districtfloodplain and wetlands. The EPA's cost recovery claims through
the end of Ohio1989 have been settled; the companies, including Cabot, that have
paid for work at the site are seeking to recover past
governmental investigatory costs. The cost recovery claims have been settled and
the action has been stayed pending the resulta share of arbitration proceedings under a
Cooperation Agreement which provides for the sharing of past and future remedial
and investigatorythose costs incurred in implementing the EPA's 1989 order. The EPA
8
9
has indicated that remediation may be required at the plant sites along the
Brook, including at leastfrom
other responsible parties. At one of the facilitiesplants formerly operated by Cabot.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. At present thereCabot and other third-party
defendants filed complaints against five additional companies that sent waste to
the site. It is no evidencenot 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 the
material allegedly senta 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 landfill will result in liability for
cleanup costs.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, 1994,1995, approximately $44,000,000$51.6 million was accrued for
environmental proceedingsmatters 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 applicable laws and regulations atapplicable 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. The federal cases have been
consolidated in the Multi-District Litigation pending in the United States
District Court for the Northern District of Alabama. Generally, the various
state cases have been similarly consolidated in each jurisdiction. In addition,
arrangements have been made for consolidated discovery in all actions. A
so-called "global settlement" between certain classes of plaintiffs who have not
"opted out" and certain defendants (not including Cabot) has been approved by
the United States District Court for the Northern District of Alabama.
Plaintiffs who have opted out of the settlement are now free to proceed with
their own claims.
Cabot hashad 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 been dismissed as a defendant from a number of those suits,
withoutnot made any settlement payments
and has been granted summary judgment (subject
to appeal) in others.connection with any breast implant suits. Cabot believes that it has adequate
defenses in each of
the lawsuitslawsuit 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 litigationlawsuit 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
federal district courtthe U.S. District Court in Oklahoma, brought by a large group of plaintiffs
allegingclaiming 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 $1,250,000,000.$1.25 billion. Cabot is currently investigating this matterhas reached a settlement agreement with
the plaintiffs, pursuant to ascertain what products, if any, were manufactured bywhich it that arewill pay a nominal amount in settlement of
any
relevance to this litigation.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
11
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(See Note L of the Notes to the Company's Consolidated Financial Statements on
page 37pages F-17 and F-18 of the Annual Report.
- --------------------------------------------------------------------------------this Report).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
- --------------------------------------------------------------------------------
9
10
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below, as of November 22, 1994,30, 1995, for each executive officer of
Cabot is information regarding his age, position(s) with Cabot, the periods
during which he has 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............. 55Bodman.... 57 Cabot Corporation
Chairman of the Board October 1988 to present
President February 1991 to present,February 1995
January 1987 to October 1988
Chief Executive Officer February 1988 to present
FMR Corp. (investment
advisor and mutual
fund manager),
President and Chief
Operating Officer 1983 to December 1986
John G.L. Cabot.............. 60Kennett F. Burnes... 52 Cabot Corporation
Vice Chairman of the Board October 1988President February 1995 to present
Chief Financial Officer October 1992 to present
Executive Vice President January 1985 to October 1988
Kennett F. Burnes............ 51 Cabot Corporation
Executive Vice President October 1988 to February 1995
Kenyon C. Gilson.... 51 Cabot Corporation
Chief Financial Officer October 1995 to present
SecretaryVice President August 1989 to present
Paul J. Gormisky.... 42 Cabot Corporation
Controller April 1995 to present
Vice President February 19881994 to October 1988present
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 November 1987October 1993 to October 1988present
Choate, Hall & Stewart
(law firm), Partner 1976 to November 1987
John D. Curtin, Jr........... 61 Cabot Corporation
Executive Vice President July 1989 to present
Chief Financial Officer July 1989 to October 1992
Curtin & Co., Incorporated
(investment banking),
President, Chief Executive
Officer and Director 1974 to June 1989
Robert Rothberg.............. 45 Cabot Corporation
Vice President and
General Counsel October 1993 to present
Choate, Hall & Stewart
(law firm), Partner January 1982 to October 1993
William R. Thompson.......... 59 Cabot Corporation
Vice President and November 1989 to present
Controller
Kurzweil Music Systems, Inc.
(computerized musical
instruments),
President, Chief Operating
Officer and Director May 1985 to June 1989
10
1112
- --------------------------------------------------------------------------------
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, 1994,1995, 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 and total cash dividends per share paid infor the past two fiscal years are shown below, restated
to reflect thea two-for-one stock split in August 1994.
- --------------------------------------------------------------------------------
STOCK PRICE AND DIVIDEND DATA
DEC.DECEMBER MARCH JUNE SEPT.
FISCAL 1994 QTR. QTR. QTR. QTR.SEPTEMBER YEAR
-------- ------- ------ --------- ------
- -----------------------------------------------------------------------------------------------------FISCAL 1995
Cash dividends per share..........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..............................High............................................. $29.19 $28.00 $26.63 $28.38 $29.19
Low...............................Low.............................................. $26.13 $25.56 $24.44 $25.13 $24.44
Close.............................Close............................................ $26.94 $27.00 $25.56 $27.25 $27.25 - -----------------------------------------------------------------------------------------------------$27.25
DEC. MARCH JUNE SEPT.
FISCAL 1993 QTR. QTR. QTR. QTR. YEAR
- -----------------------------------------------------------------------------------------------------
Cash dividends per share.......... $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.52
Price range of common stock:
High.............................. $24.81 $21.94 $24.38 $28.13 $28.13
Low............................... $20.56 $18.63 $19.81 $23.31 $18.63
Close............................. $21.69 $21.25 $24.38 $27.75 $27.75
- -----------------------------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
Cabot Corporation Selected Financial Data:
(Dollars in Thousands, Except Per Share Amounts)
YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
1990
--------- --------- --------- --------- ------------------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Financial Highlights
Net sales and other operating
revenues from continuing
operations................operations.................... $1,830,393 $1,679,819 $1,614,315 $1,556,986 $1,482,089
$ 1,547,910
- ------------------------------------------------------------------------------------------------------------ ---------- ---------- ---------- ----------
Income from continuing
operations................operations.................... $ 171,932 $ 78,691 $ 37,410 $ 62,223 $ 39,825
---------- ---------- ---------- ---------- ----------
Long-term debt................... $ 41,875
- --------------------------------------------------------------------------------------------------
Long-term debt...............306,443 $ 307,828 $ 459,275 $ 479,882 $ 369,609
Minority interest................ $ 480,762
Minority interest............-- $ -- $ -- $ 9,756 $ --
Stockholders' equity............. $ 18,642
Stockholders' equity.........685,000 $ 562,489 $ 442,273 $ 492,955 $ 426,863
---------- ---------- ---------- ---------- ----------
Total capitalization.......... $ 570,589
- --------------------------------------------------------------------------------------------------
Total capitalization......991,443 $ 870,317 $ 901,548 $ 982,593 $ 796,472
$1,069,993
- ------------------------------------------------------------------------------------------------------------ ---------- ---------- ---------- ----------
Total assets...................assets....................... $1,654,333 $1,616,756 $1,489,473 $1,554,529 $1,462,396
$1,731,909
- ------------------------------------------------------------------------------------------------------------ ---------- ---------- ---------- ----------
Per Share:
Income from continuing
operations................operations.................... $ 4.35 $ 1.96 $ 0.90(a) $ 1.59 $ 0.85
Net income....................... $ 0.77(c)
Net income...................4.35 $ 1.96 $ 0.20(b) $ 1.59 $ 2.90
Cash dividends................... $ 1.37
Cash dividends...............0.60 $ 0.53 $ 0.52 $ 0.52 $ 0.52
$ 0.52
- ------------------------------------------------------------------------------------------------------------ ---------- ---------- ---------- ----------
Average shares outstanding --
thousands....................thousands........................ 38,726 38,249 37,438 36,802 42,556
49,162
- --------------------------------------------------------------------------------------------------
- ---------------
(a) Includes charges---------------
(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
13
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.
14
16
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.
15
17
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 energymargins 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
17
19
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 adjustment of $0.23 per share. (see Item 7)
(b) Includescertain 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 of $0.70 per share for the cumulative effect of requiredthe
change in accounting changes.
(c) Includes chargesfor postretirement health care and life insurance benefits.
SFAS No. 109 requires an asset and liability approach for financial
accounting and reporting of $0.26 per share for take-or-pay provisions related toincome taxes. The Company recognized a $17.1 million
benefit in 1993 as the divestiturecumulative effect of selected energy businesses.
11
12
- --------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information required by this Item appears in the Annual Report on pages
17 through 23 and is incorporated herein by reference.
- --------------------------------------------------------------------------------adoption of SFAS No. 109.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The informationfinancial statements and supplementary data required by this item appears in the Annual Reportare
set forth on pages 24 through 39F-1 to F-20 of this Report and is incorporatedare indexed herein by reference.
- --------------------------------------------------------------------------------under Item
14(a) of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ANDON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
- --------------------------------------------------------------------------------
1221
1323
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required regarding the executive officers of Cabot is
included in Part Ion 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 on pages 2 through 6 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 on page 15 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 on pages 9
through 12 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 on pages 7
through 9 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
None.
- --------------------------------------------------------------------------------
13The 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
1424
- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements. The following are incorporated herein by
reference in this Report from the indicated pages of the Company's Annual
Report:
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 PAGE
-------------------------------------------------------------- ---------OF THIS REPORT
----------- --------------
(1) Consolidated Statements of Income for each of the three fiscal
years in the period ended September 30, 1994................ 241995.................. F-1
(2) Consolidated Balance Sheets at September 30, 19941995 and 1993.... 25 to 261994...... F-2
(3) Consolidated Statements of Cash Flows for each of the three
fiscal years in the period ended September 30, 1994......... 271995........... F-3
(4) Notes to Consolidated Financial Statements.................... 28Statements...................... F-4 to 39F-20
(5) Statement of Management Responsibility for Financial Reporting
and Report of Independent Accountants relating to the
Consolidated Financial Statements listed above.............. 40above................ 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 sent to
stockholders)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-- Certificate of Incorporation of Cabot Corporation restated effective
October 24, 1983, as amended February 14, 1985, December 3, 1986, February
19, 1987, and November 18, 1988, (incorporated herein by reference to Exhibit 3(a) of Cabot's
Annual Report on Form 10-K for the year ended September 30,
1988, file reference 1-5667,and November 24, 1995, filed with the Commission on
December 29, 1988).herewith.
