Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

The Company had ~~61,820,454~~58,467,044 shares of common stock, $1.00 par value per share, outstanding as of May 7, ~~2018.~~2019.

	Three Months Ended March 31						Six Months Ended March 31						Three Months Ended March 31						Six Months Ended March 31
	2018			2017			2018			2017			2019			2018			2019			2018
	(In millions, except per share amounts)												(In millions, except per share amounts)
Net sales and other operating revenues	$	818		$	678		$	1,538		$	1,289		$	844		$	818		$	1,665		$	1,538
Cost of sales		628			509			1,170			961			666			630			1,321			1,174
Gross profit		190			169			368			328			178			188			344			364
Selling and administrative expenses		78			65			147			128			70			79			143			149
Research and technical expenses		16			14			31			26			15			16			31			31
Purification Solutions long-lived assets impairment (Note E)		162			—			162			—
Purification Solutions goodwill impairment (Note E)		92			—			92			—
Specialty Fluids held for sale assets impairment (Note D)														20			—			20			—
Purification Solutions long-lived assets impairment (Note F)														—			162			—			162
Purification Solutions goodwill impairment (Note F)														—			92			—			92
Income (loss) from operations		(158	)		90			(64	)		174			73			(161	)		150			(70	)
Interest and dividend income		3			2			6			4			2			3			4			6
Interest expense		(14	)		(13	)		(27	)		(26	)		(14	)		(14	)		(29	)		(27	)
Other income (expense)		(2	)		(1	)		6			1			(12	)		1			(6	)		12
Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies		(171	)		78			(79	)		153			49			(171	)		119			(79	)
(Provision) benefit for income taxes		7			1			(198	)		(17	)		(20	)		7			(13	)		(198	)
Equity in earnings of affiliated companies, net of tax		1			1			2			3			—			1			—			2
Net income (loss)		(163	)		80			(275	)		139			29			(163	)		106			(275	)
Net income (loss) attributable to noncontrolling interests, net of tax		10			6			20			10			6			10			14			20
Net income (loss) attributable to Cabot Corporation	$	(173	)	$	74		$	(295	)	$	129		$	23		$	(173	)	$	92		$	(295	)

Weighted-average common shares outstanding:
Basic		61.8			62.4			61.8			62.3			59.1			61.8			59.5			61.8
Diluted		61.8			62.8			61.8			62.8			59.3			61.8			59.7			61.8

Earnings per common share:
Basic	$	(2.80	)	$	1.19		$	(4.78	)	$	2.06		$	0.39		$	(2.80	)	$	1.53		$	(4.78	)
Diluted	$	(2.80	)	$	1.19		$	(4.78	)	$	2.05		$	0.39		$	(2.80	)	$	1.53		$	(4.78	)

Dividends per common share	$	0.315		$	0.30		$	0.63		$	0.60		$	0.33		$	0.315		$	0.66		$	0.63

The accompanying notes are an integral part of these consolidated financial statements.

	Three Months Ended March 31					Six Months Ended March 31						Three Months Ended March 31						Six Months Ended March 31
	2018			2017		2018			2017			2019			2018			2019			2018
	(In millions)											(In millions)
Net income (loss)	$	(163	)	$	80	$	(275	)	$	139		$	29		$	(163	)	$	106		$	(275	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment, net of tax provision (benefit) of $(2), $1, $(4) and $3		59			56		59			(69	)
Foreign currency translation adjustment, net of tax (provision) benefit of $(1), $2, $(3) and $4													8			59			(16	)		59
Derivatives: net investment hedges
(Gains) losses reclassified to interest expense, net of tax provision of $—, $—, $— and $—		(1	)		—		(2	)		—
(Gains) losses reclassified to interest expense, net of tax provision (benefit) of $1, $—, $1 and $—													(1	)		(1	)		(2	)		(2	)
(Gains) losses excluded from effectiveness testing and amortized to interest expense, net of tax provision (benefit) of $(1), $—, $(1) and $—													—			—			—			—
Pension and other postretirement benefit liability adjustments
Amortization of net loss and prior service credit included in net periodic benefit cost, net of tax		—			1		—			2
Pension and other postretirement benefit liability adjustments arising during the period, net of tax													—			—			22			—
Other comprehensive income (loss)		58			57		57			(67	)		7			58			4			57
Comprehensive income (loss)		(105	)		137		(218	)		72			36			(105	)		110			(218	)
Net income (loss) attributable to noncontrolling interests, net of tax		10			6		20			10			6			10			14			20
Foreign currency translation adjustment attributable to noncontrolling interests, net of tax		4			1		7			(3	)		2			4			2			7
Comprehensive income (loss) attributable to noncontrolling interests, net of tax		14			7		27			7			8			14			16			27
Comprehensive income (loss) attributable to Cabot Corporation	$	(119	)	$	130	$	(245	)	$	65		$	28		$	(119	)	$	94		$	(245	)

The accompanying notes are an integral part of these consolidated financial statements.

	March 31, 2018		September 30, 2017		March 31, 2019		September 30, 2018
	(In millions)				(In millions)
Current assets:
Cash and cash equivalents	$	179	$	280	$	176	$	175
Accounts and notes receivable, net of reserve for doubtful accounts of $10 and $9		637		527
Accounts and notes receivable, net of reserve for doubtful accounts of $5 and $7						555		637
Inventories:
Raw materials		116		93		139		129
Work in process		2		2		1		3
Finished goods		332		293		363		329
Other		48		45		51		50
Total inventories		498		433		554		511
Prepaid expenses and other current assets		73		59		59		63
Assets held for sale						179		—
Total current assets		1,387		1,299		1,523		1,386
Property, plant and equipment, net		1,274		1,305		1,297		1,296
Goodwill		97		154		91		93
Equity affiliates		54		56		38		52
Intangible assets, net		103		137		93		98
Assets held for rent		107		104		—		118
Deferred income taxes		49		237		158		134
Other assets		46		46		72		67
Total assets	$	3,117	$	3,338	$	3,272	$	3,244

The accompanying notes are an integral part of these consolidated financial statements.

	March 31, 2018			September 30, 2017			March 31, 2019			September 30, 2018
	(In millions, except share						(In millions, except share
	and per share amounts)						and per share amounts)
Current liabilities:
Notes payable	$	268		$	7
Short-term borrowings							$	576		$	249
Accounts payable and accrued liabilities		505			457			529			613
Income taxes payable		24			22			2			29
Current portion of long-term debt		36			256			5			35
Liabilities held for sale								21			—
Redeemable preferred stock								—			26
Total current liabilities		833			742			1,133			952
Long-term debt		631			661			672			719
Deferred income taxes		19			38			42			42
Other liabilities		265			245			193			252
Redeemable preferred stock		26			27
Commitments and contingencies (Note I)
Stockholders’ equity:
Stockholders' equity:
Preferred stock:
Authorized: 2,000,000 shares of $1 par value		—			—			—			—
Issued and Outstanding: None and none
Common stock:
Authorized: 200,000,000 shares of $1 par value
Issued: 62,019,859 and 62,087,627 shares
Outstanding: 61,818,776 and 61,884,347 shares		62			62
Less cost of 201,083 and 203,280 shares of common treasury stock		(7	)		(6	)
Issued: 58,644,974 and 60,566,375 shares
Outstanding: 58,449,603 and 60,366,569 shares								59			61
Less cost of 195,371 and 199,806 shares of common treasury stock								(7	)		(7	)
Additional paid-in capital		—			—			—			—
Retained earnings		1,370			1,707			1,367			1,417
Accumulated other comprehensive income (loss)		(209	)		(259	)		(315	)		(317	)
Total Cabot Corporation stockholders' equity		1,216			1,504			1,104			1,154
Noncontrolling interests		127			121			128			125
Total stockholders' equity		1,343			1,625			1,232			1,279
Total liabilities and stockholders’ equity	$	3,117		$	3,338
Total liabilities and stockholders' equity							$	3,272		$	3,244

The accompanying notes are an integral part of these consolidated financial statements.

	Six Months Ended March 31						Six Months Ended March 31
	2018			2017			2019			2018
	(In millions)						(In millions)
Cash Flows from Operating Activities:
Net income (loss)	$	(275	)	$	139		$	106		$	(275	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization		79			76			73			79
Impairment of held for sale assets								20			—
Impairment of investment in equity affiliate								11			—
Long-lived assets impairment charge		162			—			—			162
Goodwill impairment charge		92			—			—			92
Deferred tax provision (benefit)		157			(26	)		(29	)		157
Gain on sale of investments		(10	)		—			—			(10	)
Employee benefit plan settlement								6			—
Gain on sale of land		(11	)		—			—			(11	)
Equity in net income of affiliated companies		(2	)		(3	)		—			(2	)
Non-cash compensation		12			6			7			12
Other non-cash (income) expense		14			—			(1	)		14
Changes in assets and liabilities:
Accounts and notes receivable		(87	)		(78	)		39			(87	)
Inventories		(61	)		(65	)		(51	)		(61	)
Prepaid expenses and other current assets		(12	)		(9	)		(7	)		(12	)
Accounts payable and accrued liabilities		33			23			(77	)		33
Income taxes payable		1			7			(21	)		1
Other liabilities		(18	)		(18	)		(27	)		(18	)
Cash dividends received from equity affiliates		7			6			2			7
Cash provided by operating activities		81			58
Cash provided (used) by operating activities								51			81

Cash Flows from Investing Activities:
Additions to property, plant and equipment		(109	)		(45	)		(97	)		(109	)
Cash paid for acquisition of business, net of cash acquired of $1		(64	)		—
Cash paid for acquisition of business, net of cash acquired of $— and $1								—			(64	)
Proceeds from sale of investments		10			—			—			10
Proceeds from sale of land		13			—			—			13
Change in assets held for rent		(3	)		(4	)
Other		(4	)		2			(1	)		(7	)
Cash used in investing activities		(157	)		(47	)
Cash used by investing activities								(98	)		(157	)

Cash Flows from Financing Activities:
Repayments under financing arrangements		—			(4	)
Increase in notes payable, net		2			8
Borrowings under financing arrangements								29			2
Proceeds from (repayments of) issuance of commercial paper, net		258			4			297			258
Repayments of long-term debt		(251	)		(1	)		(75	)		(251	)
Repayments of redeemable preferred stock								(25	)		—
Purchases of common stock		(16	)		(30	)		(112	)		(16	)
Proceeds from sales of common stock		1			21			1			1
Cash dividends paid to noncontrolling interests		(6	)		(2	)		(17	)		(6	)
Cash dividends paid to common stockholders		(39	)		(38	)		(40	)		(39	)
Cash used in financing activities		(51	)		(42	)
Cash provided (used) by financing activities								58			(51	)
Effects of exchange rate changes on cash		26			(36	)		(10	)		26
Increase (decrease) in cash and cash equivalents		(101	)		(67	)		1			(101	)
Cash and cash equivalents at beginning of period		280			200			175			280
Cash and cash equivalents at end of period	$	179		$	133		$	176		$	179

The accompanying notes are an integral part of these consolidated financial statements.

	Common Stock, Net of Treasury Stock						Additional Paid-in			Retained			Accumulated Other Comprehensive			Total Cabot Corporation Stockholders’			Noncontrolling			Total Stockholders’
	Shares			Cost			Capital			Earnings			Income (Loss)			Equity			Interests			Equity
	(In millions, except share amounts)
Balance at September 30, 2018		60,367		$	54		$	—		$	1,417		$	(317	)	$	1,154		$	125		$	1,279
Net income (loss)											69						69			8			77
Total other comprehensive income (loss)														(3	)		(3	)		—			(3	)
Cash dividends paid:
Common stock, $0.33 per share											(20	)					(20	)		—			(20	)
Issuance of stock under equity compensation plans		344			—			—									—						—
Amortization of share-based compensation								5									5						5
Purchase and retirement of common stock		(1,201	)		(1	)		(5	)		(56	)					(62	)					(62	)
Balance at December 31, 2018		59,510			53			—			1,410			(320	)		1,143			133			1,276
Net income (loss)											23						23			6			29
Total other comprehensive income (loss)														5			5			2			7
Cash dividends declared to noncontrolling interests																				(13	)		(13	)
Cash dividends paid:
Common stock, $0.33 per share											(20	)					(20	)					(20	)
Issuance of stock under equity compensation plans		41			1			—									1						1
Amortization of share-based compensation								2									2						2
Purchase and retirement of common stock		(1,101	)		(2	)		(2	)		(46	)					(50	)					(50	)
Balance at March 31, 2019		58,450		$	52		$	—		$	1,367		$	(315	)	$	1,104		$	128		$	1,232

The accompanying notes are an integral part of these consolidated financial statements.

	Common Stock, Net of Treasury Stock						Additional Paid-in			Retained			Accumulated Other Comprehensive			Total Cabot Corporation Stockholders’			Noncontrolling			Total Stockholders’
	Shares			Cost			Capital			Earnings			Income (Loss)			Equity			Interests			Equity
	(In millions, except share amounts)
Balance at September 30, 2017		61,884		$	56		$	—		$	1,707		$	(259	)	$	1,504		$	121		$	1,625
Net income (loss)											(122	)					(122	)		10			(112	)
Total other comprehensive income (loss)														(4	)		(4	)		3			(1	)
Cash dividends paid:
Common stock, $0.315 per share											(20	)					(20	)					(20	)
Cash dividends declared to noncontrolling interests																				(10	)		(10	)
Issuance of stock under equity compensation plans		178			—			—									—						—
Amortization of share-based compensation								6									6						6
Purchase and retirement of common stock		(265	)		—			(6	)		(10	)					(16	)					(16	)
Balance at December 31, 2017		61,797			56			—			1,555			(263	)		1,348			124			1,472
Net income (loss)											(173	)					(173	)		10			(163	)
Total other comprehensive income (loss)														54			54			4			58
Cash dividends paid:
Common stock, $0.315 per share											(19	)					(19	)	��	(11	)		(30	)
Issuance of stock under equity compensation plans		30			—			1									1						1
Amortization of share-based compensation								6									6						6
Purchase and retirement of common stock		(8	)		(1	)		(7	)		7						(1	)					(1	)
Balance at March 31, 2018		61,819		$	55		$	—		$	1,370		$	(209	)	$	1,216		$	127		$	1,343

The accompanying notes are an integral part of these consolidated financial statements.

The consolidated financial statements have been prepared in conformity with accounting policies generally accepted in the United States (“U.S.”) and include the accounts of Cabot Corporation (“Cabot” or the “Company”) and its wholly owned subsidiaries and majority-owned and controlled U.S. and non-U.S. subsidiaries. Additionally, Cabot considers consolidation of entities over which control is achieved through means other than voting rights. Intercompany transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance with the requirements of Form 10-Q and consequently do not include all disclosures required by Form 10-K. Additional information may be obtained by referring to Cabot’s Annual Report on Form 10-K for its fiscal year ended September 30, ~~2017~~2018 (“~~2017~~2018 10-K”).

The financial information submitted herewith is unaudited and reflects all adjustments which are, in the opinion of management, necessary to provide a fair statement of the results for the interim periods ended March 31, ~~2018~~2019 and ~~2017.~~2018. All such adjustments are of a normal recurring nature. The results for interim periods are not necessarily indicative of the results to be expected for the fiscal year.

Effective October 1, ~~2017,~~2018, the Company ~~changed its method~~adopted the new revenue recognition standard that amended the pre-existing accounting standard for revenue recognition. The Company used a modified retrospective approach, which is discussed in further detail in Note B.

Effective October 1, 2018, the Company adopted the new pension standard that amended the requirements on the presentation of ~~accounting for its U.S. carbon black inventories from the last-in, first-out (“LIFO”)~~net periodic pension and postretirement benefit costs. The Company used a retrospective transition method to reclassify net periodic benefit cost, other than the ~~first-in, first-out (“FIFO”) method. The Company applied this change retrospectively~~service component, from Cost of sales, Selling and administrative expenses and Research and technical expenses to ~~all~~Other income (expense) in the Consolidated Statements of Operations for the prior periods presented, which is discussed in further detail in Note B.

~~As discussed in Note C, in November 2017,~~In October 2018, the Company ~~acquired all~~realigned its business reporting structure under the Performance Chemicals segment and now combines the specialty carbons, fumed metal oxides and aerogel product lines into the Performance Additives business, and the specialty compounds and inkjet product lines into the Formulated Solutions business. Prior period Performance Chemicals segment revenue results have been recast to reflect the realignment.

In January 2019, the Company entered into an agreement to sell its Specialty Fluids business to Sinomine (Hong Kong) Rare Metals Resources Co. Limited, a wholly owned subsidiary of Sinomine Resource Group Co., Ltd. (“Sinomine”). In light of this impending transaction, the assets and liabilities of the ~~issued and outstanding shares of 8755329 Canada Inc. (“Tech Blend”), a North American producer of black masterbatches. The financial position, results of operations and cash flows of Tech Blend~~Specialty Fluids business are included in Assets held for sale and Liabilities held for sale in the ~~Company’s~~Consolidated Balance Sheet as of March 31, 2019. The sale of the Specialty Fluids business does not meet the criteria to be reported as a discontinued operation and, therefore, prior periods’ consolidated financial statements ~~from~~and disclosures have not been recast. Refer to Note D for further details regarding the ~~date~~pending sale of ~~acquisition.~~the Specialty Fluids business.

Cabot recognizes revenue when ~~persuasive evidence~~its customers obtain control of ~~an arrangement exists, delivery has occurred~~promised goods or ~~services have been rendered,~~services. The revenue recognized is the amount of consideration which the Company expects to receive in exchange for those goods or services. Cabot derives the majority of its revenues from contracts for the sale of products from its Reinforcement Materials, Performance Chemicals and Purification Solutions segments. The Company’s contracts with customers are generally for products only and do not include other performance obligations. Generally, Cabot considers purchase orders, which in some cases are governed by master supply agreements, to be contracts with customers. The transaction price as specified on the purchase order or sales contract is considered the standalone selling price for each distinct product. To determine the transaction price at the time when revenue is recognized, the Company evaluates whether the price is ~~fixed~~subject to adjustments, such as for returns, discounts or ~~determinable and collectability is reasonably assured. Cabot generally is able~~volume rebates, which are stated in the customer contract, to ~~ensure that products meet customer specifications prior~~determine the net consideration to ~~shipment. If~~which the Company expects to be entitled. Revenue from product sales is ~~unable to determine that~~recognized based on a point in time model when control of the product ~~has met~~is transferred to the ~~specified objective criteria prior to~~customer, which typically occurs upon shipment or ifdelivery of the product to the customer and title, ~~has not transferred because~~risk and rewards of ~~sales~~ownership have passed to the customer. Payment terms ~~the revenue is considered “unearned” and is deferred until the revenue recognition criteria are met.~~typically range from zero to ninety days.

Shipping and handling ~~charges related~~activities that occur after the transfer of control to ~~sales transactions~~the customer are billed to customers and are recorded as sales revenue, ~~when billed~~as the Company considers these to ~~customers or~~be fulfillment costs. Shipping and handling costs are expensed in the

period incurred and included in Cost of sales within the ~~sales price.~~Consolidated Statement of Operations. Taxes collected on sales to customers are excluded from ~~revenues.~~the transaction price.

The ~~following table shows~~Company generally provides a warranty that its products will substantially conform to the ~~relative size~~identified specifications. The Company’s liability typically is limited to either a credit equal to the purchase price or replacement of the ~~revenue recognized in each of the Company’s reportable segments.~~non-conforming product. Returns under warranty have historically been immaterial.

