SEC Comment Letter for CABOT CORP (CBT) (CIK 0000016040) (CBT) — Mar 7, 2014
CABOT CORP (CBT) (CIK 0000016040)
Date: March 7, 2014 · CIK: 0000016040 · Accession: 0000000000-14-011623
AI Filing Summary & Sentiment
Reasoning
Letter
March 7, 2014 Via E -mail Eduardo E. Cordeiro Chief Financial Officer Cabot Corporation Two Seaport Lane Boston, MA 02210 -2019
Re: Cabot Corporation Form 10-K for the Fiscal Year Ended September 30, 2013 Filed November 27, 2013 Form 10 -Q for the Period Ended December 31, 2013 Filed February 6, 2014 File No. 1 -5667
Dear Mr. Cordeiro :
We have reviewed your filing an d have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.
Please respond to this letter within ten business days by prov iding the requested information or by advising us when you will provide the requested response. If you d o not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments, we may have additional commen ts.
Form 10 -K for the Fiscal Year Ended September 30, 2013
Management’s Discussion and Analysis…, page 32
Goodwill and Long -Lived Assets, page 34
1. You disclose on page 34 that your Purification Solutions business had goodwill of $466 millio n as of September 30, 2013 and that the growth of this reporting unit is highly dependent on the growth in the mercury removal portion of this business. Please tell us if the estimated fair value of your Purification Solutions reporting unit substantially exceed the carrying value of this reporting unit as of your most recent goodwill impairment test.
Eduardo E. Cordeiro Cabot Corporation March 7, 2014 Page 2
2. As a related matter, if any of your reporting units are at risk of failing step one of the impairment test (e.g. reporting units have estimated fair values that are not substantially in excess of the carrying value ), please revise your future filings to disclose the following: The percentage by which fair value exceeded carrying value as of the date o f your most recent goodwill impairment test ; The amount of goodwill a llocated to the reporting unit; A description of the methods and key assumptions used and how the k ey assumptions were determined; A discussion of the degree of uncertainty associated with the key assumptions. The discussion regarding uncertainty should provide specifics to the extent possible (e.g., the valuation model assumes recovery from a business downturn within a defined period of time); and A description of potential events and/or changes in circumstances that could reasonably be expected to negatively affect the key assumptions. If you have determined that the estimated fair value substantially exceeds the carrying value for all of your reporting units, please disclose this determination. Please refer to Item 303 of Regulation S -K and Sections 216 and 501.14 of the Financial Reporting Codification for guidance.
Reinforcement Materials, page 46
3. We note that the fiscal year 2013 decrease in Reinforcement Materials sales and EBIT were driven, in part, by lower prices, a less favorable product mix and lower volumes. Please show us how you will expand your disclosures in future filings to explain the underlying causes of lower prices, a less favorable product mix and lower volumes. Please also consider discussing EBIT as a percentage of sales. Please address this comment as it relates to all your segme nt sales and EBIT d iscussions.
Form 10 -Q for the Period Ended December 31 , 2013
Management’s Discussion and Analysis of Financial Condition and Results of Operations, page
Intangible Assets and Goodwill, page 33
4. In your January 30, 2014 earnings call discussing results for the first quarter of fiscal 2014, Mr. Prevost indicated that the Purification Solutions segment “experienced another difficult quarter due to lower volumes and operational issues.” In addition, he indicated that as a result of these operational issues, the Company needed to “reposition expectations for the 2014 Purification Solutions EBITDA performance .” Please tell us how you considered ASC 350 -20-35-30 in determining the need for an interim g oodwill impairment evaluation for the Purification Solutions reporting unit in light of these adjusted performance expectations.
Eduardo E. Cordeiro Cabot Corporation March 7, 2014 Page 3
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the information the Securities Exchange Act of 1934 and all applica ble Exchange Act rules require. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accura cy and adequacy of t he disclosures they have made.
In responding to our comments, please provide a written statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the filing;
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
You may contact Lisa Etheredge, Staff Accountant, at (202) 551 -3424 or Jeanne Baker, Assistant Chief Accountant, at (202) 551 -3691 if you have questions.
