Earnings Per Share

12 Months Ended

Sep. 30, 2018

Note Q. Earnings Per Share

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

	Years Ended September 30
	2018			2017		2016
	(In millions, except per share amounts)
Basic EPS:
Net income (loss) attributable to Cabot Corporation	$	(113	)	$	248	$	147
Less: Dividends and dividend equivalents to participating securities		1			—		—
Less: Undistributed earnings allocated to participating securities⁽¹⁾		—			2		1
Earnings (loss) allocated to common shareholders (numerator)	$	(114	)	$	246	$	146

Weighted average common shares and participating securities outstanding		62.4			62.8		62.9
Less: Participating securities⁽¹⁾		0.7			0.5		0.5
Adjusted weighted average common shares (denominator)		61.7			62.3		62.4

Per share amounts—basic:
Income (loss) from continuing operations attributable to Cabot Corporation	$	(1.85	)	$	3.94	$	2.32
Income (loss) from discontinued operations		—			—		0.02
Net income (loss) attributable to Cabot Corporation	$	(1.85	)	$	3.94	$	2.34
Diluted EPS:
Earnings (loss) allocated to common shareholders	$	(114	)	$	246	$	146
Plus: Earnings (loss) allocated to participating securities		—			2		1
Less: Adjusted earnings allocated to participating securities⁽²⁾		—			2		1
Earnings (loss) available to common shares (numerator)	$	(114	)	$	246	$	146

Adjusted weighted average common shares outstanding		61.7			62.3		62.4
Effect of dilutive securities:
Common shares issuable⁽³⁾		—			0.4		0.5
Adjusted weighted average common shares (denominator)		61.7			62.7		62.9

Per share amounts—diluted:
Income (loss) from continuing operations attributable to Cabot Corporation	$	(1.85	)	$	3.91	$	2.30
Income (loss) from discontinued operations		—			—		0.02
Net income (loss) attributable to Cabot Corporation	$	(1.85	)	$	3.91	$	2.32

⁽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. The holders of these units are entitled to receive dividend equivalents payable in cash to the extent dividends are paid on the Company’s outstanding common stock and equal in value to the dividends that would have been paid in respect of the shares underlying such 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:

	Years Ended September 30
	2018			2017		2016
	(In millions)
Calculation of undistributed earnings:
Net income (loss) attributable to Cabot Corporation	$	(113	)	$	248	$	147
Less: Dividends declared on common stock		79			77		65
Less: Dividends and dividend equivalents to participating securities		1			—		—
Undistributed earnings (loss)	$	(193	)	$	171	$	82
Allocation of undistributed earnings:
Undistributed earnings (loss) allocated to common shareholders	$	(193	)	$	169	$	81
Undistributed earnings allocated to participating securities		—			2		1
Undistributed earnings (loss)	$	(193	)	$	171	$	82

⁽²⁾	Undistributed earnings (loss) 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 SERP 401(k) Plan; and (iii) assumed issuance of shares for outstanding and achieved performance-based stock unit awards issued before fiscal 2017 under Cabot’s equity incentive plans using the treasury stock method. For fiscal 2018, 2017 and 2016, respectively, 229,220, 179,052 and 634,168 incremental shares of common stock were not included in the calculation of diluted earnings per share because the inclusion of these shares would have been antidilutive.