Cabot derives the substantial majority of its revenues from the sale of products in its Reinforcement Materials, Performance Chemicals, and Purification Solutions segments. Revenue from these products is typically recognized when the product is shipped and title and risk of loss have passed to the customer. The Company offers certain of its customers cash discounts and volume rebates as sales incentives. The discounts and volume rebates are recorded as a reduction in sales at the time revenue is recognized and are estimated based on historical experience and contractual obligations. Cabot periodically reviews the assumptions underlying its estimates of discounts and volume rebates and adjusts its revenues accordingly.

~~For major activated carbon injection systems projects in Purification Solutions, revenue is recognized using the percentage-of-completion method.~~

Revenue in the Specialty Fluids segment arises primarily from the rental of cesium formate. This revenue is recognized throughout the rental period based on the contracted rental terms. Customers are also billed and revenue is recognized, typically at the end of the ~~job,~~rental period, for cesium formate product that is not returned. The Company also generates revenues from cesium formate sold outside of the rental process and from the sale of fine cesium chemicals. This revenue is recognized when control of the product transfers to the customer, which is typically upon delivery of the product.

~~Cabot maintains allowances for doubtful accounts based on an assessment~~The Company does not have contract assets or liabilities that are material.

As permitted by the revenue recognition standard, Revenue from Contracts with Customers, when the period of time between the transfer of control of the ~~collectability of specific~~goods and the time the customer ~~accounts,~~pays for the ~~aging of accounts receivable and other economic information on both~~goods is one year or less, the Company does not consider there to be a ~~historical and prospective basis. Customer account balances are charged against~~significant financing component associated with the allowance when it is probable the receivable will not be recovered. There were no material changes in the allowance for any of the periods presented. There is no material off-balance sheet credit exposure related to customer receivable balances.contract.

The Company records tangible and intangible assets acquired and liabilities assumed in business combinations under the acquisition method of accounting. Amounts paid for an acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The Company uses assumptions and estimates in determining the fair value of assets acquired and liabilities assumed in a business combination. The determination of the fair value of intangible assets requires the use of significant judgment with regard to assumptions used in the valuation model. The Company estimates the fair value of identifiable acquisition-related intangible assets principally based on projections of cash flows that will arise from these assets. The projected cash flows are discounted to determine the fair value of the assets at the dates of acquisition. ~~The Company acquired Tech Blend in November 2017, which included separately identifiable intangible assets of $29 million as part of the preliminary purchase price allocation as discussed in Note C.~~

Goodwill is comprised of the purchase price of business acquisitions in excess of the fair value assigned to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but is reviewed for impairment annually as of May 31, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value. A reporting unit, for the purpose of the impairment test, is at or below the operating segment level, and constitutes a business for which discrete financial information is available and regularly reviewed by segment management. ~~As part of the Tech Blend acquisition, goodwill of $33 million was generated and is reflected in the Specialty Compounds reporting unit. The other reporting units with goodwill balances are~~ Reinforcement Materials, and ~~Fumed Metal Oxides. The separate businesses included~~the fumed metal oxides and specialty compounds product lines within Performance Chemicals, which are considered separate reporting ~~units. As such,~~units, carry the Company’s goodwill balances ~~relative to Performance Chemicals are recorded in the Fumed Metal Oxides and Specialty Compounds reporting units.~~

~~Based on the Company’s most recent annual goodwill impairment test performed~~ as of ~~May~~March 31, 2017, the fair values of the Reinforcement Materials and Fumed Metal Oxides reporting units were substantially in excess of their carrying values. The fair value of the Purification Solutions reporting unit exceeded its carrying amount by 13%. In the second quarter of fiscal 2018, the Company determined that it was more likely than not that the carrying value of the Purification Solutions reporting unit exceeded its fair value. Accordingly, the Company performed the quantitative goodwill impairment test. Refer to Note E for details on the Purification Solutions goodwill impairment test and the resulting impairment charge recorded.2019.

For the purpose of the goodwill impairment test, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, an additional quantitative evaluation is performed. Alternatively, the Company may elect to proceed directly to the quantitative goodwill impairment test. If based on the quantitative evaluation the fair value of the reporting unit is less than its carrying amount, a goodwill impairment loss would result. The goodwill impairment loss would be the amount by which the carrying value of the reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. The fair value of a reporting unit is based on discounted estimated future cash flows. The fair value is also benchmarked against a market approach using the guideline public companies method. The assumptions used to estimate fair value include management’s best estimates of future growth rates, operating cash flows, capital expenditures and discount rates over an estimate of the remaining operating period at the reporting unit level. Based on the Company’s most recent annual goodwill impairment test performed as of May 31, 2018, the fair values of the Reinforcement Materials, Fumed Metal Oxides and Specialty Compounds reporting units were substantially in excess of their carrying values. No events occurred subsequent to the last impairment evaluation that would suggest that it is more likely than not that the carrying values of any of the Company’s reporting units exceeded their fair value. Refer to Note F for details on the Purification Solutions goodwill impairment test and the resulting impairment charge recorded in the second quarter of fiscal 2018.

The Company’s long-lived assets primarily include property, plant and equipment, intangible assets, long-term investments and assets held for rent. The carrying values of long-lived assets are reviewed for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be recoverable.

To test for impairment of assets, the Company generally uses a probability-weighted estimate of the future undiscounted net cash flows of the assets over their remaining lives to determine if the value of the asset is recoverable. Long-lived assets are grouped with other assets and liabilities at the lowest level for which independent identifiable cash flows are determinable.

An asset impairment is recognized when the carrying value of the asset is not recoverable based on the analysis described above, in which case the asset is written down to its fair value. If the asset does not have a readily determinable ~~market~~fair value, a discounted cash flow model may be used to determine the fair value of the asset. In circumstances when an asset does not have separately identifiable cash flows, an impairment charge is recorded when the Company no longer intends to use the asset. In the second quarter of fiscal 2018, the Company determined that the carrying value of the long-lived asset group of the Purification Solutions segment was not recoverable. Accordingly, the Company recorded an impairment charge for the carrying value in excess of the fair value of the asset group. Refer to Note EF regarding the results of the recoverability test performed on the long-lived assets of the Purification Solutions segment and the resulting impairment charge recorded.

The Company continues to pursue strategic options for its Purification Solutions business. Depending on the actions taken, there could be a negative impact on the fair value of the Purification Solution reporting unit, which may lead to further impairment.

Property, plant and equipment are recorded at cost. Depreciation of property, plant and equipment is calculated using the straight-line method over the estimated useful lives of the related assets. The depreciable lives for buildings, machinery and equipment, and other fixed assets are between twenty and twenty-five years, ten and twenty-five years, and three and twenty-five years, respectively. The cost and accumulated depreciation for property, plant and equipment sold, retired, or otherwise disposed of are removed from the Consolidated Balance Sheets and resulting gains or losses are included in earnings in the Consolidated Statements of Operations. Expenditures for repairs and maintenance are charged to expenses as incurred. Expenditures for major renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated.

The Company records its tax provision or benefit on an interim basis using an estimated annual effective tax rate. This rate is applied to the current period ordinary income or loss to determine the income tax provision or benefit allocated to the interim period. Losses from jurisdictions for which no benefit can be recognized and the income tax effects of unusual or infrequent items are excluded from the estimated annual effective tax rate and are recognized in the impacted interim period.

Valuation allowances are provided against the future tax benefits that arise from the deferred tax assets in jurisdictions for which no benefit can be recognized. The estimated annual effective tax rate may be significantly impacted by nondeductible expenses and the Company’s projected earnings mix by tax jurisdiction. Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised.

Inventories are stated at the lower of cost or market. Effective October 1, 2017, the Company changed its method of accounting for its U.S. carbon black inventories from the LIFO method to the FIFO method. Total U.S. inventories accounted for utilizing the LIFO cost flow assumption represented 7% of the Company’s total worldwide inventories as of September 30, 2017 prior to this change in method. The Company believes the FIFO method is preferable because it: (i) conforms the accounting for U.S. carbon black inventories to the Company’s inventory valuation methodology for the majority of its other inventories; (ii) better represents how management assesses and reports on the performance of the Reinforcement Materials and Performance Chemicals operating segments that carry the Company’s U.S. carbon black inventories, as the impact of accounting for this inventory on a LIFO basis has historically been excluded from segment results; (iii) better aligns the accounting for U.S. carbon black inventories with the physical flow of that inventory; and (iv) improves comparability with many of the Company’s peers.

The Company applied this change retrospectively to all prior periods presented. This change resulted in a $17 million increase in retained earnings as of October 1, 2016, from $1,544 million to $1,561 million. In addition, the following financial statement line items in the Company’s Consolidated Statements of Operations for the three and six months ended March 31, 2017, its Consolidated Balance Sheets as of September 30, 2017, and its Consolidated Statements of Cash Flows for the six months ended March 31, 2017 were adjusted as follows:

If the Company had continued to account for its U.S. carbon black inventories under LIFO, there would have been an increase in Cost of Sales of $2 million and $3 million, an additional benefit to the (Provision) benefit for income taxes of $1 million and $1 million, an impact to the Net income (loss) attributable to Cabot Corporation of $1 million and $2 million, and a decrease of $~~0.02 and~~ $~~0.03~~ in both basic and diluted earnings per common share in the Consolidated Statements of Operations for the three and six months ended March 31, 2018, respectively. The impact to the Consolidated Balance Sheets as of March 31, 2018 would have been a decrease of $40 ~~million in Inventories, an increase of $~~14 ~~million in Deferred income taxes, and a decrease of $~~26 ~~million in Retained earnings.~~

net realizable value. The cost of Specialty Fluids inventories that are classified as assets held for rent is determined using the average cost method. The cost of all other inventories is determined using the FIFO method.

Cabot periodically reviews inventory for both potential obsolescence and potential declines in anticipated selling prices. In this review, the Company makes assumptions about the future demand for and market value of the inventory, and based on these assumptions estimates the amount of any obsolete, unmarketable, slow moving, or overvalued inventory. Cabot writes down the value of these inventories by an amount equal to the difference between the cost of the inventory and its estimated net realizable value.

The Company recognizes the funded status of defined benefit pension and other postretirement benefit plans as an asset or liability. This amount is defined as the difference between the fair value of plan assets and the benefit obligation. The Company is required to recognize as a component of ~~other~~Other comprehensive income (loss), net of tax, the actuarial gains/losses and prior service costs/credits that arise but were not previously required to be recognized as components of net periodic benefit cost. Other comprehensive income (loss) is adjusted as these amounts are later recognized in income as components of net periodic benefit cost.

In November 2013, the Company purchased all of its joint venture partner’s common stock in the former NHUMO, S.A. de C.V. (“NHUMO”) joint venture. At the close of the transaction, NHUMO issued redeemable preferred stock to the joint venture partner with a repurchase value of $25 million and a fixed dividend rate of 6% per annum. In November 2018, the preferred stock was repurchased for $25 million and a final dividend payment of approximately $1.4 million was made. The preferred stock was accounted for as a financing obligation and was separately presented in the Consolidated Balance Sheets as a current liability as of September 30, 2018.

Accumulated other comprehensive income (loss) (“AOCI”), which is included as a component of stockholders’ equity, includes unrealized gains or losses on available-for-sale marketable securities and derivative instruments, currency translation adjustments in foreign subsidiaries, translation adjustments on foreign equity securities and minimum pension liability adjustments.

In ~~March 2016,~~May 2014, the Financial Accounting Standards Board (“FASB”) issued a new standard, Revenue from Contracts with Customers, that amends the accounting standard for stock compensation by simplifying several aspects of the accounting for employee share-based payment transactions, including the related accounting for income taxes, forfeitures, and the withholding of shares to satisfy the employer’s tax withholding requirements, as well as classification in the statements of cash flows. The Company adopted the standard on October 1, 2017. The following guidance was updated under the new standard, and its impact to Cabot is described below:

In August 2017, the FASB issued a new standard that amends the hedge accounting recognition and presentation requirements under hedge accounting. The new standard will make more financial and nonfinancial hedging strategies eligible for hedge accounting, amends the presentation and disclosure requirements, and simplifies how companies assess effectiveness. The Company adopted the standard on October 1, 2017. The adoption of this standard did not impact the Company’s consolidated financial statements.

~~In May 2014, the FASB issued a new standard that amends~~amended the existing accounting standards for revenue recognition. The standard requires entities to recognize revenue when they transfer promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. This standard is applicable for fiscal years beginning after December 15, 2017. The Company adopted this standard on October 1, 2018 and applied a modified retrospective approach. The comparative information has ~~completed its preliminary assessment of~~not been restated and continues to be reported under the ~~new standard, which included reviewing a sample of contracts across~~accounting standards in effect during those periods, as discussed in the Company’s ~~four business segments. Based on this assessment, the Company does not expect~~2018 10-K.

The adoption of this standard todid not have ~~a material~~an impact on how itthe Company recognizes revenue. As such, an adjustment to opening retained earnings was not required as a result of adopting this new standard. The Company ~~is continuing its assessment of the new standard and preparing to implement~~implemented the updates that ~~will be~~were necessary to its revenue recognition policy, internal controls, processes and financial statement ~~disclosures.~~disclosures as part of this adoption. The updated disclosures are reflected under the heading “Revenue Recognition” within Note B and the Company’s disaggregated revenue is reflected within Note P.

In addition, as part of an assessment performed in connection with adopting this standard, the Company reviewed its classification of by-product sales, which consist of sales generated from the production of steam or electricity from the Company's energy centers primarily from its carbon black manufacturing sites and sales of hydrochloric acid generated from the production of fumed silica. Historically, the Company presented by-product sales as a reduction of Cost of sales within the Consolidated Statement of Operations. However, upon further evaluation of these sales in connection with the implementation of this standard, the Company determined that it is appropriate to present by-product sales as Net sales and other operating revenues. Effective October 1, 2018, these sales are now included within Net sales and other operating revenues in the Consolidated Statement of Operations. This change did not result in a cumulative adjustment to opening retained earnings as it is a classification change within the Consolidated Statement of Operations. If the Company had continued to classify by-product sales within Cost of sales, there would have been a decrease to Net sales and other operating revenues and Cost of sales of $20 million and $40 million for the three and six months ended March 31, 2019, respectively.

In March 2017, the FASB issued a new standard that amends the requirements on the presentation of net periodic pension and postretirement benefit costs. The new standard requires the service cost component to be presented with other employee compensation costs. The other components will be reported separately outside of operations. Only the service cost component will be eligible for capitalization. Entities are required to use a retrospective transition method to adopt ~~this~~the requirement for separate income statement presentation of the service cost and other components, and a prospective transition method to adopt the requirement to limit the capitalization of benefit cost to the service component. The Company adopted the standard on October 1, 2018 and ~~expects~~used a retrospective transition method to reclassify net periodic benefit cost, other than the service component, from Cost of sales, Selling and administrative expenses and Research and technical expenses to Other income (expense) in the Consolidated Statements of Operations for the prior periods presented. In accordance with the standard, the Company utilized prior period footnote disclosures as a practical expedient to apply these retrospective presentations, which is shown in the table below:

Consolidated Statements of Operations	Three Months Ended March 31									Six Months Ended March 31
	2018									2018
	As Originally Reported			Effect of Change			As Adjusted			As Originally Reported			Effect of Change			As Adjusted
	(In millions, except per share amounts)
Cost of sales	$	628		$	2		$	630		$	1,170		$	4		$	1,174
Gross profit	$	190		$	(2	)	$	188		$	368		$	(4	)	$	364
Selling and administrative expenses	$	78		$	1		$	79		$	147		$	2		$	149
Research and technical expenses	$	16		$	—		$	16		$	31		$	—		$	31
Income (loss) from operations	$	(158	)	$	(3	)	$	(161	)	$	(64	)	$	(6	)	$	(70	)
Other income (expense)	$	(2	)	$	3		$	1		$	6		$	6		$	12

In August 2018, the FASB issued a ~~modified retrospective approach.~~new standard to align the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The updated guidance also requires an entity to expense the capitalized implementation costs of a cloud computing arrangement that is a service contract over the term of the arrangement and includes expanded disclosure requirements for such costs. The new standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, and the guidance may be applied either retrospectively or prospectively. The Company adopted this standard prospectively on January 1, 2019. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements.

In February 2016, the FASB issued a new standard for the accounting for leases. This new standard requires lessees to recognize assets and liabilities for most leases, but recognize expenses on their income statements in a manner that is similar to the current accounting treatment for leases. The standard is applicable for fiscal years beginning after December 15, 2018 and for interim periods within those years, and early adoption is permitted. The Company expects to adopt the standard on October 1, 2019. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

In August 2016, the FASB issued final amendments to clarify how entities should classify certain cash receipts and cash payments on the statement of cash flows, such as distributions received from equity method investees, proceeds from the settlement of insurance claims, and proceeds from the settlement of corporate-owned life insurance policies. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those years, and early adoption is permitted. The Company ~~will adopt~~has established a project plan and implementation team that is analyzing the current portfolio of leases to determine the impact of adopting this ~~standard on October 1, 2018.~~new standard. The ~~adoption of this standard~~implementation team is ~~not expected~~also responsible for evaluating and designing the necessary changes to ~~materially impact~~ the Company’s ~~consolidated financial statements.~~business processes, lease policies, systems and internal controls to support recognition and disclosure under the new guidance.

In March 2017, the FASB issued a new standard that amends the requirements on the presentation of net periodic pension and postretirement benefit cost. Currently, net benefit costs are reported as employee costs within operating income. The new standard requires the service cost component to be presented with other employee compensation costs. The other components will be reported separately outside of operations. The new standard is effective for fiscal years beginning after December 15, 2017. The Company will adopt this standard on October 1, 2018. The adoption of this standard is not expected to materially impact the Company’s consolidated financial statements.

In February 2018, the FASB issued a new standard that allows entities to reclassify from ~~accumulated other comprehensive income~~AOCI to ~~retained~~Retained earnings ~~for~~ stranded tax effects resulting from ~~enactment~~changes made as a result of ~~H.R. 1 (the “Act”), commonly referred to as~~ the Tax Cuts and Jobs Act of ~~2017.~~2017 (the “Act”). The amendments in this new standard also require certain disclosures about stranded tax effects. The new standard is effective for all entities for fiscal years beginning after December 15, 2018, including interim periods within those years, and early adoption is permitted. The Company is evaluating this standard and the timing of its adoption. The adoption of this standard is not expected to materially impact the Company’s consolidated financial statements.

In November 2017, the Company acquired ~~all of the issued and outstanding shares and cash of~~ Tech Blend, a North American producer of black masterbatches, for a ~~preliminary~~ purchase price of $65 million, paid in cash. The ~~preliminary~~ purchase price iswas subject to a working capital adjustment, which ~~has not been finalized as of March 31, 2018.~~was immaterial. The operating results of the business are included in the Company’s Performance Chemicals segment. The acquisition ~~extends~~extended the Company’s global footprint in black masterbatch and compounds and provides a platform to serve global customers and grow in conductive formulations. ~~Since~~

In September 2018, the ~~acquisition, Tech Blend revenues totaled approximately $12 million~~Company acquired NSCC Carbon, a carbon black manufacturing facility in Pizhou, Jiangsu Province, China for a purchase price of $8 million. The purchase price is payable upon satisfaction of certain conditions that are expected to be satisfied within the ~~five-month period~~next twelve months and is recorded within Accounts payable and accrued liabilities on the Consolidated Balance Sheets. The Company plans to modify this facility to produce specialty carbons. The plant is temporarily mothballed. The modifications are expected to be completed, and production is expected to commence, in 2021. During the three and six months ended March 31, ~~2018.~~2019 the Company has incurred $1 million and $3 million, respectively, of transition-related costs related to this acquisition.

