P. 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 and disclosed four of its operating segments (Specialty Fluids, Inkjet, Aerogel and Elastomer Composites) into an other reportable segment labeled “Advanced Technologies”. The Security Materials business was previously included in the Advanced Technologies reportable segment. During the second quarter of fiscal 2014, as discussed in Note D, the Company reached an agreement to sell its Security Materials business. Accordingly, results of the Security Materials business for all periods presented have been recast as discontinued operations.

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) from continuing operations 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 (loss) earnings of affiliated companies, net of tax, the full operating results of a contractual joint venture in Purification Solutions, royalties, Net income (loss) attributable to noncontrolling interests, net of tax, and discounting charges for certain Notes receivable, but excludes Interest expense, foreign currency transaction gains and losses, interest income, dividend income, unearned revenue, the effects of LIFO accounting for inventory, general unallocated income (expense) and unallocated corporate costs.

Prior year Purification Solutions Segment EBIT has been adjusted to include an allocation of corporate administrative and functional support costs, which were previously reflected in unallocated corporate costs and other segment results. Beginning in the second quarter of fiscal 2014, a reclassification has been made in the Purification Solutions segment information in order to align the presentation of shipping and handling costs on customer sales with the rest of the Company’s businesses. The reclassification was made between Purification Solutions and Unallocated and other to include the shipping and handling costs in Revenues from external customers. There is no impact on Segment EBIT as a result of the reclassification. Historical periods have been adjusted to reflect this reclassification.

Financial information by reportable segment is as follows:


	Reinforcement Materials		Performance Materials		Advanced Technologies		Purification Solutions			Segment Total		Unallocated and Other⁽¹⁾			Consolidated Total
	(Dollars in millions)

Three Months Ended June 30, 2014
Revenues from external customers⁽²⁾	$	534	$	243	$	47	$	78		$	902	$	38		$	940
Income (loss) from continuing operations before taxes⁽³⁾	$	61	$	41	$	14	$	(7	)	$	109	$	(29	)	$	80

Three Months Ended June 30, 2013
Revenues from external customers⁽²⁾	$	486	$	233	$	67	$	81		$	867	$	34		$	901
Income (loss) from continuing operations before taxes⁽³⁾	$	49	$	35	$	28	$	(1	)	$	111	$	(37	)	$	74

Nine Months Ended June 30, 2014
Revenues from external customers⁽²⁾	$	1,555	$	709	$	159	$	230		$	2,653	$	83		$	2,736
Income (loss) from continuing operations before taxes⁽³⁾	$	186	$	122	$	51	$	(20	)	$	339	$	(102	)	$	237

Nine Months Ended June 30, 2013
Revenues from external customers⁽²⁾	$	1,420	$	672	$	143		244		$	2,479	$	81		$	2,560
Income (loss) from continuing operations before taxes⁽³⁾	$	141	$	99	$	44		4		$	288	$	(134	)	$	154

⁽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⁾

Revenue from external customers that are categorized as Unallocated and Other reflects royalties, other operating revenues, external shipping and handling costs, the impact of unearned revenue, the removal of 100% of the sales of an equity method affiliate and discounting charges for certain Notes receivable. Details are provided in the table below:


	Three Months Ended June 30				Nine Months Ended June 30
	2014		2013		2014			2013
	(Dollars in millions)
Royalties, other operating revenues, the impact of unearned revenue, the removal of 100% of the sales of an equity method affiliate and discounting charges for certain Notes receivable.	$	10	$	9	$	(2	)	$	6
Shipping and handling fees		28		25		85			75

Total	$	38	$	34	$	83		$	81

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


	Three Months Ended June 30						Nine Months Ended June 30
	2014			2013			2014			2013
	(Dollars in millions)
Interest expense	$	(14	)	$	(15	)	$	(41	)	$	(47	)
Total certain items, pre-tax^(a)		(7	)		(4	)		(19	)		(43	)
Less: Equity in loss (earnings) of affiliated companies, net of tax^(b)		2			(3	)		2			(9	)
Unallocated corporate costs^(c)		(14	)		(12	)		(43	)		(37	)
General unallocated income (expense)^(d)		4			(3	)		(1	)		2

Total	$	(29	)	$	(37	)	$	(102	)	$	(134	)

(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, 2014 include $3 million related to global restructuring activities, $3 million of foreign currency loss on revaluations and $1 million related to legal and environmental matters and reserves. Certain items, pre-tax, for the nine months ended June 30, 2014 include $24 million related to global restructuring activities, $5 million for acquisition and integration-related charges (consisting of $3 million for certain other one-time integration costs and $2 million of additional charges related to acquisition accounting adjustments for the acquired inventory of NHUMO), $3 million of foreign currency loss on revaluations and $16 million for legal and environmental matters and reserves offset by a $29 million non-cash gain recognized on the Company’s pre-existing investment in NHUMO as a result of the NHUMO transaction. 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 and integration-related charges offset by $3 million of foreign currency gain on revaluation. Certain items, pre-tax, for the nine months ended June 30, 2013 include $29 million related to global restructuring activities and $18 million for acquisition and integration-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.

(b)

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

(c)

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

(d)

General unallocated income (expense) 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, 2014 and 2013 are as follows:


	Three Months Ended June 30				Nine Months Ended June 30
	2014		2013		2014		2013
	(Dollars in millions)
Specialty Carbons and Compounds	$	165	$	159	$	485	$	464
Fumed Metal Oxides		78		74		224		208

Total Performance Materials	$	243	$	233	$	709	$	672

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


	Three Months Ended June 30				Nine Months Ended June 30
	2014		2013		2014		2013
	(Dollars in millions)
Inkjet Colorants	$	17	$	18	$	46	$	46
Aerogel		2		9		8		17
Elastomer Composites		4		5		28		17
Specialty Fluids		24		35		77		63

Total Advanced Technologies	$	47	$	67	$	159	$	143