FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
DECEMBER 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
COMMISSION FILE NUMBER 1-5667
CABOT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-2271897
(State of Incorporation) (I.R.S. Employer Identification No.)
75 STATE STREET 02109-1806
BOSTON, MASSACHUSETTS (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code: (617) 345-0100
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
AS OF DECEMBER 31, 1996, THE COMPANY HAD 70,148,885 SHARES OF COMMON
STOCK, PAR VALUE $1 PER SHARE, OUTSTANDING.
CABOT CORPORATION
INDEX
Part I. Financial Information Page No.
--------
Item 1. Financial Statements
Consolidated Statements of Income
Three Months Ended December 31, 1996 and 1995 3
Consolidated Balance Sheets
December 31, 1996 and September 30, 1996 4
Consolidated Statements of Cash Flows
Three Months Ended December 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
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Part I. Financial Information
Item 1. Financial Statements
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended December 31, 1996 and 1995
(Dollars in thousands, except per share amounts)
UNAUDITED
1996 1995
--------- ---------
Revenues:
Net sales and other operating revenues $ 398,825 $ 443,031
Interest and dividend income 1,679 2,461
--------- ---------
Total revenues 400,504 445,492
--------- ---------
Costs and expenses:
Cost of sales 279,683 305,133
Selling and administrative expenses 53,660 46,631
Research and technical service 20,926 14,277
Interest expense 9,670 9,421
Other charges, net 1,821 5,273
--------- ---------
Total costs and expenses 365,760 380,735
--------- ---------
Income before income taxes 34,744 64,757
Provision for income taxes (12,507) (23,960)
Equity in net income of affiliated companies 3,974 3,723
Minority interest (1,098) (1,169)
--------- ---------
Net income 25,113 43,351
Dividends on preferred stock, net of tax
benefit of $524 and $475 (820) (883)
--------- ---------
Income applicable to primary common shares $ 24,293 $ 42,468
========= =========
Weighted average common shares outstanding (000):
Primary 72,019 75,114
Fully diluted (Note A) 78,088 81,318
Income per common share:
Primary $ 0.34 $ 0.57
========= =========
Fully diluted (Note A) $ 0.32 $ 0.53
========= =========
Dividends per common share $ 0.10 $ 0.09
========= =========
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The accompanying notes are an integral part of these financial statements.
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and September 30, 1996
(Dollars in thousands)
ASSETS
December 31 September 30
1996 1996
(Unaudited)
----------- -----------
Current assets:
Cash and cash equivalents $ 42,328 $ 58,148
Accounts and notes receivable
(net of reserve for doubtful
accounts of $4,813 and $5,267) 292,041 363,763
Inventories:
Raw materials 79,591 71,061
Work in process 68,103 72,914
Finished goods 83,097 72,163
Other 43,889 44,292
----------- -----------
Total inventories 274,680 260,430
Prepaid expenses 18,897 17,408
Deferred income taxes 10,424 10,034
----------- -----------
Total current assets 638,370 709,783
----------- -----------
Investments:
Equity 79,826 79,372
Other 106,223 95,680
----------- -----------
Total investments 186,049 175,052
----------- -----------
Property, plant and equipment 1,777,003 1,712,045
Accumulated depreciation and amortization (836,036) (809,053)
----------- -----------
Net property, plant and equipment 940,967 902,992
----------- -----------
Other assets:
Intangible assets, net of amortization 41,782 42,735
Deferred income taxes 2,494 2,402
Other assets 26,497 24,617
----------- -----------
Total other assets 70,773 69,754
----------- -----------
Total assets $ 1,836,159 $ 1,857,581
=========== ===========
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The accompanying notes are an integral part of these financial statements.