In January 2019, the Company entered into a Stock Purchase Agreement to sell its Specialty Fluids business, an operating segment of the Company, to Sinomine, on a cash-free and debt-free basis in a transaction valued at $135 million. The purchase price consists of $130 million to be paid at closing, subject to customary closing adjustments (including a customary working capital adjustment), and additional cash royalties of up to $5 million for lithium products, payable over a ten-year period.

The ~~Company incurred acquisition costs~~sale of ~~less than $1 million through~~the Specialty Fluids business is expected to be completed during the third quarter of fiscal 2019 and is subject to customary closing conditions, including, among other things, the receipt of certain regulatory approvals and notices with respect to the People’s Republic of China and Canada.

In light of this impending transaction, during the second quarter of fiscal 2019, the assets and liabilities of the Specialty Fluids business met the criteria for assets held for sale. The sale of the Specialty Fluids business does not meet the criteria to be reported as a discontinued operation as it does not constitute a significant strategic business shift for the Company.

In addition, based on the carrying value of the Specialty Fluids business as of March 31, ~~2018~~2019 and an estimate of the total cash proceeds from the sale, after giving effect to estimated closing adjustments, the Company recorded an impairment charge of $20 million during the second quarter of fiscal 2019.

The following table summarizes the carrying amounts of the major classes of assets and liabilities of the Specialty Fluids business classified as held for sale as of March 31, 2019 and the associated ~~with the transaction, which are included in Selling and administrative expenses and Other income (expense) in the Consolidated Statements of Operations.~~impairment charge:

The allocation of the preliminary purchase price set forth below was based on preliminary estimates of the fair value of assets acquired and liabilities assumed. The Company is continuing to obtain information to complete its valuation of these accounts and the associated tax accounting.

As part of the preliminary purchase price allocation, the Company determined the separately identifiable intangible assets are comprised of developed technologies of $21 million, which will be amortized over 25 years, and customer relationships of $8 million, which will be amortized over 12 years. The Company estimated the fair values of the identifiable acquisition-related intangible assets based on projections of cash flows that will arise from those assets. The projected cash flows are discounted to determine the fair value of the assets at the date of acquisition. The determination of the fair value of the intangible assets acquired required the use of significant judgment with regard to (i) assumptions in the discounted cash flow model used and (ii) determination of the useful lives of the developed technologies and customer relationships.

The excess of the preliminary purchase price over the fair value of the tangible net assets and intangible assets acquired was recorded as goodwill. The goodwill recognized is attributable to the growth and operating synergies that the Company expects to realize from this acquisition. Goodwill generated from the acquisition will not be deductible for tax purposes.

Net periodic defined benefit pension and other postretirement benefit costs include the following:

Three Months Ended March 31

2018

2017

2018

2017

Pension Benefits

Postretirement Benefits

U.S.

Foreign

U.S.

Foreign

U.S.

Foreign

U.S.

Foreign

(In millions)

Service cost

$
—

$
2

$
—

$
3

$
—

$
—

$
—

$
—

Interest cost

1

2

1

2

—

—

—

—

Expected return on plan assets

(3
)

(3
)

(2
)

(4
)

—

—

—

—

Amortization of prior service credit

—

—

—

—

—

—

(1
)

—

Amortization of actuarial loss

—

—

—

2

—

—

—

—

Net periodic benefit (credit) cost

$
(2
)

$
1

$
(1
)

$
3

$
—

$
—

$
(1
)

$
—

	Six Months Ended March 31																						Three Months Ended March 31
	2018						2017						2018					2017					2019						2018						2019					2018
	Pension Benefits												Postretirement Benefits										Pension Benefits												Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign		U.S.			Foreign		U.S.			Foreign			U.S.			Foreign			U.S.			Foreign		U.S.		Foreign
	(In millions)																						(In millions)
Service cost	$	—		$	4		$	—		$	5		$	—		$	—	$	—		$	—	$	—		$	2		$	—		$	2		$	—		$	—	$	—	$	—
Interest cost		2			4			2			3			—			—		—			—		2			1			1			2			1			—		—		—
Expected return on plan assets		(5	)		(7	)		(5	)		(7	)		—			—		—			—		(3	)		(2	)		(3	)		(3	)		—			—		—		—
Amortization of prior service credit		—			—			—			—			(1	)		—		(1	)		—		—			—			—			—			(1	)		—		—		—
Amortization of actuarial loss		—			1			—			3			—			—		—			—		—			—			—			—			—			—		—		—
Settlement and curtailment gain																								—			—			—			—			—			—		—		—
Net periodic benefit (credit) cost	$	(3	)	$	2		$	(3	)	$	4		$	(1	)	$	—	$	(1	)	$	—	$	(1	)	$	1		$	(2	)	$	1		$	—		$	—	$	—	$	—

	Six Months Ended March 31
	2019						2018						2019					2018
	Pension Benefits												Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign		U.S.			Foreign
	(In millions)
Service cost	$	—		$	4		$	—		$	4		$	—		$	—	$	—		$	—
Interest cost		3			3			2			4			1			—		—			—
Expected return on plan assets		(5	)		(6	)		(5	)		(7	)		—			—		—			—
Amortization of prior service credit		—			—			—			—			(1	)		—		(1	)		—
Amortization of actuarial loss		—			1			—			1			—			—		—			—
Settlement and curtailment gain		—			(6	)		—			—			—			—		—			—
Net periodic benefit (credit) cost	$	(2	)	$	(4	)	$	(3	)	$	2		$	—		$	—	$	(1	)	$	—

In December 2018, the Company transferred the majority of the defined benefit obligations and pension plan assets in one of its foreign defined benefit plans to a multi-employer plan. This action moved the administrative, asset custodial, asset investment, actuarial, communication and benefit payment obligations to the multi-employer fund administrator. As a result of the transfer, there was a $30 million reduction in net pension obligations associated with the plan, and a pre-tax gain of $6 million was recorded in the first quarter of fiscal 2019, which is included in Other income (expense) in the Consolidated Statement of Operations. The pre-tax gain consisted of a curtailment credit of less than $1 million for the accelerated recognition of prior service credit and a settlement credit of $5 million for the accelerated recognition of the unrecognized gain upon the transfer of the assets. As of March 31, 2019, approximately $2 million of plan assets remain to be transferred. Such assets are expected to be transferred by the end of the third quarter of fiscal 2019 and such transfer may result in an additional immaterial settlement gain or loss. In addition, as part of the transfer the Company recorded a $3 million charge in the first quarter of fiscal 2019 for the Company’s agreement to fund the actuarial loss gap between the terminated plan and the multi-employer plan, which will be paid over the next five years. This charge is included Other income (expense) in the Consolidated Statement of Operations and the liability is included in Accounts payable and accrued liabilities and Other liabilities on the Consolidated Balance Sheet.

During the second quarter of fiscal 2018, the Company recorded impairment charges relating to the goodwill and long-lived assets of the Purification Solutions reporting unit, and an associated deferred tax benefit, in the Consolidated Statement of Operations as follows:

In the second quarter of fiscal 2018, the Purification Solutions reporting unit had experienced ~~further~~ share losses, lower customer demand and declining prices in the mercury removal and North America powdered activated carbon applications, which led the Company to reassess its previous estimates for expected growth in volumes, prices and margins in the reporting unit. The forecasted demand and profit margins in mercury removal applications were lowered reflecting further unit closures at coal-fired utility plants, lower usage levels of activated carbon and lower capacity factors for coal-fired utilities, as well as lower pricing due to industry overcapacity, among other factors. While development programs continue to progress, growth estimates in other environmental and specialty applications were also lowered, reflecting heightened competition and updated timelines to commercialize certain new products. Due to ~~these~~the revised forecasts at the time, the Company performed ~~the~~a quantitative goodwill impairment test and determined that the estimated fair value of the Purification Solutions reporting unit was lower than the reporting unit's carrying value, resulting in a goodwill impairment charge of $92 million.

In determining the fair value of the Purification Solutions reporting unit, the Company used an income approach (a discounted cash flow analysis) which incorporated significant estimates and assumptions related to future periods, including growth rates in environmental and specialty applications and pricing assumptions of activated carbon, among others. In addition, an estimate of the reporting unit’s weighted average cost of capital (“WACC”) was used to discount future estimated cash flows to their present value. The WACC was based upon externally available data considering market participants’ cost of equity and debt, optimal capital structure and risk factors specific to the Purification Solutions reporting unit.

Prior to determining the goodwill impairment charge, the Company considered whether the assets of the reporting unit were recoverable. As a result of ~~this~~that assessment, the Company recorded an inventory reserve adjustment of $13 million and impairments to ~~long lived~~long-lived assets of $162 million. The adjustment to inventory carrying value was determined based on reassessments of volumes, pricing, and ~~margin described above~~margins for the reporting unit at the time and was recorded in Cost of sales in the Consolidated Statements of Operations. The impairment analysis to assess if definite-lived intangible assets and property, plant and equipment were recoverable was based on the estimated undiscounted cash flows of the reporting unit, and these cash flows were not sufficient to recover the carrying value of the long-lived assets over their remaining useful lives. Accordingly, the Company recorded impairment charges of $64 million and $98 million to its definite-lived intangible assets and property, plant and equipment, respectively, in the quarter ended March 31, 2018 based on the lower of the carrying amount or fair value of the long-lived assets.

~~The Company used the income approach to determine the fair value of the definite-lived intangible assets and the cost approach to determine the fair value of its property, plant and equipment.~~

As previously disclosed in the Company’s first quarter fiscal 2018 Form 10-Q, the Company has continued to review its strategic options for this business and look for opportunities to better position the business for growth and long-term value enhancement. The CompanyCabot will continue to monitor for events or changes in business circumstances that may indicate that the remaining carrying value of the asset group may not be recoverable.

Additionally, the Company recorded a tax benefit related to the impairment charges of $30 million in the second quarter of fiscal 2018 which was subsequently reduced by $1 million after the impairment charges by tax jurisdiction were finalized.

The carrying amount of goodwill attributable to each reportable segment with goodwill balances and the changes in those balances during the six month period ended March 31, ~~2018~~2019 are as follows:

The following table provides information regarding the Company’s intangible assets:

Intangible assets are amortized over their estimated useful lives, which range between twelve and twenty-five years, with a weighted average amortization period of approximately nineteen years. Amortization expense for the three month periods ended March 31, 2019 and 2018 ~~and 2017~~ was $3$2 million and $2$3 million, respectively, and is included in Cost of sales, ~~and~~ Selling and administrative expenses, and research and technical expenses in the Consolidated Statements of Operations. Amortization expense for the six month periods ended March 31, 2019 and 2018 ~~and 2017~~ was $5$3 million and $4$5 million, respectively, and is included in Cost of sales, ~~and~~ Selling and administrative expenses, and research and technical expenses in the Consolidated Statements of Operations. Total amortization expense is estimated to be approximately $6 million each year for the next five fiscal years.

In January 2015, the Board of Directors authorized Cabot to repurchase up to five million shares of its common stock in the open market or in privately negotiated transactions. As of March 31, 2018, under the current authorization, Cabot has repurchased 3,491,902 shares of its common stock and 1,508,098 shares remain available for repurchase. The Company retired the repurchased shares and recorded the excess of the purchase price over par value to additional paid-in capital until such amount was reduced to zero and then charged the remainder against retained earnings.

During the first six months of fiscal 2018 and 2017, Cabot paid cash dividends in the aggregate amount of $0.63 and $0.60, respectively, per share of common stock, with a total cost of $39 million and $38 million, respectively.

~~The following table illustrates the noncontrolling interest activity for the periods presented:~~

During the six months ended March 31, 2018, $6 million of the dividends declared to noncontrolling interests during the period were paid. During the six months ended March 31, 2017, $2 million of the dividends declared to noncontrolling interests during the period were paid.

Comprehensive income combines net income (loss) and other comprehensive income items, which are reported as components of stockholders’ equity in the accompanying Consolidated Balance Sheets.

	Currency Translation Adjustment			Unrealized Gains on Investments		Pension and Other Postretirement Benefit Liability Adjustments			Total			Currency Translation Adjustment			Unrealized Gains on Investments		Pension and Other Postretirement Benefit Liability Adjustments			Total
	(In millions)											(In millions)
Balance at September 30, 2017, attributable to Cabot Corporation	$	(204	)	$	2	$	(57	)	$	(259	)
Balance at September 30, 2018, attributable to Cabot Corporation												$	(266	)	$	1	$	(52	)	$	(317	)
Other comprehensive income (loss) before reclassifications		—			—		—			—			(24	)		—		30			6
Amounts reclassified from AOCI		(1	)		—		—			(1	)		(1	)		—		(8	)		(9	)
Less: Other comprehensive income (loss) attributable to noncontrolling interests		3			—		—			3			—			—		—			—
Balance at December 31, 2017, attributable to Cabot Corporation		(208	)		2		(57	)		(263	)
Balance at December 31, 2018, attributable to Cabot Corporation												$	(291	)	$	1	$	(30	)	$	(320	)
Other comprehensive income (loss) before reclassifications		59			—		—			59			8			—		1			9
Amounts reclassified from AOCI		(1	)		—		—			(1	)		(1	)		—		(1	)		(2	)
Less: Other comprehensive income (loss) attributable to noncontrolling interests		4			—		—			4			2			—		—			2
Balance at March 31, 2018, attributable to Cabot Corporation	$	(154	)	$	2	$	(57	)	$	(209	)
Balance at March 31, 2019, attributable to Cabot Corporation													(286	)		1		(30	)		(315	)

The amounts reclassified out of AOCI and into the Consolidated Statements of Operations in the three and six months ended March 31, ~~2018~~2019 and ~~2017~~2018 were as follows:

	Affected Line Item in the Consolidated	Three Months Ended March 31						Six Months Ended March 31						Affected Line Item in the Consolidated	Three Months Ended March 31						Six Months Ended March 31
	Statements of Operations	2018			2017			2018			2017			Statements of Operations	2019			2018			2019			2018
		(In millions)													(In millions)
Derivatives: net investment hedges
(Gains) losses reclassified to interest expense		$	(1	)	$	—		$	(2	)	$	—		Interest expense	$	(2	)	$	(1	)	$	(3	)	$	(2	)
(Gains) losses excluded from effectiveness testing and amortized to interest expense														Interest expense	$	1		$	—		$	1		$	—
Pension and other postretirement benefit liability adjustment
Amortization of actuarial losses	Net Periodic Benefit Cost - see Note D for details		—			2			1			3		Net Periodic Benefit Cost - see Note E for details		—			—			1			1
Amortization of prior service credit	Net Periodic Benefit Cost - see Note D for details		—			(1	)		(1	)		(1	)	Net Periodic Benefit Cost - see Note E for details		(1	)		—			(1	)		(1	)
Settlement and curtailment gain														Net Periodic Benefit Cost - see Note E for details		—			—			(6	)		—
Total before tax			(1	)		1			(2	)		2				(2	)		(1	)		(8	)		(2	)
Tax impact	Provision (benefit) for income taxes		—			—			—			—		Provision (benefit) for income taxes		—			—			(3	)		—
Total after tax		$	(1	)	$	1		$	(2	)	$	2			$	(2	)	$	(1	)	$	(11	)	$	(2	)

Cabot has entered into long-term purchase agreements primarily for the purchase of raw materials. Under certain of these agreements, the quantity of material being purchased is fixed, but the price paid changes as market prices change. For these purchase commitments, the amounts included in the table below are based on market prices at March 31, ~~2018,~~2019, which may differ from actual market prices at the time of purchase.

	Payments Due by Fiscal Year														Payments Due by Fiscal Year
	Remainder of Fiscal 2018		2019		2020		2021		2022		Thereafter		Total		Remainder of Fiscal 2019		2020		2021		2022		2023		Thereafter		Total
	(In millions)														(In millions)
Reinforcement Materials	$	159	$	289	$	173	$	136	$	136	$	1,947	$	2,840	$	173	$	244	$	134	$	131	$	123	$	1,607	$	2,412
Performance Chemicals		34		63		58		57		57		482		751		42		59		56		56		32		459		704
Purification Solutions		4		7		7		1		—		—		19		4		6		1		—		—		—		11
Specialty Fluids⁽¹⁾																12		—		—		—		—		—		12
Total	$	197	$	359	$	238	$	194	$	193	$	2,429	$	3,610	$	231	$	309	$	191	$	187	$	155	$	2,066	$	3,139

Cabot has provided certain indemnities pursuant to which it may be required to make payments to an indemnified party in connection with certain transactions and agreements. In connection with certain acquisitions and divestitures, Cabot has provided routine indemnities with respect to such matters as environmental, tax, insurance, product and employee liabilities. In connection with various other agreements, including service and supply agreements with customers, Cabot has provided indemnities for certain contingencies and routine warranties. Cabot is unable to estimate the maximum potential liability for these types of indemnities as a maximum obligation is not explicitly stated in most cases and the amounts, if any, are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be reasonably estimated. The duration of the indemnities vary, and in many cases are indefinite. Cabot has not recorded any liability for these indemnities in the consolidated financial statements, except as otherwise disclosed.

Cabot is a defendant, or potentially responsible party, in various lawsuits and environmental proceedings wherein substantial amounts are claimed or at issue.

As of March 31, ~~2018~~2019 and September 30, ~~2017,~~2018, Cabot had ~~$16~~$14 million and ~~$12~~$15 million, respectively, reserved for environmental matters. These environmental matters mainly relate to former operations. During the three months ended March 31, 2018, the scope and cost of additional remediation activities being performed at a former manufacturing site became probable and estimable, resulting in the recognition of an additional charge of $6 million for these actions in Cost of sales in the Consolidated Statements of Operations. The Company’s reserves for environmental matters represent Cabot’s best estimates of the probable costs to be incurred at those sites where costs are reasonably estimable based on the Company’s analysis of the extent of clean up required, alternative clean-up methods available, abilities of other responsible parties to contribute and its interpretation of laws and regulations applicable to each site.

Cash payments related to these environmental matters were $1 million and $2 million in the first six months of fiscal 2019 and fiscal 2018, ~~and less than $1 million in the first six months of fiscal 2017.~~respectively. Cabot reviews the adequacy of the reserves as circumstances change at individual sites and adjusts the reserves as appropriate. Almost all of Cabot’s environmental issues relate to sites that are mature and have been investigated and studied and, in many cases, are subject to agreed upon remediation plans. However, depending on the results of future testing, changes in risk assessment practices, remediation techniques and regulatory requirements, newly discovered conditions, and other factors, it is reasonably possible that the Company could incur additional costs in excess of environmental reserves currently recorded. Management estimates, based on the latest available information, that any such future environmental remediation costs that are reasonably possible to be in excess of amounts already recorded would be immaterial to the Company’s consolidated financial statements.

Cabot has exposure in connection with a safety respiratory products business that a subsidiary acquired from American Optical Corporation (“AO”) in an April 1990 asset purchase transaction. The subsidiary manufactured respirators under the AO brand and disposed of that business in July 1995. In connection with its acquisition of the business, the subsidiary agreed, in certain circumstances, to assume a portion of AO’s liabilities, including costs of legal fees together with amounts paid in settlements and judgments, allocable to AO respiratory products used prior to the 1990 purchase by the Cabot subsidiary. In exchange for the subsidiary’s assumption of certain of AO’s respirator liabilities, AO agreed to provide to the subsidiary the benefits of: (i) AO’s insurance coverage for the period prior to the 1990 acquisition and (ii) a former owner’s indemnity of AO holding it harmless from any liability allocable to AO respiratory products used prior to May 1982. As more fully described in the ~~2017~~2018 10-K, the respirator liabilities generally involve claims for personal injury, including asbestosis, silicosis and coal worker’s pneumoconiosis, allegedly resulting from the use of respirators that are alleged to have been negligently designed and/or labeled. Neither Cabot, nor its past or present subsidiaries, at any time manufactured asbestos or asbestos-containing products. At no time did this respiratory product line represent a significant portion of the respirator market.

