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CABOT CORP

CABOT CORPCBTEarnings & Financial Report

NYSE · Materials · Miscellaneous Chemical Products

Cabot Corporation is an American specialty chemicals and performance materials company headquartered in Boston, Massachusetts. The company operates in over 20 countries with 36 manufacturing plants, eight research and development facilities, and 28 sales offices.

What changed in CABOT CORP's 10-K — 2023 vs 2024

Top changes in CABOT CORP's 2024 10-K

281 paragraphs added · 287 removed · 231 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

71 edited+27 added−23 removed80 unchanged
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.
Accordingly, our management team places significant focus and attention on matters concerning Cabot’s workforce – particularly in the areas of employee health and safety, talent, engagement, diversity, retention and development, and total rewards.
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.
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 and without discrimination while taking into account job-related factors such as responsibilities, location, work experience, education, performance, and contributions.
Fumed silica is an ultra-fine, high-purity particle used as a reinforcing, thickening, abrasive, thixotropic, suspending or anti-caking agent in a wide variety of products for the automotive, construction, microelectronics, batteries and consumer products industries. These products include adhesives, sealants, cosmetics, batteries, inks, toners, silicone elastomers, coatings, polishing slurries and pharmaceuticals.
Fumed silica is an ultra-fine, high-purity particle used as a reinforcing, thickening, abrasive, thixotropic, suspending or anti-caking agent in a wide variety of products for the automotive, construction, microelectronics, batteries and consumer products 7 industries. These products include adhesives, sealants, cosmetics, batteries, inks, toners, silicone elastomers, coatings, polishing slurries and pharmaceuticals.
Adjustments are made to the reserve based on our continuing analysis of our share of costs likely to be incurred at each site. Inherent uncertainties exist in these estimates due to unknown conditions at the various sites, changing governmental regulations and legal standards regarding liability, and changing technologies for handling site investigation and remediation.
Adjustments are made to the reserve based on our continuing analysis of our share of costs likely to be incurred at each site. Inherent uncertainties exist in these estimates due to unknown conditions at the various sites, changing governmental regulations and legal standards regarding liability, and changing technologies for handling site investigation and 14 remediation.
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.
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. 8 Raw Materials Raw materials for our products are, in general, readily available and in adequate supply.
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.
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 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.
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.
For battery applications, we compete primarily with two global companies that manufacture conductive carbons as well as a number of regional manufacturers. For carbon nanotubes, we compete primarily with one Chinese-based company as well as a number of regional manufacturers. We compete primarily with one manufacturer of fumed alumina that operates globally.
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.
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. Our reinforcing carbons products are used in tires and industrial products.
Of this global employee population, 43% are employed in manufacturing roles. Our Management Executive Committee (“Executive Committee”) is comprised of our CEO and his nine direct reports who, collectively, have management responsibility for our businesses and regional operations, our financial, legal, safety, health, environment and sustainability, human resources, research and development, global business services and digital functions.
Of this global employee population, 42% are employed in manufacturing roles. Our Management Executive Committee (“Executive Committee”) is comprised of our CEO and his nine direct reports who, collectively, have management responsibility for our businesses and regional operations, our financial, legal, safety, health, environment and sustainability, human resources, research and development, global business services and digital functions.
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.
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 5 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) demand for electric and hybrid vehicles, (vi) consumer and industrial spending on new vehicles and (vii) changes in regulatory requirements impacting vehicle fuel efficiency and tire regulations.
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, supply and demand of such raw materials and related transportation costs.
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.
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 2024, we spent approximately $63 million on technology development.
(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.
(See “Legal Proceedings” in Item 3 below, and Note T 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, 2024, our environmental reserve was approximately $5 million.
Reinforcement Materials Products Carbon black is a form of elemental carbon that is manufactured in a highly controlled process to produce particles and aggregates of varied size, structure and surface chemistry, resulting in many different performance characteristics for a wide variety of applications.
Products Carbon black is a form of elemental carbon that is manufactured in a highly controlled process to produce particles and aggregates of varied structure and surface chemistry, resulting in many different performance characteristics for a wide variety of applications.
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.
In fiscal 2024, 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, 2024, as disclosed in Note V to our Consolidated Financial Statements.
Our ambition under this platform is to work with customers and technology partners to develop products across three sustainability categories: Renewable, Recovered and Reduced, meaning products made with renewable materials or materials recovered from end-of-life tires and/or using processes that result in reduced greenhouse gas emissions.
Our ambition under this platform is to work with customers and technology partners to develop products with reliable performance and produced at industrial scale across three sustainability categories: Renewable, Recovered and Reduced, meaning products made with renewable materials or materials recovered from end-of-life tires and/or using processes that result in reduced greenhouse gas emissions.
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. 6 Competition We are one of the leading manufacturers of carbon black in the world.
However, the majority 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. Competition We are one of the leading manufacturers of carbon black in the world.
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.
Raw Materials The principal raw material used in the manufacture of our reinforcing carbons is composed of by-product residual heavy oils derived from petroleum refining operations, the distillation of coal tars, and the production of ethylene throughout the world.
In this reporting segment we combine our specialty carbons, specialty compounds, battery materials, fumed metal oxides, aerogel and inkjet product lines. Our focus areas for growth, which we refer to as “growth vectors”, include conductive additives and other materials for battery applications, and inkjet dispersions for post print corrugated packaging applications.
In this reporting segment we combine our specialty carbons, specialty compounds, battery materials, fumed metal oxides, aerogel and inkjet product lines. Our focus areas for growth include conductive additives and other materials for battery applications, and inkjet dispersions for post print corrugated packaging 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.
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 high-wear applications such as mining.
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.
The following table shows our ownership interest as of September 30, 2024 in operations in which we own less than 100%: Location Percentage Interest Tianjin, China (Specialty Carbons and Compounds business) 90% (consolidated subsidiary) Jiangxi Province, China (Fumed Metal Oxides business) 90% (consolidated subsidiary) Wuhai, China (Fumed Metal Oxides business) 80% (consolidated subsidiary) Mettur Dam, India (Fumed Metal Oxides business) 50% (equity affiliate) Currently, four of our reinforcing carbons/specialty carbons manufacturing sites have energy centers.
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.
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.
Examples of benefit programs we offer in the U.S. include a 401(k) plan, expansive health benefits (including medical, dental and/or vision), life and accident insurance, disability coverage, paid time off, tuition reimbursement and other voluntary benefits.
Examples of benefit programs we offer in the U.S. include a robust 401(k) plan that exceeds market standards in levels of employer matching, expansive health benefits (including medical, dental and/or vision), life and accident insurance, disability coverage, paid time off, tuition reimbursement and other voluntary benefits.
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.
Our overall findings for this fiscal year 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.
An equity affiliate operates a fumed metal oxides plant in India. Our specialty compounds are predominately produced in facilities that we own, or have a controlling interest in, located in Belgium, Canada, China and the United Arab Emirates. Our inkjet colorants and inks are manufactured at our facility in the U.S.
Our specialty compounds are predominately produced in facilities that we own, or have a controlling interest in, located in Belgium, Canada, China and the United Arab Emirates. Our inkjet colorants and inks are manufactured at our facility in the U.S.
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”).
As of September 30, 2024, we had approximately 4,200 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), 32% in Asia Pacific (75% of whom are in China), and 27% in Europe, Middle East and Africa (“EMEA”).
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.
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.
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.
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 $58 million in environmental-related capital expenditures in fiscal 2024. We anticipate spending approximately $78 million for such matters in fiscal 2025.
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.
These investments include our purchase in 2022 from Tokai Carbon Group of its carbon black manufacturing facility in Tianjin, China where we expect to make technical upgrades in the future to convert certain manufacturing units to allow us to produce conductive additives.
These objectives were: · Demonstrate improvement in the percentage of job searches in which candidates from underrepresented groups (for this purpose, defined as women in all regions and in the U.S. defined as women and people of color) are interviewed.
These objectives were: · Demonstrate improvement in the percentage of job searches in which candidates from underrepresented groups (for this purpose, defined as women in all regions and in the U.S. defined as women and people of color) are interviewed. Overall, our levels of diversity remained flat this year as compared to fiscal 2023.
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, we have a 98% ownership interest in an entity that manufactures our E2C® products in Port Dickson, Malaysia. 6 The following table shows our ownership interest as of September 30, 2024 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 98% (consolidated subsidiary) Port Dickson, Malaysia 98% (consolidated subsidiary) Valencia, Venezuela 49% (equity affiliate) In 2024, we began an expansion project at our Cilegon, Indonesia plant to add approximately 80,000 metric tons of capacity for reinforcing carbons which we anticipate becoming available in fiscal 2025.
Raw materials for inkjet colorants include carbon black sourced from our carbon black plants, organic pigments and other treating agents available from various sources. Raw materials for inkjet inks include pigment dispersions, solvents and other additives. Operations We own, or have a controlling interest in, and operate plants that produce specialty carbons primarily in China, the Netherlands and the U.S.