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and September 30, 1996
(Dollars in thousands)
LIABILITIES & STOCKHOLDERS' EQUITY
December 31 September 30
1996 1996
(Unaudited)
----------- -----------
Current liabilities:
Notes payable to banks $ 244,520 $ 233,779
Current portion of long-term debt 114,570 16,175
Accounts payable and accrued liabilities 232,211 250,749
U.S. and foreign income taxes payable 20,486 26,083
Deferred income taxes 953 918
----------- -----------
Total current liabilities 612,740 527,704
----------- -----------
Long-term debt 219,796 321,497
Deferred income taxes 91,748 88,320
Other liabilities 151,024 147,991
Commitments and contingencies (Note B)
Minority interest 26,697 27,138
Stockholders' Equity (Note C):
Preferred Stock:
Authorized: 2,000,000 shares of $1 par value
Series A Junior Participating Preferred Stock
Issued and outstanding: none
Series B ESOP Convertible Preferred Stock 7.75% Cumulative
Issued: 75,336 shares (aggregate redemption value
of $70,671 and $71,193) 75,336 75,336
Less cost of shares of preferred treasury stock (7,089) (6,565)
Common stock:
Authorized: 200,000,000 shares of $1 par value
Issued: 135,549,936 shares 135,550 135,550
Additional paid-in capital 23,993 23,618
Retained earnings 1,193,791 1,176,708
Less cost of common treasury stock
(including unearned amounts of $13,791 and $16,611) (685,292) (650,981)
Deferred employee benefits (63,855) (64,283)
Unrealized gain on marketable securities 34,253 29,874
Foreign currency translation adjustments 27,467 25,674
----------- -----------
Total stockholders' equity 734,154 744,931
----------- -----------
Total liabilities and stockholders' equity $ 1,836,159 $ 1,857,581
=========== ===========
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The accompanying notes are an integral part of these financial statements.
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended December 31, 1996 and 1995
(Dollars in thousands)
UNAUDITED
1996 1995
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 25,113 $ 43,351
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 27,041 23,542
Deferred tax provision (490) 62
Equity in net income of affiliated companies,
net of dividends received (1,629) (258)
Other, net 2,165 2,414
Changes in assets and liabilities, net of consolidation
of equity affiliates:
(Increase) decrease in accounts receivable (11,637) 837
Increase in inventory (13,584) (34,677)
Decrease in accounts payable and accruals (19,342) (17,283)
Increase in prepayments and intangible assets (3,102) (695)
Decrease in income taxes payable (5,688) (266)
Other, net 1,992 (29,295)
-------- ---------
Cash (used) provided by operating activities 839 (12,268)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (58,648) (28,621)
Proceeds on sale of business 35,000
Investments and acquisitions (3,962)
Cash from consolidation of equity affiliates 9,306
Other 101 1,254
-------- ---------
Cash used by investing activities (27,509) (18,061)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (3,684) (10,247)
Increase in short-term debt 59,754 103,345
Purchases of treasury stock (38,217) (90,410)
Sales and issuances of treasury stock 1,407 2,025
Cash dividends paid to stockholders (8,031) (7,499)
Redemption of preferred stock purchase rights (1,840)
-------- ---------
Cash used by financing activities 11,229 (4,626)
Effect of exchange rate changes on cash (379) 159
-------- ---------
Decrease in cash and cash equivalents (15,820) (34,796)
Cash and cash equivalents at beginning of period 58,148 90,792
-------- ---------
Cash and cash equivalents at end of period $ 42,328 $ 55,996
======== =========
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The accompanying notes are an integral part of these financial statements.
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
A. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Cabot Corporation and majority-owned and controlled domestic and foreign subsidiaries. Investments in majority-owned affiliates where control does not exist and investments in 20 percent to 50 percent owned affiliates are accounted for on the equity method.
The financial statements have been prepared in accordance with the requirements of Form 10-Q and consequently do not include all disclosures required by Form 10-K. Additional information may be obtained by referring to the Company's Form 10-K for the year ended September 30, 1996.
The financial information submitted herewith is unaudited and reflects all adjustments which are, in the opinion of management, necessary to provide a fair statement of the results for the interim periods ended December 31, 1996 and 1995. All such adjustments are of a normal recurring nature. The results for interim periods are not necessarily indicative of the results to be expected for the fiscal year.