As of March 31, ~~2018~~2019, and September 30, ~~2017,~~2018, there were approximately 36,000 and ~~37,000~~35,000 claimants, respectively, in pending cases asserting claims against AO in connection with respiratory products. Cabot has a reserve to cover its expected share of liability for existing and future respirator liability claims. At March 31, ~~2018~~2019 and September 30, ~~2017,~~2018, the reserve was ~~$17~~$22 million and ~~$18~~$25 million, respectively. The Company made payments related to its respirator liability of $1$3 million and $2$1 million in the first six months of fiscal ~~2018~~2019 and fiscal ~~2017,~~2018, respectively.

The Company’s current estimate of the cost of its share of existing and future respirator liability claims is based on facts and circumstances existing at this time. Developments that could affect the Company’s estimate include, but are not limited to, (i) significant changes in the number of future claims, (ii) changes in the rate of dismissals without payment of pending claims, (iii) significant changes in the average cost of resolving claims, (iv) significant changes in the legal costs of defending these claims, (v) changes in the nature of claims received, (vi) trial and appellate outcomes, (vii) changes in the law and procedure applicable to these claims, ~~(vii)~~(viii) the financial viability of other parties that contribute to the settlement of respirator claims, ~~(viii)~~(ix) a change in the availability of insurance coverage maintained by certain of the other parties that contribute to the settlement of respirator claims, or the indemnity provided by a former owner of the business, ~~(ix)~~(x) changes in the allocation of costs among the various parties paying legal and settlement costs, and ~~(x)~~(xi) a determination that the assumptions that were used to estimate Cabot’s share of liability are no longer reasonable. The Company cannot determine the impact of these potential developments on its current estimate of its share of liability for existing and future claims. Accordingly, the actual amount of these liabilities for existing and future claims could be ~~different~~larger than the reserved amount.

The Company has various other lawsuits, claims and contingent liabilities arising in the ordinary course of its business and with respect to its divested businesses. The Company does not believe that any of these matters will have a material adverse effect on its financial position; however, litigation is inherently unpredictable. Cabot could incur judgments, enter into settlements or revise its expectations regarding the outcome of certain matters, and such developments could have a material impact on its results of operations in the period in which the amounts are accrued or its cash flows in the period in which the amounts are paid.

	Three Months Ended March 31						Six Months Ended March 31						Three Months Ended March 31						Six Months Ended March 31
	2018			2017			2018			2017			2019			2018			2019			2018
	(Dollars in millions)												(Dollars in millions)
(Provision) benefit for income taxes	$	7		$	1		$	(198	)	$	(17	)	$	(20	)	$	7		$	(13	)	$	(198	)
Effective tax rate		4	%		(1	)%		(248	)%		11	%		41	%		4	%		11	%		(248	)%

For the three and six months ended March 31, 2019, the tax (provision) benefit included a net discrete tax expense of less than $1 million and a net discrete tax benefit of $24 million, respectively, of which nil and $17 million, respectively, comprised the impact of the Act. For the three and six months ended March 31, 2018, the tax (provision) benefit included a net discrete tax benefit of $26 million and a net discrete tax expense of $162 million, respectively, of which net tax expenses of $4 million and $189 million, respectively, comprised the impact of the Act. The amounts for the three and six month periods also included a net tax benefit of $30 million associated with the Purification Solutions goodwill and long-lived assets impairment charges. For both the three and six months ended March 31, 2017, the tax provision included a net discrete tax benefit of $20 million, primarily associated with the generation of excess foreign tax credits upon repatriation of previously taxed foreign earnings.

On December 22, 2017, the U.S. enacted significant changes to federal income tax law affecting the Company, including a permanent reduction of the U.S. corporate income tax rate from 35% to 21%, effective January 1, ~~2018. Cabot expects that these changes will positively impact~~2018, as well as a 100% dividend received deduction for foreign dividends. Although the ~~Company's future after-tax earnings in~~passage of the ~~U.S., primarily due to~~Act reduced the ~~lower federal statutory~~U.S. tax rate and ~~the establishment of~~effectively created a ~~full participation exemption regime for foreign earnings. In transitioning to this new full~~ participation exemption regime for foreign earnings, certain other aspects of the new legislation, including in particular, immediate U.S. taxation of global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries, will have a negative impact on earnings. In transitioning to this participation exemption regime, Cabot iswas also subject, during fiscal 2018, to a one-time tax ~~for~~on the deemed repatriation of certain foreign earnings. ~~A discussion of certain provisions of the Act and the Company’s preliminary assessment of the impact of such provisions on its consolidated financial statements is set forth below.~~

~~The accounting standard for income taxes (“ASC 740”) required the Company to recognize the effect of the tax law changes under the Act~~As provided in ~~the first quarter of fiscal 2018. However, due to the potential uncertainty or diversity of views in accounting for the impact of the Act, the Securities and Exchange Commission staff issued~~ Staff Accounting Bulletin 118 (“SAB 118”) to address the application of U.S. GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act.

In particular, SAB 118 clarified that the impact of the Act must be accounted for and reported in one of three ways: (1) by reflecting the tax effects of the Act for which the accounting is complete; (2) by reporting provisional amounts for those specific income tax effects of the Act for which the accounting is incomplete but a reasonable estimate can be determined, with such provisional amounts (or adjustments to provisional amounts) identified in the measurement period, as defined therein, being included as an adjustment to tax expense or benefit from continuing operations in the period the amounts are determined; or (3) where the income tax effects cannot be reasonably estimated, no provisional amounts should be reported and the registrant should continue to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the enactment of the Act. The measurement period begins in the reporting period that includes the Act’s enactment date and ends when the accounting has been completed, but not beyond one year from the enactment date.

~~Due to various uncertainties as described below,~~, the Company ~~has not completed its accounting for~~made certain ~~tax impacts of the Act. However, as provided in SAB 118, reasonable estimates, including any~~final adjustments ~~to the estimates made~~ during the first quarter of fiscal 2018, have been made and recorded as provisional amounts in its financial results for the second quarter of fiscal 2018. A discussion of the material impacts of tax law changes under the Act for which the accounting is incomplete follows:

As of March 31, 2018, the accounting for this item was incomplete. Additional information is necessary in order to complete the accounting for this item, including: (1) further analysis regarding the impact of the reduced rate on the reversal of deferred tax assets and liabilities for the full fiscal 2018 at the pro-rata rate, and (2) the true-up of deferred tax assets and liabilities upon the filing of the U.S. income tax return for fiscal 2017. However, the Company has recorded ~~a total~~an additional provisional tax ~~expense~~benefit of $17 million related to the ~~impact~~U.S. taxation of ~~the rate change on deferred tax balances, of which $13 million was recorded~~deemed foreign dividends in the ~~first quarter of~~transition fiscal 2018 and $4 million was recorded in the second quarter of fiscal 2018. The additional provisional adjustment recorded in the second quarter was primarily associated with the Purification Solutions goodwill and long-lived assets impairment charges.

~~As of March 31, 2018, the accounting for this item~~reduced or eliminated in future legislation. If such legislation is ~~incomplete. Significant additional information~~enacted, Cabot will need to be obtained and analyzed in order to complete the accounting for this item. This includes: (1) the determination of the full fiscal 2018 E&P and foreign tax credits of the specified foreign corporations; (2) the true-up of the pre-fiscal 2018 E&P and foreign tax credits of the specified foreign corporations upon the filing of the U.S. income tax return for fiscal 2017 (tax year 2016); (3) establishing the appropriate foreign exchange rate for the full fiscal year 2018 used to translate foreign taxes; (4) clarification of the state income tax impact of the repatriation, including guidance from states in which Cabot has a taxable presence on the extent to which the state will conform with the provisions of the Act, as well as determination of the apportionment of the Company’s income for the full fiscal year 2018; (5) uncertainty as to which of the alternative aggregate cash position measurement dates will apply to the Company; and (6) further guidance from the U.S. Treasury Department on the interpretation and application of the rules.

In the absence of such additional information, Cabot has made a reasonable estimate of the financial impact of this item. The Company recorded a provisional charge of $149 million during the first quarter of fiscal 2018 to the (Provision) benefit for income taxes for deemed repatriation. No adjustment has been made to this provisional amount for the second quarter of fiscal 2018. This amount is expected to be a fully non-cash charge due to the Company’s existing tax attributes.

As of March 31, 2018, the accounting for this item is incomplete. Additional information necessary to complete the accounting includes: (1) finalization of U.S. previously taxed income resulting from the deemed repatriation of foreign earnings; (2) further analysis of the amount of distributable reserves, including treatment thereof under local law, available in various non-U.S. subsidiaries; (3) clarification of the state income tax impact of unremitted earnings that are not indefinitely reinvested; and (4) evolving interpretations of the U.S. GAAP rules applicable to the Act. As a result of the Act, the Company has made certain changes to its indefinite reinvestment assertion and has made a reasonable estimate of the financial impact of this item. The Company recorded a provisional amount of $23 million during the first quarter of fiscal 2018 to its tax expense for this item. No adjustment has been made to this provisional amount for the second quarter of fiscal 2018.

~~The Company will continue to evaluate~~record the impact of the Act on its business and consolidated financial statements and will make any further adjustments to its provisional amounts in subsequent reporting periods upon obtaining, preparing or analyzing additional information affecting the income tax effects initially reported as a provisional amount.

Under the Act, Cabot may be subject to a tax on global intangible low-taxed income (“GILTI”) in future years. In general, GILTI is a 10.5% tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. This tax is effective for taxable years beginning after December 31, 2017. The Company has not yet adopted an accounting policy with respect to whether (i) to recognize deferred taxes for temporary differences (including outside basis differences) expected to reverse as GILTI or (ii) to recognize these temporary differences as period costs if and when incurred.

~~The Act also contains a number of other provisions that may have a material financial impact on the Company~~legislation in the future. These include base erosion anti-abuse tax, foreign derived intangible income and the interest expense limitation under Internal Revenue Code section 163(j). These tax law changes apply only to tax years beginning after December 31, 2017. Therefore, the Company has not and will not record any amounts related to these items in its fiscal 2018 financial results.quarter of enactment.

Cabot and certain subsidiaries are under audit in a number of jurisdictions. In addition, certain statutes of limitations are scheduled to expire in the near future. It is reasonably possible that a further change in the unrecognized tax benefits may also occur within the next twelve months related to the settlement of one or more of these audits or the lapse of applicable statutes of limitations. However, an estimated range of the impact on the unrecognized tax benefits cannot be quantified at this time.

Cabot files U.S. federal and state and non-U.S. income tax returns in jurisdictions with varying statutes of limitations. The 2014 through ~~2015~~2017 tax years generally remain subject to examination by the ~~United States Internal Revenue Service~~IRS and various tax years from 2005 through ~~2015~~2017 remain subject to examination by the respective state tax authorities. In significant non-U.S. jurisdictions, various tax years from 2002 through ~~2016~~2017 remain subject to examination by their respective tax authorities. As of ~~December~~March 31, ~~2017,~~2019, Cabot’s significant non-U.S. jurisdictions include Canada, China, France, Germany, Italy, Japan, and the Netherlands.

During the three and six months ended March 31, ~~2018,~~2019, Cabot released uncertain tax positions of ~~less than~~ $1 million and $2$8 million, respectively, due to audit settlements and the ~~expirations~~expiration of statutes of limitations in various jurisdictions. During the three and six months ended March 31, ~~2017,~~2018, Cabot released uncertain tax positions of less than $1 million and $3$2 million, respectively, due to the expirations of statutes of limitations in various jurisdictions.

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

	Three Months Ended March 31					Six Months Ended March 31					Three Months Ended March 31					Six Months Ended March 31
	2018			2017		2018			2017		2019		2018			2019		2018
	(In millions, except per share amounts)										(In millions, except per share amounts)
Basic EPS:
Net income (loss) attributable to Cabot Corporation	$	(173	)	$	74	$	(295	)	$	129	$	23	$	(173	)	$	92	$	(295	)
Less: Undistributed earnings allocated to participating securities⁽¹⁾		—			1		—			1		—		—			—		—
Earnings (loss) allocated to common shareholders (numerator)	$	(173	)	$	73	$	(295	)	$	128	$	23	$	(173	)	$	92	$	(295	)

Weighted average common shares and participating securities outstanding		62.6			62.9		62.5			62.8		60.0		62.6			60.4		62.5
Less: Participating securities⁽¹⁾		0.8			0.5		0.7			0.5		0.9		0.8			0.9		0.7
Adjusted weighted average common shares (denominator)		61.8			62.4		61.8			62.3		59.1		61.8			59.5		61.8

Earnings (loss) per common share - basic:	$	(2.80	)	$	1.19	$	(4.78	)	$	2.06	$	0.39	$	(2.80	)	$	1.53	$	(4.78	)

Diluted EPS:
Earnings (loss) allocated to common shareholders	$	(173	)	$	73	$	(295	)	$	128	$	23	$	(173	)	$	92	$	(295	)
Plus: Earnings (loss) allocated to participating securities		—			1		—			1		—		—			1		—
Less: Adjusted earnings allocated to participating securities⁽²⁾		—			1		—			1		—		—			1		—
Earnings (loss) allocated to common shareholders (numerator)	$	(173	)	$	73	$	(295	)	$	128	$	23	$	(173	)	$	92	$	(295	)

Adjusted weighted average common shares outstanding		61.8			62.4		61.8			62.3		59.1		61.8			59.5		61.8
Effect of dilutive securities:
Common shares issuable⁽³⁾		—			0.4		—			0.5		0.2		—			0.2		—
Adjusted weighted average common shares (denominator)		61.8			62.8		61.8			62.8		59.3		61.8			59.7		61.8

Earnings (loss) per common share - diluted:	$	(2.80	)	$	1.19	$	(4.78	)	$	2.05	$	0.39	$	(2.80	)	$	1.53	$	(4.78	)

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 March 31					Six Months Ended March 31					Three Months Ended March 31					Six Months Ended March 31
	2018			2017		2018			2017		2019		2018			2019		2018
	(In millions)										(In millions)
Calculation of undistributed earnings (loss):
Net income (loss) attributable to Cabot Corporation	$	(173	)	$	74	$	(295	)	$	129	$	23	$	(173	)	$	92	$	(295	)
Less: Dividends declared on common stock		19			19		39			38		20		19			40		39
Undistributed earnings (loss)	$	(192	)	$	55	$	(334	)	$	91	$	3	$	(192	)	$	52	$	(334	)

Allocation of undistributed earnings (loss):
Undistributed earnings (loss) allocated to common shareholders	$	(192	)	$	54	$	(334	)	$	90	$	3	$	(192	)	$	52	$	(334	)
Undistributed earnings (loss) allocated to participating shareholders		—			1		—			1
Undistributed earnings (loss)	$	(192	)	$	55	$	(334	)	$	91	$	3	$	(192	)	$	52	$	(334	)

Cabot’s restructuring activities were recorded in the Consolidated Statements of Operations in the three and six months ended March 31, ~~2018~~2019 and ~~2017~~2018 as follows:

	Three Months Ended March 31					Six Months Ended March 31					Three Months Ended March 31					Six Months Ended March 31
	2018			2017		2018			2017		2019		2018			2019		2018
	(In millions)										(In millions)
Cost of sales	$	(10	)	$	2	$	(9	)	$	2	$	2	$	(10	)	$	5	$	(9	)
Selling and administrative expenses		1			—		1			—		—		1			6		1
Total	$	(9	)	$	2	$	(8	)	$	2	$	2	$	(9	)	$	11	$	(8	)

Details of all restructuring activities and the related reserves during the three and six months ended March 31, ~~2018~~2019 were as follows:

Severance
and Employee
Benefits

Environmental
Remediation

Asset
Sales

Asset
Impairment
and
Accelerated
Depreciation

Other

Total

(In millions)

Reserve at September 30, 2017

$
1

$
2

$
—

$
—

$
—

$
3

Charges

—

—

—

—

1

1

Accrual for refundable land deposit

—

—

(4
)

—

—

(4
)
Cash received (paid)

—

—

4

—

(1
)

3

Reserve at December 31, 2017

$
1

$
2

$
—

$
—

$
—

$
3

Charges (gain)

1

—

(11
)

1

—

(9
)
Costs charged against assets / (liabilities)

—

—

2

(1
)

—

1

Cash received

(1
)

—

9

—

—

8

Reserve at March 31, 2018

$
1

$
2

$
—

$
—

$
—

$
3

	Severance and Employee Benefits			Environmental Remediation		Asset Impairment and Accelerated Depreciation			Other			Total
	(In millions)
Reserve at September 30, 2018	$	1		$	4	$	—		$	—		$	5
Charges		7			—		1			1			9
Costs charged against assets / (liabilities)		—			1		(1	)		—			—
Cash paid		(1	)		—		—			(1	)		(2	)
Reserve at December 31, 2018		7			5		—			—			12
Charges (gain)		1			—		—			1			2
Costs charged against assets / (liabilities)		—			—		—			—			—
Cash paid		(1	)		—		—			(1	)		(2	)
Reserve at March 31, 2019	$	7		$	5	$	—		$	—		$	12

Cabot’s severance and employee benefit reserves and other closure related reserves are reflected in Accounts payable and accrued liabilities on the Company’s Consolidated Balance Sheets. Cabot’s environmental remediation reserves related to restructuring activities are reflected in Other liabilities on the Company’s Consolidated Balance Sheets.

In December 2018, the Company began implementation of a transformation plan to improve the long-term performance of the Purification Solutions segment. The purpose of the plan is to focus the business’s product portfolio, optimize its manufacturing assets, and streamline its organizational structure to support the new focus. The Company recorded charges of approximately $1 million of severance costs related to this plan in the three months ended March 31, 2019 and recorded charges of approximately $9 million related to this plan in the six months ended March 31, 2019, comprised of approximately $8 million of severance costs and $1 million of professional fees. Cabot paid approximately $1 million and $2 million related to these activities in the three and six months ended March 31, 2019, respectively, and expects to pay approximately $7 million in the remainder of fiscal 2019 and thereafter. As of March 31, 2019, Cabot had $6 million of accrued severance charges in the Consolidated Balance Sheets related to these actions.

In October 2017, Cabot indefinitely idled three of the seven production units at its activated carbon manufacturing facility in Marshall, Texas. The decision, affecting approximately 40 local employees, was driven by the need to better match the business’ production capacity and cost structure with the current demand for powdered activated carbon in North America. Total costs recorded related to this plan, ~~are expected to be approximately $8~~which was completed in fiscal 2018, were $1 million, comprised of approximately $8$1 million of non-cash accelerated depreciation costs and less than $1 million of severance costs. The Company recorded charges of approximately $1 million in the six months ended March 31, 2018, comprised mainly of accelerated depreciation charges. The Company anticipates charges related to these actions of approximately $1 million in the remainder of fiscal 2018 and approximately $7 million thereafter.

