O. 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”) 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 four reportable segments: Reinforcement Materials, Performance Materials, Advanced Technologies and Purification Solutions. Reinforcement Materials represents the Company’s Rubber Blacks Business. Purification Solutions represents the Company’s Activated Carbon Business. Performance Materials is an aggregation of the Specialty Carbons and Compounds and Fumed Metal Oxides Businesses, which are similar in terms of economic characteristics, nature of products, processes, customer class and product distribution methods.

The Company has combined five of its operating segments (Specialty Fluids, Inkjet Colorants, Aerogel, Elastomer Composites and Security Materials) into an other segment labeled “Advanced Technologies” for segment reporting purposes. These operating segments do not meet the thresholds to be reported as separate reportable segments.

Reportable segment operating profit (loss) before interest and taxes (“Segment EBIT”) is presented for each reportable segment in the financial information by reportable segment table below on the line entitled Income (loss) before taxes. Segment EBIT excludes certain items, meaning items considered by management to be unusual and not representative of segment results. In addition, Segment EBIT includes Equity in earnings of affiliated companies, the full operating results of a contractual joint venture in Purification Solutions, royalties paid by equity affiliates and Net income attributable to noncontrolling interests, but excludes Interest expense, foreign currency transaction gains and losses, interest income, dividend income, unearned revenue, the effects of LIFO accounting for inventory, and unallocated general and corporate costs. The Segment EBIT of Purification Solutions does not include an allocation of certain functional support and indirect costs. As the Company continues the integration of this business and identifies synergies and determines the functional costs to be appropriately allocated, the Company expects an allocation of these costs will be determined and made in the fourth quarter of fiscal 2013. Based on our current analysis, these allocations are not expected to exceed $12 million for the full fiscal year 2013, and are currently reflected in Unallocated corporate costs and other segment results.

Financial information by reportable segment is as follows:


	Reinforcement		Performance		Advanced		Purification		Segment		Unallocated			Consolidated
	Materials		Materials		Technologies		Solutions		Total		and Other⁽¹⁾			Total
	(Dollars in millions)
Three months ended June 30, 2013
Revenues from external customers⁽²⁾	$	486	$	233	$	69	$	86	$	874	$	29		$	903
Income (loss) before taxes⁽³⁾	$	48	$	35	$	27	$	1	$	111	$	(38	)	$	73

Three months ended June 30, 2012
Revenues from external customers⁽²⁾	$	517	$	247	$	57		N/A	$	821	$	25		$	846
Income (loss) before taxes⁽³⁾	$	59	$	38	$	12		N/A	$	109	$	(31	)	$	78

Nine months ended June 30, 2013
Revenues from external customers⁽²⁾	$	1,420	$	672	$	148	$	258	$	2,498	$	67		$	2,565
Income (loss) before taxes⁽³⁾	$	139	$	98	$	42	$	11	$	290	$	(140	)	$	150

Nine months ended June 30, 2012
Revenues from external customers⁽²⁾	$	1,540	$	687	$	153		N/A	$	2,380	$	72		$	2,452
Income (loss) before taxes⁽³⁾	$	186	$	94	$	33		N/A	$	313	$	(104	)	$	209

⁽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 Chief Operating Decision Maker.

⁽²⁾	Unallocated and other reflects royalties paid by equity affiliates, external shipping and handling fees, and the impact of the corporate adjustment for unearned revenue.


	Three months ended				Nine months ended
	June 30				June 30
	2013		2012		2013		2012
	(Dollars in millions)
Royalties paid by equity affiliates, other operating revenues, the impact of corporate adjustments for unearned revenue, and unconsolidated equity affiliates	$	9	$	3	$	6	$	8
Shipping and handling fees		20		22		61		64

Total	$	29	$	25	$	67	$	72

⁽³⁾	Income (loss) before taxes that are categorized as Unallocated and Other includes:


	Three months ended						Nine months ended
	June 30						June 30
	2013			2012			2013			2012
	(Dollars in millions)
Interest expense	$	(15	)	$	(11	)	$	(47	)	$	(30	)
Total certain items, pre-tax^(a)		(4	)		(7	)		(44	)		(21	)
Equity in earnings of affiliated companies^(b)		(3	)		(4	)		(9	)		(8	)
Unallocated corporate costs^(c)		(13	)		(12	)		(42	)		(44	)
General unallocated (expense) income^(d)		(3	)		3			2			(1	)

Total	$	(38	)	$	(31	)	$	(140	)	$	(104	)

(a)

Certain items are items that management does not consider to be representative of operating segment results and they are, therefore, excluded from Segment EBIT. Certain items, pre-tax, for the three months ended June 30, 2013 include $5 million related to global restructuring activities and $2 million for acquisition-related charges (consisting of $2 million for certain other one-time integration costs) offset by $3 million of foreign currency gain on revaluation of the GAM Notes. Certain items, pre-tax, for the nine months ended June 30, 2013 include $30 million related to global restructuring activities and $18 million for acquisition-related charges (consisting of $7 million for certain other one-time integration costs and $11 million of charges related to acquisition accounting adjustments for the acquired inventory) offset by $4 million of foreign currency gain on revaluation of the GAM Notes. Certain items, pre-tax, for the three months ended June 30, 2012 include $2 million related to global restructuring activities and $5 million for acquisition-related charges. Certain items, pre-tax, for the nine months ended June 30, 2012 include $14 million related to global restructuring activities, $5 million for acquisition-related charges and $2 million for environmental and legal reserves.

(b)	Equity in earnings of affiliated companies is included in Segment EBIT and is removed from Unallocated and other to reconcile to Income (loss) before taxes.

(c)	Unallocated corporate costs are not controlled by the operating segments and primarily benefit corporate interests.

(d)

General unallocated (expense) income consists of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, the impact of accounting for certain inventory on a LIFO basis the profit or loss related to the corporate adjustment for unearned revenue, and the impact of including the full operating results of an equity affiliate in Purification Solutions segment EBIT.

Performance Materials is comprised of two businesses that sell the following products: specialty grades of carbon black and thermoplastic concentrates and compounds (the Specialty Carbons and Compounds Business); and fumed silica, fumed alumina and dispersions thereof (the Fumed Metal Oxides Business). The net sales from each of these businesses for the three and nine months ended June 30, 2013 and 2012 are as follows:


	Three months ended				Nine months ended
	June 30				June 30
	2013		2012		2013		2012
	(Dollars in millions)
Specialty Carbons and Compounds	$	159	$	181	$	464	$	505
Fumed Metal Oxides		74		66		208		182

Total Performance Materials	$	233	$	247	$	672	$	687

The net sales from each of the Advanced Technologies businesses are as follows:


	Three months ended				Nine months ended
	June 30				June 30
	2013		2012		2013		2012
	(Dollars in millions)
Inkjet Colorants	$	18	$	18	$	46	$	48
Aerogel		9		3		17		12
Security Materials		2		2		5		7
Elastomer Composites		5		6		17		17
Specialty Fluids		35		28		63		69

Total Advanced Technologies	$	69	$	57	$	148	$	153