Financial Information by Segment & Geographic Area

12 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Financial Information by Segment & Geographic Area

Note U. Financial Information by Segment & Geographic Area

Segment Information

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 three reportable segments: Reinforcement Materials, Performance Chemicals and Purification Solutions. The Company’s former Specialty Fluids business was a separate reporting segment prior to divestiture in the third quarter of fiscal 2019. On November 25, 2021, the Company entered into an agreement to sell the Purification Solutions business, subject to the satisfaction or waiver of the conditions set forth in the agreement. The Company expects to close the transaction in the second quarter of fiscal 2022, and upon consummation of this transaction the Company will be organized into two reportable segments.

The Reinforcement Materials segment combines the reinforcing carbons and engineered 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 Purification Solutions segment represents the Company’s activated carbon business.

Income (loss) from continuing operations before income taxes (“Segment EBIT”) is presented for each reportable segment in the financial information by the reportable segment table below on the line entitled Income (loss) from continuing operations before taxes. 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 (loss) 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. Segment assets exclude cash, short-term investments, cost investments, income taxes receivable, deferred taxes and headquarters’ assets, which are included in unallocated and other. Expenditures for additions to long-lived assets include total equity and other investments (including available-for-sale securities) and property, plant and equipment.

Reinforcement Materials

Carbon black is a form of elemental carbon that is manufactured in a highly controlled process to produce particles and aggregates of varied structure and surface chemistry, resulting in many different performance characteristics for a wide variety of applications. Reinforcing carbons (a class of carbon blacks manufactured by Cabot) are used to enhance the physical properties of the systems and applications in which they are incorporated.

The Company’s reinforcing carbons products are used in tires and industrial products. Reinforcing carbons have traditionally been used in the tire industry as a rubber reinforcing agent to increase tread durability and are also used as a performance additive to reduce rolling resistance and improve traction. In industrial products such as hoses, belts, extruded profiles and molded goods, reinforcing carbons are used to improve the physical performance of the product, including the product’s physical strength, fluid resistance, conductivity and resistivity.

In addition to its reinforcing carbons products, the Company manufactures engineered elastomer composites (“E2C™”) solutions that are composites of reinforcing carbons and rubber made using the Company’s patented elastomer composites manufacturing process. These composites improve abrasion/wear resistance, reduce fatigue of rubber parts and reduce rolling resistance compared to reinforcing carbons/rubber compounds made entirely by conventional rubber mix methods enabling rubber product manufacturers to reduce the need to make performance trade-offs.

Performance Chemicals

Performance Chemicals is organized into two businesses: the Company’s Performance Additives business and its Formulated Solutions business. The Company’s Performance Additives business combines its specialty carbons, including battery materials, fumed metal oxides and aerogel product lines, and its Formulated Solutions business combines its specialty compounds and inkjet

product lines. In Performance Chemicals, the Company designs, manufactures and sells materials that deliver performance in a broad range of customer applications across the automotive, construction, infrastructure, inkjet printing, electronics, and consumer products sectors, and applications related to generation, transmission and storage of energy. The Company’s focus areas for growth include carbon additives and other materials for battery applications, inkjet dispersions for post print corrugated packaging applications, and conductive compounds and concentrates for various plastics applications.

The net sales from each of these businesses for fiscal 2021, 2020 and 2019 are as follows:

	Years Ended September 30
	2021		2020		2019
	(In millions)
Performance Additives	$	796	$	645	$	694
Formulated Solutions		352		288		301
Total Performance Chemicals	$	1,148	$	933	$	995

Performance Additives Business

The Company’s specialty carbons are used to impart color, provide rheology control, enhance conductivity and static charge control, provide UV protection, enhance mechanical properties, and provide formulation flexibility through surface treatment. These specialty carbon products are used in a wide variety of applications, such as inks, coatings, cables, plastics, adhesives, toners, batteries and displays.

Fumed silica is an ultra-fine, high-purity particle used as a reinforcing, thickening, abrasive, thixotropic, suspending or anti-caking agent in a wide variety of products for the automotive, construction, microelectronics, batteries, and consumer products industries. These products include adhesives, sealants, cosmetics, batteries, inks, toners, silicone elastomers, coatings, polishing slurries and pharmaceuticals. Fumed alumina, also an ultra-fine, high-purity particle, is used as an abrasive, absorbent or barrier agent in a variety of products, such as inkjet media, lighting, coatings, cosmetics and polishing slurries.