Earnings Per Share
The computation of fully diluted earnings per share considers the conversion of the Company's Series B ESOP Convertible Preferred Stock held by the Company's Employee Stock Ownership Plan, and also includes the potentially dilutive effects of the Company's Equity Incentive Plan adopted in 1989 and the 1996 Equity Incentive Plan.
Reclassification
Certain amounts in fiscal 1996 have been reclassified to conform to the fiscal 1997 presentation.
B. COMMITMENTS AND CONTINGENCIES
The Company has various lawsuits, claims and contingent liabilities. In the opinion of the Company, although final disposition of all of its suits and claims may impact the Company's financial statements in a particular period, they should not, in the aggregate, have a material adverse effect on the Company's financial position. As of the end of the quarter, approximately $37 million was committed for various capital projects.
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1996
UNAUDITED
C. STOCKHOLDERS' EQUITY The following table summarizes the changes in stockholders' equity for the three months ended December 31, 1996.
(Dollars in thousands)
Preferred Stock Preferred Common Stock
--------------- Treasury Stock ------------
Shares -------------- Shares
Issued Value Shares Cost Issued Value
------ ------- ----- ------- ----------- --------
Balance at September 30, 1996 75,336 $75,336 5,744 $(6,565) 135,549,936 $135,550
Net income
Common stock dividends paid
Issuance of treasury stock under
employee compensation plans
Purchase of treasury stock - common
Purchase of treasury stock - preferred 213 (524)
Sale of treasury stock to Cabot
Retirement Incentive Savings Plan
Preferred stock dividends paid to Employee
Stock Ownership Plan, net of tax
Principal payment by Employee Stock
Ownership Plan under guaranteed loan
Amortization of unearned compensation
Unrealized gain, net of deferred tax
Foreign currency translation adjustments
------ ------- ----- ------- ----------- --------
Balance at December 31, 1996 75,336 $75,336 5,957 $(7,089) 135,549,936 $135,550
====== ======= ===== ======= =========== ========
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Common
Additional Treasury Stock
Paid-in Retained -------------- Unearned
Capital Earnings Shares Cost Compensation
-------- ----------- ----------- --------- ------------
Balance at September 30, 1996 $ 23,618 $ 1,176,708 63,960,725 $(634,370) $(16,611)
Net income 25,113
Common stock dividends paid (7,210)
Issuance of treasury stock under
employee compensation plans (216) (24,344) 174 470
Purchase of treasury stock - common 1,503,460 (37,693)
Purchase of treasury stock - preferred
Sale of treasury stock to Cabot
Retirement Incentive Savings Plan 591 (38,790) 388
Preferred stock dividends paid to Employee
Stock Ownership Plan, net of tax (820)
Principal payment by Employee Stock
Ownership Plan under guaranteed loan
Amortization of unearned compensation 2,350
Unrealized gain, net of deferred tax
Foreign currency translation adjustments
-------- ----------- ----------- --------- --------
Balance at December 31, 1996 $ 23,993 $ 1,193,791 65,401,051 $(671,501) $(13,791)
======== =========== =========== ========= ========
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Unrealized Foreign
Deferred Gain/(Loss) Currency Total
Employee Marketable Translation Stockholders'
Benefits Securities Adjustments Equity
-------- ---------- ----------- ---------
Balance at September 30, 1996 $(64,283) $29,874 $25,674 $ 744,931
Net income 25,113
Common stock dividends paid (7,210)
Issuance of treasury stock under
employee compensation plans 428
Purchase of treasury stock - common (37,693)
Purchase of treasury stock - preferred (524)
Sale of treasury stock to Cabot
Retirement Incentive Savings Plan 979
Preferred stock dividends paid to Employee
Stock Ownership Plan, net of tax (820)
Principal payment by Employee Stock
Ownership Plan under guaranteed loan 428 428
Amortization of unearned compensation 2,350
Unrealized gain, net of deferred tax 4,379 4,379
Foreign currency translation adjustments 1,793 1,793
-------- ------- ------- ---------
Balance at December 31, 1996 $(63,855) $34,253 $27,467 $ 734,154
======== ======= ======= =========
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CABOT CORPORATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
I. RESULTS OF OPERATIONS
Sales and operating profit by industry segment are shown in the accompanying table on page 11.