3(b) --The-- 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- K10-K
for the year ended September 30, 1991, file reference 1-5667, filed with
the Commission on December 27, 1991).
4(a)(i) --Rights -- Rights Agreement, dated as of November 14, 1986, amended and
restated as of August 12, 1988,10, 1995, between Cabot Corporation
and The First National Bank of Boston as Rights Agent (incorporated herein
by reference to Exhibit 1 of Cabot's Current ReportRegistration Statement on Form 8-K, dated August 12, 1988, file reference 1-5667, filed
with the Commission).
4(a)(ii) --Amendment to Rights Agreement dated as of November 15, 1990
(incorporated herein by reference to Exhibit 4(a)(ii) of Cabot's
Annual Report on Form 10-K for the year ended September 30,
1990,8-A,
file reference 1-5667, filed with the Commission on December 24, 1990)November 13, 1995).
4(b)(i) --Indenture,-- 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-- 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 Statement No. 33-48686,
filed with the Commission).
4(c)(i)+ --Finance-- Finance Agreement between P.T. Cabot Chemical and Overseas Private
Investment Corporation, dated September 10, 1991.
14
15
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------
4(c)(ii)+ --Facility-- 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-- 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-- 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) --Credit(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-- 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-- 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-- 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 herewith.with the Commission on
December 22, 1994).
10(e)(ii)* --Supplemental-- 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 herewith.with the
Commission on December 22, 1994).
10(e)(iii)* --Supplemental-- 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 herewith.with the
Commission on December 22, 1994).
10(e)(iv)* --Supplemental-- Supplemental Employee Benefit Agreement forwith 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-- 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 forin the year ended September 30, 1991, file reference 1-5667,
filed with the Commission on December 27, 1991).
10(g) --Group-- 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-- 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 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-- 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-- 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, (incorporated herein byfile reference to Exhibit 10(n) of Cabot's
Annual Report1-5667, filed with the
Commission on Form 10-K for the year ended September 30,
1990, file reference 1-5667, filed with the Commission on
December 24, 1990).
15
16
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------
10(i)(iii) --First-- 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-- 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 herewith.with the Commission on December 22, 1994).
10(k) --Agreement-- 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-- 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-- 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) --LNG Sale and Purchase(i) -- Agreement between Distrigas Corporation
and Nigeria LNG Limited, dated June 15, 1992 (incorporated
herein by reference to Exhibit 10.2 to Cabot's Current Report on
Form 8-K, dated July 17, 1992, file reference 1-5667, filed with
the Commission).
10(o)(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(o)10(n)(ii) --Registration-- 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(o)10(n)(iii) --Share-- 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(o)10(n)(iv) --KNE-- 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 herewith.
10(o)with the Commission on December 22,
1994).
25
27
EXHIBIT
NUMBER DESCRIPTION
------------ ---------------------------------------------------------------------------
10(n)(v) --Request-- 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
herewith.
10(o)with the Commission on December 22, 1994).
10(n)(vi) --Application-- 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 herewith.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, --Statement Re1995, 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-- Statement Re: Computation of Ratio of Earnings to Fixed Charges, filed
herewith.
13 --Pages 17 through 40 of the 1994 Annual Report to Stockholders of
Cabot Corporation, a copy of which is furnished for the
information of the Securities and Exchange Commission. Portions
of the Annual Report not incorporated herein by reference are
not deemed "filed" with the Commission.
16
17
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------
21 --List-- List of Significant Subsidiaries, filed herewith.
24(a) --Power24 -- Power of attorney for signing of this Annual Report on Form 10-K, dated November 11, 1994, filed herewith.
24(b) --Certified copy of vote of Cabot's Board of Directors of October
14, 1994, authorizing the execution and filing of this Annual
Report on Form 10-K, filed
herewith.
27 --Financial-- 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 following Consolidated Schedules and information appear
on page 20 and pages S-1 to S-5 of this Report:
Report of Independent Accountants on Schedules.
V. Property, Plant and Equipment.
VI. Accumulated Depreciation and Amortization of Property, Plant and
Equipment.
IX. Short-Term Borrowings.
X. Supplementary Income Statement Information.
XIII. Other Investments.
Schedules other than those listed above arehave been omitted for the reason that they
are not required, or are not applicable, or the required information is shownincluded 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.
1726
1828
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
By..................................
SAMUEL---------------------------------
Samuel W. BODMAN,Bodman, Chairman of the
Board President and Chief Executive Officer
Date: December 20, 199421, 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 20, 1994
........................................21, 1995
- ------------------------------------------ Director (Principal Executive
Samuel W. Bodman Officer)
/s/ KENYON C. GILSON Vice President and Director
SAMUEL W. BODMANChief December 21, 1995
- ------------------------------------------ Financial Officer (Principal
Executive
Officer)
/s/ JOHN G.L. CABOT Director, Vice Chairman of the December 20, 1994
........................................ Board and Chief Financial
JOHN G.L. CABOT Officer (PrincipalKenyon C. Gilson Financial Officer)
/s/ WILLIAM R. THOMPSONPAUL J. GORMISKY Vice President and Controller December 20, 1994
........................................21, 1995
- ------------------------------------------ (Principal Accounting WILLIAM R. THOMPSON Officer)
Paul J. Gormisky
* Director December 20, 1994
........................................
DAMARIS AMES21, 1995
- ------------------------------------------
Jane C. Bradley
* Director December 20, 1994
........................................
JANE C. BRADLEY21, 1995
- ------------------------------------------
Kennett F. Burnes
* Director December 20, 1994
........................................
KENNETT F. BURNES21, 1995
- ------------------------------------------
John G.L. Cabot
* Director December 20, 1994
........................................
ROBERT21, 1995
- ------------------------------------------
Robert A. CHARPIECharpie
* Director December 20, 1994
........................................
JOHN D. CURTIN, JR.
* Director December 20, 1994
........................................
ROBERT P. HENDERSON
* Director December 20, 1994
........................................
ARNOLD S. HIATT21, 1995
- ------------------------------------------
Arthur L. Goldstein
1827
1929
SIGNATURES TITLE DATE
- ------------------------------------------ ------------------------------ ---------------------------- ----- ----
Director December 20, 1994
........................................
GERRIT JEELOF
* Director December 20, 1994
........................................
JOHN H. MCARTHUR21, 1995
- ------------------------------------------
Robert P. Henderson
* Director December 20, 1994
........................................
JOHN F. O'BRIEN21, 1995
- ------------------------------------------
Arnold S. Hiatt
* Director December 20, 1994
........................................
DAVID V. RAGONE21, 1995
- ------------------------------------------
Gerrit Jeelof
* Director December 20, 1994
........................................
CHARLES P. SIESS, JR.21, 1995
- ------------------------------------------
John H. McArthur
* Director December 20, 1994
........................................
MORRIS TANENBAUM21, 1995
- ------------------------------------------
John F. O'Brien
* Director December 20, 1994
........................................
LYDIA21, 1995
- ------------------------------------------
David V. Ragone
* Director December 21, 1995
- ------------------------------------------
Charles P. Siess, Jr.
* Director December 21, 1995
- ------------------------------------------
Morris Tanenbaum
* Director December 21, 1995
- ------------------------------------------
Lydia W. THOMASThomas
*By /s/ CHARLES D. GERLINGER
*By.......................................
CHARLES- ------------------------------------------
Charles D. GERLINGER
AS ATTORNEY-IN-FACTGerlinger
as Attorney-in-Fact
1928
20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholders of
Cabot Corporation:
Our report on the consolidated financial statements of Cabot Corporation is
incorporated by reference in this Form 10-K from page 40 of the 1994 Annual
Report to Stockholders of Cabot Corporation. In connection with our audits of
such financial statements, we have also audited the related financial statement
schedules listed in the Index on page 17 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS30
[COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 1, 1994LETTERHEAD]
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 No.Nos.
33-28699, No. 33-52940 and No. 33-53659) of (1) our report dated November 1, 1994,October 30, 1995, on our
auditsaudit of the consolidated financial statements of Cabot Corporation as of
September 30, 19941995 and 1993,1994, and for each of the three years in the period ended
September 30, 1994, which report is included in the
1994 Annual Report to Stockholders of Cabot Corporation, filed as Exhibit 13 to
this Annual Report on Form 10-K; and (2) our report dated November 1, 1994, on
our audits of the financial statement schedules of Cabot Corporation as of
September 30, 1994 and 1993, and for each of the three years in the period
ended September 30, 1994,1995, which report is included in this Annual Report on Form 10-K.
COOPERSCoopers & LYBRANDLybrand L.L.P.
