Cabot (CBT) - 2024 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the quarter ended December 31, 2023, showing a slight decrease in net sales, lower net income, and improved cash from operations Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended Dec 31, 2023 (in millions) | Three Months Ended Dec 31, 2022 (in millions) | | :--- | :--- | :--- | | Net sales and other operating revenues | $958 | $965 | | Gross profit | $218 | $181 | | Income from operations | $136 | $105 | | Net income attributable to Cabot Corporation | $50 | $54 | | Diluted Earnings per common share | $0.88 | $0.93 | Consolidated Balance Sheets Highlights (Unaudited) | Metric | December 31, 2023 (in millions) | September 30, 2023 (in millions) | | :--- | :--- | :--- | | Total current assets | $1,692 | $1,626 | | Total assets | $3,695 | $3,604 | | Total current liabilities | $830 | $822 | | Total stockholders' equity | $1,475 | $1,407 | | Total liabilities and stockholders' equity | $3,695 | $3,604 | Consolidated Statements of Cash Flows Highlights (Unaudited) | Metric | Three Months Ended Dec 31, 2023 (in millions) | Three Months Ended Dec 31, 2022 (in millions) | | :--- | :--- | :--- | | Cash provided by operating activities | $105 | $52 | | Cash used in investing activities | ($54) | ($17) | | Cash used in financing activities | ($29) | ($92) | | Increase (decrease) in cash | $6 | ($16) | Notes to the Consolidated Financial Statements The notes detail accounting policies and financial items, including a $40 million foreign exchange loss in Argentina, $9 million in restructuring charges, and stable $38 million reserve for respirator liabilities - The company's Argentinian subsidiary recorded a significant foreign exchange loss of $40 million due to the revaluation of monetary balances, with $33 million resulting from a single devaluation action by the new government[41] - In Q1 fiscal 2024, the company initiated restructuring activities, including closing a reinforcing carbons unit in Tianjin, China, and temporarily idling an aerogel plant in Frankfurt, Germany. This resulted in restructuring charges of $9 million for the quarter[48][65] - The reserve for respirator-related liabilities, a long-standing contingency, was unchanged at $38 million as of December 31, 2023, and September 30, 2023[61] Segment Revenues from External Customers (Q1 FY24 vs Q1 FY23) | Segment | Q1 2023 (in millions) | Q1 2022 (in millions) | | :--- | :--- | :--- | | Reinforcement Materials | $641 | $643 | | Performance Chemicals | $285 | $286 | | Segment Total | $926 | $929 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management's analysis indicates that while consolidated net sales slightly decreased year-over-year, gross profit increased by $37 million due to higher volumes and margins, with total segment EBIT growing by $40 million to $163 million, despite a $40 million foreign currency loss in Argentina, and cash from operations more than doubling to $105 million - Consolidated gross profit increased by $37 million YoY, primarily due to higher volumes and improved unit margins in both the Reinforcement Materials and Performance Chemicals segments[125] Segment EBIT Performance (Q1 FY24 vs Q1 FY23) | Segment | EBIT Q1 2024 (in millions) | EBIT Q1 2023 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Reinforcement Materials | $129 | $94 | +$35 | | Performance Chemicals | $34 | $29 | +$5 | | Total Segment EBIT | $163 | $123 | +$40 | - Reinforcement Materials EBIT increased by $35 million YoY, driven by higher unit margins ($28 million) from favorable pricing and product mix, and higher volumes ($5 million) in Europe and Asia[110] - Other expense increased by $24 million YoY, primarily due to $40 million in foreign currency losses from the Argentine peso devaluation, partially offset by $12 million in investment income in Argentina[78] - Cash flow from operating activities increased significantly to $105 million in Q1 2024 from $52 million in Q1 2023, mainly due to improved segment EBIT[115] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports that there have been no material changes in its market risk exposures for the quarter ended December 31, 2023, compared to the information provided in its Annual Report on Form 10-K for the fiscal year ended September 30, 2023 - Information about market risks for the period ended December 31, 2023, does not differ materially from the disclosures in the 2023 10-K[42] Item 4. Controls and Procedures Based on an evaluation as of December 31, 2023, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[147] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[147] Part II. Other Information Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's repurchases of its common stock during the first quarter of fiscal 2024, with Cabot repurchasing a total of 260,094 shares under its publicly announced plan, which does not have a set expiration date Issuer Purchases of Equity Securities (Q1 FY2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 2023 | 0 | $ - | | Nov 2023 | 191,954 | $76.74 | | Dec 2023 | 68,140 | $77.33 | | Total | 260,094 | N/A | - The Board of Directors authorized a share repurchase program on July 13, 2018, which does not have a set expiration date. As of December 31, 2023, 2,724,876 shares remained available for repurchase under this plan[44][144] Item 6. Exhibits This section lists the exhibits filed as part of the quarterly report, including the company's certificate of incorporation, by-laws, and certifications from the Principal Executive Officer (31.1) and Principal Financial Officer (31.2) as required by SEC rules - The report includes several exhibits, such as certifications from the Principal Executive Officer (31.1) and Principal Financial Officer (31.2) as required by the Exchange Act, and XBRL data files[121]