THREE MONTHS ENDED DECEMBER 31, 1996 VERSUS
THREE MONTHS ENDED DECEMBER 31, 1995
Net income for the first quarter of fiscal 1997 was $25.1 million ($0.32 per common share, fully diluted), compared with net income of $43.4 million ($0.53 per common share, fully diluted) in the same quarter a year ago. Net sales and other operating revenues decreased 10% to $398.8 million from $443.0 million. Total operating profit was $50.4 million for the quarter, compared to $80.1 million in the same quarter a year ago, reflecting lower margins in the Company's carbon black business. Results for the first quarter of fiscal 1996 included $65.7 million of revenues and $2.9 million of operating profit from the Company's former coal handling subsidiary, which was sold at the end of that fiscal year.
In the Specialty Chemicals and Materials Group, net sales were $340.2 million, compared with $344.0 million last year. The effects of greater specialty chemical volumes globally were more than offset by the effects of lower carbon black selling prices, primarily in the European and Pacific Asia markets. The Group reported operating profit of $45.9 million for the first quarter, compared with $71.8 million for the first quarter of fiscal 1996. More than half of the year-to-year decrease in operating profit occurred in the Company's European carbon black business. Price concessions made during 1996 and higher year-to-year feedstock costs, which the Company could not recover from its customers, resulted in tighter margins in that business. Higher year-to-year feedstock costs also affected North American carbon black margins during the first quarter, but were partially offset by higher selling prices.
The Company's Performance Materials Division (CPM), which primarily manufactures tantalum products, experienced 20% lower volumes in the first quarter compared to the same quarter last year. CPM's customers continued to draw down their tantalum inventories from excessive levels caused by a slowdown in the U.S. electronics industry market during 1996.
The Cab-O-Sil fumed silica business reported increased earnings for the first quarter, due primarily to an 18% increase in volumes from the first quarter of last year.
As expected, increased spending on research and development and marketing costs associated with new product, new business and market development initiatives accounted for $6.8 million of the year-to-year operating profit decrease. The Company is pursuing a number of new product and new business development opportunities as part of a growth strategy.
In the Energy Group, sales decreased to $58.6 million from $99.0 million in the first quarter of fiscal 1996. The first quarter of fiscal 1996 results included revenues of $65.7 million from the Company's former coal handling subsidiary, TUCO INC. The Company sold TUCO at the end of fiscal 1996. Excluding TUCO revenues from the Energy Group's 1996 results to form a comparative basis, the Group's revenues increased 76% in the first quarter of fiscal 1997.
CABOT CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
I. RESULTS OF OPERATIONS (CONTINUED)
The Energy Group's operating profit was $4.5 million, compared with $8.3 million in the first quarter of 1996. Excluding the coal handling business' results and a gain from the reduction of the Company's ownership position in the Trinidad liquefaction joint venture from the 1996 results to form a comparative basis, the Group's operating profit increased $2.4 million, or 114% in the first quarter of fiscal 1997. The earnings increase reflected higher gas prices and greater availability of liquefied natural gas.
The Company's income tax rate for the first quarter was 36%, compared with a 37% rate for fiscal 1996.
II. CASH FLOWS AND LIQUIDITY
During the quarter, the Company generated $0.8 million of cash from operations. Working capital increased $44.6 million primarily due to business seasonality. Effective September 30, 1996, the Company sold its TUCO INC. subsidiary for $77 million. Accordingly, during the quarter, the Company received $35 million in cash, which included $8 million of working capital adjustments, and $50 million in the form of a debt repayment on Cabot's behalf from the respective buyer.
Capital expenditures totaled $58.6 million during the three months ended December 31, 1996. The Company expects to spend a total of $200 million to $225 million on capital projects during fiscal year 1997. The major components of the 1997 capital program include new carbon black capacity to support the contracts with U.S. tire manufacturers, Clean Air Act compliance, differentiated product manufacturing capabilities, new business expansion spending and normal plant maintenance spending.
