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What changed in CABOT CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CABOT CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+308 added−709 removedSource: 10-K (2023-11-22) vs 10-K (2022-11-23)

Top changes in CABOT CORP's 2023 10-K

308 paragraphs added · 709 removed · 238 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

92 edited+18 added−16 removed64 unchanged
Biggest changeThe policy defines several important objectives for our continuous improvement in safety, including: • Complying with all applicable regulations • Sharing complete information about the safe handling of our products • Maintaining the safety and security of our employees, contractors and neighbors • Managing our operations to minimize any impacts on our communities • Exemplifying the Responsible Care® Guiding Principles • Partnering with customers to develop innovative and sustainable solutions • Improving efficiencies, reducing environmental impacts and ensuring that we are prepared for emergencies that could occur Safety, Health, Environment, and Sustainability In recognition of the importance of safety, health, environment and sustainability matters to Cabot, our Board of Directors has a Safety, Health, Environment, and Sustainability Committee.
Biggest changeThe SHE & Sustainability Commitment defines several important objectives for our continuous improvement in safety, including: · Complying with all applicable regulations; · Sharing complete information about the safe handling and appropriate use of our products; · Maintaining the safety and security of our employees, contractors and neighbors; · Managing our operations to minimize any impacts on our communities; · Exemplifying the Responsible Care® Guiding Principles; · Partnering with customers and suppliers to advance innovative and sustainable solutions; and · Improving efficiencies, reducing environmental impacts and ensuring that we are prepared for emergencies that could occur.
Our conductive carbon additives consist of conductive carbons, carbon nanotubes and carbon nano-structures, and blends of these materials, each of which offers different levels of conductivity and formulation flexibility for battery manufacturers to address performance (energy density, fast charging), cost and safety.
Our conductive additives consist of conductive carbons, carbon nanotubes and carbon nano structures, and blends of these materials, each of which offers different levels of conductivity and formulation flexibility for battery manufacturers to address performance (energy density, fast charging), cost and safety.
We produce our conductive carbon additives in China, and at our specialty carbon plants in the U.S. and in the Netherlands. We also own, or have a controlling interest in, manufacturing plants that produce fumed metal oxides in China, Germany, the United Kingdom (“U.K.”), and the U.S. and a manufacturing plant that produces aerogel in Frankfurt, Germany.
We produce our conductive additives in China, and at our specialty carbon plants in the U.S. and in the Netherlands. We also own, or have a controlling interest in, manufacturing plants that produce fumed metal oxides in China, Germany, the United Kingdom (“U.K.”), and the U.S. and a manufacturing plant that produces aerogel in Frankfurt, Germany.
Throughout the year, managers and employees engage in annual objective setting, 10 quarterly reviews of goal progress, performance feedback, career development discussions, and a year-end performance evaluation. In addition, we regularly review talent development and succession plans for each of our functions and business segments to identify and develop a pipeline of talent.
Throughout the year, managers and employees engage in annual objective setting, quarterly reviews of goal progress, performance feedback, career development discussions, and a year-end performance evaluation. In addition, we regularly review talent development and succession plans for each of our functions and business segments to identify and develop a pipeline of talent.
There are legal and operational risks associated with having substantial operations in China, which are more fully described under the heading “Risk Factors”, including the risks described under the headings: “We are exposed to political or country risk inherent in doing business in some countries, including China”; “Information technology systems failures, data security breaches, cybersecurity attacks or network disruptions could compromise our information, disrupt our operations and expose us to liability, which may adversely impact our operations”; “The continued protection of patents, trade secrets and other proprietary intellectual property rights is important to our success”; “Negative or uncertain worldwide or regional economic conditions or trade relations, as well as regional conflicts, may adversely impact our business” and “Our tax rate and other tax obligations are dependent upon a number of factors, a change in any of which could impact our future tax rates and financial results”.
There are legal, operational and other risks associated with having substantial operations in China, which are more fully described under the heading “Risk Factors”, including the risks described under the headings: “We are exposed to political or country risk inherent in doing business in some countries, including China”; “Information technology systems failures, data security breaches, cybersecurity attacks or network disruptions have harmed us in the past, and could compromise our information, disrupt our operations and expose us to liability, which may adversely impact our operations”; “The continued protection of patents, trade secrets and other proprietary intellectual property rights is important to our success”; “Negative or uncertain worldwide or regional economic conditions or trade relations, as well as regional conflicts, may adversely impact our business” and “Our tax rate and other tax obligations are dependent upon a number of factors, a change in any of which could impact our future tax rates and financial results”.
We are currently in discussions with the EPA and LDEQ to extend our compliance date at the Ville Platte facility to mid 2024 based upon force majeure events primarily related to the COVID-19 pandemic.
We are currently in discussions with the EPA and LDEQ to extend our compliance date at the Ville Platte facility to 2024 based upon force majeure events primarily related to the COVID-19 pandemic.
The dispersions are used in aqueous inkjet inks to impart color, sharp print characteristics and durability, while maintaining high printhead reliability. These products are used in various inkjet printing applications, including traditional work-from-home and corporate office settings, and, increasingly, in commercial and corrugated packaging, that all require a high level of dispersibility and colloidal stability.
The dispersions are used in aqueous inkjet inks to impart color, sharp print characteristics and durability, while maintaining high printhead reliability. These products are used in various inkjet printing applications, including traditional work-from-home and corporate office settings, and, increasingly, in commercial and corrugated packaging, all of which require a high level of dispersibility and colloidal stability.
We licensed our patented elastomer composites manufacturing process to Manufacture Francaise des Pneumatiques Michelin for their exclusive use in tire applications through fiscal 2017, and for a period of limited exclusivity in tire applications through fiscal 2019. As consideration, we receive quarterly royalty payments extending through calendar year 2022.
We licensed our patented elastomer composites manufacturing process to Manufacture Francaise des Pneumatiques Michelin for their exclusive use in tire applications through fiscal 2017, and for a period of limited exclusivity in tire applications through fiscal 2019. As consideration, we received quarterly royalty payments extending through calendar year 2022.
In lithium-ion batteries, our conductive carbon additives are used in both cathode and anode applications to increase energy density by providing a conductive network between active materials. Fumed alumina is used to reduce cathode material and electrolyte decomposition and improve capacity retention leading to longer cycle life.
In lithium-ion batteries, our conductive additives are used in both cathode and anode applications to increase energy density by providing a conductive network between active materials. Fumed alumina is used to reduce cathode material and electrolyte decomposition and improve capacity retention leading to longer battery cycle life.
In addition to its battery applications, fumed alumina, also an ultra-fine, high-purity particle, is used as an abrasive, absorbent or barrier agent in a variety of products, such as inkjet media, lighting, coatings, cosmetics and polishing slurries.
In addition to its battery applications discussed above, fumed alumina, also an ultra-fine, high-purity particle, is used as an abrasive, absorbent or barrier agent in a variety of products, such as inkjet media, lighting, coatings, cosmetics and polishing slurries.
Demand for our conductive carbon additives for use in batteries is largely driven by the trend in electrification of vehicles.
Demand for our conductive additives for use in batteries is largely driven by the trend in electrification of vehicles.
The principal raw material used in the manufacture of our specialty carbons is composed of residual heavy oils derived from petroleum refining operations, the distillation of coal tars, and the production of ethylene throughout the world. Natural gas is also used in the production of our specialty carbons.
The principal raw material used in the manufacture of our specialty carbons and conductive additives is composed of residual heavy oils derived from petroleum refining operations, the distillation of coal tars, and the production of ethylene throughout the world. Natural gas is also used in the production of our specialty carbons.
In fiscal 2022, sales in China across our segments constituted approximately 25% of our revenues, and our property, plant and equipment located in China constituted approximately 25% of our total property, plant and equipment as of September 30, 2022 as disclosed in Note T to our Consolidated Financial Statements.
In fiscal 2023, sales in China across our segments constituted approximately 25% of our revenues, and our property, plant and equipment located in China constituted approximately 25% of our total property, plant and equipment as of September 30, 2023, as disclosed in Note T to our Consolidated Financial Statements.
Reinforcing carbons (a class of carbon blacks manufactured by Cabot) are used to enhance the physical properties of the systems and applications in which they are incorporated. 4 Our reinforcing carbons products are used in tires and industrial products.
Reinforcing carbons (a class of carbon blacks manufactured by Cabot) are used to enhance the physical properties of the systems and applications in which they are incorporated. 5 Our reinforcing carbons products are used in tires and industrial products.
Accordingly, our management team places significant focus and attention on 9 matters concerning Cabot’s workforce – particularly in the areas of diversity, talent retention and development, total rewards, and employee health and safety.
Accordingly, our management team places significant focus and attention on matters concerning Cabot’s workforce – particularly in the areas of diversity, talent, engagement, retention and development, total rewards, and employee health and safety.
In fiscal 2022, approximately two-thirds of our reinforcing carbons volume was sold under these supply arrangements. The majority of the volumes sold under these arrangements are sold to customers in the Americas and Europe.
In fiscal 2023, approximately two-thirds of our reinforcing carbons volume was sold under these supply arrangements. The majority of the volumes sold under these arrangements are sold to customers in the Americas and Europe.
Item 1. Business General Cabot is a global specialty chemicals and performance materials company headquartered in Boston, Massachusetts. Our principal products are reinforcing and specialty carbons, specialty compounds, conductive carbons, carbon nanotubes, fumed metal oxides, inkjet colorants, and aerogel. Cabot and its affiliates have manufacturing facilities and operations in the United States (“U.S.”) and over 20 other countries.
Item 1. B usiness General Cabot is a global specialty chemicals and performance materials company headquartered in Boston, Massachusetts. Our principal products are reinforcing and specialty carbons, specialty compounds, conductive additives, carbon nanotubes, fumed metal oxides, inkjet colorants and aerogel. Cabot and its affiliates have manufacturing facilities and operations in the United States (“U.S.”) and over 20 other countries.
In other regions where we operate, some of our facilities are required to report their greenhouse gas emissions but are not cur rently subject to programs requiring trading or emission controls but may be subject to limited carbon tax programs affecting fuels we purchase.
In other regions where we operate, some of our facilities are required to report their greenhouse gas emissions but are not currently subject to programs requiring trading or emission controls but may be subject to limited carbon tax programs affecting fuels we purchase.
The following table shows our ownership interest as of September 30, 2022 in operations in which we own less than 100%: Location Percentage Interest Tianjin, China 90% (consolidated subsidiary) Jiangxi Province, China Wuhai, China 90% (consolidated subsidiary) 80% (consolidated subsidiary) Mettur Dam, India 50% (equity affiliate) 8 Currently, four of our reinforcing carbons/specialty carbons manufacturing sites have energy centers.
The following table shows our ownership interest as of September 30, 2023 in operations in which we own less than 100%: Location Percentage Interest Tianjin, China 90% (consolidated subsidiary) Jiangxi Province, China Wuhai, China 90% (consolidated subsidiary) 80% (consolidated subsidiary) Mettur Dam, India 50% (equity affiliate) 9 Currently, four of our reinforcing carbons/specialty carbons manufacturing sites have energy centers.
We anticipate spending approximately $92 million for such matters in fiscal 2023, a significant portion of which will continue to be for the installation of air pollution control equipment at our plant in Ville Platte, Louisiana. These costs include costs associated with our compliance with the Consent Decree we entered into in November 2013 with the U.S.
We anticipate spending approximately $74 million for such matters in fiscal 2024, a significant portion of which will continue to be for the installation of air pollution control equipment at our plant in Ville Platte, Louisiana. These costs include costs associated with our compliance with the Consent Decree we entered into in November 2013 with the U.S.
(See “Legal Proceedings” in Item 3 below, and Note S in Item 8 below, under the heading “Contingencies”.) During the next several years, as remediation of various environmental sites is carried out, we expect to spend against our environmental reserve for costs associated with such remediation. As of September 30, 2022, our environmental reserve was approximately $4 million.
(See “Legal Proceedings” in Item 3 below, and Note S in Item 8 below, under the heading “Contingencies”.) During the next several years, as remediation of various environmental sites is carried out, we expect to spend against our environmental reserve for costs associated with such remediation. As of September 30, 2023, our environmental reserve was approximately $5 million.
Our inkjet inks, which utilize our pigment-based colorant dispersions, are used in the commercial printing segment for digital print. Drivers of Demand and Sales and Customers Our specialty carbons products have a wide variety of end-uses and demand is largely driven by the growth and development of the construction and infrastructure, automotive, electronics and consumer products industries.
Our inkjet inks, which utilize our pigment-based colorant dispersions, are used in the commercial printing segment for graphic arts. Drivers of Demand and Sales and Customers Our specialty carbons products have a wide variety of end-uses and demand is largely driven by the growth and development of the construction and infrastructure, automotive, electronics and consumer products industries.
Many of these chemical control regulations are in the process of a multi-year implementation period for product/substance registrations or notifications. 13 Additional requirements for nanomaterials apply to many of our existing products including carbon black, fumed silica, inkjet pigments, fumed alumina, and advanced carbons such as carbon nanostructures and carbon nanotubes.
Many of these chemical control regulations are in the process of a multi-year implementation period for product/substance registrations or notifications. Additional requirements for nanomaterials apply to many of our existing products including carbon black, fumed silica, inkjet pigments, fumed alumina, and advanced carbons such as carbon nano structures and carbon nanotubes.
The principal raw material used in the manufacture of conductive carbons is composed of residual heavy oils derived from petroleum refining operations, the distillation of coal tars, and the production of ethylene throughout the world. Natural gas is also used in the production of our conductive carbons.
Raw Materials The principal raw material used in the manufacture of our reinforcing carbons is composed of residual heavy oils derived from petroleum refining operations, the distillation of coal tars, and the production of ethylene throughout the world. Natural gas is also used in the production of our reinforcing carbons.
The silica substance evaluation was concluded in 2022, and from this, a proposal for additional regulatory requirements related to silica is expected to be issued. Carbon black is scheduled for a substance review in 2024. Analogous regimes exist in other parts of the world, including the UK, Turkey, Eurasia, China, South Korea, and Taiwan.
The silica substance evaluation was concluded in 2022, and from this, a proposal for additional regulatory requirements related to silica is expected to be issued. Carbon black is scheduled for a substance review in 2025. Analogous regimes exist in other parts of the world, including the 14 UK, Turkey, China, South Korea, and Taiwan.
We have expended and will continue to expend considerable resources to construct, maintain, operate, and improve our facilities throughout the world for safety, health and environmental protection and to comply with SH&E Requirements. We spent $80 million in environmental-related capital expenditures in fiscal 2022.
We have expended and will continue to expend considerable resources to construct, maintain, operate, and improve our facilities throughout the world for safety, health and environmental protection and to comply with SH&E Requirements. We spent $72 million in environmental-related capital expenditures in fiscal 2023.
The following table shows our ownership interest as of September 30, 2022 in operations in which we own less than 100%: Location Percentage Interest Shanghai, China 70% (consolidated subsidiary) Tianjin, China 70% (consolidated subsidiary) Xingtai City, China 60% (consolidated subsidiary) Valasske Mezirici (Valmez), Czech Republic 52% (consolidated subsidiary) Cilegon, Indonesia Port Dickson,Malaysia 98% (consolidated subsidiary) 98% (consolidated subsidiary) Valencia, Venezuela 49% (equity affiliate) During fiscal 2019, we began engineering work on an expansion of our Cilegon, Indonesia plant, which would have added approximately 90,000 metric tons of capacity for reinforcing carbons to our network.
The following table shows our ownership interest as of September 30, 2023 in operations in which we own less than 100%: Location Percentage Interest Shanghai, China 70% (consolidated subsidiary) Tianjin, China 70% (consolidated subsidiary) Xingtai City, China 60% (consolidated subsidiary) Valasske Mezirici (Valmez), Czech Republic 52% (consolidated subsidiary) Cilegon, Indonesia Port Dickson, Malaysia 98% (consolidated subsidiary) 98% (consolidated subsidiary) Valencia, Venezuela 49% (equity affiliate) During fiscal 2019, we began engineering work on an expansion of our Cilegon, Indonesia plant to add approximately 80,000 metric tons of capacity for reinforcing carbons to our network.
In addition to general global economic conditions, demand for reinforcing carbons in tires is mainly influenced by the number of replacement and original equipment tires produced, which in turn is driven by (i) vehicle and driving trends, including the number of miles driven, and the number of vehicles produced and registered, (ii) demand for high-performance tires, (iii) demand for larger tires and larger vehicles, such as trucks, buses, off-road vehicles used in agriculture, mining and similar vehicles, (iv) consumer and industrial spending on new vehicles and (v) changes in regulatory requirements impacting vehicle fuel efficiency and tire regulations.
In addition to general global economic conditions, demand for reinforcing carbons in tires is mainly influenced by the number of replacement and original equipment tires produced, which in turn is driven by (i) vehicle and driving trends, including the number of miles driven, and the number of vehicles produced and registered, (ii) changes in supply chain inventory levels to adapt to end-market demand, (iii) demand for high-performance tires, (iv) demand for larger tires and larger vehicles, such as trucks, buses, off-road vehicles used in agriculture, mining and similar vehicles, (v) consumer and industrial spending on new vehicles and (vi) changes in regulatory requirements impacting vehicle fuel efficiency and tire regulations.
We also aim to provide competitive benefits programs in all the locations where we operate, including meeting or exceeding local regulations and focusing on health and welfare, employee well-being, and retirement savings.
We also aim to provide highly competitive benefits programs in all the locations where we operate, including meeting or exceeding local regulations and focusing on health and welfare, employee well-being, employee assistance program (EAP), and retirement savings.
Currently, in Europe, our four carbon black facilities are subject to the EU Emission Trading Scheme (“EU ETS”). The fourth phase of the EU ETS began in January 2021 with updated product benchmarks for our carbon black fac ilities.
Currently, in Europe, our four carbon black facilities are subject to the EU Emissions Trading Scheme (“EU ETS”). The fourth phase of the EU ETS began in January 2021, with updated product benchmarks for our carbon black facilities.
We expect that the total capital costs to install these technology controls will be in the range of $225 million to $250 million and will be incurred through fiscal 2024. As of September 30, 2022, we have incurred approximately $145 million to install these controls in the U.S. Operating these controls increases our plant operating costs.
We expect that the total capital costs to install these technology controls will be in the range of $225 million to $250 million and will be incurred through 2024. As of September 30, 2023, we have incurred approximately $180 million to install these controls in the U.S. Operating these controls increases our plant operating costs.
The use of E2C™ solutions enables our customers to produce better performing tires, including giant off-the-road tires, truck tires and retreaded tires, as well as other rubber products used in aggressive applications.
The use of E2C®solutions enables our customers to produce better performing tires, including giant off-the-road tires and on-road commercial tires, as well as other rubber products used in aggressive applications.
All carbon black manufacturers in the U.S. have settled with the EPA and are installing similar controls. In addition, under the Province of Ontario Ministry of Environment, Conservation and Parks’ ("MECP”) Regulation 419, a new requirement for sulfur dioxide emissions goes into effect in July 2023 for our reinforcing carbons plant in Sarnia, Ontario.