Raw materials for inkjet inks include pigment dispersions, solvents and other additives. Operations We own, or have a controlling interest in, and operate plants that produce specialty carbons primarily in China, the Netherlands and the U.S. We produce our conductive additives in China, and at our specialty carbon plants in the U.S. and in the Netherlands.
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”.
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. In fiscal 2023, we launched a new technology platform, EVOLVE® Sustainable Solutions.
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.
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.
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.
The majority of the volumes sold under these arrangements are sold to customers in the Americas and Europe. 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.
In particular, China continues to be an important producer of tires and products for automotive applications and since we made our initial investment in China in 1988, we have increased our operations in China to support increased demand for our products in China.
In particular, manufacturers in China continue to be important producers of tires and products for automotive applications, including more recently of batteries for electric vehicles, and since we made our initial investment in China in 1988, we have increased our operations in China to support increased demand for our products in China.
Given the size of our current operations in China and the future growth we anticipate from those operations, if our ability to operate in China were to be constrained by legal, regulatory and operational risks, it could have a material negative impact on our overall operations and the value of our securities. Our internet address is www.cabotcorp.com.
If our ability to operate in China were to be constrained by legal, regulatory and operational risks, it could have a material negative impact on our overall operations and the value of our securities.
We have long-term procurement contracts or arrangements in place for the purchase of fumed silica feedstock primarily from fence-line partners, which we believe will enable us to meet our raw material requirements for the foreseeable future. In addition, we buy some raw materials in the spot market to help ensure flexibility and minimize costs.
We also purchase aluminum chloride as feedstock for the production of fumed alumina. We have long-term procurement contracts or arrangements in place for the purchase of fumed silica feedstock primarily from fence-line partners, which we believe will enable us to meet our raw material requirements for the foreseeable future.
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.
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, which is currently idled. An equity affiliate operates a fumed metal oxides plant in India.
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.
Talent Attraction, Development and Retention 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.
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.
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%.
Our pay practices reward individual and Company performance and are equitably differentiated based on role, experience, contributions, and performance. We value our employees' efforts and reward those contributions through our recognition and incentive programs.
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. We value our employees' efforts and reward those contributions through our recognition and incentive programs.
As a result of revisions to the EU ETS program in late 2022, the free allowances under the program will be phased out over time likely resulting in increased costs to the Company.
As a result of revisions to the EU ETS program following the ETS Directive reform adopted in May 2023 that increased the ambition of the EU ETS, the free allowances under the program will be phased out over time likely resulting in increased costs to the Company due to an increased need to purchase emission credits.
We are continuing discussions with the MECP on a new technical standard for SO2 emissions controls at our plant as an alternative to this requirement, which in its current form would require the installation of air pollution controls at the plant by July 1, 2028.
We are out of compliance with this new air standard and are in discussions with the MECP on an abatement plan regarding this requirement that we expect, in its current form, would require the installation of air pollution controls at the plant by July 1, 2028.
Demand in developing markets, such as China, Southeastern Asia, South America and Eastern Europe, is mainly driven by the growing middle class, rapid industrialization, infrastructure spending and increasing car ownership trends. The growth in vehicle production in turn drives demand for both original equipment tires and replacement tires in developing regions.
Demand in developing markets, such as China, Southeastern Asia, South America and Eastern Europe, has been mainly driven by the growing middle class, rapid industrialization, infrastructure spending and car ownership trends and demand for products exported from these regions to the Western markets.
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.
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.
The principal raw materials for the production of aerogel are silica sol and/or sodium silicate. The primary raw materials used for our specialty compounds include carbon black, primarily sourced from our carbon black plants, prime and recycled thermoplastic resins and mineral fillers supplied from various sources.
The primary raw materials used for our specialty compounds include carbon black, primarily sourced from our carbon black plants, prime and recycled thermoplastic resins and mineral fillers supplied from various sources. Raw materials for inkjet colorants include carbon black sourced from our carbon black plants, organic pigments and other treating agents available from various sources.
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.
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, 2024, 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* 579 72 % 227 28 % 806 Professional Contributor 824 70 % 351 30 % 1,175 Hourly & Associate Staff 1,719 80 % 441 20 % 2,160 Total Population 3,129 75 % 1,022 25 % 4,151 Racial and Ethnic Diversity Non-Minority % of total People of Color ** % of total Total Employees Executive Committee 8 100 % - 0 % 8 Management* 232 77 % 71 23 % 303 Professional Contributor 192 80 % 48 20 % 240 Hourly & Associate Staff 348 73 % 132 28 % 480 Total Population 780 76 % 251 24 % 1,031 11 * 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.
Both of our segments operate globally, and a significant portion of our revenues and operating profits is derived from operations outside the U.S.
We intend to pace our investments in additional battery materials manufacturing capacity to meet demand. 9 Global Operations Both of our segments operate globally, and a significant portion of our revenues and operating profits is derived from operations outside the U.S.
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.
We are currently in discussions with the EPA and LDEQ to extend our compliance date at the Ville Platte facility to 2025 based upon force majeure events primarily related to the COVID-19 pandemic. We expect that the total capital costs to install these technology controls will be approximately $250 million and will be incurred through mid-calendar year 2025.
We saw a significant improvement during the fiscal year. · Ensure strong pay equity is maintained by putting action plans in place to address any pay inequities identified through our global compensation review process.
However, we saw progress in candidate diversity in the U.S. (12% improvement) and China (8% improvement), two of our larger job markets. · Ensure strong pay equity is maintained by putting action plans in place to address any pay inequities identified through our global compensation review process.
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.
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.
This settlement is related to the EPA’s national enforcement initiative focused on the U.S. carbon black manufacturing sector alleging non-compliance with certain regulatory and permitting requirements under The Clean Air Act, including the New Source Review (“NSR”) construction permitting requirements.
This settlement is related to the EPA’s national enforcement initiative focused on the U.S. carbon black manufacturing sector alleging non-compliance with certain regulatory and permitting requirements under The Clean Air Act, including the New Source Review (“NSR”) construction permitting requirements. 13 Pursuant to this settlement, Cabot has installed technology controls for sulfur dioxide and/or nitrogen oxide at its carbon black plants in Pampa, Texas and Franklin, Louisiana, and is in the process of installing such technology controls at its plant in Ville Platte.
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.
For fiscal 2024, our Total Recordable Incident Rate (TRIR) based upon the number of injuries per 200,000 work hours for both employees and contractors was 0.22 and our Lost Time Incident Rate (LTIR) was 0.16. For comparison, the US Bureau of Labor Statistics reports for chemical manufacturing an average TRIR of 1.8 and LTIR of 0.6 in calendar year 2023.
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.
We have well-established performance management and talent development processes in which managers provide regular feedback and coaching to develop employees. 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.
We are currently evaluating future potential applicability of the new carbon border adjustment mechanism (“CBAM”) program in the EU as an alternative to coverage under the EU ETS. Our carbon black facility in The Netherlands is subject to The Netherlands CO2 tax, which is a top up tax to the EU ETS scheme.
In addition, we are evaluating the future potential applicability of the new carbon border adjustment mechanism (“CBAM”) program in the EU as an alternative to free allowances under the EU ETS and as a system complementary to the EU ETS.
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.
Our carbon black facility in Ontario, Canada is subject to the Ontario Emissions Performance Standard trading system, a transition from the federal carbon tax program and under which specific transition requirements became effective on January 1, 2022.
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.
Increasing regulatory programs associated with emissions and concerns regarding climate change are expected to increase our capital and operational costs in the future.
We purchase feedstocks and for certain customers convert their feedstock to product on a fee-basis (so called “toll conversion”). We also purchase aluminum chloride as feedstock for the production of fumed alumina.
Our manufacturing processes also require water and electricity. The primary raw materials for our carbon nanotubes are catalysts that we synthesize and propylene. Raw materials for the production of fumed silica are various chlorosilane feedstocks. We purchase feedstocks and for certain customers convert their feedstock to product on a fee-basis (so called “toll conversion”).
The recent investments we have made for growth in this segment, including in respect of these specific areas of focus, are described below under the heading “Operations”. 7 Products Carbon black is a form of elemental carbon that is manufactured in a highly controlled process to produce particles and aggregates of varied structure and surface chemistry, resulting in many different performance characteristics for a wide variety of applications.
Reinforcement Materials Products Carbon black is a form of elemental carbon that is manufactured from by-product feedstock streams in a highly controlled process to produce particles and aggregates of varied size, structure and surface chemistry, resulting in many different performance characteristics for a wide variety of applications.
Under appropriate circumstances, we have entered into supply arrangements with certain customers, the typical duration of which is one year. These arrangements typically provide for sales price adjustments to account for changes in relevant feedstock indices including natural gas and, in many cases, changes in other relevant costs (such as the cost of CO 2 credits in Europe).