During the quarter, the Company repurchased approximately 1,500,000 shares of common stock. These repurchases were funded with the proceeds from the sale of its TUCO INC. subsidiary and short term borrowings. At the end of the quarter, approximately 1,800,000 shares remained under the April 1996 repurchase authorization for 4,000,000 shares.
The Company's ratio of total debt (including short-term debt net of cash) to capital increased to 41% from 40% at the beginning of the three month period. On February 6, 1997, the Company issued $90 million of medium-term notes maturing from 2004 to 2011 with a weighted average interest rate of approximately 7%. The proceeds from the issuance were used to repay short-term debt.
During the quarter, the Company renegotiated its line of credit agreement. The facility was increased to $300 million from $250 million and was extended to January 3, 2002. Management expects cash from operations and present financing arrangements, including the Company's unused line of credit of $300 million, to be sufficient to meet the Company's cash requirements for the foreseeable future.
CABOT CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
(Dollars in millions, except per share amounts)
UNAUDITED
Three Months Ended
------------------------
12/31/96 12/31/95
-------- --------
Industry Segment Data
Sales:
Specialty Chemicals and Materials $ 340.2 $ 344.0
Energy 58.6 99.0
------- -------
Net sales $ 398.8 $ 443.0
======= =======
Operating profit:
Specialty Chemicals and Materials $ 45.9 $ 71.8
Energy 4.5 8.3
------- -------
Total operating profit 50.4 80.1
Interest expense (9.7) (9.4)
General corporate/other expenses (6.0) (5.9)
------- -------
Income before income taxes 34.7 64.8
Provision for income taxes (12.5) (24.0)
Equity in net income of affiliated companies 4.0 3.7
Minority interest (1.1) (1.1)
------- -------
Net income 25.1 43.4
Dividends on preferred stock (0.8) (0.9)
------- -------
Income applicable to primary common shares $ 24.3 $ 42.5
======= =======
Income per common share:
Primary $ 0.34 $ 0.57
======= =======
Fully diluted $ 0.32 $ 0.53
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Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibit numbers in the following list correspond to the number assigned to such exhibits in the Exhibit Table of Item 601 of Regulation S-K:
Exhibit
Number Description
------ -----------
4 Second Supplemental Indenture, dated as of January 31,
1997, between Cabot Corporation and State Street
Bank and Trust Company, Trustee, filed herewith.
11 Statement Regarding Computation of Per Share Earnings, filed herewith.
12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges, filed herewith.
25 Statement of Eligibility under the Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee, filed herewith.
27 Financial Data Schedule, filed herewith. (Not included with printed copy of the Form 10-Q.)
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(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the three months ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CABOT CORPORATION
Date: February 14, 1997 /s/ Kenyon C. Gilson
------------------------------------------
Kenyon C. Gilson
Executive Vice President and
Chief Financial Officer
Date: February 14, 1997 /s/ William T. Anderson
------------------------------------------
William T. Anderson
Acting Corporate Controller
(Chief Accounting Officer)
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EXHIBIT 4
SECOND SUPPLEMENTAL INDENTURE, dated as of January 31, 1997, between CABOT CORPORATION, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal executive offices at 75 State Street, Boston, Massachusetts, and THE STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company (herein called the "Trustee"), having its principal corporate trust office at Two International Place, Boston, Massachusetts 02110.
RECITALS
WHEREAS, the Company has entered into an Indenture dated as of December 1, 1987 and supplemented by a First Supplemental Indenture dated June 17, 1992 (as the same may be modified by the Trust Indenture Reform Act of 1990, the "Indenture"), with The First National Bank of Boston, as the Trustee's predecessor, to provide for the issuance from time to time of the Company's Securities, to be issued in one or more series; and
WHEREAS, Section 9.01 of the Indenture provides, among other things, that the Company and the Trustee may enter into indentures supplemental to the Indenture to cure any ambiguity, omission, defect or inconsistency or to make other formal changes and to make any change that does not adversely affect the rights of any Securityholder; and
WHEREAS, the Trustee became the successor to The First National Bank of Boston, as Trustee under the Indenture, pursuant to Section 7.09 of the Indenture; and
WHEREAS, all conditions have been complied with, all actions have been taken and all things have been done which are necessary to make this Second Supplemental Indenture a valid and binding supplement to the Indenture.
