Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Dec. 31, 2018 | Feb. 05, 2019 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Dec. 31, 2018 | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | CBT | |
Entity Registrant Name | CABOT CORP | |
Entity Central Index Key | 16,040 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 59,520,108 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Net sales and other operating revenues | $ 821 | $ 720 |
Cost of sales | 655 | 544 |
Gross profit | 166 | 176 |
Selling and administrative expenses | 73 | 70 |
Research and technical expenses | 16 | 15 |
Income (loss) from operations | 77 | 91 |
Interest and dividend income | 2 | 3 |
Interest expense | (15) | (13) |
Other income (expense) | 6 | 11 |
Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies | 70 | 92 |
(Provision) benefit for income taxes | 7 | (205) |
Equity in earnings of affiliated companies, net of tax | 1 | |
Net income (loss) | 77 | (112) |
Net income (loss) attributable to noncontrolling interests, net of tax | 8 | 10 |
Net income (loss) attributable to Cabot Corporation | $ 69 | $ (122) |
Weighted-average common shares outstanding: | ||
Basic | 59.9 | 61.9 |
Diluted | 60.1 | 61.9 |
Earnings per common share: | ||
Basic | $ 1.14 | $ (1.98) |
Diluted | 1.14 | (1.98) |
Dividends per common share | $ 0.33 | $ 0.315 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Net income (loss) | $ 77 | $ (112) |
Other comprehensive income (loss), net of tax | ||
Foreign currency translation adjustment, net of tax provision (benefit) of $2 and $(2) | (24) | |
Derivatives: net investment hedges | ||
(Gains) losses reclassified to interest expense, net of tax provision (benefit) of $— and $— | (1) | (1) |
Pension and other postretirement benefit liability adjustments | ||
Pension and other postretirement benefit liability adjustments arising during the period, net of tax | 22 | |
Other comprehensive income (loss) | (3) | (1) |
Comprehensive income (loss) | 74 | (113) |
Net income (loss) attributable to noncontrolling interests, net of tax | 8 | 10 |
Foreign currency translation adjustment attributable to noncontrolling interests, net of tax | 3 | |
Comprehensive income (loss) attributable to noncontrolling interests, net of tax | 8 | 13 |
Comprehensive income (loss) attributable to Cabot Corporation | $ 66 | $ (126) |
Consolidated Statements of Co_2
Consolidated Statements of Comprehensive Income (Parenthetical) (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Foreign currency translation adjustment, tax provision (benefit) | $ 2 | $ (2) |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions | Dec. 31, 2018 | Sep. 30, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 142 | $ 175 |
Accounts and notes receivable, net of reserve for doubtful accounts of $6 and $7 | 588 | 637 |
Inventories: | ||
Raw materials | 146 | 129 |
Work in process | 3 | 3 |
Finished goods | 390 | 329 |
Other | 50 | 50 |
Total inventories | 589 | 511 |
Prepaid expenses and other current assets | 62 | 63 |
Total current assets | 1,381 | 1,386 |
Property, plant and equipment, net | 1,298 | 1,296 |
Goodwill | 90 | 93 |
Equity affiliates | 49 | 52 |
Intangible assets, net | 94 | 98 |
Assets held for rent | 125 | 118 |
Deferred income taxes | 151 | 134 |
Other assets | 67 | 67 |
Total assets | 3,255 | 3,244 |
Current liabilities: | ||
Short-term borrowings | 515 | 249 |
Accounts payable and accrued liabilities | 521 | 613 |
Income taxes payable | 14 | 29 |
Current portion of long-term debt | 5 | 35 |
Redeemable preferred stock | 26 | |
Total current liabilities | 1,055 | 952 |
Long-term debt | 671 | 719 |
Deferred income taxes | 42 | 42 |
Other liabilities | 211 | 252 |
Commitments and contingencies (Note G) | ||
Preferred stock: | ||
Authorized: 2,000,000 shares of $1 par value Issued and Outstanding: None and none | ||
Common stock: | ||
Authorized: 200,000,000 shares of $1 par value Issued: 59,709,462 and 60,566,375 shares Outstanding: 59,509,656 and 60,366,569 shares | 60 | 61 |
Less cost of 199,806 and 199,806 shares of common treasury stock | (7) | (7) |
Retained earnings | 1,410 | 1,417 |
Accumulated other comprehensive income (loss) | (320) | (317) |
Total Cabot Corporation stockholders' equity | 1,143 | 1,154 |
Noncontrolling interests | 133 | 125 |
Total stockholders' equity | 1,276 | 1,279 |
Total liabilities and stockholders' equity | $ 3,255 | $ 3,244 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Millions | Dec. 31, 2018 | Sep. 30, 2018 | |
Statement Of Financial Position [Abstract] | |||
Accounts and notes receivable, reserve for doubtful accounts | $ 6 | $ 7 | |
Preferred stock, authorized shares | 2,000,000 | 2,000,000 | |
Preferred stock, par value | $ 1 | $ 1 | |
Preferred stock, Issued shares | 0 | 0 | |
Preferred stock, Outstanding shares | 0 | 0 | |
Common stock, authorized shares | 200,000,000 | 200,000,000 | |
Common stock, par value | $ 1 | [1] | $ 1 |
Common stock, issued shares | 59,709,462 | 60,566,375 | |
Common stock, outstanding shares | 59,509,656 | 60,366,569 | |
Common treasury stock, shares | 199,806 | 199,806 | |
[1] | 1 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash Flows from Operating Activities: | ||
Net income (loss) | $ 77 | $ (112) |
Adjustments to reconcile net income (loss) to cash provided by operating activities: | ||
Depreciation and amortization | 35 | 39 |
Deferred tax provision (benefit) | (23) | 186 |
Gain on sale of investments | (10) | |
Employee benefit plan settlement | 6 | |
Equity in net income of affiliated companies | (1) | |
Non-cash compensation | 5 | 6 |
Changes in assets and liabilities: | ||
Accounts and notes receivable | 47 | (19) |
Inventories | (83) | (41) |
Prepaid expenses and other current assets | (2) | (4) |
Accounts payable and accrued liabilities | (75) | 10 |
Income taxes payable | (15) | (3) |
Other liabilities | (12) | (10) |
Cash dividends received from equity affiliates | 1 | 4 |
Cash provided (used) by operating activities | (39) | 45 |
Cash Flows from Investing Activities: | ||
Additions to property, plant and equipment | (54) | (52) |
Cash paid for acquisition of business, net of cash acquired of $— and $1 | (64) | |
Proceeds from sale of investments | 10 | |
Change in assets held for rent | (1) | |
Other | 1 | 5 |
Cash used by investing activities | (54) | (101) |
Cash Flows from Financing Activities: | ||
Borrowings under financing arrangements | 18 | |
Proceeds from (repayments of) issuance of commercial paper, net | 248 | |
Repayments of long-term debt | (74) | |
Repayments of redeemable preferred stock | (25) | |
Purchases of common stock | (62) | (16) |
Cash dividends paid to noncontrolling interests | (11) | |
Cash dividends paid to common stockholders | (20) | (20) |
Cash provided (used) by financing activities | 74 | (36) |
Effects of exchange rate changes on cash | (14) | 1 |
Increase (decrease) in cash and cash equivalents | (33) | (91) |
Cash and cash equivalents at beginning of period | 175 | 280 |
Cash and cash equivalents at end of period | $ 142 | $ 189 |
Consolidated Statements of Ca_2
Consolidated Statements of Cash Flows (Parenthetical) (Unaudited) $ in Millions | 3 Months Ended |
Dec. 31, 2017USD ($) | |
Statement Of Cash Flows [Abstract] | |
Cash acquired in acquisition of business | $ 1 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Millions | Total | Common Stock, Net of Treasury Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total Cabot Corporation Stockholders' Equity [Member] | Noncontrolling Interests [Member] |
Beginning Balance at Sep. 30, 2017 | $ 1,625 | $ 56 | $ 1,707 | $ (259) | $ 1,504 | $ 121 | |
Beginning Balance, Shares at Sep. 30, 2017 | 61,884 | ||||||
Net income (loss) | (112) | (122) | (122) | 10 | |||
Total other comprehensive income (loss) | (1) | (4) | (4) | 3 | |||
Cash dividends paid to common stockholders | (20) | (20) | (20) | ||||
Cash dividends declared to noncontrolling interests | (10) | (10) | |||||
Issuance of stock under equity compensation plans, Shares | 178 | ||||||
Amortization of share-based compensation | 6 | $ 6 | 6 | ||||
Purchase and retirement of common stock | (16) | (6) | (10) | (16) | |||
Purchase and retirement of common stock, Shares | (265) | ||||||
Ending Balance at Dec. 31, 2017 | 1,472 | $ 56 | 1,555 | (263) | 1,348 | 124 | |
Ending Balance, Shares at Dec. 31, 2017 | 61,797 | ||||||
Beginning Balance at Sep. 30, 2018 | 1,279 | $ 54 | 1,417 | (317) | 1,154 | 125 | |
Beginning Balance, Shares at Sep. 30, 2018 | 60,367 | ||||||
Net income (loss) | 77 | 69 | 69 | 8 | |||
Total other comprehensive income (loss) | (3) | (3) | (3) | ||||
Cash dividends paid to common stockholders | (20) | (20) | (20) | ||||
Issuance of stock under equity compensation plans, Shares | 344 | ||||||
Amortization of share-based compensation | 5 | 5 | 5 | ||||
Purchase and retirement of common stock | (62) | $ (1) | $ (5) | (56) | (62) | ||
Purchase and retirement of common stock, Shares | (1,201) | ||||||
Ending Balance at Dec. 31, 2018 | $ 1,276 | $ 53 | $ 1,410 | $ (320) | $ 1,143 | $ 133 | |
Ending Balance, Shares at Dec. 31, 2018 | 59,510 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | A. Basis of Presentation The consolidated financial statements have been prepared in conformity with accounting policies generally accepted in the United States (“U.S.”) and include the accounts of Cabot Corporation (“Cabot” or the “Company”) and its wholly owned subsidiaries and majority-owned and controlled U.S. and non-U.S. subsidiaries. Additionally, Cabot considers consolidation of entities over which control is achieved through means other than voting rights. Intercompany transactions have been eliminated in consolidation. The unaudited consolidated 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 Cabot’s Annual Report on Form 10-K for its fiscal year ended September 30, 2018 (“2018 10-K”). 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, 2018 and 2017. 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. Effective October 1, 2018, the Company adopted the new revenue recognition standard that amended the pre-existing accounting standard for revenue recognition. The Company used a modified retrospective approach, which is discussed in further detail in Note B. Effective October 1, 2018, the Company adopted the new pension standard that amended the requirements on the presentation of net periodic pension and postretirement benefit costs. The Company used a retrospective transition method to reclassify net periodic benefit cost, other than the service component, from Cost of sales, Selling and administrative expenses and Research and technical expenses to Other income (expense) in the Consolidated Statements of Income for the prior periods presented, which is discussed in further detail in Note B. In October 2018, the Company realigned its business reporting structure under the Performance Chemicals segment and now combines the specialty carbons, fumed metal oxides and aerogel product lines into the Performance Additives business, and the specialty compounds and inkjet product lines into the Formulated Solutions business. Prior period Performance Chemicals segment revenue results have been recast to reflect the realignment. |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | B. Significant Accounting Policies Revenue Recognition Cabot recognizes revenue when its customers obtain control of promised goods or services. The revenue recognized is the amount of consideration which the Company expects to receive in exchange for those goods or services. Cabot derives the majority of its revenues from contracts for the sale of products from its Reinforcement Materials, Performance Chemicals and Purification Solutions segments. The Company’s contracts with customers are generally for products only and do not include other performance obligations. Generally, Cabot considers purchase orders, which in some cases are governed by master supply agreements, to be contracts with customers. The transaction price as specified on the purchase order or sales contract is considered the standalone selling price for each distinct product. To determine the transaction price at the time when revenue is recognized, the Company evaluates whether the price is subject to adjustments, such as for returns, discounts or volume rebates, which are stated in the customer contract, to determine the net consideration to which the Company expects to be entitled. Revenue from product sales is recognized based on a point in time model when control of the product is transferred to the customer, which typically occurs upon shipment or delivery of the product to the customer and title, risk and rewards of ownership have passed to the customer. Payment terms typically range from zero to ninety days Shipping and handling activities that occur after the transfer of control to the customer are billed to customers and are recorded as sales revenue, as the Company considers these to be fulfillment costs. Shipping and handling costs are expensed in the period incurred and included in Cost of sales within the Consolidated Statement of Operations. Taxes collected on sales to customers are excluded from the transaction price. The Company generally provides a warranty that its products will substantially conform to the identified specifications. The Company’s liability typically is limited to either a credit equal to the purchase price or replacement of the non-conforming product. Returns under warranty have historically been immaterial. Revenue in the Specialty Fluids segment arises primarily from the rental of cesium formate. This revenue is recognized throughout the rental period based on the contracted rental terms. During the three months ended December 31, 2018, the Company recognized revenue of $8 million related to the rental of cesium formate. Customers are also billed and revenue is recognized, typically at the end of the rental period, for cesium formate product that is not returned. The Company also generates revenues from cesium formate sold outside of the rental process and from the sale of fine cesium chemicals. This revenue is recognized when control of the product transfers to the customer, which is typically upon delivery of the product. The Company does not have contract assets or liabilities that are material. As permitted by the revenue recognition standard, Revenue from Contracts with Customers when the period of time between the transfer of control of the goods and the time the customer pays for the goods is one year or less, the Company does not consider there to be a significant financing component associated with the contract. Intangible Assets and Goodwill Impairment The Company records tangible and intangible assets acquired and liabilities assumed in business combinations under the acquisition method of accounting. Amounts paid for an acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The Company uses assumptions and estimates in determining the fair value of assets acquired and liabilities assumed in a business combination. The determination of the fair value of intangible assets requires the use of significant judgment with regard to assumptions used in the valuation model. The Company estimates the fair value of identifiable acquisition-related intangible assets principally based on projections of cash flows that will arise from these assets. The projected cash flows are discounted to determine the fair value of the assets at the dates of acquisition. Definite-lived intangible assets, which are comprised of trademarks, customer relationships and developed technologies, are amortized over their estimated useful lives and are reviewed for impairment when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets. Goodwill is comprised of the purchase price of business acquisitions in excess of the fair value assigned to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but is reviewed for impairment annually as of May 31, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value. A reporting unit, for the purpose of the impairment test, is at or below the operating segment level, and constitutes a business for which discrete financial information is available and regularly reviewed by segment management. Reinforcement Materials, and the fumed metal oxides and specialty compounds product lines within Performance Chemicals, which are considered separate reporting units, carry the Company’s goodwill balances as of December 31, 2018. For the purpose of the goodwill impairment test, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, an additional quantitative evaluation is performed. Alternatively, the Company may elect to proceed directly to the quantitative goodwill impairment test. If based on the quantitative evaluation the fair value of the reporting unit is less than its carrying amount, a goodwill impairment loss would result. The goodwill impairment loss would be the amount by which the carrying value of the reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. The fair value of a reporting unit is based on discounted estimated future cash flows. The fair value is also benchmarked against a market approach using the guideline public companies method. The assumptions used to estimate fair value include management’s best estimates of future growth rates, operating cash flows, capital expenditures and discount rates over an estimate of the remaining operating period at the reporting unit level. Based on the Company’s most recent annual goodwill impairment test performed as of May 31, 2018, the fair values of the Reinforcement Materials, Fumed Metal Oxides and Specialty Compounds reporting units were substantially in excess of their carrying values. No events occurred subsequent to the last impairment evaluation that would suggest that it is more likely than not that the carrying values of any of the Company’s reporting units exceeded their fair value. Long-lived Assets Impairment The Company’s long-lived assets primarily include property, plant and equipment, intangible assets, long-term investments and assets held for rent. The carrying values of long-lived assets are reviewed for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be recoverable. To test for impairment of assets, the Company generally uses a probability-weighted estimate of the future undiscounted net cash flows of the assets over their remaining lives to determine if the value of the asset is recoverable. Long-lived assets are grouped with other assets and liabilities at the lowest level for which independent identifiable cash flows are determinable. An asset impairment is recognized when the carrying value of the asset is not recoverable based on the analysis described above, in which case the asset is written down to its fair value. If the asset does not have a readily determinable market value, a discounted cash flow model may be used to determine the fair value of the asset. In circumstances when an asset does not have separately identifiable cash flows, an impairment charge is recorded when the Company no longer intends to use the asset. The Company continues to pursue strategic options for its Purification Solutions business. Depending on the actions taken, there could be a negative impact on the fair value of the Purification Solution reporting unit, which may lead to impairment. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation of property, plant and equipment is calculated using the straight-line method over the estimated useful lives of the related assets. The depreciable lives for buildings, machinery and equipment, and other fixed assets are between twenty and twenty-five years, ten and twenty-five years, and three and twenty-five years, respectively. The cost and accumulated depreciation for property, plant and equipment sold, retired, or otherwise disposed of are removed from the Consolidated Balance Sheets and resulting gains or losses are included in earnings in the Consolidated Statements of Operations. Expenditures for repairs and maintenance are charged to expenses as incurred. Expenditures for major renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. Income Tax in Interim Periods The Company records its tax provision or benefit on an interim basis using an estimated annual effective tax rate. This rate is applied to the current period ordinary income or loss to determine the income tax provision or benefit allocated to the interim period. Losses from jurisdictions for which no benefit can be recognized and the income tax effects of unusual or infrequent items are excluded from the estimated annual effective tax rate and are recognized in the impacted interim period. Valuation allowances are provided against the future tax benefits that arise from the deferred tax assets in jurisdictions for which no benefit can be recognized. The estimated annual effective tax rate may be significantly impacted by nondeductible expenses and the Company’s projected earnings mix by tax jurisdiction. Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised. Inventory Valuation Inventories are stated at the lower of cost or market. The cost of Specialty Fluids inventories that are classified as assets held for rent is determined using the average cost method. The cost of all other inventories is determined using the FIFO method. Cabot periodically reviews inventory for both potential obsolescence and potential declines in anticipated selling prices. In this review, the Company makes assumptions about the future demand for and market value of the inventory, and based on these assumptions estimates the amount of any obsolete, unmarketable, slow moving, or overvalued inventory. Cabot writes down the value of these inventories by an amount equal to the difference between the cost of the inventory and its estimated net realizable value. Pensions and Other Postretirement Benefits The Company recognizes the funded status of defined benefit pension and other postretirement benefit plans as an asset or liability. This amount is defined as the difference between the fair value of plan assets and the benefit obligation. The Company is required to recognize as a component of Other comprehensive income (loss), net of tax, the actuarial gains/losses and prior service costs/credits that arise but were not previously required to be recognized as components of net periodic benefit cost. Other comprehensive income (loss) is adjusted as these amounts are later recognized in income as components of net periodic benefit cost. Redeemable Preferred Stock In November 2013, the Company purchased all of its joint venture partner’s common stock in the former NHUMO, S.A. de C.V. (“NHUMO”) joint venture. At the close of the transaction, NHUMO issued redeemable preferred stock to the joint venture partner with a repurchase value of $25 million and a fixed dividend rate of 6% per annum. In November 2018, the preferred stock was repurchased for $25 million and a final dividend payment of approximately $1.4 million was made. The preferred stock was accounted for as a financing obligation and was separately presented in the Consolidated Balance Sheets as a current liability as of September 30, 2018. Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) (“AOCI”), which is included as a component of stockholders’ equity, includes unrealized gains or losses on available-for-sale marketable securities and derivative instruments, currency translation adjustments in foreign subsidiaries, translation adjustments on foreign equity securities and minimum pension liability adjustments. Recently Adopted Accounting Standards In May 2014, the FASB issued a new standard, Revenue from Contracts with Customers The adoption of this standard did not have an impact on how the Company recognizes revenue. As such, an adjustment to opening retained earnings was not required as a result of adopting this new standard. The Company implemented the updates that were necessary to its revenue recognition policy, internal controls, processes and financial statement disclosures as part of this adoption. The updated disclosures are reflected under the heading “Revenue Recognition” within Note B and the Company’s disaggregated revenue is reflected within Note N. In addition, as part of an assessment performed in connection with adopting this standard, the Company reviewed its classification of by-product sales, which consist of sales generated from the production of steam or electricity from the Company's energy centers primarily from its carbon black manufacturing sites and sales of hydrochloric acid generated from the production of fumed silica. Historically, the Company presented by-product sales as a reduction of Cost of sales within the Consolidated Statement of Operations. However, upon further evaluation of these sales in connection with the implementation of this standard, the Company determined that it is appropriate to present by-product sales as Net sales and other operating revenues. Effective October 1, 2018, these sales are now included within Net sales and other operating revenues in the Consolidated Statement of Operations. This change did not result in a cumulative adjustment to opening retained earnings as it is a classification change within the Consolidated Statement of Operations. If the Company had continued to classify by-product sales within Cost of sales, there would have been a decrease to Net sales and other operating revenues and Cost of sales of $20 million for the three months ended December 31, 2018. In August 2016, the FASB issued final amendments to clarify how entities should classify certain cash receipts and cash payments on the statement of cash flows, such as distributions received from equity method investees, proceeds from the settlement of insurance claims, and proceeds from the settlement of corporate-owned life insurance policies. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those years, and early adoption is permitted. The Company adopted this standard on October 1, 2018. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements. In March 2017, the FASB issued a new standard that amends the requirements on the presentation of net periodic pension and postretirement benefit costs. The new standard requires the service cost component to be presented with other employee compensation costs. The other components will be reported separately outside of operations. Only the service cost component will be eligible for capitalization. Entities are required to use a retrospective transition method to adopt the requirement for separate income statement presentation of the service cost and other components, and a prospective transition method to adopt the requirement to limit the capitalization of benefit cost to the service component. The Company adopted the standard on October 1, 2018 and used a retrospective transition method to reclassify net periodic benefit cost, other than the service component, from Cost of sales, Selling and administrative expenses and Research and technical expenses to Other income (expense) in the Consolidated Statements of Operations for the prior periods presented. In accordance with the standard, the Company utilized prior period footnote disclosures as a practical expedient to apply these retrospective presentations, which is shown in the table below: Consolidated Statements of Operations Three Months Ended December 31 2017 As Originally Reported Effect of Change As Adjusted (In millions, except per share amounts) Cost of sales $ 542 $ 2 $ 544 Gross profit $ 178 $ (2 ) $ 176 Selling and administrative expenses $ 69 $ 1 $ 70 Research and technical expenses $ 15 $ — $ 15 Income (loss) from operations $ 94 $ (3 ) $ 91 Other income (expense) $ 8 $ 3 $ 11 Recent Accounting Pronouncements In February 2016, the FASB issued a new standard for the accounting for leases. This new standard requires lessees to recognize assets and liabilities for most leases, but recognize expenses on their income statements in a manner that is similar to the current accounting treatment for leases. The standard is applicable for fiscal years beginning after December 15, 2018 and for interim periods within those years, and early adoption is permitted. The Company expects to adopt the standard on October 1, 2019. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. The Company has established a project plan and implementation team which will analyze the current portfolio of leases to determine the impact of adopting this new standard. The implementation team will also be responsible for evaluating and designing the necessary changes to the Company’s business processes, lease policies, systems and internal controls to support recognition and disclosure under the new guidance. In February 2018, the FASB issued a new standard that allows entities to reclassify from AOCI to Retained earnings stranded tax effects resulting from changes made as a result of the Tax Cuts and Jobs Act of 2017 (the “Act”). The amendments in this new standard also require certain disclosures about stranded tax effects. The new standard is effective for all entities for fiscal years beginning after December 15, 2018, including interim periods within those years, and early adoption is permitted. The Company is evaluating this standard and the timing of its adoption. The adoption of this standard is not expected to materially impact the Company’s consolidated financial statements. |
Acquisitions
Acquisitions | 3 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Acquisitions | C. Acquisitions Tech Blend In November 2017, the Company acquired Tech Blend, a North American producer of black masterbatches, for a purchase price of $65 million, paid in cash. The purchase price was subject to a working capital adjustment, which was immaterial. The operating results of the business are included in the Company’s Performance Chemicals segment. The acquisition extended the Company’s global footprint in black masterbatch and compounds and provides a platform to serve global customers and grow in conductive formulations. The allocation of the purchase price set forth below was based on estimates of the fair value of assets acquired and liabilities assumed. (In millions) Assets Cash $ 1 Accounts receivable 5 Inventories 3 Property, plant and equipment 7 Intangible assets 29 Goodwill 33 Total assets acquired 78 Liabilities Current liabilities (3 ) Deferred tax liabilities (10 ) Total liabilities assumed (13 ) Cash consideration paid $ 65 As part of the purchase price allocation, the Company determined the separately identifiable intangible assets are comprised of developed technologies of $21 million, which will be amortized over twenty-five years, and customer relationships of $8 million, which will be amortized over twelve years. The Company estimated the fair values of the identifiable acquisition-related intangible assets based on projections of cash flows that will arise from those assets. The projected cash flows were discounted to determine the fair value of the assets at the date of acquisition. The determination of the fair value of the intangible assets acquired required the use of significant judgment with regard to (i) assumptions in the discounted cash flow model used and (ii) determination of the useful lives of the developed technologies and customer relationships. The excess of the purchase price over the fair value of the tangible net assets and intangible assets acquired was recorded as goodwill. The goodwill recognized is attributable to the growth and operating synergies that the Company expects to realize from this acquisition. Goodwill generated from the acquisition is not deductible for tax purposes. NSCC Carbon (Jiangsu) Co. Ltd In September 2018, the Company acquired NSCC Carbon, a carbon black manufacturing facility in Pizhou, Jiangsu Province, China for a purchase price of $8 million. The purchase price is payable upon satisfaction of certain conditions that are expected to be satisfied in less than twelve months and is recorded within Accounts payable and accrued liabilities on the Consolidated Balance Sheets. The Company plans to modify this manufacturing facility to produce specialty carbons. The plant is temporarily mothballed. The modifications are expected to be completed, and production is expected to commence, in 2021. The Company has incurred $2 million of transition related costs in the first quarter of fiscal 2019 related to this acquisition. |
Employee Benefit Plans
Employee Benefit Plans | 3 Months Ended |
Dec. 31, 2018 | |
Compensation And Retirement Disclosure [Abstract] | |
Employee Benefit Plans | D. Employee Benefit Plans Net periodic defined benefit pension and other postretirement benefit costs include the following: Three Months Ended December 31 2018 2017 2018 2017 Pension Benefits Postretirement Benefits U.S. Foreign U.S. Foreign U.S. Foreign U.S. Foreign (In millions) Service cost $ — $ 2 $ — $ 2 $ — $ — $ — $ — Interest cost 1 2 1 2 — — — — Expected return on plan assets (2 ) (4 ) (2 ) (4 ) — — — — Amortization of prior service credit — — — — — — (1 ) — Amortization of actuarial loss — 1 — 1 — — — — Settlement and curtailment gain — (6 ) — — — — — — Net periodic benefit (credit) cost $ (1 ) $ (5 ) $ (1 ) $ 1 $ — $ — $ (1 ) $ — Curtailments and Settlements of Employee Benefit Plans In December 2018, the Company transferred the majority of the defined benefit obligations and pension plan assets in one of its foreign defined benefit plans to a multi-employer plan. This action moved the administrative, asset custodial, asset investment, actuarial, communication and benefit payment obligations to the multi-employer fund administrator. As a result of the transfer, there was a $30 million reduction in net pension obligations associated with the plan, and a pre-tax gain of $6 million was recorded in the first quarter of fiscal 2019, which is included in Other income (expense) in the Consolidated Statement of Operations. The pre-tax gain consisted of a curtailment credit of less than $1 million for the accelerated recognition of prior service credit and a settlement credit of $5 million for the accelerated recognition of the unrecognized gain upon the transfer of the assets. As of December 31, 2018, approximately $8 million of plan assets remain to be transferred. Such assets are expected to be transferred by the third quarter of fiscal 2019 and such transfer may result in an additional immaterial settlement gain or loss. In addition, as part of the transfer the Company recorded a $3 million charge for the Company’s agreement to fund the actuarial loss gap between the terminated plan and the multi-employer plan, which will be paid over the next five years. This charge is included Other income (expense) in the Consolidated Statement of Operations and the liability is included in Accounts payable and accrued liabilities and Other liabilities on the Consolidated Balance Sheet. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Dec. 31, 2018 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | E. Goodwill and Intangible Assets The carrying amount of goodwill attributable to each reportable segment with goodwill balances and the changes in those balances during the three month period ended December 31, 2018 are as follows: Reinforcement Materials Performance Chemicals Total (In millions) Balance at September 30, 2018 $ 52 $ 41 $ 93 Foreign currency impact (2 ) (1 ) (3 ) Balance at December 31, 2018 $ 50 $ 40 $ 90 The following table provides information regarding the Company’s intangible assets: December 31, 2018 September 30, 2018 Gross Carrying Value Accumulated Amortization Net Intangible Assets Gross Carrying Value Accumulated Amortization Net Intangible Assets (In millions) Intangible assets with finite lives Developed technologies $ 51 $ (2 ) $ 49 $ 52 $ (2 ) $ 50 Trademarks 8 — 8 8 — 8 Customer relationships 49 (12 ) 37 51 (11 ) 40 Total intangible assets $ 108 $ (14 ) $ 94 $ 111 $ (13 ) $ 98 Intangible assets are amortized over their estimated useful lives, which range between twelve and twenty-five years, with a weighted average amortization period of approximately nineteen years. Amortization expense for the three month periods ended December 31, 2018 and 2017 was $1 million and $2 million, respectively, and is included in Cost of sales and Selling and administrative expenses in the Consolidated Statements of Operations. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 3 Months Ended |
Dec. 31, 2018 | |
