Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

Management's Discussion and Analysis ofFinancial Condition and Results of Operations

Recently Issued Accounting Pronouncements

Refer to the discussion under the heading "Recent Accounting Pronouncements" in Note B of our Notes to the unaudited Consolidated Financial Statements.

Results of Operations

The Company has two reportable segments: Reinforcement Materials and Performance Chemicals. Cabot is also organized for operational purposes into three geographic regions: the Americas; Europe, Middle East and Africa ("EMEA"); and Asia Pacific. The discussion of our results of operations for the periods presented reflects these structures.

Our analysis of our financial condition and operating results should be read with our consolidated financial statements and accompanying notes.

Definition of Terms and Non-GAAP Financial Measures

When discussing our results of operations, we use several terms as described below.

The term "product mix" refers to the mix of types and grades of products sold or the mix of geographic regions where products are sold, and the positive or negative impact this has on the revenue or profitability of the business and/or segment.

Our discussion under the heading "(Provision) Benefit for Income Taxes and Reconciliation of Effective Tax Rate to Operating Tax Rate" includes a discussion and reconciliation of our "effective tax rate" and our "operating tax rate" for the periods presented, as well as management's projection of our operating tax rate range for the full fiscal year. Our operating tax rate is a non-GAAP financial measure and should not be considered as an alternative to our effective tax rate, the most comparable GAAP financial measure. The operating tax rate is calculated based upon management's forecast of the annual operating tax rate for the fiscal year applied to adjusted pre-tax earnings. The operating tax rate excludes income tax (expense) benefit on certain items, discrete tax items, and, on a quarterly basis, the timing of losses in certain jurisdictions. The income tax (expense) benefit on certain items is determined using the applicable rates in the taxing jurisdictions in which the certain items occurred and includes both current and deferred income tax (expense) benefit based on the nature of the certain items. Discrete tax items include, but are not limited to, changes in valuation allowance, uncertain tax positions, and other tax items, such as the tax impact of legislative changes and tax accruals on historic earnings due to changes in indefinite reinvestment assertions. Our definition of the operating tax rate may not be comparable to the definition used by other companies. 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.

Our discussion under the heading "First Quarter of Fiscal 2026 versus First Quarter of Fiscal 2025-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. Our Chief Operating Decision Maker, who is our President and Chief Executive Officer, uses segment EBIT to evaluate the operating results of each segment and to allocate resources to the segments. We believe Total segment EBIT, which reflects the sum of EBIT from our reportable segments, provides useful supplemental information for our investors as it is an important indicator of our operational strength and performance, allows investors to see our results through the eyes of management, and provides context for our discussion of individual business segment performance. Total segment EBIT should not be considered an alternative for Income (loss) from operations before income taxes and equity in earnings of affiliated companies, which is the most directly comparable U.S. GAAP financial measure. 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 "First Quarter of Fiscal 2026 versus First Quarter of Fiscal 2025-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.

In calculating Total segment EBIT, we exclude from our Income (loss) from operations before income taxes and equity in earnings of affiliated companies (i) items of expense and income that management does not consider representative of our fundamental on-going segment results, which we refer to as "certain items", and (ii) items that, because they are not controlled by the business segments and primarily benefit corporate objectives, are not allocated to our business segments, such as interest expense and other corporate costs, which include unallocated corporate overhead expenses such as certain corporate salaries and headquarter expenses, plus costs related to special projects and initiatives, which we refer to as "other unallocated items". 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. 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.

Overview

During the first quarter of fiscal 2026, Income (loss) before income taxes and equity in earnings of affiliated companies decreased as compared to the first quarter of fiscal 2025. The decrease was primarily due to lower segment EBIT in our Reinforcement Materials segment, partially offset by higher segment EBIT in our Performance Chemicals segment.