Boston, Massachusetts
December 20, 1994
201995
29
21
CABOT CORPORATION CONSOLIDATED
- --------------------------------------------------------------------------------31
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
YEARCABOT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30
----------------------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN 000'S)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) -- --
Other charges, net............................... 28,688 35,736 11,264
---------- ---------- ----------
Total costs and expenses.................... 1,584,543 1,568,236 1,550,640
========= ========= =========
Income before income taxes............................ 256,342 118,325 67,900
Provision for income taxes (Note K)................... (101,080) (44,963) (30,699)
Equity in net income of affiliated companies
(Note D)............................................ 16,670 5,329 209
---------- ---------- ----------
Income before cumulative effect of accounting
changes............................................. 171,932 78,691 37,410
---------- ---------- ----------
Cumulative effect of accounting changes
(Notes H and K)..................................... -- -- (26,109)
---------- ---------- ----------
Net income.................................. 171,932 78,691 11,301
========= ========= =========
Dividends on preferred stock, net of tax benefit of
$1,911, $1,929 and $1,934........................... (3,551) (3,583) (3,632)
---------- ---------- ----------
Income applicable to common shares.......... $ 168,381 $ 75,108 $ 7,669
========= ========= =========
Income per common share (Notes A and I):
Primary
Continuing operations............................ $ 4.35 $ 1.96 $ 0.90
Cumulative effect of accounting changes.......... -- -- (0.70)
---------- ---------- ----------
Income per share............................ $ 4.35 $ 1.96 $ 0.20
Fully diluted
Continuing operations............................ $ 4.04 $ 1.84 $ 0.90
Cumulative effect of accounting changes.......... -- -- (0.70)
---------- ---------- ----------
Income per share............................ $ 4.04 $ 1.84 $ 0.20
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-1
32
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
COLUMNSEPTEMBER 30
-------------------------
1995 1994
---- ----
ASSETS (DOLLARS IN THOUSANDS)
Current assets:
Cash and cash equivalents................................................ $ 90,792 $ 80,917
Accounts and notes receivable (net of reserve for doubtful accounts of
$5,207 and $7,697)...................................................... 292,777 272,787
Inventories (Note C)..................................................... 253,110 216,882
Prepaid expenses......................................................... 13,499 13,293
Deferred income taxes (Note K)........................................... 27,681 22,509
---------- ----------
Total current assets................................................ 677,859 606,388
---------- ----------
Investments:
Equity (Notes B and D)................................................... 98,866 86,164
Other (Notes D and I).................................................... 119,866 115,768
---------- ----------
Total investments................................................... 218,732 201,932
---------- ----------
Property, plant and equipment (Note E)....................................... 1,447,653 1,381,576
Accumulated depreciation and amortization.................................... (741,132) (687,068)
---------- ----------
Net property, plant and equipment................................... 706,521 694,508
---------- ----------
Other assets:
Intangible assets (net of accumulated amortization of $3,396 and
$34,534)................................................................ 13,922 74,089
Deferred income taxes (Note K)........................................... 6,949 6,722
Other assets............................................................. 30,350 33,117
---------- ----------
Total other assets.................................................. 51,221 113,928
---------- ----------
Total assets................................................................. $1,654,333 $1,616,756
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks................................................... $ 52,437 $ 26,480
Current portion of long-term debt (Note G)............................... 15,709 159,724
Accounts payable and accrued liabilities (Note F)........................ 260,879 281,342
U.S. and foreign income taxes............................................ 69,286 3,626
Deferred income taxes (Note K)........................................... 4,068 3,943
---------- ----------
Total current liabilities........................................... 402,379 475,115
---------- ----------
Long-term debt (Note G)...................................................... 306,443 307,828
Deferred income taxes (Note K)............................................... 100,353 124,286
Other liabilities (Notes H and L)............................................ 160,158 147,038
Commitments and contingencies (Note L)
Stockholders' equity (Notes D, G, H, I and J):
Preferred stock:
Authorized: 2,000,000 shares of $1 par value
Series A COLUMNJunior Participating Preferred Stock
Issued and outstanding: none
Series B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------ESOP Convertible Preferred Stock 7.75% Cumulative
Issued: 75,336 shares (aggregate redemption value of $72,479 and
$73,577).......................................................... 75,336 75,336
Less cost of shares of preferred treasury stock.............................. (4,836) (4,003)
Common stock:
Authorized: 80,000,000 shares of $1 par value
Issued: 67,774,968 shares................................................ 67,775 67,775
Additional paid-in capital................................................... 17,799 3,783
Retained earnings............................................................ 1,062,482 916,942
Less cost of shares of common treasury stock (including unearned amounts of
$10,834 and $7,884)........................................................ (539,585) (475,055)
Deferred employee benefits................................................... (65,907) (67,403)
Unrealized gain on marketable securities..................................... 32,023 28,787
Foreign currency translation adjustments..................................... 39,913 16,327
---------- ----------
Total stockholders' equity............................................... 685,000 562,489
---------- ----------
Total liabilities and stockholders' equity................................... $1,654,333 $1,616,756
========== ==========
The accompanying notes are an integral part of these financial statements.
F-2
33
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30
------------------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................... $ 171,932 $ 78,691 $ 11,301
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization....................... 94,184 87,357 85,155
Deferred tax (benefit) provision.................... (24,163) 27,084 (12,176)
Gain on sale of safety business..................... (32,625) -- --
Gain on sales of investments........................ -- -- (2,841)
Effects of accounting changes....................... -- -- 26,109
Equity in income of affiliated companies, net of
dividends received................................ (6,292) 309 5,779
Other, net.......................................... 6,694 5,750 3,391
Changes in assets and liabilities, excluding safety
business assets and liabilities sold:
Increase in accounts receivable................... (37,354) (3,042) (17,332)
(Increase) decrease in inventories................ (57,987) (13,688) 17,412
(Decrease) increase in accounts payable and
accruals....................................... (6,905) (27,862) 38,555
Other, net........................................ 74,477 (10,832) 33,790
--------- -------- ---------
Cash provided by operating activities.................. 181,961 143,767 189,143
========= ======== =========
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment............... (131,214) (73,555) (65,009)
Proceeds on sale of safety business...................... 169,178 -- --
Investments and acquisitions (excluding cash acquired)... (13,874) (371) (40,905)
Sales of property, plant and equipment, and
investments............................................ 373 545 3,506
--------- -------- ---------
Cash provided (used) by investing activities........... 24,463 (73,381) (102,408)
========= ======== =========
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt............................. 17,385 1,189 9,259
Repayments of long-term debt............................. (157,609) (41,584) (7,076)
Net increase (decrease) in short-term debt............... 25,980 24,979 (66,700)
Purchases of treasury stock.............................. (76,251) (1,000) (367)
Sales and issuances of treasury stock.................... 19,658 8,703 13,014
Cash dividends paid to stockholders...................... (26,392) (23,552) (22,920)
--------- -------- ---------
Cash used by financing activities...................... (197,229) (31,265) (74,790)
========= ======== =========
Effect of exchange rate changes on cash.................. 680 1,529 (2,334)
--------- -------- ---------
Increase in cash and cash equivalents.................... 9,875 40,650 9,611
Cash and cash equivalents at beginning of year........... 80,917 40,267 30,656
--------- -------- ---------
Cash and cash equivalents at end of year............... $ 90,792 $ 80,917 $ 40,267
========= ======== =========
The accompanying notes are an integral part of these financial statements.
F-3
34
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. The significant accounting policies of
the Company are described below.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Cabot
Corporation and majority-owned and controlled domestic and foreign subsidiaries.
Investments in majority-owned affiliates where control does not exist and
investments in 20 percent to 50 percent-owned affiliates are accounted for on
the equity method. Intercompany transactions have been eliminated.
CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
time deposits and short-term investments with a maturity of three months or less
at time of purchase to be cash equivalents.
FOREIGN CURRENCY TRANSLATION
Substantially all assets and liabilities of the Company's foreign
operations are translated at year-end exchange rates. Revenues and expenses are
translated at the weighted average rates during the year. Foreign currency gains
and losses arising from transactions are reflected in net income. Balance sheet
translation gains and losses are reflected as a separate component of
stockholders' equity.
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of most
domestic inventories is determined using the last-in, first-out (LIFO) method.
The cost of other domestic and all foreign inventories is determined using the
average cost method or the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. For financial reporting
purposes, depreciation of property, plant and equipment is calculated using
primarily the straight-line method based on estimated economic lives of 3 to 25
years.
EARNINGS PER SHARE
Earnings per share is computed on the basis of weighted average shares
outstanding during each year. Fully diluted earnings per share considers
conversion of the Company's Series B ESOP Convertible Preferred Stock held by
the Company's Employee Stock Ownership Plan (Note I) and shares issuable under
the Company's incentive compensation plans (Note J).
INCOME TAXES
In the fourth quarter of 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," retroactive
to October 1, 1992. Under SFAS No. 109, deferred income taxes are provided based
on the estimated future tax effects of differences between financial statement
carrying amounts and the tax bases of existing assets and liabilities.
Provisions are made for the U.S. income tax liability and additional foreign
taxes on the undistributed earnings of foreign subsidiaries, except for amounts
the Company has designated to be permanently reinvested (Note K).
F-4
35
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INTANGIBLE ASSETS
Intangible assets are comprised of the cost of business acquisitions in
excess of the fair value assigned to the net tangible assets acquired and the
costs of technology, licenses and patents purchased in business acquisitions.
The excess of cost over the fair value of net assets acquired is amortized on
the straight-line basis over either 40 years or an estimated useful life,
whichever is shorter. Other intangibles are amortized over their estimated
useful lives. The Company considers the impairment of long-lived assets, in
accordance with the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-lived Assets," based on an assessment of the asset's ability to
contribute to the profitability of the Company. Included in other charges is
amortization expense of $6,638,000, $7,661,000 and $6,884,000, in 1995, 1994 and
1993, respectively.
FINANCIAL INSTRUMENTS
Forward foreign currency exchange contracts and currency options are used
to manage foreign currency exposures. Realized and unrealized gains and losses
on these contracts are recorded in net income currently, with the exception of
gains or losses on contracts designated to hedge a net investment, which are
recorded as translation adjustments, and currency options, which are designated
to hedge future cash flows. Included in other charges are foreign exchange gains
(losses) of $1,354,000, $(1,713,000) and $(1,977,000) in 1995, 1994 and 1993,
respectively.
Financial instruments, primarily interest rate swaps, are used to manage
interest rate risks. The interest differentials from these swaps are recorded as
interest expense.
RECLASSIFICATION
Certain amounts in 1994 and 1993 have been reclassified to conform to the
1995 presentation.
B. DIVESTITURES & RESTRUCTURING
SPECIALTY CHEMICALS AND MATERIALS
On July 11, 1995, the Company sold substantially all of the assets of its
safety products and specialty composites business to Cabot Safety Acquisition
Corporation and its subsidiaries (New Safety). The transaction was accounted for
as a sale, with the Company receiving consideration consisting of approximately
$169,178,000 in cash, 42,500 common shares of Cabot Safety Holdings Corporation
(Holdings), a subsidiary of Cabot Safety Acquisition Corporation, representing
approximately 42.5% of Holdings' outstanding common stock, and $22,500,000 of
Holdings' non-voting 12.5% preferred stock. In addition, New Safety assumed
approximately $22,176,000 of the third party current liabilities relating to the
safety business and approximately $4,822,000 in debt. The Company recorded an
after-tax gain on the sale of approximately $14,500,000. The Company's book
value in Holdings' common and preferred stock after the transaction was zero
dollars. The Company accounts for its investment in New Safety using the equity
method.
During 1993, the Company recognized a $47,400,000 charge for the
restructuring of certain Specialty Chemicals and Materials businesses including
a carbon black plant closing in Europe, the scaling back of the Company's
plastics recycling business and the closing of certain Specialty Chemicals
production lines.