Stockholders Equity Note [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | F. Accumulated Other Comprehensive Income (Loss) Comprehensive income combines net income (loss) and other comprehensive income items, which are reported as components of stockholders’ equity in the accompanying Consolidated Balance Sheets. Changes in each component of AOCI, net of tax, were as follows: Currency Translation Adjustment Unrealized Gains on Investments Pension and Other Postretirement Benefit Liability Adjustments Total (In millions) Balance at September 30, 2018, attributable to Cabot Corporation $ (266 ) $ 1 $ (52 ) $ (317 ) Other comprehensive income (loss) before reclassifications (24 ) — 30 6 Amounts reclassified from AOCI (1 ) — (8 ) (9 ) Less: Other comprehensive income (loss) attributable to noncontrolling interests — — — — Balance at December 31, 2018, attributable to Cabot Corporation $ (291 ) $ 1 $ (30 ) $ (320 ) The amounts reclassified out of AOCI and into the Consolidated Statements of Operations in the three months ended December 31, 2018 and 2017 were as follows: Affected Line Item in the Consolidated Three Months Ended December 31 Statements of Operations 2018 2017 (In millions) Derivatives: net investment hedges (Gains) losses reclassified to interest expense Interest expense $ (1 ) $ (1 ) Pension and other postretirement benefit liability adjustment Amortization of actuarial losses Net Periodic Benefit Cost - see Note D for details 1 1 Amortization of prior service credit Net Periodic Benefit Cost - see Note D for details — (1 ) Settlement and curtailment gain Net Periodic Benefit Cost - see Note D for details (6 ) — Total before tax (6 ) (1 ) Tax impact Provision (benefit) for income taxes (3 ) — Total after tax $ (9 ) $ (1 ) |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Dec. 31, 2018 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | G. Commitments and Contingencies Purchase Commitments Cabot has entered into long-term purchase agreements primarily for the purchase of raw materials. Under certain of these agreements, the quantity of material being purchased is fixed, but the price paid changes as market prices change. For these purchase commitments, the amounts included in the table below are based on market prices at December 31, 2018, which may differ from actual market prices at the time of purchase. Payments Due by Fiscal Year Remainder of Fiscal 2019 2020 2021 2022 2023 Thereafter Total (In millions) Reinforcement Materials $ 263 $ 248 $ 141 $ 137 $ 130 $ 1,703 $ 2,622 Performance Chemicals 73 59 55 55 32 454 728 Purification Solutions 6 6 1 — — — 13 Specialty Fluids 15 — — — — — 15 Total $ 357 $ 313 $ 197 $ 192 $ 162 $ 2,157 $ 3,378 Guarantee Agreements Cabot has provided certain indemnities pursuant to which it may be required to make payments to an indemnified party in connection with certain transactions and agreements. In connection with certain acquisitions and divestitures, Cabot has provided routine indemnities with respect to such matters as environmental, tax, insurance, product and employee liabilities. In connection with various other agreements, including service and supply agreements with customers, Cabot has provided indemnities for certain contingencies and routine warranties. Cabot is unable to estimate the maximum potential liability for these types of indemnities as a maximum obligation is not explicitly stated in most cases and the amounts, if any, are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be reasonably estimated. The duration of the indemnities vary, and in many cases are indefinite. Cabot has not recorded any liability for these indemnities in the consolidated financial statements, except as otherwise disclosed. Contingencies Cabot is a defendant, or potentially responsible party, in various lawsuits and environmental proceedings wherein substantial amounts are claimed or at issue. Environmental Matters As of December 31, 2018 and September 30, 2018, Cabot had $14 million and $15 million, respectively, reserved for environmental matters. These environmental matters mainly relate to former operations. The Company’s reserves for environmental matters represent Cabot’s best estimates of the probable costs to be incurred at those sites where costs are reasonably estimable based on the Company’s analysis of the extent of clean up required, alternative clean-up methods available, abilities of other responsible parties to contribute and its interpretation of laws and regulations applicable to each site. Cash payments related to these environmental matters were $1 million and less than $1 million in the first three months of fiscal 2019 and fiscal 2018, respectively. Cabot reviews the adequacy of the reserves as circumstances change at individual sites and adjusts the reserves as appropriate. Almost all of Cabot’s environmental issues relate to sites that are mature and have been investigated and studied and, in many cases, are subject to agreed upon remediation plans. However, depending on the results of future testing, changes in risk assessment practices, remediation techniques and regulatory requirements, newly discovered conditions, and other factors, it is reasonably possible that the Company could incur additional costs in excess of environmental reserves currently recorded. Management estimates, based on the latest available information, that any such future environmental remediation costs that are reasonably possible to be in excess of amounts already recorded would be immaterial to the Company’s consolidated financial statements. Respirator Liabilities Cabot has exposure in connection with a safety respiratory products business that a subsidiary acquired from American Optical Corporation (“AO”) in an April 1990 asset purchase transaction. The subsidiary manufactured respirators under the AO brand and disposed of that business in July 1995. In connection with its acquisition of the business, the subsidiary agreed, in certain circumstances, to assume a portion of AO’s liabilities, including costs of legal fees together with amounts paid in settlements and judgments, allocable to AO respiratory products used prior to the 1990 purchase by the Cabot subsidiary. In exchange for the subsidiary’s assumption of certain of AO’s respirator liabilities, AO agreed to provide to the subsidiary the benefits of: (i) AO’s insurance coverage for the period prior to the 1990 acquisition and (ii) a former owner’s indemnity of AO holding it harmless from any liability allocable to AO respiratory products used prior to May 1982. As more fully described in the 2018 10-K, the respirator liabilities generally involve claims for personal injury, including asbestosis, silicosis and coal worker’s pneumoconiosis, allegedly resulting from the use of respirators that are alleged to have been negligently designed and/or labeled. Neither Cabot, nor its past or present subsidiaries, at any time manufactured asbestos or asbestos-containing products. At no time did this respiratory product line represent a significant portion of the respirator market. As of both December 31, 2018 and September 30, 2018, there were approximately 35,000 claimants in pending cases asserting claims against AO in connection with respiratory products. Cabot has a reserve to cover its expected share of liability for existing and future respirator liability claims. At December 31, 2018 and September 30, 2018, the reserve was $24 million and $25 million, respectively. The Company made payments related to its respirator liability of $1 million and less than $1 million in the first three months of fiscal 2019 and fiscal 2018, respectively. The Company’s current estimate of the cost of its share of existing and future respirator liability claims is based on facts and circumstances existing at this time. Developments that could affect the Company’s estimate include, but are not limited to, (i) significant changes in the number of future claims, (ii) changes in the rate of dismissals without payment of pending claims, (iii) significant changes in the average cost of resolving claims, (iv) significant changes in the legal costs of defending these claims, (v) changes in the nature of claims received, (vi) trial and appellate outcomes, (vii) changes in the law and procedure applicable to these claims, (viii) the financial viability of other parties that contribute to the settlement of respirator claims, (ix) a change in the availability of insurance coverage maintained by certain of the other parties that contribute to the settlement of respirator claims, or the indemnity provided by a former owner of the business, (x) changes in the allocation of costs among the various parties paying legal and settlement costs, and (xi) a determination that the assumptions that were used to estimate Cabot’s share of liability are no longer reasonable. The Company cannot determine the impact of these potential developments on its current estimate of its share of liability for existing and future claims. Accordingly, the actual amount of these liabilities for existing and future claims could be larger than the reserved amount. Other Matters The Company has various other lawsuits, claims and contingent liabilities arising in the ordinary course of its business and with respect to its divested businesses. The Company does not believe that any of these matters will have a material adverse effect on its financial position; however, litigation is inherently unpredictable. Cabot could incur judgments, enter into settlements or revise its expectations regarding the outcome of certain matters, and such developments could have a material impact on its results of operations in the period in which the amounts are accrued or its cash flows in the period in which the amounts are paid. |
Income Tax
Income Tax | 3 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Tax | H. Income Tax Effective Tax Rate Three Months Ended December 31 2018 2017 (Dollars in millions) (Provision) benefit for income taxes $ 7 $ (205 ) Effective tax rate (10 )% 224 % For the three months ended December 31, 2018, the tax (provision) benefit included a net discrete tax benefit of $24 million, of which $17 million comprised the impact of the Act. For the three months ended December 31, 2017, the tax provision included net discrete tax expense of $188 million, of which $185 million comprised the impact of the enactment of the Act. Tax Reform On December 22, 2017, the U.S. enacted significant changes to federal income tax law affecting the Company, including a permanent reduction of the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018, as well as a 100% dividend received deduction for foreign dividends. Although the passage of the Act reduced the U.S. tax rate and effectively created a participation exemption regime for foreign earnings, certain other aspects of the new legislation, including in particular, immediate U.S. taxation of global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries, will have a negative impact on earnings. In transitioning to this participation exemption regime, Cabot was also subject, during fiscal 2018, to a one-time tax on the deemed repatriation of certain foreign earnings. A discussion of key relevant provisions of the Act and the Company’s assessment of the impact of such provisions on its consolidated financial statements is set forth below. Uncertain Impacts of the Act The accounting standard for income taxes (“ASC 740”) required the Company to recognize the effect of the tax law changes under the Act in the first quarter of fiscal 2018. However, due to the potential uncertainty or diversity of views in accounting for the impact of the Act, the Securities and Exchange Commission staff issued Staff Accounting Bulletin 118 (“SAB 118”) to address the application of U.S. GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In particular, SAB 118 clarified that the impact of the Act must be accounted for and reported in one of three ways: (1) by reflecting the tax effects of the Act for which the accounting is complete; (2) by reporting provisional amounts for those specific income tax effects of the Act for which the accounting is incomplete but a reasonable estimate can be determined, with such provisional amounts (or adjustments to provisional amounts) identified in the measurement period, as defined therein, being included as an adjustment to tax expense or benefit from continuing operations in the period the amounts are determined; or (3) where the income tax effects cannot be reasonably estimated, no provisional amounts should be reported and the registrant should continue to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the enactment of the Act. The measurement period begins in the reporting period that includes the Act’s enactment date and ends when the accounting has been completed, but not beyond one year from the enactment date. As provided in SAB 118, final adjustments have been made to the provisional amounts recorded during fiscal 2018 and the Company has now completed its accounting for various tax impacts of the Act: • Revaluation of Deferred Tax Assets: Due to the Company’s September 30 fiscal year-end, the reduction in the corporate tax rate to 21% effective January 1, 2018 applied on a pro-rata basis for fiscal 2018, resulting in a U.S. federal statutory tax rate of 24.53% for fiscal 2018. As of September 30, 2018, the accounting for this item was complete; no further adjustment has been made to this amount during the three months ended December 31, 2018. • Deemed Repatriation: In general, the Act provides that U.S. shareholders of a “specified foreign corporation”, as defined in the Act, must include in U.S. taxable income its pro-rata share of certain undistributed and previously untaxed post-1986 foreign earnings and profits (“E&P”). The amount of E&P taken into account is the amount determined either as of November 2, 2017 or December 31, 2017, whichever is greater. This inclusion is offset by a deduction that results in an effective U.S. federal income tax rate of either 15.5% or 8%. The 15.5% rate applies to the “aggregate cash position”, as defined in the Act, of the specified foreign corporations and the 8% rate applies to the extent that the income inclusion exceeds the aggregate cash position. The aggregate cash position is determined as the cash position either as of September 30, 2018, or the average of September 30, 2016 and September 30, 2017, whichever is greater. Finally, the U.S. cash tax impact of the deemed repatriation inclusion may be offset by the utilization of foreign tax credits, which are pro-rated to reflect the deduction described above. As of December 31, 2018, the accounting for this item is complete. For the three months ended December 31, 2018, the Company recorded an additional provisional tax benefit of $17 million related to the U.S. taxation of deemed foreign dividends in the transition fiscal year. This benefit may be reduced or eliminated in future legislation. If such legislation is enacted, Cabot will record the impact of the legislation in the quarter of enactment. Including the provisional tax expense of $138 million recorded for deemed repatriation during fiscal 2018, the total tax expense for this item was $121 million. • Deferred Tax Liability on Unremitted Earnings: In addition to the deemed repatriation of foreign earnings, going forward, the Act effectively establishes a participation exemption system of taxation that, in general, provides a 100% deduction for dividends from specified foreign corporations. However, the Company is still required to provide non-U.S. withholding taxes, as well as other potential tax impacts, on undistributed earnings of non-U.S. subsidiaries that it does not consider to be indefinitely reinvested. As of December 31, 2018, the accounting for this item is complete. For the three months ended December 31, 2018, the Company did not make any further adjustments to the provisional tax expense of $8 million recorded for deferred tax liability on unremitted earnings during fiscal 2018. Accounting for the Global Intangible Low-Taxed Income Tax Under the Act, Cabot is subject to a tax on GILTI beginning in fiscal 2019. In general, GILTI is a 10.5% tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company has adopted an accounting policy to recognize these temporary differences as period costs if and when incurred. Uncertainties Cabot and certain subsidiaries are under audit in a number of jurisdictions. In addition, certain statutes of limitations are scheduled to expire in the near future. It is reasonably possible that a further change in the unrecognized tax benefits may also occur within the next twelve months related to the settlement of one or more of these audits or the lapse of applicable statutes of limitations. However, an estimated range of the impact on the unrecognized tax benefits cannot be quantified at this time. Cabot files U.S. federal and state and non-U.S. income tax returns in jurisdictions with varying statutes of limitations. The 2014 through 2017 tax years generally remain subject to examination by the IRS and various tax years from 2005 through 2017 remain subject to examination by the respective state tax authorities. In significant non-U.S. jurisdictions, various tax years from 2002 through 2017 remain subject to examination by their respective tax authorities. As of December 31, 2018, Cabot’s significant non-U.S. jurisdictions include Canada, China, France, Germany, Italy, Japan, and the Netherlands. During the three months ended December 31, 2018, Cabot released uncertain tax positions of $7 million due to audit settlements and the expiration of statutes of limitations in various jurisdictions. During the three months ended December 31, 2017, Cabot released uncertain tax positions of $1 million due to the expirations of statutes of limitations in various jurisdictions. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | I. Earnings Per Share The following tables summarize the components of the basic and diluted earnings (loss) per common share (“EPS”) computations: Three Months Ended December 31 2018 2017 (In millions, except per share amounts) Basic EPS: Net income (loss) attributable to Cabot Corporation $ 69 $ (122 ) Less: Undistributed earnings allocated to participating securities (1) — — Earnings (loss) allocated to common shareholders (numerator) $ 69 $ (122 ) Weighted average common shares and participating securities outstanding 60.8 62.6 Less: Participating securities (1) 0.9 0.7 Adjusted weighted average common shares (denominator) 59.9 61.9 Earnings (loss) per common share - basic: $ 1.14 $ (1.98 ) Diluted EPS: Earnings (loss) allocated to common shareholders $ 69 $ (122 ) Plus: Earnings (loss) allocated to participating securities 1 — Less: Adjusted earnings allocated to participating securities (2) 1 — Earnings (loss) allocated to common shareholders (numerator) $ 69 $ (122 ) Adjusted weighted average common shares outstanding 59.9 61.9 Effect of dilutive securities: Common shares issuable (3) 0.2 — Adjusted weighted average common shares (denominator) 60.1 61.9 Earnings (loss) per common share - diluted: $ 1.14 $ (1.98 ) (1) Participating securities consist of shares underlying outstanding and achieved performance-based restricted stock units issued during and after fiscal 2017 and all unvested time-based restricted stock units. Undistributed earnings are the earnings which remain after dividends declared during the period are assumed to be distributed to the common and participating shareholders. Undistributed earnings are allocated to common and participating shareholders on the same basis as dividend distributions. The calculation of undistributed earnings is as follows: Three Months Ended December 31 2018 2017 (In millions) Calculation of undistributed earnings (loss): Net income (loss) attributable to Cabot Corporation $ 69 $ (122 ) Less: Dividends declared on common stock 20 20 Undistributed earnings (loss) $ 49 $ (142 ) Allocation of undistributed earnings (loss): Undistributed earnings (loss) allocated to common shareholders $ 49 $ (142 ) Undistributed earnings (loss) $ 49 $ (142 ) (2) Undistributed earnings are adjusted for the assumed distribution of dividends to the dilutive securities, which are described in (3) below, and then reallocated to participating securities. (3) Represents incremental shares of common stock from the (i) assumed exercise of stock options issued under Cabot’s equity incentive plans; (ii) assumed issuance of shares to employees pursuant to the Company’s Deferred Compensation and Supplemental Retirement Plan; and (iii) assumed issuance of shares for outstanding and achieved performance-based restricted stock unit awards issued before fiscal 2017 under Cabot’s equity incentive plans using the treasury stock method. For the three months ended December 31, 2018, 687,995 incremental shares of common stock were excluded from the calculation of diluted earnings per share because the inclusion of these shares would have been antidilutive. For the three months ended December 31, 2017, 764,077 |