All carbon black manufacturers in the U.S. have settled with the EPA and are installing similar controls. In addition, under the Province of Ontario Ministry of Environment, Conservation and Parks’ (“MECP”) Regulation 419, a new requirement for sulfur dioxide (“SO2”) emissions went into effect on July 1, 2023 for our reinforcing carbons plant in Sarnia, Ontario.
We continue to monitor that program’s further implementation and expect it to apply to the carbon black industry in 2023 or 2024, with the existing pilot programs expected to continue to operate until the national program becomes effective. In Canada, our carbon black manufacturing facility has been subject to the Canadian federal carbon tax program.
We continue to monitor that program’s further implementation and expect it may apply to the carbon black industry in the future with the existing regional pilot programs expected to continue to operate until the national program becomes effective. In Canada, our carbon black facility has been subject to the Canadian federal carbon tax program.
The new Ontario Emissions Performance Standard trading system will replace the Canadian federal Output-Based Pricing System for our carbon black facility in Ontario, and specific transition requirements became effective on January 1, 2022. In Mexico, our carbon black facility is participating in the pilot national ETS program, which is expected to be effective in 2023 .
The Ontario Emissions Performance Standard trading system replaced the Canadian federal Output-Based Pricing System for our carbon black facility in Ontario, and specific transition requirements became effective on January 1, 2022. In Mexico, our carbon black facility is participating in the pilot national ETS program, which is expected to be effective by the end of calendar 2023.
In Performance Chemicals, we design, manufacture and sell materials that deliver performance in a broad range of customer applications across the automotive, construction, infrastructure, inkjet printing, electronics, and consumer products sectors and in applications related to the generation, transmission and storage of energy.
In addition, we generate revenues from our energy center sales. Performance Chemicals In Performance Chemicals, we design, manufacture and sell materials that deliver performance in a broad range of customer applications across the automotive, construction, infrastructure, inkjet printing, electronics, and consumer products sectors and in applications related to the generation, transmission and storage of energy.
Natural gas is also used in the production of our reinforcing carbons. Raw materials are, in general, readily available and in adequate supply. Raw material costs generally are influenced by the availability of various types of our feedstocks and natural gas, supply and demand of such raw materials and related transportation costs.
Raw materials are, in general, readily available and in adequate supply. Raw material costs generally are influenced by the availability of various types of our feedstocks and natural gas, supply and demand of such raw materials and related transportation costs.
We focus on creating particles, and formulations of those particles, with the composition, morphology, and surface functionalities to deliver the requisite performance to support our customers’ existing and emerging applications. Our business is currently organized into two reportable segments: Reinforcement Materials and Performance Chemicals.
We focus on creating particles, and formulations of those particles, with the composition, morphology and surface functionalities to deliver the requisite performance to support our customers’ existing and emerging applications. Our business is currently organized into two reportable segments: Reinforcement Materials and Performance Chemicals. Our business segments are discussed in more detail later in this section.
In our specialty carbons and specialty compounds product lines, sales are generally to a broad number of customers. In our fumed metal oxides product line, sales under contracts with six customers account for approximately one-third of the revenue.
In our specialty carbons and specialty compounds product lines, sales are generally to a broad number of customers. In our fumed metal oxides 8 product line, sales under contracts with five customers account for approximately one-third of the revenue. In our battery materials product line, sales to three customers account for approximately 50% of revenue.
While our trademarks are important to Cabot, the loss of any one of our trademarks would not materially affect our business, taken as a whole. Research and Development Our products are highly versatile and meet specific performance requirements across many industries, creating opportunities for innovation.
While our trademarks are important to Cabot, the loss of any one of our trademarks would not materially affect our business, taken as a whole. Research and Development Our products are highly versatile and meet specific performance requirements across many industries, creating opportunities for innovation. In fiscal 2023, we spent approximately $57 million on technology development.
As of September 30, 2022, we had approximately 4,200 employees across our global network of office and manufacturing locations, with 40% of our employees located in the Americas (61% of whom are in the United States), 34% in Asia Pacific (77% of whom are in China), and 26% in Europe, Middle East and Africa (“EMEA”).
As of September 30, 2023, we had approximately 4,300 employees across our global network of office and manufacturing locations, with 41% of our employees located in the Americas (61% of whom are in the United States), 33% in Asia Pacific (76% of whom are in China), and 26% in Europe, Middle East and Africa (“EMEA”).
Additionally, in 2022, a subset of multi-walled carb on nanotubes that includes a carbon nanotube grade we currently manufacture, were classified as carcinogen category 1B and specific target organ toxicant (lung) after repeated exposure category 1 under European Union regulations.
Additionally, in 2022, an opinion was adopted to classify a subset of multi-walled carbon nanotubes that includes a carbon nanotube grade we currently manufacture, as carcinogen category 1B and specific target organ toxicant (lung) after repeated exposure category 1 under European Union regulations.
We compete in the sale of carbon black with three companies that operate globally and numerous other companies that operate regionally, a number of which export product outside their region of manufacture.
Competition We are a leading producer of the products we sell in this segment. We compete in the sale of carbon black with three companies that operate globally and numerous other companies that operate regionally, a number of which export product outside their region of manufacture.
In addition, a significant portion of battery manufacturers are located in China, and we anticipate a material portion of the future growth of our Battery Materials growth vector to be derived from our business and operations in China.
In addition, a significant portion of battery manufacturers for electric vehicles are located in China, and, in the near term, we anticipate a material portion of the future growth of our Battery Materials product line to be derived from our business and operations in China.
To meet the growing demand in the inkjet market for digital printing applications, in April 2022 we began construction of a new production line at our manufacturing plant in Haverhill, Massachusetts, U.S., to increase our global capacity for aqueous pigment dispersions. We expect this new production line to be operational in fiscal 2023.
To meet the growing demand in the inkjet market for digital printing applications, in fiscal 2023 we commenced operations at a new production line at our manufacturing plant in Haverhill, Massachusetts, U.S., to increase our global capacity for aqueous pigment dispersions.
Our most recent analysis (which did not include employees under certain collective bargaining or similar agreements) indicated that we have strong pay parity between females and males globally as well as with People of Color in the United States across all pay components (annual base salary, short-term incentives, and long-term incentives) for those in the same job and location.
Our overall findings for this fiscal year (which did not include employees under certain collective bargaining or similar agreements) continue to indicate that we have strong pay parity between females and males globally as well as with under-represented groups in the United States across all pay components (annual base salary, short-term incentives, and long-term incentives) for those in the same job and location.
Cabot’s business was founded in 1882 and incorporated in the State of Delaware in 1960. The terms “Cabot”, “Company”, “we”, and “our” as used in this report refer to Cabot Corporation and its consolidated subsidiaries.
Cabot’s business was founded in 1882 and incorporated in the State of Delaware in 1960. The terms “Cabot”, “Company”, “we”, and “our” as used in this report refer to Cabot Corporation and its consolidated subsidiaries. In early fiscal 2022, we introduced our “Creating for Tomorrow” growth strategy.
We believe our product differentiation, technological leadership, operations excellence and customer service provide us with a competitive advantage. Raw Materials Raw materials for our products are, in general, readily available and in adequate supply.
Competition for our Performance Chemicals products is based on product performance, quality, reliability, service, technical innovation and price. We believe our product differentiation, technological leadership, operations excellence and customer service provide us with a competitive advantage. Raw Materials Raw materials for our products are, in general, readily available and in adequate supply.
In fiscal 2020, after a review of our capital allocation priorities, we temporarily suspended further work on this expansion and currently expect to recommence work on this project at a later time. One of the main environmental challenges of a carbon black plant is the management of exhaust gas from production processes.
In fiscal 2020, after a review of our capital allocation priorities, we temporarily suspended further work on this expansion. We are restarting work on this project and anticipate this additional capacity becoming available in fiscal 2025. One of the main environmental challenges of a carbon black plant is the management of exhaust gas from production processes.
In addition, growing concerns about climate change and an increased focus on carbon neutrality have led to global efforts to reduce greenhouse gas emissions, which will impact the carbon black industry and our business as carbon dioxide is emitted from those manufacturing processes.
In addition, growing concerns about climate change have led to global efforts to reduce greenhouse gas (“GHG”) emissions with a goal of achieving net zero GHG emissions in the future, which will impact the carbon black industry and our business as carbon dioxide is emitted from those manufacturing processes.
In accordance with this certification, we report our safety performance metrics annually and undergo external audits regularly to evaluate our program, identify gaps, and undertake corrective actions as needed. In response to the COVID-19 pandemic we put in place additional health and safety protocols at our sites.
In accordance with this certification, we report our safety performance metrics annually and undergo external audits regularly to evaluate our program, identify gaps, and undertake corrective actions as needed.
Additionally, because E2C™ solutions can be integrated into current product methods without additional significant capital investment, and require fewer mixing stages, lower mixing temperatures and shorter mixing cycles than conventional products, operating and production costs may be reduced.
Additionally, because E2C®solutions can be integrated into current product methods without additional significant capital investment, and require fewer mixing stages, lower mixing temperatures and shorter mixing cycles than conventional products, operating and production costs may be reduced. E2C® is one of our focus areas for growth, which we refer to as “growth vectors”.
Human Capital Resources Our success is realized through the engagement and commitment of our people. We believe that our globally distributed workforce positions us well to serve our broad customer base in the regions and geographies in which they operate.
Seasonality Our businesses are generally not seasonal in nature, although we may experience some regional seasonal declines during holiday periods. Human Capital Resources Our success is realized through the engagement and commitment of our people. We believe that our globally distributed workforce positions us well to serve our broad customer base in the regions and geographies in which they operate.
Country-specific nanomaterial reporting programs have been implemented in some countries and are being developed by others. In the European Union, application-specific safety evaluations are ongoing for nanomaterials. Silica is currently being re-evaluated for use as a food addi tive and cosmetic ingredient.
Country-specific nanomaterial reporting programs have been implemented in some countries and are being developed by others. In the European Union, application-specific safety evaluations are ongoing for nanomaterials.
For aerogel, we compete principally with one other company that produces aerogel products. We also compete with non-aerogel insulation products manufactured by regional companies throughout the world. For specialty compounds, we compete with many regional companies and a small number of global companies.
For fumed silica, we compete with two companies with a global presence and several other companies that have a regional presence. For aerogel, we compete globally principally with one other company that produces aerogel products. We also compete with non-aerogel insulation products manufactured by regional companies throughout the world.
For battery applications, we compete primarily with three companies that manufacture conductive carbons, a small number of China-based companies that manufacture carbon nanotubes, and one manufacturer of fumed alumina that operates globally. For fumed silica, we compete with two companies with a global presence and several other companies that have a regional presence.
For battery applications, we compete primarily with two global companies that manufacture conductive carbons as well as a number of smaller regional manufacturers. For carbon nanotubes, we compete primarily with one Chinese-based company. For battery applications, we compete primarily with one manufacturer of fumed alumina that operates globally.
However, we believe workplace exposures can be appropriately managed with engineering controls in place at our manufacturing facilities and the use of required personal protective equipment at our sites. We intend to continue to monitor developments with respect to, and comply with requirements for, the safe manufacturing and handling of nanomaterials.
Exposure to carbon nanotubes could occur in the workplace. However, we believe workplace exposures can be appropriately managed with engineering controls in place at our manufacturing facilities and the use of required personal protective equipment at our sites.
Following the successful execution of our “Advancing the Core” strategy, we introduced our “Creating for Tomorrow” growth strategy in early fiscal 2022. This new strategy is focused on investing for advantaged growth, developing innovative products and processes that enable a better future, and driving continuous improvement in all we do.
This strategy is focused on investing for advantaged growth, developing innovative products and processes that enable a better future, and driving continuous improvement in all we do.
These areas of focus are also represented in our 2025 Sustainability Goals, which include: • fostering an environment where employees report high levels of inclusion and support for their professional development; • increasing diverse representation in leadership and professional roles; and • reducing injuries and frequency of significant process safety events by 50%.
These areas of focus are also represented in our 2025 Sustainability Goals, which include: • fostering an environment where employees report high levels of inclusion and support for their professional development; • increasing diverse representation in leadership and professional roles; and • reducing injuries and frequency of significant process safety events by 50%. 10 Diversity, Equity and Inclusion (DE&I) In support of our commitment to foster a diverse and inclusive environment, in fiscal 2023 we established DE&I objectives which were factors that were considered in establishing the funding levels of our short-term incentive awards.
In our specialty compounds business, to meet anticipated demand we are in the process of expanding our manufacturing capacity with a new specialty compounds unit at our reinforcing carbons plant in Cilegon, Indonesia, which we expect to be completed in fiscal 2023. Purification Solutions We completed the sale of our activated carbon business in March 2022.
In our specialty compounds business, to meet anticipated demand we expanded our manufacturing capacity with a new specialty compounds unit at our reinforcing carbons plant in Cilegon, Indonesia, which was completed in fiscal 2023.
We anticipate we will need to incur capital costs for these new controls although the timing for such spend is uncertain. 12 As described above, e nvironmental agencies worldwide are increasingly implementing regulations and other requirements resulting in more restrictive air emission limits globally, particularly as they relate to nitrogen oxide, sul f ur dioxide and particulate matter emissions.
We anticipate that we will need to incur significant capital costs for the installation of these new SO2 emissions controls, particularly during the 24-month period prior to the date of installation. 13 As described above, environmental agencies worldwide are increasingly implementing regulations and other requirements resulting in more restrictive air emission limits globally, particularly as they relate to nitrogen oxide, sulfur dioxide and particulate matter emissions.
Our carbon nanotubes are bound in a matrix or contained within conductive materials in batteries, molded parts, plastics, coatings, adhesives, and sealants, and we do not believe they present a health risk to consumers under normal use conditions. Exposure to carbon nanotubes could occur in the workplace.
The opinion has not yet been published in the Adaptation to Technical Progress (ATP), which would make the classification legally binding. Our carbon nanotubes are bound in a matrix or contained within conductive materials in batteries, molded parts, plastics, coatings, adhesives, and sealants, and we do not believe they present a health risk to end users under normal use conditions.
We regularly assess these practices to ensure we are aligning roles with compensation levels based on job responsibilities, market competitiveness, geographic location, strategic importance of roles and other relevant factors. Cabot is committed to ensuring that employees are paid fairly, without discrimination while taking into account job-related factors such as responsibilities, location, work experience, education, performance, and contributions.
We regularly assess these practices to ensure we are market competitive in each of our geographic locations, offering what we believe is a compelling and attractive place to work. Cabot is committed to ensuring that employees are paid fairly, without discrimination while taking into account job-related factors such as responsibilities, location, work experience, education, performance, and contributions.
Demographic information with respect to gender representation among all Cabot employees and with respect to racial and ethnic representation among Cabot employees located in the United States, as of September 30, 2022, is set forth in the tables below: Gender Diversity Male % of total Female % of total Total Employees Executive Committee 7 70 % 3 30 % 10 Management* 567 73 % 205 27 % 772 Professional Contributor 793 71 % 327 29 % 1,120 Hourly & Associate Staff 1,850 81 % 438 19 % 2,288 Total Population 3,217 77 % 973 23 % 4,190 Racial and Ethnic Diversity Non-Minority % of total People of Color** % of total Total Employees Executive Committee 8 100 % - 0 % 8 Management* 234 79 % 61 21 % 295 Professional Contributor 190 83 % 40 17 % 230 Hourly & Associate Staff 353 71 % 145 29 % 498 Total Population 785 76 % 246 24 % 1,031 * Management includes both people managers, excluding members of the Executive Committee, and senior-level individual contributor roles. ** People of Color consists of U.S. based employees who identify as a race or ethnicity other than white.
Demographic information with respect to gender representation among all Cabot employees and with respect to racial and ethnic representation among Cabot employees located in the United States, as of September 30, 2023, is set forth in the tables below: Gender Diversity Male % of total Female % of total Total Employees Executive Committee 7 70 % 3 30 % 10 Management* 584 73 % 219 27 % 803 Professional Contributor 835 71 % 339 29 % 1,174 Hourly & Associate Staff 1,831 80 % 450 20 % 2,281 Total Population 3,257 76 % 1,011 24 % 4,268 Racial and Ethnic Diversity Non-Minority % of total People of Color % of total Total Employees Executive Committee 8 100 % - 0 % 8 Management* 237 78 % 67 22 % 304 Professional Contributor 193 81 % 46 19 % 239 Hourly & Associate Staff 358 71 % 149 29 % 507 Total Population 796 75 % 262 25 % 1,058 * Management includes both people managers, excluding members of the Executive Committee, and senior-level individual contributor roles. ** People of Color consists of U.S. based employees who identify as a race or ethnicity other than white.
Much of the reinforcing carbons we sell is used in tires and automotive products and, therefore, our financial results may be affected by the cyclical nature of the automotive industry. However, a large portion of the market for our products is in replacement tires that historically has been less cyclical as demand for replacement tires is correlated to miles driven.
Much of the reinforcing carbons we sell is used in tires and automotive products and, therefore, our financial results may be affected by the cyclical nature of the automotive industry.
Our inkjet colorants and inks are designed to replace traditional pigment dispersions and dyes used in inkjet printing applications. Competitive products for inkjet colorants are organic dyes and other dispersed pigments manufactured and marketed by large chemical companies and small independent producers. Competition for our Performance Chemicals products is based on product performance, quality, reliability, service, technical innovation and price.
For specialty compounds, we compete with many regional companies and a small number of global companies. Our inkjet colorants and inks are designed to replace traditional pigment dispersions and dyes used in inkjet printing applications. Competitive products for inkjet colorants are organic dyes and other dispersed pigments manufactured and marketed by large chemical companies and small independent producers.
Some of our employees in the U.S. and abroad are covered by collective bargaining or similar agreements. We have generally positive and productive employee relations with our employees, unions and works councils globally.
Some of our employees in the U.S. and abroad are covered by collective bargaining or similar agreements. We have generally positive and productive employee relations with our employees, unions and works councils globally. Cabot’s global voluntary turnover rate for fiscal 2023 was approximately 7.3%, which represents a decrease in the Company’s attrition rate relative to fiscal 2022, which was 9.0%.
In March 2022, we completed our purchase from Tokai Carbon Group of its carbon black manufacturing facility in Tianjin, China, and subsequently began technical upgrades to convert certain manufacturing units to allow us to produce conductive carbon additives.
These investments include our purchase in 2022 from Tokai Carbon Group of its carbon black manufacturing facility in Tianjin, China where we continue to make technical upgrades to convert certain manufacturing units to allow us to produce conductive additives. We expect to complete the conversion of the first unit at the site in early fiscal 2026.
For fiscal 2022, our Total Recordable Incident Rate (TRIR) based upon the number of injuries per 200,000 work hours for both employees and contractors was 0.29 and our Lost Time Incident Rate (LTIR) was 0.17. For comparison, the US Bureau of Labor Statistics reports for chemical manufacturing an average TRIR of 2.0 and LTIR of 0.8 in calendar year 2021.
For fiscal 2023, our Total Recordable Incident Rate (TRIR) based upon the number of injuries per 200,000 work hours for both employees and contractors was 0.14 and 12 our Lost Time Incident Rate (LTIR) was 0.05.
