Financial Information by Segment

3 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

Financial Information by Segment

N. Financial Information by Segment

The Company identifies a product line 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 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. In November 2021, the Company entered into an agreement to sell the Purification Solutions business as discussed in Note D. Upon consummation of the transaction, the Company will be organized into two reportable segments.

The Reinforcement Materials segment combines the reinforcing carbons and engineered elastomer composites product lines.

The Performance Chemicals segment combines the specialty carbons, fumed metal oxides, battery materials 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 months ended December 31, 2021 and 2020 were as follows:

	Three Months Ended December 31
	2021		2020
	(In millions)
Performance Additives	$	227	$	184
Formulated Solutions		75		83
Total Performance Chemicals	$	302	$	267

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 December 31, 2021
Revenues from external customers(2)	$	541	$	302	$	61		$	904	$	64		$	968
Income (loss) before income taxes(3)	$	85	$	52	$	—		$	137	$	(230	)	$	(93	)
Three Months Ended December 31, 2020
Revenues from external customers(2)	$	375	$	267	$	59		$	701	$	45		$	746
Income (loss) before income taxes(3)	$	88	$	54	$	(2	)	$	140	$	(41	)	$	99

^{(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 December 31
	2021			2020
	(In millions)
Shipping and handling fees	$	39		$	33
By-product sales		28			17
Other		(3	)		(5	)
Total	$	64		$	45

⁽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 December 31
	2021			2020
	(In millions)
Interest expense	$	(12	)	$	(12	)
Certain items(a)
Purification Solutions assets held for sale impairment charge (Note D)		(197	)		—
Divestiture related charges		(4	)		—
Global restructuring activities (Note K)		(2	)		(3	)
Legal and environmental matters and reserves		(1	)		—
Acquisition and integration-related charges		(1	)		(1	)
Employee benefit plan settlement and other charges		—			(6	)
Other		1			(1	)
Total certain items, pre-tax		(204	)		(11	)
Unallocated corporate costs(b)		(14	)		(13	)
General unallocated income (expense)(c)		1			(5	)
Less: Equity in earnings of affiliated companies, net    of tax(d)		1			—
Total	$	(230	)	$	(41	)

^(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 December 31, 2021
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	206	$	90	$	27	$	323
Asia Pacific		240		136		8		384
Europe, Middle East and Africa		95		76		26		197
Segment revenues from external customers		541		302		61		904
Unallocated and other								64
Net sales and other operating revenues							$	968

	Three Months Ended December 31, 2020
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	149	$	69	$	25	$	243
Asia Pacific		155		118		9		282
Europe, Middle East and Africa		71		80		25		176
Segment revenues from external customers		375		267		59		701
Unallocated and other								45
Net sales and other operating revenues							$	746