Restructuring
Restructuring | 3 Months Ended |
Dec. 31, 2018 | |
Restructuring And Related Activities [Abstract] | |
Restructuring | J. Restructuring Cabot’s restructuring activities were recorded in the Consolidated Statements of Operations in the three months ended December 31, 2018 and 2017 as follows: Three Months Ended December 31 2018 2017 (In millions) Cost of sales $ 3 $ 1 Selling and administrative expenses 6 — Total $ 9 $ 1 Details of all restructuring activities and the related reserves during the three months ended December 31, 2018 were as follows: Severance and Employee Benefits Environmental Remediation Asset Impairment and Accelerated Depreciation Other Total (In millions) Reserve at September 30, 2018 $ 1 $ 4 $ — $ — $ 5 Charges 7 — 1 1 9 Costs charged against assets / (liabilities) — 1 (1 ) — — Cash received (paid) (1 ) — — (1 ) (2 ) Reserve at December 31, 2018 $ 7 $ 5 $ — $ — $ 12 Cabot’s severance and employee benefit reserves and other closure related reserves are reflected in Accounts payable and accrued liabilities on the Company’s Consolidated Balance Sheets. Cabot’s environmental remediation reserves related to restructuring activities are reflected in Other liabilities on the Company’s Consolidated Balance Sheets. Purification Solutions Transformation Plan In December 2018, the Company began implementation, subject to local consultation requirements, of a transformation plan to improve the long-term performance of the Purification Solutions segment. The purpose of the plan is to focus the business’s product portfolio, optimize its manufacturing assets, and streamline its organizational structure to support the new focus. The plan includes a proposed workforce restructuring, which is subject to local consultation requirements. The Company recorded charges of approximately $8 million related to this plan in the three months ended December 31, 2018, comprised of approximately $7 million of severance costs and $1 million of professional fees. Cabot paid approximately $1 million related to these activities in the three months ended December 31, 2018 and expects to pay approximately $7 million in the remainder of fiscal 2019 and thereafter, subject to the results of the consultation processes in certain locations. As of December 31, 2018, Cabot had $7 million of accrued severance charges in the Consolidated Balance Sheets related to these actions. Marshall, Texas Plan In October 2017, Cabot indefinitely idled three of the seven production units at its activated carbon manufacturing facility in Marshall, Texas. Total costs recorded related to this plan, which was completed in fiscal 2018, were $1 million, comprised of approximately $1 million of non-cash accelerated depreciation costs and less than $1 million of severance costs. 2016 Plan In October 2015, in response to challenging macroeconomic conditions, the Company announced its intention to restructure its operations subject to local consultation requirements and processes in certain locations. Most of the charges and cash outlays related to this plan were recorded in fiscal 2016. The Company recorded pre-tax cash charges related to this plan of less than $1 million in the first three months of both fiscal 2019 and 2018. No further charges are expected related to this plan. Other Actions Cabot recorded approximately $1 million of severance charges in the first quarter of fiscal 2019, of which less than $1 million was paid during the quarter. The balance is expected to be paid during the remainder of fiscal 2019. Additionally, Cabot recorded less than $1 million of accelerated depreciation charges in the first quarter of fiscal 2019 and expects to record approximately $1 million of additional accelerated depreciation in the remainder of fiscal 2019 and approximately $1 million thereafter. Cabot recorded less than $1 million of severance charges in the first quarter of fiscal 2018, nearly all of which was paid in that quarter. Additionally, in previous years, the Company entered into other various restructuring actions that have been substantially completed. As of December 31, 2018, Cabot had approximately $5 million of accrued environmental and closure costs in the Consolidated Balance Sheets related to these actions which it expects to pay in the remainder of fiscal 2019 and thereafter. |
Financial Instruments and Fair
Financial Instruments and Fair Value Measurements | 3 Months Ended |
Dec. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Financial Instruments and Fair Value Measurements | K. Financial Instruments and Fair Value Measurements The FASB authoritative guidance on fair value measurements defines fair value, provides a framework for measuring fair value, and requires certain disclosures about fair value measurements. The required disclosures focus on the inputs used to measure fair value. The guidance establishes the following hierarchy for categorizing these inputs: Level 1 — Quoted market prices in active markets for identical assets or liabilities Level 2 — Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs) Level 3 — Significant unobservable inputs There were no transfers of financial assets or liabilities measured at fair value between Level 1 and Level 2 and there were no Level 3 investments during the first three months of either fiscal 2019 or 2018. At December 31, 2018 and September 30, 2018, Cabot had derivatives relating to foreign currency risks carried at fair value. At December 31, 2018 and September 30, 2018, the fair value of these derivatives was a net liability of $10 million and $18 million, respectively, and was included in Prepaid expenses and other current assets and Other liabilities on the Consolidated Balance Sheets. These derivatives are classified as Level 2 instruments within the fair value hierarchy as the fair value determination was based on observable inputs. At both December 31, 2018 and September 30, 2018, the fair value of guaranteed investment contracts, included in Other assets on the Consolidated Balance Sheets, was $11 million. Guaranteed investment contracts were classified as Level 2 instruments within the fair value hierarchy as the fair value determination was based on other observable inputs. At December 31, 2018 and September 30, 2018, the fair values of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued liabilities, and short-term borrowings and variable rate debt approximated their carrying values due to the short-term nature of these instruments. The carrying value and fair value of the long-term fixed rate debt were $669 million and $681 million, respectively, as of December 31, 2018, and $747 million and $742 million, respectively, as of September 30, 2018. The fair values of Cabot’s fixed rate long-term debt are estimated based on comparable quoted market prices at the respective period ends. The carrying amounts of Cabot’s floating rate long-term debt and capital lease obligations approximate their fair values. All such measurements are based on observable inputs and are classified as Level 2 within the fair value hierarchy. The valuation technique used is the discounted cash flow model. |
Derivatives
Derivatives | 3 Months Ended |
Dec. 31, 2018 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Derivatives | L. Derivatives Foreign Currency Risk Management Cabot’s international operations are subject to certain risks, including currency exchange rate fluctuations and government actions. Cabot endeavors to match the currency in which debt is issued to the currency of the Company’s major, stable cash receipts. In some situations, Cabot has issued debt denominated in U.S. dollars and then entered into cross-currency swaps that exchange the dollar principal and interest payments into Euro-denominated principal and interest payments. Additionally, the Company has foreign currency exposure arising from its net investments in foreign operations. Cabot may enter into cross-currency swaps to mitigate the impact of currency rate changes on the Company’s net investments. The Company also has foreign currency exposure arising from the denomination of monetary assets and liabilities in foreign currencies other than the functional currency of a given subsidiary as well as the risk that currency fluctuations could affect the dollar value of future cash flows generated in foreign currencies. Accordingly, Cabot uses short-term forward contracts to minimize the exposure to foreign currency risk. In certain situations where the Company has forecasted purchases under a long-term commitment or forecasted sales denominated in a foreign currency, Cabot may enter into appropriate financial instruments in accordance with the Company’s risk management policy to hedge future cash flow exposures. The following table provides details of the derivatives held as of December 31, 2018 and September 30, 2018 to manage foreign currency risk. Notional Amount Description Borrowing December 31, 2018 September 30, 2018 Hedge Designation Cross-Currency Swaps 3.4% Notes USD 250 million swapped to EUR 223 million USD 250 million swapped to EUR 223 million Net investment Forward Foreign Currency Contracts (1) N/A USD 14 million USD 18 million No designation (1) Cabot’s forward foreign exchange contracts are denominated in the Canadian dollar, Indonesian rupiah and Czech koruna. Accounting for Derivative Instruments and Hedging Activities The Company determines the fair value of financial instruments using quoted market prices whenever available. When quoted market prices are not available for various types of financial instruments (such as forwards, options and swaps), the Company uses standard models with market-based inputs, which take into account the present value of estimated future cash flows and the ability of Cabot or the financial counterparty to perform. For interest rate and cross-currency swaps, the significant inputs to these models are interest rate curves for discounting future cash flows and are adjusted for credit risk. For forward foreign currency contracts, the significant inputs are interest rate curves for discounting future cash flows, and exchange rate curves of the foreign currency for translating future cash flows. Fair Value Hedge For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in current period earnings. Cash Flow Hedge For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is recorded in AOCI and reclassified to earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current period earnings. Net Investment Hedge For net investment hedges, changes in the fair value of the effective portion of the derivatives’ gains or losses are reported as foreign currency translation gains or losses in AOCI while changes in the ineffective portion are reported in earnings. Effectiveness is assessed using the method based on changes in spot exchange rates. The gains or losses on derivative instruments reported in AOCI are reclassified to earnings in the period in which earnings are affected by the underlying item, such as a disposal or substantial liquidations of the entities being hedged. The Company has cross-currency swaps with a notional amount of $250 million, which are designated as hedges of its net investments in certain Euro-denominated subsidiaries. Cash settlements occur semi-annually on March 15 th th The following tables summarize the impact of the cross-currency swaps to AOCI and the Consolidated Statements of Operations: Three Months Ended December 31 2018 2017 2018 2017 2018 2017 Description Gain/(Loss) Recognized in AOCI (Gain)/Loss Reclassified from AOCI into Interest Expense in the Consolidated Statements of Operations (Gain)/Loss Recognized in Interest Expense in the Consolidated Statements of Operations (Amount Excluded from Effectiveness Testing) (In millions) Cross-currency swaps $ 8 $ (5 ) $ (1 ) $ (1 ) $ — $ — Other Derivative Instruments From time to time, the Company may enter into certain derivative instruments that may not be designated as hedges for accounting purposes, which may include cross-currency swaps, foreign currency forward contracts and commodity derivatives. For cross-currency swaps and foreign currency forward contracts not designated as hedges, the Company uses standard models with market-based inputs. The significant inputs to these models are interest rate curves for discounting future cash flows, and exchange rate curves of the foreign currency for translating future cash flows. In determining the fair value of the commodity derivatives, the significant inputs to valuation models are quoted market prices of similar instruments in active markets. Although these derivatives do not qualify for hedge accounting, Cabot believes that such instruments are closely correlated with the underlying exposure, thus managing the associated risk. The gains or losses from changes in the fair value of derivative instruments that are not accounted for as hedges are recognized in current period earnings. At December 31, 2018, the fair value of derivative instruments not designated as hedges were immaterial and were presented in Accounts payable and accrued liabilities, and Prepaid expenses and other current assets on the Consolidated Balance Sheets. At September 30, 2018 the fair value of derivative instruments not designated as hedges were immaterial and were presented in Accounts payable and accrued liabilities on the Consolidated Balance Sheets. |
Hyperinflationary Economies
Hyperinflationary Economies | 3 Months Ended |
Dec. 31, 2018 | |
Equity Method Investments And Joint Ventures [Abstract] | |
Hyperinflationary Economies | M. Hyperinflationary Economies Argentina Cabot owns 100% of a carbon black operating entity in Argentina. Effective July 1, 2018, the operating entity was considered to be functioning in a highly inflationary economy and began using Cabot’s reporting currency, the U.S. dollar, as its functional currency. Since the conversion, all impacts of foreign exchange changes between the reporting currency and Argentine peso are reflected in earnings in the Consolidated Statements of Operations. The Company’s income from operations has not been significantly impacted from this change because the operating entity’s sales and a portion of its raw material purchases were already denominated in U.S. dollars. The operating entity’s net revenue represented approximately 2% of Cabot’s total net revenue for the three months ended December 31, 2018. The operating entity’s assets and liabilities held in local currency, which consist primarily of cash and cash equivalents, inventories, property, plant and equipment and accounts payable and accrued liabilities, made up less than 2% of Cabot’s total assets and total liabilities as of both December 31, 2018 and September 30, 2018. Changes in the Argentine peso exchange rate will result in foreign currency exchange gains or losses on the operating entity’s peso-denominated monetary assets and liabilities. The Company recorded a $1 million net loss within Other (income) expense in the Consolidated Statements of Operations for the three months ended December 31, 2018, which reflects the remeasurement of the operating entity’s net monetary liabilities denominated in Argentine peso using an exchange rate of 37.70 Argentine peso to the U.S. dollar at December 31, 2018. The Company will continue to monitor the developments in Argentina and their potential impact on the operating entity’s operations or carrying value. Venezuela Cabot owns 49% of a carbon black operating affiliate in Venezuela, which is accounted for as an equity affiliate, through wholly-owned subsidiaries that carry the investment and receive its dividends. As of December 31, 2018, these subsidiaries carried the operating affiliate investment of $12 million. During the three months ended December 31, 2018 and 2017, the Company received dividends in the amounts of $1 million and $2 million, respectively, which were paid in U.S. dollars. A significant portion of the Company’s operating affiliate’s sales are exports denominated in U.S. dollars. The Venezuelan government mandates that a certain percentage of the dollars collected from these sales be converted into bolivars. The exchange rate made available to the Company as of December 31, 2018 and September 30, 2018 was 564 and 62 bolivars soberano to the U.S. dollar, respectively. Due to a reduced level of export sales in recent periods, the exchange rate devaluation during the first three months of fiscal 2019 had an immaterial impact on the Company’s results. While the operating entity has historically been profitable, it has not been operational in recent months due to a lack of available raw materials. The Company continues to closely monitor developments in Venezuela and their potential impact on the recoverability of its equity affiliate investment. Any future change in the exchange rate made available to the Company could cause the Company to change the exchange rate it uses and result in gains or losses on the bolivar-denominated assets held by its operating affiliate. |
Financial Information by Segmen