The Committee, which is comprised of independent directors, meets regularly and oversees our safety, health, and environmental performance, process safety, security, product stewardship, community engagement and governmental affairs. In particular, the Committee reviews metrics, audit results, emerging trends, overall performance, risks and opportunity assessments and management processes related to our safety, health, environmental and sustainability program.
Safety, Health, Environment and Sustainability In recognition of the importance of safety, health, environment and sustainability matters to Cabot, our Board of Directors has a Safety, Health, Environment, and Sustainability Committee. The Committee, which is comprised of independent directors, meets regularly and oversees our safety, health, and environmental performance, process safety, security, product stewardship, community engagement and governmental affairs.
Our ongoing operations are subject to extensive federal, state, local, and foreign laws, regulations, rules, and ordinances relating to safety, health, and environmental matters (“SH&E Requirements”).
In particular, the Committee reviews metrics, audit results, emerging trends, overall performance, risks and opportunity assessments and management processes related to our safety, health, environmental and sustainability program. Our ongoing operations are subject to extensive federal, state, local, and foreign laws, regulations, rules, and ordinances relating to safety, health, and environmental matters (“SH&E Requirements”).
Competition We are one of the leading manufacturers of carbon black in the world. We compete in the sale of reinforcing carbons with four companies that operate globally and numerous other companies that operate regionally, a number of which export product outside their region of manufacture.
We compete in the sale of reinforcing carbons with four companies that operate globally and numerous other companies that operate regionally, a number of which export product outside their region of manufacture. Competition for our Reinforcement Materials products is based on product performance, quality, reliability, price, service, technical innovation, sustainability performance, and logistics.
Talent Retention and Development We have numerous initiatives and programs to attract, develop and retain our talent tailored to specific employee populations and geographies, including leadership and executive development programs, technical training, and other skill-based training. In fiscal 2022, we introduced a new Leadership Acceleration program to further enhance the skills and effectiveness of our mid-level leaders.
Talent Retention and Development We have numerous initiatives and programs to attract, develop and retain our talent tailored to specific employee populations and geographies, including leadership and executive development programs, technical training, and other skill-based training. In fiscal 2023, we focused on building awareness for managers and employees on the tools and resources available to support employee development.
We continue to monitor and revise these protocols as appropriate to address the evolving nature of the pandemic. 11 Through our global SH&E Policy, which is endorsed by our Executive Committee, we hold ourselves accountable to demonstrate our company values and continuously improve the way we operate.
Through our global SHE & Sustainability Commitment, which is endorsed by our Executive Committee and adopted by our Board of Directors, we hold ourselves accountable to demonstrate our company values and continuously improve the way we operate.
In the specialty chemicals industry, the product is used to provide matte finishing, insulating and thickening properties for use in a variety of applications including thermal management for lithium-ion batteries. Formulated Solutions Business Our masterbatch and conductive compound products, which we refer to as “specialty compounds”, are formulations derived from specialty carbons mixed with polymers and other additives.
These specialty carbon products are used in a wide variety of applications, such as plastics, which applications represent the largest use for our products, inks, coatings, adhesives, toners, batteries, and displays. Our masterbatch and conductive compound products, which we refer to as “specialty compounds”, are formulations derived from specialty carbons mixed with polymers and other additives.
Our goal is for all employees, contractors, and visitors to return home in the same condition as when they arrived at work that day. As part of our “Drive to Zero” initiative, we have set a long-term goal of achieving zero injuries at our facilities worldwide.
As part of our “Drive to Zero” initiative, we have set a long-term goal of achieving zero injuries at our facilities worldwide.
Increasing regulatory programs associated with emissions and concerns regarding climate change are expected to increase our capital and operational costs in the future.
In addition, further air emission regulations may be adopted in the future in regions and countries where we operate, which could have an impact on our operations. Increasing regulatory programs associated with emissions and concerns regarding climate change are expected to increase our capital and operational costs in the future.
In each of fiscal 2022 and fiscal 2021, we spent approximately $55 million on technology development. Our R&D activities included those focused in the areas of conductive carbon additives, inkjet dispersions and engineered elastomer composites. We are also focused on process innovation across our product lines.
Our R&D activities included those focused in the areas of conductive additives, inkjet dispersions and engineered elastomer composites. We are also focused on process innovation across our product lines. We are investing in furthering our sustainability efforts across various areas in order to reduce waste, reduce emissions and utilize more sustainable material in our production processes.
Our compensation programs embrace a pay for performance philosophy and are designed to be competitive within the markets in which we compete for talent. Our pay practices reward individual and Company performance and are equitably differentiated based on role, experience, contributions, and performance.
Total Rewards We strive to provide a total rewards program that enables us to attract, retain and motivate the best talent to support our businesses. Our compensation programs embrace a pay for performance philosophy and are designed to be competitive within the markets in which we compete for talent.
We do not expect to be assessed a supplemental Netherlands CO 2 tax in 2022-2025 as EUA pricing is expected to remain higher than the Netherlands CO 2 tax threshold in the next few years. In China , a national emissions trading program is currently in place for the power sector and has not yet been expanded beyond that sector.
In China, a national emissions trading program is currently in place for the power sector and has not yet been expanded beyond that sector.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur products are subject to extensive safety, health and environmental requirements, which could impair our ability to manufacture and sell certain products. In order to secure and maintain the right to produce or sell our products, we must satisfy product related regulatory requirements in different jurisdictions.
Biggest changeIn order to secure and maintain the right to produce or sell our products, we must satisfy product related regulatory requirements in different jurisdictions. Obtaining and maintaining these approvals requires a significant amount of product testing and data, and there is no certainty these approvals will be obtained.
Even without such regulation, increased public awareness and adverse publicity about potential impacts on climate change or environmental harm from us or our industry could harm our reputation or otherwise impact the Company adversely. In recent years, investors have also begun to show increased interest about sustainability and climate change as it relates to their investment decisions.
Even without such regulation, increased public awareness and adverse publicity about potential impacts on climate change or environmental harm from us or our industry could harm our reputation or otherwise impact the Company adversely. In recent years, investors have also begun to show increased interest in sustainability and climate change as it relates to their investment decisions.
For example, the Russian invasion of Ukraine has disrupted and may continue to disrupt the price and availability of natural gas in Europe. 15 Certain of our carbon black supply arrangements contain provisions that adjust prices to account for changes in relevant feedstock and natural gas price indices.
For example, the Russian invasion of Ukraine has disrupted and may continue to disrupt the price and availability of natural gas in Europe. Certain of our carbon black supply arrangements contain provisions that adjust prices to account for changes in relevant feedstock and natural gas price indices.
If any of our counterparties are unable to perform their obligations in the future, we could be exposed to increased earnings and cash flow volatility due to an instrument’s failure to hedge or adequately address a financial risk. 20 Technology Risks We may not be successful achieving our growth expectations from new products, new applications and technology developments, and money we spend on these efforts may not result in an increase in revenues or profits commensurate with our investment.
If any of our counterparties are unable to perform their obligations in the future, we could be exposed to increased earnings and cash flow volatility due to an instrument’s failure to hedge or adequately address a financial risk. 21 Technology Risks We may not be successful achieving our growth expectations from new products, new applications and technology developments, and money we spend on these efforts may not result in an increase in revenues or profits commensurate with our investment.
Complying with these laws and regulations may be more costly or take longer than we anticipate, and any failure to comply could result in fines or penalties.
Complying with these 19 laws and regulations may be more costly or take longer than we anticipate, and any failure to comply could result in fines or penalties.
As described in Note D in Item 8 below under the heading “Divestitures”, we recorded an asset impairment charge and a loss on sale of business in fiscal 2022 in connection with the disposition of our Purification Solutions business. 21 Plant capacity expansions and site development projects may impact existing plant operations, be delayed and/or not achieve the expected benefits.
As described in Note D in Item 8 below under the heading “Divestitures”, we recorded an asset impairment charge and a loss on sale of business in fiscal 2022 in connection with the disposition of our Purification Solutions business. 22 Plant capacity expansions and site development projects may impact existing plant operations, be delayed and/or not achieve the expected benefits.
Sales outside of the U.S. constituted the majority of our revenues in fiscal 2022. We conduct business in several countries, including China, that have less stable legal systems and financial markets, and potentially more corrupt, or less predictable, business environments than the U.S.
Sales outside of the U.S. constituted the majority of our revenues in fiscal 2023. We conduct business in several countries, including China, that have less stable legal systems and financial markets, and potentially more corrupt, or less predictable, business environments than the U.S.
Item 1A. Risk Factors In addition to factors described elsewhere in this report, the following are important factors that could adversely affect our business. The risks described below are not the only risks we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations and financial results.
Item 1A. Ri sk Factors In addition to factors described elsewhere in this report, the following are important factors that could adversely affect our business. The risks described below are not the only risks we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations and financial results.
As set forth in Note T to our Consolidated Financial Statements, sales in China constituted approximately 25% of our revenues in fiscal 2022 and our property, plant and equipment located in China constituted approximately 25% of our total property, plant and equipment as of September 30, 2022.
As set forth in Note T to our Consolidated Financial Statements, sales in China constituted approximately 25% of our revenues in fiscal 2023 and our property, plant and equipment located in China constituted approximately 25% of our total property, plant and equipment as of September 30, 2023.
Additionally, we may be exposed to unauthorized access to our information technology systems through undetected vulnerabilities in our service providers’ information systems or software. With the evolving nature of cybersecurity threats, the scope and impact of any information security incident cannot be predicted.
Additionally, we have in the past and may in the future be exposed to unauthorized access to our information technology systems through undetected vulnerabilities in our or our service providers’ information systems or software. With the evolving nature of cybersecurity threats, the scope and impact of any information security incident cannot be predicted.
In addition, our ability to expand capacity in emerging regions depends in part on economic and political conditions in these regions and, in some cases, on our ability to establish operations, construct additional manufacturing capacity or form strategic business alliances. Item 1B. Unresolved Staff Comments None.
In addition, our ability to expand capacity in emerging regions depends in part on economic and political conditions in these regions and, in some cases, on our ability to establish operations, construct additional manufacturing capacity or form strategic business alliances. Item 1B. Unresolve d Staff Comments None.
We may not be successful achieving our growth expectations from developing new products or product applications. Moreover, we cannot be certain that the costs we incur investing in new product and technology development will result in an increase in revenues or profits commensurate with our investment.
We may not be successful achieving our growth expectations from developing new products or product applications. Moreover, we cannot be certain that the costs we incur investing in new product and technology development will result in an increase in revenues or profits commensurate with our investment or within the time period we expect.
Information technology systems failures, including those associated with our managed service provider or related to upgrading our systems or integrating information technology and other systems in connection with the integration of businesses we acquire, or network disruptions could disrupt our operations by impeding our processing of transactions and our financial reporting, and our operations, which could have a material adverse effect on our business or results of operations.
Information technology systems failures, including those associated with our managed service provider or related to maintaining or upgrading our systems or integrating information technology and other systems in connection with the integration of businesses we acquire, or network disruptions could disrupt our operations by impeding our processing of transactions and our financial reporting, and our operations, including by contributing to a process safety event, any of which could have a material adverse effect on our business or results of operations.
In addition, increasing weather-related impacts on our operations and plant sites may impact the cost or availability of insurance.
Further, increasing weather-related impacts on our operations and plant sites may impact the cost or availability of insurance.
The timing and length of these curtailments are difficult to predict and, at times, are applied to manufacturing operations without regard to whether the operations being curtailed comply with environmental regulations in the area. Accordingly, our manufacturing operations in China have been subject to these curtailments in the past and will likely be subject to them in the future.
The timing and length of these curtailments has been difficult to predict and, at times, were applied to manufacturing operations without regard to whether the operations being curtailed comply with environmental regulations in the area. Accordingly, our manufacturing operations in China have been subject to these curtailments in the past and may be subject to them in the future.
We face increased information technology security and fraud risks due to our increased reliance on working remotely during the COVID-19 pandemic and beyond, which may create additional information security vulnerabilities and/or magnify the impact of any disruption in information technology systems.
We face increased information technology security and fraud risks due to our increased reliance on working remotely, which may create additional information security vulnerabilities and/or magnify the impact of any disruption in information technology systems.
These include requirements to obtain and comply with various environmental-related and other permits for constructing any new facilities and operating all of our existing facilities. These environmental regulatory requirements and restrictions impose constraints on our operations, and could threaten our competitive position.
These include requirements to obtain and comply with various environmental-related and other permits for constructing any new facilities and operating all of our existing facilities, as well as settlements with agencies regarding environmental matters and environmental requirements. These environmental regulatory requirements and restrictions impose constraints on our operations, and could threaten our competitive position.
Information technology systems failures, data security breaches, cybersecurity attacks or network disruptions could compromise our information, disrupt our operations and expose us to liability, which may adversely impact our operations.
Information technology systems failures, data security breaches, cybersecurity attacks or network disruptions have harmed us in the past and could compromise our information, disrupt our operations and expose us to liability, which may adversely impact our operations.
For example, our investments to further develop our E2C™ solutions, inkjet dispersions and inks, and battery materials applications may not result in the earnings growth expectations on which these investments are being made.
For example, our investments to further develop our E2C® solutions, inkjet dispersions and inks, and battery materials applications may not result in the earnings growth expectations on which these investments are being made, or we may not realize such growth in line with our expectations when we made such investments.
Additionally, our operations in some countries, including China, are subject to the following risks: changes in the rate of economic growth; unsettled political or economic conditions; non-renewal of operating permits or licenses; possible expropriation or other governmental actions; corruption by government officials and other third parties; social unrest, war, terrorist activities or other armed conflict; confiscatory taxation or other adverse tax policies; deprivation of contract rights; trade regulations affecting production, pricing and marketing of products; reduced protection of intellectual property rights; restrictions or additional costs associated with repatriating cash; exchange controls; inflation; currency fluctuations and devaluation; political tension that could result in sanctions being imposed against our customers or suppliers in countries where sanctions have not been imposed in the past; the effect of global health, safety and environmental matters on economic conditions and market opportunities; and changes in financial policy and availability of credit. 16 For example, the Chinese government has, from time to time, curtailed manufacturing operations, with little or no notice, in industrial regions out of growing concern over air quality and in response to COVID-19 outbreaks .
Additionally, our operations in some countries, including China, are subject to the following risks: changes in the rate of economic growth; unsettled political or economic conditions; non-renewal of operating 17 permits or licenses; possible expropriation or other governmental actions; corruption by government officials and other third parties; social unrest, war, terrorist activities or other armed conflict; confiscatory taxation or other adverse tax policies; deprivation of contract rights; trade regulations affecting production, pricing and marketing of products; reduced protection of intellectual property rights; restrictions or additional costs associated with repatriating cash; exchange controls; inflation; currency fluctuations and devaluation; political tension that could result in sanctions being imposed against our customers or suppliers in countries where sanctions have not been imposed in the past; the effect of global health, safety and environmental matters on economic conditions and market opportunities; and changes in financial policy and availability of credit.
Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period.
In fiscal 2023, we derived a majority of our revenues from sales outside the U.S. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period.
An interruption in our operations as a result of fence-line arrangements could disrupt our manufacturing operations and adversely affect our financial results.
An interruption in our operations as a result of fence-line arrangements or a joint venture partner's actions could disrupt our manufacturing operations and adversely affect our financial results.
Our operations and performance are affected by worldwide and regional economic conditions. Uncertainty or a deterioration in the economic conditions affecting the businesses to which, or geographic areas in which, we sell products could reduce demand for our products and inflationary pressures may increase our costs.
Uncertainty or a deterioration in the economic conditions affecting the businesses to which, or geographic areas in which, we sell products could reduce demand for our products and inflationary pressures may increase our costs.
Our global operations expose us to risks associated with public health crises and outbreaks of epidemics, pandemics, or contagious diseases, such as the outbreak of a novel strain of coronavirus beginning in December 2019 (“COVID-19”).
Any future outbreak of a widespread health epidemic could materially and adversely impact our business in the future. Our global operations expose us to risks associated with public health crises and outbreaks of epidemics, pandemics, or contagious diseases, such as the outbreak of a novel strain of coronavirus beginning in December 2019 (“COVID-19”).
In addition, the global regulatory environment pertaining to information security and privacy is increasingly demanding, with new and changing requirements, such as the European Union’s General Data Protection Regulation, The Personal Information Protection Law of the People’s Republic of China, and Brazil’s Lei Geral de Protecao de Dados.
In addition, more than a dozen states in the United States have also passed comprehensive data protection legislation, and the global regulatory environment pertaining to information security and privacy is increasingly demanding, with new and changing requirements, such as the European Union’s General Data Protection Regulation, The Personal Information Protection Law of the People’s Republic of China, and Brazil’s Lei Geral de Protecao de Dados.
At certain of our fumed metal oxides facilities and one of our carbon black facilities in China we have fence-line arrangements with adjacent third party manufacturing operations (“fence-line partners”), who provide raw materials for our manufacturing operations and/or take by-products generated from our operations.
At certain of our fumed metal oxides facilities we have fence-line arrangements (many of which are closed-loop) with adjacent third-party manufacturing operations (“fence-line partners”), who provide raw materials for our manufacturing operations and/or take by-products generated from our operations.
For example, the COVID-19 pandemic has also contributed to increased costs and decreased availability of labor and materials for construction projects, and these factors have increased the costs of our capital improvement projects and delayed our completion of such projects. There may also be long-term effects on our customers in, and the economies of, affected countries.
For example, the COVID-19 pandemic has also contributed to increased costs and decreased availability of labor and materials for construction projects, and these factors have increased the costs of our capital improvement projects and delayed our completion of such projects.
Adverse rulings, judgments or settlements in pending or future litigation (including liabilities associated with respirator claims) or in connection with environmental remediation activities could adversely affect our financial results or cause our results to differ materially from those expressed or forecasted in any forward-looking statements.
Adverse rulings, judgments or settlements in pending or future litigation (including liabilities associated with respirator claims) or in connection with environmental remediation activities could adversely affect our financial results or cause our results to differ materially from those expressed or forecasted in any forward-looking statements. 20 Our tax rate and other tax obligations are dependent upon a number of factors, a change in any of which could impact our future tax rates and financial results.
In addition, we are exposed to adverse changes in interest rates. We use a combination of commercial paper and borrowings under our Credit Agreements to meet our cash needs, with borrowings intra-quarter that may be higher than at quarter-end. As this debt is at variable interest rates, high interest rates environments, such as the current environment, increase our borrowing costs.
We use a combination of commercial paper and borrowings under our Credit Agreements to meet our short-term cash needs, with borrowings intra-quarter that may be higher than at quarter-end. As this debt is at variable interest rates, the higher interest rate environment as compared to recent years increases our borrowing costs.
Therefore, increases or decreases in the value of the U.S. dollar against other currencies in countries where we operate will affect our results of operations and the value of balance sheet items denominated in foreign currencies. Due to the geographic diversity of our operations, weaknesses in some currencies might be offset by strengths in others over time.
Therefore, increases or decreases in the value of the U.S. dollar against other currencies in countries where we operate will affect our results of operations and the value of balance sheet items denominated in foreign currencies.
Volatility in the price and availability of raw materials and energy could impact our margins and working capital and our revenues from our energy center operations. Our manufacturing processes consume significant amounts of energy and raw materials, the costs of which are subject to worldwide supply and demand as well as other factors beyond our control.
