Financial Information by Segment

6 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Financial Information by Segment

M. Financial Information by Segment

The Company identifies a business as an operating segment if: (i) it engages in business activities from which it may earn revenues and incur expenses; (ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Cabot’s President and Chief Executive Officer, to make decisions about resources to be allocated to the segment and assess its performance; and (iii) it has available discrete financial information. The Company has determined that all of its businesses are operating segments. The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. Operating segments are aggregated into a reportable segment if the operating segments are determined to have similar economic characteristics and if the operating segments are similar in the following areas: (i) nature of products and services; (ii) nature of production processes; (iii) type or class of customer for their products and services; (iv) methods used to distribute the products or provide services; and (v) if applicable, the nature of the regulatory environment.

The Company has three reportable segments: Reinforcement Materials, Performance Chemicals, and Purification Solutions.

The Reinforcement Materials segment consists of the rubber blacks and elastomer composites product lines.

The Performance Chemicals segment combines the specialty carbons, fumed metal oxides and aerogel product lines into the Performance Additives business, and combines the specialty compounds and inkjet colorants product lines into the Formulated Solutions business. These businesses are similar in terms of economic characteristics, nature of products, processes, customer class and product distribution methods, and, therefore, have been aggregated into one reportable segment. The net sales from each of these businesses for the three and six months ended March 31, 2021 and 2020 were as follows:

	Three Months Ended March 31				Six Months Ended March 31
	2021		2020		2021		2020
	(In millions)
Performance Additives	$	203	$	168	$	387	$	338
Formulated Solutions		91		77		174		149
Total Performance Chemicals	$	294	$	245	$	561	$	487

The Purification Solutions segment consists of the Company’s activated carbon business.

Income (loss) before income taxes (“Segment EBIT”) is presented for each reportable segment in the table below. Segment EBIT excludes Interest expense, general unallocated income (expense), unallocated corporate costs, and certain items, meaning items management does not consider representative of on-going operating segment results. In addition, Segment EBIT includes Equity in earnings of affiliated companies, net of tax, the full operating results of a contractual joint venture in Purification Solutions, royalties, Net income attributable to noncontrolling interests, net of tax, and discounting charges for certain Notes receivable.

Financial information by reportable segment is as follows:

	Reinforcement Materials		Performance Chemicals		Purification Solutions		Segment Total		Unallocated and Other(1)			Consolidated Total
	(In millions)
Three Months Ended March 31, 2021
Revenues from external customers(2)	$	434	$	294	$	63	$	791	$	51		$	842
Income (loss) before income taxes(3)	$	89	$	58	$	2	$	149	$	(31	)	$	118
Three Months Ended March 31, 2020
Revenues from external customers(2)	$	355	$	245	$	64	$	664	$	46		$	710
Income (loss) before income taxes(3)	$	61	$	31	$	3	$	95	$	(83	)	$	12
Six Months Ended March 31, 2021
Revenues from external customers(2)	$	809	$	561	$	122	$	1,492	$	96		$	1,588
Income (loss) before income taxes(3)	$	177	$	112	$	—	$	289	$	(72	)	$	217
Six Months Ended March 31, 2020
Revenues from external customers(2)	$	734	$	487	$	123	$	1,344	$	93		$	1,437
Income (loss) before income taxes(3)	$	108	$	72	$	1	$	181	$	(119	)	$	62

^{(1) Unallocated and Other includes certain items and eliminations necessary to reflect management’s reporting of operating segment results. These items are reflective of the segment reporting presented to the CODM.}

⁽²⁾ Consolidated Total Revenues from external customers reconciles to Net sales and other operating revenues on the Consolidated Statements of Operations. Revenues from external customers that are categorized as Unallocated and Other reflects royalties, external shipping and handling fees, the impact of unearned revenue, the removal of 100% of the sales of an equity method affiliate, discounting charges for certain Notes receivable, and by-product revenue. Details are provided in the table below:

	Three Months Ended March 31						Six Months Ended March 31
	2021			2020			2021			2020
	(In millions)
Royalties, the impact of unearned revenue, the    removal of 100% of the sales of an equity method    affiliate and discounting charges for certain notes    receivable	$	(5	)	$	(1	)	$	(10	)	$	(2	)
Shipping and handling fees		38			30			71			61
By-product sales		18			17			35			34
Total	$	51		$	46		$	96		$	93

⁽³⁾ Consolidated Total Income (loss) before income taxes reconciles to Income (loss) before income taxes and equity in earnings of affiliated companies on the Consolidated Statements of Operations. Income (loss) before income taxes that are categorized as Unallocated and Other includes:

	Three Months Ended March 31						Six Months Ended March 31
	2021			2020			2021			2020
	(In millions)
Interest expense	$	(13	)	$	(14	)	$	(25	)	$	(28	)
Certain items(a)
Employee benefit plan settlement and other charges (Note D)		1			(1	)		(5	)		(3	)
Global restructuring activities (Note J)		(1	)		(5	)		(4	)		(13	)
Acquisition and integration-related charges		(1	)		(1	)		(2	)		(2	)
Legal and environmental matters and reserves		—			(51	)		—			(50	)
Specialty Fluids loss on sale and asset impairment charges		—			(1	)		—			(1	)
Indirect tax settlement credits		—			3			—			3
Other		—			—			(1	)		(1	)
Total certain items, pre-tax		(1	)		(56	)		(12	)		(67	)
Unallocated corporate costs(b)		(16	)		(12	)		(29	)		(22	)
General unallocated income (expense)(c)		—			—			(5	)		(1	)
Less: Equity in earnings of affiliated companies, net    of tax(d)		1			1			1			1
Total	$	(31	)	$	(83	)	$	(72	)	$	(119	)

^(a) Certain items are items of expense and income that management does not consider representative of the Company’s fundamental on-going segment results and they are, therefore, excluded from Segment EBIT.

^(b) Unallocated corporate costs are costs that are not controlled by the segments and primarily benefit corporate interests.

^(c) General unallocated income (expense) consists 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, the impact of including the full operating results of a contractual joint venture in Purification Solutions Segment EBIT and unrealized holding gains (losses) for equity securities.

^(d) Equity in earnings of affiliated companies, net of tax, is included in Segment EBIT and is removed in Unallocated and other to reconcile to Income (loss) from operations before income taxes and equity in earnings from affiliated companies.

The Company’s segments operate globally. In addition to presenting Revenue from external customers by reportable segment, the following tables further disaggregate Revenues from external customers by geographic region.

	Three Months Ended March 31, 2021
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	163	$	78	$	26	$	267
Asia Pacific		185		122		9		316
Europe, Middle East and Africa		86		94		28		208
Segment revenues from external customers		434		294		63		791
Unallocated and other								51
Net sales and other operating revenues							$	842

	Three Months Ended March 31, 2020
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	154	$	76	$	29	$	259
Asia Pacific		122		79		9		210
Europe, Middle East and Africa		79		90		26		195
Segment revenues from external customers		355		245		64		664
Unallocated and other								46
Net sales and other operating revenues							$	710

	Six Months Ended March 31, 2021
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	312	$	147	$	51	$	510
Asia Pacific		340		240		18		598
Europe, Middle East and Africa		157		174		53		384
Segment revenues from external customers		809		561		122		1,492
Unallocated and other								96
Net sales and other operating revenues							$	1,588

	Six Months Ended March 31, 2020
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	295	$	152	$	55	$	502
Asia Pacific		292		173		18		483
Europe, Middle East and Africa		147		162		50		359
Segment revenues from external customers		734		487		123		1,344
Unallocated and other								93
Net sales and other operating revenues							$	1,437