Financial Information by Segment | 3 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Financial Information by Segment | N. Financial Information by Segment The Company identifies a business as an operating segment if: (i) it engages in business activities from which it may earn revenues and incur expenses; (ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Cabot’s President and Chief Executive Officer, to make decisions about resources to be allocated to the segment and assess its performance; and (iii) it has available discrete financial information. The Company has determined that all of its businesses are operating segments. The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. Operating segments are aggregated into a reportable segment if the operating segments are determined to have similar economic characteristics and if the operating segments are similar in the following areas: (i) nature of products and services; (ii) nature of production processes; (iii) type or class of customer for their products and services; (iv) methods used to distribute the products or provide services; and (v) if applicable, the nature of the regulatory environment. The Company has four reportable segments: Reinforcement Materials, Performance Chemicals, Purification Solutions and Specialty Fluids. The Reinforcement Materials segment represents the rubber blacks and elastomer composites product lines. The Performance Chemicals segment combines the specialty carbons, fumed metal oxides and aerogel product lines into the Performance Additives business, and combines the specialty compounds and inkjet colorants product lines into the Formulated Solutions business. These businesses are similar in terms of economic characteristics, nature of products, processes, customer class and product distribution methods, and, therefore, have been aggregated into one reportable segment. The net sales from each of these businesses for the three months ended December 31, 2018 and 2017 were as follows: Three Months Ended December 31 2018 2017 (In millions) Performance Additives $ 167 $ 159 Formulated Solutions 64 70 Performance Chemicals $ 231 $ 229 The Purification Solutions segment represents the Company’s activated carbon business and the Specialty Fluids segment includes cesium formate oil and gas drilling fluids and high-purity fine cesium chemicals product lines. Income (loss) from continuing operations before income taxes (“Segment EBIT”) is presented for each reportable segment in the table below. Segment EBIT excludes certain items, meaning items management does not consider representative of on-going operating segment results. In addition, Segment EBIT includes Equity in earnings of affiliated companies, net of tax, the full operating results of a contractual joint venture in Purification Solutions, royalties, Net income attributable to noncontrolling interests, net of tax, and discounting charges for certain Notes receivable, but excludes Interest expense, foreign currency transaction gains and losses, interest income, dividend income, unearned revenue, general unallocated expense and unallocated corporate costs. Financial information by reportable segment is as follows: Reinforcement Materials Performance Chemicals Purification Solutions Specialty Fluids Segment Total Unallocated and Other (1) Consolidated Total (In millions) Three Months Ended December 31, 2018 Revenues from external customers (2) $ 457 $ 231 $ 65 $ 19 $ 772 $ 49 $ 821 Income (loss) from continuing operations before income taxes (3) $ 62 $ 36 $ (3 ) $ 10 $ 105 $ (35 ) $ 70 Three Months Ended December 31, 2017 Revenues from external customers (2) $ 387 $ 229 $ 70 $ 6 $ 692 $ 28 $ 720 Income (loss) from continuing operations before income taxes (3) $ 62 $ 47 $ 6 $ (2 ) $ 113 $ (21 ) $ 92 (1) Unallocated and Other includes certain items and eliminations necessary to reflect management’s reporting of operating segment results. These items are reflective of the segment reporting presented to the CODM. (2) Consolidated Total Revenues from external customers reconciles to Net sales and other operating revenues on the Consolidated Statements of Operations. Three Months Ended December 31 2018 2017 (In millions) Royalties, the impact of unearned revenue, the removal of 100% of the sales of an equity method affiliate and discounting charges for certain notes receivable $ (3 ) $ 1 Shipping and handling fees 32 27 By-product sales (a) 20 — Total $ 49 $ 28 (a) Beginning in fiscal 2019 as part of the adoption of the new accounting standard, Revenue from Contracts with Customers (3) Consolidated Total Income (loss) from continuing operations before income taxes Three Months Ended December 31 2018 2017 (In millions) Interest expense $ (15 ) $ (13 ) Certain items (a) Global restructuring activities (9 ) (1 ) Legal and environmental matters and reserves — (1 ) Gains (losses) on sale of investments — 10 Acquisition and integration-related charges (3 ) — Other 2 (1 ) Total certain items, pre-tax (10 ) 7 Unallocated corporate costs (b) (12 ) (14 ) General unallocated income (expense) (c) 2 — Less: Equity in earnings of affiliated companies, net of tax (d) — 1 Total $ (35 ) $ (21 ) (a) Certain items are (b) Unallocated corporate costs are costs that are not controlled by the segments and primarily benefit corporate interests. (c) General unallocated income (expense) consists of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, the profit or loss related to the corporate adjustment for unearned revenue, and the impact of including the full operating results of a contractual joint venture in Purification Solutions Segment EBIT. (d) Equity in earnings of affiliated companies, net of tax, is included in Segment EBIT and is removed in Unallocated and other to reconcile to Income (loss) from operations before income taxes and equity in earnings from affiliated companies. The Company’s segments operate globally. In addition to presenting Revenue from external customers by reportable segment, the following table further disaggregates Revenue from external customers by geographic region. Three Months Ended December 31, 2018 Reinforcement Materials Performance Chemicals Purification Solutions Specialty Fluids Consolidated Total (In millions) Americas $ 167 $ 72 $ 29 $ 2 $ 270 Asia Pacific 202 85 9 1 297 Europe, Middle East and Africa 88 74 27 16 205 Segment revenues from external customers 457 231 65 19 772 Unallocated and other 49 Net sales and other operating revenues $ 821 |
Subsequent Event
Subsequent Event | 3 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Event | O. Subsequent Event On January 30, 2019, the Company entered into a Stock Purchase Agreement to sell its Specialty Fluids business to Sinomine (Hong Kong) Rare Metals Resources Co. Limited, a wholly owned subsidiary of Sinomine Resource Group Co., Ltd. (“Sinomine”), on a cash-free and debt-free basis in a transaction valued at $135 million. The purchase price consists of $130 million to be paid at closing, subject to customary closing adjustments (including a customary working capital adjustment), and additional cash royalties of up to $5 million for lithium products, payable over a ten-year period. The transaction is expected to close in the third quarter of fiscal 2019 and is subject to customary closing conditions, including, among other things, the receipt of certain regulatory approvals and notices with respect to the People’s Republic of China and Canada and the consent from the shareholders of Sinomine to the entry into the Agreement and the consummation of the transactions contemplated thereby. Based on the carrying value of the Specialty Fluids business as of December 31, 2018 and an estimate of the total cash proceeds from the sale including customary closing adjustments, the Company estimates a non-cash impairment charge of approximately $25 million to be recorded in the second quarter of fiscal 2019 related to the assets held for sale of this business. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 3 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Revenue Recognition | Revenue Recognition Cabot recognizes revenue when its customers obtain control of promised goods or services. The revenue recognized is the amount of consideration which the Company expects to receive in exchange for those goods or services. Cabot derives the majority of its revenues from contracts for the sale of products from its Reinforcement Materials, Performance Chemicals and Purification Solutions segments. The Company’s contracts with customers are generally for products only and do not include other performance obligations. Generally, Cabot considers purchase orders, which in some cases are governed by master supply agreements, to be contracts with customers. The transaction price as specified on the purchase order or sales contract is considered the standalone selling price for each distinct product. To determine the transaction price at the time when revenue is recognized, the Company evaluates whether the price is subject to adjustments, such as for returns, discounts or volume rebates, which are stated in the customer contract, to determine the net consideration to which the Company expects to be entitled. Revenue from product sales is recognized based on a point in time model when control of the product is transferred to the customer, which typically occurs upon shipment or delivery of the product to the customer and title, risk and rewards of ownership have passed to the customer. Payment terms typically range from zero to ninety days Shipping and handling activities that occur after the transfer of control to the customer are billed to customers and are recorded as sales revenue, as the Company considers these to be fulfillment costs. Shipping and handling costs are expensed in the period incurred and included in Cost of sales within the Consolidated Statement of Operations. Taxes collected on sales to customers are excluded from the transaction price. The Company generally provides a warranty that its products will substantially conform to the identified specifications. The Company’s liability typically is limited to either a credit equal to the purchase price or replacement of the non-conforming product. Returns under warranty have historically been immaterial. Revenue in the Specialty Fluids segment arises primarily from the rental of cesium formate. This revenue is recognized throughout the rental period based on the contracted rental terms. During the three months ended December 31, 2018, the Company recognized revenue of $8 million related to the rental of cesium formate. Customers are also billed and revenue is recognized, typically at the end of the rental period, for cesium formate product that is not returned. The Company also generates revenues from cesium formate sold outside of the rental process and from the sale of fine cesium chemicals. This revenue is recognized when control of the product transfers to the customer, which is typically upon delivery of the product. As permitted by the revenue recognition standard, Revenue from Contracts with Customers when the period of time between the transfer of control of the goods and the time the customer pays for the goods is one year or less, the Company does not consider there to be a significant financing component associated with the contract. |
Intangible Assets and Goodwill Impairment | Intangible Assets and Goodwill Impairment The Company records tangible and intangible assets acquired and liabilities assumed in business combinations under the acquisition method of accounting. Amounts paid for an acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The Company uses assumptions and estimates in determining the fair value of assets acquired and liabilities assumed in a business combination. The determination of the fair value of intangible assets requires the use of significant judgment with regard to assumptions used in the valuation model. The Company estimates the fair value of identifiable acquisition-related intangible assets principally based on projections of cash flows that will arise from these assets. The projected cash flows are discounted to determine the fair value of the assets at the dates of acquisition. Definite-lived intangible assets, which are comprised of trademarks, customer relationships and developed technologies, are amortized over their estimated useful lives and are reviewed for impairment when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets. Goodwill is comprised of the purchase price of business acquisitions in excess of the fair value assigned to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but is reviewed for impairment annually as of May 31, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value. A reporting unit, for the purpose of the impairment test, is at or below the operating segment level, and constitutes a business for which discrete financial information is available and regularly reviewed by segment management. Reinforcement Materials, and the fumed metal oxides and specialty compounds product lines within Performance Chemicals, which are considered separate reporting units, carry the Company’s goodwill balances as of December 31, 2018. For the purpose of the goodwill impairment test, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, an additional quantitative evaluation is performed. Alternatively, the Company may elect to proceed directly to the quantitative goodwill impairment test. If based on the quantitative evaluation the fair value of the reporting unit is less than its carrying amount, a goodwill impairment loss would result. The goodwill impairment loss would be the amount by which the carrying value of the reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. The fair value of a reporting unit is based on discounted estimated future cash flows. The fair value is also benchmarked against a market approach using the guideline public companies method. The assumptions used to estimate fair value include management’s best estimates of future growth rates, operating cash flows, capital expenditures and discount rates over an estimate of the remaining operating period at the reporting unit level. Based on the Company’s most recent annual goodwill impairment test performed as of May 31, 2018, the fair values of the Reinforcement Materials, Fumed Metal Oxides and Specialty Compounds reporting units were substantially in excess of their carrying values. No events occurred subsequent to the last impairment evaluation that would suggest that it is more likely than not that the carrying values of any of the Company’s reporting units exceeded their fair value. |
Long-Lived Assets Impairment | Long-lived Assets Impairment The Company’s long-lived assets primarily include property, plant and equipment, intangible assets, long-term investments and assets held for rent. The carrying values of long-lived assets are reviewed for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be recoverable. To test for impairment of assets, the Company generally uses a probability-weighted estimate of the future undiscounted net cash flows of the assets over their remaining lives to determine if the value of the asset is recoverable. Long-lived assets are grouped with other assets and liabilities at the lowest level for which independent identifiable cash flows are determinable. An asset impairment is recognized when the carrying value of the asset is not recoverable based on the analysis described above, in which case the asset is written down to its fair value. If the asset does not have a readily determinable market value, a discounted cash flow model may be used to determine the fair value of the asset. In circumstances when an asset does not have separately identifiable cash flows, an impairment charge is recorded when the Company no longer intends to use the asset. The Company continues to pursue strategic options for its Purification Solutions business. Depending on the actions taken, there could be a negative impact on the fair value of the Purification Solution reporting unit, which may lead to impairment. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation of property, plant and equipment is calculated using the straight-line method over the estimated useful lives of the related assets. The depreciable lives for buildings, machinery and equipment, and other fixed assets are between twenty and twenty-five years, ten and twenty-five years, and three and twenty-five years, respectively. The cost and accumulated depreciation for property, plant and equipment sold, retired, or otherwise disposed of are removed from the Consolidated Balance Sheets and resulting gains or losses are included in earnings in the Consolidated Statements of Operations. Expenditures for repairs and maintenance are charged to expenses as incurred. Expenditures for major renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. |
Income Tax in Interim Periods | Income Tax in Interim Periods The Company records its tax provision or benefit on an interim basis using an estimated annual effective tax rate. This rate is applied to the current period ordinary income or loss to determine the income tax provision or benefit allocated to the interim period. Losses from jurisdictions for which no benefit can be recognized and the income tax effects of unusual or infrequent items are excluded from the estimated annual effective tax rate and are recognized in the impacted interim period. Valuation allowances are provided against the future tax benefits that arise from the deferred tax assets in jurisdictions for which no benefit can be recognized. The estimated annual effective tax rate may be significantly impacted by nondeductible expenses and the Company’s projected earnings mix by tax jurisdiction. Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised. |
Inventory Valuation | Inventory Valuation Inventories are stated at the lower of cost or market. The cost of Specialty Fluids inventories that are classified as assets held for rent is determined using the average cost method. The cost of all other inventories is determined using the FIFO method. Cabot periodically reviews inventory for both potential obsolescence and potential declines in anticipated selling prices. In this review, the Company makes assumptions about the future demand for and market value of the inventory, and based on these assumptions estimates the amount of any obsolete, unmarketable, slow moving, or overvalued inventory. Cabot writes down the value of these inventories by an amount equal to the difference between the cost of the inventory and its estimated net realizable value. |
Pensions and Other Postretirement Benefits | Pensions and Other Postretirement Benefits The Company recognizes the funded status of defined benefit pension and other postretirement benefit plans as an asset or liability. This amount is defined as the difference between the fair value of plan assets and the benefit obligation. The Company is required to recognize as a component of Other comprehensive income (loss), net of tax, the actuarial gains/losses and prior service costs/credits that arise but were not previously required to be recognized as components of net periodic benefit cost. Other comprehensive income (loss) is adjusted as these amounts are later recognized in income as components of net periodic benefit cost. |