In October 2015, in response to challenging macroeconomic conditions, the Company announced its intention to restructure its operations subject to local consultation requirements and processes in certain locations. ~~Cabot’s plan resulted in the termination of employment for approximately 300 employees across the Company’s global locations.~~

Most of the charges and cash outlays related to this plan were recorded in fiscal 2016. The Company recorded pre-tax cash charges related to this plan of ~~approximately~~less than $1 million and $1 million in the first six months of ~~both~~ fiscal 2019 and 2018, ~~and 2017, and expects to record approximately $1 million of cash~~respectively. No further charges ~~in the remainder of fiscal 2018. The charges recorded and anticipated~~ are ~~comprised of severance, employee benefits and other transition costs. As of March 31, 2018, Cabot has less than $1 million of accrued severance charges in the Consolidated Balance Sheets~~expected related to ~~these actions.~~this plan.

Additionally, in fiscal 2016 Cabot closed its carbon black manufacturing facility in Merak, Indonesia to consolidate production in Asia using the Company’s Cilegon, Indonesia and other Asian and global carbon black production sites to meet regional demand. The decision was driven by the financial performance at the Merak facility in the years preceding the closure. Manufacturing operations ceased at the end of January 2016.

The Company completed the sale of the land in Merak on which the facility was located in the second quarter of fiscal ~~2018. The Company received a refundable deposit of $4~~2018 for cash consideration totaling approximately $13 million, of cash in the first quarter of fiscal 2018, which was recorded in Accounts payable and accrued liabilities on the Consolidated Balance Sheets as of December 31, 2017. An additional payment of approximately $9 million was received in the second quarter of fiscal 2018, resulting in a net pre-tax gain of approximately $11 ~~million. The Company~~million recorded ~~net charges~~to Cost of ~~less than $1 million~~sales in the ~~six months ended March 31, 2017 primarily for site clearing and demolition costs related to the Merak closure.~~

AsCompany’s Consolidated Statements of ~~March 31, 2018, Cabot has less than $1 million of accrued severance costs in the Consolidated Balance Sheets related to the Merak facility closure.~~Operations.

Cabot ~~has~~ recorded approximately $1 million of severance charges in the six months ended March 31, 2019, nearly all of which was paid during that period. The balance of less than $1 million is expected to be paid during the remainder of fiscal 2019. Additionally, Cabot recorded approximately $1 million of accelerated depreciation charges in the first six months of fiscal 2019 and expects to record approximately $1 million of additional accelerated depreciation in the remainder of fiscal 2019 and less than $1 million thereafter.

Cabot recorded approximately $1 million of severance charges in the first six month of fiscal 2018, nearly all of which ~~has been~~was paid in ~~the second quarter of fiscal 2018.~~that period.

Additionally, in previous years, the Company entered into other various restructuring actions that have been substantially ~~completed, other than the sale of land rights in Thane, India and environmental remediation activities in Berre, France that remain to be~~ completed.

~~Cabot expects to pay approximately $2 million related to these remediation activities in the remainder of fiscal 2018 and thereafter, mainly for accrued environmental and other closure related costs.~~ As of March 31, ~~2018,~~2019, Cabot ~~has~~had approximately $2$5 million of accrued environmental ~~costs~~ and ~~less than $1 million of accrued severance~~closure costs in the Consolidated Balance Sheets related to these ~~actions.~~actions which it expects to pay in the remainder of fiscal 2019 and thereafter.

The FASB authoritative guidance on fair value measurements defines fair value, provides a framework for measuring fair value, and requires certain disclosures about fair value measurements. The required disclosures focus on the inputs used to measure fair value. The guidance establishes the following hierarchy for categorizing these inputs:

There were no transfers of financial assets or liabilities measured at fair value between Level 1 and Level 2 and there were no Level 3 investments during the first six months of either fiscal ~~2018~~2019 or ~~2017.~~2018.

At March 31, ~~2018~~2019 and September 30, ~~2017,~~2018, Cabot had derivatives relating to foreign currency risks carried at fair value. At March 31, ~~2018~~2019 and September 30, ~~2017,~~2018, the fair value of these derivatives was a net liability of ~~$28~~$7 million and ~~$13~~$18 million, respectively, and was included in Prepaid expenses and other current assets and Other liabilities on the Consolidated Balance Sheets. These derivatives are classified as Level 2 instruments within the fair value hierarchy as the fair value determination was based on observable inputs.

At both March 31, ~~2018~~2019 and September 30, ~~2017,~~2018, the fair value of guaranteed investment contracts, included in Other assets on the Consolidated Balance Sheets, was ~~$12~~$11 million. Guaranteed investment contracts were classified as Level 2 instruments within the fair value hierarchy as the fair value determination was based on other observable inputs.

At March 31, ~~2018~~2019 and September 30, ~~2017,~~2018, the fair values of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued liabilities, and ~~notes payable~~short-term borrowings and variable rate debt approximated their carrying values due to the short-term nature of these instruments. ~~Both the carrying value and fair value of the long-term fixed rate debt were $0.66 billion as of March 31, 2018.~~ The carrying value and fair value of the long-term fixed rate debt were ~~$0.91 billion~~$670 million and ~~$0.94 billion,~~$686 million, respectively, as of March 31, 2019, and $747 million and $742 million, respectively, as of September 30, ~~2017.~~2018. The fair values of Cabot’s fixed rate long-term debt are estimated based on comparable quoted market prices at the respective period ends. The carrying amounts of Cabot’s floating rate long-term debt and capital lease obligations approximate their fair values. All such measurements are based on observable inputs and are classified as Level 2 within the fair value hierarchy. The valuation technique used is the discounted cash flow model.

Cabot’s international operations are subject to certain risks, including currency exchange rate fluctuations and government actions. Cabot endeavors to match the currency in which debt is issued to the currency of the Company’s major, stable cash receipts. In some situations, Cabot has issued debt denominated in U.S. dollars and then entered into cross-currency swaps that exchange the dollar principal and interest payments into ~~Euro denominated~~Euro-denominated principal and interest payments.

Additionally, the Company has foreign currency exposure arising from its net investments in foreign operations. Cabot may enter into cross-currency swaps to mitigate the impact of currency rate changes on the Company’s net investments.

The Company also has foreign currency exposure arising from the denomination of monetary assets and liabilities in foreign currencies other than the functional currency of a given subsidiary as well as the risk that currency fluctuations could affect the dollar value of future cash flows generated in foreign currencies. Accordingly, Cabot uses short-term forward contracts to minimize the exposure to foreign currency risk. In certain situations where the Company has forecasted purchases under a long-term commitment or forecasted sales denominated in a foreign currency, Cabot may enter into appropriate financial instruments in accordance with the Company’s risk management policy to hedge future cash flow exposures.

The following table provides details of the derivatives held as of March 31, ~~2018~~2019 and September 30, ~~2017~~2018 to manage foreign currency risk.

The Company determines the fair value of financial instruments using quoted market prices whenever available. When quoted market prices are not available for various types of financial instruments (such as forwards, options and swaps), the Company uses standard models with market-based inputs, which take into account the present value of estimated future cash flows and the ability of Cabot or the financial counterparty to perform. For interest rate and cross-currency swaps, the significant inputs to these models are interest rate curves for discounting future cash flows and are adjusted for credit risk. For forward foreign currency contracts, the significant inputs are interest rate curves for discounting future cash flows, and exchange rate curves of the foreign currency for translating future cash flows.

For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in current period earnings.

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is recorded in AOCI and reclassified to earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current period earnings.

For net investment hedges, changes in the fair value of the effective portion of the derivatives’ gains or losses are reported as foreign currency translation gains or losses in AOCI while changes in the ineffective portion are reported in earnings. Effectiveness is assessed using the method based on ~~the hypothetical derivative method.~~changes in spot exchange rates. The gains or losses on derivative instruments reported in AOCI are reclassified to earnings in the period in which earnings are affected by the underlying item, such as a disposal or substantial liquidations of the entities being hedged. Effective October 1, 2017, the Company elected to de-designate its existing net investment hedge instruments in which hedge effectiveness was assessed using the method based on changes in forward exchange rates and re-designate the net investment hedges in which hedge effectiveness will be assessed using the method based on changes in spot exchange rates.

The Company has cross-currency swaps with a notional amount of $250 million, which are designated as hedges of its net investments in certain ~~Euro denominated~~Euro-denominated subsidiaries. Cash settlements occur semi-annually on March 15^th and September 15^th for fixed rate interest payments and a cash exchange of the notional currency amount will occur at the end of the term in 2026. ~~During the second quarter of both fiscal 2018 and 2017, the Company received net cash interest of $2 million.~~ As of March 31, ~~2018,~~2019, the fair value of these swaps was a net liability of ~~$28~~$7 million and was included in Prepaid expenses and other current assets and Other liabilities and the cumulative loss of ~~$24~~$4 million was included in AOCI on the Consolidated Balance Sheets. As of September 30, ~~2017,~~2018, the fair value of these swaps was a net liability of ~~$13~~$18 million and was included in Prepaid expenses and other current assets and Other Liabilities and the cumulative loss of $9$14 million was included in AOCI on the Consolidated Balance Sheets.

The following tables summarize the impact of the cross-currency swaps to AOCI and the Consolidated Statements of Operations:

	Six Months Ended March 31															Three Months Ended March 31
	2018			2017			2018			2017		2018		2017		2019		2018			2019			2018			2019		2018
Description	Gain/(Loss) Recognized in AOCI						(Gain)/Loss Reclassified from AOCI into Interest Expense in the Consolidated Statements of Operations					(Gain)/Loss Recognized in Interest Expense in the Consolidated Statements of Operations (Amount Excluded from Effectiveness Testing)				Gain/(Loss) Recognized in AOCI					(Gain)/Loss Reclassified from AOCI into Interest Expense in the Consolidated Statements of Operations						(Gain)/Loss Recognized in Interest Expense in the Consolidated Statements of Operations (Amount Excluded from Effectiveness Testing)
	(In millions)															(In millions)
Cross-currency swaps ⁽¹⁾	$	(13	)	$	(8	)	$	(2	)	$	—	$	1	$	—	$	5	$	(8	)	$	(2	)	$	(1	)	$	1	$	1

From time to time, the Company may enter into certain derivative instruments that may not be designated as hedges for accounting purposes, which may include cross-currency swaps, foreign currency forward contracts and commodity derivatives. For cross-currency swaps and foreign currency forward contracts not designated as hedges, the Company uses standard models with market-based inputs. The significant inputs to these models are interest rate curves for discounting future cash flows, and exchange rate curves of the foreign currency for translating future cash flows. In determining the fair value of the commodity derivatives, the significant inputs to valuation models are quoted market prices of similar instruments in active markets. Although these derivatives do not qualify for hedge accounting, Cabot believes that such instruments are closely correlated with the underlying exposure, thus managing the associated risk. The gains or losses from changes in the fair value of derivative instruments that are not accounted for as hedges are recognized in current period earnings.

At March 31, ~~2018 and September 30, 2017,~~2019, the fair value of derivative instruments not designated as hedges were immaterial and were presented in Accounts payable and accrued liabilities, and Prepaid expenses and other current assets ~~respectively,~~on the Consolidated Balance Sheets. At September 30, 2018, the fair value of derivative instruments not designated as hedges were immaterial and were presented in Accounts payable and accrued liabilities on the Consolidated Balance Sheets.

Cabot owns 100% of a carbon black operating entity in Argentina. Effective July 1, 2018, the operating entity was considered to be functioning in a highly inflationary economy and began using Cabot’s reporting currency, the U.S. dollar, as its functional currency. Since the conversion, all impacts of foreign exchange changes between the reporting currency and Argentine peso are reflected in earnings in the Consolidated Statements of Operations.

The Company’s income from operations has not been significantly impacted from this change because the operating entity’s sales and a portion of its raw material purchases were already denominated in U.S. dollars. The operating entity’s net revenue represented approximately 2% of Cabot’s total net revenue for both the three months and six months ended March 31, 2019.

The operating entity’s assets and liabilities held in local currency, which consist primarily of cash and cash equivalents, inventories, property, plant and equipment and accounts payable and accrued liabilities, made up less than 2% of Cabot’s total assets and total liabilities as of both March 31, 2019 and September 30, 2018. Changes in the Argentine peso exchange rate will result in foreign currency exchange gains or losses on the operating entity’s peso-denominated monetary assets and liabilities. For the three and six months ended March 31, 2019, the Company recorded a net gain of less than $1 million and a net loss of less than $1 million, respectively, within Other (income) expense in the Consolidated Statements of Operations, which reflects the remeasurement of the operating entity’s net monetary liabilities denominated in Argentine pesos using an exchange rate of 43.63 Argentine pesos to the U.S. dollar at March 31, 2019.

The Company will continue to monitor the developments in Argentina and their potential impact on the operating entity’s operations or carrying value.

Cabot owns 49% of a carbon black operating affiliate in Venezuela, which is accounted for as an equity affiliate, through wholly-owned subsidiaries that carry the investment and receive its dividends. ~~As of March 31, 2018, these subsidiaries carried~~While the ~~operating affiliate investment of $13 million.~~

~~During the six months ended March 31, 2018 and 2017, the Company received dividends in the amounts of $3 million and $2 million, respectively, which were paid in U.S. dollars.~~

A significant portion of the Company’s operating affiliate’s sales are exports denominated in U.S. dollars. The Venezuelan government mandates that a certain percentage of the dollars collected from these sales be converted into bolivars. The exchange rates made available to the Company as of March 31, 2018 and September 30, 2017 were 49,478 bolivars and 3,345 bolivars to the U.S. dollar, respectively. This exchange rate devaluation had an immaterial impact on the Company’s results.

~~The~~ operating entity has ~~generally~~historically been ~~profitable.~~profitable, it has not been operational in recent periods due to a lack of available raw materials, which is expected to continue for the foreseeable future. As such, in the second quarter of fiscal 2019, the Company performed an impairment analysis and determined that the decrease in fair value of the Venezuelan equity investment is other-than-temporary and that the investment is fully impaired. The Company ~~continues to closely monitor developments~~recorded an impairment charge of $11 million, which is included in ~~Venezuela and their potential impact on~~Other income (expense) within the ~~recoverability~~Consolidated Statement of its equity affiliate investment. Any future change in the exchange rate made available to the Company could cause the Company to change the exchange rate it uses and result in gains or losses on the bolivar denominated assets held by its operating affiliate and wholly-owned subsidiaries.Operations.

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, ~~and compounds and inkjet colorants product lines into the Specialty Carbons and Formulations business, and combines the~~ fumed metal oxides and aerogel product lines into the ~~Metal Oxides~~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, ~~2018~~2019 and ~~2017~~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			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
	(In millions)
Three Months Ended March 31, 2018
Revenues from external customers⁽²⁾	$	454	$	268	$	66		$	6		$	794	$	24		$	818		$	454	$	268	$	66		$	6		$	794	$	24		$	818
Income (loss) from continuing operations before income taxes⁽³⁾	$	79	$	57	$	(6	)	$	(3	)	$	127	$	(298	)	$	(171	)	$	79	$	57	$	(6	)	$	(3	)	$	127	$	(298	)	$	(171	)

Three Months Ended March 31, 2017
Six Months Ended March 31, 2019
Revenues from external customers⁽²⁾	$	352	$	228	$	67		$	7		$	654	$	24		$	678		$	902	$	485	$	137		$	43		$	1,567	$	98		$	1,665
Income (loss) from continuing operations before income taxes⁽³⁾	$	54	$	51	$	2		$	—		$	107	$	(29	)	$	78		$	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		$	841	$	497	$	136		$	12		$	1,486	$	52		$	1,538
Income (loss) from continuing operations before income taxes⁽³⁾	$	141	$	104	$	—		$	(5	)	$	240	$	(319	)	$	(79	)	$	141	$	104	$	—		$	(5	)	$	240	$	(319	)	$	(79	)

Six Months Ended March 31, 2017
Revenues from external customers⁽²⁾	$	647	$	433	$	136		$	18		$	1,234	$	55		$	1,289
Income (loss) from continuing operations before income taxes⁽³⁾	$	94	$	100	$	6		$	2		$	202	$	(49	)	$	153

	Three Months Ended March 31						Six Months Ended March 31						Three Months Ended March 31						Six Months Ended March 31
	2018			2017			2018			2017			2019			2018			2019			2018
	(In millions)												(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	$	(9	)	$	(6	)	$	(8	)	$	(2	)	$	(3	)	$	(9	)	$	(6	)	$	(8	)
Shipping and handling fees		33			30			60			57			32			33			64			60
By-product sales^(a)														20			—			40			—
Total	$	24		$	24		$	52		$	55		$	49		$	24		$	98		$	52

	Three Months Ended March 31						Six Months Ended March 31						Three Months Ended March 31						Six Months Ended March 31
	2018			2017			2018			2017			2019			2018			2019			2018
	(In millions)												(In millions)
Interest expense	$	(14	)	$	(13	)	$	(27	)	$	(26	)	$	(14	)	$	(14	)	$	(29	)	$	(27	)
Certain items ^(a)
Purification Solutions goodwill and long-lived assets impairment charge		(254	)		—			(254	)		—
Inventory reserve adjustment		(13	)		—			(13	)		—
Global restructuring activities		9			(2	)		8			(2	)
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		(5	)		2			(6	)		2			(1	)		(5	)		(1	)		(6	)
Gains (losses) on sale of investments														—			—			—			10
Acquisition and integration-related charges		(1	)		—			(1	)		—			(1	)		(1	)		(4	)		(1	)
Gains (losses) on sale of investments		—			—			10			—
Other		—			—			(1	)		—			(2	)		—			—			(1	)
Total certain items, pre-tax		(264	)		—			(257	)		—			(37	)		(264	)		(47	)		(257	)
Unallocated corporate costs^(b)		(16	)		(14	)		(30	)		(26	)		(13	)		(16	)		(25	)		(30	)
General unallocated income (expense)^(c)		(3	)		(1	)		(3	)		6			1			(3	)		3			(3	)
Less: Equity in earnings of affiliated companies, net of tax^(d)		1			1			2			3			—			1			—			2
Total	$	(298	)	$	(29	)	$	(319	)	$	(49	)	$	(63	)	$	(298	)	$	(98	)	$	(319	)

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.

Our consolidated financial statements have been prepared in conformity with accounting policies generally accepted in the United States (“GAAP”). The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. We consider an accounting estimate to be critical to the financial statements if (i) the estimate is complex in nature or requires a high degree of judgment and (ii) different estimates and assumptions were used, the results could have a material impact on the consolidated financial statements. On an ongoing basis, we evaluate our estimates and the application of our policies. We base our estimates on historical experience, current conditions and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting policies have not substantially changed from those described in the ~~2017~~2018 Form 10-K, other than our method for accounting for ~~U.S. carbon black inventories~~revenue recognition which we changed effective October 1, ~~2017,~~2018, as described below.

We ~~have updated~~recognize revenue when our customers obtain control of promised goods or services. The revenue recognized is the ~~discussion~~amount of ~~the Inventory Valuation, Intangible Asset and Goodwill Impairment, and Long-lived Assets Impairment policies included below~~consideration which we expect to ~~reflect recent events.~~

~~Effective October 1, 2017, we changed our method of accounting~~receive in exchange for U.S. carbon black inventories from the LIFO method to the FIFO method. Total U.S. inventories accounted for utilizing the LIFO cost flow assumption represented 7% of total worldwide inventories as of September 30, 2017 prior to this change in method.those goods or services. We ~~believe the FIFO method is preferable because it: (i) conforms the accounting for U.S. carbon black inventories to the inventory valuation methodology for~~derive the majority of our revenues from contracts for the sale of products from our Reinforcement Materials, Performance Chemicals and Purification Solutions segments. Our contracts with customers are generally for products only and do not include other ~~inventories; (ii) better represents how management assesses and reports~~performance obligations. Generally, we consider purchase orders, which in some cases are governed by master supply agreements, to be contracts with customers. The transaction price as specified on the ~~performance~~purchase order or sales contract is considered the standalone selling price for each distinct product. To determine the transaction price at the time when revenue is recognized, we evaluate whether the price is subject to adjustments, such as for returns, discounts or volume rebates, which are stated in the customer contract, to determine the net consideration to which we expect to be entitled. Revenue from product sales is recognized based on a point in time model when control of the ~~Reinforcement Materials~~product is transferred to the customer, which typically occurs upon shipment or delivery of the product to the customer and ~~Performance Chemicals operating segments~~title, risk and rewards of ownership have passed to the customer. Payment terms typically range from zero to ninety days.