Aerogel is a hydrophobic, silica-based particle with a high surface area that is used in a variety of thermal insulation and specialty chemical applications. In the building and construction industry, the product is used in insulative sprayable plasters and composite building products, as well as translucent skylight, window, wall and roof systems for insulating eco-daylighting applications. In the specialty chemicals industry, the product is used to provide matte finishing, insulating and thickening properties for use in a variety of applications.

Formulated Solutions Business

Cabot’s masterbatch and conductive compound products, which Cabot refers to as “specialty compounds”, are formulations derived from specialty carbons mixed with polymers and other additives. These products are generally used by plastic resin producers and converters in applications for the automotive, industrial, packaging, infrastructure, agricultural, consumer products, and electronics industries. As an alternative to directly mixing specialty carbon blacks, these formulations offer greater ease of handling and help customers achieve their desired levels of dispersion and color and manage the addition of small doses of additives. In addition, Cabot’s electrically conductive compound products generally are used to help ensure uniform conductive performance and reduce risks associated with electrostatic discharge in plastics applications.

The Company’s inkjet colorants are high-quality pigment-based black and color dispersions and inks. The Company’s dispersions are based on patented pigment surface modification technology and polymer encapsulation technology. The dispersions are used in aqueous inkjet inks to impart color, sharp print characteristics and durability, while maintaining high printhead reliability. These products are used in various inkjet printing applications, including traditional work-from-home and corporate office settings, and, increasingly, in commercial and corrugated packaging printing, that all require a high level of dispersibility and colloidal stability. Our inkjet inks, which utilize our pigment-based colorant dispersions, are used in the commercial printing segment for digital print.

Purification Solutions

The Company’s activated carbon products are used for the purification of water, air, food and beverages, pharmaceuticals and other liquids and gases, as either a colorant or a decolorizing agent in the production of products for food and beverage applications and as a chemical carrier in slow release applications. In gas and air applications, one of the uses of activated carbon is for the removal of mercury in flue gas streams. In certain applications, used activated carbon can be reactivated for further use by removing the contaminants from the pores of the activated carbon product. The most common applications for the Company’s reactivated carbon are water treatment and food and beverage purification. In addition to activated carbon production and reactivation, the Company also provides activated carbon solutions through on-site equipment and services, including delivery systems for activated carbon injection in coal-fired utilities, mobile water filter units and carbon reactivation services.

Specialty Fluids

Cabot divested its Specialty Fluids business on June 28, 2019. Refer to Note D for the terms of this transaction. The Specialty Fluids segment produced and marketed a range of cesium products that included cesium formate brines and other fine cesium chemicals.

Financial information by reportable segment is as follows:

Years Ended September 30	Reinforcement Materials			Performance Chemicals		Purification Solutions		Specialty Fluids		Segment Total(1)		Unallocated and Other(2), (4)			Consolidated Total
	(In millions)
2021
Revenues from external customers(3)	$	1,781		$	1,148	$	257	$	—	$	3,186	$	223		$	3,409
Depreciation and amortization	$	70		$	73	$	16	$	—	$	159	$	1		$	160
Equity in earnings of affiliated companies	$	—		$	2	$	2	$	—	$	4	$	(1	)	$	3
Income (loss) from continuing operations    before income taxes(4)	$	329		$	211	$	10	$	—	$	550	$	(144	)	$	406
Assets(5)	$	1,421		$	1,325	$	283	$	—	$	3,029	$	277		$	3,306
Total expenditures for additions to long-lived    assets(6)	$	104		$	80	$	9	$	—	$	193	$	5		$	198
2020
Revenues from external customers(3)	$	1,256		$	933	$	253	$	—	$	2,442	$	172		$	2,614
Depreciation and amortization	$	68		$	64	$	24	$	—	$	156	$	2		$	158
Equity in earnings of affiliated companies	$	—		$	1	$	3	$	—	$	4	$	(1	)	$	3
Income (loss) from continuing operations    before income taxes(4)	$	162		$	118	$	3	$	—	$	283	$	(316	)	$	(33	)
Assets(5)	$	1,077		$	1,145	$	296	$	—	$	2,518	$	263		$	2,781
Total expenditures for additions to long-lived    assets(6)	$	66		$	92	$	8	$	—	$	166	$	3		$	169
2019
Revenues from external customers(3)	$	1,815		$	995	$	278	$	56	$	3,144	$	193		$	3,337
Depreciation and amortization	$	69		$	51	$	26	$	1	$	147	$	1		$	148
Equity in earnings of affiliated companies	$	(1	)	$	1	$	3	$	—	$	3	$	(2	)	$	1
Income (loss) from continuing operations    before income taxes(4)	$	266		$	152	$	2	$	24	$	444	$	(189	)	$	255
Assets(5)	$	1,177		$	1,024	$	436	$	—	$	2,637	$	367		$	3,004
Total expenditures for additions to long-lived    assets(6)	$	82		$	148	$	11	$	1	$	242	$	5		$	247

⁽¹⁾ Cabot divested its Specialty Fluids business on June 28, 2019. Refer to Note D for the terms of this transaction.