These arrangements typically provide for sales price adjustments to account for changes in relevant feedstock costs including natural gas and, in many cases, changes in other relevant costs (such as the cost of CO 2 credits in Europe, vendor financing and product delivery). In fiscal 2024, approximately two-thirds of our reinforcing carbons volume was sold under these supply arrangements.
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.
The silica substance evaluation was concluded in 2021, and following this, the Netherlands has proposed a STOT RE 1 classification for untreated silica which has not yet been finalized. Carbon black is scheduled for a substance review in 2026. Analogous regimes exist in other parts of the world, including the UK, Turkey, China, South Korea, and Taiwan.
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 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. 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.
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.
As of September 30, 2024, we have incurred $201 million to install these controls in the U.S. Operating these controls increases our plant operating costs. All carbon black manufacturers in the U.S. have settled with the EPA and have installed similar controls.
We continued to see strong engagement and use of this 11 platform to support our leadership development programs, DE&I knowledge and skill building, and self-directed learning through our career development portal for employees. We believe that our continued focus and investment on employee development continues to be well received by our employees.
We also further expanded internal promotion and use of our online learning platform and made it available to all employees globally to support our leadership development programs, DE&I knowledge and skill building, and self-directed learning through our career development portal for employees.
Sales of reinforcing carbons and E2C®solutions are made primarily by Cabot employees and secondarily through distributors and sales representatives. We typically “make and sell” in region, which, among other advantages, provides our customers a regional supply chain and typically reduces transportation costs.
We typically “make and sell” in region, which, among other advantages, provides our customers a regional supply chain and typically reduces transportation costs. Sales to five major tire customers represent a material portion of Reinforcement Materials’ total net sales and operating revenues.
Environmental Protection Agency (“EPA”) and the Louisiana Department of Environmental Quality (“LDEQ”) regarding Cabot’s three carbon black manufacturing facilities in the U.S.
Environmental Protection Agency (“EPA”) and the Louisiana Department of Environmental Quality (“LDEQ”) regarding Cabot’s three carbon black manufacturing facilities in the U.S., and a significant portion of our anticipated capital expenditures for fiscal 2025 will continue to be for the installation of air pollution control equipment at our third and final plant in Ville Platte, Louisiana.
Currently, nine reinforcing carbons manufacturing sites and four reinforcing carbons/specialty carbons manufacturing sites have energy centers, which allow us to utilize these gases through some form of energy co-generation, such as the sale or reuse of steam, gas or electricity. Depending on our capacity utilization, our energy centers generally reduce our manufacturing operating costs.
These energy centers allow us to utilize the tailgas through some form of energy co-generation, such as steam or electricity. We can use this co-generated energy internally to reduce our manufacturing operating costs, or sell it and generate revenues from these energy center operations.
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.
Cabot’s global voluntary turnover rate for fiscal 2024 was approximately 6.0%, which represents a decrease in the Company’s attrition rate relative to fiscal 2023, which was 7.3%. 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.
Sales to five major tire customers represent a material portion of Reinforcement Materials’ total net sales and operating revenues. The loss of any of these customers, or a significant reduction in volumes sold to them, could have a material adverse effect on the segment.
The loss of any of these customers, or a significant reduction in volumes sold to them, could have a material adverse effect on the segment until such business is replaced. Under appropriate circumstances, we have entered into supply arrangements with certain customers, the typical duration of which is one year.
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.
These costs include costs associated with our compliance with the Consent Decree we entered into in November 2013 with the U.S.
Removed
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.
Added
The growth in vehicle production, and in exports, in turn drives demand for both original equipment tires and replacement tires in developing regions. Sales of reinforcing carbons and E2C®solutions are made primarily by Cabot employees and secondarily through distributors and sales representatives.
Removed
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”.
Added
We also compete with substitute products, specifically precipitated silica, and products marketed as being made with more sustainable material, specifically reclaimed carbon, sometimes referred to as recovered carbon black. Competition for our Reinforcement Materials products is based on product performance, quality, reliability, price, service, technical innovation, sustainability performance, and logistics.
Removed
In fiscal 2023, we launched EVOLVE® Sustainable Solutions, our technology platform focused on developing sustainable reinforcing carbons and other performance materials with reliable performance at industrial scale.
Added
This "feedstock" is not made-for-purpose, but is a by-product stream of other industrial processes and would generally otherwise be consumed as a fuel oil and burned for heat or power. Natural gas is also used as a feedstock in the production of our reinforcing carbons. Our manufacturing process also requires water and electricity.
Removed
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.
Added
In addition to carbon black, our manufacturing processes produce usable energy in the form of tailgas, as a by-product. Nine of our reinforcing carbons manufacturing sites and four reinforcing carbons/specialty carbons manufacturing sites have energy centers, and we are currently installing an energy center at our reinforcing carbons plant in Ville Platte, Louisiana.
Removed
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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.
We may not be successful in 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.
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.
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.
We also attempt to offset the effects of increases in raw material and energy costs through selling price increases in our non-contract sales, productivity improvements and cost reduction efforts. Success in offsetting increased raw material and energy costs with price increases is largely influenced by competitive and economic conditions and could vary significantly depending on the segment served.
We also attempt to offset the effects of increases in raw material and energy costs through price increases in our non-contract sales, productivity improvements and cost reduction efforts. Success in offsetting increased raw material and energy costs with price increases is largely influenced by competitive and economic conditions and could vary significantly depending on the segment served.
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.
Furthermore, our actual or perceived failure to adhere to these principles could harm our reputation. 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.
Industry Risks Industry capacity utilization and competition from other specialty chemical companies may adversely impact our business. Our businesses are sensitive to industry capacity utilization, and pricing tends to fluctuate when capacity utilization changes occur, which could affect our financial performance. Further, we operate in a highly competitive marketplace.
Industry Risks 15 Industry capacity utilization and competition from other specialty chemical companies may adversely impact our business. Our businesses are sensitive to industry capacity utilization, and pricing tends to fluctuate when capacity utilization changes occur, which could affect our financial performance. Further, we operate in a highly competitive marketplace.
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.
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.
Moreover, in the case of capacity expansions, the cost of these activities could have a negative impact on the financial performance of the relevant business until capacity utilization at the particular facility is sufficient to absorb the incremental costs associated with an expansion.
Moreover, in the case of capacity expansions, the cost of these activities could have a negative impact on the financial performance of the relevant business until capacity utilization at the particular facility is sufficient to absorb the incremental costs associated with expansion.
For example, the production and/or processing of carbon black, specialty compounds, fumed metal oxides, aerogel, carbon nanotubes and other chemicals involve the handling, transportation, manufacture or use of certain substances or components that may be considered toxic or hazardous.
For example, the production and/or processing of carbon black, specialty compounds, fumed metal oxides, aerogel, carbon nanotubes and other chemicals involve the handling, transportation, manufacture or use of certain substances or components that may be considered dangerous, toxic or hazardous.
Compliance with greenhouse gas and climate change initiatives may result in additional costs to us, including, among other things, increased production costs, increased feedstock costs, additional taxes, reduced emission allowances or additional restrictions on production or operations.
Compliance with greenhouse gas and climate change initiatives may result in additional costs to us, including, among other things, increased production costs, increased feedstock costs, additional taxes, reduced emission allowances 16 or additional restrictions on production or operations.
In addition, chemicals that are currently classified as non-hazardous may be classified as hazardous in the future, and our products may have characteristics that are not recognized today but may be found in the future to impair human health or to be carcinogenic.
In addition, chemicals that are currently classified as non-hazardous may be reclassified as hazardous in the future, and our products may have characteristics that are not recognized today but may be found in the future to impair human health or to be carcinogenic.
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.
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. 22 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.
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.
While our systems were able to isolate and expel the attacker before 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.
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.
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. 21 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.
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.
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.
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.
In addition, even without increased 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.
As more fully described in Note S in Item 8 below under the heading “Contingencies”, we are a party to or the subject of lawsuits, claims, and proceedings, including, but not limited to, those involving environmental, and health and safety matters as well as product liability and personal injury claims relating to asbestosis, silicosis, and coal worker’s pneumoconiosis.
As more fully described in Note T in Item 8 below under the heading “Contingencies”, we are a party to or the subject of lawsuits, claims, and proceedings, including, but not limited to, those involving environmental, and health and safety matters as well as product liability and personal injury claims relating to asbestosis, silicosis, and coal worker’s pneumoconiosis.
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.
In fiscal 2024, 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.
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.
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 upheld by the courts, and state laws requiring climate disclosure, may negatively impact our business by diverting resources, increasing our compliance costs and harming our reputation.
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.
Further, 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. Our products are subject to extensive safety, health and environmental requirements, which could impair our ability to manufacture and sell certain products.
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.
Sales outside of the U.S. constituted the majority of our revenues in fiscal 2024. 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.