Redeemable Preferred Stock | Redeemable Preferred Stock In November 2013, the Company purchased all of its joint venture partner’s common stock in the former NHUMO, S.A. de C.V. (“NHUMO”) joint venture. At the close of the transaction, NHUMO issued redeemable preferred stock to the joint venture partner with a repurchase value of $25 million and a fixed dividend rate of 6% per annum. In November 2018, the preferred stock was repurchased for $25 million and a final dividend payment of approximately $1.4 million was made. The preferred stock was accounted for as a financing obligation and was separately presented in the Consolidated Balance Sheets as a current liability as of September 30, 2018. |
Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) (“AOCI”), which is included as a component of stockholders’ equity, includes unrealized gains or losses on available-for-sale marketable securities and derivative instruments, currency translation adjustments in foreign subsidiaries, translation adjustments on foreign equity securities and minimum pension liability adjustments. |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards In May 2014, the FASB issued a new standard, Revenue from Contracts with Customers The adoption of this standard did not have an impact on how the Company recognizes revenue. As such, an adjustment to opening retained earnings was not required as a result of adopting this new standard. The Company implemented the updates that were necessary to its revenue recognition policy, internal controls, processes and financial statement disclosures as part of this adoption. The updated disclosures are reflected under the heading “Revenue Recognition” within Note B and the Company’s disaggregated revenue is reflected within Note N. In addition, as part of an assessment performed in connection with adopting this standard, the Company reviewed its classification of by-product sales, which consist of sales generated from the production of steam or electricity from the Company's energy centers primarily from its carbon black manufacturing sites and sales of hydrochloric acid generated from the production of fumed silica. Historically, the Company presented by-product sales as a reduction of Cost of sales within the Consolidated Statement of Operations. However, upon further evaluation of these sales in connection with the implementation of this standard, the Company determined that it is appropriate to present by-product sales as Net sales and other operating revenues. Effective October 1, 2018, these sales are now included within Net sales and other operating revenues in the Consolidated Statement of Operations. This change did not result in a cumulative adjustment to opening retained earnings as it is a classification change within the Consolidated Statement of Operations. If the Company had continued to classify by-product sales within Cost of sales, there would have been a decrease to Net sales and other operating revenues and Cost of sales of $20 million for the three months ended December 31, 2018. In August 2016, the FASB issued final amendments to clarify how entities should classify certain cash receipts and cash payments on the statement of cash flows, such as distributions received from equity method investees, proceeds from the settlement of insurance claims, and proceeds from the settlement of corporate-owned life insurance policies. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those years, and early adoption is permitted. The Company adopted this standard on October 1, 2018. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements. In March 2017, the FASB issued a new standard that amends the requirements on the presentation of net periodic pension and postretirement benefit costs. The new standard requires the service cost component to be presented with other employee compensation costs. The other components will be reported separately outside of operations. Only the service cost component will be eligible for capitalization. Entities are required to use a retrospective transition method to adopt the requirement for separate income statement presentation of the service cost and other components, and a prospective transition method to adopt the requirement to limit the capitalization of benefit cost to the service component. The Company adopted the standard on October 1, 2018 and used a retrospective transition method to reclassify net periodic benefit cost, other than the service component, from Cost of sales, Selling and administrative expenses and Research and technical expenses to Other income (expense) in the Consolidated Statements of Operations for the prior periods presented. In accordance with the standard, the Company utilized prior period footnote disclosures as a practical expedient to apply these retrospective presentations, which is shown in the table below: Consolidated Statements of Operations Three Months Ended December 31 2017 As Originally Reported Effect of Change As Adjusted (In millions, except per share amounts) Cost of sales $ 542 $ 2 $ 544 Gross profit $ 178 $ (2 ) $ 176 Selling and administrative expenses $ 69 $ 1 $ 70 Research and technical expenses $ 15 $ — $ 15 Income (loss) from operations $ 94 $ (3 ) $ 91 Other income (expense) $ 8 $ 3 $ 11 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued a new standard for the accounting for leases. This new standard requires lessees to recognize assets and liabilities for most leases, but recognize expenses on their income statements in a manner that is similar to the current accounting treatment for leases. The standard is applicable for fiscal years beginning after December 15, 2018 and for interim periods within those years, and early adoption is permitted. The Company expects to adopt the standard on October 1, 2019. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. The Company has established a project plan and implementation team which will analyze the current portfolio of leases to determine the impact of adopting this new standard. The implementation team will also be responsible for evaluating and designing the necessary changes to the Company’s business processes, lease policies, systems and internal controls to support recognition and disclosure under the new guidance. In February 2018, the FASB issued a new standard that allows entities to reclassify from AOCI to Retained earnings stranded tax effects resulting from changes made as a result of the Tax Cuts and Jobs Act of 2017 (the “Act”). The amendments in this new standard also require certain disclosures about stranded tax effects. The new standard is effective for all entities for fiscal years beginning after December 15, 2018, including interim periods within those years, and early adoption is permitted. The Company is evaluating this standard and the timing of its adoption. The adoption of this standard is not expected to materially impact the Company’s consolidated financial statements. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of Change Retrospectively to Prior Periods Financial Statement Line Items | The Company adopted the standard on October 1, 2018 and used a retrospective transition method to reclassify net periodic benefit cost, other than the service component, from Cost of sales, Selling and administrative expenses and Research and technical expenses to Other income (expense) in the Consolidated Statements of Operations for the prior periods presented. In accordance with the standard, the Company utilized prior period footnote disclosures as a practical expedient to apply these retrospective presentations, which is shown in the table below: Consolidated Statements of Operations Three Months Ended December 31 2017 As Originally Reported Effect of Change As Adjusted (In millions, except per share amounts) Cost of sales $ 542 $ 2 $ 544 Gross profit $ 178 $ (2 ) $ 176 Selling and administrative expenses $ 69 $ 1 $ 70 Research and technical expenses $ 15 $ — $ 15 Income (loss) from operations $ 94 $ (3 ) $ 91 Other income (expense) $ 8 $ 3 $ 11 |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Preliminary Purchase Price Estimates Fair Value of Assets Acquired and Liabilities Assumed | The allocation of the purchase price set forth below was based on estimates of the fair value of assets acquired and liabilities assumed. (In millions) Assets Cash $ 1 Accounts receivable 5 Inventories 3 Property, plant and equipment 7 Intangible assets 29 Goodwill 33 Total assets acquired 78 Liabilities Current liabilities (3 ) Deferred tax liabilities (10 ) Total liabilities assumed (13 ) Cash consideration paid $ 65 |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Compensation And Retirement Disclosure [Abstract] | |
Net Periodic Defined Benefit Pension and Other Postretirement Benefit Costs | Net periodic defined benefit pension and other postretirement benefit costs include the following: Three Months Ended December 31 2018 2017 2018 2017 Pension Benefits Postretirement Benefits U.S. Foreign U.S. Foreign U.S. Foreign U.S. Foreign (In millions) Service cost $ — $ 2 $ — $ 2 $ — $ — $ — $ — Interest cost 1 2 1 2 — — — — Expected return on plan assets (2 ) (4 ) (2 ) (4 ) — — — — Amortization of prior service credit — — — — — — (1 ) — Amortization of actuarial loss — 1 — 1 — — — — Settlement and curtailment gain — (6 ) — — — — — — Net periodic benefit (credit) cost $ (1 ) $ (5 ) $ (1 ) $ 1 $ — $ — $ (1 ) $ — |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill Balances | The carrying amount of goodwill attributable to each reportable segment with goodwill balances and the changes in those balances during the three month period ended December 31, 2018 are as follows: Reinforcement Materials Performance Chemicals Total (In millions) Balance at September 30, 2018 $ 52 $ 41 $ 93 Foreign currency impact (2 ) (1 ) (3 ) Balance at December 31, 2018 $ 50 $ 40 $ 90 |
Schedule of Intangible Assets | The following table provides information regarding the Company’s intangible assets: December 31, 2018 September 30, 2018 Gross Carrying Value Accumulated Amortization Net Intangible Assets Gross Carrying Value Accumulated Amortization Net Intangible Assets (In millions) Intangible assets with finite lives Developed technologies $ 51 $ (2 ) $ 49 $ 52 $ (2 ) $ 50 Trademarks 8 — 8 8 — 8 Customer relationships 49 (12 ) 37 51 (11 ) 40 Total intangible assets $ 108 $ (14 ) $ 94 $ 111 $ (13 ) $ 98 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Changes in Each Component of AOCI, Net of Tax | Changes in each component of AOCI, net of tax, were as follows: Currency Translation Adjustment Unrealized Gains on Investments Pension and Other Postretirement Benefit Liability Adjustments Total (In millions) Balance at September 30, 2018, attributable to Cabot Corporation $ (266 ) $ 1 $ (52 ) $ (317 ) Other comprehensive income (loss) before reclassifications (24 ) — 30 6 Amounts reclassified from AOCI (1 ) — (8 ) (9 ) Less: Other comprehensive income (loss) attributable to noncontrolling interests — — — — Balance at December 31, 2018, attributable to Cabot Corporation $ (291 ) $ 1 $ (30 ) $ (320 ) |
Amounts Reclassified Out of AOCI | The amounts reclassified out of AOCI and into the Consolidated Statements of Operations in the three months ended December 31, 2018 and 2017 were as follows: Affected Line Item in the Consolidated Three Months Ended December 31 Statements of Operations 2018 2017 (In millions) Derivatives: net investment hedges (Gains) losses reclassified to interest expense Interest expense $ (1 ) $ (1 ) Pension and other postretirement benefit liability adjustment Amortization of actuarial losses Net Periodic Benefit Cost - see Note D for details 1 1 Amortization of prior service credit Net Periodic Benefit Cost - see Note D for details — (1 ) Settlement and curtailment gain Net Periodic Benefit Cost - see Note D for details (6 ) — Total before tax (6 ) (1 ) Tax impact Provision (benefit) for income taxes (3 ) — Total after tax $ (9 ) $ (1 ) |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Commitments And Contingencies Disclosure [Abstract] | |
Schedule of Components of Purchase Commitments | Cabot has entered into long-term purchase agreements primarily for the purchase of raw materials. Under certain of these agreements, the quantity of material being purchased is fixed, but the price paid changes as market prices change. For these purchase commitments, the amounts included in the table below are based on market prices at December 31, 2018, which may differ from actual market prices at the time of purchase. Payments Due by Fiscal Year Remainder of Fiscal 2019 2020 2021 2022 2023 Thereafter Total (In millions) Reinforcement Materials $ 263 $ 248 $ 141 $ 137 $ 130 $ 1,703 $ 2,622 Performance Chemicals 73 59 55 55 32 454 728 Purification Solutions 6 6 1 — — — 13 Specialty Fluids 15 — — — — — 15 Total $ 357 $ 313 $ 197 $ 192 $ 162 $ 2,157 $ 3,378 |
Income Tax (Tables)
Income Tax (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Effective Tax Rate | Effective Tax Rate Three Months Ended December 31 2018 2017 (Dollars in millions) (Provision) benefit for income taxes $ 7 $ (205 ) Effective tax rate (10 )% 224 % |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
Components of Basic and Diluted Earnings (Loss) Per Common Share (EPS) | The following tables summarize the components of the basic and diluted earnings (loss) per common share (“EPS”) computations: Three Months Ended December 31 2018 2017 (In millions, except per share amounts) Basic EPS: Net income (loss) attributable to Cabot Corporation $ 69 $ (122 ) Less: Undistributed earnings allocated to participating securities (1) — — Earnings (loss) allocated to common shareholders (numerator) $ 69 $ (122 ) Weighted average common shares and participating securities outstanding 60.8 62.6 Less: Participating securities (1) 0.9 0.7 Adjusted weighted average common shares (denominator) 59.9 61.9 Earnings (loss) per common share - basic: $ 1.14 $ (1.98 ) Diluted EPS: Earnings (loss) allocated to common shareholders $ 69 $ (122 ) Plus: Earnings (loss) allocated to participating securities 1 — Less: Adjusted earnings allocated to participating securities (2) 1 — Earnings (loss) allocated to common shareholders (numerator) $ 69 $ (122 ) Adjusted weighted average common shares outstanding 59.9 61.9 Effect of dilutive securities: Common shares issuable (3) 0.2 — Adjusted weighted average common shares (denominator) 60.1 61.9 Earnings (loss) per common share - diluted: $ 1.14 $ (1.98 ) (1) Participating securities consist of shares underlying outstanding and achieved performance-based restricted stock units issued during and after fiscal 2017 and all unvested time-based restricted stock units. |
Calculation of Undistributed Earnings | Undistributed earnings are the earnings which remain after dividends declared during the period are assumed to be distributed to the common and participating shareholders. Undistributed earnings are allocated to common and participating shareholders on the same basis as dividend distributions. The calculation of undistributed earnings is as follows: Three Months Ended December 31 2018 2017 (In millions) Calculation of undistributed earnings (loss): Net income (loss) attributable to Cabot Corporation $ 69 $ (122 ) Less: Dividends declared on common stock 20 20 Undistributed earnings (loss) $ 49 $ (142 ) Allocation of undistributed earnings (loss): Undistributed earnings (loss) allocated to common shareholders $ 49 $ (142 ) Undistributed earnings (loss) $ 49 $ (142 ) (2) Undistributed earnings are adjusted for the assumed distribution of dividends to the dilutive securities, which are described in (3) below, and then reallocated to participating securities. (3) Represents incremental shares of common stock from the (i) assumed exercise of stock options issued under Cabot’s equity incentive plans; (ii) assumed issuance of shares to employees pursuant to the Company’s Deferred Compensation and Supplemental Retirement Plan; and (iii) assumed issuance of shares for outstanding and achieved performance-based restricted stock unit awards issued before fiscal 2017 under Cabot’s equity incentive plans using the treasury stock method. For the three months ended December 31, 2018, 687,995 incremental shares of common stock were excluded from the calculation of diluted earnings per share because the inclusion of these shares would have been antidilutive. For the three months ended December 31, 2017, 764,077 |
Restructuring (Tables)
Restructuring (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Restructuring And Related Activities [Abstract] | |
Recorded Restructuring Activities | Cabot’s restructuring activities were recorded in the Consolidated Statements of Operations in the three months ended December 31, 2018 and 2017 as follows: Three Months Ended December 31 2018 2017 (In millions) Cost of sales $ 3 $ 1 Selling and administrative expenses 6 — Total $ 9 $ 1 |
Restructuring Activities and Related Reserves | Details of all restructuring activities and the related reserves during the three months ended December 31, 2018 were as follows: Severance and Employee Benefits Environmental Remediation Asset Impairment and Accelerated Depreciation Other Total (In millions) Reserve at September 30, 2018 $ 1 $ 4 $ — $ — $ 5 Charges 7 — 1 1 9 Costs charged against assets / (liabilities) — 1 (1 ) — — Cash received (paid) (1 ) — — (1 ) (2 ) Reserve at December 31, 2018 $ 7 $ 5 $ — $ — $ 12 |
Derivatives (Tables)
Derivatives (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Details of Derivatives Held to Manage Foreign Currency Risk | The following table provides details of the derivatives held as of December 31, 2018 and September 30, 2018 to manage foreign currency risk. Notional Amount Description Borrowing December 31, 2018 September 30, 2018 Hedge Designation Cross-Currency Swaps 3.4% Notes USD 250 million swapped to EUR 223 million USD 250 million swapped to EUR 223 million Net investment Forward Foreign Currency Contracts (1) N/A USD 14 million USD 18 million No designation (1) Cabot’s forward foreign exchange contracts are denominated in the Canadian dollar, Indonesian rupiah and Czech koruna. |
Summary Impact of Cross-currency Swaps to AOCI and Consolidated Statements of Operations | The following tables summarize the impact of the cross-currency swaps to AOCI and the Consolidated Statements of Operations: Three Months Ended December 31 2018 2017 2018 2017 2018 2017 Description Gain/(Loss) Recognized in AOCI (Gain)/Loss Reclassified from AOCI into Interest Expense in the Consolidated Statements of Operations (Gain)/Loss Recognized in Interest Expense in the Consolidated Statements of Operations (Amount Excluded from Effectiveness Testing) (In millions) Cross-currency swaps $ 8 $ (5 ) $ (1 ) $ (1 ) $ — $ — |
Financial Information by Segm_2
Financial Information by Segment (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Performance Segment | The net sales from each of these businesses for the three months ended December 31, 2018 and 2017 were as follows: Three Months Ended December 31 2018 2017 (In millions) Performance Additives $ 167 $ 159 Formulated Solutions 64 70 Performance Chemicals $ 231 $ 229 |
