Cabot (CBT) - 2025 Q2 - Quarterly Report

Part I. Financial Information This section provides the unaudited interim financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the company Financial Statements (unaudited) This section presents Cabot Corporation's unaudited consolidated financial statements for the interim periods ended March 31, 2025, and 2024, along with detailed notes on accounting policies and disclosures Consolidated Statements of Operations Cabot Corporation's unaudited consolidated statements show decreased net sales but increased net income for both the three and six months ended March 31, 2025 Consolidated Statements of Operations Highlights (In millions, except per share amounts) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales and other operating revenues | $936 | $1,019 | $1,891 | $1,977 | | Gross profit | $241 | $246 | $476 | $464 | | Income from operations | $162 | $156 | $317 | $292 | | Net income attributable to Cabot Corporation | $94 | $84 | $187 | $134 | | Diluted Earnings per common share | $1.69 | $1.49 | $3.36 | $2.37 | Consolidated Balance Sheets As of March 31, 2025, total assets increased slightly to $3.784 billion, while total liabilities also rose, and total stockholders' equity remained flat Consolidated Balance Sheet Highlights (In millions) | Metric | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $213 | $223 | | Total current assets | $1,603 | $1,605 | | Net property, plant and equipment | $1,603 | $1,534 | | Total assets | $3,784 | $3,736 | | Liabilities & Equity | | | | Total current liabilities | $818 | $772 | | Long-term debt | $1,090 | $1,087 | | Total liabilities | $2,194 | $2,146 | | Total stockholders' equity | $1,590 | $1,590 | Consolidated Statements of Cash Flows For the six months ended March 31, 2025, cash provided by operating activities decreased, while cash used in investing activities increased, and cash used in financing activities significantly decreased Consolidated Cash Flow Summary (In millions) | Cash Flow Activity | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $197 | $281 | | Cash used in investing activities | ($174) | ($95) | | Cash used in financing activities | ($7) | ($195) | | Increase (decrease) in cash | ($10) | ($32) | | Cash and cash equivalents at end of period | $213 | $206 | Notes to the Consolidated Financial Statements The notes provide detailed information supporting the financial statements, covering accounting policies, acquisitions, contingencies, and segment performance - In October 2024, the Company acquired certain assets and licensed technology for its Battery Materials product line for $27 million, allocated to property, plant and equipment ($19 million) and intangible assets ($8 million)[37] - The Company maintains a reserve of $34 million as of March 31, 2025, for expected liabilities related to a former respirator products business[40][41] - Foreign exchange losses related to Argentina were significantly lower in the first six months of fiscal 2025 ($2 million) compared to the same period in 2024 ($40 million), which included a $33 million loss from a single devaluation event[32] Segment EBIT (In millions) | Segment | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Reinforcement Materials | $131 | $149 | $261 | $278 | | Performance Chemicals | $50 | $31 | $95 | $65 | | Total Segment EBIT | $181 | $180 | $356 | $343 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results, highlighting decreased net sales but increased gross profit for the six-month period, alongside detailed segment performance, liquidity, and cash flow activities Results of Operations Consolidated net sales for Q2 2025 decreased year-over-year, while net income attributable to Cabot rose in both the quarter and six-month period, largely due to lower foreign exchange losses - Q2 2025 net sales decreased by $83 million YoY, driven by lower Reinforcement Materials volumes ($48M), unfavorable pricing/mix ($24M), and negative currency impact ($28M), partly offset by higher Performance Chemicals volumes ($16M)[78][79] - Net income for Q2 2025 rose to $94 million from $84 million YoY, mainly due to higher Segment EBIT in Performance Chemicals (+$19M) and lower losses from Argentina's currency devaluation (+$8M), which offset lower EBIT from Reinforcement Materials (-$18M)[95] - The company expects the operating tax rate for fiscal 2025 to be in the range of 27% to 29%[92] Business Segment Analysis In Q2 2025, Reinforcement Materials EBIT fell due to lower volumes, while Performance Chemicals EBIT grew from higher volumes and improved gross profit per ton Reinforcement Materials Segment Results (In millions) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales | $594 | $676 | $1,205 | $1,317 | | EBIT | $131 | $149 | $261 | $278 | - The decrease in Reinforcement Materials EBIT was primarily driven by lower volumes ($20 million impact) resulting from lower tire demand and contract outcomes in South America[103] Performance Chemicals Segment Results (In millions) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales | $311 | $311 | $622 | $596 | | EBIT | $50 | $31 | $95 | $65 | - The increase in Performance Chemicals EBIT was driven by higher gross profit per ton ($9 million) and higher volumes ($9 million), particularly in the Fumed Metal Oxides product line[107][108] Liquidity and Capital Resources The company's liquidity position decreased in the first six months of fiscal 2025, with reduced cash from operations, increased capital expenditures, and significant share repurchases - As of March 31, 2025, the company had cash and cash equivalents of $213 million and borrowing availability of $1.0 billion under its revolving credit agreements[112] - Cash provided by operating activities decreased to $197 million in the first six months of fiscal 2025, compared to $281 million in the prior year period, mainly due to an increase in net working capital[119][120] - Capital expenditures for fiscal 2025 are projected to be between $250 million and $275 million[124] - During the first six months of fiscal 2025, the company repurchased $89 million of its shares and paid $47 million in dividends to common stockholders[126] Quantitative and Qualitative Disclosures About Market Risk The company states that information regarding market risks for the period ended March 31, 2025, has not materially changed from prior disclosures - There are no material changes in market risk disclosures from the company's 2024 10-K report[131] Controls and Procedures Based on evaluation, the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls over financial reporting - Management, including the CEO and CFO, concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[132] - No changes occurred during the fiscal quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[133] Part II. Other Information This section includes information on unregistered sales of equity securities, other general disclosures, and a list of exhibits filed with the report Unregistered Sales of Equity Securities and Use of Proceeds During the quarter ended March 31, 2025, Cabot repurchased a total of 527,379 shares of common stock under a board-authorized program that was recently expanded Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2025 | — | — | | February 2025 | 462,379 | $86.51 | | March 2025 | 65,000 | $82.05 | | Total | 527,379 | N/A | - In December 2024, the Board of Directors authorized the repurchase of an additional ten million shares of common stock[134] Other Information The company reports that no directors or officers entered into, modified, or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers entered into, modified, or terminated Rule 10b5-1 trading plans or other trading arrangements during the quarter ended March 31, 2025[135] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, equity award certificates, and required officer certifications - Filed exhibits include corporate governance documents, forms of equity award certificates, and required officer certifications (Rule 13a-14(a) and Section 1350)[136]