We expect complying with existing regulations and other regulatory and tax changes being proposed in regions where we operate, if approved, will require us to incur significant additional costs for compliance, capital improvements or limit our current or planned operations. We may not be able to offset the effects of these compliance costs through price increases.
We expect complying with existing regulations and other regulatory and tax changes being proposed in regions where we operate, if approved, will require us to incur significant additional costs for compliance, capital improvements or possibly limit our current or planned operations. We may not be able to offset the costs of these compliance obligations through price increases.
We may be exposed to certain regulatory and financial risks related to climate change developments and an increased focus on carbon neutrality, which may adversely affect our business and results of operations, and increased pressures and adverse publicity about potential impacts on climate change by us or other companies in our industry could harm our reputation.
We may be exposed to certain regulatory and financial risks related to climate change developments and an increased focus on carbon neutrality and net zero emissions, which may adversely affect our business and results of operations, and increased pressures and adverse publicity about potential impacts on climate change by us or other companies in our industry could harm our reputation.
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”.
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 T in Item 8 below under the heading “Contingencies”.
Increased competition from existing or newly developed products offered by our competitors or companies whose products offer a similar functionality as our products, particularly those with an improved environmental footprint, and could be substituted for our products, may negatively affect demand for our products.
Increased competition from existing or newly developed products offered by our competitors or companies whose products offer similar functionality as our products, particularly those with an improved environmental footprint, that could be substituted for our products, may negatively affect demand for our products.
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.
For example, in both fiscal 2023 and 2024, 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.
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.
In addition, we may have foreign currency losses from government-controlled currency devaluations, such as the foreign currency losses we recorded in both fiscal 2023 and 2024 related to the impact of the sharp devaluation of the Argentine peso that was guided by the Argentine central bank.
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.
These include requirements to obtain and comply with various environmental-related and other permits for constructing new facilities and operating our existing facilities, as well as settlements with agencies regarding environmental matters and environmental requirements. These environmental regulatory requirements impose constraints on our operations and could threaten our competitive position.
We have entered into a number of derivative contracts with financial counterparties. The effectiveness of these contracts is dependent on the ability of these financial counterparties to perform their obligations and their nonperformance could harm our financial condition. We have entered into forward foreign currency contracts and cross-currency swaps as part of our financial risk management strategy.
The effectiveness of these contracts is dependent on the ability of these financial counterparties to perform their obligations, and their nonperformance could harm our financial condition. We have entered into forward foreign currency contracts and cross-currency swaps as part of our financial risk management strategy.
Carbon dioxide, a greenhouse gas, is emitted in carbon black manufacturing processes. Concerns about the relationship between greenhouse gases and global climate change, and an increased focus on carbon neutrality, may result in additional regulations on both national and supranational levels, to monitor, regulate, control and tax emissions of carbon dioxide and other greenhouse gases.
Carbon dioxide, a greenhouse gas, is emitted in carbon black manufacturing processes. Concerns about the relationship between greenhouse gases and global climate change, and an increased focus on carbon neutrality and net zero, may result in additional regulations on both national and supranational levels, to monitor, regulate, control and impose taxes on emissions of carbon dioxide and other greenhouse gases.
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.
For example, the Russian invasion of Ukraine and the resulting ongoing war has in the past disrupted and may in the future 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.
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.
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.
Our ability to complete capacity expansions and site development projects, including capacity conversions from reinforcing carbons to specialty carbons and other site development projects, as planned may be delayed or interrupted by the need to obtain environmental and other regulatory approvals, unexpected cost increases, availability of labor and materials, unforeseen hazards such as weather conditions, and other risks customarily associated with construction projects.
Our ability to complete capacity expansions and site development projects as planned may be delayed or interrupted by the need to obtain environmental and other regulatory approvals, unexpected cost increases, availability of labor and materials, unforeseen hazards such as weather conditions, and other risks customarily associated with construction projects.
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.
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 and the provision of other services for the joint venture operations.
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.
As set forth in Note V to our Consolidated Financial Statements, sales in China constituted approximately 25% of our revenues in fiscal 2024 and our property, plant and equipment located in China constituted approximately 25% of our total property, plant and equipment as of September 30, 2024.
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.
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.
Our ongoing carbon black operations are subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to environmental matters, many of which provide for substantial monetary fines and civil and criminal sanctions for violations.
Our ongoing manufacturing operations are subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to environmental matters, many of which provide for substantial monetary fines, civil and criminal sanctions and possible injunctive relief for violations.
Breaches of our security measures, cyber incidents and disruptions, or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information or sensitive or confidential information about the Company, our employees, our vendors, or our customers, or failure to comply with laws and regulations related to information security or privacy, could result in legal claims or proceedings against us by governmental entities or individuals, significant fines, penalties and judgments, disruption of our operations, remediation requirements, changes to our business practices, and damage to our reputation, and could otherwise harm our business and our results of operations.
Breaches of our security measures, cyber incidents and disruptions, the theft or accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information or sensitive or confidential information about the Company, our employees, our vendors, or our customers, or failure to comply with laws and regulations related to information security or privacy, could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives or result in 20 legal claims or proceedings against us by governmental entities or individuals, significant fines, penalties and judgments, disruption of our operations, remediation requirements, changes to our business practices, and damage to our reputation, and could otherwise harm our business and our results of operations.
For example, in recent years we have experienced unplanned plant outages at our plants in Franklin, Louisiana and Altamira, Mexico that caused reduced volumes and earnings during the period the plant was down and increased our fixed costs.
For example, in recent years we have experienced unplanned plant outages at our plants in Franklin, Louisiana and Altamira, Mexico that caused a period of reduced volumes and earnings and increased our fixed costs.
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.
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.
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.
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.
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.
These costs could increase in the future in the event of water shortages. 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 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.
Our failure to execute our sustainability strategy in a way that adequately responds to these environmental concerns in a timely manner could harm our reputation and negatively impact the perceived value of our securities.
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 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, while inflationary pressures may increase our 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.
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, changes in interest rates can impact our borrowing costs.
In addition, the timely commercialization of products that we are developing may be disrupted or delayed by manufacturing or other technical difficulties, market acceptance or insufficient market size to support a new product, competitors’ new products, and difficulties in moving from the experimental stage to the production stage. These disruptions or delays could affect our future business results.
In addition, the timely commercialization of products that we are developing may be disrupted or delayed by manufacturing or other technical difficulties, market acceptance or insufficient market size to support a new product, competitors’ new products launched in advance of our own, and difficulties in moving from the experimental stage to the production stage.
Our future tax rates may be adversely affected by a number of factors, including: changes in the jurisdictions in which our profits are determined to be earned and taxed; changes in the estimated realization of our net deferred tax assets; the repatriation of non-U.S. earnings for which we have not previously provided for non-U.S. withholding taxes; adjustments to estimated taxes upon finalization of various tax returns; increases in expenses that are not deductible for tax purposes; changes in available tax credits; the resolution of issues arising from tax audits with various tax authorities; and changes in tax laws or the interpretation of such tax laws.
Our future tax rates may be adversely affected by a number of factors, including: changes in the jurisdictions in which our profits are determined to be earned and taxed; changes in the estimated realization of our net deferred tax assets; the repatriation of non-U.S. earnings for which we have not previously accrued for non-U.S. withholding taxes; adjustments to estimated taxes upon finalization of various tax returns; increases in expenses that are not deductible for tax purposes; changes in available tax credits; the resolution of issues arising from tax audits with various tax authorities; and changes in tax laws including Pillar Two legislation adopted as part of the OECD Inclusion Framework, which established a global minimum corporate tax rate of 15% for certain multinational enterprises, or the interpretation of such tax laws.
For example, tensions in the U.S.-China trade relationship have led to an increased risk of sanctions being imposed against our suppliers and customers in China which, if imposed, could restrict our ability to do business with such companies.
In addition, changes in, or tensions relating to, U.S. trade relations with countries where we do business may adversely impact our business. For example, tensions in the U.S.-China trade relationship have led to an increased risk of sanctions being imposed against our suppliers and customers in China which, if imposed, could restrict our ability to do business with such companies.
In addition, escalating tensions in the U.S.-China trade relationship and/or restrictive policies by either country could require us to duplicate the technology resources and capabilities we have in China, particularly those related to our battery materials product line, in a geography outside China, thereby increasing our costs.
In addition, escalating tensions in the U.S.-China trade relationship and/or actual or potential additional restrictive policies by either country could require us to duplicate the technology or other resources and capabilities we have in China, in a geography outside China, thereby increasing our costs.
Operational Risks As a chemical manufacturing company, our operations are subject to operational risks and have the potential to cause environmental or other damage as well as personal injury, or disrupt our ability to supply our customers, any of which could adversely affect our business, results of operations and cash flows.
Further, any such curtailments on the operations at our customers’ facilities could reduce demand for our products and our volumes. 18 Operational Risks As a chemical manufacturing company, our operations are subject to operational risks and have the potential to cause environmental or other damage as well as personal injury, or disrupt our ability to supply our customers, any of which could adversely affect our business, results of operations and cash flows.