Financial Information by Reportable Segment | Financial information by reportable segment is as follows: Reinforcement Materials Performance Chemicals Purification Solutions Specialty Fluids Segment Total Unallocated and Other (1) Consolidated Total (In millions) Three Months Ended December 31, 2018 Revenues from external customers (2) $ 457 $ 231 $ 65 $ 19 $ 772 $ 49 $ 821 Income (loss) from continuing operations before income taxes (3) $ 62 $ 36 $ (3 ) $ 10 $ 105 $ (35 ) $ 70 Three Months Ended December 31, 2017 Revenues from external customers (2) $ 387 $ 229 $ 70 $ 6 $ 692 $ 28 $ 720 Income (loss) from continuing operations before income taxes (3) $ 62 $ 47 $ 6 $ (2 ) $ 113 $ (21 ) $ 92 (1) Unallocated and Other includes certain items and eliminations necessary to reflect management’s reporting of operating segment results. These items are reflective of the segment reporting presented to the CODM. (2) Consolidated Total Revenues from external customers reconciles to Net sales and other operating revenues on the Consolidated Statements of Operations. Three Months Ended December 31 2018 2017 (In millions) Royalties, the impact of unearned revenue, the removal of 100% of the sales of an equity method affiliate and discounting charges for certain notes receivable $ (3 ) $ 1 Shipping and handling fees 32 27 By-product sales (a) 20 — Total $ 49 $ 28 (a) Beginning in fiscal 2019 as part of the adoption of the new accounting standard, Revenue from Contracts with Customers (3) Consolidated Total Income (loss) from continuing operations before income taxes Three Months Ended December 31 2018 2017 (In millions) Interest expense $ (15 ) $ (13 ) Certain items (a) Global restructuring activities (9 ) (1 ) Legal and environmental matters and reserves — (1 ) Gains (losses) on sale of investments — 10 Acquisition and integration-related charges (3 ) — Other 2 (1 ) Total certain items, pre-tax (10 ) 7 Unallocated corporate costs (b) (12 ) (14 ) General unallocated income (expense) (c) 2 — Less: Equity in earnings of affiliated companies, net of tax (d) — 1 Total $ (35 ) $ (21 ) (a) Certain items are (b) Unallocated corporate costs are costs that are not controlled by the segments and primarily benefit corporate interests. (c) General unallocated income (expense) consists of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, the profit or loss related to the corporate adjustment for unearned revenue, and the impact of including the full operating results of a contractual joint venture in Purification Solutions Segment EBIT. (d) Equity in earnings of affiliated companies, net of tax, is included in Segment EBIT and is removed in Unallocated and other to reconcile to Income (loss) from operations before income taxes and equity in earnings from affiliated companies. |
Revenues from External Customers by Geographic Region | The Company’s segments operate globally. In addition to presenting Revenue from external customers by reportable segment, the following table further disaggregates Revenue from external customers by geographic region. Three Months Ended December 31, 2018 Reinforcement Materials Performance Chemicals Purification Solutions Specialty Fluids Consolidated Total (In millions) Americas $ 167 $ 72 $ 29 $ 2 $ 270 Asia Pacific 202 85 9 1 297 Europe, Middle East and Africa 88 74 27 16 205 Segment revenues from external customers 457 231 65 19 772 Unallocated and other 49 Net sales and other operating revenues $ 821 |
Significant Accounting Polici_4
Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | ||
Nov. 30, 2018 | Nov. 30, 2013 | Dec. 31, 2018 | Dec. 31, 2017 | |
Significant Accounting Policies [Line Items] | ||||
Net sales and other operating revenues | $ 821 | $ 720 | ||
Cost of sales | 655 | $ 544 | ||
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Net sales and other operating revenues | (20) | |||
Cost of sales | (20) | |||
NHUMO [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Preferred stock repurchase amount | $ 25 | $ 25 | ||
Dividend percentage of preferred stock | 6.00% | |||
Preferred stock dividend | $ 1.4 | |||
Specialty Fluids [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Revenue recognized | $ 8 | |||
Minimum [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Payment terms | 0 days | |||
Minimum [Member] | Buildings [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Useful life of property, plant and equipment | 20 years | |||
Minimum [Member] | Machinery and Equipment [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Useful life of property, plant and equipment | 10 years | |||
Minimum [Member] | Other Fixed Assets [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Useful life of property, plant and equipment | 3 years | |||
Maximum [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Payment terms | 90 days | |||
Maximum [Member] | Buildings [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Useful life of property, plant and equipment | 25 years | |||
Maximum [Member] | Machinery and Equipment [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Useful life of property, plant and equipment | 25 years | |||
Maximum [Member] | Other Fixed Assets [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Useful life of property, plant and equipment | 25 years |
Significant Accounting Polici_5
Significant Accounting Policies - Schedule of Change Retrospectively to Prior Periods Consolidated Statements of Operations (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Significant Accounting Policies [Line Items] | ||
Cost of sales | $ 655 | $ 544 |
Gross profit | 166 | 176 |
Selling and administrative expenses | 73 | 70 |
Research and technical expenses | 16 | 15 |
Income (loss) from operations | 77 | 91 |
Other income (expense) | $ 6 | 11 |
Change in Method of Accounting for Inventories from Last-in, First-out Method to First-in, First-out Method [Member] | ||
Significant Accounting Policies [Line Items] | ||
Cost of sales | 544 | |
Gross profit | 176 | |
Selling and administrative expenses | 70 | |
Research and technical expenses | 15 | |
Income (loss) from operations | 91 | |
Other income (expense) | 11 | |
Change in Method of Accounting for Inventories from Last-in, First-out Method to First-in, First-out Method [Member] | As Originally Reported [Member] | ||
Significant Accounting Policies [Line Items] | ||
Cost of sales | 542 | |
Gross profit | 178 | |
Selling and administrative expenses | 69 | |
Research and technical expenses | 15 | |
Income (loss) from operations | 94 | |
Other income (expense) | 8 | |
Change in Method of Accounting for Inventories from Last-in, First-out Method to First-in, First-out Method [Member] | Effect of Change [Member] | ||
Significant Accounting Policies [Line Items] | ||
Cost of sales | 2 | |
Gross profit | (2) | |
Selling and administrative expenses | 1 | |
Income (loss) from operations | (3) | |
Other income (expense) | $ 3 |
Acquisitions - Additional Infor
Acquisitions - Additional Information (Detail) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | |
Sep. 30, 2018 | Nov. 30, 2017 | Mar. 31, 2019 | |
Tech Blend [Member] | |||
Business Acquisition [Line Items] | |||
Acquisition date | Nov. 30, 2017 | ||
Business acquisition, purchase price | $ 65 | ||
Intangible assets | 29 | ||
Tech Blend [Member] | Developed Technologies [Member] | |||
Business Acquisition [Line Items] | |||
Intangible assets | $ 21 | ||
Intangible assets, amortization period | 25 years | ||
Tech Blend [Member] | Customer Relationships [Member] | |||
Business Acquisition [Line Items] | |||
Intangible assets | $ 8 | ||
Intangible assets, amortization period | 12 years | ||
NSCC Carbon (Jiangsu) Co. Ltd [Member] | |||
Business Acquisition [Line Items] | |||
Acquisition date | Sep. 30, 2018 | ||
Expected Production commencement year | 2,021 | ||
Transition related costs | $ 2 |
Acquisitions - Preliminary Purc
Acquisitions - Preliminary Purchase Price Estimates Fair Value of Assets Acquired and Liabilities Assumed (Detail) - USD ($) $ in Millions | Dec. 31, 2018 | Sep. 30, 2018 | Nov. 30, 2017 |
Assets | |||
Goodwill | $ 90 | $ 93 | |
Tech Blend [Member] | |||
Assets | |||
Cash | $ 1 | ||
Accounts receivable | 5 | ||
Inventories | 3 | ||
Property, plant and equipment | 7 | ||
Intangible assets | 29 | ||
Goodwill | 33 | ||
Total assets acquired | 78 | ||
Liabilities | |||
Current liabilities | (3) | ||
Deferred tax liabilities | (10) | ||
Total liabilities assumed | (13) | ||
Cash consideration paid | $ 65 |
Employee Benefit Plans - Net Pe
Employee Benefit Plans - Net Periodic Defined Benefit Pension and Other Postretirement Benefit Costs (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Pension Benefits [Member] | U.S. Defined Benefit Plans [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Interest cost | $ 1 | $ 1 |
Expected return on plan assets | (2) | (2) |
Net periodic benefit (credit) cost | (1) | (1) |
Pension Benefits [Member] | Foreign Plans [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | 2 | 2 |
Interest cost | 2 | 2 |
Expected return on plan assets | (4) | (4) |
Amortization of actuarial loss | 1 | 1 |
Settlement and curtailment gain | (6) | |
Net periodic benefit (credit) cost | $ (5) | 1 |
Postretirement Benefits [Member] | U.S. Defined Benefit Plans [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Amortization of prior service credit | (1) | |
Net periodic benefit (credit) cost | $ (1) |
Employee Benefit Plans - Additi
Employee Benefit Plans - Additional Information (Detail) $ in Millions | 3 Months Ended |
Dec. 31, 2018USD ($)Plan | |
Defined Benefit Plan Disclosure [Line Items] | |
Number of foreign defined benefit plans | Plan | 1 |
Reduction in net pension obligations | $ (30) |
Pre-tax gain from net pension obligations | 6 |
Settlement credit | 5 |
Plan assets remain to be transferred. | 8 |
Additional charge on defined benefit plan actuarial gain (loss) | $ 3 |
Pay out period for additional charge payment | 5 years |
Maximum [Member] | |
Defined Benefit Plan Disclosure [Line Items] | |
Curtailment credit | $ 1 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Schedule of Goodwill Balances (Detail) $ in Millions | 3 Months Ended |
Dec. 31, 2018USD ($) | |
Goodwill And Intangible Assets [Line Items] | |
Beginning balance | $ 93 |
Foreign currency impact | (3) |
Ending balance | 90 |
Reinforcement Materials [Member] | |
Goodwill And Intangible Assets [Line Items] | |
Beginning balance | 52 |
Foreign currency impact | (2) |
Ending balance | 50 |
Performance Chemicals [Member] | |
Goodwill And Intangible Assets [Line Items] | |
Beginning balance | 41 |
Foreign currency impact | (1) |
Ending balance | $ 40 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Schedule of Intangible Assets (Detail) - USD ($) $ in Millions | Dec. 31, 2018 | Sep. 30, 2018 |
Finite Lived Intangible Assets [Line Items] | ||
Gross Carrying Value, finite lives | $ 108 | $ 111 |
Accumulated Amortization | (14) | (13) |
Net Intangible Assets, finite lives | 94 | 98 |
Developed Technologies [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Gross Carrying Value, finite lives | 51 | 52 |
Accumulated Amortization | (2) | (2) |
Net Intangible Assets, finite lives | 49 | 50 |
Trademarks [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Gross Carrying Value, finite lives | 8 | 8 |
Net Intangible Assets, finite lives | 8 | 8 |
Customer Relationships [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Gross Carrying Value, finite lives | 49 | 51 |
Accumulated Amortization | (12) | (11) |
Net Intangible Assets, finite lives | $ 37 | $ 40 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill And Intangible Assets [Line Items] | ||
Amortization expense estimated for year one | $ 6 | |
Amortization expense estimated for year two | 6 | |
Amortization expense estimated for year three | 6 | |
Amortization expense estimated for year four | 6 | |
Amortization expense estimated for year five | 6 | |
Cost of Sales and Selling and Administrative Expenses [Member] | ||
Goodwill And Intangible Assets [Line Items] | ||
Amortization of intangible assets | $ 1 | $ 2 |
Minimum [Member] | ||
Goodwill And Intangible Assets [Line Items] | ||
Useful life of intangible assets | 12 years | |
Maximum [Member] | ||
Goodwill And Intangible Assets [Line Items] | ||
Useful life of intangible assets | 25 years | |
Weighted Average [Member] | ||
Goodwill And Intangible Assets [Line Items] | ||
Useful life of intangible assets | 19 years |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) - Changes in Each Component of AOCI, Net of Tax (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning Balance | $ 1,279 | $ 1,625 |
Ending Balance | 1,276 | 1,472 |
Currency Translation Adjustment [Member] | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning Balance | (266) | |
Other comprehensive income (loss) before reclassifications | (24) | |
Amounts reclassified from AOCI | (1) | |
Ending Balance | (291) | |
Unrealized Gains on Investments [Member] | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning Balance | 1 | |
Ending Balance | 1 | |
Pension and Other Postretirement Benefit Liability Adjustments [Member] | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning Balance | (52) | |
Other comprehensive income (loss) before reclassifications | 30 | |
Amounts reclassified from AOCI | (8) | |
Ending Balance | (30) | |
Accumulated Other Comprehensive Income (Loss) [Member] | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning Balance | (317) | (259) |
Other comprehensive income (loss) before reclassifications | 6 | |
Amounts reclassified from AOCI | (9) | (1) |
Ending Balance | $ (320) | $ (263) |
Accumulated Other Comprehensi_4
Accumulated Other Comprehensive Income (Loss) - Amounts Reclassified Out of AOCI (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
(Gains) Losses Reclassified to Interest Expense [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Total before tax | $ (1) | $ (1) |
Amortization of Actuarial Losses [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Total before tax | 1 | 1 |
Amortization of Prior Service Credit [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Total before tax | (1) | |
Settlement and Curtailment Gain [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Total before tax | (6) | |
Accumulated Other Comprehensive Income (Loss) [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Total before tax | (6) | (1) |
Tax impact | (3) | |
Total after tax | $ (9) | $ (1) |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Components of Purchase Commitments (Detail) $ in Millions | Dec. 31, 2018USD ($) |
Long-term Purchase Commitment [Line Items] | |
Payments Due by Remainder of Fiscal Year 2019 | $ 357 |
Payments Due by Fiscal Year 2020 | 313 |
Payments Due by Fiscal Year 2021 | 197 |
Payments Due by Fiscal Year 2022 | 192 |
Payments Due by Fiscal Year 2023 | 162 |
Payments Due Thereafter | 2,157 |
Payments Due, Total | 3,378 |
Reinforcement Materials [Member] | |
Long-term Purchase Commitment [Line Items] | |
Payments Due by Remainder of Fiscal Year 2019 | 263 |
Payments Due by Fiscal Year 2020 | 248 |
Payments Due by Fiscal Year 2021 | 141 |
Payments Due by Fiscal Year 2022 | 137 |
Payments Due by Fiscal Year 2023 | 130 |
Payments Due Thereafter | 1,703 |
Payments Due, Total | 2,622 |
Performance Chemicals [Member] | |
Long-term Purchase Commitment [Line Items] | |
Payments Due by Remainder of Fiscal Year 2019 | 73 |
Payments Due by Fiscal Year 2020 | 59 |
Payments Due by Fiscal Year 2021 | 55 |
Payments Due by Fiscal Year 2022 | 55 |
Payments Due by Fiscal Year 2023 | 32 |
Payments Due Thereafter | 454 |
Payments Due, Total | 728 |
Purification Solutions [Member] | |
Long-term Purchase Commitment [Line Items] | |
Payments Due by Remainder of Fiscal Year 2019 | 6 |
Payments Due by Fiscal Year 2020 | 6 |
Payments Due by Fiscal Year 2021 | 1 |
Payments Due, Total | 13 |
Specialty Fluids [Member] | |
Long-term Purchase Commitment [Line Items] | |
Payments Due by Remainder of Fiscal Year 2019 | 15 |
Payments Due, Total | $ 15 |
Commitments and Contingencies_2
Commitments and Contingencies - Additional Information (Detail) $ in Millions | 3 Months Ended | ||
Dec. 31, 2018USD ($)claimants | Dec. 31, 2017USD ($) | Sep. 30, 2018USD ($)claimants | |
Respirator Liabilities [Member] | |||
Loss Contingencies [Line Items] | |||
Number of claimants | claimants | 35,000 | 35,000 | |
Cash payments for respirator reserves | $ 1 | $ 1 | |
Respirator reserve | 24 | $ 25 | |
Maximum [Member] | Respirator Liabilities [Member] | |||
Loss Contingencies [Line Items] | |||
Cash payments for respirator reserves | 1 | 1 | |
Environmental Matters [Member] | |||
Loss Contingencies [Line Items] | |||
Reserved for environmental matters | 14 | $ 15 | |
Cash payments for environmental reserves | 1 | 1 | |
Environmental Matters [Member] | Maximum [Member] | |||
Loss Contingencies [Line Items] | |||
Cash payments for environmental reserves | $ 1 | $ 1 |
Income Tax - Effective Tax Rate
Income Tax - Effective Tax Rate (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
(Provision) benefit for income taxes | $ 7 | $ (205) |
Effective tax rate | (10.00%) | 224.00% |
Income Tax - Additional Informa
Income Tax - Additional Information (Detail) - USD ($) $ in Millions | Jan. 01, 2018 | Dec. 31, 2018 | Dec. 30, 2018 | Dec. 31, 2017 | Dec. 30, 2017 | Sep. 30, 2018 |
Income Taxes [Line Items] | ||||||
Net discrete tax (benefits) charges related to tax settlements | $ (24) | $ 188 | ||||
Net tax expense from impact of the Act | $ (17) | $ 185 | ||||
Income tax rate | 21.00% | 35.00% | 24.53% | |||
Percentage of dividend received deduction for foreign dividends | 100.00% | |||||
Income tax rate for aggregate cash position | 15.50% | |||||
Income tax rate for exceeds aggregate cash position | 8.00% | |||||
(Provision) benefit for income taxes for deemed repatriation | $ 17 | $ (138) | ||||
Provisional tax expense | $ 121 | |||||
Percentage of deduction for dividends from specified foreign corporations | 100.00% | |||||
Provisional amount to tax expense | $ 8 | |||||
Percentage of tax on foreign income in excess of a deemed return on tangible assets of foreign corporations | 10.50% | |||||
Uncertain tax positions from expirations of statute of limitations | $ 7 | $ 1 | ||||
Earliest Tax Year [Member] | United States Internal Revenue Service (IRS) [Member] | ||||||
Income Taxes [Line Items] | ||||||
Tax years remain subject to examination | 2,014 | |||||
Latest Tax Year [Member] | United States Internal Revenue Service (IRS) [Member] | ||||||
Income Taxes [Line Items] | ||||||
Tax years remain subject to examination | 2,017 | |||||
State Tax Authorities [Member] | Earliest Tax Year [Member] | ||||||
Income Taxes [Line Items] | ||||||
Tax years remain subject to examination | 2,005 | |||||
State Tax Authorities [Member] | Latest Tax Year [Member] | ||||||
Income Taxes [Line Items] | ||||||