First quarter of Fiscal 2026 versus First quarter of Fiscal 2025-Consolidated

Net Sales and Other Operating Revenues and Gross Profit

For the first quarter of fiscal 2026, Net sales and other operating revenue decreased by $106 million compared to the same period of fiscal 2025. The decrease in Net sales and other operating revenue in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025 was driven by less favorable pricing and product mix in both our Reinforcement Materials and Performance Chemicals segments ($61 million combined) and lower volumes in both our Reinforcement Materials and Performance Chemicals segments ($56 million combined), partially offset by the favorable impact from foreign currency translation in both our Reinforcement Materials and Performance Chemicals segments ($15 million combined). The less favorable pricing and product mix was primarily driven by lower raw material costs which, in certain instances, are passed through to our customers through formulas and other market-based adjustments. The lower volumes in our Reinforcement Materials segment were primarily due to lower volumes in the Americas and Asia Pacific Region. Volumes were impacted by lower production levels at our tire customers and year-end inventory management by our customers in the Americas, and increased competitive intensity in Asia Pacific. The lower volumes in our Performance Chemicals segment were primarily due to weaker demand in Europe.

For the first quarter of fiscal 2026, gross profit decreased by $24 million compared to the same period of fiscal 2025. The decrease in Gross profit in the first quarter of fiscal 2026 as compared to the first quarter of fiscal 2025 was driven primarily by lower volumes in both our Reinforcement Materials and Performance Chemical segments ($25 million combined). The lower volumes in our Reinforcement Materials segment were primarily due to lower volumes in the Americas and Asia Pacific Region. Volumes were impacted by lower production levels at our tire customers and year-end inventory management by our customers in the Americas and increased competitive intensity in Asia Pacific. The lower volumes in our Performance Chemicals segment were primarily due to weaker demand in Europe.

Selling and Administrative Expenses

Selling and administrative expenses increased by $3 million in the first quarter of fiscal 2026 compared to the same period of fiscal 2025 primarily due to higher legal expenses.

Research and Technical Expenses

Research and technical expenses decreased by $1 million in the first quarter of fiscal 2026 compared to the same period of fiscal 2025 primarily due to cost management efforts.

Interest and Dividend Income, Interest Expense and Other Income (Expense)

Interest and dividend income increased by $1 million in the first quarter of fiscal 2026 compared to the same period of fiscal 2025 primarily due to higher average cash balances, partially offset by lower average interest rates.

Interest expense of $18 million in the first quarter of fiscal 2026 was unchanged compared to the same period of fiscal 2025.

Other income (expense) was nil in the first quarter of fiscal 2026 compared to income of $1 million for the same period of fiscal 2025. The change was primarily due to a difference in the amount of foreign exchange losses, primarily in Argentina, in the first quarter of fiscal 2026.

(Provision) Benefit for Income Taxes and Reconciliation of Effective Tax Rate to Operating Tax Rate

For the first quarter of fiscal 2026, the (Provision) benefit for income taxes was a provision of $37 million compared to a provision of $41 million for the same period in fiscal 2025, with the change primarily due to lower earnings. Our income taxes are affected by the mix of earnings in the tax jurisdictions in which we operate and by the presence of valuation allowances in certain tax jurisdictions.

For fiscal 2026, we expect the Operating tax rate to be in the range of 27% to 29%. We are not providing a forward-looking reconciliation of the operating tax rate range with an effective tax rate range because, without unreasonable effort, we are unable to predict with reasonable certainty the matters we would allocate to "certain items," including unusual gains and losses, costs associated with future restructurings, acquisition-related expenses and litigation outcomes. These items are uncertain, depend on various factors, and could have a material impact on the effective tax rate in future periods.

Equity in Earnings of Affiliated Companies and Net Income (Loss) Attributable to Noncontrolling Interests

Equity in earnings of affiliated companies, net of tax, remained flat in the first quarter of fiscal 2026 compared to the same period of fiscal 2025.

Net income (loss) attributable to noncontrolling interests, net of tax, decreased by $2 million in the first quarter of fiscal 2026 compared to the same period of fiscal 2025 primarily due to lower earnings of our joint ventures in China.