Our manufacturing processes consume significant amounts of energy and raw materials, the costs of which are subject to worldwide supply and demand as well as other factors beyond our control.
We have a group of key customers across our businesses that together represent a significant portion of our total net sales and operating revenues. The loss of any of our important customers, or a significant reduction in volumes sold to them, could adversely affect our results of operations until such business is replaced or any temporary disruption ends.
The loss of any of our important customers, or a significant reduction in volumes sold to them, could adversely affect our results of operations until such business is replaced or any temporary disruption ends.
These risks include the risk that existing plant operations are disrupted, which could make it difficult for us to meet our customer needs.
These risks include the risk that existing plant operations are disrupted as well as the risk associated with delays in the start-up of operations using new technologies, which disruptions could make it difficult for us to meet our customer needs.
Factors that will influence the impact on our business and operations include the duration and extent of the pandemic, including the virulence and spread of different strains of a virus and the level and timing of vaccine development and distribution across the world and their impact on economic recovery and growth, the extent of imposed or recommended containment and mitigation measures and their impact on our operations and the operations of our customers, and the general economic consequences of the pandemic.
Factors that will influence the impact on our business and operations include the duration and extent of the pandemic, the extent of imposed or recommended containment and mitigation measures and their impact on our operations and the operations of our customers, and the general economic consequences of the pandemic.
Such events could disrupt our supply of raw materials or otherwise affect production, transportation and delivery of our products or affect demand for our products. 18 We have experienced recent disruptions of the type described above.
Such events could disrupt our supply of raw materials or otherwise affect production, transportation and delivery of our products or affect demand for our products and otherwise harm our business and our results of operations, potentially in material ways that may exceed available insurance coverage in the particular circumstances. We have experienced recent disruptions of the type described above.
We have experienced disruptions in the supply of raw materials from certain of our fence-line partners in recent years, which have caused us to curtail our operations or incur higher operating costs. Significant events at neighboring industrial facilities, such as environmental releases, could also disrupt our operations and result in negative publicity about us and harm our reputation.
We have experienced disruptions in the supply of raw materials from certain of our fence-line partners in recent years, which have caused us to curtail our operations or incur higher operating costs.
In addition, during periods of economic uncertainty, our customers may temporarily pursue inventory reduction measures that exceed declines in the actual underlying demand. Regional conflicts may also adversely impact our business.
In addition, during periods of economic uncertainty, our customers may temporarily pursue inventory reduction (“destocking”) measures that exceed declines in the actual underlying demand. Given our position in the value chains for our principal products, we typically experience greater destocking impacts in our results of operations early in a recessionary cycle. Regional conflicts may also adversely impact our business.
A significant adverse change in a customer relationship or the failure of a customer to perform its obligations under agreements with us could harm our business or cash flows. Our success in strengthening relationships and growing business with our largest customers and retaining their business over extended time periods is important to our future results.
A significant adverse change in a customer or joint venture relationship or the failure of a customer or joint venture partner to perform its obligations under agreements with us could harm our business or cash flows.
Our ability to implement price increases is largely influenced by competitive and economic conditions and could vary significantly depending on the segment served.
Our ability to implement price increases is largely influenced by competitive and economic conditions and could vary significantly depending on the segment served. Such increases may not be accepted by our customers, may not be sufficient to compensate for increased regulatory costs or may decrease demand for our products and our volume of sales.
We have expended and will continue to expend considerable amounts to construct, maintain, operate, and improve our facilities around the world for environmental protection. Further, environmental agencies worldwide are increasingly implementing regulations and other requirements resulting in more restrictive air emission limits globally, particularly as they relate to nitrogen oxides, sulfur dioxide and particulate matter emissions.
Furthermore, our actual or perceived failure to adhere to these principles could harm our reputation. 15 Further, environmental agencies worldwide are increasingly implementing regulations and other requirements resulting in more restrictive air emission limits globally, particularly as they relate to nitrogen oxides, sulfur dioxide and particulate matter emissions.
Such increases may not be accepted by our customers, may not be sufficient to compensate for increased regulatory costs or may decrease demand for our products and our volume of sales. 14 A description of these matters is included in the discussion under the heading “Safety, Health, Environment, and Sustainability” in Item 1 above, and in Note S in Item 8 below under the heading “Contin gencies” .
A description of these matters is included in the discussion under the heading “Safety, Health, Environment, and Sustainability” in Item 1 above, and in Note S in Item 8 below under the heading “Contingencies”.
Obtaining and maintaining these approvals requires a significant amount of product testing and data, and there is no certainty these approvals will be obtained. 17 Certain national and international health organizations have classified carbon black as a possible or suspected human carcinogen.
Certain national and international health organizations have classified carbon black as a possible or suspected human carcinogen.
In addition, losses for which no tax benefits can be recorded could materially impact our tax rate and its volatility from one quarter to another.
In addition, losses for which no tax benefits can be recorded could materially impact our tax rate and its volatility from one quarter to another. Fluctuations in foreign currency exchange and interest rates affect our financial results. We earn revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar.
For example, t he severe flooding that occurred in Western Europe in July 2021 ca used significant damage to our specialty c ompounds plant in Pepinster, Belgium .
For example, the severe flooding that occurred in Western Europe in July 2021 caused significant damage to our specialty compounds plant in Pepinster, Belgium. That disruption resulted in a near-term reduction in earnings from lower volumes and certain increases in our operating costs.
Th at disruption resulted in a near-term reduction in earnings from lower volumes and certain increases in our operating costs, not all of which we expect to be able to recover from our insurance. Financial and Other Risks Negative or uncertain worldwide or regional economic conditions or trade relations, as well as regional conflicts, may adversely impact our business.
Financial and Other Risks Negative or uncertain worldwide or regional economic conditions or trade relations, as well as regional conflicts, may adversely impact our business. Our operations and performance are affected by worldwide and regional economic conditions.
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Our tax rate and other tax obligations are dependent upon a number of factors, a change in any of which could impact our future tax rates and financial results.
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We have expended and will continue to expend considerable amounts to construct, maintain, operate, and improve our facilities around the world for environmental protection.
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The Inflation Reduction Act (“IRA”), enacted in the U.S. on August 16, 2022, imposes several new taxes that will be effective in 2023, including a 1% excise tax on stock repurchases. 19 Fluctuations in foreign currency exchange and interest rates affect our financial results.
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In addition, the increased emphasis on environmental justice, which is the fair treatment and meaningful involvement of all individuals and communities in which we operate, regardless of race, color, national origin, or income, with respect to the development, implementation and enforcement of environmental laws, regulations, and policies, could result in increased compliance requirements and costs.
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We earn revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar. In fiscal 2022, we derived a majority of our revenues from sales outside the U.S.
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Our failure to develop and execute a sustainability strategy that adequately responds to these environmental concerns could harm our reputation and negatively impact the value of our securities.
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The COVID-19 pandemic has disrupted our operations and has had and could continue to have a material adverse effect on our business and any future outbreak of a widespread health epidemic could materially and adversely impact our business in the future.
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In addition, new disclosure requirements related to GHG emissions and climate change, including the European Sustainability Reporting Standards, any final rules approved by the SEC, and state laws requiring climate disclosure, may negatively impact our business by diverting resources, increasing our compliance costs and harming our reputation.
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Even if a virus or other illness does not spread significantly, the perceived risk of infection or health risk may materially affect our business. As we cannot predict the duration or scope of COVID-19 or any pandemic, the negative financial impact to our results cannot be reasonably estimated and could be material.
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We cannot predict how legal, regulatory and social responses to concerns about climate change, as well as other sustainability and environmental matters, will impact our business. 16 Volatility in the price and availability of raw materials and energy could impact our margins and working capital and our revenues from our energy center operations.
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In addition, a global health crisis that continues for an extended period of time with an adverse impact on our revenue and overall profitability may lead to an increase in inventory reserves, allowances for doubtful accounts, and additional valuation allowances on certain of our deferred tax assets, or a reduction in our borrowing availability under our credit agreements, or cause us to recognize impairments for certain long-lived assets including goodwill, intangible assets or property, plant and equipment.
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Our success in strengthening relationships and growing business with our largest customers and retaining their business over extended time periods is important to our future results. We have a group of key customers across our businesses that together represent a significant portion of our total net sales and operating revenues.
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To the extent the COVID-19 pandemic or other widespread health epidemic adversely affected or affects our business and financial results, it may also have the effect of heightening many of the other risks that could adversely affect our business described herein, such as risks associated with industry capacity utilization, volatility in the price and availability of raw materials, material adverse changes in customer relationships including any failure of a customer to perform its obligations under agreements with us, IT security systems risks, factors affecting our tax rate, and risks associated with worldwide or regional economic conditions.
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In addition, a number of our operations are conducted through joint venture arrangements that operate pursuant to long-term contracts, including for the supply of raw materials for the joint venture operations.
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Any dispute as to the terms of these contractual arrangements or deterioration in the relationship between us and our joint venture partner could disrupt the operations of the joint venture, which could affect our financial results and harm our reputation.
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For example, the Chinese government has, from time to time, curtailed manufacturing operations, with little or no notice, in industrial regions out of concerns over air quality and in response to COVID-19 outbreaks.
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In addition, we operate certain of our carbon black facilities through joint venture arrangements, pursuant to which our joint venture partners provide feedstock and/or take by-products generated from our operations. A dispute with a joint venture partner concerning the terms of those arrangements could impact our joint venture operations and could decrease our income from such operations.
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Significant events at neighboring industrial facilities, such as environmental releases, could also disrupt our operations and result in negative publicity about us and harm our reputation. 18 Our products are subject to extensive safety, health and environmental requirements, which could impair our ability to manufacture and sell certain products.
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In the past, our networks have been subject to an attack, potentially by suspected foreign nation-state attackers, who conducted reconnaissance and deployed malware.
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While our systems were able to isolate and expel the attacker before we believe material harm was caused, criminals, rogue insiders, nation-state, and other attackers may continue to attack our network, and our defenses may be unable to succeed in detecting their actions or stop them from inflicting potentially material harms including by theft, destruction, misuse, or corruption of our data or systems or those of other entities whose systems may interconnect with ours.
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For example, in fiscal 2023, we recorded foreign exchange losses related to the remeasurement of our net monetary assets denominated in Argentine pesos, as the official Argentine exchange rate weakened compared to the U.S. dollar throughout the year.
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In addition, we may have foreign currency losses from government-controlled currency devaluations, such as the foreign currency losses we recorded in fiscal 2023 related to the impact of the sharp devaluation of the Argentine peso that was guided by the Argentine central bank.
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Due to the geographic diversity of our operations, weaknesses in some currencies might be offset by strengths in others over time. In addition, we are exposed to adverse changes in interest rates.
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Similarly, we cannot be certain that the investments we are making in our EVOLVE® Sustainable Solutions technology platform to develop products for our customers using sustainable reinforcing carbons from renewable or recycled materials or using processes that result in lower GHG emissions will be successful, including within the time period our customers expect.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Cabot’s corporate headquarters are in leased office space in Boston, Massachusetts. We also own or lease office, manufacturing, storage, distribution, marketing and research and development facilities in the U.S. and in foreign countries. The locations of our principal manufacturing and/or administrative facilities are set forth in the table below. Unless otherwise indicated, all the properties are owned.
Biggest changeItem 2. Pr operties Cabot’s corporate headquarters are in leased office space in Boston, Massachusetts. We also own or lease office, manufacturing, storage, distribution, marketing and research and development facilities in the U.S. and in foreign countries. The locations of our principal manufacturing and/or administrative facilities are set forth in the table below.
Location by Region Reinforcement Materials Performance Chemicals Americas Region Alpharetta, Georgia* X X Tuscola, Illinois X Carrollton, Kentucky** X Franklin, Louisiana X X Ville Platte, Louisiana X Billerica, Massachusetts X X Haverhill, Massachusetts X Midland, Michigan X Pampa, Texas X X Campana, Argentina X Maua, Brazil X X Sao Paulo, Brazil* (1) X X Saint-Jean-sur-Richelieu, Québec, Canada X Sarnia, Ontario, Canada X X Cartagena, Colombia X Altamira, Mexico** X Europe, Middle East and Africa Region Loncin, Belgium X Pepinster, Belgium X Valasske Mezirici (Valmez), Czech Republic** X Port Jerome, France** X Frankfurt, Germany* X Rheinfelden, Germany X Ravenna, Italy X Riga, Latvia* (1) X X Schaffhausen, Switzerland* X X Botlek, Netherlands** X X Dubai, United Arab Emirates* X Barry, United Kingdom (Wales)** X 22 Location by Region Reinforcement Materials Performance Chemicals Asia Pacific Region Jiangsu Province, China** X Jiangxi Province, China** X Tianjin, China** (2 plants) X X Shanghai, China* (1) X X Shanghai, China** (plant) X Xingtai City, China** X Wuhai, China** X Shenzhen, China** X Zhuhai, China** X Mumbai, India* X X Cilegon, Indonesia** X Jakarta, Indonesia* (1) X X Chiba, Japan X Shimonoseki, Japan** X Tokyo, Japan* (1) X X Port Dickson, Malaysia** X (1) Business service center * Leased premises ** Building(s) owned by Cabot on leased land We conduct research and development for our various businesses primarily at facilities in Billerica, Massachusetts; Pampa, Texas; Pepinster, Belgium; Frankfurt, Germany; and Zhuhai and Shanghai, China.
Location by Region Reinforcement Materials Performance Chemicals Americas Region Alpharetta, Georgia* X X Tuscola, Illinois X Carrollton, Kentucky** X Franklin, Louisiana X X Ville Platte, Louisiana X Billerica, Massachusetts X X Haverhill, Massachusetts X Midland, Michigan X Pampa, Texas X X Campana, Argentina X Maua, Brazil X X Sao Paulo, Brazil* (1) X X Saint-Jean-sur-Richelieu, Québec, Canada X Sarnia, Ontario, Canada X X Cartagena, Colombia X Altamira, Mexico X Europe, Middle East and Africa Region Loncin, Belgium X Pepinster, Belgium X Valasske Mezirici (Valmez), Czech Republic** X Port Jerome, France** X Frankfurt, Germany* X Münster, Germany* X Rheinfelden, Germany X Ravenna, Italy X Riga, Latvia* (1) X X Schaffhausen, Switzerland* X X Botlek, Netherlands** X X Dubai, United Arab Emirates* X Barry, United Kingdom (Wales)** X 23 Location by Region Reinforcement Materials Performance Chemicals Asia Pacific Region Jiangsu Province, China** X Jiangxi Province, China** X Tianjin, China** (2 plants) X X Shanghai, China* (1) X X Shanghai, China** (plant) X Xingtai City, China** X Wuhai, China** X Shenzhen, China** X Zhuhai, China** X Mumbai, India* X X Cilegon, Indonesia** X X Jakarta, Indonesia* (1) X X Chiba, Japan X Shimonoseki, Japan** X Tokyo, Japan* (1) X X Port Dickson, Malaysia** X (1) Business service center * Leased premises ** Building(s) owned by Cabot on leased land We conduct research and development for our various businesses primarily at facilities in Billerica, Massachusetts; Pampa, Texas; Pepinster, Belgium; Frankfurt and Münster, Germany; and Zhuhai and Shanghai, China.
With our existing manufacturing plants and planned expansions, we generally have sufficient production capacity to meet current requirements and expected near-term growth. These plants are generally well maintained, in good operating condition and suitable and adequate for their intended use. Our administrative offices and other facilities are suitable and adequate for their intended purposes. 23
With our existing manufacturing plants and planned expansions, we generally have sufficient production capacity to meet current requirements and expected near-term growth. These plants are generally well maintained, in good operating condition and suitable and adequate for their intended use. Our administrative offices and other facilities are suitable and adequate for their intended purposes. 24
Added
Unless otherwise indicated, all the properties are owned.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changePrior to assuming his current role in October 2019, he had served as President, Asia Pacific Region since joining Cabot. Prior to joining Cabot, Mr.
Biggest changeHe was elected Executive Vice President effective December 2022 and Senior Vice President and President, Performance Additives business and President, Asia Pacific Region in October 2019. Prior to this, he had served as President, Asia Pacific Region since joining Cabot. Prior to joining Cabot, Mr.
In addition, Mr. Zhu served as head of global pulp and paper sales at Asia Pacific Resources International Holdings Limited from 2010 to 2012. 24 PART II
In addition, Mr. Zhu served as head of global pulp and paper sales at Asia Pacific Resources International Holdings Limited from 2010 to 2012. 25 PART II
Kalita, age 43, is Senior Vice President and General Counsel. Ms. Kalita joined Cabot in 2008.
Kalita, age 44, is Senior Vice President and General Counsel. Ms. Kalita joined Cabot in 2008.
He was appointed Vice President in March 2005, Senior Vice President in March 2012 and Executive Vice President in November 2014. He was a member of the Interim Office of the Chief Executive Officer, which was in place from December 2015 until March 2016. Erica McLaughlin, age 46, is Senior Vice President and Chief Financial Officer. Ms.
He was appointed Vice President in March 2005, Senior Vice President in March 2012 and Executive Vice President in November 2014. He was a member of the Interim Office of the Chief Executive Officer, which was in place from December 2015 until March 2016. Erica McLaughlin, age 47, is Executive Vice President, Chief Financial Officer and Head of Corporate Strategy.
Item 4. Mine Safety Disclosures Not applicable. Information about our Executive Officers Set forth below is certain information about Cabot’s executive officers as of November 14, 2022. Sean D. Keohane, age 55, is President and Chief Executive Officer and a member of Cabot’s Board of Directors, positions he has held since March 2016. Mr. Keohane joined Cabot in 2002.
Item 4. Mine Sa fety Disclosures Not applicable. Information about our Executive Officers Set forth below is certain information about Cabot’s executive officers as of November 13, 2023. Sean D. Keohane, age 56, is President and Chief Executive Officer and a member of Cabot’s Board of Directors, positions he has held since March 2016. Mr. Keohane joined Cabot in 2002.
Prior to that, he served as General Manager of the Aerogel business from October 2007 to February 2010. Jeff Zhu, age 54, is Senior Vice President and President, Performance Additives business and President, Asia Pacific Region. Mr. Zhu joined Cabot in 2012.
Prior to that, he served as General Manager of the Aerogel business from October 2007 to February 2010. Jeff Zhu, age 55, is Executive Vice President and President, Performance Chemicals Segment and President, Asia Pacific Region. Mr. Zhu joined Cabot in 2012.
McLaughlin joined Cabot in 2002. She was appointed Senior Vice President and Chief Financial Officer in May 2018, and in October 2018 she assumed responsibility for Corporate Strategy and Development.
Ms. McLaughlin joined Cabot in 2002. She was elected Executive Vice President effective December 2022, Senior Vice President and Chief Financial Officer in May 2018, and in October 2018 she assumed responsibility for Corporate Strategy and Development.
Kalita was in private practice at WilmerHale LLP in Boston, MA. Hobart C. Kalkstein, age 52, is Senior Vice President and President, Reinforcement Materials Segment and President, Americas Region. Mr. Kalkstein joined Cabot in 2005. Prior to assuming his current role in April 2016, he was Vice President of Corporate Strategy and Development from December 2015 to April 2016.