During 1995 and 1994, the Company incurred $6,079,000 and $17,890,000,
respectively, of costs accrued for in 1993 for employee separation and facility
closings. During 1994, the Company revised its restructuring reserve based on
the actual costs incurred during the closing of a carbon black plant in Europe.
A $4,000,000 benefit from the revision of the reserve was recorded in other
charges in 1994. The Company will continue to evaluate its remaining reserve of
$13,395,000 as new data become available, primarily relating to the final
disposition of the closed plant's assets and cleanup costs.
F-5
36
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Also during 1994, the Company recorded a $6,150,000 charge to write off its
investment in its Japanese carbon black equity affiliate due to significant
ongoing losses.
ENERGY
During 1994 and 1993, the Company recognized gains of $10,210,000 and
$14,177,000, respectively, on the favorable resolution of certain matters
related to divested energy businesses, which included settlement of the
Company's last significant take-or-pay case in 1994.
C. INVENTORIES
Inventories were as follows:
SEPTEMBER 30,
----------------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
Raw materials.................................................. $ 64,830 $ 52,564
Work in process................................................ 47,058 33,139
Finished goods................................................. 97,597 94,363
Other.......................................................... 43,625 36,816
-------- --------
Total................................................ $ 253,110 $ 216,882
======== ========
Inventories valued under the LIFO method comprised approximately 37 percent
and 26 percent of 1995 and 1994 total inventory, respectively. The estimated
current cost of these inventories exceeded their stated valuation determined on
the LIFO basis by $27,393,000 and $25,149,000 at September 30, 1995 and 1994,
respectively.
D. INVESTMENTS
Investments in net assets of affiliated companies accounted for under the
equity method amounted to $98,866,000 and $86,164,000 at September 30, 1995 and
1994, respectively. The combined results of operations and financial position of
the Company's equity-basis affiliates are summarized below:
YEARS ENDED
SEPTEMBER 30,
----------------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
CONDENSED INCOME STATEMENT INFORMATION
Net sales...................................................... $ 435,806 $ 335,346
Gross margin................................................... 120,130 84,281
Net income..................................................... 32,462 5,064
CONDENSED BALANCE SHEET INFORMATION
Current assets................................................. $ 257,941 $ 199,920
Non-current assets............................................. 454,877 317,666
Current liabilities............................................ 269,852 242,452
Non-current liabilities........................................ 247,150 105,599
Net worth...................................................... 195,816 169,535
-------- --------
Condensed income statement (after July 11, 1995) and balance sheet
information of New Safety (Note B) have been included in the 1995 amounts above.
F-6
37
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On July 13, 1994, American Oil and Gas Corporation (AOG) was merged into a
subsidiary of KN Energy, Inc. (KNE). As a result of the merger, each outstanding
share of AOG held by the Company was converted into 0.47 of a share of KNE
common stock. On the completion of the merger, the Company owned approximately
15% of the outstanding KNE common stock (17% including warrants) and has
accounted for its investment in accordance with the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," which the
Company adopted effective September 30, 1994. The Company's investment in KNE
common stock is $114,394,000 and $109,693,000 at September 30, 1995 and 1994,
respectively. Prior to the merger, the Company owned a 34% interest in AOG and
accounted for its investment using the equity method.
During 1994, the Company's investment in its Indonesian affiliate was
accounted for on an equity basis. Effective September 30, 1994, the balance
sheet of the Indonesian affiliate was fully consolidated, reflecting the
Company's controlling interest.
In accordance with SFAS No. 115, equity securities with readily
determinable fair values have been reflected on the balance sheet at their fair
values. Unrealized gains of $32,023,000 and $28,787,000, which are net of
deferred tax liabilities of $18,807,000 and $17,644,000, have been reflected as
a separate component of stockholders' equity (Note I) at September 30, 1995 and
1994, respectively.
E. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment is summarized as follows:
SEPTEMBER 30,
-------------------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
Land and improvements....................................... $ 49,435 $ 46,778
Buildings................................................... 242,374 245,319
Machinery and equipment..................................... 990,521 965,665
Other....................................................... 70,019 72,467
Construction in progress.................................... 95,304 51,347
---------- ----------
Total property, plant and equipment......................... $1,447,653 $1,381,576
Less: accumulated depreciation.............................. 741,132 687,068
---------- ----------
Net property, plant and equipment................. $ 706,521 $ 694,508
========== ==========
F. ACCOUNTS PAYABLE & ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following:
SEPTEMBER 30,
-------------------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
Accounts payable............................................ $ 107,003 $ 101,934
Accrued employee compensation............................... 25,984 25,024
Restructuring liabilities................................... 13,395 19,474
Other accrued liabilities................................... 114,497 134,910
---------- ----------
Total............................................. $ 260,879 $ 281,342
========== ==========
F-7
38
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
G. DEBT
Long-term debt consisted of the following:
SEPTEMBER 30,
---------------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
Notes due 1994, 9.875%......................................... $ -- $150,000
Notes due 2002-2022, 8.07%..................................... 105,000 105,000
Notes due 1997, 10.25%......................................... 100,000 100,000
Guarantee of ESOP notes due 2013, 8.29%........................ 65,907 67,403
Term loan due 2000, 8.7%....................................... 16,385 --
Overseas Private Investment Corporation term loan due 2002,
floating rate, 8.0% and 6.5%................................. 13,100 15,000
Industrial Revenue Bonds due 1997-2014, 9.35%-14.00%........... 4,000 5,000
Other, including foreign term loans............................ 17,760 25,149
-------- --------
322,152 467,552
Less: current portion of long-term debt........................ (15,709) (159,724)
-------- --------
Total................................................ $306,443 $307,828
======== ========
In June 1992, the Company filed a $300,000,000 debt shelf registration
statement with the Securities and Exchange Commission. Subsequently,
$105,000,000 of notes payable were refinanced with notes of a weighted average
maturity of 19 years and a weighted average interest rate of 8.07%. The notes
were issued at par and provide for principal to be repaid at maturity.
During fiscal 1989, the Company's Employee Stock Ownership Plan (ESOP)
borrowed $75,000,000 from an institutional lender in order to finance its
purchase of 75,000 shares of the Company's Series B ESOP Convertible Preferred
Stock. This debt bears interest at 8.29% per annum, and is to be repaid in equal
quarterly installments through December 31, 2013. The Company, as guarantor, has
reflected the outstanding balance of $65,907,000 as a liability on the Company's
consolidated balance sheet at September 30, 1995. An equal amount, representing
deferred employee benefits, has been recorded as a reduction of stockholders'
equity (Note I).
The Company may borrow up to $250,000,000 at floating rates under the terms
of a revolving credit and term loan facility. The agreement contains provisions
regarding minimum net worth requirements and certain indebtedness limitations
which would limit the amount available for future borrowings. Commitment fees
are paid based on the used and unused portions of the facility. The facility is
available through January 13, 2000. No amounts were outstanding under this
credit agreement at September 30, 1995 or 1994.
The aggregate principal amounts of long-term debt due in each of the five
fiscal years 1996 through 2000 are $15,709,000, $10,138,000, $109,528,000,
$10,106,000 and $7,080,000, respectively.
Based primarily on dealer quotes, the fair value of long-term borrowings
was approximately $353,000,000 and $478,000,000 at September 30, 1995 and 1994,
respectively.
The weighted average interest rate on short-term borrowings was
approximately 7% and 8% at September 30, 1995 and 1994, respectively.
Cash paid for interest during 1995, 1994 and 1993 totalled $37,912,000,
$41,663,000 and $41,970,000, respectively. The Company capitalized no interest
in 1995, 1994 or 1993.
F-8
39
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
H. PENSION PLANS & POSTRETIREMENT BENEFITS
PENSION PLANS
Net periodic pension cost was comprised of the following elements:
YEARS ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS)
Current year service cost.......................... $ 7,629 $ 8,090 $ 9,254
Interest accrued on pension obligations............ 12,493 11,675 9,964
Actual return on plan assets....................... (25,320) (11,431) (12,357)
Net amortization and deferral...................... 10,606 (2,062) (1,580)
------ ------ ------
Net periodic pension cost................ $ 5,408 $ 6,272 $ 5,281
====== ====== ======
The following table sets forth the funded status of pension plans:
SEPTEMBER 30,
---------------------
1995 1994
---- ----
(DOLLARS IN
THOUSANDS)
Actuarial present value of projected benefit obligations....... $182,771 $155,253
Plan assets at fair value (primarily fixed-income and equity
securities).................................................. 187,339 163,651
-------- --------
Excess of plan assets over projected benefit obligations....... 4,568 8,398
Unrecognized net gain.......................................... (19,012) (24,084)
Unrecognized prior service cost................................ 3,512 3,066
Unrecognized net asset being amortized over 16 years........... (6,013) (6,906)
-------- --------
Net deferred pension credit (included in other
liabilities)....................................... $(16,945) $(19,526)
======== ========
The Company has trusteed, non-contributory pension plans covering most
employees in the United States and certain foreign subsidiaries. Benefits
provided under the Company's defined benefit pension plans are primarily based
on the employee's years of service and compensation. The Company's funding
policy is to contribute annually amounts based upon actuarial and economic
assumptions designed to achieve adequate funding of projected benefit
obligations.
Pension benefits accrue under several benefit plans, including the
following two plans: the Cash Balance Plan (CBP), a defined benefit pension
plan, and the Employee Stock Ownership Plan (ESOP). In November 1988, the ESOP
was funded with the Company's newly issued Series B ESOP Convertible Preferred
Stock, which was acquired with $75,000,000 borrowed by the ESOP (Notes G and I).
At September 30, 1995 and 1994, the projected benefit obligations included
accumulated benefit obligations of $152,422,000 and $132,823,000, respectively,
of which $142,296,000 and $123,694,000 were vested, respectively.
The following weighted average rates were used in the calculations:
YEARS ENDED
SEPTEMBER 30,
---------------
1995 1994
---- ----
Discount rate........................................................ 7.3 % 8.0 %
Expected rate of return on plan assets............................... 8.9 % 9.0 %
Assumed rate of increase in compensation............................. 5.1 % 5.5 %
F-9
40
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
POSTRETIREMENT BENEFITS OTHER CHANGES/
ADD (DEDUCT)
-----------------------
BALANCETHAN PENSIONS
The Company has defined benefit postretirement plans that provide certain
health care and life insurance benefits for retired employees. Substantially all
U.S. employees become eligible for these benefits if they have met certain age
and service requirements at retirement. The Company funds the plans as claims or
insurance premiums are incurred.