Net Income Attributable to Cabot Corporation

In the first quarters of fiscal 2026 and 2025, we reported Net income (loss) attributable to Cabot Corporation of $73 million ($1.37 per diluted common share) and $93 million ($1.67 per diluted common share), respectively. The lower Net income in the first quarter of fiscal 2026 compared with the same period in fiscal 2025 was primarily due to lower EBIT in our Reinforcement Materials segment ($28 million), partially offset with higher EBIT in our Performance Chemicals segment ($3 million).

First quarter of Fiscal 2026 versus First quarter of Fiscal 2025-By Business Segment

Income (loss) before income taxes and equity in earnings of affiliated companies, Certain items, Other unallocated items and Total segment EBIT for the first quarter of fiscal 2026 and 2025 are included in the following table, and details of each item is set forth in the sections below.

Certain Items

Details of the certain items for the first quarter of fiscal 2026 and 2025 are as follows:

Other Unallocated Items

Total other unallocated items remained flat in the first quarter of fiscal 2026 when compared to the same period in fiscal 2025.

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". The balances of unallocated corporate costs are primarily comprised of expenditures related to managing a public company and corporate business development costs related to ongoing corporate projects that are not allocated to the segments. 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, the profit or loss related to the corporate adjustment for unearned revenue and unrealized holding gains (losses) for investments. This does not include items of income or expense from the items that are separately treated as Certain items.

Reinforcement Materials

Sales and EBIT for Reinforcement Materials for the first quarter of fiscal 2026 and 2025 were as follows:

Sales in Reinforcement Materials decreased by $91 million in the first quarter of fiscal 2026 compared to the same period of fiscal 2025 primarily due to less favorable pricing and product mix ($57 million) and lower volumes ($44 million), partially offset by the favorable impact from foreign currency translation ($10 million). The less favorable pricing and product mix was primarily due to lower raw materials costs that are generally passed through to our customers. The lower volumes were primarily due to lower volumes in the Americas and Asia Pacific. Volumes were impacted by lower production levels at our tire customers and year-end inventory management by our customers in the Americas, and increased competitive intensity in Asia Pacific.

EBIT in Reinforcement Materials in the first quarter of fiscal 2026 decreased by $28 million compared to the same period of fiscal 2025. The decrease in EBIT was primarily driven by lower volumes ($17 million), and lower gross profit per ton ($12 million). The lower volumes were primarily due to lower volumes in the Americas and Asia Pacific. Volumes were impacted by lower production levels at our tire customers and year-end inventory management by our customers in the Americas and increased competitive intensity in Asia Pacific. The lower gross profit per ton was primarily due to lower pricing from increased competitive intensity in Asia Pacific.

As we look to the second quarter of the fiscal year, we expect Reinforcement Materials segment EBIT to decline sequentially from the first quarter of fiscal 2026 primarily due to lower pricing outcomes related to our calendar year 2026 annual tire customer agreements as compared to calendar year 2025, partially offset by higher expected sequential volumes from seasonality improvements.

Performance Chemicals

Sales and EBIT for Performance Chemicals for the first quarter of fiscal 2026 and 2025 were as follows:

Sales in Performance Chemicals decreased by $11 million in the first quarter of fiscal 2026 as compared to the same period of fiscal 2025 primarily due to lower volumes ($12 million) and less favorable pricing and product mix ($4 million), partially offset by the favorable impact from foreign currency translation ($5 million). The lower volumes in our Performance Chemicals segment were primarily due to weaker demand in Europe. The less favorable pricing and product mix was primarily driven by lower raw material costs which, in certain instances, are passed through to our customers through formulas and other market-based adjustments.

EBIT in Performance Chemicals increased by $3 million in the first quarter of fiscal 2026 as compared to the same period of fiscal 2025 primarily due to higher gross profit per ton ($10 million), partially offset by lower volumes ($8 million). The higher gross profit per ton was primarily driven by a favorable product mix and lower spending from overall cost management efforts and optimization measures across the segment. The lower volumes in our Performance Chemicals segment were primarily due to weaker demand in Europe.