Kalita was in private practice at WilmerHale LLP in Boston, MA. Hobart C. Kalkstein, age 53, is Executive Vice President and President, Reinforcement Materials Segment and President, Americas Region. Mr. Kalkstein joined Cabot in 2005. He was elected Executive Vice President effective December 2022, and Senior Vice President and President, Reinforcement Materials Segment and President, Americas Region in April 2016.
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Prior to this, he was Vice President of Corporate Strategy and Development from December 2015 to April 2016.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe current authorization does not have a set expiration date. (2) Total number of shares purchased does not include 681 shares withheld to pay taxes on the vesting of equity awards made under the Company's equity incentive plans or to pay the exercise price of options exercised during the period.
Biggest change(2) Total number of shares purchased does not include 881 shares withheld to pay taxes on the vesting of equity awards made under the Company's equity incentive plans or to pay the exercise price of options exercised during the period. 26 Comparative Stock Performance The graph compares the cumulative total stockholder return on Cabot common stock for the five-year period ended September 30, 2023 with the S&P 400 Chemical Index and the S&P Midcap 400 Index.
The comparisons assume the investment of $100 on October 1, 2017 in Cabot’s common stock and in each of the indices and the reinvestment of all dividends.
The comparisons assume the investment of $100 on October 1, 2018 in Cabot’s common stock and in each of the indices and the reinvestment of all dividends.
The stock price performance on the graph below is not necessarily indicative of future price performance. 25 The information included under the heading comparative stock performance in Item 5 shall not be deemed to be “soliciting material” or subject to Regulation 14A, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise be subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act. 26
The information included under the heading comparative stock performance in Item 5 shall not be deemed to be “soliciting material” or subject to Regulation 14A, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise be subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act. 27
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Cabot’s common stock is listed for trading (symbol CBT) on the New York Stock Exchange. As of November 14, 2022, there were 587 holders of record of Cabot’s common stock.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Cabot’s common stock is listed for trading (symbol CBT) on the New York Stock Exchange. As of November 13, 2023, there were 508 holders of record of Cabot’s common stock.
Issuer Purchases of Equity Securities The table below sets forth information regarding Cabot’s purchases of its equity securities during the quarter ended September 30, 2022: Period Total Number of Shares Purchased (1)(2) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1) July 1, 2022 — July 31, 2022 — $ — — 4,321,334 August 1, 2022 — August 31, 2022 — $ — — 4,321,334 September 1, 2022 — September 30, 2022 68,200 $ 73.13 68,200 4,253,134 Total 68,200 68,200 (1) On July 13, 2018, Cabot publicly announced that the Board of Directors authorized the Company to repurchase up to an additional ten million shares of its common stock on the open market or in privately negotiated transactions, increasing the amount of shares available for repurchase at that time to approximately eleven million shares.
Issuer Purchases of Equity Securities The table below sets forth information regarding Cabot’s purchases of its equity securities during the quarter ended September 30, 2023: Period Total Number of Shares Purchased (1)(2) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1) July 1, 2023 — July 31, 2023 — $ — — 3,691,572 August 1, 2023 — August 31, 2023 430,000 $ 70.66 430,000 3,261,572 September 1, 2023 — September 30, 2023 276,602 $ 70.95 276,602 2,984,970 Total 706,602 706,602 (1) On July 13, 2018, Cabot publicly announced that the Board of Directors authorized the Company to repurchase up to an additional ten million shares of its common stock on the open market or in privately negotiated transactions, increasing the amount of shares available for repurchase at that time to approximately eleven million shares.
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Comparative Stock Performance The graph compares the cumulative total stockholder return on Cabot common stock for the five-year period ended September 30, 2022 with the S&P 500 Chemicals Index and the S&P Midcap 400 Index.
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The current authorization does not have a set expiration date.
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We have historically included the S&P 500 Chemical Index as a point of reference in our Comparative Stock Performance chart; however, we have made the decision to remove the S&P 500 Chemical Index from this chart beginning with our next Annual Report on Form 10-K.
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The decision to remove the S&P 500 Chemical Index was based on our belief that the S&P 500 Chemical Index is no longer the most relevant benchmark for assessing our stock performance due to Cabot's smaller size relative to the companies in that index.
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We are adding the S&P 400 Chemical Index, which we believe provides a more representative index based on our market capitalization. The stock price performance on the graph below is not necessarily indicative of future price performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCertain Items: Details of the certain items for fiscal 2022 and 2021 are as follows: Years Ended September 30 2022 2021 (In millions) Gain on bargain purchase of a business (Note C) $ 24 $ — Gain on sale of land 17 — Specialty Fluids divestiture related benefit 5 — Employee benefit plan settlement and other charges 1 (4 ) Loss on sale of business and asset impairment charge (Note D) (207 ) — Legal and environmental matters and reserves (Note S) (9 ) (25 ) Purification Solutions divestiture related charges (5 ) — Acquisition and integration-related charges (6 ) (5 ) Global restructuring activities (3 ) (11 ) Indirect tax settlement credits (Note S) — 12 Other certain items — (1 ) Total certain items, pre-tax (183 ) (34 ) Non-GAAP tax adjustments 32 (4 ) Total certain items, net of tax $ (151 ) $ (38 ) An explanation of these items of expense and income is included in our discussion under the heading “Definition of Terms and Non-GAAP Financial Measures”.
Biggest changeCertain Items: Details of the certain items for fiscal 2023 and 2022 are as follows: Years Ended September 30 2023 2022 (In millions) Gain on sale of land $ 1 $ 17 Legal and environmental matters and reserves (Note S) (10 ) (9 ) Argentina controlled currency devaluation loss (7 ) — Acquisition and integration-related charges (4 ) (6 ) Global restructuring activities (4 ) (3 ) Loss on sale of business and asset impairment charge (Note D) (3 ) (207 ) Other certain items (2 ) — Gain on bargain purchase of a business (Note C) — 24 Specialty Fluids divestiture related benefit — 5 Employee benefit plan settlement and other charges — 1 Purification Solutions divestiture related charges — (5 ) Total certain items, pre-tax (29 ) (183 ) Non-GAAP tax adjustments 161 32 Total certain items, net of tax $ 132 $ (151 ) An explanation of these items of expense and income is included in our discussion under the heading “Definition of Terms and Non-GAAP Financial Measures”.
We consider an accounting estimate to be critical to the financial statements if (i) the estimate is complex in nature or requires a high degree of judgment and (ii) different estimates and assumptions were used, the results could have a material impact on the consolidated financial statements.
We consider an accounting estimate to be critical to the financial statements if (i) the estimate is complex in nature or requires a high degree of judgment and if (ii) different estimates and assumptions were used, the results could have a material impact on the consolidated financial statements.
The balances of General unallocated income (expense) consist of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, interest income, dividend income, and the profit or loss related to the corporate adjustment for unearned revenue.
The balances of General unallocated income (expense) consist of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, interest and dividend income, and the profit or loss related to the corporate adjustment for unearned revenue.
In calculating Total segment EBIT, we exclude from our Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies (i) items of expense and income that management does not consider representative of our fundamental on-going segment results, which we refer to as “certain items”, and (ii) items that, because they are not controlled by the business segments and primarily benefit corporate objectives, are not allocated to our business segments, such as interest expense and other corporate costs, which include unallocated corporate overhead expenses such as certain corporate salaries and headquarter expenses, plus costs related to special projects and initiatives, which we refer to as “other unallocated items”.
In calculating Total segment EBIT, we exclude from our Income (loss) from operations before income taxes and equity in earnings of affiliated companies (i) items of expense and income that management does not consider representative of our fundamental on-going segment results, which we refer to as “certain items”, and (ii) items that, because they are not controlled by the business segments and primarily benefit corporate objectives, are not allocated to our business segments, such as interest expense and other corporate costs, which include unallocated corporate overhead expenses such as certain corporate salaries and headquarter expenses, plus costs related to special projects and initiatives, which we refer to as “other unallocated items”.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies Our consolidated financial statements have been prepared in conformity with U.S. GAAP. This preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Estimates Our consolidated financial statements have been prepared in conformity with U.S. GAAP. This preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities.
Because reserves are limited to amounts that are probable and estimable as of a relevant measurement date, and there is inherent difficulty in projecting the impact of potential developments on our share of liability for these existing and future claims, it is reasonably possible that the 28 liabilities for existing and future claims could change in the near term and that change could be material .
Because reserves are limited to amounts that are probable and estimable as of a relevant measurement date, and there is inherent difficulty in projecting the impact of potential developments on our share of liability for these existing and future claims, it is reasonably possible that the liabilities for existing and future claims could change in the near term and that change could be material.
Consolidated net debt is defined as consolidated debt offset by the lesser of (i) unrestricted cash and cash equivalents and (ii) $150 million. 36 A significant portion of our business occurs outside the U.S. and our cash generation does not always align geographically with our cash needs.
Consolidated net debt is defined as consolidated debt offset by the lesser of (i) unrestricted cash and cash equivalents and (ii) $150 million. A significant portion of our business occurs outside the U.S. and our cash generation does not always align geographically with our cash needs.
Total segment EBIT should not be considered an alternative for Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, which is the most directly comparable U.S. GAAP financial measure.
Total segment EBIT should not be considered an alternative for Income (loss) from operations before income taxes and equity in earnings of affiliated companies, which is the most directly comparable U.S. GAAP financial measure.
Developments that could affect our 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, including potential settlements of groups of claims, (iv) significant changes in the legal costs of defending these claims, (v) changes in the nature of claims received or changes in our assessment of the viability of these claims, (vi) trial and appellate outcomes, (vii) changes in the law and procedure applicable to these claims, (viii) the financial viability of the parties that contribute to the payment of respirator claims and developments in the bankruptcy proceedings of one of those parties, (ix) exhaustion or changes in the recoverability of the insurance coverage maintained by certain of the parties that contribute to the settlement of respirator claims, or a change in the availability of 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 our share of liability are no longer reasonable.
Developments that could affect our 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, including potential settlements of groups of claims, (iv) significant changes in the legal costs of defending these claims, (v) changes in the nature of claims received or changes in our assessment of the viability of these claims, (vi) trial and appellate outcomes, (vii) changes in the law and procedure applicable to these claims, (viii) the financial viability of the parties that contribute to the payment of respirator claims, (ix) exhaustion or changes in the recoverability of the insurance coverage maintained by certain of the parties that contribute to the settlement of respirator claims, or a change in the availability of 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 our share of liability are no longer reasonable.
Leases We have entered into various leases as the lessee, primarily related to certain transportation vehicles, warehouse facilities, office space, and machinery and equipment. These leases have remaining lease terms between one and seventeen years, some of which may include options to extend the leases for up to fifteen years or options to terminate the leases.
Leases We have entered into various leases as the lessee, primarily related to certain transportation vehicles, warehouse facilities, office space, and machinery and equipment. These leases have remaining lease terms between one and sixteen years, some of which may include options to extend the leases for up to fifteen years or options to terminate the leases.
As of September 30, 2022, we were in compliance with the debt covenants under the Credit Agreements, which, with limited exceptions, require us to comply on a quarterly basis with a leverage test requiring the ratio of consolidated net debt to consolidated EBITDA not to exceed 3.50 to 1.00.
As of September 30, 2023, we were in compliance with the debt covenants under the Credit Agreements, which, with limited exceptions, require us to comply on a quarterly basis with a leverage test requiring the ratio of consolidated net debt to consolidated EBITDA not to exceed 3.50 to 1.00.
A reconciliation of Total segment EBIT to Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies is provided under the heading “Fiscal 2022 compared to Fiscal 2021—By Business Segment”. Investors should consider the limitations associated with this non-GAAP measure, including the potential lack of comparability of this measure from one company to another.
A reconciliation of Total segment EBIT to Income (loss) from operations before income taxes and equity in earnings of affiliated companies is provided under the heading “Fiscal 2023 compared to Fiscal 2022—By Business Segment”. Investors should consider the limitations associated with this non-GAAP measure, including the potential lack of comparability of this measure from one company to another.
Unless a calendar year is specified, all references to years in this discussion are to our fiscal years ended September 30. This section discusses our fiscal 2022 and fiscal 2021 results of operations and year-to-year comparisons between fiscal 2022 and fiscal 2021.
Unless a calendar year is specified, all references to years in this discussion are to our fiscal years ended September 30. This section discusses our fiscal 2023 and fiscal 2022 results of operations and year-to-year comparisons between fiscal 2023 and fiscal 2022.
In fiscal 2022, the use of cash by investing activities primarily consisted of $211 million of capital expenditures for sustaining and compliance capital projects at our operating facilities as well as growth-related capital, including a capacity expansion project in Performance Chemicals, partially offset by proceeds from the sale of our Purification Solutions business of $79 million and proceeds from the sale of land adjacent to our Billerica site of $18 million.
In fiscal 2022, the use of cash by investing activities primarily consisted of $211 million of capital expenditures for sustaining and compliance capital projects at our operating facilities as well as growth-related capital, including a capacity expansion project in Performance Chemicals, partially offset by proceeds from the sale of our Purification Solutions business of $79 million and proceeds from the sale of land of $18 million.
Impairment Charges and Loss on Sale Years Ended September 30 2022 2021 (In millions) Loss on sale of business and asset impairment charge $ 207 $ — The loss on sale and asset impairment charges associated with the sale of the Purification Solutions business are described in Note D of our Notes to the Consolidated Financial Statements.
Impairment Charges and Loss on Sale Years Ended September 30 2023 2022 (In millions) Loss on sale of business and asset impairment charge $ 3 $ 207 The loss on sale and asset impairment charges associated with the sale of the Purification Solutions business are described in Note D of our Notes to the Consolidated Financial Statements.
We have also entered into long-term purchase agreements primarily for services related to information technology, which are not included in the table above, that total $26 million as of September 30, 2022, the majority of which is expected to be paid within the next 5 years.
We have also entered into long-term purchase agreements primarily for services related to information technology, which are not included in the table above, that total $19 million as of September 30, 2023, the majority of which is expected to be paid within the next 5 years.
Our long-term total debt, of which $ 7 million is current, matures at various times as presented in Note I of our Notes to the Consolidated Financial Statements. The weighted-average interest rate on our fixed rate long-term debt was 4.29 % as of September 30, 2022.
Our long-term total debt, of which $8 million is current, matures at various times as presented in Note I of our Notes to the Consolidated Financial Statements. The weighted-average interest rate on our fixed rate long-term debt was 4.29% as of September 30, 2023.
Management believes excluding the items identified as certain items facilitates operating performance comparisons from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a U.S. GAAP basis and also facilitates an evaluation of our operating performance without the impact of these costs or benefits.
Management believes excluding the items identified as certain items facilitates operating performance comparisons from period to period by eliminating differences that would not otherwise be apparent on a U.S. GAAP basis and also facilitates an evaluation of our operating performance without the impact of these costs or benefits.
Our income taxes are affected by the mix of earnings in the tax jurisdictions in which we operate, and the presence of valuation allowances in certain tax jurisdictions. For fiscal 2023, we expect our Operating tax rate to be in the range of 26% to 28%.
Our income taxes are affected by the mix of earnings in the tax jurisdictions in which we operate, and the presence of valuation allowances in certain tax jurisdictions. For fiscal 2024, we expect our Operating tax rate to be in the range of 28% to 30%.
In recent years, operating results in Performance Chemicals have been driven by: i) increases or decreases in sales volumes to the industries previously noted; ii) changes in pricing and product mix, which includes customer pricing as well as the mix of products sold or the region in which they are sold; iii) our ability to deliver differentiated products that drive enhanced performance in customers’ applications; iv) our ability to obtain value pricing for this differentiation; v) the cost of new capacity; vi) changes in selling prices relative to variations in the cost of raw materials; and vii) the adoption of new products for use in our customers’ applications.
In recent years, operating results in Performance Chemicals have been driven by: i) increases or decreases in sales volumes to the industries previously noted; ii) changes in pricing and product mix, which includes customer pricing as well as the mix of products sold or the region in which they are sold; iii) our ability to deliver differentiated products that drive enhanced performance in customers’ applications; iv) our ability to obtain value pricing for this differentiation; v) the cost of new capacity; vi) changes in selling prices relative to variations in the cost of raw materials; vii) the adoption of new products for use in our customers’ applications; and viii) changes in supply chain inventory levels to adapt to end-market demand and other market dynamics.
Net income (loss) attributable to noncontrolling interests, net of tax, decreased by $2 million in fiscal 2022 compared to fiscal 2021 primarily due to lower earnings of our joint ventures in China, partially offset by increased earnings of our joint venture in the Czech Republic.
Net income (loss) attributable to noncontrolling interests, net of tax, increased by $5 million in fiscal 2023 compared to fiscal 2022 primarily due to increased earnings of our joint venture in the Czech Republic, partially offset by lower earnings of our joint ventures in China.
As of September 30, 2022, we had cash and cash equivalents of $206 million and borrowing availability under our revolving credit agreements of $856 million. We have access to borrowings under the following two credit agreements: • $1 billion unsecured revolving credit agreement (the “U.S.
As of September 30, 2023, we had cash and cash equivalents of $238 million and borrowing availability under our revolving credit agreements of $1 billion. We have access to borrowings under the following two credit agreements: • $1 billion unsecured revolving credit agreement (the “U.S.
GAAP Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, as applicable, are described below. • Asset impairment charges, which primarily include charges associated with an impairment of goodwill, other long-lived assets or assets held for sale. • Charges related to the divestiture of our Purification Solutions business, which include accelerated costs associated with the change in control and employee incentive compensation. • Benefit from the settlement of a royalty arrangement entered into in connection with the divestiture of our former Specialty Fluids business. • Legal and environmental reserves and matters, which consist of costs or benefits for matters typically related to former businesses or that are otherwise incurred outside of the ordinary course of business. • Global restructuring activities, which include costs or benefits associated with cost reduction initiatives or plant closures and are primarily related to (i) employee termination costs, (ii) asset impairment charges associated with restructuring actions, (iii) costs to close facilities, including environmental costs and contract termination penalties, and (iv) gains realized on the sale of land or equipment associated with restructured plants or locations. 30 • Acquisition and integration-related charges, which include transaction costs, redundant costs incurred during the period of integration, and costs associated with transitioning certain management and business processes to Cabot’s processes. • Indirect tax settlement credits, which includes favorable settlements resulting in the recoveries of indirect taxes. • Gains (losses) on sale of a business. • Employee benefit plan settlements, which consist of either charges or benefits associated with the termination of a pension plan or the transfer of a pension plan to a multi-employer plan. • Gain associated with the bargain purchase of a business. • Gain realized on the sale of land.
