SEC Comment Letter for CABOT CORP (CBT) (CIK 0000016040) (CBT) — Jun 24, 2016
CABOT CORP (CBT) (CIK 0000016040)
Date: June 24, 2016 · CIK: 0000016040 · Accession: 0000000000-16-081892
AI Filing Summary & Sentiment
Reasoning
Letter
Mail Stop 4631 June 23, 2016 Via E -mail Mr. Eduardo E. Cordeiro Executive Vice President and Chief Financial Officer Cabot Corporation Two Seaport Lane Boston, MA 02210 -2019
RE: Cabot Corporation Form 10 -K for the Year Ended September 30, 2015 Filed November 25 , 2015 Item 2.02 Form 8 -K Filed May 2, 2016 File No. 1 -5667
Dear Mr. Cordeiro :
We have limited our review of your filing to the financial statements and related disclosures and 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 these comments within ten busine ss days by providing the requested informa tion or advis e us as soon as possible when you will respond. If you do not believe our comments apply to your facts and circumstances, please tell us why in your response.
After reviewing your response to these comments, we may have additional comments.
Form 10 -K for the Year Ended September 30, 2015
Item 6. Selected Financial Data, page 20
1. We have the following comments regarding the presentation of your non -GAAP measures Adjusted Return on Invested Capital and Adjusted Return on Net Assets: In accordance with Item 10(e)(1)(A) and (B) of Regulation S -K, please present, with equal or greater prominence, the most directly comparable financial measures calculated and presented in accordance with Generally Accepted Accounting Princi ples (GAAP) and a reconciliation of the differences between the non-GAAP financial measure with the most directly comparable GAAP financial measure;
Mr. Eduardo E. Cordeiro Cabot Corporation June 23 , 2016 Page 2
As presented in Notes (4) and (5), we note these non -GAAP measures include the after-tax impact of the ite ms identified without a clear explanation for how the tax effect is calculated. These presentations may be inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your fut ure filings; and Management believes these non -GAAP financial measures are useful to investors as a measure of performance and the effectiveness of your use of capital. Please revise your disclosure in future filings to provide adequately detailed information specific to your circumstances as to why these non -GAAP measures are useful to investors. Refer to Item 10( e)(1)(i)(C) of Regulation S -K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 2 4
Definition of Terms and Non -GAAP Financial Measures, page 29
2. You indicate that Total Segment EBIT is a non -GAAP financial measure that provides useful supplemental information for your investors as it is an important indicator of your operational stren gth and performance. Please revise your disclosure in future filings to provide adequately detailed information specific to your circumstances as to why this non-GAAP measure is useful to investors. Refer to Item 10(e)(1)(i)(C) of Regulation S - K.
Provis ion for Income Taxes and Reconciliation of Effective Tax Rate to Operating Tax Rate, page 32
3. We note that you have provided a reconciliation of your effective tax rate to your operating tax rate, a non -GAAP financial measure. Please identify the nature o f the unusual or infrequent items, items related to uncertain tax positions and other discrete items in each period. We also note that t his presentation may be inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your future filings.
Form 8 -K Filed May 2, 2016
4. Please address the above comments on your earnings release as well, as applicable.
5. We remind you that Item 10(e)(1)(i)(a) of Regulation S -K indicates that you should not present non -GAAP financial measures with greater prominence than the most directly comparable GAAP financial measures. The following presentations appear inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your next earnings release : You present non -GAAP adjusted EPS before your GAAP diluted EPS in your earnings release headline;
Mr. Eduardo E. Cordeiro Cabot Corporation June 23 , 2016 Page 3
Your narrative appears to place more prominence on non -GAAP financial measures s uch as adjusted EBITDA and adjusted EPS without providing a discussion of the corresponding GAAP financial measures; and You do not provide a quantitative reconciliation with respect to your forwar d- looking non -GAAP measures.