In addition, extreme weather events and changing weather patterns present physical risks on existing infrastructure that may become more frequent or more severe as a result of factors related to climate change.
Extreme weather events and changing weather patterns present physical risks on existing infrastructure that may become more frequent or more severe as a result of factors related to climate change, including in areas that have not historically been exposed to natural hazards.
The continued protection of our patents, trade secrets and other proprietary intellectual property rights is important to our success. Our patents, trade secrets and other intellectual property rights are important to our success and competitive position.
These disruptions or delays could affect our future business results. The continued protection of our patents, trade secrets and other proprietary intellectual property rights is important to our success. Our patents, trade secrets and other intellectual property rights are important to our success and competitive position.
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.
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.
In addition, we may encounter unexpected operating difficulties in China, more restrictive investment opportunities in China, greater difficulty transferring funds, more restrictive travel in and out of China, or negative currency impacts. Further, the cost of our capital projects may be higher than anticipated because of trade tariffs.
In addition, we may encounter unexpected operating difficulties in China, more restrictive investment opportunities in China, greater difficulty transferring funds, more restrictive travel in and out of China, or negative currency impacts.
Natural disasters and severe weather events could affect our operations and financial results. We operate facilities in areas of the world that are exposed to natural hazards, such as floods, windstorms, hurricanes, and earthquakes.
We operate facilities in areas of the world that are exposed to natural hazards, such as floods, windstorms, hurricanes, droughts and earthquakes.
In addition, we obtain certain of our raw materials from selected key suppliers.
We obtain certain of our raw materials from selected key suppliers and certain joint venture partners.
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”).
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 could have a serious adverse impact on the economy and on our business, results of operations and cash flows.
Although we typically maintain raw material inventory, if any sole source supplier of raw materials ceases supplying raw materials to us, or if any of our key suppliers is unable to meet its obligations under supply agreements with us on a timely basis or at an acceptable price, or at all, we may be forced to incur higher costs to obtain the necessary raw materials elsewhere or, in certain limited cases, may not be able to obtain the required raw materials.
If any supplier of raw materials ceases supplying raw materials to us or is unable to meet its obligations under supply agreements with us on a timely basis or at an acceptable price, or at all, we may be forced to incur higher costs to obtain the necessary raw materials elsewhere. 17 In addition, our manufacturing processes require water in their operations.
In implementing this strategy, we may not be successful in separating non-strategic assets. The gains or losses on the divestiture of, or lost operating income from, such assets may affect our earnings. Moreover, we have in the past, and may again in the future, incur asset impairment charges related to acquisitions or divestitures that reduce earnings.
In implementing this strategy, we may not be successful in separating non-strategic assets. The gains or losses on the divestiture of, or lost operating income from, such assets may affect our earnings.
These events could negatively impact our results of operations and cash flows both during and after the period of any government-imposed curtailment or power outages affecting our operations. Further, any such curtailments on the operations at our customers’ facilities could reduce demand for our products and our volumes.
These events could negatively impact our results of operations and cash flows both during and after the period of any government-imposed curtailment affecting our operations.
In 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.
In order to secure and maintain the right to produce or sell our products, we must satisfy product related registration and other regulatory requirements in different jurisdictions.
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.
Further, increasing weather-related impacts on our operations and plant sites may impact the cost or availability of insurance. 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.
Environmental regulations and restrictions that affect the carbon black industry impose constraints on our operations, and could threaten our competitive position and increase our operating costs, which may adversely impact our business and results of operations.
In addition, actions by our competitors could impair our ability to maintain or raise prices, successfully enter new markets or maintain or grow our market position. Environmental laws and regulations that affect our industries impose constraints on our operations, and could threaten our competitive position and increase our operating costs, which may adversely impact our business and results of 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.
A pandemic could also contribute to increased costs and decreased availability of labor and materials for construction projects, which could increase the costs of our capital improvement projects and delay our completion of such projects. We have entered into a number of derivative contracts with financial counterparties.
Certain national and international health organizations have classified carbon black as a possible or suspected human carcinogen.
Obtaining and maintaining these approvals requires a significant amount of product testing and data, and there is no certainty these approvals will be obtained. 19 Certain national and international health organizations have classified carbon black as a possible or suspected human carcinogen.
Specifically, a pandemic or future global health crisis may disrupt operations at our customers and reduce demand for our products, require or cause us to cease operations or idle production lines at our facilities, could materially affect our ability to adequately staff and maintain our operations, including in the event government authorities impose mandatory closures, such as those imposed in China as part of that country’s “Zero COVID” policy, work-from-home orders and social distancing protocols, and seek voluntary facility closures and impose other restrictions to mitigate the further spread of disease.
Specifically, a pandemic or future global health crisis may disrupt operations at our customers and reduce demand for our products, require or cause us to cease operations or idle production lines at our facilities, could materially affect our ability to adequately staff and maintain our operations, and could disrupt our supply chain and materially and adversely impact our ability to secure supplies for our facilities.
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.
We also experienced severe weather events in fiscal 2024 that negatively impacted the results of our Reinforcement Materials segment. Specifically, drought conditions in Mexico affected our operations and flooding conditions in Brazil affected our customers. Financial and Other Risks Negative or uncertain worldwide or regional economic conditions or trade relations may adversely impact our business.
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In addition, actions by our competitors could impair our ability to maintain or raise prices, successfully enter new markets or maintain or grow our market position.
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Further, the capital improvements needed to comply with environmental requirements frequently involves the development and installation of new technologies within existing plant operations and there is a risk that these new technologies will not operate as we expect.
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Further, increasing weather-related impacts on our operations and plant sites may impact the cost or availability of insurance.
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There may be delays in the start-up of these capital improvements and our ability to comply with these requirements in a timely manner. In particular, it is possible we will experience these issues at our plant in Sarnia in light of the complexity of the new technology we expect to install at that plant.
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In addition, the Chinese government has instituted energy intensity and energy consumption targets in a number of provinces in its efforts to reduce energy consumption, resulting in energy quotas and shortages in energy supply. We are unable to predict how any power outages related to these targets will impact our operations.
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If climate change, manufacturing, and trends in digitization and electricity demands create a mismatch between water supply and demand that makes water less available for our operations, there is a risk that our operations may be curtailed, particularly in situations where water for human use needs to be prioritized over other uses, such as manufacturing operations.
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While we do not have manufacturing operations in Russia or Ukraine, and we do not have material sales in Ukraine and have stopped sales into Russia, Russia’s continuing invasion of Ukraine is negatively impacting economic conditions in Europe.
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For example, we are currently in arbitration following an on-going dispute with our joint venture partner in the Czech Republic, which has, and continues to, negatively impact those operations and reduce our income from those joint venture operations.
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This could reduce demand for our products in our EMEA region, and negatively impact our and our customers’ ability to operate plants in Europe, and harm our suppliers and otherwise increase our operating costs. In addition, changes in, or tensions relating to, U.S. trade relations with countries where we do business may adversely impact our business.
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Additionally, as we increase our use of artificial intelligence tools into our operations, the risk of unauthorized access to our data and of making compliance errors or erroneous decisions based on our reliance on the AI tool will increase.
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A global health crisis could have a serious adverse impact on the economy and on our business, results of operations and cash flows as the COVID-19 pandemic and associated containment efforts did in fiscal 2020.
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The devotion of additional resources to the security of our information technology systems in the future could significantly increase the cost of doing business or otherwise adversely impact our financial results. Natural disasters and severe weather events could affect our operations and financial results.
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A global health crisis could also disrupt our supply chain and materially and adversely impact our ability to secure supplies for our facilities and to provide personal protective equipment for our employees, which could materially and adversely affect our operations.
Added
In addition, certain of our facilities are located in areas that have, in recent years, experienced extreme heat conditions. Our operations at those facilities may be disrupted if extreme heat conditions create an unsafe work environment or be subject to additional safe workplace requirements that could increase their operating costs. We have experienced recent disruptions of the type described above.

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Item 2. Properties

Properties — owned and leased real estate

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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
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.
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.
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 26 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) Global Business Services 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; Münster, Germany; Chiba, Japan, Port Dickson, Malaysia and Zhuhai and Shanghai, China.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings Cabot is a party in various lawsuits and environmental proceedings wherein substantial amounts are claimed. Additional information regarding legal proceedings involving Cabot is disclosed in Note S in Item 8 below, under the heading “Contingencies”, which disclosure is incorporated herein by reference.
Item 3. Legal Proceedings Cabot is a party in various lawsuits and environmental proceedings wherein substantial amounts are claimed. Additional information regarding legal proceedings involving Cabot is disclosed in Note T in Item 8 below, under the heading “Contingencies”, which disclosure is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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From June 2016 until May 2018 she was Vice President of Business Operations for Reinforcement Materials and General Manager of the tire business, and from July 2011 until June 2016, she was Vice President of Investor Relations and Corporate Communications. Prior to July 2011, she held a variety of leadership positions in Finance and Corporate Planning. Karen A.