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities by the holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all holders of Securities, as follows:
Section 1. Definitions. Capitalized terms not defined herein shall have their associated meanings as defined in the Indenture.
Section 2. Successor Trustee. The Trustee succeeded The First National Bank of Boston, as Trustee under the Indenture, pursuant to Section 7.09 of the Indenture, with effect from and after October 2, 1995 (the "Effective Date").
Section 3. Incorporation of Indenture. From and after the date hereof, the Indenture, as supplemented and amended by this Second Supplemental Indenture, shall be read, taken and construed as one and the same instrument with respect to the Securities.
Section 4. Acceptance of Trust. The Trustee accepts the trusts created by the Indenture, from and after the Effective Date, as supplemented by this Second Supplemental Indenture, and agrees to perform the same upon the terms and conditions in the Indenture, as supplemented by this Second Supplemental Indenture.
Section 5. Counterparts. This Second Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, and their respective seals to be hereunto affixed and attested, all as of the date first above written.
CABOT CORPORATION
BY: /s/ Kenyon C. Gilson
----------------------
Kenyon C. Gilson,
Executive Vice President and
Chief Financial Officer
ATTEST:
/s/ Edith C. McGuinness
- -----------------------
Edith C. McGuinness
Assistant Secretary
THE STATE STREET BANK AND
TRUST COMPANY, as Trustee
BY: /s/ Henry W. Seemore
--------------------
Henry W. Seemore,
Assistant Vice President
ATTEST:
/s/ Eric J. Donaghey
- --------------------
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EXHIBIT 11
CABOT CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
For the three month period ended December 31, 1996
(In thousands, except per share amounts)
Primary Fully Diluted
-------- -------------
Shares of common stock outstanding at October 1, 1996,
less treasury stock 71,589 71,589
Plus net weighted shares of treasury stock purchased (692) (692)
Plus common stock equivalents:
Effect of convertible preferred stock conversion 6,069
Effect of equity incentive awards 1,122 1,122
-------- --------
Weighted average shares outstanding 72,019 78,088
======== ========
Income applicable to common shares $ 24,293 $ 24,293
Dividends on preferred stock 820
Preferred stock conversion compensation shortfall (511)
-------- --------
Earnings applicable to common shares $ 24,293 $ 24,602
======== ========
Earnings per common share $ 0.34 $ 0.32
======== ========
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EXHIBIT 12
CABOT CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
Three Months Years ended September 30
ended ------------------------------------------------------------------
December 31, 1996 1996 1995 1994 1993 1992
----------------- -------- -------- -------- -------- --------
Earnings:
Pre-tax income from continuing operations $34,744 $279,834 $256,029 $118,325 $ 67,900 $116,599
Distributed income of affiliated companies 2,345 11,173 11,699 5,638 5,988 5,766
Add fixed charges:
Interest on indebtedness 9,670 41,718 35,639 41,668 44,043 41,714
Portion of rents representative of
the interest factor 1,209 4,837 5,515 5,879 4,838 4,933
------- -------- -------- -------- -------- --------
Income as adjusted $47,968 $337,562 $308,882 $171,510 $122,769 $169,012
Fixed charges:
Interest on indebtedness $ 9,670 $ 41,718 $ 35,639 $ 41,668 $ 44,043 $ 41,714
Capitalized interest -- -- -- -- -- 3,963
Portion of rents representative of
the interest factor 1,209 4,837 5,515 5,879 4,838 4,933
------- -------- -------- -------- -------- --------
Total fixed charges $10,879 $ 46,555 $ 41,154 $ 47,547 $ 48,881 $ 50,610
Ratio of earnings to fixed charges 4.41 7.25 7.51 3.61 2.51 3.34
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EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
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225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Senior Vice President and Corporate Secretary 225 Franklin Street, Boston, Massachusetts 02110 (617)654-3253
(Name, address and telephone number of agent for service)
CABOT CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 04-2271897
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
75 STATE STREET
BOSTON, MA 02109
(Address of principal executive offices) (Zip Code)
--------------------
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CABOT CORPORATION SERIES A MEDIUM - TERM NOTES
(Title of indenture securities)
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State Street Boston Corporation.