Explanation of Terms and Use of Non -GAAP Measures
6. You believe that the non -GAAP financial measures adjusted EPS, Total Segment EBIT, operating tax rate and adjusted EBITDA assist your investors in evaluating the changes in your results and the Company’s performance. We also not e that you believe that Total Segment EBIT provides useful supplemental information for your investors as it is an important indicator of the Company’s operations strength and performance. Please revise your disclosure in future filings to provide adequat ely detailed information specific to your circumstances as to why each of these non -GAAP measures are useful to investors. Refer to Item 10( e)(1)( i)(C) of Regulation S -K.
Adjusted EBITDA
7. Under the caption, Explanation of Terms Used and Use of Non -GAAP measures, you indicate that “Adjusted EBITDA” is a non -GAAP financial measure and refers to earnings before interest, taxes, depreciation and amortization, excluding items that management does not consider representative of the fundamental segment results . We have the following comments in this regard: You indicate that a reconciliation of adjusted EBITDA from segment EBIT for the second quarter of fiscal year 2016 is provided on the investor portion of your website. Please revise future filings to inclu de a reconciliation to your most directly comparable GAAP measure and ensure this reconciliation is included in your filing; and Under the caption, Cash Performance, you state that you generated adjusted EBITDA of $117 million during the second quarter of fiscal 2016. Based on the inclusion of this information in your discussion of cash performance, it appears that you also use this measure as a liquidity measure. If so, please provide all the disclosures required by Item 10(e(1)(i)(A),(B) and (C) in futu re filings.
Table 1: Detail of Certain Items Table 4: Reconciliation of Operating Tax Rate Table 5: Reconciliation of Adjusted EPS by Quarter Fiscal 2016 and Fiscal 2015
8. We note that your presentations of certain items include the tax impact of these it ems witho ut a clear explanation for how the tax effect is calculated. These presentations may be inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your next earnings release .
Mr. Eduardo E. Cordeiro Cabot Corporation June 23 , 2016 Page 4
9. Please explain the nature of the discrete tax -related certain items.
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 accuracy 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 Jeffrey Gordon, Staff Accountant, at (202) 551 -3866 or Jeanne Baker, Assistant Chief Accountant, at (202) 551 -3691 with any questions.
Sincerely,
/s/ John Cash
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Mail Stop 4631 June 23, 2016 Via E -mail Mr. Eduardo E. Cordeiro Executive Vice President and Chief Financial Officer Cabot Corporation Two Seaport Lane Boston, MA 02210 -2019 RE: Cabot Corporation Form 10 -K for the Year Ended September 30, 2015 Filed November 25 , 2015 Item 2.02 Form 8 -K Filed May 2, 2016 File No. 1 -5667 Dear Mr. Cordeiro : We have limited our review of your filing to the financial statements and related disclosures and 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 these comments within ten busine ss days by providing the requested informa tion or advis e us as soon as possible when you will respond. If you do not believe our comments apply to your facts and circumstances, please tell us why in your response. After reviewing your response to these comments, we may have additional comments. Form 10 -K for the Year Ended September 30, 2015 Item 6. Selected Financial Data, page 20 1. We have the following comments regarding the presentation of your non -GAAP measures Adjusted Return on Invested Capital and Adjusted Return on Net Assets: In accordance with Item 10(e)(1)(A) and (B) of Regulation S -K, please present, with equal or greater prominence, the most directly comparable financial measures calculated and presented in accordance with Generally Accepted Accounting Princi ples (GAAP) and a reconciliation of the differences between the non-GAAP financial measure with the most directly comparable GAAP financial measure; Mr. Eduardo E. Cordeiro Cabot Corporation June 23 , 2016 Page 2 As presented in Notes (4) and (5), we note these non -GAAP measures include the after-tax impact of the ite ms identified without a clear explanation for how the tax effect is calculated. These presentations may be inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your fut ure filings; and Management believes these non -GAAP financial measures are useful to investors as a measure of performance and the effectiveness of your use of capital. Please revise your disclosure in future filings to provide adequately detailed information specific to your circumstances as to why these non -GAAP measures are useful to investors. Refer to Item 10( e)(1)(i)(C) of Regulation S -K. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 2 4 Definition of Terms and Non -GAAP Financial Measures, page 29 2. You indicate that Total Segment EBIT is a non -GAAP financial measure that provides useful supplemental information for your investors as it is an important indicator of your operational stren gth and performance. Please revise your disclosure in future filings to provide adequately detailed information specific to your circumstances as to why this non-GAAP measure is useful to investors. Refer to Item 10(e)(1)(i)(C) of Regulation S - K. Provis ion for Income Taxes and Reconciliation of Effective Tax Rate to Operating Tax Rate, page 32 3. We note that you have provided a reconciliation of your effective tax rate to your operating tax rate, a non -GAAP financial measure. Please identify the nature o f the unusual or infrequent items, items related to uncertain tax positions and other discrete items in each period. We also note that t his presentation may be inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your future filings. Form 8 -K Filed May 2, 2016 4. Please address the above comments on your earnings release as well, as applicable. 5. We remind you that Item 10(e)(1)(i)(a) of Regulation S -K indicates that you should not present non -GAAP financial measures with greater prominence than the most directly comparable GAAP financial measures. The following presentations appear inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your next earnings release : You present non -GAAP adjusted EPS before your GAAP diluted EPS in your earnings release headline; Mr. Eduardo E. Cordeiro Cabot Corporation June 23 , 2016 Page 3 Your narrative appears to place more prominence on non -GAAP financial measures s uch as adjusted EBITDA and adjusted EPS without providing a discussion of the corresponding GAAP financial measures; and You do not provide a quantitative reconciliation with respect to your forwar d- looking non -GAAP measures. Explanation of Terms and Use of Non -GAAP Measures 6. You believe that the non -GAAP financial measures adjusted EPS, Total Segment EBIT, operating tax rate and adjusted EBITDA assist your investors in evaluating the changes in your results and the Company’s performance. We also not e that you believe that Total Segment EBIT provides useful supplemental information for your investors as it is an important indicator of the Company’s operations strength and performance. Please revise your disclosure in future filings to provide adequat ely detailed information specific to your circumstances as to why each of these non -GAAP measures are useful to investors. Refer to Item 10( e)(1)( i)(C) of Regulation S -K. Adjusted EBITDA 7. Under the caption, Explanation of Terms Used and Use of Non -GAAP measures, you indicate that “Adjusted EBITDA” is a non -GAAP financial measure and refers to earnings before interest, taxes, depreciation and amortization, excluding items that management does not consider representative of the fundamental segment results . We have the following comments in this regard: You indicate that a reconciliation of adjusted EBITDA from segment EBIT for the second quarter of fiscal year 2016 is provided on the investor portion of your website. Please revise future filings to inclu de a reconciliation to your most directly comparable GAAP measure and ensure this reconciliation is included in your filing; and Under the caption, Cash Performance, you state that you generated adjusted EBITDA of $117 million during the second quarter of fiscal 2016. Based on the inclusion of this information in your discussion of cash performance, it appears that you also use this measure as a liquidity measure. If so, please provide all the disclosures required by Item 10(e(1)(i)(A),(B) and (C) in futu re filings. Table 1: Detail of Certain Items Table 4: Reconciliation of Operating Tax Rate Table 5: Reconciliation of Adjusted EPS by Quarter Fiscal 2016 and Fiscal 2015 8. We note that your presentations of certain items include the tax impact of these it ems witho ut a clear explanation for how the tax effect is calculated. These presentations may be inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your next earnings release . Mr. Eduardo E. Cordeiro Cabot Corporation June 23 , 2016 Page 4 9. Please explain the nature of the discrete tax -related certain items. 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 accuracy 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 Jeffrey Gordon, Staff Accountant, at (202) 551 -3866 or Jeanne Baker, Assistant Chief Accountant, at (202) 551 -3691 with any questions. Sincerely, /s/ John Cash John Cash Accounting Branch Chief Office of Manufacturing and Construction