From June 2016 until May 2018, she was Vice President of Business Operations for Reinforcement Materials and General Manager of the tire business, and from July 2011 until June 2016, she was Vice President of Investor Relations and Corporate Communications. Prior to July 2011, she held a variety of leadership positions in Finance and Corporate Planning. 27 Karen A.
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
In addition, Mr. Zhu served as head of global pulp and paper sales at Asia Pacific Resources International Holdings Limited from 2010 to 2012. PART II
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.
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 48, is Executive Vice President, Chief Financial Officer and Head of Corporate Strategy.
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.
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, 2024. Sean D. Keohane, age 57, 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.
Kalita, age 44, is Senior Vice President and General Counsel. Ms. Kalita joined Cabot in 2008.
Kalita, age 45, is Senior Vice President and General Counsel. Ms. Kalita joined Cabot in 2008.
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.
Prior to that, he served as General Manager of the Aerogel business from October 2007 to February 2010. Jeff Zhu, age 56, is Executive Vice President and President, Carbon and Silica Technologies, and Battery Materials businesses within Cabot’s Performance Chemicals Segment and President, Asia Pacific Region. Mr. Zhu joined Cabot in 2012.
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.
Kalita was in private practice at WilmerHale LLP in Boston, MA. Hobart C. Kalkstein, age 54, is Executive Vice President and President, Reinforcement Materials Segment and President, Americas Region. Mr. Kalkstein also has executive responsibility for Cabot’s Digital function. Mr. Kalkstein joined Cabot in 2005.
Prior to this, he was Vice President of Corporate Strategy and Development from December 2015 to April 2016.
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. 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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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
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. 29
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.
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, 2024, there were 530 holders of record of Cabot’s common stock.
(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.
(2) Total number of shares purchased does not include 4,038 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. 28 Comparative Stock Performance The graph compares the cumulative total stockholder return on Cabot common stock for the five-year period ended September 30, 2024 with the S&P 400 Chemical Index and the S&P Midcap 400 Index.
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.
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, 2024: 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, 2024 — July 31, 2024 — $ — — 1,938,177 August 1, 2024 — August 31, 2024 440,000 $ 102.62 440,000 1,498,177 September 1, 2024 — September 30, 2024 197,206 $ 100.70 197,206 1,300,971 Total 637,206 637,206 (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.
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 comparisons assume the investment of $100 on October 1, 2019 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.
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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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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.
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 fifteen years, some of which may include options to extend the leases for up to fifteen years or options to terminate the leases.
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.
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, repurchases of common stock of $98 million and dividend payments to noncontrolling interests of $42 million.
If additional funds are needed in the U.S., we expect to be able to repatriate cash, including cash from China, while paying any withholding or other taxes. Changes in tax laws in the U.S. or foreign countries could restrict our ability to transfer funds or impose material costs on such transfers.
If additional funds are needed in the U.S., we expect to be able to repatriate cash, including cash from China, while paying any withholding or other taxes. Changes in regulations and tax laws in the U.S. or foreign countries could restrict our ability to transfer funds or impose material costs on such transfers.
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.
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 GAAP basis and also facilitates an evaluation of our operating performance without the impact of these costs or benefits.
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.
As of September 30, 2024, 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.
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.
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, 2024.
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.
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.
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.
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 2024 and 2023 results of operations and year-to-year comparisons between fiscal 2024 and 2023.
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.
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 2024 versus Fiscal 2023—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.
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.
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. 31 Our discussion under the heading “Fiscal 2024 versus Fiscal 2023—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.
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.
For the discussions of our fiscal 2022 results and year-to-year comparisons between fiscal 2023 and fiscal 2022, 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, 2023, which was filed with the United States Securities and Exchange Commission on November 22, 2023.
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.
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 and unrealized holdings gains (losses) for investments.
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.
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 $31 million as of September 30, 2024, the majority of which is expected to be paid within the next 5 years.
The details of certain items and other unallocated items are shown below and in Note T of our Notes to the Consolidated Financial Statements.
The details of certain items and other unallocated items are shown below and in Note V of our Notes to the Consolidated Financial Statements.
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.
Refer to Note A and Note T of our Notes to the Consolidated Financial Statements for description of our policies related to contingencies. 30 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.
We anticipate sufficient liquidity from (i) cash on hand; (ii) cash flows from operating activities; and (iii) cash available from the Credit Agreements and our commercial paper program to meet our operational and capital investment needs and financial obligations for the foreseeable future.
We anticipate sufficient liquidity from (i) cash on hand; (ii) cash flows from operating activities; and (iii) cash available from the Credit Agreements and our commercial paper program to meet our operational and capital investment needs and financial obligations for both the next twelve months and the foreseeable future.
Included in the (provision) benefit for income taxes for the year ended September 30, 2023 is a tax benefit of $152 million related to a partial valuation allowance release on the Company’s U.S. net deferred tax assets.
Included in the (provision) benefit for income taxes for the year ended September 30, 2024 and 2023 is a tax benefit of $24 million and $152 million, respectively, related to a partial valuation allowance release on the Company’s U.S. net deferred tax assets.
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.
Capital expenditures for fiscal 2025 are expected to be between $250 million and $300 million. Our planned capital spending program for fiscal 2025 is primarily for sustaining, compliance and improvement capital projects at our operating facilities as well as capacity expansion capital expenditures.
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 items of income and expense that we have excluded from Total segment EBIT, as applicable, but that are included in our GAAP Income (loss) from operations before income taxes and equity in earnings of affiliated companies, as applicable, are described below. • Argentina controlled currency devaluation loss related to the foreign exchange loss from government-controlled currency devaluations on our net monetary assets denominated in the Argentine peso and investment losses related to the utilization of government bond programs established for the settlement of certain foreign payables. • 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. • Legal and environmental matters and reserves, 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. • 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. • 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. • 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. 32 Drivers of Demand and Key Factors Affecting Profitability Drivers of demand and key factors affecting our profitability differ by segment.
Our land leases have remaining lease terms up to seventy-nine years.
Our land leases have remaining lease terms up to seventy-eight years.
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.
As of September 30, 2024, we had cash and cash equivalents of $223 million and borrowing availability under our revolving credit agreements of $1.2 billion. 37 We have access to borrowings under the following two credit agreements: • $1 billion unsecured revolving credit agreement (the “U.S.
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.
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 2024, we repurchased approximately 1.7 million shares of common stock on the open market for $159 million.
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%.
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 2025, we expect our Operating tax rate to be in the range of 27% to 29%.
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.
For the year ended September 30, 2024, the (Provision) benefit for income taxes was a $111 million expense compared to a $28 million benefit for fiscal 2023.
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”.
Other Unallocated Items: Years Ended September 30 2024 2023 (In millions) Interest expense $ (81 ) $ (90 ) Unallocated corporate costs (68 ) (54 ) General unallocated income (expense) 42 22 Less: Equity in earnings of affiliated companies, net of tax 6 5 Total other unallocated items $ (113 ) $ (127 ) 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”.
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.
As of September 30, 2024, we had approximately 1.3 million shares available for repurchase under the Board of Directors’ share repurchase authorization. Dividend Payments In fiscal 2024 and 2023, we paid cash dividends on our common stock of $1.66 and $1.54 per share, respectively. These cash dividend payments totaled $93 million and $88 million in fiscal 2024 and 2023, respectively.
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.
Net income (loss) attributable to noncontrolling interests, net of tax, increased by $5 million in fiscal 2024 compared to fiscal 2023 primarily due to increase earnings of our joint ventures in China and the Czech Republic.
Our current estimate of the cost of our share of pending and future respirator liability claims is based on facts and circumstances existing at this time, including the number and nature of the remaining claims.
Contingencies We have recorded a significant reserve for respirator liability claims. Our current estimate of the cost of our share of pending and future respirator liability claims is based on facts and circumstances existing at this time, including the number and nature of the remaining claims.
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.
In fiscal 2023, we repurchased approximately 1.3 million shares of common stock on the open market for $91 million. Additionally, during fiscal 2024 and 2023, we repurchased 0.2 million and 0.1 million, respectively, shares of our common stock associated with employee tax obligations on stock-based compensation awards for $13 million and $7 million, respectively.
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.
Liquidity and Capital Resources Overview Our liquidity position, as measured by cash and cash equivalents plus borrowing availability, increased by $137 million during fiscal 2024, primarily due to lower outstanding revolving credit and commercial paper balances at the end of the period.
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.
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 $692 million in fiscal 2024. Operating activities provided $595 million of cash in fiscal 2023.
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.