In July 2025, Dow, our fence-line partner at our fumed metal oxides facility in Barry, Wales, announced that it would be ceasing its polysiloxane operations at their site by mid-calendar year 2026. Dow currently supplies our operations with chlorosilane feedstock, which we convert into fumed silica, under an agreement with a term through the end of calendar year 2028. During the first quarter of fiscal 2026, we amended our agreement with Dow to include a mechanism for Dow to compensate Cabot in the event that Dow fails to supply chlorosilane for the duration of the supply agreement. We intend to cease production of fumed silica at our manufacturing plant in Barry, Wales beginning in the fourth quarter of fiscal 2026. We will continue operations to post-treat fumed silica at this site.

As we look to the second quarter of the fiscal year, we expect the Performance Chemicals segment EBIT to be relatively flat sequentially from the first quarter of fiscal 2026 primarily due to higher expected seasonal volumes which we expect to be offset with higher costs.

Liquidity and Capital Resources

Overview

Our liquidity position, as measured by cash and cash equivalents plus borrowing availability, decreased by $26 million during the first quarter of fiscal 2026 as compared to September 30, 2025, which was largely due to a lower cash balance at the end of the period. As of December 31, 2025, we had cash and cash equivalents of $230 million and borrowing availability under our revolving credit agreements of $1.2 billion.

We have access to borrowings under the following two credit agreements:

As of December 31, 2025, 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. Consolidated net debt is defined as consolidated debt offset by the lesser of (i) unrestricted cash and cash equivalents and (ii) $150 million.

A significant portion of our business occurs outside the U.S. and our cash generation does not always align geographically with our cash needs. The vast majority of our cash and cash equivalent holdings tend to be held outside the U.S. We generally use a combination of U.S. earnings, repatriation of certain foreign earnings, commercial paper issuances and borrowings under our U.S. Credit Agreement to meet our U.S. cash needs. With the exception of Argentina, which has some currency controls that prevent the distribution of cash, we are generally able to move cash throughout the Company through our cash pooling structures, intercompany accounts and/or distributions, as needed. 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, including the utilization of customer supply chain financing programs, settlement of intercompany balances and short-term intercompany loans. 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.

As of December 31, 2025 and September 30, 2025, we had $128 million and $130 million, respectively, of borrowings under the Euro Credit Agreement and no outstanding borrowings under the U.S. Credit Agreement at either date. There was $6 million of commercial paper outstanding as of both December 31, 2025 and September 30, 2025.

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. The liquidity we derive from cash flows from operations is, to a large degree, predicated on our ability to collect our receivables in a timely manner, the cost of our raw materials, and our ability to manage inventory levels.

The following discussion of the changes in our cash balance refers to the various sections of our Consolidated Statements of Cash Flows.

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 $126 million in the first quarter of fiscal 2026 compared to $124 million of cash provided by operating activities during the same period of fiscal 2025.

Cash provided by operating activities in the first quarter of fiscal 2026 was driven by business earnings excluding the non-cash impacts of depreciation and amortization of $41 million and a decrease in net working capital of $5 million. The decrease in net working capital was largely driven by a decrease in Accounts and notes receivable, which was partially offset by a decrease in Accounts payable and accrued liabilities.

Cash provided by operating activities in the first quarter of fiscal 2025 was driven by business earnings excluding the non-cash impacts of depreciation and amortization of $37 million and cash dividends received from one of our equity investments of $12 million, which was partially offset by an increase in net working capital of $38 million. The increase in net working capital was largely driven by a decrease in Accounts Payable and accrued liabilities, and an increase in inventories, partially offset by a decrease in Accounts and notes receivable.

Cash Flows from Investing Activities

Investing activities consumed $69 million of cash in the first quarter of fiscal 2026 compared to $104 million of cash consumed in the first quarter of fiscal 2025.

In the first quarter of fiscal 2026 and 2025, investing activities included $69 million and $77 million, respectively, of capital expenditures for sustaining and compliance capital projects at our operating facilities as well as growth-related capital. In addition, in the first quarter of fiscal 2025, investing activities included $27 million for cash paid for the asset acquisition described in Note C of our Notes to the Consolidated Financial Statements.

