Earnings Per Share (Tables)

3 Months Ended

Dec. 31, 2019

Components of Basic and Diluted Earnings (Loss) Per Common Share (EPS)

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

	Three Months Ended December 31
	2019		2018
	(In millions, except per share amounts)
Basic EPS:
Net income (loss) attributable to Cabot Corporation	$	41	$	69
Less: Undistributed earnings allocated to participating securities⁽¹⁾		—		—
Earnings (loss) allocated to common shareholders (numerator)	$	41	$	69

Weighted average common shares and participating securities outstanding		57.7		60.8
Less: Participating securities⁽¹⁾		0.8		0.9
Adjusted weighted average common shares (denominator)		56.9		59.9

Earnings (loss) per common share - basic:	$	0.71	$	1.14

Diluted EPS:
Earnings (loss) allocated to common shareholders	$	41	$	69
Plus: Earnings (loss) allocated to participating securities		—		1
Less: Adjusted earnings allocated to participating securities⁽²⁾		—		1
Earnings (loss) allocated to common shareholders (numerator)	$	41	$	69

Adjusted weighted average common shares outstanding		56.9		59.9
Effect of dilutive securities:
Common shares issuable⁽³⁾		0.1		0.2
Adjusted weighted average common shares (denominator)		57.0		60.1

Earnings (loss) per common share - diluted:	$	0.70	$	1.14

⁽¹⁾

^{Participating securities consist of shares underlying: (i) achieved but unvested performance-based restricted stock units, and (ii) 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.}

Calculation of Undistributed Earnings

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 December 31
	2019		2018
	(In millions)
Calculation of undistributed earnings (loss):
Net income (loss) attributable to Cabot Corporation	$	41	$	69
Less: Dividends declared on common stock		20		20
Undistributed earnings (loss)	$	21	$	49

Allocation of undistributed earnings (loss):
Undistributed earnings (loss) allocated to common shareholders	$	21	$	49
Undistributed earnings (loss) allocated to participating shareholders		—		—
Undistributed earnings (loss)	$	21	$	49

⁽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; and (ii) assumed issuance of shares to employees pursuant to the Company’s Deferred Compensation and Supplemental Retirement Plan. For the three months ended December 31, 2019, 995,294 incremental shares of common stock were excluded from the calculation of diluted earnings per share because the inclusion of these shares would have been antidilutive. For the three months ended December 31, 2018, 687,995 incremental shares of common stock were excluded from the calculation of diluted earnings per share because the inclusion of these shares would have been antidilutive.