Shipping and handling activities that ~~carry U.S. carbon black inventories,~~occur after the transfer of control to the customer are billed to customers and are recorded as sales revenue, as we consider these to be fulfillment costs. Shipping and handling costs are expensed in the ~~impact~~period incurred and included in Cost of ~~accounting for this inventory~~sales within the Consolidated Statement of Operations. Taxes collected on sales to customers are excluded from the transaction price.

We generally provide a ~~LIFO basis has~~warranty that our products will substantially conform to the identified specifications. Our liability typically is limited to either a credit equal to the purchase price or replacement of the non-conforming product. Returns under warranty have historically been ~~excluded~~immaterial.

Revenue in the Specialty Fluids segment arises primarily from ~~segment results; (iii) better aligns~~ the ~~accounting~~rental of cesium formate. This revenue is recognized throughout the rental period based on the contracted rental terms. Customers are also billed and revenue is recognized, typically at the end of the rental period, for ~~U.S. carbon black inventories~~cesium formate product that is not returned. We also generate revenues from cesium formate sold outside of the rental process and from the sale of fine cesium chemicals. This revenue is recognized when control of the product transfers to the customer, which is typically upon delivery of the product.

As permitted by the revenue recognition standard, Revenue from Contracts with Customers, when the period of time between the transfer of control of the goods and the time the customer pays for the goods is one year or less, we do not consider there to be a significant financing component associated with the ~~physical flow of that inventory;~~contract.

Refer to the discussion under the headings “Recently Adopted Accounting Standards” and ~~(iv) improves comparability with many of our peers. We applied this change retrospectively to all prior periods presented for which details are presented~~“Recent Accounting Pronouncements” in Note B of our Notes to the Consolidated Financial ~~Statements (“Note B”).~~Statements.

~~The cost of Specialty Fluids inventories that are classified as assets held for rent is determined using the average cost method. The cost of all other inventories is determined using the FIFO method.~~

We periodically review inventory for both potential obsolescence and potential declines in anticipated selling prices. In this review, we make assumptions about the future demand for and market value of the inventory, and based on these assumptions estimate the amount of any obsolete, unmarketable, slow moving or overvalued inventory. We write down the value of our inventories by an amount equal to the difference between the cost of the inventory and its estimated net realizable value. Historically, such write-downs have not been material. If actual market conditions are less favorable than those projected by management at the time of the assessment, however, additional inventory write-downs may be required, which could reduce our gross profit and our earnings.

We record tangible and intangible assets acquired and liabilities assumed in business combinations under the acquisition method of accounting. Amounts paid for an acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. We use assumptions and estimates in determining the fair value of assets acquired and liabilities assumed in a business combination. The determination of the fair value of intangible assets requires the use of significant judgment with regard to assumptions used in the valuation model. We estimate the fair value of identifiable acquisition-related intangible assets principally based on projections of cash flows that will arise from these assets. The projected cash flows are discounted to determine the fair value of the assets at the dates of acquisition.

Definite-lived intangible assets, which are comprised of trademarks, customer relationships and developed technologies, are amortized over their estimated useful lives and are reviewed for impairment when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets. As discussed in Note C of our Notes to the Consolidated Financial Statements, we acquired Tech Blend in November 2017, and the preliminary purchase price allocation included separately identifiable intangible assets of $29 million.

Goodwill is comprised of the purchase price of business acquisitions in excess of the fair value assigned to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but is reviewed for impairment annually as of May 31, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value. A reporting unit, for the purpose of the impairment test, is at or below the operating segment level, and constitutes a business for which discrete financial information is available and regularly reviewed by segment management. As part of the Tech Blend acquisition, goodwill of $33 million was generated and is reflected in the Specialty Compounds reporting unit. The other reporting units with goodwill balances are Reinforcement Materials and Fumed Metal Oxides. The separate businesses included within Performance Chemicals are considered separate reporting units. As such, the goodwill balance relative to Performance Chemicals is recorded in the Fumed Metal Oxides and Specialty Compounds reporting units.

Based on our most recent annual goodwill impairment test performed as of May 31, 2017, the fair values of the Reinforcement Materials and Fumed Metal Oxides reporting units were substantially in excess of their carrying values. The fair value of the Purification Solutions reporting unit exceeded its carrying amount by 13%. In the second quarter of fiscal 2018, we determined that it was more likely than not that the carrying value of the Purification Solutions reporting unit exceeded its fair value. Accordingly, we performed the quantitative goodwill impairment test. Refer to Note E of our Notes to the Consolidated Financial Statements (“Note E”) for details on the Purification Solutions goodwill impairment test and the resulting impairment charge recorded.

For the purpose of the goodwill impairment test, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, an additional quantitative evaluation is performed. Alternatively, we may elect to proceed directly to the quantitative goodwill impairment test. If based on the quantitative evaluation the fair value of the reporting unit is less than its carrying amount, a goodwill impairment loss would result. The goodwill impairment loss would be the amount by which the carrying value of the reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. The fair value of a reporting unit is based on discounted estimated future cash flows. The fair value is also benchmarked against a market approach using the guideline public companies method. The assumptions used to estimate fair value include management’s best estimates of future growth rates, operating cash flows, capital expenditures and discount rates over an estimate of the remaining operating period at the reporting unit level.

Our long-lived assets primarily include property, plant and equipment, intangible assets, long-term investments and assets held for rent. The carrying values of long-lived assets are reviewed for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be recoverable.

To test for impairment of assets, we generally use a probability-weighted estimate of the future undiscounted net cash flows of the assets over their remaining lives to determine if the value of the asset is recoverable. Long-lived assets are grouped with other assets and liabilities at the lowest level for which independent identifiable cash flows are determinable.

An asset impairment is recognized when the carrying value of the asset is not recoverable based on the analysis described above, in which case the asset is written down to its fair value. If the asset does not have a readily determinable market value, a discounted cash flow model may be used to determine the fair value of the asset. In circumstances when an asset does not have separately identifiable cash flows, an impairment charge is recorded when we no longer intend to use the asset. In the second quarter of fiscal 2018, we determined that the long-lived asset group of Purification Solutions was not recoverable. Accordingly, we recorded an impairment charge for the carrying value in excess of the fair value of the asset group. Refer to Note E regarding the results of the recoverability test performed on the long-lived assets of the Purification Solutions segment and the resulting impairment charge recorded.

Cabot is organized into four reportable business segments: Reinforcement Materials, Performance Chemicals, Purification Solutions and Specialty Fluids. Cabot is also organized for operational purposes into three geographic regions: the Americas; Europe, Middle East and Africa; and Asia Pacific. The discussions of our results of operations for the periods presented reflect these structures. In October 2018, the Company realigned its business reporting structure under the Performance Chemicals segment and now combines the specialty carbons, fumed metal oxides and aerogel product lines into the Performance Additives business, and the specialty compounds and inkjet product lines into the Formulated Solutions business. Prior period Performance Chemicals Segment revenue results have been recast to reflect the realignment.

Our analysis of our financial condition and operating results should be read with our consolidated financial statements and accompanying notes.

When discussing our results of operations, we use several terms as described below.

The term “product mix” refers to the mix of types and grades of products sold or the mix of geographic regions where products are sold, and the positive or negative impact this has on the revenue or profitability of the business and/or segment.

Our discussion under the heading “(Provision) Benefit for Income Taxes and Reconciliation of Effective Tax Rate to Operating Tax Rate” includes a discussion of our historical and expected “effective tax rate” and our “operating tax rate” and includes a reconciliation of the two rates. Our operating tax rate is a non-GAAP financial measure and should not be considered as an alternative to our effective tax rate, the most comparable GAAP financial measure. In calculating our operating tax rate, we exclude discrete tax items, which include: (i) unusual or infrequent items, such as a significant release or establishment of a valuation allowance, (ii) items related to uncertain tax positions, such as the tax impact of audit settlements, interest on tax reserves, and the release of tax reserves from the expiration of statutes of limitations, and (iii) other discrete tax items, such as the tax impact of legislative changes and, on a quarterly basis, the timing of losses in certain jurisdictions and the cumulative rate adjustment, if applicable. We also exclude the tax impact of certain items, as defined below in the discussion of Total segment EBIT, on both operating income and the tax provision. Our definition of the operating tax rate may not be comparable to the definition used by other companies. Management believes that this non-GAAP financial measure is useful supplemental information because it helps our investors compare our tax rate year to year on a consistent basis and to understand what our tax rate on current operations would be without the impact of these items.

Our discussion under the heading “Second Quarter and First Six Months of Fiscal ~~2018~~2019 versus Second Quarter and First Six Months of Fiscal ~~2017—~~2018—By Business Segment” includes a discussion of Total segment EBIT, which is a non-GAAP financial measure defined as Income (loss) from continuing operations before income taxes and equity in earnings from affiliated companies less certain items and other unallocated items. Our Chief Operating Decision Maker, who is our President and Chief Executive Officer, uses segment EBIT to evaluate the operating results of each segment and to allocate resources to the segments. We believe Total segment EBIT, which reflects the sum of EBIT from our four reportable segments, provides useful supplemental information for our investors as it is an important indicator of our operational strength and performance, allows investors to see our results through the eyes of management, and provides context for our discussion of individual business segment performance. Total segment EBIT should not be considered an alternative for Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, which is the most directly comparable GAAP financial measure. A reconciliation of Total segment EBIT to Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies is provided under the heading “Second Quarter of Fiscal ~~2018~~2019 versus Second Quarter of Fiscal ~~2017—~~2018—By Business Segment”. Investors should consider the limitations associated with this non-GAAP measure, including the potential lack of comparability of this measure from one company to another.

In calculating Total segment EBIT, we exclude from our Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies (i) items of expense and income that management does not consider representative of our fundamental on-going segment results, which we refer to as “certain items”, and (ii) items that, because they are not controlled by the business segments and primarily benefit corporate objectives, are not allocated to our business segments, such as interest expenseand other corporate costs, which include unallocated corporate overhead expenses such as certain corporate salaries and headquarter expenses, plus costs related to special projects and initiatives, which we refer to as “other unallocated items”. Management believes excluding the items identified as certain items facilitates operating performance comparisons from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis and also facilitates an evaluation of our operating performance without the impact of these costs or benefits. The items of income and expense that we have excluded from Total segment EBIT, as applicable, but that are included in our GAAP Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, as applicable, are described below.

The ~~$140~~$26 million increase in net sales in the second quarter of fiscal ~~2018~~2019 compared to the second quarter of fiscal ~~2017~~2018 was primarily driven by the impact of the change in classification of by-product sales, effective October 1, 2018, from a ~~more favorable price~~reduction of Cost of sales to an inclusion in Net sales and ~~product mix (combined $93~~other operating revenues ($20 million) ~~predominantly~~. Net sales from the business segments was consistent in ~~Reinforcement Materials and~~ the ~~favorable impact from foreign currency translation ($42 million).~~second quarter of fiscal 2019 when compared to the same period of the prior year. For the first six months of fiscal ~~2018,~~2019, net sales increased ~~$249~~$127 million compared to the first six months of fiscal ~~2017~~2018 primarily due to a more favorable price and product mix ~~($173~~(combined $117 million) predominantly in Reinforcement Materials and higher volumes ($7 million), partially offset by the ~~favorable~~unfavorable impact from foreign currency translation ($~~55 million) and higher volumes ($24~~45 million). ~~The higher volumes~~Net sales were ~~driven~~also impacted by the ~~Reinforcement Materials~~change in classification of by-product sales, effective October 1, 2018, from a reduction of Cost of sales to an inclusion in Net sales and ~~Performance Chemicals segments (combined $37~~other operating revenues ($40 million) ~~and were partially offset by Purification Solutions and Specialty Fluids (combined $13 million)~~.

Gross profit ~~increased~~decreased by ~~$21~~$10 million in the second quarter of fiscal ~~2018~~2019 compared to the second quarter of fiscal ~~2017,~~2018, primarily due to ~~higher~~lower unit margins in Reinforcement Materials ~~the favorable impact from foreign currency translation~~ and ~~the favorable impact from changing inventory levels, partially offset~~Performance Chemicals. Lower margins were caused by ~~higher fixed costs.~~softer automotive production and weaker pricing in China. For the first six months of fiscal ~~2017,~~2019, gross profit ~~increased~~decreased by ~~$40~~$20 million primarily due to ~~higher~~lower unit margins in Reinforcement Materials and ~~the favorable impact from foreign currency translation,~~Performance Chemicals, partially offset by higher ~~fixed costs.~~project activity from the Specialty Fluids segment.

Selling and administrative expenses ~~increased~~decreased by ~~$13~~$9 million and ~~$19~~$6 million in the second quarter and first six months of fiscal ~~2018~~2019 compared to the same periods of fiscal ~~2017,~~2018, primarily due to ~~ongoing Corporate projects and higher~~lower incentive ~~compensation accruals.~~compensation.

Research and technical expenses ~~increased~~decreased by $2$1 million in the second quarter of fiscal 2019 compared to the second quarter of fiscal 2018, ~~and $5 million~~due to efforts to reduce costs in the current fiscal year. For the first six months of fiscal ~~2018~~2019, Research and technical expenses were flat as compared to the ~~same periods~~first six months of fiscal ~~2017, primarily due to higher spending on growth projects across the Company.~~2018.

	Three Months Ended March 31						Six Months Ended March 31						Three Months Ended March 31						Six Months Ended March 31
	2018			2017			2018			2017			2019			2018			2019			2018
	(In millions)												(In millions)
Interest and dividend income	$	3		$	2		$	6		$	4		$	2		$	3		$	4		$	6
Interest expense	$	(14	)	$	(13	)	$	(27	)	$	(26	)	$	(14	)	$	(14	)	$	(29	)	$	(27	)
Other income (expense)	$	(2	)	$	(1	)	$	6		$	1		$	(12	)	$	1		$	(6	)	$	12

Interest and dividend income ~~increased~~decreased by $1 million in the second quarter of fiscal ~~2018~~2019 and $2 million ~~for~~in the first six months of fiscal ~~2018~~2019 compared to the same periods offor fiscal ~~2017~~2018 primarily due to ~~interest earned on higher~~lower cash balances.

Interest expense ~~increased by $1 million~~remained consistent in the second quarter of fiscal ~~2018 and the first six months of fiscal 2018~~2019 compared to the same ~~periods in~~period of fiscal ~~2017~~2018. For the six months ended fiscal 2019, Interest expense increased by $2 million compared to the same period of fiscal 2018 primarily due to higher commercial paper ~~debt~~ balances and higher interest rates.

Other income (expense) changed by $1$13 million in the second quarter of fiscal ~~2018~~2019 compared to the second quarter of fiscal ~~2017,~~2018, primarily due to the ~~unfavorable comparison of foreign currency movements.~~impairment charge recorded related to our investment in our Venezuelan equity affiliate. For the six months ended fiscal 2019, Other income (expense) changed by $5$18 million ~~in the first six months of fiscal 2018~~ compared to the same period of fiscal ~~2017 primarily~~2018 due to the ~~realized~~impairment charge related to our investment in our Venezuelan equity affiliate and a gain on the sale of ~~cost-method investments.~~cost method investments in fiscal 2018 that did not reoccur in fiscal 2019, partially offset by a pension settlement gain in the first quarter of fiscal 2019.

(Provision) Benefit for Income Taxes and Reconciliation of Effective Tax Rate to Operating Tax Rate

	Three Months Ended March 31						Six Months Ended March 31						Three Months Ended March 31						Six Months Ended March 31
	2018			2017			2018			2017			2019			2018			2019			2018
	(Dollars in millions)												(Dollars in millions)
(Provision) benefit for income taxes	$	7		$	1		$	(198	)	$	(17	)	$	(20	)	$	7		$	(13	)	$	(198	)

Effective tax rate		4	%		(1	)%		(248	)%		11	%		41	%		4	%		11	%		(248	)%
Impact of discrete tax items⁽¹⁾:
Unusual or infrequent items		(15	)%		25	%		238	%		12	%		(1	)%		(15	)%		17	%		238	%
Items related to uncertain tax positions		—	%		(1	)%		2	%		1	%		1	%		—	%		3	%		2	%
Other discrete tax items		—	%		1	%		—	%		—	%		(1	)%		—	%		—	%		—	%
Impact of certain items		32	%		—	%		29	%		—	%		(16	)%		32	%		(7	)%		29	%
Operating tax rate		21	%		24	%		21	%		24	%		24	%		21	%		24	%		21	%

For fiscal ~~2018, our expected operating~~year 2019, the Effective tax rate ~~is reconciled to our expected effective~~and Operating tax rate are expected to be in a range of 19% to 21% and 23% to 25%, respectively. The discrete tax items have the same impact on these ranges. The table ~~below.~~provided below reconciles to the mid-point of these ranges.

We file U.S. federal and state and non-U.S. income tax returns in jurisdictions with varying statutes of limitations. We are under audit in a number of jurisdictions. It is possible that some of these audits will be resolved in fiscal ~~2018~~2019 and could impact our anticipated effective tax rate. We have filed our tax returns in accordance with the tax laws, in all material respects, in each jurisdiction and maintain tax reserves for uncertain tax positions.

On December 22, 2017, the U.S. enacted significant changes to federal income tax law affecting us, including a permanent reduction of the U.S. corporate income tax rate from 35% to 21%, effective January 1, ~~2018. We expect that these changes will positively impact our future after-tax earnings in~~2018, as well as a 100% dividend received deduction for foreign dividends. Although the ~~U.S., primarily due to~~passage of the ~~lower federal statutory~~Act reduced the U.S. tax rate and ~~the establishment of~~effectively created a ~~full participation exemption regime for foreign earnings. In transitioning to this new full~~ participation exemption regime for foreign earnings, certain other aspects of the new legislation, including in particular, immediate U.S. taxation of global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries, will have a negative impact on earnings and this is the primary driver of the increase in the operating tax rate. In transitioning to this participation exemption regime, we ~~are~~were also subject, during our fiscal 2018, to a one-time tax ~~for~~on the deemed repatriation of certain foreign earnings. ~~Refer to the discussion under the heading “Tax Reform” in Note J.~~

Equity in Earnings of Affiliated Companies and Net Income (Loss) Attributable to Noncontrolling Interests

	Three Months Ended March 31				Six Months Ended March 31				Three Months Ended March 31				Six Months Ended March 31
	2018		2017		2018		2017		2019		2018		2019		2018
	(In millions)								(In millions)
Equity in earnings of affiliated companies, net of tax	$	1	$	1	$	2	$	3	$	—	$	1	$	—	$	2
Net income (loss) attributable to noncontrolling interests, net of tax	$	10	$	6	$	20	$	10	$	6	$	10	$	14	$	20

Equity in earnings of affiliated companies, net of tax, ~~remained consistent~~decreased by $1 million and $2 million in the second quarter and first six months of fiscal ~~2018~~2019 compared to the same ~~period~~periods of fiscal ~~2017. For the six months ended fiscal~~ 2018, ~~Equity in earnings of affiliated companies, net of tax decreased $1 million compared to the same period of fiscal 2017,~~ primarily due to lower earnings from our Venezuelan equity affiliate.

