Note O. Restructuring

Cabot’s restructuring activities were recorded in the Consolidated Statements of Operations as follows:


	Years Ended September 30
	2014		2013		2012
	(Dollars in millions)
Cost of sales	$	12	$	28	$	13
Selling and administrative expenses		17		7		2
Research and technical expenses		—		—		—

Total	$	29	$	35	$	15

Details of these restructuring activities and the related reserves for fiscal 2014 and 2013 were as follows:


	Severance and Employee Benefits			Environmental Remediation			Asset Impairment and Accelerated Depreciation			Asset Sales			Other			Total
	(Dollars in millions)
Reserve at September 30, 2012	$	2		$	1		$	—		$	—		$	2		$	5
Charges		11			1			19			—			4			35
Costs charged against assets and other		—			—			(19	)		—			(2	)		(21	)
Cash paid		(6	)		—			—			—			(3	)		(9	)
Foreign currency translation adjustment		—			—			—			—			—			—

Reserve at September 30, 2013	$	7		$	2		$	—		$	—		$	1		$	10
Charges		18			1			4			1			5			29
Costs charged against assets and other		—			—			(4	)		—			—			(4	)
Cash paid		(8	)		(1	)		—			(1	)		(5	)		(15	)
Foreign currency translation adjustment		(1	)		—			—			—			—			(1	)

Reserve at September 30, 2014	$	16		$	2		$	—		$	—		$	1		$	19

Business Service Center Transition

In January 2014, the Company announced its intention to open a new Europe, Middle East and Africa (“EMEA”) business service center in Riga, Latvia, and to close its Leuven, Belgium site, subject to the Belgian information and consultation process, which was successfully completed in June 2014. These actions were developed following an extensive evaluation of the Company’s business service capabilities in the EMEA region and a determination that the future EMEA business service center will enable the Company to provide the highest quality of service at the most competitive cost.

The Company has recorded $18 million of charges during fiscal 2014 related to this plan, comprised primarily of employee severance costs. The Company expects that the majority of actions related to the transition of the business service center will be completed by the end of fiscal 2015 and result in total cash charges of approximately $25 million comprised of $18 million of severance charges and $7 million of other transition costs including training costs and redundant salaries. Through September 30, 2014, the Company has made $3 million in cash payments related to this plan, mainly related to transition costs, and expects to make cash payments of approximately $22 million, comprised of $18 million of severance costs and $4 million of other transition costs, in fiscal 2015.

As of September 30, 2014, Cabot has $14 million of accrued restructuring costs in the Consolidated Balance Sheet related to this closure which is mainly comprised of accrued severance charges.

Closure of Port Dickson, Malaysia Manufacturing Facility

On April 26, 2013, the Company announced that the Board of its carbon black joint venture, Cabot Malaysia Sdn. Bhd. (“CMSB”), decided to cease production at its Port Dickson, Malaysia facility. The facility ceased production in June 2013. The Company holds a 50.1 percent equity share in CMSB. The decision, which affected approximately 90 carbon black employees, was driven by the facility’s manufacturing inefficiencies and raw materials costs.

During fiscal 2014 and fiscal 2013, the Company recorded pre-tax restructuring charges related to this plan of $2 million and $18 million, respectively. These pre-tax restructuring costs were comprised mainly of accelerated depreciation and asset write-offs of $15 million, severance charges of $2 million, site demolition, clearing and environmental remediation charges of $2 million, and other closure related charges of $1 million. CMSB’s net income or loss is attributable to Cabot Corporation and to the noncontrolling interest in the joint venture. The portion of the charges that are allocable to the noncontrolling interest in CMSB (49.9%) are recorded within Net income (loss) attributable to noncontrolling interests, net of tax, in the Consolidated Statements of Operations.

The majority of actions related to closure of the plant have been completed in fiscal 2014 with future environmental charges of $3 million forecasted for fiscal 2015.

Cumulative net cash outlays related to this plan are expected to be approximately $8 million comprised primarily of $5 million for site demolition, clearing and environmental remediation, $2 million for severance, and $1 million for other closure related charges. Through September 30, 2014, CMSB has made approximately $4 million in cash payments related to this plan related mainly to severance and site demolition and clearing costs.

CMSB expects to make net cash payments of $4 million during fiscal 2015 and thereafter mainly comprised of site demolition, clearing and environmental remediation costs. These amounts exclude any proceeds that may be received from the sale of land or other manufacturing assets.

As of September 30, 2014, Cabot has $1 million of accrued restructuring costs in the Consolidated Balance Sheets related to this closure which is mainly comprised of accrued environmental and other charges.

Other Activities

The Company has recorded pre-tax charges of approximately $8 million, $13 million and $1 million during fiscal 2014, 2013 and 2012, respectively, related to restructuring activities at several other locations. Fiscal 2014 charges are comprised of accelerated depreciation and asset write-offs of $5 million and severance charges of $3 million. Fiscal 2013 costs are comprised of $8 million of severance charges, $3 million of accelerated depreciation and asset write-offs and $2 million of other expenses. Fiscal 2012 is comprised mainly of severance charges. The Company anticipates that it will record additional charges of $2 million in fiscal 2015 related to these actions.

Through September 30, 2014, Cabot has made cash payments of $18 million related to these activities and expects to pay $3 million in fiscal 2015 mainly for severance and other closure related costs at the impacted locations.

As of September 30, 2014, Cabot has $1 million of accrued severance and other closure related costs in the Consolidated Balance Sheets related to these activities.

Previous Actions and Sites Pending Sale

Beginning in fiscal 2009, the Company entered into several different restructuring plans which have been substantially completed, pending the sale of former manufacturing sites in Thane, India, Stanlow, U.K. and Hong Kong. The Company has incurred total cumulative pre-tax charges of approximately $163 million related to these plans through September 30, 2014, comprised of $67 million for severance charges, $65 million for accelerated depreciation and asset impairments, $10 million for environmental, demolition and site clearing costs, and $22 million of other closure related charges partially offset by gains on asset sales of $1 million. These amounts do not include any gain that may be recorded if the Company successfully sells its land rights and certain manufacturing related assets in India and Hong Kong or its land in the U.K.

Pre-tax restructuring expenses related to these plans were approximately $1 million, $3 million and $14 million during fiscal 2014, 2013 and 2012, respectively. Fiscal 2014 charges are comprised mainly of environmental charges and other post closure costs. Fiscal 2013 charges are comprised mainly of severance, accelerated depreciation and other expenses. Fiscal 2012 charges are comprised of $6 million of accelerated depreciation and impairment charges, $3 million of severance charges, $3 million of environmental, demolition and site clearing costs and $2 million of net other charges.

Since fiscal 2009, Cabot has made net cash payments of $85 million related to these plans and expects to pay approximately $3 million in fiscal 2015 and thereafter. The remaining payments consist mainly of environmental and other closure related costs. These amounts do not include any proceeds that may be received if the Company successfully sells its land rights and certain manufacturing related assets in India and Hong Kong or its land in the U.K.

As of September 30, 2014, Cabot has $3 million of accrued environmental, severance and other closure related costs in the Consolidated Balance Sheets related to these activities.