Years Ended September 30 2024 2023 (In millions) Income (loss) from operations before income taxes and equity in earnings of affiliated companies $ 529 $ 451 Less: Certain items, pre-tax (59 ) (29 ) Less: Other unallocated items (113 ) (127 ) Total segment EBIT $ 701 $ 607 In fiscal 2024, Income (loss) from operations before income taxes and equity in earnings of affiliated companies increased by $78 million.
Cash Flows from Financing Activities Financing activities consumed $403 million of cash in fiscal 2023 compared to $145 million provided in fiscal 2022.
Cash Flows from Financing Activities Financing activities consumed $415 million of cash in fiscal 2024 compared to $403 million consumed in fiscal 2023.
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.
Loss on Sale of Business Years Ended September 30 2024 2023 (In millions) Loss on sale of business $ — $ 3 The loss on sale of business associated with the sale of the Purification Solutions business is described in Note D of our Notes to the Consolidated Financial Statements.
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.
The decrease in net working capital was largely driven by a decrease in inventories from lower cost of raw materials and an increase in accounts payable and accrued liabilities, partially offset by an increase in accounts receivable from increased sales volumes.
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.
Equity in Earnings of Affiliated Companies and Net Income (Loss) Attributable to Noncontrolling Interest, Net of Tax Years Ended September 30 2024 2023 (In millions) Equity in earnings of affiliated companies, net of tax $ 6 $ 5 Net income (loss) attributable to noncontrolling interests, net of tax $ 44 $ 39 Equity in earnings of affiliated companies, net of tax, increased by $1 million in fiscal 2024 compared to fiscal 2023 primarily due to higher profitability at our equity affiliate in Venezuela.
For fiscal 2024, our benefit payments for our postretirement plans are expected to be $3 million. In fiscal 2023, we commenced the plan termination process for the Cabot Carbon Limited Pension Plan and Carbon Plastics Pension Plan and expect to complete this process in fiscal 2024. Contractual Obligations The following table sets forth our long-term contractual obligations.
In fiscal 2023, we commenced the plan termination process for the Cabot Carbon Limited Pension Plan and Carbon Plastics Pension Plan and expect to complete this process in fiscal 2025. 39 Contractual Obligations The following table sets forth our long-term contractual obligations.
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.
Fiscal 2024 compared to Fiscal 2023—Consolidated Net Sales and Other Operating Revenues and Gross Profit Years Ended September 30 2024 2023 (In millions) Net sales and other operating revenues $ 3,994 $ 3,931 Gross profit $ 960 $ 839 Net sales and other operating revenues increased by $63 million in fiscal 2024 as compared to fiscal 2023.
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.
As of September 30, 2024 and 2023, we had $113 million and $120 million, respectively, of borrowings outstanding under the Euro Credit Agreement and no outstanding borrowings under the U.S. Credit Agreement at either date. There was $45 million and $172 million of commercial paper outstanding at September 30, 2024 and 2023, respectively.
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).
Net Income (Loss) Attributable to Cabot Corporation In fiscal 2024 and 2023, we reported net income attributable to Cabot Corporation of $380 million ($6.72 earnings per diluted common share) and $445 million ($7.73 earnings per diluted common share), respectively.
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.
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 2024, we paid postretirement benefits of $4 million. For fiscal 2025, our benefit payments for our postretirement plans are expected to be $3 million.
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.
Interest and Dividend Income Years Ended September 30 2024 2023 (In millions) Interest and dividend income $ 32 $ 31 Interest and dividend income in fiscal 2024 increased by $1 million as compared to fiscal 2023 primarily due to higher interest rates and the currency mix of deposit balances.
Certain 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”.
Certain Items: Details of the certain items for fiscal 2024 and 2023 are as follows: Years Ended September 30 2024 2023 (In millions) Argentina controlled currency devaluation and other losses $ (43 ) $ (7 ) Global restructuring activities (Note O) (13 ) (4 ) Legal and environmental matters and reserves (Note T) (2 ) (10 ) Gain on sale of land — 1 Acquisition and integration-related charges — (4 ) Loss on sale of business (Note D) — (3 ) Other certain items (1 ) (2 ) Total certain items $ (59 ) $ (29 ) 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”.
Cash provided by operating activities in fiscal 2022 was driven by business earnings excluding the non-cash impacts of depreciation and amortization of $146 million, which was partially offset by an increase in net working capital of $431 million.
Cash provided by operating activities in fiscal 2024 was driven by business earnings excluding the non-cash impacts of depreciation and amortization of $151 million, plus a decrease in net working capital of $57 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.
In fiscal 2024, the use of cash by investing activities primarily consisted of $241 million of capital expenditures for sustaining and compliance capital projects at our operating facilities as well as growth-related capital, including capacity expansion projects.
Assumptions, judgment, and estimates are required when estimating future income and scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective.
Assumptions, judgment, and estimates are required when estimating future income and scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective. Refer to Note A and Note R of our Notes to the Consolidated Financial Statements for description of our policies related to income taxes.
(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.
The increase was primarily due to higher foreign currency losses in Argentina, including the impact of the government devaluation of the currency that occurred during the first quarter of fiscal 2024. 34 (Provision) Benefit for Income Taxes and Reconciliation of Effective Tax Rate to Operating Tax Rate Years Ended September 30 2024 2023 (Provision) / Benefit for Income Taxes Rate (Provision) / Benefit for Income Taxes Rate (Dollars in millions) Effective tax rate (1) $ (111 ) 21 % $ 28 -6 % Less: Non-GAAP tax adjustments (2) 40 161 Operating tax rate $ (151 ) 26 % $ (133 ) 28 % (1) Refer to the reconciliation of computed tax expense at the federal statutory rate to the Provision (benefit) for income taxes in Note R of our Notes to the Consolidated Financial Statements.
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.
Interest Expense Years Ended September 30 2024 2023 (In millions) Interest expense $ 81 $ 90 Interest expense decreased by $9 million in fiscal 2024 as compared to fiscal 2023 primarily due to lower average short-term borrowings, partially offset by higher interest rates.
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.
Employee Benefit Plans As of September 30, 2024, we had a consolidated pension obligation, net of the fair value of plan assets, of $26 million, primarily associated with postretirement benefit plan liabilities. In fiscal 2024, we made cash contributions totaling $4 million to our defined benefit pension plans.
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.
In fiscal 2025, we expect to make cash contributions of $5 million to our defined benefit pension plans. The $25 million of unfunded postretirement benefit plan liabilities is comprised of $13 million for our U.S. and $12 million for our foreign postretirement benefit plans. These postretirement benefit plans provide certain health care and life insurance benefits for retired employees.
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.
Overview of Results for Fiscal 2024 During fiscal 2024, Income (loss) from operations before income taxes and equity in earnings of affiliated companies increased compared to fiscal 2023 primarily due to higher earnings in both our Reinforcement Materials and Performance Chemicals segments.
Although we repatriate certain foreign earnings, cash held by foreign subsidiaries is generally considered permanently reinvested and is used to finance the subsidiaries’ operational activities and future investments. We usually reduce our commercial paper balance and, if applicable, borrowings under our Credit Agreements, at quarter-end using cash derived from customer collections, settlement of intercompany balances and short-term intercompany loans.
We usually reduce our commercial paper balance and, if applicable, borrowings under our Credit Agreements, at quarter-end using cash derived from customer collections, including the utilization of customer supply chain financing programs, settlement of intercompany balances and short-term intercompany loans.
The cash provided by financing activities in fiscal 2022 primarily consisted of net proceeds from long-term debt of $22 million, which consisted of proceeds of $394 million less repayments of $372 million, net proceeds from the issuance of commercial paper of $250 million, and proceeds from short-term borrowings of $26 million, partially offset by dividend payments to stockholders of $84 million, purchases of common stock of $53 million and dividend payments to noncontrolling interests of $22 million.
The cash consumed by financing activities in fiscal 2024 primarily consisted of repurchases of common stock of $172 million, net repayments of commercial paper of $127 million, dividend payments to stockholders of $93 million, dividend payments to noncontrolling interests of $27 million, and net repayments of long-term debt of $12 million under our Euro Credit Agreement, which includes repayments of $26 million partially offset by proceeds of $14 million.
Total segment EBIT decreased by $35 million in fiscal 2023 compared to fiscal 2022 driven by lower volumes, the unfavorable impact of foreign currency movements, partially offset by higher unit margins in the Reinforcement Materials segment.
EBIT in Performance Chemicals increased by $39 million compared to fiscal 2023 due to higher volumes ($35 million) and higher unit margins, net of higher costs ($11 million), partially offset by the unfavorable impact of foreign currency translation ($6 million).
Refer to Note D of our Notes to the Consolidated Financial Statements. 35 Fiscal 2024 Outlook Looking forward to fiscal 2024, we remain focused on our strategy of Creating for Tomorrow, advancing several strategic initiatives, generating strong cash flows, and maintaining a disciplined approach to capital allocation.