Net income (loss) attributable to noncontrolling interests, net of tax, ~~increased~~decreased by $4 million in the second quarter ~~of fiscal 2018~~ and ~~$10~~$6 million ~~for~~in the first six months of fiscal ~~2018 as~~2019 compared to the same periods of fiscal ~~2017,~~2018, primarily due to the ~~higher~~lower profitability offrom our joint ventures in ~~China and the Czech Republic.~~China.

In the second quarter and first six months of fiscal ~~2018,~~2019, we reported net income (loss) attributable to Cabot Corporation of ~~($173)~~$23 million and ~~($295)~~$92 million, ~~respectively,~~ or ~~($2.80)~~$0.39 and ~~($4.78)~~$1.53 per diluted common share, respectively. This compares to net income (loss) attributable to Cabot Corporation of ~~$74~~($173) million and ~~$129~~($295) million, ~~respectively,~~ or ~~$1.19~~($2.80) and ~~$2.05~~($4.78) per diluted common share, respectively, in the second quarter and first six months of fiscal ~~2017.~~2018. The net loss ~~for~~in the second quarter and first six months of fiscal 2018 ~~year to date~~ is ~~due to a tax charge recorded of $189 million in connection with the enactment of the Act, and~~driven by the Purification Solutions asset impairment charge of $224 million after-tax. In addition, the first six months of fiscal 2018 were impacted by a tax charge of $189 million recorded in connection with the enactment of the Act.

Second Quarter ~~and First Six Months~~ of Fiscal ~~2018~~2019 versus Second Quarter ~~and First Six Months~~ of Fiscal ~~2017—~~2018—By Business Segment

Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, certain items, other unallocated items, and Total segment EBIT for the three and six months ended March 31, ~~2018~~2019 and ~~2017~~2018 are set forth in the table below. The details of certain items and other unallocated items are shown below and in Note P of our Notes to the Consolidated Financial Statements.

	Three Months Ended March 31						Six Months Ended March 31						Three Months Ended March 31						Six Months Ended March 31
	2018			2017			2018			2017			2019			2018			2019			2018
	(In millions)												(In millions)
Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies	$	(171	)	$	78		$	(79	)	$	153		$	49		$	(171	)	$	119		$	(79	)
Less: Certain items		(264	)		—			(257	)		—			(37	)		(264	)		(47	)		(257	)
Less: Other unallocated items		(34	)		(29	)		(62	)		(49	)		(26	)		(34	)		(51	)		(62	)
Total segment EBIT	$	127		$	107		$	240		$	202		$	112		$	127		$	217		$	240

In the second quarter of fiscal ~~2018,~~ 2019,Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies ~~decreased~~increased by ~~$249~~$220 million ~~due to the Purification Solutions asset impairment charge of $254 million, as compared with the second quarter of fiscal 2017.~~and Total segment EBIT ~~increased~~decreased by ~~$20 million when compared to the second quarter of fiscal 2017 primarily~~$15 million. These changes were due to ~~higher~~lower unit margins ($3231 million)~~, a favorable impact from foreign currency translation ($7 million) and~~ driven by the ~~favorable impact from changing inventory levels ($5 million),~~Reinforcement Materials segment, partially offset by ~~higher~~lower fixed costs ($2114 million)~~. Higher unit~~ across all segments. The lower margins in Reinforcement Materials were primarily driven by ~~calendar year 2018 customer agreement~~the unfavorable impact to margins in China from weaker pricing ~~and a strong spot pricing environment in Asia in Reinforcement Materials. The higher fixed costs were associated with our investments in growth initiatives~~due to softening automotive production and higher ~~personnel~~raw material costs.

In addition, the ~~first six months of fiscal 2018,~~increase in Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies ~~decreased by $232 million due to~~reflects the Purification Solutions asset impairment ~~charges totaling $254 million, as compared with~~charge ($254 million) recorded in the second quarter of fiscal 2018 that did not reoccur in fiscal 2019 and the decrease in expense related to Other unallocated items ($8 million), partially offset by the Specialty Fluids asset impairment and an impairment charge related to our Venezuelan equity affiliate (combined $31 million) recorded in the second quarter of fiscal 2019.

In the first six months of ~~2017.~~fiscal 2019, Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies increased by $198 million and Total segment EBIT ~~increased~~decreased by ~~$38 million when compared to the same period of fiscal 2017 primarily~~$23 million. These changes were due to ~~higher volumes~~lower unit margins ($539 million), primarily in Reinforcement Materials and Performance Chemicals, ~~higher unit margins ($50 million) and the favorable impact from foreign currency translation ($9 million),~~ partially offset by higher ~~fixed costs~~volumes ($2417 million)~~. Higher~~ which were driven by higher activity from Specialty Fluids. The lower unit margins were primarily driven by ~~calendar year~~weaker China pricing due to softening automotive production. In addition, the increase in Income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies reflects the Purification Solutions asset impairment charges recorded in the second quarter of fiscal 2018 ~~contract pricing~~($254 million) that did not reoccur in fiscal 2019 and ~~a strong spot pricing environment~~the decrease in ~~Asia~~expense related to other unallocated items ($11 million), partially offset by the Specialty Fluids asset impairment and an impairment charge related to our Venezuelan equity affiliate (combined $31 million) recorded in ~~Reinforcement Materials. The higher fixed costs were associated with our investments in growth initiatives~~the second quarter of fiscal 2019 and higher ~~personnel costs.~~restructuring charges related to the Purification Solutions transformation plan.

Details of the certain items for the second quarter of fiscal 2019 and ~~first six months of~~ fiscal 2018 are as follows:

	Three Months Ended March 31						Six Months Ended March 31						Three Months Ended March 31						Six Months Ended March 31
	2018			2017			2018			2017			2019			2018			2019			2018
	(In millions)												(In millions)
Purification Solutions goodwill and long-lived asset impairment charge (Note E)	$	(254	)		—		$	(254	)		—
Inventory reserve adjustment (Note E)		(13	)		—			(13	)		—
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)		9			(2	)		8			(2	)		(2	)		9			(11	)		8
Legal and environmental matters and reserves (Note I)		(5	)		2			(6	)		2
Acquisition and integration-related charges (Note C)		(1	)		—			(1	)		—
Legal and environmental matters and reserves														(1	)		(5	)		(1	)		(6	)
Gains (losses) on sale of investments		—			—			10			—			—			—			—			10
Acquisition and integration-related charges														(1	)		(1	)		(4	)		(1	)
Other		—			—			(1	)		—			(2	)		—			—			(1	)
Total certain items, pre-tax		(264	)		—			(257	)		—			(37	)		(264	)		(47	)		(257	)
Tax-related certain items:
Tax impact of certain items		32			—			30			—			1			32			3			30
Discrete tax items (Note J)		(5	)		20			(190	)		20			—			(5	)		24			(190	)
Total tax-related certain items		27			20			(160	)		20			1			27			27			(160	)
Total certain items, after tax	$	(237	)	$	20		$	(417	)	$	20		$	(36	)	$	(237	)	$	(20	)	$	(417	)

The tax impact of certain items is determined by (1) starting with the current and deferred income tax expense or benefit included in Net income (loss) attributable to Cabot Corporation, and (2) subtracting the tax expense or benefit on “adjusted earnings”. Adjusted earnings is defined as the pre-tax income attributable to Cabot Corporation excluding certain items. The tax expense or benefit on adjusted earnings is calculated by applying the operating tax rate, as defined under the heading “Definition of Terms and Non-GAAP Financial Measures”, to adjusted earnings.

	Three Months Ended March 31						Six Months Ended March 31						Three Months Ended March 31						Six Months Ended March 31
	2018			2017			2018			2017			2019			2018			2019			2018
	(In millions)												(In millions)
Interest expense	$	(14	)	$	(13	)	$	(27	)	$	(26	)	$	(14	)	$	(14	)	$	(29	)	$	(27	)
Unallocated corporate costs		(16	)		(14	)		(30	)		(26	)		(13	)		(16	)		(25	)		(30	)
General unallocated income (expense)		(3	)		(1	)		(3	)		6			1			(3	)		3			(3	)
Less: Equity in earnings of affiliated companies, net of tax		1			1			2			3			—			1			—			2
Total other unallocated items	$	(34	)	$	(29	)	$	(62	)	$	(49	)	$	(26	)	$	(34	)	$	(51	)	$	(62	)

A discussion of items that we refer to as “other unallocated items” can be found under the heading “Definition of Terms and Non-GAAP Financial Measures”. The balances of unallocated corporate costs are primarily comprised of expenditures related to managing a public company that are not allocated to the segments and corporate business development costs related to ongoing corporate projects. The balances of General unallocated income (expense) consist 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.

Total other unallocated items changed by $5$8 million in the second quarter of fiscal ~~2018~~2019 as compared to the same period in fiscal ~~2017,~~2018. Within Total other unallocated items, General unallocated income (expense) changed by $4 million over the same period of fiscal 2018 primarily due to the ~~unfavorable~~favorable impact of foreign currency ~~translation which is included in General unallocated income (expense) and an increase in~~translation. Unallocated corporate costs ~~for~~decreased $3 million in the second quarter of fiscal 2019 as compared to the same period in fiscal 2018 primarily due to lower spending on corporate ~~projects.~~projects and lower incentive compensation.

Total other unallocated items changed by ~~$13~~$11 million in the first six months of fiscal ~~2018~~2019 as compared to the same period in fiscal ~~2017~~2018 primarily due to the ~~unfavorable~~favorable impact from ~~the change in the deferred margin and the unfavorable impact of~~ foreign currency translation and higher interest income, both of which are included in General unallocated income (expense) and ~~an increase~~a decrease in Unallocated corporate costs for corporate ~~projects.~~projects and lower incentive compensation.

Sales and EBIT for Reinforcement Materials for the second quarter and first six months of fiscal ~~2018~~2019 and fiscal ~~2017~~2018 were as follows:

	Three Months Ended March 31				Six Months Ended March 31				Three Months Ended March 31				Six Months Ended March 31
	2018		2017		2018		2017		2019		2018		2019		2018
	(In millions)								(In millions)
Reinforcement Materials Sales	$	454	$	352	$	841	$	647	$	445	$	454	$	902	$	841
Reinforcement Materials EBIT	$	79	$	54	$	141	$	94	$	61	$	79	$	123	$	141

Sales in Reinforcement Materials ~~increased~~decreased by ~~$102~~$9 million in the second quarter of fiscal ~~2018~~2019 compared to the same period of fiscal ~~2017,~~2018, primarily due to ~~a more favorable price and product mix (combined $80 million) and a favorable~~the unfavorable impact from foreign currency translation ($2216 million) and lower volumes ($2 million), partially offset by more favorable pricing ($9 million). The favorable ~~price and product mix impact~~pricing was primarily due to ~~price improvements in~~benefits from calendar year ~~2018~~2019 customer agreements and ~~higher~~partially offset by lower spot ~~prices~~pricing in ~~Asia.~~China.

In the first six months of fiscal ~~2018,~~2019, sales in Reinforcement Materials increased by ~~$194~~$61 million when compared to the first six months of fiscal ~~2017.~~2018. The increase was principally driven by a more favorable price and product mix (combined ~~$158~~$85 million) and higher volumes ($3 million), partially offset by the ~~favorable~~unfavorable impact from foreign currency translation ($28 ~~million) and higher volumes ($9~~ million). The more favorable price and product mix impact was primarily due to ~~higher spot pricing in Asia and~~ favorable pricing related to calendar year 2018 and 2019 customer ~~agreements.~~agreements and the passthrough of higher feedstock costs in our pricing.

EBIT in Reinforcement Materials ~~increased~~decreased by ~~$25~~$18 million in the second quarter of fiscal ~~2018~~2019 compared to the same period of fiscal ~~2017,~~2018. The decrease was primarily due to ~~higher~~lower unit margins ($2825 million), the unfavorable impact of inventory comparisons ($2 million) and lower volumes ($1 million), partially offset by lower fixed costs ($9 million) and the favorable impact from foreign currency translation ($~~4 million), partially offset by higher fixed costs ($10~~1 million). ~~Higher~~The lower unit margins ~~were driven by price improvements in calendar year 2018 customer agreements, a more favorable product mix, and spot pricing in Asia. The higher fixed costs~~ were primarily due to ~~higher utilities~~the rapid decline of global feedstock costs during our first fiscal quarter, which resulted in a temporary pricing and ~~personnel costs.~~cost mismatch, and the weaker pricing environment in China that more than offset the favorable pricing related to calendar year 2019 customer agreements.

EBIT in Reinforcement Materials ~~increased~~decreased by ~~$47~~$18 million in the first six months of fiscal ~~2018~~2019 compared to the same period of fiscal ~~2017.~~2018. The ~~increase~~decrease was principally driven by ~~higher~~lower unit margins ($4926 million), partially offset by lower fixed costs ($4 million), higher volumes ($41 million) and the favorable impact of foreign currency translation ($~~5 million), partially offset by higher fixed costs ($11~~1 million). ~~Higher~~The lower unit margins ~~were driven by price improvements in customer agreements and spot pricing in Asia. The higher fixed costs~~ were primarily due to ~~higher utilities~~the rapid decline of global feedstock costs during our first fiscal quarter, which resulted in a temporary pricing and ~~personnel costs.~~cost mismatch, and the weaker pricing environment in China that more than offset the favorable pricing related to calendar year 2019 customer agreements.

Sales and EBIT for Performance Chemicals for the second quarter and first six months of fiscal ~~2018~~2019 and fiscal ~~2017~~2018 were as follows:

	Three Months Ended March 31				Six Months Ended March 31				Three Months Ended March 31				Six Months Ended March 31
	2018		2017		2018		2017		2019		2018		2019		2018
	(In millions)								(In millions)
Specialty Carbons and Formulations Sales	$	193	$	162	$	353	$	300
Metal Oxides Sales		75		66		144		133
Performance Additives Sales									$	179	$	177	$	346	$	336
Formulated Solutions Sales										75		91		139		161
Performance Chemicals Sales	$	268	$	228	$	497	$	433	$	254	$	268	$	485	$	497
Performance Chemicals EBIT	$	57	$	51	$	104	$	100	$	38	$	57	$	74	$	104

Sales in Performance Chemicals ~~increased~~decreased by ~~$40~~$14 million in the second quarter of fiscal ~~2018~~2019 compared to the same period of fiscal ~~2017,~~2018, primarily due to ~~higher~~lower volumes ($1215 million)~~, a favorable~~ and the unfavorable impact from foreign currency translation ($169 million) ~~and~~, partially offset by a more favorable price and product mix (combined ~~$12~~$10 million). The lower volumes were primarily due to weaker sales from the Formulated Solutions business due to softer automotive production. The favorable price and product mix was primarily ~~due~~related to ~~increased pricing achieved for both Specialty Carbons and Formulations and Metal Oxides sales.~~the metal oxides product line within the Performance Additives business.

In the first six months of fiscal ~~2018,~~2019, sales in Performance Chemicals ~~increased~~decreased by ~~$64~~$12 million when compared to the same period of fiscal ~~2017.~~2018. The ~~increase~~decrease was primarily due to ~~higher~~lower volumes ($2822 million) and the unfavorable impact from foreign currency translation ($14 million), partially offset by a more favorable price and product mix (combined ~~$15 million) and the favorable impact of foreign currency translation ($21~~$24 million). ~~Higher volumes~~Volumes were ~~primarily related to~~lower across all product lines within Performance Chemicals with the ~~Specialty Carbons~~most significant impact being in the Formulated Solutions business. The favorable price and ~~Formulations business in Europe, China and North America.~~product mix was driven by the metal oxides product line within Performance Additives.

EBIT in Performance Chemicals ~~increased~~decreased by $6$19 million incompared to the second quarter of fiscal 2018 ~~compared to the same period of fiscal 2017,~~ primarily due to ~~higher~~lower volumes ($37 million), ~~higher~~lower unit margins ($~~7 million), a favorable impact from changing inventory levels ($4~~8 million) and ~~a favorable~~the unfavorable impact from foreign currency translation ($~~4 million), partially offset by higher fixed costs ($12~~2 million). ~~Higher unit~~Volumes decreased by 1% in the Performance Additives business and 16% in the Formulated Solutions business. Lower volumes were primarily due to softer automotive production in EMEA and China. Lower margins were largely driven by ~~price increases and~~ a ~~more favorable~~weaker product mix ~~while higher fixed costs were primarily driven by increased spending on maintenance~~ and ~~selling and administrative costs related to growth initiatives.~~the impact of high cost specialty carbons inventory that moved through our supply chain during the second quarter.

EBIT in Performance Chemicals ~~increased~~decreased by $4$30 million in the first six months of fiscal ~~2018~~2019 when compared to the same period of fiscal ~~2017~~2018 principally due to ~~higher~~lower volumes ($11 million), lower unit margins ($67 million), higher ~~volumes~~fixed costs ($109 million) largely related to growth investments and the ~~favorable~~unfavorable impact of foreign currency translation ($~~5 million), partially offset by higher fixed costs ($17~~3 million). ~~Higher~~Lower volumes ~~were primarily related to the Specialty Carbons and Formulations business in Europe, China and North America. Higher fixed costs~~ were primarily due to ~~increased maintenance~~softer automotive production in EMEA and China. Lower margins were largely driven by a weaker product mix and the impact of high cost specialty carbons inventory that moved through our supply chain during the first six months of 2019. Higher fixed costs ~~and selling and administrative costs~~are largely related to growth ~~initiatives.~~investments for our two new metal oxides plants in China and the U.S.

Sales and EBIT for Purification Solutions for the second quarter and first six months of fiscal ~~2018~~2019 and fiscal ~~2017~~2018 were as follows:

	Three Months Ended March 31					Six Months Ended March 31				Three Months Ended March 31					Six Months Ended March 31
	2018			2017		2018		2017		2019		2018			2019			2018
	(In millions)									(In millions)
Purification Solutions Sales	$	66		$	67	$	136	$	136	$	72	$	66		$	137		$	136
Purification Solutions EBIT	$	(6	)	$	2	$	—	$	6	$	1	$	(6	)	$	(2	)	$	—

Sales in Purification Solutions ~~decreased~~increased by $1$6 million in the second quarter of fiscal ~~2018~~2019 compared to the same period of fiscal ~~2017~~2018 due to ~~lower~~a more favorable price and product mix (combined $5 million) and higher volumes ($64 million), partially offset by ~~a favorable~~the unfavorable impact from foreign currency translation ($43 million). The more favorable price and product mix was primarily due to higher pricing related to specialty applications. Sales in Purification Solutions ~~remained consistent~~increased by $1 million in the first six months of fiscal 2019 when compared to the same period of fiscal 2018 due to higher volumes in the specialty and environmental applications.

EBIT in Purification Solutions increased by $7 million compared to the second quarter of fiscal 2018 due to higher volumes ($2 million), higher unit margins ($1 million) mainly from improved pricing and lower fixed costs ($3 million). The lower fixed costs are in part due to the impacts of the previously announced transformation plan.EBIT in Purification Solutions decreased by $2 million in the first six months of fiscal 2019 when compared to the same period of fiscal 2018 due to lower unit margins ($6 million) and the receipt of royalty payments in the first six months of fiscal 2018 ~~when compared to the same period of~~that did not repeat in fiscal ~~2017. Volume decreases~~2019 ($5 million) ~~during the first six months of fiscal 2018 were~~, partially offset by higher volumes ($2 million), lower fixed costs ($6 million) and the favorable impact from foreign currency translation ($61 million).