GAAP Income (loss) from operations before income taxes and equity in earnings of affiliated companies, as applicable, are described below. • Asset impairment charges, which primarily include charges associated with an impairment of goodwill, other long-lived assets or assets held for sale. • Charges related to the divestiture of our Purification Solutions business, which include accelerated costs associated with the change in control and employee incentive compensation. • Benefit from the settlement of a royalty arrangement entered into in connection with the divestiture of our former Specialty Fluids business. • Legal and environmental reserves and matters, which consist of costs or benefits for matters typically related to former businesses or that are otherwise incurred outside of the ordinary course of business. • Global restructuring activities, which include costs or benefits associated with cost reduction initiatives or plant closures and are primarily related to (i) employee termination costs, (ii) asset impairment charges associated with restructuring actions, (iii) costs to close facilities, including environmental costs and contract termination penalties, and (iv) gains realized on the sale of land or equipment associated with restructured plants or locations. • Acquisition and integration-related charges, which include transaction costs, redundant costs incurred during the period of integration, and costs associated with transitioning certain management and business processes to Cabot’s processes. • Indirect tax settlement credits, which includes favorable settlements resulting in the recoveries of indirect taxes. • Gains (losses) on sale of a business. • Employee benefit plan settlements, which consist of either charges or benefits associated with the termination of a pension plan or the transfer of a pension plan to a multi-employer plan. • Gain associated with the bargain purchase of a business. • Gain realized on the sale of land. • Argentina controlled currency devaluation loss relates to the foreign exchange loss from government-controlled currency devaluations on our net monetary assets denominated in the Argentine peso. 30 Drivers of Demand and Key Factors Affecting Profitability Drivers of demand and key factors affecting our profitability differ by segment.
The increase in net working capital was driven by an increase in accounts receivable due to higher sales and an increase in inventory driven by a higher cost of raw materials, partially offset by an increase in accounts payable.
The increase in net working capital was driven by an increase in accounts receivable due to higher sales, including the pass through of higher raw material costs, and an increase in inventory driven by a higher cost of raw materials, partially offset by an increase in accounts payable.
For the year ended September 30, 2022, the (Provision) benefit for income taxes was a $102 million expense compared to a $123 million expense for fiscal 2021.
For the year ended September 30, 2023, the (Provision) benefit for income taxes was a $28 million benefit compared to a $102 million expense for fiscal 2022.
Liquidity and Capital Resources Overview Our liquidity position, as measured by cash and cash equivalents plus borrowing availability, decreased by $250 million during fiscal 2022, primarily due to a higher outstanding commercial paper balance at the end of the period.
Liquidity and Capital Resources Overview Our liquidity position, as measured by cash and cash equivalents plus borrowing availability, increased by $200 million during fiscal 2023, primarily due to a higher cash balance and lower outstanding commercial paper balance at the end of the period.
Other Unallocated Items: Years Ended September 30 2022 2021 (In millions) Interest expense $ (56 ) $ (49 ) Unallocated corporate costs (59 ) (58 ) General unallocated income (expense) 1 — Less: Equity in earnings of affiliated companies, net of tax 10 3 Total other unallocated items $ (124 ) $ (110 ) 34 A discussion of items that we refer to as “other unallocated items” can be found under the heading “Definition of Terms and Non-GAAP Financial Measures”.
Other Unallocated Items: Years Ended September 30 2023 2022 (In millions) Interest expense $ (90 ) $ (56 ) Unallocated corporate costs (54 ) (59 ) General unallocated income (expense) 22 1 Less: Equity in earnings of affiliated companies, net of tax 5 10 Total other unallocated items $ (127 ) $ (124 ) A discussion of items that we refer to as “other unallocated items” can be found under the heading “Definition of Terms and Non-GAAP Financial Measures”.
Selling and Administrative Expenses Years Ended September 30 2022 2021 (In millions) Selling and administrative expenses $ 258 $ 289 Selling and administrative expenses decreased by $ 31 million in fiscal 2022 as compared to fiscal 2021.
Selling and Administrative Expenses Years Ended September 30 2023 2022 (In millions) Selling and administrative expenses $ 253 $ 258 31 Selling and administrative expenses decreased by $5 million in fiscal 2023 as compared to fiscal 2022.
Interest Expense Years Ended September 30 2022 2021 (In millions) Interest expense $ 56 $ 49 Interest expense increased by $7 million in fiscal 2022 as compared to fiscal 2021 primarily due to higher interest rates.
Interest Expense Years Ended September 30 2023 2022 (In millions) Interest expense $ 90 $ 56 Interest expense increased by $34 million in fiscal 2023 as compared to fiscal 2022 primarily due to higher interest rates.
Cash Flows from Investing Activities Investing activities consumed $118 million of cash in fiscal 2022 compared to $186 million in fiscal 2021.
Cash Flows from Investing Activities Investing activities consumed $214 million of cash in fiscal 2023 compared to $118 million in fiscal 2022.
Equity in Earnings of Affiliated Companies and Net Income (Loss) Attributable to Noncontrolling Interest, Net of Tax Years Ended September 30 2022 2021 (In millions) Equity in earnings of affiliated companies, net of tax $ 10 $ 3 Net income (loss) attributable to noncontrolling interests, net of tax $ 34 $ 36 Equity in earnings of affiliated companies, net of tax, increased by $7 million in fiscal 2022 compared to fiscal 2021 primarily due to higher profitability at our equity affiliates in India and Venezuela.
Equity in Earnings of Affiliated Companies and Net Income (Loss) Attributable to Noncontrolling Interest, Net of Tax Years Ended September 30 2023 2022 (In millions) Equity in earnings of affiliated companies, net of tax $ 5 $ 10 Net income (loss) attributable to noncontrolling interests, net of tax $ 39 $ 34 Equity in earnings of affiliated companies, net of tax, decreased by $5 million in fiscal 2023 compared to fiscal 2022 primarily due to lower profitability at our equity affiliates in India and Venezuela.
Interest and Dividend Income Years Ended September 30 2022 2021 (In millions) Interest and dividend income $ 11 $ 8 Interest and dividend income in fiscal 2022 increased by $3 million as compared to fiscal 2021 primarily due to increases in interest rates.
Interest and Dividend Income Years Ended September 30 2023 2022 (In millions) Interest and dividend income $ 31 $ 11 Interest and dividend income in fiscal 2023 increased by $20 million as compared to fiscal 2022 primarily due to higher interest rates.
Net Income (Loss) Attributable to Cabot Corporation In fiscal 2022, we reported net income attributable to Cabot Corporation of $ 209 million ($ 3.62 earnings per diluted common share). In fiscal 2021, we reported net income attributable to Cabot Corporation of $250 million ($4.34 earnings per diluted common share).
Net Income (Loss) Attributable to Cabot Corporation In fiscal 2023, we reported net income attributable to Cabot Corporation of $445 million ($7.73 earnings per diluted common share). In fiscal 2022, we reported net income attributable to Cabot Corporation of $209 million ($3.62 earnings per diluted common share).
Fiscal 2022 compared to Fiscal 2021—Consolidated Net Sales and Other Operating Revenues and Gross Profit Years Ended September 30 2022 2021 (In millions) Net sales and other operating revenues $ 4,321 $ 3,409 Gross profit $ 885 $ 799 Net sales increased by $912 million in fiscal 2022 as compared to fiscal 2021.
Fiscal 2023 compared to Fiscal 2022—Consolidated Net Sales and Other Operating Revenues and Gross Profit Years Ended September 30 2023 2022 (In millions) Net sales and other operating revenues $ 3,931 $ 4,321 Gross profit $ 839 $ 885 Net sales decreased by $390 million in fiscal 2023 as compared to fiscal 2022.
Typical of such plans, our postretirement plans are unfunded and, therefore, have no plan assets. We fund these plans as claims or insurance premiums come due. In fiscal 2022, we paid postretirement benefits of $5 million. For fiscal 2023, our benefit payments for our postretirement plans are expected to be $3 million.
These postretirement benefit plans provide certain health care and life insurance benefits for retired employees. Typical of such plans, our postretirement plans are unfunded and, therefore, have no plan assets. We fund these plans as claims or insurance premiums come due. In fiscal 2023, we paid postretirement benefits of $3 million.
For the discussions of our fiscal 2020 results and year-to-year comparisons between fiscal 2021 and fiscal 2020, refer to our discussions under the headings “Results of Operations” and “Cash Flows and Liquidity” in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021, which was filed with the United States Securities and Exchange Commission on November 29, 2021. 29 Definition of Terms and Non-GAAP Financial Measures When discussing our results of operations, we use several terms as described below.
For the discussions of our fiscal 2021 results and year-to-year comparisons between fiscal 2022 and fiscal 2021, refer to our discussions under the headings “Results of Operations” and “Cash Flows and Liquidity” in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022, which was filed with the United States Securities and Exchange Commission on November 23, 2022.
Years Ended September 30 2022 2021 (In millions) Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies $ 335 $ 406 Less: Certain items, pre-tax (183 ) (34 ) Less: Other unallocated items (124 ) (110 ) Total segment EBIT $ 642 $ 550 In fiscal 2022, Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies decreased by $ 71 million and Total Segment EBIT increased by $92 million.
Years Ended September 30 2023 2022 (In millions) Income (loss) from operations before income taxes and equity in earnings of affiliated companies $ 451 $ 335 Less: Certain items, pre-tax (29 ) (183 ) Less: Other unallocated items (127 ) (124 ) Total segment EBIT $ 607 $ 642 33 In fiscal 2023, Income (loss) from operations before income taxes and equity in earnings of affiliated companies increased by $116 million.
Share Repurchases In fiscal 2018, our Board of Directors authorized us to repurchase up to an additional ten million shares of common stock. In fiscal 2022 we repurchased approximately 0.8 million shares of common stock on the open market for $49 million. We did not repurchase any shares during fiscal 2021.
Share Repurchases In fiscal 2018, our Board of Directors authorized us to repurchase up to an additional ten million shares of common stock. In fiscal 2023, we repurchased approximately 1.3 million shares of common stock on the open market for $91 million.
This increase was partially offset by benefits from money market investments. 32 ( Provision ) Benefit for Income Taxes and Reconciliation of Effective Tax Rate to Operating Tax Rate Years Ended September 30 2022 2021 (Provision) / Benefit for Income Taxes Rate (Provision) / Benefit for Income Taxes Rate (Dollars in millions) Effective tax rate (1) $ (102 ) 30 % $ (123 ) 30 % Less: Non-GAAP tax adjustments (2) 32 (4 ) Operating tax rate $ (134 ) 26 % $ (119 ) 27 % (1) Refer to the reconciliation of computed tax expense at the federal statutory rate to the Provision (benefit) for income taxes in Note Q of our Notes to the Consolidated Financial Statements.
(Provision) Benefit for Income Taxes and Reconciliation of Effective Tax Rate to Operating Tax Rate Years Ended September 30 2023 2022 (Provision) / Benefit for Income Taxes Rate (Provision) / Benefit for Income Taxes Rate (Dollars in millions) Effective tax rate (1) $ 28 -6 % $ (102 ) 30 % Less: Non-GAAP tax adjustments (2) 161 32 Operating tax rate $ (133 ) 28 % $ (134 ) 26 % 32 (1) Refer to the reconciliation of computed tax expense at the federal statutory rate to the Provision (benefit) for income taxes in Note Q of our Notes to the Consolidated Financial Statements.
Cash Flows from Operating Activities Cash provided by operating activities, which consists of net income adjusted for the various non-cash items included in income, changes in working capital and changes in certain other balance sheet accounts, totaled $ 100 million in fiscal 2022. Operating activities provided $257 million of cash in fiscal 2021.
The following discussion of the changes in our cash balance refers to the various sections of our Consolidated Statements of Cash Flows. 36 Cash Flows from Operating Activities Cash provided by operating activities, which consists of net income adjusted for the various non-cash items included in income, changes in working capital and changes in certain other balance sheet accounts, totaled $595 million in fiscal 2023.
Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Syndication Agent, and the other lenders party thereto, which matures in August 2026, subject to a one-year option to extend the maturity, exercisable on or prior to August 6, 2023. The U.S.
Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Syndication Agent, and the other lenders party thereto, which matures in August 2027. The U.S.
Employee Benefit Plans As of September 30, 2022, we had a consolidated pension obligation, net of the fair value of plan assets, of $29 million, primarily associated with postretirement benefit plan liabilities. In fiscal 2022, we made cash contributions totaling $5 million to our pension benefit plans.
These cash dividend payments totaled $88 million and $84 million in fiscal 2023 and fiscal 2022, respectively. 37 Employee Benefit Plans As of September 30, 2023, we had a consolidated pension obligation, net of the fair value of plan assets, of $22 million, primarily associated with postretirement benefit plan liabilities.
The decrease in fiscal 2022 was primarily due to the Purification Solutions loss on sale and asset impairment charge, partially offset by higher Total segment EBIT in Reinforcement Materials and Performance Chemicals . 33 Fiscal 2022 compared to Fiscal 2021 —By Business Segment Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, certain items, pre-tax, other unallocated items and Total segment EBIT for fiscal 2022 and 2021 are set forth in the table below.
Fiscal 2023 compared to Fiscal 2022—By Business Segment Income (loss) from operations before income taxes and equity in earnings of affiliated companies, pre-tax certain items, other unallocated items and Total segment EBIT for fiscal 2023 and 2022 are set forth in the table below.
As of September 30, 2022, we had $ 856 million of availability under our Credit Agreements. As of September 30, 2022, we had $114 million of borrowings outstanding under the Euro Credit Agreement and no outstanding borrowings under the U.S. Credit Agreement.
As of September 30, 2023, we had $1 billion of availability under our Credit Agreements. As of September 30, 2023, we had $120 million of borrowings outstanding under the Euro Credit Agreement and no outstanding borrowings under the U.S. Credit Agreement. There was $172 million and $322 million of commercial paper outstanding at September 30, 2023 and 2022, respectively.
Goodwill Impairment 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.
Refer to Note A and Note S of our Notes to the Consolidated Financial Statements for description of our policies related to contingencies. 28 Goodwill Impairment 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.
Additionally, during both fiscal 2022 and fiscal 2021 we repurchased 0.1 million shares of our common stock associated with employee tax obligations on stock-based compensation awards for $4 million and $3 million, respectively. As of September 30, 2022, we had approximately 4.3 million shares available for repurchase under the Board of Directors’ share repurchase authorization.
In fiscal 2022 we repurchased approximately 0.8 million shares of common stock on the open market for $49 million. Additionally, during both fiscal 2023 and fiscal 2022 we repurchased 0.1 million shares of our common stock associated with employee tax obligations on stock-based compensation awards for $7 million and $4 million, respectively.
Overview of Results for Fiscal 2022 During fiscal 2022, Income (loss) before income taxes and equity in earnings of affiliated companies decreased compared to fiscal 2021 primarily due to the impairment and loss on sale charges related to the divestiture of the Purification Solutions business.
Overview of Results for Fiscal 2023 During fiscal 2023, Income (loss) from operations before income taxes and equity in earnings of affiliated companies increased compared to fiscal 2022 primarily due to the impairment and loss on sale charges related to the divestiture of the Purification Solutions business, which did not recur in fiscal 2023, and higher earnings in our Reinforcement Materials segment partially offset by lower earnings in our Performance Chemicals segment.
Our discussion under the heading “Fiscal 2022 compared to Fiscal 2021—By Business Segment” includes a discussion of Total segment EBIT, which is a non-GAAP financial measure defined as Income (loss) from continuing operations before income taxes and equity in earnings from affiliated companies less certain items and other unallocated items.
Management believes that this non-GAAP financial measure is useful supplemental information because it helps our investors compare our tax rate year to year on a consistent basis and to understand what our tax rate on current operations would be without the impact of these items. 29 Our discussion under the heading “Fiscal 2023 compared to Fiscal 2022—By Business Segment” includes a discussion of Total segment EBIT, which is a non-GAAP financial measure defined as Income (loss) from operations before income taxes and equity in earnings from affiliated companies less certain items and other unallocated items.
The increase in net working capital was driven by an increase in accounts receivable due to higher sales and an increase in inventory driven by a higher cost of raw materials, partially offset by an increase in accounts payable.
The decrease in net working capital was largely driven by a decrease in accounts receivable due to lower customer prices from lower cost of raw materials and decreased sales volumes and a decrease in inventories, partially offset by a decrease in accounts payable and accrued expenses driven by lower cost of raw materials.
In fiscal 2021, the use of cash by investing activities primarily consisted of $195 million of capital expenditures for sustaining and compliance capital projects at our operating facilities as well as growth-related capital, including a capacity expansion project in Performance Chemicals. Capital expenditures for fiscal 2023 are expected to be between $300 million and $350 million.
In fiscal 2023, the use of cash by investing activities primarily consisted of $244 million of capital expenditures for sustaining and compliance capital projects at our operating facilities as well as growth-related capital, including a capacity expansion project in Performance Chemicals, partially offset by proceeds from insurance settlements of $12 million, proceeds from the sale of land of $7 million, and proceeds from the sale of our Purification Solutions business of $6 million.
Goodwill is not amortized and is subject to impairment testing annually, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value. 27 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.
Goodwill is not amortized and is subject to impairment testing annually, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value.
Additionally, we have established valuation allowances against a variety of deferred tax assets, including net operating loss carryforwards, capital loss carryforwards, foreign tax credits, and other income tax credits.
We believe the following critical accounting estimates are the most significant to understanding our consolidated financial statements. Deferred Tax Assets We have established valuation allowances against a variety of deferred tax assets, including net operating loss carryforwards, capital loss carryforwards, foreign tax credits, and other income tax credits.
Cash provided by operating activities in fiscal 2021 was driven by business earnings excluding the non-cash impacts of depreciation and amortization of $160 million, which was partially offset by an increase in net working capital of $222 million.
Operating activities provided $100 million of cash in fiscal 2022. Cash provided by operating activities in fiscal 2023 was driven by business earnings excluding the non-cash impacts of depreciation and amortization of $144 million, plus a decrease in net working capital of $97 million.
In fiscal 2023, we expect to make cash contributions of $ 4 million to our pension plans. The $29 million of unfunded postretirement benefit plan liabilities is comprised of $16 million for our U.S. and $13 million for our foreign postretirement benefit plans. These postretirement benefit plans provide certain health care and life insurance benefits for retired employees.
In fiscal 2023, we made cash contributions totaling $4 million to our defined benefit pension plans. In fiscal 2024, we expect to make cash contributions of $4 million to our defined benefit pension plans. The $25 million of unfunded postretirement benefit plan liabilities is comprised of $14 million for our U.S. and $11 million for our foreign postretirement benefit plans.
Drivers of Demand and Key Factors Affecting Profitability Drivers of demand and key factors affecting our profitability differ by segment. In Reinforcement Materials, longer term demand is driven primarily by: i) the number of vehicle miles driven globally; ii) the number of original equipment and replacement tires produced; and iii) the number of automotive builds.
In Reinforcement Materials, longer term demand is driven primarily by: i) the number of vehicle miles driven globally; ii) the number of original equipment and replacement tires produced; iii) the number of automotive builds; and iv) changes in supply chain inventory levels to adapt to end-market demand and other market dynamics.
Credit Agreement, the “Credit Agreements”), with Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto, which matures in May 2024 or earlier if the U.S. Credit Agreement should terminate early.
Credit Agreement, the “Credit Agreements”), with PNC Bank, National Association, as Administrative Agent, and the other lenders party thereto, which matures in August 2027.
Fixed costs increased in support of our growth vectors, higher utilities costs and general inflationary cost increases. 35 Purification Solutions Sales and EBIT for Purification Solutions for fiscal 2022 and 2021 are as follows: Years Ended September 30 2022 2021 (In millions) Purification Solutions Sales $ 97 $ 257 Purification Solutions EBIT $ — $ 10 We divested the Purification Solutions business in March 2022.