Effective October 1, 1992, the Company adopted the provisions of SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
which requires accrual of these benefits during the years an employee provides
service. Prior to October 1, 1992, the expense for these benefits was recognized
as actual claims or insurance premiums were incurred. As of October 1, 1992, the
cumulative effect of adopting this change was a $43,200,000 after-tax charge. In
addition to the one-time charge upon adoption, the effect of the change in
accounting increased 1993 pre-tax expense by $800,000, resulting in a pre-tax
net periodic postretirement benefit cost of $5,500,000.
Net periodic postretirement benefit cost was comprised of the following
elements:
YEARS ENDED
SEPTEMBER 30,
----------------------------
1995 1994 1993
------ ------ ------
(DOLLARS IN THOUSANDS)
Current year service cost....................................................... $ 672 $ 709 $ 580
Interest accrued on postretirement benefit obligations.......................... 5,301 4,776 4,920
Net amortization................................................................ -- 221 --
------ ------ ------
Net periodic postretirement benefit cost........................................ $5,973 $5,706 $5,500
====== ====== ======
The following table sets forth the funded status of the postretirement
benefit plans:
SEPTEMBER 30,
-------------------------
1995 1994
-------- --------
(DOLLARS IN THOUSANDS)
Accumulated postretirement benefit obligations:
Retirees....................................................................... $ 58,526 $ 51,489
Fully eligible active plan participants........................................ 6,262 4,716
Other active plan participants................................................. 13,221 10,712
-------- --------
78,009 66,917
Plan assets at fair value........................................................ -- --
-------- --------
Excess of accumulated postretirement benefit obligations over plan assets........ (78,009) (66,917)
Unrecognized net loss (gain)..................................................... 10,749 (81)
Unrecognized prior service cost.................................................. 95 (85)
-------- --------
Accrued postretirement benefit cost (included in other liabilities)...... $(67,165) $(67,083)
======== ========
Health care cost trend rate assumptions have a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of September 30, 1995 and 1994 by
approximately $6,700,000 and $5,400,000, respectively, and the aggregate of the
service and interest cost components of net periodic postretirement benefit cost
for the years then ended by approximately $600,000 and $500,000, respectively.
The following rates were used in the calculations:
YEARS ENDED
SEPTEMBER 30,
---------------
1995 1994
---- ----
Discount rate............................................................................. 7.0% 8.3%
Assumed rate of increase in compensation.................................................. 5.3% 6.0%
Assumed average annual rate of increase in health care benefits........................... 10.5% 11.5%
Annual decrease in assumed rate of increase in health care benefits....................... 1.0% 1.0%
Assumed ultimate trend rate............................................................... 5.0% 6.3%
Assumed ultimate trend rate to be reached in year......................................... 2003 2002
F-10
41
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
I. STOCKHOLDERS' EQUITY
The following table summarizes the changes in stockholders' equity for each
of the three years in the period ended September 30, 1995:
YEARS ENDED SEPTEMBER 30,
--------------------------------------
1995 1994 1993
---------- --------- ---------
(DOLLARS IN THOUSANDS)
PREFERRED STOCK
Beginning of year........................................................... $ 75,336 $ 75,336 $ 75,336
---------- --------- ---------
End of year............................................................... $ 75,336 $ 75,336 $ 75,336
---------- --------- ---------
PREFERRED TREASURY STOCK
Beginning of year........................................................... $ (4,003) $ (3,003) $ (2,693)
Purchase of treasury stock.................................................. (833) (1,000) (310)
---------- --------- ---------
End of year............................................................... $ (4,836) $ (4,003) $ (3,003)
---------- --------- ---------
COMMON STOCK
Beginning of year........................................................... $ 67,775 $ 33,887 $ 33,887
Two-for-one stock split..................................................... -- 33,888 --
---------- --------- ---------
End of year............................................................... $ 67,775 $ 67,775 $ 33,887
---------- --------- ---------
ADDITIONAL PAID-IN CAPITAL
Beginning of year........................................................... $ 3,783 $ 33,621 $ 30,324
Sale of treasury stock to the Company's savings plans....................... 3,576 633 861
Issuance of treasury stock under employee compensation plans................ 10,440 3,417 2,436
Two-for-one stock split..................................................... -- (33,888) --
---------- --------- ---------
End of year............................................................... $ 17,799 $ 3,783 $ 33,621
---------- --------- ---------
RETAINED EARNINGS
Beginning of year........................................................... $ 916,942 $ 861,803 $ 873,422
Net income.................................................................. 171,932 78,691 11,301
Common dividends paid ($0.60, $0.53, $0.52 per share)....................... (22,841) (19,969) (19,288)
Preferred dividends paid to ESOP, net of tax benefit........................ (3,551) (3,583) (3,632)
---------- --------- ---------
End of year............................................................... $1,062,482 $ 916,942 $ 861,803
---------- --------- ---------
COMMON TREASURY STOCK
Beginning of year........................................................... $ (467,171) $(475,863) $(490,132)
Purchase of treasury stock.................................................. (75,418) -- (57)
Sale of treasury stock to the Company's savings plans....................... 4,348 625 1,896
Issuance of treasury stock under employee compensation plans................ 9,490 8,067 12,430
---------- --------- ---------
End of year............................................................... $ (528,751) $(467,171) $(475,863)
---------- --------- ---------
UNEARNED COMPENSATION
Beginning of year........................................................... $ (7,884) $ (7,321) $ (4,692)
Issuance of treasury stock under employee compensation plans................ (8,196) (4,039) (4,609)
Amortization................................................................ 5,246 3,476 1,980
---------- --------- ---------
End of year............................................................... $ (10,834) $ (7,884) $ (7,321)
---------- --------- ---------
DEFERRED EMPLOYEE BENEFITS
Beginning of year........................................................... $ (67,403) $ (68,781) $ (70,050)
Principal payment by ESOP under guaranteed loan............................. 1,496 1,378 1,269
---------- --------- ---------
End of year............................................................... $ (65,907) $ (67,403) $ (68,781)
---------- --------- ---------
UNREALIZED GAIN ON MARKETABLE SECURITIES (NOTE D)
Beginning of year........................................................... $ 28,787 $ -- $ --
Unrealized holding gain..................................................... 3,236 28,787 --
---------- --------- ---------
End of year............................................................... $ 32,023 $ 28,787 $ --
---------- --------- ---------
FOREIGN BALANCE
AT CURRENCY AT
BEGINNING ADDITIONS TRANSLATION ADJUSTMENTS
Beginning of year........................................................... $ 16,327 $ (7,406) $ 47,553
Foreign currency translation adjustments.................................... 23,586 23,733 (54,959)
---------- --------- ---------
End of year............................................................... $ 39,913 $ 16,327 $ (7,406)
---------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY, END OF CLASSIFICATION OF PERIOD AT COST RETIREMENTS ADJUSTMENT OTHER PERIOD
- -----------------------------------------------------------------------------------------------YEAR....................................... $ 685,000 $ 562,489 $ 442,273
========== ========= =========
F-11
42
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHARES OF STOCK
YEARS ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
---- ---- ----
PREFERRED STOCK
Beginning of year...................................... 75,336 75,336 75,336
---------- ---------- ----------
End of year.......................................... 75,336 75,336 75,336
========== ========== ==========
PREFERRED TREASURY STOCK
Beginning of year...................................... 4,504 3,686 3,230
Purchased.............................................. 532 818 456
---------- ---------- ----------
End of year.......................................... 5,036 4,504 3,686
========== ========== ==========
COMMON STOCK
Beginning of year...................................... 67,774,968 33,887,484 33,887,484
Two-for-one stock split................................ -- 33,887,484 --
---------- ---------- ----------
End of year.......................................... 67,774,968 67,774,968 33,887,484
========== ========== ==========
COMMON TREASURY STOCK
Beginning of year...................................... 29,783,722 15,161,103 15,560,213
Purchased.............................................. 1,525,036 -- 1,300
Issued................................................. (915,791) (278,550) (400,410)
Two-for-one stock split................................ -- 14,901,169 --
---------- ---------- ----------
End of year.......................................... 30,392,967 29,783,722 15,161,103
========== ========== ==========
In November 1995, the Company declared a dividend of one Preferred Stock
Purchase Right (Right) for each outstanding share of Cabot common stock. The
Rights are not presently exercisable. Each Right entitles the holder, upon the
occurrence of certain specified events, to purchase from Cabot one one-hundredth
of a share of Series A Junior Participating Preferred Stock at a purchase price
of $200 per share. The Rights further provide that each Right will entitle the
holder, upon the occurrence of certain other specified events, to purchase from
Cabot, Cabot common stock having a value of twice the exercise price of the
Right and, upon the occurrence of certain other specified events, to purchase
from another person into which Cabot was merged or which acquired 50% or more of
Cabot's assets or earnings power, common stock of such other person having a
value of twice the exercise price of the Right. The Rights may be generally
redeemed by Cabot at a price of $0.01 per Right. The Rights expire on November
10, 2005.
The Company redeemed the rights issued under the 1986 shareholder rights
plan from shareholders of record on November 24, 1995, for a redemption payment
equal to $0.05 per share.
During fiscal 1989, the Company placed 75,336 shares of its Series B ESOP
Convertible Preferred Stock with the Company's Employee Stock Ownership Plan
(ESOP) for cash at a price of $1,000 per share. Each share of the Series B ESOP
Convertible Preferred Stock is convertible into 43.735 shares of the Company's
common stock subject to certain events and anti-dilution adjustment provisions,
and carries voting rights on an "as converted" basis. The trustee for the ESOP
has the right to cause the Company to redeem shares sufficient to provide for
periodic distributions to plan participants. Such shares shall be redeemed at
their fair market value, and may be redeemed by the Company for cash, shares of
the Company's common stock, or a combination thereof at the Company's option.
Each share is redeemable at the option of the Company at a price of $1,031. The
redemption price declines annually until it becomes $1,000 on and after November
19, 1998, plus accrued but unpaid dividends to the redemption date.
F-12
43
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The issued shares of Series B ESOP Convertible Preferred Stock are entitled
to receive preferential and cumulative quarterly dividends, and rank as to
dividends and liquidation prior to the Company's Series A Junior Participating
Preferred Stock and common stock. At September 30, 1995, 3,075,000 shares of the
Company's common stock were reserved for conversion of the Series B ESOP
Convertible Preferred Stock.