Higher costs were primarily driven by higher maintenance and turnaround costs. Fiscal 2025 Outlook Looking forward to fiscal 2025, we remain focused on our strategy of Creating for Tomorrow, advancing several strategic initiatives, generating strong cash flows, continuing our disciplined approach to capital allocation, and remain committed to our investment grade credit rating.
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.
Selling and Administrative Expenses Years Ended September 30 2024 2023 (In millions) Selling and administrative expenses $ 283 $ 253 33 Selling and administrative expenses increased by $30 million in fiscal 2024 as compared to fiscal 2023. The increase was primarily due to an increase in the incentive compensation expense.
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 higher unit margins, net of higher costs, were primarily driven by favorable pricing and product mix in our 2023 and 2024 calendar year customer agreements, and higher costs were primarily driven by higher selling and administrative costs.
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.
Performance Chemicals Sales and EBIT for Performance Chemicals for fiscal 2024 and 2023 are as follows: Years Ended September 30 2024 2023 (In millions) Performance Chemicals Sales $ 1,250 $ 1,225 Performance Chemicals EBIT $ 164 $ 125 In fiscal 2024, sales in Performance Chemicals increased by $25 million compared to the same period of fiscal 2023.
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.
Research and Technical Expenses Years Ended September 30 2024 2023 (In millions) Research and technical expenses $ 63 $ 57 Research and technical expenses increased by $6 million in fiscal 2024 as compared to fiscal 2023. The increase was primarily due to an increase in the incentive compensation expense.
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.
The decrease in fiscal 2024 was primarily due to a lower partial release of the valuation allowance on our U.S. deferred tax assets ($128 million) and higher losses from government-controlled currency devaluations in Argentina ($26 million), partially offset by higher earnings in both our Reinforcement Material and Performance Chemicals segments ($94 million combined). 35 Fiscal 2024 compared to Fiscal 2023—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 2024 and 2023 are set forth in the table below.
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.
Payments Due by Fiscal Year 2025 2026 2027 2028 2029 Thereafter Total (In millions) Purchase commitments $ 251 $ 210 $ 184 $ 132 $ 116 $ 1,349 $ 2,242 Long-term debt 4 250 113 8 300 400 1,075 Fixed interest on long-term debt 41 41 33 32 32 60 239 Variable interest on long-term debt 5 5 4 — — — 14 Finance leases (1) 5 5 3 3 3 13 32 Operating leases (1) 17 14 12 10 10 69 132 Total $ 323 $ 525 $ 349 $ 185 $ 461 $ 1,891 $ 3,734 (1) Lease liabilities include interest.
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.
Other Income (Expense) Years Ended September 30 2024 2023 (In millions) Other income (expense) $ (36 ) $ (16 ) Other expense increased during fiscal 2024 by $20 million as compared to fiscal 2023.
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.
Gross profit increased by $121 million in fiscal 2024 as compared to fiscal 2023. The increase was primarily due to higher earnings in both our Reinforcement Materials and Performance Chemicals segments as volumes and unit margins, net of costs, in both segments improved.
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.
Reinforcement Materials Sales and EBIT for Reinforcement Materials for fiscal 2024 and 2023 are as follows: Years Ended September 30 2024 2023 (In millions) Reinforcement Materials Sales $ 2,610 $ 2,563 Reinforcement Materials EBIT $ 537 $ 482 In fiscal 2024, sales in Reinforcement Materials increased by $47 million compared to fiscal 2023.
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.
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. 38 Cash Flows from Investing Activities Investing activities consumed $235 million of cash in fiscal 2024 compared to $214 million in fiscal 2023.
The decrease in net sales was primarily driven by lower volumes in both segments ($212 million), the negative impact from foreign currency translation ($128 million), and the impact of the divestiture of our Purification Solutions business in fiscal 2022 ($97 million), partially offset by a favorable price and product mix ($98 million).The favorable price and product mix was driven by favorable 2023 calendar year tire customer contracts agreements within the Reinforcement Materials segment, partially offset by a weaker price and product mix in the Performance Chemicals segment.
The increase in net sales and other operating revenues was driven by higher volumes in both the Reinforcement Materials and Performance Chemicals segments ($148 million combined), partially offset by unfavorable pricing and product mix in both segments ($48 million combined), the unfavorable impact from foreign currency translation in both segments ($22 million combined) and lower by-product revenue in both segments ($5 million combined).
The less favorable pricing and product mix was primarily due to lower raw material prices that are generally passed through to our customers and a less favorable pricing and product mix within the battery materials product line.
The increase was primarily due to higher volumes ($79 million), partially offset by the unfavorable impact from foreign currency translation ($17 million) and unfavorable pricing and product mix ($13 million). The higher volumes were primarily in Asia Pacific and EMEA. The unfavorable pricing was primarily due to lower raw material costs that are generally passed through to our customers.
The decrease was primarily due to lower volumes ($147 million), the unfavorable impact from foreign currency translation ($86 million) and lower by-product revenue ($24 million), partially offset by improved price and product mix (combined $148 million). Lower volumes were primarily due to lower replacement tire demand and customer destocking.
The increase was driven by higher volumes ($69 million), partially offset by unfavorable pricing and product mix ($36 million) and the unfavorable impact from foreign currency translation ($5 million).
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 higher volumes were primarily due to demand recovery in key end markets as the customer destocking that occurred in fiscal 2023 did not reoccur in fiscal 2024. The higher unit margins, net of higher costs, were primarily due to higher unit margins from a more favorable product mix with higher sales into the automotive and electronics end markets.
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.
The higher volumes were due to higher volumes in Asia Pacific and EMEA in Reinforcement Materials and higher volumes in Performance Chemicals as volumes reconnected to underlying demand drivers in key end markets. The unfavorable pricing in both segments was primarily due to lower raw material costs that are generally passed through to our customers.
Removed
Management concluded that, based on the weight of all available evidence at September 30, 2023, it is more likely than not that a portion of our U.S. deferred tax assets will be realized, resulting in a $152 million release of valuation allowance.
Added
The increase was primarily driven by higher earnings in both our Reinforcement Materials and Performance Chemicals segment ($94 combined) and higher General unallocated income ($20 million), partially offset by higher expenses from Argentina controlled currency devaluation and other losses ($36 million).
Removed
Refer to Note A and Note Q of our Notes to the Consolidated Financial Statements for description of our policies related to income taxes. Contingencies We have recorded a significant reserve for respirator liability claims.
Added
This does not include items of income or expense from the items that are separately treated as Certain items. 36 In fiscal 2024, Total other unallocated items expense decreased by $14 million as compared to fiscal 2023 primarily due to higher General unallocated income partially offset by higher Unallocated corporate costs.
Removed
The items of income and expense that we have excluded from Total segment EBIT, as applicable, but that are included in our U.S.
Added
General unallocated income (expense) was increased by $20 million of income primarily due to less foreign currency operating losses in Argentina in fiscal 2024 as compared to fiscal 2023. The foreign currency losses from government devaluations in Argentina are treated as a certain item and are not included in General unallocated income (expense).
Removed
The volume decrease is primarily due to destocking in both segments, soft demand in key markets, and, for the Performance Chemicals segment, a prolonged weakness in China following the impact of COVID-19 outbreaks in the first half of fiscal 2023. Gross profit decreased by $46 million in fiscal 2023 as compared to fiscal 2022.
Added
Unallocated corporate costs increased by $14 million primarily due to an increase in incentive compensation expense.
Removed
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.
Added
EBIT in Reinforcement Materials increased by $55 million compared to fiscal 2023. The increase was driven by higher volumes ($28 million) and higher unit margins, net of higher costs ($25 million). The higher volumes were primarily in Asia Pacific and EMEA.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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These 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.
These forwards had a fair value of less than $1 million as of both September 30, 2024 and 2023. 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.
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.
Description Notional Amount Interest Rate Received Interest Rate Paid Fiscal Year Entered Into Maturity Year Fair Value at September 30, 2024 Fair Value at September 30, 2023 Cross Currency Swaps USD 250 million swapped to EUR 223 million 3.40% 1.94% 2016 2026 $1 million $12 million 40 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.
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.
We manage these risks through normal operating and financing activities and, when deemed appropriate, using 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.
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 derivative instruments are booked in our balance sheet at fair value and reflect the asset or liability position as of September 30, 2024. 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, 2023 and September 30, 2022.
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, 2024 and 2023.
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 2024 and 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 $5 million and $16 million, respectively, which affected the results of the Reinforcement Materials and Performance Materials segments.
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.
Accordingly, we use short-term forward contracts to minimize the exposure to foreign currency risk. At September 30, 2024 and 2023, we had $138 million and $82 million, respectively, in notional foreign currency contracts, which were denominated in Indonesian rupiah, Czech koruna, and Colombian peso.
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.
In fiscal 2024 and 2023, we recognized a net foreign exchange loss of $46 million and $35 million, respectively, 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 in both periods. 41
Removed
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
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

Other CBT 10-K year-over-year comparisons