Financial Information by Segment

6 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Financial Information by Segment

L. 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 two reportable segments consisting of Reinforcement Materials and Performance Chemicals. The Company’s former Purification Solutions segment was a separate reporting segment prior to divestiture in the second quarter of fiscal 2022.

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 and six months ended March 31, 2022 and 2021 were as follows:

	Three Months Ended March 31				Six Months Ended March 31
	2022		2021		2022		2021
	(In millions)
Performance Additives	$	266	$	203	$	493	$	387
Formulated Solutions		94		91		169		174
Total Performance Chemicals	$	360	$	294	$	662	$	561

The Purification Solutions segment consisted 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, 2022
Revenues from external customers(2)	$	627	$	360	$	36	$	1,023	$	69		$	1,092
Income (loss) before income taxes(3)	$	101	$	70	$	—	$	171	$	(24	)	$	147
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
Six Months Ended March 31, 2022
Revenues from external customers(2)	$	1,168	$	662	$	97	$	1,927	$	133		$	2,060
Income (loss) before income taxes(3)	$	186	$	122	$	—	$	308	$	(254	)	$	54
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

^{(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
	2022			2021			2022			2021
	(In millions)
Shipping and handling fees	$	41		$	38		$	80		$	71
By-product sales		33			18			61			35
Other		(5	)		(5	)		(8	)		(10	)
Total	$	69		$	51		$	133		$	96

⁽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
	2022			2021			2022			2021
	(In millions)
Interest expense	$	(11	)	$	(13	)	$	(23	)	$	(25	)
Certain items(a)
Gain on bargain purchase of a business (Note C)		24			—			24			—
Loss on sale of business and asset impairment charge (Note D)		(7	)		—			(204	)		—
Legal and environmental matters and reserves		(7	)		—			(8	)		—
Divestiture related charges		(1	)		—			(5	)		—
Acquisition and integration-related charges		(2	)		(1	)		(3	)		(2	)
Global restructuring activities		—			(1	)		(2	)		(4	)
Employee benefit plan settlement and other charges		—			1			—			(5	)
Other		—			—			1			(1	)
Total certain items, pre-tax		7			(1	)		(197	)		(12	)
Unallocated corporate costs(b)		(16	)		(16	)		(30	)		(29	)
General unallocated income (expense)(c)		(1	)		—			—			(5	)
Less: Equity in earnings of affiliated companies, net    of tax(d)		3			1			4			1
Total	$	(24	)	$	(31	)	$	(254	)	$	(72	)

^(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, 2022
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	252	$	110	$	16	$	378
Asia Pacific		245		138		6		389
Europe, Middle East and Africa		130		112		14		256
Segment revenues from external customers		627		360		36		1,023
Unallocated and other								69
Net sales and other operating revenues							$	1,092

	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

	Six Months Ended March 31, 2022
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	458	$	200	$	43	$	701
Asia Pacific		485		274		14		773
Europe, Middle East and Africa		225		188		40		453
Segment revenues from external customers		1,168		662		97		1,927
Unallocated and other								133
Net sales and other operating revenues							$	2,060

	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