Tax years remain subject to examination | 2,017 | |||||
Non-U.S. Jurisdictions [Member] | Earliest Tax Year [Member] | ||||||
Income Taxes [Line Items] | ||||||
Tax years remain subject to examination | 2,002 | |||||
Non-U.S. Jurisdictions [Member] | Latest Tax Year [Member] | ||||||
Income Taxes [Line Items] | ||||||
Tax years remain subject to examination | 2,017 |
Earnings Per Share - Components
Earnings Per Share - Components of Basic and Diluted Earnings (Loss) Per Common Share (EPS) (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Basic EPS: | ||
Net income (loss) attributable to Cabot Corporation | $ 69 | $ (122) |
Earnings (loss) allocated to common shareholders (numerator) | $ 69 | $ (122) |
Weighted average common shares and participating securities outstanding | 60.8 | 62.6 |
Less: Participating securities | 0.9 | 0.7 |
Adjusted weighted average common shares (denominator) | 59.9 | 61.9 |
Earnings (loss) per common share - basic: | $ 1.14 | $ (1.98) |
Diluted EPS: | ||
Earnings (loss) allocated to common shareholders | $ 69 | $ (122) |
Plus: Earnings (loss) allocated to participating securities | 1 | |
Less: Adjusted earnings allocated to participating securities | 1 | |
Earnings (loss) allocated to common shareholders (numerator) | $ 69 | $ (122) |
Adjusted weighted average common shares outstanding | 59.9 | 61.9 |
Common shares issuable | 0.2 | |
Adjusted weighted average common shares (denominator) | 60.1 | 61.9 |
Earnings (loss) per common share - diluted: | $ 1.14 | $ (1.98) |
Earnings Per Share - Calculatio
Earnings Per Share - Calculation of Undistributed Earnings (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Earnings Per Share [Abstract] | ||
Net income (loss) attributable to Cabot Corporation | $ 69 | $ (122) |
Less: Dividends declared on common stock | 20 | 20 |
Undistributed earnings (loss) | 49 | (142) |
Undistributed earnings (loss) allocated to common shareholders | $ 49 | $ (142) |
Earnings Per Share - Componen_2
Earnings Per Share - Components of Basic and Diluted Earnings (Loss) Per Common Share (EPS) (Parenthetical) (Detail) - shares | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Earnings Per Share [Abstract] | ||
Antidilutive securities excluded from computation of earnings per share | 687,995 | 764,077 |
Restructuring - Additional Info
Restructuring - Additional Information (Detail) $ in Millions | Oct. 01, 2017USD ($)ProductionUnit | Sep. 30, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2019USD ($) |
Restructuring Cost And Reserve [Line Items] | |||||
Restructuring Charges | $ 9 | ||||
Scenario, Forecast | |||||
Restructuring Cost And Reserve [Line Items] | |||||
Accelerated depreciation charges | $ 1 | $ 1 | |||
Restructuring Activities Other | |||||
Restructuring Cost And Reserve [Line Items] | |||||
Accrued environmental costs | 5 | ||||
Previous Actions and Sites Pending Sale [Member] | |||||
Restructuring Cost And Reserve [Line Items] | |||||
Severance costs | 1 | ||||
Previous Actions and Sites Pending Sale [Member] | Maximum [Member] | |||||
Restructuring Cost And Reserve [Line Items] | |||||
Severance costs | 1 | ||||
Accelerated depreciation charges | 1 | ||||
Previous Actions and Sites Pending Sale [Member] | Restructuring Activities Other | Scenario, Forecast | |||||
Restructuring Cost And Reserve [Line Items] | |||||
Restructuring cash payments through the reminder of fiscal 2019 and thereafter | 5 | ||||
Purification Solutions Transformation Plan [Member] | |||||
Restructuring Cost And Reserve [Line Items] | |||||
Restructuring Charges | 8 | ||||
Severance costs | 7 | ||||
Professional fees | 1 | ||||
Restructuring cash payments of fiscal year | 1 | ||||
Accrued severance charges | 7 | ||||
Purification Solutions Transformation Plan [Member] | Scenario, Forecast | |||||
Restructuring Cost And Reserve [Line Items] | |||||
Restructuring cash payments through the reminder of fiscal 2019 and thereafter | $ 7 | ||||
Marshall, Texas Plan [Member] | |||||
Restructuring Cost And Reserve [Line Items] | |||||
Restructuring Charges | $ 1 | ||||
Number of idled production units | ProductionUnit | 3 | ||||
Number of production units | ProductionUnit | 7 | ||||
Accelerated depreciation charges | $ 1 | ||||
Marshall, Texas Plan [Member] | Maximum [Member] | |||||
Restructuring Cost And Reserve [Line Items] | |||||
Severance costs | $ 1 | ||||
Operational Restructuring [Member] | Maximum [Member] | |||||
Restructuring Cost And Reserve [Line Items] | |||||
Restructuring Charges | $ 1 | $ 1 |
Restructuring - Recorded Restru
Restructuring - Recorded Restructuring Activities (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Restructuring Cost And Reserve [Line Items] | ||
Restructuring reserve, period expense | $ 9 | $ 1 |
Cost of Sales [Member] | ||
Restructuring Cost And Reserve [Line Items] | ||
Restructuring reserve, period expense | 3 | $ 1 |
Selling and Administrative Expenses [Member] | ||
Restructuring Cost And Reserve [Line Items] | ||
Restructuring reserve, period expense | $ 6 |
Restructuring - Restructuring A
Restructuring - Restructuring Activities and Related Reserves (Detail) $ in Millions | 3 Months Ended |
Dec. 31, 2018USD ($) | |
Restructuring Cost And Reserve [Line Items] | |
Reserve balance | $ 5 |
Charges | 9 |
Cash received (paid) | (2) |
Reserve balance | 12 |
Severance and Employee Benefits [Member] | |
Restructuring Cost And Reserve [Line Items] | |
Reserve balance | 1 |
Charges | 7 |
Cash received (paid) | (1) |
Reserve balance | 7 |
Environmental Remediation [Member] | |
Restructuring Cost And Reserve [Line Items] | |
Reserve balance | 4 |
Costs charged against assets / (liabilities) | 1 |
Reserve balance | 5 |
Asset Impairment and Accelerated Depreciation [Member] | |
Restructuring Cost And Reserve [Line Items] | |
Charges | 1 |
Costs charged against assets / (liabilities) | (1) |
Other [Member] | |
Restructuring Cost And Reserve [Line Items] | |
Charges | 1 |
Cash received (paid) | $ (1) |
Financial Instruments and Fai_2
Financial Instruments and Fair Value Measurements - Additional Information (Detail) - USD ($) | 3 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Fair value, liabilities, Level 2 to Level 1 transfers, amount | $ 0 | $ 0 | |
Fair value, assets, Level 2 to Level 1 transfers, amount | 0 | 0 | |
Fair value, liabilities, Level 1 to Level 2 transfers, amount | 0 | 0 | |
Fair value, assets, Level 1 to Level 2 transfers, amount | 0 | 0 | |
Fair value, assets, transfers into Level 3, amount | 0 | 0 | |
Fair value, assets, transfers out of Level 3, amount | 0 | 0 | |
Fair value, liabilities, transfers into Level 3, amount | 0 | 0 | |
Fair value, liabilities, transfers out of Level 3, amount | 0 | $ 0 | |
Fair value of long-term debt | 681,000,000,000 | $ 742,000,000,000 | |
Fixed Rate Debt [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Carrying value of long-term debt | 669,000,000,000 | 747,000,000,000 | |
Significant Observable Inputs (Level 2) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Other assets in the Consolidated Balance Sheets | 11,000,000 | 11,000,000 | |
Significant Observable Inputs (Level 2) [Member] | Foreign Currency Risks [Member] | Prepaid Expenses and Other Current Assets and Other Liabilities [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Derivative assets (liabilities), at fair Value, net | $ (10,000,000) | $ (18,000,000) |
Derivatives - Details of Deriva
Derivatives - Details of Derivatives Held to Manage Foreign Currency Risk (Detail) | Dec. 31, 2018USD ($) | Dec. 31, 2018EUR (€) | Sep. 30, 2018USD ($) | Sep. 30, 2018EUR (€) | |
Net Investment Hedge [Member] | Cross Currency Swaps [Member] | |||||
Derivative [Line Items] | |||||
Notional Amount | $ 250,000,000 | ||||
Net Investment Hedge [Member] | 3.4% Notes [Member] | Cross Currency Swaps [Member] | |||||
Derivative [Line Items] | |||||
Notional Amount | $ 250,000,000 | € 223,000,000 | $ 250,000,000 | € 223,000,000 | |
Net Investment Hedge [Member] | 3.4% Notes [Member] | Fixed Rate Debt [Member] | Cross Currency Swaps [Member] | |||||
Derivative [Line Items] | |||||
Interest rate on borrowing | 3.40% | 3.40% | 3.40% | 3.40% | |
Not Designated as Hedging Instrument [Member] | Forward Foreign Currency Contracts [Member] | |||||
Derivative [Line Items] | |||||
Notional Amount | [1] | $ 14,000,000 | $ 18,000,000 | ||
[1] | Cabot’s forward foreign exchange contracts are denominated in the Canadian dollar, Indonesian rupiah and Czech koruna. |
Derivatives - Additional Inform
Derivatives - Additional Information (Detail) - Cross Currency Swaps [Member] - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Sep. 30, 2018 | |
Prepaid Expenses And Other Asset Current And Other Liabilities [Member] | ||
Derivative [Line Items] | ||
Fair value of swaps, net liability | $ 10,000,000 | $ 18,000,000 |
Net Investment Hedge [Member] | ||
Derivative [Line Items] | ||
Notional Amount | 250,000,000 | |
Cumulative gain (loss) related to swaps | $ (7,000,000) | $ (14,000,000) |
Net Investment Hedge [Member] | Fixed Rate Debt [Member] | ||
Derivative [Line Items] | ||
Derivative Instruments Frequency of Cash Settlements | semi-annually |
Derivatives - Summary Impact of
Derivatives - Summary Impact of Cross-currency Swaps to AOCI and Consolidated Statements of Operations (Detail) - Cross Currency Swaps [Member] - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Derivative Instruments Gain Loss [Line Items] | ||
Gain/(Loss) Recognized in AOCI | $ 8 | $ (5) |
(Gain)/Loss Reclassified from AOCI into Interest Expense in the Consolidated Statements of Operations | $ (1) | $ (1) |
Hyperinflationary Economies - A
Hyperinflationary Economies - Additional Information (Detail) Bs. / $ in Millions, $ in Millions | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2018USD ($)$ / $Bs. / $ | Dec. 31, 2017USD ($) | Sep. 30, 2018Bs. / $ | |
Schedule Of Equity Method Investments [Line Items] | |||
Other income (expense) | $ 6 | $ 11 | |
Argentina [Member] | |||
Schedule Of Equity Method Investments [Line Items] | |||
Percentage of net revenue | 2.00% | ||
Other income (expense) | $ 1 | ||
Foreign currency exchange rate, translation | $ / $ | 37.70 | ||
Argentina [Member] | Maximum [Member] | |||
Schedule Of Equity Method Investments [Line Items] | |||
Percentage of assets and liabilities current | 2.00% | 2.00% | |
Venezuela [Member] | |||
Schedule Of Equity Method Investments [Line Items] | |||
Operating affiliate investment | $ 12 | ||
Venezuela [Member] | Devaluation Of Venezuelan Bolivar [Member] | |||
Schedule Of Equity Method Investments [Line Items] | |||
Foreign currency exchange rate, translation | Bs. / $ | 56.4 | 6.2 | |
Venezuela [Member] | Subsidiaries [Member] | |||
Schedule Of Equity Method Investments [Line Items] | |||
Cash dividends received from subsidiary | $ 1 | $ 2 | |
Venezuela [Member] | Carbon Black Affiliate [Member] | |||
Schedule Of Equity Method Investments [Line Items] | |||
Equity method investment, ownership percentage | 49.00% | ||
Carbon Black Operating Entity [Member] | Argentina [Member] | |||
Schedule Of Equity Method Investments [Line Items] | |||
Ownership percentage | 100.00% |
Financial Information by Segm_3
Financial Information by Segment - Additional Information (Detail) | 3 Months Ended |
Dec. 31, 2018Segment | |
Segment Reporting Information [Line Items] | |
Number of business reportable segments | 4 |
Performance Chemicals [Member] | |
Segment Reporting Information [Line Items] | |
Number of business reportable segments | 1 |
Financial Information by Segm_4
Financial Information by Segment - Schedule of Performance Segment (Detail) - Performance Chemicals [Member] - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Net sales | $ 231 | $ 229 |
Performance Additives [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | 167 | 159 |
Formulated Solutions [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | $ 64 | $ 70 |
Financial Information by Segm_5
Financial Information by Segment - Financial Information by Reportable Segment (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Revenues from external customers | $ 821 | $ 720 |
Income (loss) from continuing operations before income taxes | 70 | 92 |
Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues from external customers | 772 | 692 |
Income (loss) from continuing operations before income taxes | 105 | 113 |
Unallocated and Other [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues from external customers | 49 | 28 |
Income (loss) from continuing operations before income taxes | (35) | (21) |
Reinforcement Materials [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues from external customers | 457 | 387 |
Income (loss) from continuing operations before income taxes | 62 | 62 |
Performance Chemicals [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues from external customers | 231 | 229 |
Income (loss) from continuing operations before income taxes | 36 | 47 |
Purification Solutions [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues from external customers | 65 | 70 |
Income (loss) from continuing operations before income taxes | (3) | 6 |
Specialty Fluids [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues from external customers | 19 | 6 |
Income (loss) from continuing operations before income taxes | $ 10 | $ (2) |
Financial Information by Segm_6
Financial Information by Segment - Financial Information by Reportable Segment (Parenthetical) (Detail) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Segment Reporting [Abstract] | ||
Percentage of sale of an equity method affiliate | 100.00% | 100.00% |
Financial Information by Segm_7
Financial Information by Segment - Sales of Equity Method Affiliate and Discounting Charges for Certain Notes Receivable and By-product Revenue (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Revenues from external customers | $ 821 | $ 720 |
Unallocated and Other [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues from external customers | 49 | 28 |
Unallocated and Other [Member] | Royalties, the Impact of Unearned Revenue, the Removal of 100% of the Sales of an Equity Method Affiliate and Discounting Charges for Certain Notes Receivable [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues from external customers | (3) | 1 |
Unallocated and Other [Member] | Shipping and Handling Costs [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues from external customers | 32 | $ 27 |
Unallocated and Other [Member] | By-product Sales [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues from external customers | $ 20 |
Financial Information by Segm_8
Financial Information by Segment - Sales of Equity Method Affiliate and Discounting Charges for Certain Notes Receivable and By-product Revenue (Parenthetical) (Detail) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Segment Reporting [Abstract] | ||
Percentage of sale of an equity method affiliate | 100.00% | 100.00% |
Financial Information by Segm_9
Financial Information by Segment - Schedule of Income (Loss) from Continuing Operations before Income Taxes and Equity in Earnings of Affiliated Companies for Unallocated and Other (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Interest expense | $ (15) | $ (13) |
Global restructuring activities | (9) | (1) |
Gains (losses) on sale of investments | 10 | |
Unallocated and Other [Member] | ||
Segment Reporting Information [Line Items] | ||
Interest expense | (15) | (13) |
Unallocated corporate costs | (12) | (14) |
General unallocated income (expense) | 2 | |
Less: Equity in earnings of affiliated companies, net of tax | 1 | |
Income from continuing operations before income taxes and equity in earnings of affiliated companies | (35) | (21) |
Certain Item [Member] | ||
Segment Reporting Information [Line Items] | ||
Global restructuring activities | (9) | (1) |
Legal and environmental matters and reserves | (1) | |
Gains (losses) on sale of investments | 10 | |
Acquisition and integration-related charges | (3) | |
Other | 2 | (1) |
Total certain items, pre-tax | $ (10) | $ 7 |
Financial Information by Seg_10
Financial Information by Segment - Revenue from External Customers by Geographic Region (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | $ 821 | $ 720 |
Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 772 | 692 |
Unallocated and Other [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 49 | 28 |
Americas [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 270 | |
Asia Pacific [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 297 | |
Europe, Middle East and Africa [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 205 | |
Reinforcement Materials [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 457 | 387 |
Reinforcement Materials [Member] | Americas [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 167 | |
Reinforcement Materials [Member] | Asia Pacific [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 202 | |
Reinforcement Materials [Member] | Europe, Middle East and Africa [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 88 | |
Performance Chemicals [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 231 | 229 |
Performance Chemicals [Member] | Americas [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 72 | |
Performance Chemicals [Member] | Asia Pacific [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 85 | |
Performance Chemicals [Member] | Europe, Middle East and Africa [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 74 | |
Purification Solutions [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 65 | 70 |
Purification Solutions [Member] | Americas [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 29 | |
Purification Solutions [Member] | Asia Pacific [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 9 | |
Purification Solutions [Member] | Europe, Middle East and Africa [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 27 | |
Specialty Fluids [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 19 | $ 6 |
Specialty Fluids [Member] | Americas [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 2 | |
Specialty Fluids [Member] | Asia Pacific [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | 1 | |
Specialty Fluids [Member] | Europe, Middle East and Africa [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales and other operating revenues | $ 16 |
Subsequent Event - Additional I
Subsequent Event - Additional Information (Detail) - Sinomine (Hong Kong) Rare Metals Resources Co. Limited [Member] - Specialty Fluids [Member] - USD ($) $ in Millions | Jan. 30, 2019 | Mar. 31, 2019 |
Scenario, Forecast | ||
Subsequent Event [Line Items] | ||
Non cash impairment charge | $ 25 | |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Stock transaction value | $ 135 | |
Purchase price | 130 | |
Additional cash royalties for lithium products | $ 5 | |
Royalty payable term | 10 years |