Purification Solutions Sales and EBIT for Purification Solutions for fiscal 2023 and 2022 are as follows: Years Ended September 30 2023 2022 (In millions) Purification Solutions Sales $ — $ 97 Purification Solutions EBIT $ — $ — We divested the Purification Solutions business in March 2022.
The use of cash by financing activities in fiscal 2021 primarily consisted of dividend payments to stockholders of $80 million, dividend payments to noncontrolling interests of $19 million, and net repayments of long-term debt of $22 million, which consisted of proceeds of $200 million less repayments of $222 million, partially offset by net proceeds from the issuance of commercial paper of $58 million.
The cash consumed by financing activities in fiscal 2023 primarily consisted of net repayments of long-term debt of $6 million, which consisted of repayments of $90 million partially offset by proceeds of $84 million, net repayments of commercial paper of $149 million, net repayments of credit facility borrowings of $24 million, dividend payments to stockholders of $88 million, purchases of common stock of $98 million and dividend payments to noncontrolling interests of $42 million.
Our planned capital spending program for fiscal 2023 is primarily for sustaining, compliance and improvement capital projects at our operating facilities as well as capacity expansion capital expenditures in Performance Chemicals. 37 Cash Flows from Financing Activities Financing activities provided $145 million of cash in fiscal 2022 compared to $60 million of cash consumed in fiscal 2021.
Capital expenditures for fiscal 2024 are expected to be between $250 million and $275 million. Our planned capital spending program for fiscal 2024 is primarily for sustaining, compliance and improvement capital projects at our operating facilities as well as capacity expansion capital expenditures.
Research and Technical Expenses Years Ended September 30 2022 2021 (In millions) Research and technical expenses $ 55 $ 56 Research and technical expenses decreased by $1 million in fiscal 2022 as compared to fiscal 2021.
Research and Technical Expenses Years Ended September 30 2023 2022 (In millions) Research and technical expenses $ 57 $ 55 Research and technical expenses increased by $2 million in fiscal 2023 as compared to fiscal 2022 primarily due to higher costs related to our battery materials and inkjet product lines.
Other Income (Expense) Years Ended September 30 2022 2021 (In millions) Other income (expense) $ (9 ) $ (7 ) Other expense increased during fiscal 2022 by $ 2 million as compared to fiscal 2021. The change was primarily due to unfavorable foreign currency impacts largely due to the significant depreciation of the Argentine peso against the U.S. dollar.
Other Income (Expense) Years Ended September 30 2023 2022 (In millions) Other income (expense) $ (16 ) $ (9 ) Other expense increased during fiscal 2023 by $7 million as compared to fiscal 2022. The change was driven by higher foreign currency losses, primarily in Argentina, partially offset by an increase in investment income in Argentina and Brazil.
Under certain of these agreements the quantity of material being purchased is fixed, but the price we pay changes as market prices change. For purposes of the table above, current purchase prices have been used to quantify total commitments.
For purposes of the table above, current purchase prices have been used to quantify total commitments.
Dividend Payments In fiscal 2022 and fiscal 2021, we paid cash dividends on our common stock of $1.48 and $1.40 per share, respectively. These cash dividend payments totaled $84 million and $80 million in fiscal 2022 and fiscal 2021, respectively.
As of September 30, 2023, we had approximately 3.0 million shares available for repurchase under the Board of Directors’ share repurchase authorization. Dividend Payments In fiscal 2023 and fiscal 2022, we paid cash dividends on our common stock of $1.54 and $1.48 per share, respectively.
The decrease in Income (loss) before income taxes and equity earnings of affiliated companies is primarily due to the Purification Solutions loss on sale and asset impairment charge of $207 million, partially offset by increased Total segment EBIT of $92 million and the gain on a bargain purchase acquisition of $24 million.
The increase is primarily due to the absence of the Purification Solutions loss on sale and asset impairment charge of $207 million that occurred in fiscal 2022, partially offset by the gain on the Tokai Carbon acquisition of $24 million that did not reoccur in fiscal 2023.
The increase was primarily due to favorable price and product mix (combined $251 million) and higher volumes ($4 million), partially offset by unfavorable impact from foreign currency translation ($32 million). The favorable price and product mix was due to increased pricing ahead of rising input costs across the segment.
The increase was driven by higher unit margins, net of higher costs ($128 million) partially offset by lower volumes ($48 million) and the unfavorable impact from foreign currency translation ($6 million). The higher unit margins net of higher costs was primarily driven by favorable pricing and product mix in 2023 calendar year customer agreements.
The decrease was due primarily to a $17 million benefit from the sale of land in fiscal 2022 and reduced charges related to our legal reserve for respirator matters compared to fiscal 2021.
The decrease in selling and administrative expenses in fiscal 2023 was primarily due to a decrease in the incentive compensation accrual for the fiscal 2023 period and prior year charges related to the Purification Solutions divestiture, partially offset by a $17 million benefit from the sale of land in fiscal 2022 that did not recur.
This decrease was partially offset by higher earnings in our Reinforcement Materials and Performance Chemicals segments.
The decrease was primarily due to lower volumes within both the Reinforcement Materials and Performance Chemicals segments and the negative impact of foreign currency translation, partially offset by higher unit margins in our Reinforcement Materials segment.
In fiscal 2022, EBIT in Performance Chemicals increased by $23 million compared to fiscal 2021 primarily due to higher unit margins ($64 million) and higher volumes ($1 million), partially offset by higher fixed cost ($33 million) and unfavorable impact from foreign currency translation ($7 million).
EBIT in Performance Chemicals decreased by $109 million compared to the same period of fiscal 2022 due to lower volumes ($51 million), lower unit margins ($43 million), the unfavorable impact of a reduction in inventory levels ($10 million) and the unfavorable impact of foreign currency translation ($10 million).
Reinforcement Materials Sales and EBIT for Reinforcement Materials for fiscal 2022 and 2021 are as follows: Years Ended September 30 2022 2021 (In millions) Reinforcement Materials Sales $ 2,575 $ 1,781 Reinforcement Materials EBIT $ 408 $ 329 In fiscal 2022, sales in Reinforcement Materials increased by $ 794 million as compared to fiscal 2021, primarily due to a favorable price and product mix (combined $799 million) and higher volumes ($72 million), partially offset by unfavorable impact from foreign currency translation ($76 million).
In fiscal 2023, total other unallocated items increased by $3 million as compared to fiscal 2022 primarily due to increased interest expense from higher interest rates, partially offset by higher general unallocated income due to higher interest and investment income. 34 Reinforcement Materials Sales and EBIT for Reinforcement Materials for fiscal 2023 and 2022 are as follows: Years Ended September 30 2023 2022 (In millions) Reinforcement Materials Sales (1) $ 2,563 $ 2,673 Reinforcement Materials EBIT $ 482 $ 408 (1) Beginning in fiscal 2023, the Company began allocating energy center revenue to the applicable segment’s Sales.
Performance Chemicals Sales and EBIT for Performance Chemicals for fiscal 2022 and 2021 are as follows: Years Ended September 30 2022 2021 (In millions) Performance Additives Sales $ 1,013 $ 796 Formulated Solutions Sales 359 352 Performance Chemicals Sales $ 1,372 $ 1,148 Performance Chemicals EBIT $ 234 $ 211 In fiscal 2022, sales in Performance Chemicals increased by $224 million as compared to fiscal 2021 .
Performance Chemicals Sales and EBIT for Performance Chemicals for fiscal 2023 and 2022 are as follows: Years Ended September 30 2023 2022 (In millions) Performance Chemicals Sales (1) $ 1,225 $ 1,388 Performance Chemicals EBIT $ 125 $ 234 (1) Beginning in fiscal 2023, the Company began allocating energy center revenue to the applicable segment’s Sales.
The favorable price and product mix was primarily due to favorable 2022 calendar year customer agreements and higher feedstock and energy costs that are generally passed through to our customers. The higher volumes in fiscal 2022 were driven by stronger demand across all regions.
The improved price and product mix was primarily due to favorable 2023 calendar year customer agreements. The lower by-product revenue was due to lower utility and energy costs in fiscal 2023 compared to fiscal 2022, particularly in Europe. EBIT in Reinforcement Materials increased by $74 million compared to fiscal 2022.
Higher unit margins were driven by strong pricing and favorable product mix in our specialty carbons and fumed metal oxides product lines. The higher volume was due to increased demand for our battery materials product line partially offset by lower volumes in our fumed metal oxides product line.
Lower volumes were driven by customer destocking, demand softness in key end markets, and prolonged weakness in China following the impact from COVID-19 outbreaks in the first half of fiscal 2023. The decrease in unit margins were largely due to a less favorable pricing and product mix in the battery materials and specialty carbons product lines.
The gross profit increase was primarily due to higher volumes across all regions , higher unit margins in the Reinforcement Materials segment due to favorable pricing and product mix in our 2022 customer agreements and higher unit margins in the Performance Chemicals segment due to price increases and favorable product mix in our specialty carbons and fumed metal oxides product lines.
Lower volumes in the Reinforcement Materials ($48 million) and Performance Chemicals ($51 million) segments were primarily due to demand softness in key end markets and destocking. Higher unit margins in the Reinforcement Materials segment ($128 million) were primarily due to improved pricing and product mix in our calendar year 2023 annual tire customer agreements.
Payments Due by Fiscal Year 2023 2024 2025 2026 2027 Thereafter Total (In millions) Purchase commitments $ 294 $ 244 $ 237 $ 236 $ 221 $ 1,960 $ 3,192 Long-term debt 4 114 — 250 — 708 1,076 Fixed interest on long-term debt 41 41 41 41 33 114 311 Variable interest on long-term debt 4 4 — — — — 8 Finance leases ( 1) 5 4 4 4 3 16 36 Operating leases ( 1) 16 14 13 11 10 51 115 Total $ 364 $ 421 $ 295 $ 542 $ 267 $ 2,849 $ 4,738 (1) Lease liabilities include interest. 38 Purchase Commitments We have entered into long-term, volume-based purchase agreements primarily for the purchase of raw materials and natural gas with various key suppliers for all of our business segments.
Payments Due by Fiscal Year 2024 2025 2026 2027 2028 Thereafter Total (In millions) Purchase commitments $ 249 $ 223 $ 217 $ 197 $ 122 $ 1,477 $ 2,485 Long-term debt 4 — 250 120 8 700 1,082 Fixed interest on long-term debt 41 41 41 33 32 82 270 Variable interest on long-term debt 6 6 6 6 — — 24 Finance leases (1) 5 4 4 3 3 15 34 Operating leases (1) 18 16 13 12 10 51 120 Total $ 323 $ 290 $ 531 $ 371 $ 175 $ 2,325 $ 4,015 (1) Lease liabilities include interest.
Removed
The policies that we believe are critical to the preparation of the consolidated financial statements are presented below. Revenue Recognition We recognize revenue when our customers obtain control of promised goods or services. The revenue recognized is the amount of consideration which we expect to receive in exchange for those goods or services.
Added
We assess the realizability of our deferred tax assets quarterly and recognize a valuation allowance when it is more likely than not that some or all of our deferred tax assets are not realizable. This assessment is completed on a jurisdiction-by-jurisdiction basis and relies on the weight of all positive and negative evidence available.
Removed
Our contracts with customers are generally for products only and do not include other performance obligations. Generally, we consider 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.
Added
Cumulative pre-tax losses for a three-year period are considered significant objective negative evidence that some or all of our deferred tax assets may not be realizable. Cumulative reported pre-tax income is considered objectively verifiable positive evidence of our ability to generate positive pretax income in the future. In accordance with U.S.
Removed
To determine the transaction price at the time when revenue is recognized, we evaluate 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 we expect to be entitled.
Added
GAAP, when there is a recent history of pre-tax losses, there is little weight placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. Judgment is required when considering the relative impact of positive and negative evidence.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn certain situations where we have forecasted purchases under a long-term commitment or forecasted sales denominated in a foreign currency we may enter into appropriate financial instruments in accordance with our risk management policy to hedge future cash flow exposures. 39 In fiscal 2022, due to the weakening of most foreign currencies against the U .
Biggest changeThese forwards had a fair value of less than $1 million as of both September 30, 2023 and 2022. In certain situations where we have forecasted purchases under a long-term commitment or forecasted sales denominated in a foreign currency, we may enter into appropriate financial instruments in accordance with our risk management policy to hedge future cash flow exposures.
We manage these risks through normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. We have policies governing our use of derivative instruments, and we do not enter into financial instruments for trading or speculative purposes. By using derivative instruments, we are subject to credit and market risk.
We manage these risks through normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. We have policies governing our use of derivative instruments, and we do not enter into financial instruments for trading or speculative purposes. 38 By using derivative instruments, we are subject to credit and market risk.
Description Notional Amount Interest Rate Received Interest Rate Paid Fiscal Year Entered Into Maturity Year Fair Value at September 30, 2022 Fair Value at September 30, 2021 Cross Currency Swaps USD 250 million swapped to EUR 223 million 3.40% 1.94% 2016 2026 $29 million $3 million We also have foreign currency exposures 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.
Description Notional Amount Interest Rate Received Interest Rate Paid Fiscal Year Entered Into Maturity Year Fair Value at September 30, 2023 Fair Value at September 30, 2022 Cross Currency Swaps USD 250 million swapped to EUR 223 million 3.40% 1.94% 2016 2026 $12 million $29 million We also have foreign currency exposures 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.
The derivative instruments are booked in our balance sheet at fair value and reflect the asset or liability position as of September 30, 2022. If a counterparty fails to fulfill its performance obligations under a derivative contract, our exposure will equal the fair value of the derivative.
The derivative instruments are booked in our balance sheet at fair value and reflect the asset or liability position as of September 30, 2023. If a counterparty fails to fulfill its performance obligations under a derivative contract, our exposure will equal the fair value of the derivative.
The following table summarizes the principal terms of our cross-currency swaps, including the aggregate notional amount of the swaps, the interest rate payment we receive from and pay to our swap counterparties, the term and fair value at September 30, 2022 and September 30, 2021.
The following table summarizes the principal terms of our cross-currency swaps, including the aggregate notional amount of the swaps, the interest rate payment we receive from and pay to our swap counterparties, the term and fair value at September 30, 2023 and September 30, 2022.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to changes in interest rates and foreign currency exchange rates because we finance certain operations through long- and short-term borrowings and denominate our transactions in a variety of foreign currencies. Changes in these rates may have an impact on future cash flows and earnings.
Item 7A. Quantitative and Qualita tive Disclosures About Market Risk We are exposed to changes in interest rates and foreign currency exchange rates because we finance certain operations through long- and short-term borrowings and denominate our transactions in a variety of foreign currencies. Changes in these rates may have an impact on future cash flows and earnings.
We recognized a net foreign exchange loss of $13 million in Other income (expense) in fiscal 2022 from the revaluation of monetary assets and liabilities from transactional currencies to functional currency, largely attributable to changes in the value of the Argentine p eso and to a lesser extent Columb ian p eso .
In fiscal 2022, we recognized a net foreign exchange loss of $13 million in Other income (expense) from the revaluation of monetary assets and liabilities from transactional currencies to functional currency, largely attributable to changes in the value of the Argentine peso and to a lesser extent Colombian peso. 39
Accordingly, we use short-term forward contracts to minimize the exposure to foreign currency risk. At September 30, 2022, we had $ 42 million in notional foreign currency contracts, which were denominated in Indonesian rupiah and Czech koruna . These forwards had a fair value of less than $ 1 million as of September 30, 2022.
Accordingly, we use short-term forward contracts to minimize the exposure to foreign currency risk. At September 30, 2023, we had $82 million in notional foreign currency contracts, which were denominated in Indonesian rupiah, Czech koruna, and Colombian peso. At September 30, 2022, we had $42 million in notional foreign currency contracts, which were denominated in Indonesian rupiah and Czech koruna.
In fiscal 202 1 , w e recognized a net foreign exchange loss of $6 million in Other income (expense) from the revaluation of monetary assets and liabilities from transactional currencies to functional currency, largely attributable to changes in the value of the Argentine p es o and to a lesser extent Czech koruna and Mexican p eso. 40 Item 8 .
We recognized a net foreign exchange loss of $35 million in Other income (expense) in fiscal 2023 from the revaluation of monetary assets and liabilities from transactional currencies to functional currency, largely attributable to changes in the value of the Argentine peso.
S . d ollar , foreign currency translations in the aggregate decreased our business segment EBIT by $ 2 4 million, which affected the results of the Reinforcement Materials and Performance Materials segment s .
In fiscal 2023, due to the weakening of most foreign currencies against the U.S. dollar, foreign currency translations in the aggregate decreased our business segment EBIT by $16 million, which affected the results of the Reinforcement Materials and Performance Materials segments.
In fiscal 2021, foreign currency translations in the aggregate increased our business segment EBIT by $10 million, the majority of which affected the results of the Performance Chemicals segment.
In fiscal 2022, due to the weakening of most foreign currencies against the U.S. dollar, foreign currency translations in the aggregate decreased our business segment EBIT by $24 million, which affected the results of the Reinforcement Materials and Performance Materials segments.
Removed
At September 30, 2021, we had $48 million in notional foreign currency contracts, which were denominated in Indonesian rupiah and Czech koruna. These forwards had a fair value of less than $1 million as of September 30, 2021.
