I. Earnings Per Share

The following tables summarize the components of the basic and diluted earnings per common share computations:

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2016		2015			2016			2015
	(Dollars and shares in millions, except per share amounts)
Basic EPS:
Net income (loss) attributable to Cabot Corporation	$	56	$	(445	)	$	97		$	(374	)
Less: Dividends and dividend equivalents to participating securities		—		—			—			—
Less: Undistributed earnings allocated to participating securities⁽¹⁾		—		—			—			—
Earnings (loss) allocated to common shareholders (numerator)	$	56	$	(445	)	$	97		$	(374	)
Weighted average common shares and participating securities outstanding		62.9		63.8			62.9			64.2
Less: Participating securities⁽¹⁾		0.5		0.5			0.5			0.5
Adjusted weighted average common shares (denominator)		62.4		63.3			62.4			63.7
Amounts per share - basic:
Income (loss) from continuing operations attributable to Cabot Corporation	$	0.90	$	(7.05	)	$	1.55		$	(5.89	)
Income from discontinued operations		—		0.01			—			0.01
Net income (loss) attributable to Cabot Corporation	$	0.90	$	(7.04	)	$	1.55		$	(5.88	)
Diluted EPS:
Earnings (loss) allocated to common shareholders	$	56	$	(445	)	$	97		$	(374	)
Plus: Earnings allocated to participating securities		—		—			—			—
Less: Adjusted earnings allocated to participating securities⁽²⁾		—		—			(1	)		—
Earnings (loss) allocated to common shareholders (numerator)	$	56	$	(445	)	$	96		$	(374	)
Adjusted weighted average common shares outstanding		62.4		63.3			62.4			63.7
Effect of dilutive securities:
Common shares issuable⁽³⁾		0.5		—			0.5			—
Adjusted weighted average common shares (denominator)		62.9		63.3			62.9			63.7
Amounts per share - diluted:
Income (loss) from continuing operations attributable to Cabot Corporation	$	0.88	$	(7.05	)	$	1.53		$	(5.89	)
Income from discontinued operations		—		0.01			—			0.01
Net income (loss) attributable to Cabot Corporation	$	0.88	$	(7.04	)	$	1.53		$	(5.88	)

⁽¹⁾	Participating securities consist of shares of unvested time-based restricted stock units.

Undistributed earnings are the earnings which remain after dividends declared during the period are assumed to be distributed to the common and participating shareholders. Undistributed earnings are allocated to common and participating shareholders on the same basis as dividend distributions. The calculation of undistributed earnings is as follows:

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2016		2015			2016		2015
	(Dollars in millions)
Calculation of undistributed earnings (loss):
Net income (loss) attributable to Cabot Corporation	$	56	$	(445	)	$	97	$	(374	)
Less: Dividends declared on common stock		19		14			47		42
Less: Dividends declared on participating securities		—		—			—		—
Undistributed earnings (loss)	$	37	$	(459	)	$	50	$	(416	)
Allocation of undistributed earnings (loss):
Undistributed earnings (loss) allocated to common shareholders	$	37	$	(459	)	$	50	$	(416	)
Undistributed earnings (loss) allocated to participating shareholders		—		—			—		—
Undistributed earnings (loss)	$	37	$	(459	)	$	50	$	(416	)

⁽²⁾	Undistributed earnings are adjusted for the assumed distribution of dividends to the dilutive securities, which are described in (3) below, and then reallocated to participating securities.

⁽³⁾

Represents incremental shares of common stock from the (i) assumed exercise of stock options issued under Cabot’s equity incentive plans; (ii) assumed issuance of shares to employees pursuant to the Company’s Deferred Compensation and Supplemental Retirement Plan; and (iii) assumed issuance of shares under outstanding performance-based restricted stock unit awards issued under Cabot’s equity incentive plans. For the three and nine months ended June 30, 2016, 338,854 and 726,589 incremental shares of common stock, respectively, were not included in the calculation of diluted earnings per share because the inclusion of these shares would have been antidilutive. For the three and nine months ended June 30, 2015, 492,172 and 508,991 incremental shares of common stock, respectively, were not included in the calculation of diluted earnings per share because the inclusion of these shares would have been antidilutive.