On July 27, 1994, a two-for-one stock split in the form of a stock dividend
was authorized, payable to stockholders of record on August 9, 1994. A total of
33,887,484 shares were issued in connection with the split. Also, $33,887,484
was reclassified from additional paid-in capital to common stock. All common
share and per share amounts in these financial statements have been restated to
reflect the split where appropriate.
In September 1995, the Company commenced a program to purchase up to
3,000,000 of the Company's common shares. As of September 30, 1995, 581,000
shares had been purchased under that program.
J. SAVINGS & INCENTIVE COMPENSATION PLANS
During 1994, the Company amended its Profit Sharing and Savings Plan
(PSSP), which covers salaried employees of most U.S. operations, effective
October 1, 1994. Under the amended plan, now called the Cabot Retirement
Incentive Savings Plan (CRISP), the Company makes matching contributions of at
least 75% of a participant's contribution of up to 7.5% of the participant's
eligible compensation, subject to limitations required by governmental laws or
regulations. Accrued contributions to the CRISP in 1995 were $3,886,000.
Accrued contributions of the Company under the PSSP, which were based upon
an annual return on stockholders' equity, were $5,707,000 and $1,178,000 in 1994
and 1993, respectively.
The Company has an Equity Incentive Plan for key employees. Under this
plan, participants may be granted various types of stock and stock-based awards.
During 1988 through 1991, the awards granted consisted of stock options,
performance appreciation rights (PARs) and tandem units which may be exercised
as stock options or PARs. These awards were granted at fair market value of
Cabot's stock at date of grant, and vested ratably on each of the next four
anniversaries of the award. In 1992 through 1995, awards consisted of common
stock of the Company which employees could elect to receive in the form of
restricted stock purchased at a price equal to 50% of the fair market value on
the date of the award, nonqualified stock options at fair market value of
Cabot's stock on the date of the award, or a combination of one-half of each.
Variations on these awards were made to international employees in order to try
to provide results comparable to U.S. employees. The awards vest on the third
anniversary of the award for employees then employed by the Company or a
subsidiary.
F-13
44
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the Equity Incentive Plan's activity from
September 30, 1992 through September 30, 1995:
STOCK OPTIONS
AND
RESTRICTED STOCK PARS PRICE RANGE
---------------- ------ -----------------
September 30, 1992......................... 1,971,922 5,274 $12.63 to $23.38
Granted.................................. 431,870 -- $21.94 to $22.82
Exercised................................ (100,086) (1,120) $14.63 to $20.94
Cancelled................................ (75,428) -- $14.00 to $23.38
--------- ------ ----------------
September 30, 1993......................... 2,228,278 4,154 $12.63 to $23.38
Granted.................................. 484,090 -- $24.56 to $27.94
Exercised................................ (110,202) (950) $12.63 to $20.94
Cancelled................................ (139,420) -- $15.19 to $24.56
--------- ------ ----------------
September 30, 1994......................... 2,462,746 3,204 $12.63 to $27.94
Granted.................................. 472,200 -- $40.00
Exercised................................ (177,574) -- $12.63 to $23.38
Vested................................... (311,606) -- $14.00 to $24.56
Cancelled................................ (284,224) -- $15.19 to $23.38
--------- ------ ----------------
September 30, 1995......................... 2,161,542 3,204 $14.31 to $40.00
========= ====== ================
The options in the table above expire at various dates through September
2002. Options for 1,020,565 shares were exercisable at prices ranging from
$14.31 to $23.38 at September 30, 1995. During 1995, Cabot purchased
approximately 57,000 options, included in the "Exercised" caption, at the then
current market value less the exercise price. The Company had reserved 3,635,336
shares of common stock for issuance under the plan at September 30, 1995. There
were 456,338 shares available for future grants at September 30, 1995.
The Company has not adopted the recently issued SFAS No. 123, "Accounting
for Stock-based Compensation," which is required to be adopted by fiscal 1997.
The Company currently intends to continue to record compensation based on the
provisions of Accounting Principles Board Opinion 25, "Accounting for Stock
Issued to Employees," as allowed by SFAS No. 123. Although the Company has not
determined the ultimate impact of adopting SFAS No. 123 on its present
disclosure, it does not believe, based on the number of options previously
granted, that the adoption will have a material impact on its current
disclosure.
K. INCOME TAXES
In the fourth quarter of 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes," retroactive to October 1, 1992. The Company
recognized the cumulative effect of adoption, which resulted in an increase to
net income for the year ended September 30, 1993, of approximately $17,100,000.
Income before income taxes and the cumulative effect of accounting changes
was as follows:
YEARS ENDED SEPTEMBER 30,
-----------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS)
Domestic............................................ $102,980 $ 30,388 $32,780
Foreign............................................. 153,362 87,937 35,120
-------- -------- --------
Total..................................... $256,342 $118,325 $67,900
======== ======== ========
F-14
45
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of taxes on income is as follows:
YEARS ENDED SEPTEMBER 30,
-----------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS)
U.S. federal and state:
Current........................................... $ 64,204 $ (3,131) $16,798
Deferred.......................................... (25,794) 15,644 (5,305)
-------- -------- --------
Total..................................... $ 38,410 $ 12,513 $11,493
======== ======== ========
Foreign:
Current........................................... $ 61,039 $ 21,010 $26,077
Deferred.......................................... 1,631 11,440 (6,871)
-------- -------- --------
Total..................................... $ 62,670 $ 32,450 $19,206
-------- -------- --------
Total U.S. and Foreign.................... $101,080 $ 44,963 $30,699
======== ======== ========
The provision for income taxes at the Company's effective tax rate differed
from the provision for income taxes at the statutory rate as follows:
YEARS ENDED SEPTEMBER 30,
----------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS)
Computed tax expense at the expected statutory
rate............................................... $ 89,720 $41,414 $23,596
Foreign income:
Impact of taxation at different rates, repatriation
and other....................................... 5,407 (257) 2,412
Impact of foreign losses for which a current tax
benefit is not available........................ 529 701 2,158
State taxes, net of federal effect................... 5,560 2,655 407
Foreign sales corporation............................ (1,500) (1,158) (1,000)
Increase in U.S. tax rate............................ -- -- (812)
Other, net........................................... 1,364 1,608 3,938
-------- ------- -------
Provision for income taxes......................... $101,080 $44,963 $30,699
======== ======= =======
F-15
46
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of deferred income taxes were as follows:
SEPTEMBER 30,
---------------------
1995 1994
-------- --------
(DOLLARS IN THOUSANDS)
Deferred tax assets:
Property, plant and equipment................................ $ 28,467 $ 23,257
Pension and other benefits................................... 44,640 43,572
Environmental issues......................................... 18,008 14,761
Restructuring charges........................................ 5,633 10,337
Investments.................................................. 10,850 --
State and local taxes........................................ 5,449 1,804
Net operating loss and other tax carryforwards............... 12,132 14,568
Other........................................................ 33,373 25,338
-------- --------
Subtotal.................................................. 158,552 133,637
-------- --------
Valuation allowances........................................... (9,318) (14,915)
-------- --------
Total deferred tax assets............................ $149,234 $118,722
-------- --------
Deferred tax liabilities:
Property, plant and equipment................................ $ 71,629 $ 72,379
Pension and other benefits................................... 10,235 10,967
Investments.................................................. 36,629 34,480
Other........................................................ 100,532 99,894
-------- --------
Total deferred tax liabilities....................... $219,025 $217,720
======== ========
The valuation allowance for deferred tax assets decreased $5,597,000 in
1995 primarily because of improved business results which allowed realization of
deferred tax assets for which a valuation allowance had been previously
established. The major component of the valuation allowance at September 30,
1995 relates to the uncertainty of realizing certain foreign deferred tax
assets.
Approximately $45,415,000 of net operating losses and other tax
carryforwards remain at September 30, 1995, $24,005,000 of which expire in the
years 1996 through 2002, and $21,410,000 of which can be carried forward
indefinitely. The benefits of these carryforwards are dependent on taxable
income during the carryforward period in those foreign jurisdictions wherein
they arose, and accordingly, a valuation allowance has been provided where the
Company has determined that it is more likely than not that the carryforwards
will not be utilized.
United States income tax returns for fiscal years 1990 and 1991 are
currently under examination by the Internal Revenue Service. Assessments, if
any, are not expected to have a material adverse effect on the financial
statements.
Provision has not been made for U.S. income taxes or foreign withholding
taxes on approximately $130,000,000 of undistributed earnings of foreign
subsidiaries as these earnings are considered indefinitely reinvested. These
earnings could become subject to U.S. income taxes and foreign withholding taxes
(subject to a reduction for foreign tax credits) if they were remitted as
dividends, if foreign earnings were loaned to the Company or a U.S. subsidiary,
or if the Company should sell its stock in the subsidiaries. However, the
Company believes that U.S. foreign tax credits would largely eliminate any U.S.
income tax and offset any foreign withholding tax that might otherwise be due.
F-16
47
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash paid for income taxes during 1995, 1994 and 1993 totalled $60,340,000,
$23,855,000 and $25,934,000, respectively.
L. COMMITMENTS & CONTINGENCIES
LEASE COMMITMENTS
The Company leases certain transportation vehicles, warehouse facilities,
office space, machinery and equipment under cancelable and non-cancelable
leases, most of which expire within 10 years and may be renewed by the Company.
Rent expense under such arrangements totalled $16,545,000, $17,638,000 and
$14,514,000 in 1995, 1994 and 1993, respectively. Future minimum rental
commitments under non-cancelable leases are as follows:
(DOLLARS IN THOUSANDS)
1996.................................... $12,108
1997.................................... 10,499
1998.................................... 9,503
1999.................................... 6,918
2000.................................... 6,548
2001 and thereafter..................... 23,635
-------
$69,211
=======
OTHER LONG-TERM COMMITMENTS
During 1995, the Company entered into long-term supply agreements of more
than six years with certain North American tire customers. The contracts are
designed to provide such customers with agreed upon amounts of carbon black at
prices based on agreed upon formulae.
Also during 1995, the Company agreed to participate as a 10 percent owner
in a proposed liquefied natural gas plant in Trinidad, and to purchase 60
percent of the LNG produced by the plant. Once the plant is operational, it is
estimated that it will produce 3.3 trillion cubic feet of gas over a period of
20 years. All costs related to this project to date have been charged to expense
as incurred. LNG from the project is not expected to be available until fiscal
year 1999.