Removed
Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Description Page (1) Consolidated Statements of Operations 42 (2) Consolidated Statements of Comprehensive Income 43 (3) Consolidated Balance Sheets 44 (4) Consolidated Statements of Cash Flows 46 (5) Consolidated Statements of Changes in Stockholders’ Equity 47 (6) Notes to the Consolidated Financial Statements 48 (7) Reports of Independent Registered Public Accounting Firm (PCAOB ID 34) 84 41 CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended September 30 2022 2021 2020 (In millions, except per share amounts) Net sales and other operating revenues $ 4,321 $ 3,409 $ 2,614 Cost of sales 3,436 2,610 2,114 Gross profit 885 799 500 Selling and administrative expenses 258 289 292 Research and technical expenses 55 56 57 Purification Solutions loss on sale and asset impairment charge (Note D) 207 — — Gain on bargain purchase of a business (Note C) (24 ) — — Specialty Fluids loss on sale and asset impairment charge — — 1 Marshall Mine loss on sale and asset impairment charge — — 129 Income (loss) from operations 389 454 21 Interest and dividend income 11 8 8 Interest expense (56 ) (49 ) (53 ) Other income (expense) (9 ) (7 ) (9 ) Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies 335 406 (33 ) (Provision) benefit for income taxes (102 ) (123 ) (191 ) Equity in earnings of affiliated companies, net of tax 10 3 3 Net income (loss) 243 286 (221 ) Net income (loss) attributable to noncontrolling interests, net of tax of $8, $10 and $4 34 36 17 Net income (loss) attributable to Cabot Corporation $ 209 $ 250 $ (238 ) Weighted-average common shares outstanding: Basic 56.5 56.7 56.6 Diluted 56.9 56.8 56.6 Earnings (loss) per common share: Basic $ 3.65 $ 4.35 $ (4.21 ) Diluted $ 3.62 $ 4.34 $ (4.21 ) The accompanying notes are an integral part of these consolidated financial statements. 42 CABOT CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended September 30 2022 2021 2020 (In millions) Net income (loss) $ 243 $ 286 $ (221 ) Other comprehensive income (loss), net of tax Foreign currency translation adjustment, net of tax (175 ) 52 42 Derivatives: net investment hedges (Gains) losses reclassified to interest expense, net of tax (6 ) (5 ) (5 ) (Gains) losses excluded from effectiveness testing and amortized to interest expense, net of tax 2 2 2 Pension and other postretirement benefit liability adjustments, net of tax 14 20 9 Other comprehensive income (loss), net of tax of $3, $8 and $1 (165 ) 69 48 Comprehensive income (loss) 78 355 (173 ) Net income (loss) attributable to noncontrolling interests, net of tax 34 36 17 Foreign currency translation adjustment attributable to noncontrolling interests, net of tax (15 ) 7 5 Comprehensive income (loss) attributable to noncontrolling interests 19 43 22 Comprehensive income (loss) attributable to Cabot Corporation $ 59 $ 312 $ (195 ) The accompanying notes are an integral part of these consolidated financial statements. 43 CABOT CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS September 30 2022 2021 (In millions, except share and per share amounts) Current assets: Cash and cash equivalents $ 206 $ 168 Accounts and notes receivable, net of reserve for doubtful accounts of $3 and $4 836 645 Inventories 664 523 Prepaid expenses and other current assets 114 89 Total current assets 1,820 1,425 Property, plant and equipment 3,554 3,885 Accumulated depreciation (2,284 ) (2,509 ) Net property, plant and equipment 1,270 1,376 Goodwill 129 140 Equity affiliates 20 40 Intangible assets, net 63 100 Deferred income taxes 45 53 Other assets 178 172 Total assets $ 3,525 $ 3,306 The accompanying notes are an integral part of these consolidated financial statements. 44 CABOT CORPORATION CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS’ EQUITY September 30 2022 2021 (In millions, except share and per share amounts) Current liabilities: Short-term borrowings $ 347 $ 72 Accounts payable and accrued liabilities 707 667 Income taxes payable 44 35 Current portion of long-term debt 7 373 Total current liabilities 1,105 1,147 Long-term debt 1,089 717 Deferred income taxes 65 73 Other liabilities 234 279 Commitments and contingencies (Note S) Stockholders’ equity: 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: 56,385,963 and 56,870,237 shares, Outstanding: 56,248,559 and 56,726,818 shares 56 57 Less cost of 137,404 and 143,419 shares of common treasury stock (4 ) (4 ) Additional paid-in capital 1 24 Retained earnings 1,284 1,159 Accumulated other comprehensive income (loss) (439 ) (289 ) Total Cabot Corporation stockholders’ equity 898 947 Noncontrolling interests 134 143 Total stockholders’ equity 1,032 1,090 Total liabilities and stockholders’ equity $ 3,525 $ 3,306 The accompanying notes are an integral part of these consolidated financial statements. 45 CABOT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended September 30 2022 2021 2020 (In millions) Cash Flows from Operating Activities: Net income (loss) $ 243 $ 286 $ (221 ) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 146 160 158 Purification Solutions loss on sale and asset impairment charge 207 — — Gain on bargain purchase of a business (24 ) — — Marshall Mine loss on sale and asset impairment charge — — 129 Gain on sale of land (17 ) — — Deferred tax provision (benefit) (40 ) 9 130 Employee benefit plan settlement (1 ) 5 4 Equity in net income of affiliated companies (10 ) (3 ) (3 ) Share-based compensation 23 21 9 Other non-cash (income) expense 20 21 8 Cash dividends received from equity affiliates 1 2 1 Changes in assets and liabilities: Accounts and notes receivable (287 ) (215 ) 126 Inventories (259 ) (174 ) 114 Prepaid expenses and other current assets (25 ) (37 ) (7 ) Accounts payable and accrued liabilities 115 167 (55 ) Income taxes payable 15 14 (5 ) Other liabilities (7 ) 1 (11 ) Cash provided by operating activities 100 257 377 Cash Flows from Investing Activities: Additions to property, plant and equipment (211 ) (195 ) (200 ) Proceeds from sale of Purification Solutions business 79 — — Cash paid for acquisition of business, net of cash acquired of $5, $— and $1 (9 ) — (92 ) Proceeds from sale of land 18 — — Other 5 9 4 Cash used in investing activities (118 ) (186 ) (288 ) Cash Flows from Financing Activities: Increase (decrease) in short-term borrowings 26 — — Proceeds from (repayments of) issuance of commercial paper, net 250 58 (19 ) Proceeds from long-term debt, net of issuance costs 394 200 444 Repayments of long-term debt (372 ) (222 ) (410 ) Purchases of common stock (53 ) (3 ) (44 ) Proceeds from sales of common stock 6 6 3 Cash dividends paid to noncontrolling interests (22 ) (19 ) (26 ) Cash dividends paid to common stockholders (84 ) (80 ) (80 ) Cash provided by (used in) financing activities 145 (60 ) (132 ) Effects of exchange rate changes on cash (91 ) 8 25 Increase (decrease) in cash, cash equivalents and restricted cash 36 19 (18 ) Cash, cash equivalents and restricted cash at beginning of year 170 151 169 Cash, cash equivalents and restricted cash at end of year $ 206 $ 170 $ 151 The following table presents the Company’s cash, cash equivalents and restricted cash by category within the Consolidated Balance Sheets: Cash and cash equivalents $ 206 $ 168 $ 151 Restricted cash classified within Prepaid expenses and other current assets — 2 — Cash, cash equivalents and restricted cash $ 206 $ 170 $ 151 Non-cash investing activities and supplemental cash flow information: Additions to property, plant and equipment included in Accounts payable and accrued liabilities 24 $ 41 $ 29 Income taxes paid 129 $ 93 $ 71 Interest paid 46 $ 41 $ 48 The accompanying notes are an integral part of these consolidated financial statements . 46 CABOT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (In millions, except shares in thousands and per share amounts) Common Stock, Net of Treasury Stock Additional Paid-in Retained Accumulated Other Comprehensive Total Cabot Corporation Stockholders’ Noncontrolling Total Stockholders’ Shares Cost Capital Earnings Income (Loss) Equity Interests Equity Balance at September 30, 2019 57,081 $ 52 $ — $ 1,337 $ (391 ) $ 998 $ 136 $ 1,134 Net income (loss) (238 ) (238 ) 17 (221 ) Adoption of accounting standards 3 (3 ) — Total other comprehensive income (loss) 43 43 5 48 Cash dividends declared to noncontrolling interests — (35 ) (35 ) Cash dividends declared to common stockholders, $1.40 per share (80 ) (80 ) (80 ) Issuance of stock under equity compensation plans 330 2 1 3 3 Share-based compensation 9 9 9 Purchase and retirement of common stock (944 ) (1 ) (10 ) (33 ) (44 ) (44 ) Balance at September 30, 2020 56,467 53 — 989 (351 ) 691 123 814 Net income (loss) 250 250 36 286 Total other comprehensive income (loss) 62 62 7 69 Cash dividends declared to noncontrolling interests — (23 ) (23 ) Cash dividends declared to common stockholders, $1.40 per share (80 ) (80 ) (80 ) Issuance of stock under equity compensation plans 317 — 6 6 6 Share-based compensation 21 21 21 Purchase and retirement of common stock (57 ) — (3 ) (3 ) (3 ) Balance at September 30, 2021 56,727 53 24 1,159 (289 ) 947 143 1,090 Net income (loss) 209 209 34 243 Total other comprehensive income (loss) (150 ) (150 ) (15 ) (165 ) Cash dividends declared to noncontrolling interests — (28 ) (28 ) Cash dividends declared to common stockholders, $1.48 per share (84 ) (84 ) (84 ) Issuance of stock under equity compensation plans 359 — 6 6 6 Share-based compensation 23 23 23 Purchase and retirement of common stock (837 ) (1 ) (52 ) — (53 ) (53 ) Balance at September 30, 2022 56,249 $ 52 $ 1 $ 1,284 $ (439 ) $ 898 $ 134 $ 1,032 The accompanying notes are an integral part of these consolidated financial statements. 47 Notes to the Consolidated Financial Statements Note A.
Removed
Significant Accounting Policies The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). The significant accounting policies of Cabot Corporation (“Cabot” or “the Company”) are described below. Unless otherwise indicated, all disclosures and amounts in the Notes to the Consolidated Financial Statements relate to the Company’s continuing operations.
Removed
Principles of Consolidation The consolidated financial statements include the accounts of Cabot and its wholly-owned subsidiaries and majority-owned and controlled subsidiaries. Additionally, Cabot considers consolidation of entities over which control is achieved through means other than voting rights, of which there were none in the periods presented. Intercompany transactions have been eliminated in consolidation.
Removed
Cash and Cash Equivalents Cash equivalents include all highly liquid investments with a maturity of three months or less at date of acquisition. Cabot continually assesses the liquidity of cash equivalents and, as of September 30, 2022, has determined that they are readily convertible to cash. Inventories Inventories are stated at the lower of cost or net realizable value.
Removed
The cost of inventories is determined using the first-in, first-out method. Cabot periodically reviews inventory for both potential obsolescence and potential declines in anticipated selling prices.
Removed
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.
Removed
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. Investments The Company has investments in equity affiliates and marketable securities. As circumstances warrant, all investments are subject to periodic impairment reviews.
Removed
Unless consolidation is required, investments in equity affiliates, where Cabot generally owns between 20% and 50% of the affiliate, are accounted for using the equity method. Cabot records its share of the equity affiliate’s results of operations based on its percentage of ownership of the affiliate.
Removed
Dividends declared from equity affiliates are a return on investment and are recorded as a reduction to the equity investment value. At September 30, 2022 and 2021, Cabot had equity affiliate investments of $20 million an d $40 million, respectively.
Removed
Dividends declared and received from these investments were $1 million, $5 million and $3 million in fiscal 2022, 2021 and 2020, respectively. 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.
Removed
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.
Removed
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.
Removed
The projected cash flows are discounted to determine the fair value of the assets at the dates of acquisition.
Removed
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.
Removed
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 and is subject to impairment testing annually, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value.
Removed
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.
Removed
Reinforcement Materials, and the fumed metal oxides, specialty compounds, and battery materials product lines within Performance Chemicals, which are considered separate reporting units, carry the Company’s goodwill balances as of September 30, 2022. 48 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.
Removed
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.
Removed
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.
Removed
The fair value of a reporting unit is based on discounted estimated future cash flows. 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.
Removed
The fair value is also benchmarked against the value calculated from a market approach using the guideline public company method.
Removed
Based on the Company’s most recent annual goodwill impairment test performed as of August 31, 20 2 2 , the fair values of the R einforcement Materials, f umed m etal o xides , s pecialty c ompounds , and battery materials reporting units were substantially in excess of their carrying values.
Removed
Long-lived Assets Impairment The Company’s long-lived assets primarily include property, plant and equipment, and intangible assets. 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.
Removed
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.
Removed
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.
Removed
In circumstances when an asset does not have separate identifiable cash flows, an impairment charge is recorded when the Company no longer intends to use the asset. 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.
Removed
The depreciable lives for buildings, machinery and equipment, and other fixed assets are generally between twenty and twenty-five years, ten and twenty-five years, and three and twenty-five years, respectively.
Removed
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.
Removed
Expenditures for major renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. Cabot capitalizes interest costs when they are part of the cost of acquiring and constructing certain assets that require a period of time to prepare for their intended use.
Removed
During fiscal 2022, 2021 and 2020, Cabot capitalized $3 million, $1 million and $2 million of interest costs, respectively. These amounts are amortized over the lives of the related assets when they are placed in service.
Removed
Asset Retirement Obligations Cabot estimates incremental costs for special handling, removal and disposal of materials that may or will give rise to conditional asset retirement obligations (“ARO”) and then discounts the expected costs back to the current year using a credit adjusted risk free rate. Cabot recognizes ARO liabilities and costs when the timing and/or settlement can be reasonably estimated.
Removed
In certain instances, Cabot has not recorded a reserve for AROs because the timing of disposal of the underlying asset is unknown. The ARO reserves were $10 million and $19 million at September 30, 2022 and 2021, respectively. The decrease was primarily driven by the sale of the Purification Solutions business.
Removed
The ARO balances are included in Accounts payable and accrued liabilities and Other liabilities on the Consolidated Balance Sheets. Foreign Currency Translation The functional currency of the majority of Cabot’s foreign subsidiaries is the local currency in which the subsidiary operates.
Removed
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet dates. Income and expense items are translated at average monthly exchange rates during the year. The functional currency of Cabot’s foreign subsidiaries that operate in a highly inflationary economy is the U.S. dollar.
Removed
Cabot’s operations in highly inflationary economies are not material. 49 Unrealized currency translation adjustments (“CTA”) are included as a separate component of Accumulated other comprehensive income (loss) (“AOCI”) within stockholders’ equity.
Removed
Realized and unrealized foreign currency gains and losses arising from transactions denominated in currencies other than the subsidiary’s functional currency are reflected in earnings with the exception of (i) intercompany transactions considered to be of a long-term investment nature; (ii) income taxes upon future repatriation of unremitted earnings from non-U.S. subsidiaries that are not indefinitely reinvested; and (iii) foreign currency borrowings designated as net investment hedges.
Removed
Gains or losses arising from these transactions are included within the CTA component of Other comprehensive income (loss). In fiscal 2022, 2021 and 2020, net foreign currency transaction loss of $13 million, $6 million, and $6 million, respectively, is included in Other income (expense) in the Consolidated Statements of Operations.
Removed
Share Repurchases Periodically, Cabot repurchases shares of the Company’s common stock in the open market or in privately negotiated transactions under the authorization approved by the Board of Directors.
Removed
The Company retires the repurchased shares and records the excess of the purchase price over par value to additional paid-in capital (“APIC”) until such amount is reduced to zero and then charges the remainder against retained earnings.
Removed
Financial Instruments Cabot’s financial instruments consist primarily of cash and cash equivalents, accounts and notes receivable, investments, accounts payable and accrued liabilities, short-term and long-term debt, and derivative instruments. The carrying values of Cabot’s financial instruments approximate fair value with the exception of fixed rate long-term debt, which is recorded at amortized cost.
Removed
The fair values of the Company’s financial instruments are based on quoted market prices, if such prices are available. In situations where quoted market prices are not available, the Company relies on valuation models to derive fair value. Such valuations take into account the ability of the financial counterparty to perform and the Company’s own credit risk.
Removed
Cabot uses derivative financial instruments primarily for purposes of hedging the exposures to fluctuations in foreign currency exchange rates, which exist as part of its on-going business operations. Cabot does not enter into derivative contracts for speculative purposes, nor does it hold or issue any derivative contracts for trading purposes.
Removed
All derivatives are recognized on the Consolidated Balance Sheets at fair value. Where Cabot has a legal right to offset derivative settlements under a master netting agreement with a counterparty, derivatives with that counterparty are presented on a net basis.
Removed
The changes in the fair value of derivatives are recorded in either earnings or AOCI, depending on whether or not the instrument is designated as part of a hedge transaction and, if designated as part of a hedge transaction, the type of hedge transaction.
Removed
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 hedged item. The ineffective portion of all hedges is recognized in earnings during the period in which the ineffectiveness occurs.
Removed
In accordance with Cabot’s risk management strategy, the Company may enter into certain derivative instruments that may not be designated as hedges for hedge accounting purposes. Although these derivatives are not designated as hedges, the Company believes that such instruments are closely correlated with the underlying exposure, thus managing the associated risk.
Removed
The Company records in earnings the gains or losses from changes in the fair value of derivative instruments that are not designated as hedges. Cash movements associated with these instruments are presented in the Consolidated Statements of Cash Flows as Cash Flows from Operating Activities because the derivatives are designed to mitigate risk to the Company’s cash flow from operations.
Removed
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. The Company’s contracts with customers are generally for products only and do not include other performance obligations.
Removed
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.
Removed
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.
Removed
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.
Removed
The Company has an immaterial amount of revenue that is recognized over time. 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.
Removed
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. 50 The Company generally provides a warranty that its products will substantially conform to the identified specifications.
Removed
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. The Company does not have contract assets or liabilities that are material.
Removed
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.
Removed
Cost of Sales Cost of sales consists of the cost of raw and packaging materials, direct manufacturing costs, depreciation, internal transfer costs, inspection costs, inbound and outbound freight and shipping and handling costs, plant purchasing and receiving costs and other overhead expenses necessary to manufacture the products.
Removed
Accounts and Notes Receivable Trade receivables are recorded at the invoiced amount and generally do not bear interest. Trade receivables in China may at certain times be settled with the receipt of bank issued non-interest bearing notes.
Removed
These notes totaled $8 million and $5 million as of September 30, 2022 and 2021, respectively, and are included in Accounts and notes receivable on the Company’s Consolidated Balance Sheets. Cabot periodically sells a portion of these bank notes and other customer receivables at a discount and such sales are accounted for as asset sales.
Removed
The Company does not have any continuing involvement with these notes or other customer receivables after the sale. The difference between the proceeds from the sale and the carrying value of these assets is recognized as a loss on the sale of receivables and is included in Other income (expense) in the accompanying Consolidated Statements of Operations.
Removed
During fiscal year 2022, 2021, and 2020, the Company recorded charges of $3 million, $2 million, and $2 million, respectively, for the sale of these assets. Cabot maintains allowances for doubtful accounts based on an assessment of the collectability of specific customer accounts, the aging of accounts receivable and other economic information on both a historical and prospective basis.
Removed
Customer account balances are charged against the allowance when it is probable the receivable will not be recovered. There were no material changes in the allowance for any of the years presented. There is no material off-balance sheet credit exposure related to customer receivable balances.
Removed
Stock-based Compensation Cabot recognizes compensation expense for stock-based awards granted to employees using the fair value method.
Removed
Under the fair value recognition provisions, stock-based compensation cost is measured at the grant date based on the fair value of the award, and is recognized as expense over the service period, which generally represents the vesting period, and includes an estimate of what level of performance the Company will achieve for Cabot’s performance-based stock awards.
Removed
Cabot calculates the fair value of its stock options using the Black-Scholes option pricing model. The fair value of restricted stock units is determined using the closing price of Cabot stock on the day of the grant. The Company recognizes forfeitures as they occur.
Removed
Selling and Administrative Expenses Selling and administrative expenses consist of salaries and fringe benefits of sales and office personnel, general office expenses and other expenses not directly related to manufacturing operations. Research and Technical Expenses Research and technical expenses include salaries, equipment and material expenditures, and contractor fees and are expensed as incurred.
Removed
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.
Removed
Pension and post-retirement benefit costs other than service cost are included in Other income (expense) in the Consolidated Statement of Operations. Service cost is included with other employee compensation costs within Cost of sales, Selling and administrative expenses, or Research and technical expenses.
Removed
The Company is required to recognize as a component of Other comprehensive income (loss), net of tax, the actuarial gains and losses and prior service costs and credits that arise but were not previously required to be recognized as components of net periodic benefit cost.

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