J. Restructuring

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

	Three Months Ended
	December 31,
	2015		2014
	(Dollars in millions)
Cost of sales	$	37	$	2
Selling and administrative expenses		6		5
Research and technical expenses		5		—
Total	$	48	$	7

Details of all restructuring activities and the related reserves during the three months ended December 31, 2015 are as follows:

	Severance and Employee Benefits			Environmental Remediation		Asset Sales			Asset Impairment and Accelerated Depreciation			Other			Total
	(Dollars in millions)
Reserve at September 30, 2015	$	5		$	2	$	—		$	—		$	2		$	9
Charges (credit)		25			—		(2	)		23			2			48
Costs charged against assets / liabilities		—			—		(5	)		(23	)		—			(28	)
Cash (paid) received		(11	)		—		7			—			(3	)		(7	)
Reserve at December 31, 2015	$	19		$	2	$	—		$	—		$	1		$	22

2016 Plan

On October 20, 2015, in response to challenging macroeconomic conditions, the Company announced its intention to restructure its operations subject to local consultation requirements and processes in certain locations. Cabot’s plan has resulted in a reduction of approximately 300 positions across the Company’s global locations. These actions are intended to result in a more competitive cost structure.

The Company has recorded pre-tax charges of approximately $24 million in the first three months of fiscal 2016, and expects to record an additional $4 million through the rest of fiscal 2016 related to these actions. The charges recorded and anticipated are comprised of severance, employee benefits and other transition costs.

Cumulative net cash outlays related to these actions are expected to be approximately $28 million, comprised of severance, employee benefits and other transition costs. Through December 31, 2015, the Company has made $11 million in cash payments related to this plan and expects to make $15 million in cash payments through the remainder of fiscal 2016 and $2 million thereafter.

As of December 31, 2015, Cabot has $14 million of accrued severance costs in the Consolidated Balance Sheet related to this plan.

Additionally, on November 11, 2015, Cabot announced that it had committed to closing its carbon black manufacturing facility in Merak, Indonesia. The decision to close this plant and to consolidate production in Asia using the Company’s Cilegon, Indonesia and other Asian and global carbon black production sites to meet regional demand was driven by the financial performance at the Merak facility in the past several years. Manufacturing operations ceased at the end of January 2016 and approximately 50 employees were affected.

The Company has recorded pre-tax charges of approximately $24 million in the first three months of fiscal 2016 related to this closure, comprised of $22 million of asset impairments and accelerated depreciation and $2 million of severance and employee benefits. The asset impairment charges reflect the write-down of the long-lived assets group that is no longer in use to its fair value.

Future anticipated site closure costs for the Merak facility, anticipated to be recorded through the remainder of fiscal 2016, are $6 million for site remediation and other miscellaneous costs.

Net cash outlays related to this closure are expected to be approximately $8 million, substantially all of which is expected to be paid through the remainder of fiscal 2016.

As of December 31, 2015, Cabot has $2 million of accrued severance costs in the Consolidated Balance Sheet related to the Merak facility closure.

Details of the 2016 restructuring activities, including the Merak facility closure, during the three months ended December 31, 2015 are as follows:

	Severance and Employee Benefits			Asset Impairment and Accelerated Depreciation			Other			Total
	(Dollars in millions)
Reserve at September 30, 2015	$	—		$	—		$	—		$	—
Charges		25			22			1			48
Costs charged against assets / liabilities		1			(22	)		—			(21	)
Cash paid		(10	)		—			(1	)		(11	)
Reserve at December 31, 2015	$	16		$	—		$	—		$	16

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 actions related to the transition of the business service center have been completed and have resulted in total charges of approximately $24 million, comprised of $16 million of severance charges and $8 million of other transition costs including training costs and redundant salaries. There were no charges related to this plan recorded in the first fiscal quarter of 2016 and $4 million was recorded related to this plan in the first fiscal quarter of 2015.

Through December 31, 2015, the Company has made $20 million in cash payments related to this plan, comprised of $13 million of severance payments and $7 million of other transition related costs, and expects to make cash payments of approximately $1 million, comprised mainly of severance, in the remainder of fiscal 2016. The difference between the initial accrual and subsequent cash payments was due to changes in foreign exchange rates.

As of December 31, 2015, Cabot has $1 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.

Through December 31, 2015, the Company recorded cumulative net pre-tax restructuring charges related to this plan of $19 million, comprised mainly of accelerated depreciation and asset write-offs of $16 million, severance charges of $2 million, site demolition, clearing and environmental remediation charges of $2 million, and other closure related charges of $1 million, partially offset by the gain from the sale of land of $2 million in fiscal 2016. CMSB’s net income or loss is attributable to Cabot Corporation and to the noncontrolling interest in the joint venture.

The Company has recorded a net pre-tax gain of $1 million, and a net pre-tax charge of less than $1 million in the three months ended December 31, 2015 and 2014, respectively. The portion of the charges that are allocable to the noncontrolling interest in CMSB (49.9%) are recorded within Net income attributable to noncontrolling interests, net of tax, in the Consolidated Statements of Operations. The majority of actions related to closure of the plant were completed in fiscal 2014.

Cumulative net cash received related to this plan is $3 million, comprised of $7 million received from the sale of land, partially offset by approximately $2 million for severance, $1 million for site demolition, clearing and environmental remediation, and $1 million for other closure related charges.

CMSB expects to make cash payments of less than $1 million during the remainder of fiscal 2016 mainly for site demolition, clearing and environmental remediation costs.

As of December 31, 2015, Cabot has less than $1 million of accrued restructuring costs in the Consolidated Balance Sheets related to this closure, which is mainly for accrued environmental and other charges.

Other Activities

The Company has recorded other pre-tax restructuring charges of approximately $1 million during each of the first quarters of fiscal 2016 and 2015. Fiscal 2016 charges are comprised mainly of accelerated depreciation and severance costs whereas fiscal 2015 charges are comprised of severance costs. Future charges related to these actions are anticipated to be less than $1 million in the remainder of fiscal 2016 and thereafter.

As of December 31, 2015, Cabot has $3 million of accrued severance and other closure related costs in the Consolidated Balance Sheets related to these activities which is expected to be paid through early fiscal 2017.

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 and Hong Kong. The Company has incurred total cumulative pre-tax charges of approximately $165 million related to these plans through December 31, 2015, comprised of $67 million for severance charges, $66 million for accelerated depreciation and asset impairments, $10 million for environmental, demolition and site clearing costs, and $23 million of other closure related charges, partially offset by gains on asset sales of $1 million. The Company anticipates that it will record a gain on the sale of land rights in Hong Kong of $8 million during fiscal 2016.

Pre-tax restructuring expenses related to these plans were less than $1 million and $2 million during the first three months of fiscal 2016 and 2015, respectively. Since fiscal 2009, Cabot has made net cash payments of $87 million related to these plans and expects to receive approximately $9 million from the sale of land rights in Hong Kong during fiscal 2016, partially offset by payments of approximately $2 million for environmental and other closure related costs.

As of December 31, 2015, Cabot has $2 million of accrued environmental and other closure related costs in the Consolidated Balance Sheets related to these activities.