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”), who is Cabot’s President and Chief Executive Officer, 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.

The Performance Chemicals segment combines the specialty carbons, fumed metal oxides and aerogel product lines into the Performance Additives business, and combines the specialty compounds and inkjet colorants product lines into the Formulated Solutions business. These businesses are similar in terms of economic characteristics, nature of products, processes, customer class and product distribution methods, and, therefore, have been aggregated into one reportable segment. The net sales from each of these businesses for the three and six months ended March 31, 2019 and 2018 were as follows:

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.

Income (loss) from continuing operations before income taxes (“Segment EBIT”) is presented for each reportable segment in the table below. Segment EBIT excludes certain items, meaning items management does not consider representative of on-going operating segment results. In addition, Segment EBIT includes Equity in earnings 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, general unallocated expense and unallocated corporate costs.

	Reinforcement Materials		Performance Chemicals		Purification Solutions			Specialty Fluids			Segment Total		Unallocated and Other⁽¹⁾			Consolidated Total
	(In millions)
Three Months Ended March 31, 2019
Revenues from external customers⁽²⁾	$	445	$	254	$	72		$	24		$	795	$	49		$	844
Income (loss) from continuing operations before income taxes⁽³⁾	$	61	$	38	$	1		$	12		$	112	$	(63	)	$	49

Three Months Ended March 31, 2018
Revenues from external customers⁽²⁾	$	454	$	268	$	66		$	6		$	794	$	24		$	818
Income (loss) from continuing operations before income taxes⁽³⁾	$	79	$	57	$	(6	)	$	(3	)	$	127	$	(298	)	$	(171	)

Six Months Ended March 31, 2019
Revenues from external customers⁽²⁾	$	902	$	485	$	137		$	43		$	1,567	$	98		$	1,665
Income (loss) from continuing operations before income taxes⁽³⁾	$	123	$	74	$	(2	)	$	22		$	217	$	(98	)	$	119

Six Months Ended March 31, 2018
Revenues from external customers⁽²⁾	$	841	$	497	$	136		$	12		$	1,486	$	52		$	1,538
Income (loss) from continuing operations before income taxes⁽³⁾	$	141	$	104	$	—		$	(5	)	$	240	$	(319	)	$	(79	)

⁽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 CODM.

⁽²⁾

Consolidated Total Revenues from external customers reconciles to Net sales and other operating revenues on the Consolidated Statements of Operations. Revenues from external customers that are categorized as Unallocated and Other reflects royalties, external shipping and handling fees, the impact of unearned revenue, the removal of 100% of the sales of an equity method affiliate, discounting charges for certain Notes receivable, and by-product revenue. Details are provided in the table below:

	Three Months Ended March 31						Six Months Ended March 31
	2019			2018			2019			2018
	(In millions)
Royalties, the impact of unearned revenue, the removal of 100% of the sales of an equity method affiliate and discounting charges for certain notes receivable	$	(3	)	$	(9	)	$	(6	)	$	(8	)
Shipping and handling fees		32			33			64			60
By-product sales^(a)		20			—			40			—
Total	$	49		$	24		$	98		$	52

^(a)

As of October 1, 2018, as part of the adoption of the new accounting standard, Revenue from Contracts with Customers, the Company began presenting revenue from by-products produced in manufacturing operations in Net sales and other operating revenues, which in prior years was included as a reduction in Cost of sales.

⁽³⁾

Consolidated Total Income (loss) from continuing operations before income taxes reconciles to Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies on the Consolidated Statements of Operations. Income (loss) from continuing operations before income taxes that are categorized as Unallocated and Other includes:

	Three Months Ended March 31						Six Months Ended March 31
	2019			2018			2019			2018
	(In millions)
Interest expense	$	(14	)	$	(14	)	$	(29	)	$	(27	)
Certain items^(a)
Specialty Fluids held for sale asset impairment charge (Note D)		(20	)		—			(20	)		—
Equity affiliate investment impairment charge (Note O)		(11	)		—			(11	)		—
Purification Solutions goodwill and long-lived assets impairment charge (Note F)		—			(254	)		—			(254	)
Inventory reserve adjustment (Note F)		—			(13	)		—			(13	)
Global restructuring activities (Note L)		(2	)		9			(11	)		8
Legal and environmental matters and reserves		(1	)		(5	)		(1	)		(6	)
Gains (losses) on sale of investments		—			—			—			10
Acquisition and integration-related charges		(1	)		(1	)		(4	)		(1	)
Other		(2	)		—			—			(1	)
Total certain items, pre-tax		(37	)		(264	)		(47	)		(257	)
Unallocated corporate costs^(b)		(13	)		(16	)		(25	)		(30	)
General unallocated income (expense)^(c)		1			(3	)		3			(3	)
Less: Equity in earnings of affiliated companies, net of tax^(d)		—			1			—			2
Total	$	(63	)	$	(298	)	$	(98	)	$	(319	)

^(a)

Certain items are items of expense and income that management does not consider representative of the Company’s fundamental on-going segment results and they are, therefore, excluded from Segment EBIT.

^(b)

Unallocated corporate costs are costs that are not controlled by the segments and primarily benefit corporate interests.

^(c)

General unallocated income (expense) consists of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, the profit or loss related to the corporate adjustment for unearned revenue, and the impact of including the full operating results of a contractual joint venture in Purification Solutions Segment EBIT.

^(d)

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

The Company’s segments operate globally. In addition to presenting Revenue from external customers by reportable segment, the following tables further disaggregate Revenue from external customers by geographic region.