May 23, 2002
By e-mail: firstname.lastname@example.org
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: File No. S7-08-02
Dear Mr. Katz,
This letter is written on behalf of Cabot Corporation ("Cabot") in response to the Securities and Exchange Commission's request for comment on its proposed rule, "Acceleration of Periodic Report Filing Dates and Disclosure Concerning Website Access to Reports", dated April 12, 2002. Cabot Corporation is a $1.7 billion specialty chemical company with global operations.
Cabot supports the Commission's objective to provide investors with accurate financial information on a more timely basis. However, in today's accounting environment, the Company feels that the accuracy and completeness of the information should not be compromised for accelerated timeliness. Specifically, with the number of recent accounting pronouncements, the requirement of greater and more complex disclosures, and the desire for more meaningful and thoughtful MD&A, the Company believes a significantly accelerated filing schedule would be imprudent.
We believe that reducing the timeframe to the proposed schedule would be unwise without a lengthened phase-in period. We feel Cabot could satisfactorily comply with a filing requirement of 70 days for the 10-K and 40 days for the 10-Q starting in 2003, with a further 10-Q target of 35 days in 2004 and 30 days in 2005.
Cabot's most recent 10-K included eighteen footnote disclosures. These disclosures include information related to Employee Benefit Plans, Equity Incentive Plans, Acquisitions, Special Items, Discontinued Businesses and Financial Information by Segment and Geographic Area. These disclosures require significant data collection, complex calculations, as well as information from outside specialists. Reducing the length of time to collect and present the information would increase the potential for inaccurate disclosures.
Recently there has been an influx of new accounting pronouncements, which require additional disclosures, such as FR 60 Critical Accounting Policies in Management's Discussion and Analysis ("MD&A"). In addition, if the Commission's proposed rule "Disclosure in Management's Discussion and Analysis about the Application of Critical Accounting Policies" is adopted as proposed, we believe that preparation of the MD&A will require even greater involvement by Cabot's auditors, audit committee and legal counsel. With every change or addition to required disclosures, additional work and time is needed to ensure compliance. Regarding MD&A, Cabot strives to provide meaningful and comprehensive MD&A as suggested by FR 60, which requires research and input from various members of Cabot's global businesses.
Cabot ensures that the information provided in its periodic filings receives an extensive review by senior management and external auditors. Acceleration of the process would present a challenge to adequately review the information. In the current accounting environment, the Company believes this risk should not be overlooked.
While the Company supports the Commission's initiative to provide more timely information to investors, the Company believes the proposal may undermine the goal of providing accurate and complete information to investors. We request the Commission reconsider the period of acceleration and contemplate changing its proposal to a more gradual, phased in approach, that would allow companies time to improve their financial processes to provide more timely reporting without sacrificing accuracy.
We appreciate your time and consideration of this matter. Please contact us if you have any questions or concerns related to the views expressed in this letter.
Very truly yours,
John A. Shaw
Chief Financial Officer