Sincerely,
/s/ John Cas h
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March 7, 2014 Via E -mail Eduardo E. Cordeiro Chief Financial Officer Cabot Corporation Two Seaport Lane Boston, MA 02210 -2019 Re: Cabot Corporation Form 10-K for the Fiscal Year Ended September 30, 2013 Filed November 27, 2013 Form 10 -Q for the Period Ended December 31, 2013 Filed February 6, 2014 File No. 1 -5667 Dear Mr. Cordeiro : We have reviewed your filing an d have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within ten business days by prov iding the requested information or by advising us when you will provide the requested response. If you d o not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response. After reviewing the information you provide in response to these comments, we may have additional commen ts. Form 10 -K for the Fiscal Year Ended September 30, 2013 Management’s Discussion and Analysis…, page 32 Goodwill and Long -Lived Assets, page 34 1. You disclose on page 34 that your Purification Solutions business had goodwill of $466 millio n as of September 30, 2013 and that the growth of this reporting unit is highly dependent on the growth in the mercury removal portion of this business. Please tell us if the estimated fair value of your Purification Solutions reporting unit substantially exceed the carrying value of this reporting unit as of your most recent goodwill impairment test. Eduardo E. Cordeiro Cabot Corporation March 7, 2014 Page 2 2. As a related matter, if any of your reporting units are at risk of failing step one of the impairment test (e.g. reporting units have estimated fair values that are not substantially in excess of the carrying value ), please revise your future filings to disclose the following: The percentage by which fair value exceeded carrying value as of the date o f your most recent goodwill impairment test ; The amount of goodwill a llocated to the reporting unit; A description of the methods and key assumptions used and how the k ey assumptions were determined; A discussion of the degree of uncertainty associated with the key assumptions. The discussion regarding uncertainty should provide specifics to the extent possible (e.g., the valuation model assumes recovery from a business downturn within a defined period of time); and A description of potential events and/or changes in circumstances that could reasonably be expected to negatively affect the key assumptions. If you have determined that the estimated fair value substantially exceeds the carrying value for all of your reporting units, please disclose this determination. Please refer to Item 303 of Regulation S -K and Sections 216 and 501.14 of the Financial Reporting Codification for guidance. Reinforcement Materials, page 46 3. We note that the fiscal year 2013 decrease in Reinforcement Materials sales and EBIT were driven, in part, by lower prices, a less favorable product mix and lower volumes. Please show us how you will expand your disclosures in future filings to explain the underlying causes of lower prices, a less favorable product mix and lower volumes. Please also consider discussing EBIT as a percentage of sales. Please address this comment as it relates to all your segme nt sales and EBIT d iscussions. Form 10 -Q for the Period Ended December 31 , 2013 Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 32 Intangible Assets and Goodwill, page 33 4. In your January 30, 2014 earnings call discussing results for the first quarter of fiscal 2014, Mr. Prevost indicated that the Purification Solutions segment “experienced another difficult quarter due to lower volumes and operational issues.” In addition, he indicated that as a result of these operational issues, the Company needed to “reposition expectations for the 2014 Purification Solutions EBITDA performance .” Please tell us how you considered ASC 350 -20-35-30 in determining the need for an interim g oodwill impairment evaluation for the Purification Solutions reporting unit in light of these adjusted performance expectations. Eduardo E. Cordeiro Cabot Corporation March 7, 2014 Page 3 We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the information the Securities Exchange Act of 1934 and all applica ble Exchange Act rules require. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accura cy and adequacy of t he disclosures they have made. In responding to our comments, please provide a written statement from the company acknowledging that: the company is responsible for the adequacy and accuracy of the disclosure in the filing; staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. You may contact Lisa Etheredge, Staff Accountant, at (202) 551 -3424 or Jeanne Baker, Assistant Chief Accountant, at (202) 551 -3691 if you have questions. Sincerely, /s/ John Cas h John Cash Accoun ting Branch Chief