CONTINGENCIES
The Company is a defendant or potentially responsible party in various
lawsuits and environmental proceedings wherein substantial amounts are claimed
or at issue.
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.
F-17
48
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of September 30, 1995, approximately $51,580,000 was accrued for
environmental matters, primarily related to divested businesses. 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 applicable laws and regulations at each site. The
Company reviews the adequacy of this reserve as circumstances change at
individual sites. Included in other charges are environmental expenses of
$17,000,000, $15,000,000 and $1,000,000 in 1995, 1994 and 1993, respectively.
In the opinion of the Company, although final settlement of these suits and
claims may impact the Company's financial statements in a particular period,
they will not, in the aggregate, have a material adverse effect on the Company's
financial position.
M. FINANCIAL INSTRUMENTS & CONCENTRATIONS OF CREDIT RISK
The Company uses financial instruments, primarily forward contracts,
options and swaps in its management of foreign currency and interest rate
exposures. These financial instruments hedge transactions and balances
consistent with the Company's currency and interest rate exposures. The Company
does not purchase or issue financial instruments for trading purposes. None of
the Company's off-balance-sheet financial instruments would result in a
significant loss to the Company if the counterparty failed to perform in
accordance with the terms of the agreements.
FOREIGN EXCHANGE
The Company's forward foreign exchange contracts and options do not subject
the Company to risk due to exchange rate movements because gains and losses on
these contracts offset losses and gains on the assets, liabilities, transactions
and cash flows being hedged. The Company had $59,567,000 of foreign exchange
contracts outstanding at September 30, 1995. The fair value of such contracts,
which was the replacement value, represented a net unrealized gain of
approximately $2,679,000 as of September 30, 1995. The Company purchased foreign
currency put options at a cost of $3,200,000 during 1995. The cost of these
options will be recognized as cost of sales, along with any gains, over the
option period. Forward exchange and option contracts generally have maturities
which do not exceed twelve months. See Note A for information on the Company's
policy on forward exchange contract and currency option gains and losses.
INTEREST RATE
During 1995, the Company entered into an interest rate swap agreement to
fix the interest rate on certain borrowings expected to be refinanced in 1997.
Pursuant to the agreement, beginning on June 17, 1998, the Company will pay an
average fixed rate of 7.375% on a notional $100,000,000 and receive a floating
rate based on London Interbank Offered Rates (LIBOR) as determined at six month
intervals through December 17, 2007. During 1993, the Company entered into swap
agreements to convert a portion of its fixed-rate borrowings to floating-rate
borrowings.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which subject the Company to concentrations of credit
risk consist principally of trade receivables. International tire manufacturers
comprise a significant portion of the Company's carbon black customer base. The
Company had trade receivables of approximately $68,105,000 and $52,641,000 from
international tire manufacturers at September 30, 1995 and 1994, respectively.
Although the Company's exposure to credit risk associated with nonpayment by
tire manufacturers is affected by conditions or occurrences within the tire
industry, trade receivables from the international tire manufacturers were
current at September 30, 1995, and no manufacturer exceeded 7.5% of the
Company's receivables at that date.
F-18
49
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
N. FINANCIAL INFORMATION BY INDUSTRY SEGMENT & GEOGRAPHIC AREA
Financial information by industry segment for 1991 through 1995, as set
forth in Part II, Item 7. of the Company's Form 10-K, and on page 19 of the
annual report, is an integral part of these financial statements. Energy segment
sales include sales to a major customer in the amount of $250,439,000,
$272,245,000 and $265,800,000, in 1995, 1994 and 1993, respectively. Transfers
between geographic areas are recorded at cost plus mark-up or at market.
Financial information by geographic area is as follows:
YEARS ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
SALES
United States:
Sales, excluding export sales
Specialty Chemicals and Materials............... $ 605.7 $ 563.2 $ 521.4
Energy.......................................... 342.6 438.7 422.5
Export sales....................................... 93.7 85.0 73.9
-------- -------- --------
1,042.0 1,086.9 1,017.8
Europe............................................... 642.9 503.8 512.3
Other areas.......................................... 249.5 177.1 156.9
-------- -------- --------
Total...................................... 1,934.4 1,767.8 1,687.0
Less: Eliminations................................... 104.0 88.0 72.7
-------- -------- --------
Net sales.................................. $1,830.4 $1,679.8 $1,614.3
======== ======== ========
OPERATING PROFIT
United States:
Specialty Chemicals and Materials(a)............... $ 155.9 $ 108.5 $ 105.8
Energy............................................. 12.7 18.4 16.7
Europe(a)............................................ 103.0 49.0 (21.4)
Other areas(a)....................................... 27.9 8.4 17.3
-------- -------- --------
Total operating profit..................... 299.5 184.3 118.4
Interest expense..................................... 35.6 41.7 44.0
Unallocated corporate expenses, net(b)............... 27.7 23.4 20.7
Gain on sale of safety business...................... (32.6) -- --
Adjustment of reserves related to divested
businesses......................................... 12.5 0.8 (14.2)
-------- -------- --------
Income before income taxes................. $ 256.3 $ 118.4 $ 67.9
======== ======== ========
F-19
50
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
IDENTIFIABLE ASSETS
United States:
Specialty Chemicals and Materials.................. $ 426.9 $ 482.7 $ 480.9
Energy............................................. 133.8 127.4 116.1
Europe............................................... 465.3 444.3 437.2
Other areas.......................................... 275.7 245.2 199.3
General corporate(c)................................. 253.7 231.0 89.3
Equity in affiliates -- United States................ -- -- 63.6
Equity in affiliates -- Europe....................... 26.9 22.3 21.8
Equity in affiliates -- Other areas.................. 72.0 63.9 81.3
-------- -------- --------
Total...................................... $1,654.3 $1,616.8 $1,489.5
======== ======== ========
- ---------------
(a) Operating profit in 1993 included losses from restructuring of the Specialty
Chemicals and Materials Group of $2.9 in the United States, $43.8 in Europe
and $0.7 in Other areas.
(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.
O. UNAUDITED QUARTERLY FINANCIAL INFORMATION
Unaudited financial results by quarter for the fiscal years ended September
30, 1995 and 1994 are summarized below and should be read in conjunction with
Management's Discussion and Analysis of Results of Operations and Financial
Condition.
DEC MARCH JUNE SEPT YEAR
------ ------ ------ ------ --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Specialty Chemicals and
Materials.............. $1,156,692 $70,628 $(18,720) $34,522 $45,525(a) $1,288,647
Energy................... 91,566 2,923 (3,194) 91,295
General corporate........ 1,970 4 (340) 1,634
--------- ------- -------- ------- ------- ----------
Total.......... $1,250,228 $73,555 $(22,254) $34,522 $45,525 $1,381,576
========== ======= ======== ======= ======= ==========
YEAR ENDED SEPTEMBER 30, 1993
(DOLLARS IN 000'S)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------
OTHER CHANGES/
ADD (DEDUCT)
-----------------------
BALANCE FOREIGN BALANCE
AT CURRENCY AT
BEGINNING ADDITIONS TRANSLATION END OF
CLASSIFICATION OF PERIOD AT COST RETIREMENTS ADJUSTMENT OTHER PERIOD
- -----------------------------------------------------------------------------------------------
Specialty Chemicals and
Materials............... $1,182,186 $63,943 $(7,938)FISCAL 1995
Net sales............................ $428.0 $481.3 $494.8 $426.3 $1,830.4
Cost of sales........................ $296.8 $329.4 $336.1 $296.7 $1,259.0
Net income........................... $ (87,114) $5,615(b) $1,156,692
Energy.................... 90,860 706 91,566
General corporate......... 1,610 360 1,970
--------- ------- -------- ----------33.9 $ 46.4 $ 47.0 $ 44.6(a) $ 171.9
Income applicable to common shares... $ 33.0 $ 45.5 $ 46.1 $ 43.7 $ 168.4
------ ----------
Total........... $1,274,656 $65,009 $(7,938) $ (87,114) $5,615 $1,250,228
========== ======= ======= ========= ====== ==========
YEAR ENDED SEPTEMBER 30, 1992
(DOLLARS IN 000'S)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------
OTHER CHANGES/
ADD (DEDUCT)
-----------------------
BALANCE FOREIGN BALANCE
AT CURRENCY AT
BEGINNING ADDITIONS TRANSLATION END OF
CLASSIFICATION OF PERIOD AT COST RETIREMENTS ADJUSTMENT OTHER PERIOD
- -----------------------------------------------------------------------------------------------
Specialty Chemicals and
Materials.............. $1,042,090 $76,519 $(8,542) $42,680 $29,439(c) $1,182,186
Energy................... 89,581 1,279 90,860
General corporate........ 5,162 272 (3,824) 1,610
---------- ------- -------- ------- ------- ----------
Total.......... $1,136,833 $78,070 $(12,366) $42,680 $29,439 $1,274,656
========== ======= ======== ======== ======= ==========
- ---------------
(a) Consolidation of Indonesia subsidiary, which was accounted for on an
equity basis in 1993.
(b) Write-up in basis upon purchase of remaining equity interest in Brazil
subsidiary.
(c) Consolidation of Brazil subsidiary, which was accounted for on an equity
basis in 1991.
