K. Earnings Per Share

The following tables summarize the components of the basic and diluted earnings (loss) per common share (“EPS”) computations:

	Three Months Ended June 30				Nine Months Ended June 30
	2018		2017		2018			2017
	(In millions, except per share amounts)
Basic EPS:
Net income (loss) attributable to Cabot Corporation	$	88	$	47	$	(207	)	$	176
Less: Undistributed earnings allocated to participating securities⁽¹⁾		—		—		—			1
Earnings (loss) allocated to common shareholders (numerator)	$	88	$	47	$	(207	)	$	175

Weighted average common shares and participating securities outstanding		62.5		62.9		62.5			62.8
Less: Participating securities⁽¹⁾		0.7		0.5		0.7			0.5
Adjusted weighted average common shares (denominator)		61.8		62.4		61.8			62.3

Earnings (loss) per common share - basic:	$	1.41	$	0.73	$	(3.36	)	$	2.79

Diluted EPS:
Earnings (loss) allocated to common shareholders	$	88	$	47	$	(207	)	$	175
Plus: Earnings (loss) allocated to participating securities		1		—		1			1
Less: Adjusted earnings allocated to participating securities⁽²⁾		1		—		1			1
Earnings (loss) allocated to common shareholders (numerator)	$	88	$	47	$	(207	)	$	175

Adjusted weighted average common shares outstanding		61.8		62.4		61.8			62.3
Effect of dilutive securities:
Common shares issuable⁽³⁾		0.5		0.3		—			0.5
Adjusted weighted average common shares (denominator)		62.3		62.7		61.8			62.8

Earnings (loss) per common share - diluted:	$	1.40	$	0.73	$	(3.36	)	$	2.78

⁽¹⁾	Participating securities consist of shares underlying outstanding and achieved performance-based restricted stock units issued during and after fiscal 2017 and all 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 June 30				Nine Months Ended June 30
	2018		2017		2018			2017
	(In millions)
Calculation of undistributed earnings (loss):
Net income (loss) attributable to Cabot Corporation	$	88	$	47	$	(207	)	$	176
Less: Dividends declared on common stock		21		19		60			57
Undistributed earnings (loss)	$	67	$	28	$	(267	)	$	119

Allocation of undistributed earnings (loss):
Undistributed earnings (loss) allocated to common shareholders	$	67	$	28	$	(267	)	$	118
Undistributed earnings (loss) allocated to participating shareholders		—		—		—			1
Undistributed earnings (loss)	$	67	$	28	$	(267	)	$	119

⁽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 for outstanding and achieved performance-based restricted stock unit awards issued before fiscal 2017 under Cabot’s equity incentive plans using the treasury stock method. For the three and nine months ended June 30, 2018, 260,630 and 799,163 incremental shares of common stock, respectively, were excluded from 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, 2017, 191,616 and 172,969 incremental shares of common stock, respectively, were excluded from the calculation of diluted earnings per share because the inclusion of these shares would have been antidilutive.