(See note on page 6.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22- 17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility and Qualification which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Boston and The Commonwealth of Massachusetts, on the 29TH DAY OF JANUARY, 1997.
STATE STREET BANK AND TRUST COMPANY
By /s/ Henry W. Seemore
------------------------------
HENRY W. SEEMORE
ASSISTANT VICE PRESIDENT
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EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by CABOT CORPORATION of its CABOT CORPORATION SERIES A MEDIUM - TERM NOTES, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Henry W. Seemore
----------------------------------
HENRY W. SEEMORE
ASSISTANT VICE PRESIDENT
DATED: JANUARY 29, 1997
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EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company of Boston, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business December 31, 1995, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin .... 1,331,827
Interest-bearing balances ............................. 5,971,326
Securities ..................................................... 6,325,054
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ................... 5,436,994
Loans and lease financing receivables:
Loans and leases, net of unearned income ....4,308,339
Allowance for loan and lease losses ......... 63,491
Loans and leases, net of unearned income and allowances 4,244,848
Assets held in trading accounts ................................ 1,042,846
Premises and fixed assets ...................................... 374,362
Other real estate owned ........................................ 3,223
Investments in unconsolidated subsidiaries ..................... 31,624
Customers' liability to this bank on acceptances outstanding ... 57,472
Intangible assets .............................................. 68,384
Other assets ................................................... 670,058
Total assets ................................................... 25,558,018
==========
LIABILITIES
Deposits:
In domestic offices ................................... 6,880,231
Noninterest-bearing ................4,728,115
Interest-bearing ...................2,152,116
In foreign offices and Edge subsidiary ................ 9,607,427
Noninterest-bearing ................ 28,265
Interest-bearing ...................9,579,162
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ................... 5,913,969
Demand notes issued to the U.S. Treasury and Trading Liabilities 530,406
Other borrowed money ........................................... 493,191
Bank's liability on acceptances executed and outstanding ....... 57,387
Other liabilities .............................................. 620,287
----------
Total liabilities .............................................. 24,102,898
----------
EQUITY CAPITAL
Common stock ................................................... 29,176
Surplus ........................................................ 228,448
Undivided profits .............................................. 1,197,496
----------
Total equity capital ........................................... 1,455,120
----------
Total liabilities and equity capital ........................... 25,558,018
==========
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I, Rex S. Schuette, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct.
David A. Spina Marshall N. Carter Charles F. Kaye
| ARTICLE 5 |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | SEP 30 1996 |
| PERIOD END | DEC 31 1996 |
| CASH | 42,328 |
| SECURITIES | 0 |
| RECEIVABLES | 296,854 |
| ALLOWANCES | 4,813 |
| INVENTORY | 274,680 |
| CURRENT ASSETS | 638,370 |
| PP&E | 1,777,003 |
| DEPRECIATION | 836,036 |
| TOTAL ASSETS | 1,836,159 |
| CURRENT LIABILITIES | 612,740 |
| BONDS | 219,796 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 75,336 |
| COMMON | 135,550 |
| OTHER SE | 1,217,783 |
| TOTAL LIABILITY AND EQUITY | 1,836,159 |
| SALES | 398,825 |
| TOTAL REVENUES | 400,504 |
| CGS | 279,683 |
| TOTAL COSTS | 279,683 |
| OTHER EXPENSES | 22,747 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 9,670 |
| INCOME PRETAX | 34,744 |
| INCOME TAX | 12,507 |
| INCOME CONTINUING | 25,113 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 25,113 |
| EPS PRIMARY | 0.34 |
| EPS DILUTED | 0.32 |