S-1
22
CABOT CORPORATION CONSOLIDATED
- --------------------------------------------------------------------------------
SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY,
PLANT AND EQUIPMENT
YEAR ENDED SEPTEMBER 30, 1994
(DOLLARS IN 000'S)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------
OTHER CHANGES/
ADD (DEDUCT)
-----------------------
BALANCE FOREIGN BALANCE
AT CURRENCY AT
BEGINNING TRANSLATION END OF
CLASSIFICATION OF PERIOD DEPRECIATION RETIREMENTS ADJUSTMENT OTHER PERIOD
- -----------------------------------------------------------------------------------------------
Specialty Chemicals and
Materials............... $570,125 $76,755 $(15,947) $15,994 $7,008(a) $653,935
Energy.................... 33,036 2,813 (3,185) 32,664
General corporate......... 547 225 (303) 469
-------- ------- -------- ------------- ------ ------ --------
Total........... $603,708 $79,793 $(19,435) $15,994 $7,008 $687,068Income per common share (primary).... $ 0.85 $ 1.17 $ 1.18 $ 1.13 $ 4.35
====== ====== ====== ====== ========
======= ========= =======FISCAL 1994
Net sales............................ $398.5 $434.9 $428.8 $417.7 $1,679.8
Cost of sales........................ $296.8 $319.3 $312.3 $305.9 $1,234.3
Net income........................... $ 16.0 $ 22.3 $ 22.0 $ 18.4(b) $ 78.7
Income applicable to common shares... $ 15.1 $ 21.4 $ 21.1 $ 17.5 $ 75.1
------ ------ ------ ------ --------
Income per common share (primary).... $ 0.39 $ 0.56 $ 0.55 $ 0.45 $ 1.96
====== ====== ====== ====== ========
YEAR ENDED SEPTEMBER 30, 1993
(DOLLARS IN 000'S)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------
OTHER CHANGES/
ADD (DEDUCT)
-----------------------
BALANCE FOREIGN BALANCE
AT CURRENCY AT
BEGINNING TRANSLATION END- ---------------
(a) Includes $14.5 after-tax gain on sale of safety business and $7.9 after-tax
charge for environmental reserves.
(b) Includes $6.8 after-tax charge for environmental reserves and $6.3 after-tax
gain on resolution of matters from divested energy businesses.
F-20
51
MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying financial statements were prepared by Cabot Corporation in
conformity with generally accepted accounting principles. The Company's
management is responsible for the integrity of these statements and of the data,
estimates and judgments that underlie them.
Cabot Corporation maintains a system of internal accounting controls
designed to provide reasonable assurance that the Company's assets are
safeguarded from loss or unauthorized use, that transactions are properly
authorized and recorded, and that financial records are reliable and adequate
for public reporting. The standard of reasonable assurance is based on
management's judgment that the cost of such controls should not exceed their
associated benefits. The system is monitored and evaluated on an ongoing basis
by management in conjunction with the Company's internal audit staff,
independent accountants, and the Audit Committee of the Board of Directors.
Coopers & Lybrand, L.L.P., independent accountants, were engaged by the
Company to audit these financial statements. Their audit was conducted in
accordance with generally accepted auditing standards and included a study and
evaluation of the Company's system of internal accounting controls, selected
tests of that system, and related audit procedures as they consider necessary to
render their opinion.
The Audit Committee of the Board of Directors provides general oversight
responsibility for the financial statements. Composed entirely of Directors who
are not employees of the Company, the Committee meets periodically with Company
management, internal auditors and the independent accountants to review the
quality of the financial reporting and internal controls as well as the results
of the auditing efforts. The internal auditors and independent accountants have
full and direct access to the Audit Committee, with and without management
present.
/s/ Samuel W. Bodman
Samuel W. Bodman
Chief Executive Officer
/s/ Kenyon C. Gilson
Kenyon C. Gilson
Chief Financial Officer
/s/ Paul J. Gormisky
Paul J. Gormisky
Chief Accounting Officer
F-21
52
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE DIRECTORS AND STOCKHOLDERS OF
CLASSIFICATION OF PERIOD DEPRECIATION RETIREMENTS ADJUSTMENT OTHER PERIOD
- -----------------------------------------------------------------------------------------------
Specialty Chemicals and
Materials............... $540,886 $74,815 $(5,446) $ (40,130) $570,125
Energy.................... 30,208 2,828 33,036
General corporate......... 346 201 547
-------- ------- ------- --------- ------ --------
Total........... $571,440 $77,844 $(5,446) $ (40,130) $ 0 $603,708
======== ======= ======= ========= ====== ========
YEAR ENDED SEPTEMBER 30, 1992
(DOLLARS IN 000'S)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------
OTHER CHANGES/
ADD (DEDUCT)
-----------------------
BALANCE FOREIGN BALANCE
AT CURRENCY AT
BEGINNING TRANSLATION END OF
CLASSIFICATION OF PERIOD DEPRECIATION RETIREMENTS ADJUSTMENT OTHER PERIOD
- -----------------------------------------------------------------------------------------------
Specialty Chemicals and
Materials.............. $436,819 $72,262 $(6,070) $20,235 $17,640(b) $540,886
Energy................... 27,490 2,718 30,208
General corporate........ 2,098 199 (1,951) 346
-------- ------- -------- ------- ------- --------
Total.......... $466,407 $75,179 $(8,021) $20,235 $17,640 $571,440
======== ======= ======= ======= ======= ========
- ---------------
(a) Consolidation of Indonesia subsidiary, which was accounted for on an equity basis in 1993.
(b) Consolidation of Brazil subsidiary, which was accounted for on an equity basis in 1991.
S-2
23 CABOT CORPORATION
CONSOLIDATED
- --------------------------------------------------------------------------------
SCHEDULE IX
SHORT-TERM BORROWINGS
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1994
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ---------------------------------------------------------------------------------------------
WEIGHTED
MAXIMUM AVERAGE AVERAGE
WEIGHTED AMOUNT AMOUNT INTEREST
BALANCE AVERAGE OUTSTANDING OUTSTANDING RATE
CATEGORY OF AGGREGATE AT END INTEREST DURING DURING DURING
SHORT-TERM BORROWINGS OF YEAR RATE THE YEAR THE YEAR THE YEAR
- ---------------------------------------------------------------------------------------------
1994
Banks and financial
institutions............ $26,480,000 8% $66,588,000 $33,170,000 7%
1993
Banks and financial
institutions............ $1,501,000 8% $85,619,000 $53,520,000 5%
1992
Banks and financial
institutions............ $74,500,000 4% $222,976,000 $175,384,000 6%
- ---------------------------------------------------------------------------------------------
The short-term borrowings consist primarilyWe have audited the accompanying consolidated balance sheets of notes payable toCabot
Corporation as of September 30, 1995 and overdraft facilities with banks1994 and other financial institutions incurredthe related consolidated
statements of income and cash flows for each of the three fiscal years in the
ordinary courseperiod ended September 30, 1995. These financial statements are the
responsibility of business. Borrowings are arrangedthe Company's management. Our responsibility is to express an
opinion on an as-needed basis at
various terms and at the best available rates.
The maximum and average amounts outstanding during the year werethese financial statements based on month-end outstanding balancesour audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and were representativeperform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cabot
Corporation as of September 30, 1995 and 1994, and the consolidated results of
its operations and its cash flows for each of the year. The
weighted average interest rate duringthree fiscal years in the
yearperiod ended September 30, 1995, in conformity with generally accepted
accounting principles.
As discussed in Notes H and K to the Consolidated Financial Statements, the
Company changed its methods of accounting for postretirement benefits other than
pensions and for income taxes, respectively, in fiscal 1993.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 30, 1995, except for the information in Note I,
for which the date is computed based on the average
of rates applicable to individual short-term borrowings during the year.
S-3December 1, 1995
F-22
24
CABOT CORPORATION CONSOLIDATED
- --------------------------------------------------------------------------------
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1994
(DOLLARS IN 000'S)
CHARGED TO COSTS AND EXPENSES
- -----------------------------------------------------------------------------------------------
COLUMN A COLUMN B
- -----------------------------------------------------------------------------------------------
ITEM 1994 1993 1992
- -----------------------------------------------------------------------------------------------
Maintenance and repairs................................. $56,059 $60,866 $65,484
Amortization of intangible assets....................... * * *
Taxes, other than payroll and income taxes.............. 22,397 18,263 19,849
Royalties............................................... * * *
Advertising costs....................................... * * *
- -----------------------------------------------------------------------------------------------
* Less than 1% of total sales and operating revenues.
S-4
25
CABOT CORPORATION CONSOLIDATED
- --------------------------------------------------------------------------------
SCHEDULE XIII
OTHER INVESTMENTS
SEPTEMBER 30, 1994
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------------------------------------------------------
AMOUNT
MARKET VALUE CARRIED
OF ISSUE AT IN THE
NAME OF ISSUER AND NUMBER OF COST OF SEPTEMBER BALANCE
TITLE OF ISSUE SHARES ISSUE 30, 1994 SHEET
- ---------------------------------------------------------------------------------------------------
K N Energy, Inc.*
Common Stock........................ 4,197,954 $66,554,000 $109,693,000 $109,693,000
- ---------------------------------------------------------------------------------------------------
* Excludes warrants to purchase 642,232 shares of common stock of K N Energy,
Inc. ("KNE stock") at an exercise price of $17.55 per share, which warrants
expire in 1999 and the fair value of which is not readily determinable because
of certain restrictions on the transferability of such warrants and KNE stock.
S-5
2653
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
- --------------------------------------------------------------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDEDFor the Fiscal Year ended SEPTEMBER 30, 1994 COMMISSION FILE
NUMBER1995 Commission File Number 1-5667
- --------------------------------------------------------------------------------
CABOT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)(Exact Name of Registrant as Specified in Charter)
EXHIBITS
- --------------------------------------------------------------------------------
EXHIBIT INDEX
- --------------------------------------------------------------------------------
EXHIBIT
NUMBER DESCRIPTION
PAGE NUMBER
- -------------------------------------------------------------------------------- 10(e)(i)
- --------------------------------------------------------------------------------------------------
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.
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.
10 (e)(v)* -- Supplemental Cash Balance Plan.
10(e)(ii)* -- Supplemental Employee Stock Ownership Plan.
10(e)(iii)* -- Supplemental Retirement Incentive Savings Plan.
10(j) -- Agreement for the Sale and Purchase of Liquefied Natural Gas and Transportation Agreement,Cabot Corporation Deferred Compensation Plan, dated April 13, 1976,
between Sonatrach and Distrigas Corporation, and Amendment No. 3 to said Agreement, dated February 21, 1988.
10(o)(iv) -- KNE By-law provision.
10(o)(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.
10(o)(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 13, 1994.January 1, 1995.
11 -- Statement Re Computation of Per Share Earnings.
12 -- Statement Re Computation of Ratio of Earnings to Fixed Charges.
13 -- Pages 17 through 40 of the 1994 Annual Report to Stockholders of Cabot Corporation.
21 -- List of Significant Subsidiaries.
24(a)24 -- Power of attorney for signing of this Annual Report on Form 10-K, dated November 11, 1994.
24(b) -- Certified copy of vote of Cabot's Board of Directors of October 14, 1994, authorizing the execution
and filing of this Annual Report on Form 10-K.
27 -- Financial Data Schedule.
- --------
* Management contract or compensatory plan or arrangement.