⁽²⁾ 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.

⁽³⁾ 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 indirect tax settlement credits. Details are provided in the table below.

	Years Ended September 30
	2021			2020			2019
	(In millions)
Shipping and handling fees	$	153		$	113		$	130
By-product sales		73			62			76
Other		(3	)		(3	)		(13	)
Total	$	223		$	172		$	193

⁽⁴⁾ 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. Total Income (loss) from continuing operations before income taxes that are categorized as Unallocated and Other includes:

	Years Ended September 30
	2021			2020			2019
	(In millions)
Interest expense	$	(49	)	$	(53	)	$	(59	)
Certain items:(a)
Indirect tax settlement credits	$	12		$	3		$	-
Legal and environmental matters and reserves (Note T)		(25	)		(54	)		(21	)
Global restructuring activities (Note O)		(11	)		(19	)		(16	)
Acquisition and integration-related charges (Note C)		(5	)		(5	)		(6	)
Employee benefit plan settlement and other charges (Note M)		(4	)		(10	)		1
Marshall Mine loss on sale and asset impairment charge (Note D)		—			(129	)		—
Inventory reserve adjustment		—			(2	)		—
Specialty Fluids loss on sale and asset impairment charge (Note D)		—			(1	)		(29	)
Equity affiliate investment impairment charge		—			—			(11	)
Executive transition costs		—			—			(1	)
Other certain items		(1	)		(1	)		(4	)
Total certain items, pre-tax		(34	)		(218	)		(87	)
Unallocated corporate costs(b)		(58	)		(41	)		(50	)
General unallocated income (expense)(c)		—			(1	)		8
Less: Equity in earnings of affiliated companies, net of tax(d)		3			3			1
Total	$	(144	)	$	(316	)	$	(189	)

^(a) Certain items are items that management does not consider representative of operating segment results and they are, therefore, excluded from Segment EBIT.

^(b) Unallocated corporate costs 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, interest income, dividend income, 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 from Unallocated and other to reconcile to income (loss) from operations before taxes.

⁽⁵⁾ Unallocated and Other assets includes cash, marketable securities, cost investments, income taxes receivable, deferred taxes, headquarters’ assets, and current and non-current assets held for sale.

⁽⁶⁾ Expenditures for additions to long-lived assets include total equity and other investments (including available-for-sale securities) and property, plant and equipment.

Geographic Information

Revenues from external customers attributable to an individual country, other than the U.S. and China, were not material for disclosure. Revenues from external customers by individual country are summarized as follows:

	Years Ended September 30
	2021		2020		2019
	(In millions)
United States	$	668	$	581	$	702
China		858		598		738
Other countries		1,883		1,435		1,897
Total	$	3,409	$	2,614	$	3,337

Each of 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.

	Year Ended September 30, 2021
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	699	$	310	$	110	$	1,119
Asia Pacific		745		485		34		1,264
Europe, Middle East and Africa		337		353		113		803
Segment revenues from external customers		1,781		1,148		257		3,186
Unallocated and other								223
Net sales and other operating revenues							$	3,409

	Year Ended September 30, 2020
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Specialty Fluids		Consolidated Total
	(In millions)
Americas	$	490	$	266	$	112	$	—	$	868
Asia Pacific		529		368		34		—		931
Europe, Middle East and Africa		237		299		107		—		643
Segment revenues from external customers		1,256		933		253		—		2,442
Unallocated and other										172
Net sales and other operating revenues									$	2,614

	Year Ended September 30, 2019
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Specialty Fluids		Consolidated Total
	(In millions)
Americas	$	688	$	294	$	126	$	6	$	1,114
Asia Pacific		769		353		35		1		1,158
Europe, Middle East and Africa		358		348		117		49		872
Segment revenues from external customers		1,815		995		278		56		3,144
Unallocated and other										193
Net sales and other operating revenues									$	3,337

Property, plant and equipment attributable to an individual country, other than the U.S. and China, were not material for disclosure. Property, plant and equipment information by individual country is summarized as follows:

	Years Ended September 30
	2021		2020
	(In millions)
United States	$	513	$	493
China		333		295
Other countries		530		526
Total	$	1,376	$	1,314