Financial Information by Segment

9 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Financial Information by Segment

L. Financial Information by Segment

The Company identifies a product line 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 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 two reportable segments consisting of Reinforcement Materials and Performance Chemicals. The Company’s former Purification Solutions business was a separate reporting segment prior to divestiture in the second quarter of fiscal 2022.

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, battery materials 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 nine months ended June 30, 2022 and 2021 were as follows:

	Three Months Ended June 30				Nine Months Ended June 30
	2022		2021		2022		2021
	(In millions)
Performance Additives	$	270	$	208	$	763	$	595
Formulated Solutions		102		95		271		269
Total Performance Chemicals	$	372	$	303	$	1,034	$	864

The Purification Solutions segment consisted of the Company’s activated carbon business.

Income (loss) before income taxes (“Segment EBIT”) is presented for each reportable segment in the table below. Segment EBIT excludes Interest expense, general unallocated income (expense), unallocated corporate costs, and 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.

Financial information by reportable segment is as follows:

	Reinforcement Materials		Performance Chemicals		Purification Solutions		Segment Total		Unallocated and Other(1)			Consolidated Total
	(In millions)
Three Months Ended June 30, 2022
Revenues from external customers(2)	$	707	$	372	$	—	$	1,079	$	70		$	1,149
Income (loss) before income taxes(3)	$	113	$	63	$	—	$	176	$	(24	)	$	152
Three Months Ended June 30, 2021
Revenues from external customers(2)	$	479	$	303	$	69	$	851	$	66		$	917
Income (loss) before income taxes(3)	$	85	$	54	$	6	$	145	$	(22	)	$	123
Nine Months Ended June 30, 2022
Revenues from external customers(2)	$	1,875	$	1,034	$	97	$	3,006	$	203		$	3,209
Income (loss) before income taxes(3)	$	299	$	185	$	—	$	484	$	(278	)	$	206
Nine Months Ended June 30, 2021
Revenues from external customers(2)	$	1,288	$	864	$	191	$	2,343	$	162		$	2,505
Income (loss) before income taxes(3)	$	262	$	166	$	6	$	434	$	(94	)	$	340

^{(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 June 30					Nine Months Ended June 30
	2022			2021		2022			2021
	(In millions)
Shipping and handling fees	$	44		$	41	$	124		$	112
By-product sales		28			19		89			54
Other		(2	)		6		(10	)		(4	)
Total	$	70		$	66	$	203		$	162

⁽³⁾ Consolidated Total Income (loss) before income taxes reconciles to Income (loss) before income taxes and equity in earnings of affiliated companies on the Consolidated Statements of Operations. Income (loss) before income taxes that are categorized as Unallocated and Other includes:

	Three Months Ended June 30						Nine Months Ended June 30
	2022			2021			2022			2021
	(In millions)
Interest expense	$	(15	)	$	(12	)	$	(38	)	$	(37	)
Certain items(a)
Gain on bargain purchase of a business (Note C)		—			—			24			—
Gain on sale of land		17			—			17			—
Loss on sale of business and asset impairment charge (Note D)		(2	)		—			(206	)		—
Legal and environmental matters and reserves		(1	)		—			(9	)		—
Divestiture related charges		—			—			(5	)		—
Acquisition and integration-related charges		(1	)		(2	)		(4	)		(4	)
Global restructuring activities		(1	)		(4	)		(3	)		(8	)
Employee benefit plan settlement and other charges		—			(1	)		—			(6	)
Indirect tax settlement credits		—			12			—			12
Other		—			—			1			(1	)
Total certain items, pre-tax		12			5			(185	)		(7	)
Unallocated corporate costs(b)		(15	)		(14	)		(45	)		(43	)
General unallocated income (expense)(c)		(3	)		1			(3	)		(4	)
Less: Equity in earnings of affiliated companies, net    of tax(d)		3			2			7			3
Total	$	(24	)	$	(22	)	$	(278	)	$	(94	)

^(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, Interest and dividend income, the profit or loss related to the corporate adjustment for unearned revenue, the impact of including the full operating results of a contractual joint venture in Purification Solutions Segment EBIT and unrealized holding gains (losses) for investments.

^(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 Revenues from external customers by geographic region.

	Three Months Ended June 30, 2022
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	299	$	113	$	—	$	412
Asia Pacific		256		146		—		402
Europe, Middle East and Africa		152		113		—		265
Segment revenues from external customers		707		372		—		1,079
Unallocated and other								70
Net sales and other operating revenues							$	1,149

	Three Months Ended June 30, 2021
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	189	$	85	$	28	$	302
Asia Pacific		197		118		9		324
Europe, Middle East and Africa		93		100		32		225
Segment revenues from external customers		479		303		69		851
Unallocated and other								66
Net sales and other operating revenues							$	917

	Nine Months Ended June 30, 2022
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	757	$	313	$	43	$	1,113
Asia Pacific		741		420		14		1,175
Europe, Middle East and Africa		377		301		40		718
Segment revenues from external customers		1,875		1,034		97		3,006
Unallocated and other								203
Net sales and other operating revenues							$	3,209

	Nine Months Ended June 30, 2021
	Reinforcement Materials		Performance Chemicals		Purification Solutions		Consolidated Total
	(In millions)
Americas	$	501	$	232	$	79	$	812
Asia Pacific		537		358		27		922
Europe, Middle East and Africa		250		274		85		609
Segment revenues from external customers		1,288		864		191		2,343
Unallocated and other								162
Net sales and other operating revenues							$	2,505