Financial Information by Segment

6 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Financial Information by Segment

N. 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 Chemicals, Purification Solutions and Specialty Fluids.

The Reinforcement Materials segment represents the rubber blacks and elastomer composites product lines.

Performance Chemicals is comprised of two businesses: (i) our Specialty Carbons and Formulations business, which manufactures and sells specialty grades of carbon black, specialty compounds and inkjet colorants, and (ii) our Metal Oxides business, which manufactures and sells fumed silica, fumed alumina and dispersions thereof and aerogel.The net sales from each of these businesses for the three and six months ended March 31, 2016 and 2015 are as follows:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2016		2015		2016		2015
	(Dollars in millions)
Specialty Carbons and Formulations	$	145	$	162	$	285	$	319
Metal Oxides		71		75		138		147
Total Performance Chemicals	$	216	$	237	$	423	$	466

The Purification Solutions segment represents the Company’s activated carbon business and the Specialty Fluids segment includes cesium formate oil and gas drilling fluids and high-purity fine cesium chemicals product lines.

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 management does not consider representative of segment results. In addition, Segment EBIT includes Equity in earnings (loss) 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, 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 expense and unallocated corporate costs.

Financial information by reportable segment is as follows:

	Reinforcement Materials		Performance Chemicals		Purification Solutions			Specialty Fluids			Segment Total		Unallocated and Other(1)			Consolidated Total
	(Dollars in millions)
Three Months Ended March 31, 2016
Revenues from external customers(2)	$	261	$	216	$	67		$	6		$	550	$	18		$	568
Income (loss) from continuing operations    before taxes(3)	$	34	$	58	$	(2	)	$	(2	)	$	88	$	(26	)	$	62
Three Months Ended March 31, 2015
Revenues from external customers(2)	$	358	$	237	$	71		$	8		$	674	$	20		$	694
Income (loss) from continuing operations    before taxes(3)	$	27	$	42	$	1		$	(1	)	$	69	$	(30	)	$	39
Six Months Ended March 31, 2016
Revenues from external customers(2)	$	549	$	423	$	133		$	13		$	1,118	$	53		$	1,171
Income (loss) from continuing operations    before taxes(3)	$	60	$	108	$	(7	)	$	(2	)	$	159	$	(105	)	$	54
Six Months Ended March 31, 2015
Revenues from external customers(2)	$	818	$	466	$	147		$	24		$	1,455	$	51		$	1,506
Income (loss) from continuing operations    before taxes(3)	$	80	$	81	$	—		$	5		$	166	$	(76	)	$	90

⁽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 revenues from external customers” 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						Six Months Ended
	March 31,						March 31,
	2016			2015			2016		2015
	(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	$	(9	)	$	(8	)	$	—	$	(4	)
Shipping and handling fees		27			28			53		55
Total	$	18		$	20		$	53	$	51

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

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2016			2015			2016			2015
	(Dollars in millions)
Interest expense	$	(14	)	$	(14	)	$	(27	)	$	(27	)
Total certain items, pre-tax(a)		1			(6	)		(57	)		(32	)
Equity in (earnings) loss of affiliated companies, net of tax(b)		(1	)		(2	)		(1	)		(3	)
Unallocated corporate costs(c)		(12	)		(11	)		(25	)		(23	)
General unallocated income (expense)(d)		—			3			5			9
Total	$	(26	)	$	(30	)	$	(105	)	$	(76	)

^(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 March 31, 2016 include a $5 million benefit related to global restructuring activities, $3 million of net foreign currency impacts related to a loss on the devaluation of the Argentine peso, which was partially offset by a gain on the devaluation of the Venezuelan bolivar, and $1 million related to legal and environmental matters and reserves. Certain items, pre-tax, for the six months ended March 31, 2016 include $43 million related to global restructuring activities, $11 million related to net foreign currency impacts related to a loss on the devaluation of the Argentine peso, which was partially offset by a gain on the devaluation of the Venezuelan bolivar, and $3 million related to legal and environmental matters and reserves. Certain items, pre-tax, for the three months ended March 31, 2015 include a $5 million charge related to global restructuring activities and $1 million for acquisition and integration-related charges. Certain items, pre-tax, for the six months ended March 31, 2015 include a $12 million charge related to global restructuring activities, $2 million for acquisition and integration-related charges and $18 million related to an employee benefit plan settlement charge.

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

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

^(d) General unallocated 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.