Capital expenditures for fiscal 2026 are expected to be between $200 million and $230 million. Our planned capital spending program for fiscal 2026 is for sustaining, compliance and improvement capital projects at our operating facilities.

U.S. EPA Consent Decree

As described in Part 1, Item 1 of the 2025 Form 10-K under the heading "Safety, Health, Environment, and Sustainability", pursuant to the Consent Decree we entered into in November 2013 with 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. 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 sulfur dioxide and nitrogen oxide technology controls at its plant in Ville Platte, Louisiana. We are currently in discussions with the EPA and LDEQ to extend our compliance date at the Ville Platte facility to mid calendar year 2026. We expect that the total capital costs to install these technology controls will be approximately $270 million and will be incurred through mid calendar year 2026. As of December 31, 2025, we have incurred approximately $251 million to install these controls in the U.S. Operating these controls increases our plant operating costs.

Cash Flows from Financing Activities

Financing activities consumed $92 million of cash in the first quarter of fiscal 2026 compared to $24 million of cash consumed during the same period of fiscal 2025.

In the first quarter of fiscal 2026, financing activities primarily consisted of share repurchases of $52 million and dividend payments of $24 million and $13 million to common stockholders and noncontrolling interest, respectively. There were also repayments of $8 million for short-term borrowings with a maturity greater than 90 days and net proceeds of $7 million from short-term borrowings with a maturity 90 days or less.

In the first quarter of fiscal 2025, financing activities primarily consisted of share repurchases of $42 million and dividend payments of $24 million and $20 million to common stockholders and noncontrolling interest, respectively. These payments were partially offset by net proceeds from the issuance of commercial paper of $55 million and proceeds from long-term debt of $6 million under our Euro Credit Agreement.

Forward-Looking Information

This report on Form 10-Q contains "forward-looking statements" under the Federal securities laws. These forward-looking statements address expectations or projections about the future, including our expectations regarding our future business performance and overall prospects, including for EBIT, volumes and costs in our business segments in the second quarter of fiscal 2026, and the principal assumptions underlying these expectations, including demand for our products, the sufficiency of our cash on hand, cash provided from operations and cash available under our credit and commercial paper facilities to fund our cash requirements in both the next twelve months and the foreseeable future; anticipated capital spending; regulatory developments, including regulatory compliance costs and potential impact on our operations; cash requirements and uses of available cash, including future cash outlays associated with respirator liabilities and reorganization activity and the timing of such outlays; amortization expenses; charges we expect to record in connection with reorganization activities; our operating tax rate; the cessation of production of fumed silica at our manufacturing plant in Barry, Wales beginning in the fourth quarter of fiscal 2026; and the possible outcome of legal and environmental proceedings. From time to time, we also provide forward-looking statements in other materials we release to the public and in oral statements made by authorized officers.

Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, potentially inaccurate assumptions, and other factors, some of which are beyond our control or difficult to predict. If known or unknown risks materialize, our actual results could differ materially from those expressed in the forward-looking statements.

In addition to factors described elsewhere in this report, the following are some of the factors that could cause our actual results to differ materially from those expressed in our forward-looking statements: industry capacity utilization, shifts in the geographic area of tire production, and competition from other specialty chemical companies; safety, health and environmental requirements and related constraints imposed on our business; regulatory and financial risks related to climate change developments; volatility in the price and availability of energy and raw materials, including with respect to the Russian invasion of Ukraine; 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; failure to achieve growth expectations from new products, applications and technology developments; failure to realize benefits from acquisitions, alliances, or joint ventures or achieve our portfolio management objectives; unanticipated delays in or increased costs of site development projects; negative or uncertain worldwide or regional economic conditions and market opportunities, including from trade relations, global health matters or geo-political conflicts; litigation or legal proceedings; interest rates, tax rates, tariffs, currency exchange controls, and fluctuations in foreign currency; and the accuracy of the assumptions we used in establishing reserves for our share of liability for respirator claims. These other factors and risks are discussed more fully in our 2025 10-K.