~~EBIT in Purification Solutions decreased by $8 million in the second quarter of fiscal 2018 compared to the same period of fiscal 2017, primarily due to lower volumes ($3 million),~~ The lower unit margins ~~($4 million) and the unfavorable impact from foreign currency translation ($1 million). EBIT in Purification Solutions decreased by $6 million in the~~for first six months of fiscal 2018 when compared to the same period of fiscal 2017 due to lower volumes ($2 million), lower unit margins ($5 million), the unfavorable impact of inventory comparisons ($2 million) and the unfavorable impact of foreign currency translation ($1 million), partially offset by lower fixed costs ($5 million). The lower volumes and lower unit margins for both the second quarter and first six months of fiscal 20182019 were primarily due to ongoing competitive pressures within the mercury removal application.

Sales and EBIT for Specialty Fluids for the second quarter and first six months of fiscal ~~2018~~2019 and ~~2017~~2018 were as follows:

	Three Months Ended March 31					Six Months Ended March 31					Three Months Ended March 31					Six Months Ended March 31
	2018			2017		2018			2017		2019		2018			2019		2018
	(In millions)										(In millions)
Specialty Fluids Sales	$	6		$	7	$	12		$	18	$	24	$	6		$	43	$	12
Specialty Fluid EBIT	$	(3	)	$	—	$	(5	)	$	2	$	12	$	(3	)	$	22	$	(5	)

Sales in Specialty Fluids ~~decreased~~increased by $1$18 million in the second quarter of fiscal ~~2018~~2019 and $6$31 million in the first six months of fiscal ~~2018~~2019 compared to the same periods of fiscal ~~2017~~2018 primarily due to ~~lower~~higher volumes from ~~reduced~~increased project activity.

EBIT in Specialty Fluids ~~decreased~~increased by $3$15 million in the second quarter of fiscal ~~2018~~2019 and $7$27 million in the first six months of fiscal ~~2018~~2019 compared to the same periods of fiscal ~~2017~~2018 primarily due to ~~lower~~higher volumes from ~~reduced~~increased project activity.

~~Looking ahead,~~While the recovery in the China economy and the automotive market are taking longer than expected, we believe the current challenges are temporary and our outlook for the fourth quarter remains strong. We anticipate ~~that~~improving sequential results in our Reinforcement Materials ~~will continue to benefit from strong execution in a favorable market environment. In~~and Performance Chemicals segments driven by volume and margin recovery. We are seeing some signs of recovery as we ~~expect~~move into the third quarter and anticipate the unfavorable impact from the timing of raw material flow-through will not repeat. We’ve implemented steps to ~~maintain our margins while we drive volume growth through the second half of the year. Although the ongoing competitive pressures will continue to impact results in~~control costs and manage cash, including executing on the Purification Solutions ~~segment,~~transformation plan, as well as reducing discretionary spending and net working capital levels. Additionally, we ~~expect higher seasonal volumes and lower variable costs in~~remain on track to complete the ~~second half~~divestiture of ~~the year. Longer term, we will continue to explore strategic alternatives for~~ our Purification Solutions business to maximize value for our shareholders. In the meantime, we will remain focused on regaining volumes in the mercury removal application, growing volumes in our specialty applications, and looking for opportunities to reduce costs and tightly manage capital for this business. In the Specialty Fluids segment ~~we are expecting the startup of drilling activity on previously awarded projects to drive improved results~~ in the ~~remainder~~third fiscal quarter and begin operations at our new fumed metal oxides facility in China near the start of the ~~year.~~ fourth fiscal quarter.

Our liquidity position, as measured by cash and cash equivalents plus borrowing availability, decreased by $~~359~~$296 million during the first six months of fiscal ~~2018,~~2019, which was largely attributable to ~~a lower cash balance~~higher net working capital, share repurchases, the redemption of the preferred stock issued in the NHUMO, S.A. de C.V. (“NHUMO”) transaction and ~~lower borrowing availability under our revolving line~~the refinancing of ~~credit.~~long-term debt with commercial paper. As of March 31, ~~2018,~~2019, we had cash and cash equivalents of $~~179~~$176 million and borrowing availability under our revolving credit agreement of ~~$742~~$454 million. Our revolving credit agreement supports our commercial paper program and may be used for working capital, letters of credit and other general corporate purposes. ~~During the second quarter of fiscal 2018, we repaid $250 million of 2.55% fixed rate debt that matured on January 15, 2018 using a combination of foreign cash and commercial paper borrowings.~~

At March 31, ~~2018,~~2019, we were in compliance with all covenants under our revolving credit facility, including the total consolidated debt to consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) covenant.

A significant portion of our business occurs outside the U.S. and our cash generation does not always align geographically with our cash needs. The vast majority of our cash and cash equivalent holdings tend to be held outside the U.S. Cash held by foreign subsidiaries is generally used to finance the subsidiaries’ operational activities and future investments. We use commercial paper throughout the year to manage short-term U.S. cash needs. The commercial paper balance is generally ~~paid down~~reduced at quarter-end using cash derived from customer collections, settlement of intercompany balances and short-term intercompany loans. The balance of commercial paper outstanding as of March 31, ~~2018~~2019 was ~~$258~~$546 million. In the unusual event that additional funds are needed in the U.S., we have the ability to repatriate additional funds.

We do not expect Tax Reform, discussed in more detail in Note J, to have a material impact on our liquidity position due to our existing tax attributes. We are evaluating the impact of tax reform on our opportunities to repatriate some portion of our foreign cash balances to the U.S.

We generally manage our cash and debt on a global basis to provide for working capital requirements as needed by region or site. Cash and debt are generally denominated in the local currency of the subsidiary holding the assets or liabilities, except where there are operational cash flow reasons to hold non-functional currency or debt.

We anticipate sufficient liquidity from (i) cash on hand; (ii) cash flows from operating activities; and (iii) cash available from our revolving credit agreement and our commercial paper program to meet our operational and capital investment needs and financial

obligations for the foreseeable future. The liquidity we derive from cash flows from operations is, to a large degree, predicated on our ability to collect our receivables in a timely manner, the cost of our raw materials, and our ability to manage inventory levels.

We issued $30 million of 7.42% medium term notes in fiscal 1999 that ~~mature~~matured on December 11, ~~2018 and are included in Current portion of long-term debt on the Consolidated Balance Sheets as of March 31,~~ 2018. We ~~intend to pay off~~repaid these notes at maturity with a combination of cash on hand ~~and/or~~and commercial paper borrowings.

In November 2013, we purchased all of our joint venture partner’s common stock in the former NHUMO joint venture. At the close of the transaction, NHUMO issued redeemable preferred stock to the joint venture partner with a repurchase value of $25 million and a fixed dividend rate of 6% per annum. In November 2018, the preferred stock was repurchased for $25 million and a final dividend payment of approximately $1.4 million was made.

The following discussion of the changes in our cash balance refers to the various sections of our Consolidated Statements of Cash Flows.

Cash provided by operating activities, which consists of net income adjusted for the various non-cash items included in income, changes in working capital and changes in certain other balance sheet accounts, totaled ~~$81~~$51 million in the first six months of fiscal ~~2018~~2019 compared to ~~$58~~$81 million of cash provided by operating activities during the same period of fiscal ~~2017.~~2018.

Cash provided by operating activities in the first six months of fiscal 2019 was driven primarily by our net income of $106 million, a decrease in Accounts and notes receivable of $39 million and the non-cash impacts of depreciation and amortization of $73 million and the impairments of our held for sale assets and of our investment in our Venezuelan equity affiliate of $20 million and $11 million, respectively. Partially offsetting these cash inflows were an increase in Inventories of $51 million, a decrease in Accounts payable and accrued liabilities of $77 million, a decrease in Income taxes payable of $21 million, a decrease in Other liabilities of $27 million and the non-cash impact of a decrease in our deferred tax provision of $29 million.

Cash provided by operating activities in the first six months of fiscal 2018 was driven primarily by the non-cash impacts of the impairment of the assets and goodwill of the Purification Solutions business of $162 million and $92 million, respectively, depreciation and amortization of $79 million and an increase in our deferred tax provision of $157 million, which more than offset our net loss. In addition, there was an increase in Accounts payable and accrued liabilities. Partially offsetting these cash inflows was an increase in Accounts and notes receivable and Inventories.

~~Cash provided by~~In addition to the factors noted above, the following other elements of operations have a bearing on operating ~~activities~~cash flows:

Restructurings — As of March 31, 2019, we had $12 million of total restructuring costs in accrued expenses in the ~~first six months~~Consolidated Balance Sheets related to our global restructuring activities. In the remainder of fiscal ~~2017 was driven~~2019 and thereafter, we expect to make cash payments totaling approximately $12 million related to these restructuring plans.

Environmental Reserves and Litigation Matters — As of March 31, 2019, we had a $14 million reserve for environmental remediation costs at various sites. These sites are primarily ~~by net income excluding~~associated with businesses divested in prior years. Additionally, as of March 31, 2019, we had a $22 million reserve for respirator claims. Expenditures for each of these reserves will be incurred over many years. We also have other litigation costs arising in the ~~non-cash impact~~ordinary course of ~~depreciation and amortization of $76 million.~~ In addition, there was an increase in accounts payable and accrued liabilities. Partially offsetting these cash inflows was an increase in accounts and notes receivable, inventories, and deferred tax benefits.business.

In the six months ended March 31, 2019, investing activities consumed $98 million of cash, which was primarily driven by capital expenditures. These capital expenditures were for sustaining and compliance capital projects at our operating facilities as well as capacity expansion capital expenditures in Reinforcement Materials and Performance Chemicals.In the six months ended March 31, 2018, investing activities consumed $157 million of cash, which was primarily driven by $64 million of cash paid for our acquisition of Tech Blend, net of cash acquired of $1 million, and capital expenditures of $109 million. These capital expenditures were for sustaining and compliance capital projects at our operating facilities as well as expansion capital expenditures.In the six months ended March 31, 2017, investing activities consumed $47 million of cash which was primarily driven by capital expenditures of $45 million. These capital expenditures were primarily for sustaining and compliance capital projects at our operating facilities.

Capital expenditures for fiscal ~~2018~~2019 are expected to be ~~approximately~~between $250 million and $275 million. Our planned capital spending program for fiscal ~~2018~~2019 is primarily for sustaining, compliance and improvement capital projects at our operating facilities as well as expansion capital expenditures ~~primarily for the construction of our fumed silica manufacturing plants~~ in ~~Carrollton, Kentucky~~Reinforcement Materials and ~~Wuhai, China.~~Performance Chemicals.

Financing activities ~~consumed $51~~provided $58 million of cash in the first six months of fiscal ~~2018~~2019 compared to ~~$42~~$51 million of cash consumed in the first six months of fiscal ~~2017.~~ 2018. In the first six months of fiscal 2019, financing activities primarily consisted of $297 million of proceeds from the issuance of commercial paper and $29 million of short-term borrowings, which was partially offset by share repurchases of $112 million, dividend payments to stockholders of $40 million, the repayment of $75 million of fixed rate debt and the redemption of $25 million of preferred stock held by our former NHUMO joint venture partner.

In the first six months of fiscal 2018, financing activities consisted of share repurchases and dividend payments to stockholders as well as the repayment of our $250 million of 2.55% fixed rate debt, which was offset by proceeds from the issuance of commercial paper. ~~In the first six months of fiscal 2017, financing activities consisted of share repurchases and dividend payments to stockholders.~~

We have entered into long-term purchase agreements primarily for the purchase of raw materials. Under certain of these agreements the quantity of material being purchased is fixed, but the price paid changes as market prices change. For those commitments, the amounts included in the table below are based on market prices at March 31, ~~2018,~~2019, which may differ from actual market prices at the time of purchase.

	Payments Due by Fiscal Year														Payments Due by Fiscal Year
	Remainder of Fiscal 2018		2019		2020		2021		2022		Thereafter		Total		Remainder of Fiscal 2019		2020		2021		2022		2023		Thereafter		Total
	(In millions)														(In millions)
Reinforcement Materials	$	159	$	289	$	173	$	136	$	136	$	1,947	$	2,840	$	173	$	244	$	134	$	131	$	123	$	1,607	$	2,412
Performance Chemicals		34		63		58		57		57		482		751		42		59		56		56		32		459		704
Purification Solutions		4		7		7		1		—		—		19		4		6		1		—		—		—		11
Specialty Fluids⁽¹⁾																12		—		—		—		—		—		12
Total	$	197	$	359	$	238	$	194	$	193	$	2,429	$	3,610	$	231	$	309	$	191	$	187	$	155	$	2,066	$	3,139

As of March 31, ~~2018,~~2019, we had no material transactions that meet the definition of an off-balance sheet arrangement.

This report on Form 10-Q contains “forward-looking statements” under the Federal securities laws. These forward-looking statements address expectations or projections about the future, including our expectations for future financial ~~performance;~~performance and the factors we expect to impact our volumes, demand for our ~~products;~~products, costs and margins; when we expect the purchase price for our purchase of NSCC Carbon to be payable and the upgrades of that plant to be completed; when we expect the sale of our Specialty Fluids business to be completed; when we expect operations to commence at our new fumed metal oxides plant in China; the amount and timing of the charge to earnings we will record and the cash outlays we will make in connection with the closing of certain manufacturing facilities, restructuring initiatives and ~~restructuring initiatives;~~under our transformation plan for our Purification Solutions business; our estimated future amortization expenses for our intangible assets; the sufficiency of our cash on hand, cash provided from operations and cash available under our credit facilities to fund our cash ~~requirements, including for the repayment of the current portion of our long-term debt;~~requirements; uses of available cash including anticipated capital spending and future cash outlays associated with long-term contractual obligations; ~~the impact we expect tax reform legislation in the U.S. to have on our future after-tax earnings and liquidity position, and~~ our expected tax rate for fiscal ~~2018;~~2019; and the possible outcome of legal and environmental proceedings. From time to time, we also provide forward-looking statements in other materials we release to the public and in oral statements made by authorized officers.

Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, potentially inaccurate assumptions, and other factors, some of which are beyond our control or difficult to predict. If known or unknown risks materialize, our actual results could differ materially from those expressed in the forward-looking statements.

In addition to factors described elsewhere in this report, the following are some of the factors that could cause our actual results to differ materially from those expressed in the forward-looking statements: changes in raw material costs; lower than expected demand for our products; changes in environmental requirements in the U.S.; the loss of one or more of our important customers; our inability to complete capacity expansions or other development projects; the availability of raw materials; our failure to develop new products or to keep pace with technological developments; fluctuations in currency exchange rates; patent rights of others; stock and credit market conditions; the timely commercialization of products under development (which may be disrupted or delayed by technical difficulties, market acceptance, competitors’ new products, as well as difficulties in moving from the experimental stage to the production stage); demand for our customers’ products; competitors’ reactions to market conditions; unanticipated disruptions or delays in plant operations or development projects; delays in the successful integration of structural changes, including acquisitions or joint ventures; severe weather events that cause business interruptions, including plant and power outages or disruptions in supplier or customer operations; changes in global trade policies; the accuracy of the assumptions we used in establishing reserves for environmental matters and for our share of liability for respirator claims; and the outcome of pending litigation. Other factors and risks are discussed in our ~~2017~~2018 10-K.

~~Refer to the discussion under the headings “Recently Adopted Accounting Standards” and “Recent Accounting Pronouncements” in Note B.~~

Information about market risks for the period ended March 31, ~~2018~~2019 does not differ materially from that discussed under Item 7A of our ~~2017~~2018 10-K.

As of March 31, ~~2018,~~2019, we carried out an evaluation, under the supervision and with the participation of our management, including our ~~Principal Executive Officer~~principal executive officer and our ~~Executive Vice President and Chief Financial Officer,~~principal financial officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our ~~Principal Executive Officer~~principal executive officer and our ~~Executive Vice President and Chief Financial Officer~~principal financial officer concluded that our disclosure controls and procedures were effective as of that date.

There were no changes in our internal control over financial reporting that occurred during our fiscal quarter ended March 31, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The table below sets forth information regarding Cabot’s purchases of its equity securities during the quarter ended March 31, ~~2018:~~2019:

~~Period~~

~~Total Number of~~

~~Shares~~

~~Purchased~~⁽¹⁾⁽²⁾

~~Average Price~~

~~Paid per Share~~

~~Total Number of~~

~~Shares Purchased~~

~~as Part of Publicly~~

~~Announced Plans or~~

~~Programs~~⁽¹⁾

~~Maximum Number (or~~

~~Approximate Dollar~~

~~Value) of Shares that~~

~~May Yet Be Purchased~~

~~Under the Plans or~~

~~Programs~~⁽¹⁾

~~January 1, 2018 - January 31, 2018~~

—

~~1,508,098~~

~~February 1, 2018 - February 28, 2018~~

—

~~1,508,098~~

~~March 1, 2018 - March 31, 2018~~

—

~~1,508,098~~

~~Total~~

—

Period	Total Number of Shares Purchased⁽¹⁾⁽²⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs⁽¹⁾
January 1, 2019 - January 31, 2019		—	$	—		—		8,443,345
February 1, 2019 - February 28, 2019		560,000	$	45.74		560,000		7,883,345
March 1, 2019 - March 31, 2019		535,000	$	45.21		535,000		7,348,345
Total		1,095,000				1,095,000

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐ ~~(Do not check if smaller reporting company)~~	Smaller reporting company	☐

Emerging growth company	☐


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $1 par value per share	CBT	The New York Stock Exchange

Part I.	Financial Information

	Item 1.	Financial Statements (unaudited)
		Consolidated Statements of Operations	3
		Consolidated Statements of Comprehensive Income	4
		Consolidated Balance Sheets	5
		Consolidated Statements of Cash Flows	7
		Consolidated Statements of Changes in Stockholders’ Equity	8
		Notes to the Consolidated Financial Statements	810

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
	Item 4.	Controls and Procedures	44

Part II.	Other Information
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
	Item 6.	Exhibits	45

		Notional Amount
Description	Borrowing	March 31, ~~2018~~2019	September 30, ~~2017~~2018	Hedge Designation
Cross-Currency Swaps	3.4% Notes	USD 250 million swapped to EUR 223 million	USD 250 million swapped to EUR 223 million	Net investment
Forward Foreign Currency Contracts ⁽¹⁾	N/A	USD 2(3) million	USD 518 million	No designation

	(In millions)
Assets
Accounts and notes receivable, net of reserve for doubtful accounts	$	42
Inventories		5
Prepaid expenses and other current assets		4
Property, plant and equipment, net		13
Assets held for rent		134
Deferred income taxes		1
Total assets held for sale		199
Impairment of held for sale assets		(20	)
Adjusted assets held for sale	$	179

Liabilities
Accounts payable and accrued liabilities	$	5
Income taxes payable		5
Deferred income taxes		4
Other liabilities		7
Total liabilities held for sale		21
Total net assets held for sale	$	158

	(In millions)
Assets
Cash	$	1
Accounts Receivable		5
Inventories		3
Property, plant and equipment		7
Intangible assets		29
Goodwill		33
Total assets acquired		78

Liabilities
Current liabilities		(3	)
Deferred tax liabilities		(10	)
Total liabilities assumed		(13	)

Cash consideration paid	$	65

	March 31, 2018							September 30, 2017
	Gross Carrying Value		Accumulated Amortization			Net Intangible Assets		Gross Carrying Value		Accumulated Amortization			Net Intangible Assets
	(In millions)
Intangible assets with finite lives⁽¹⁾
Developed technologies	$	52	$	—		$	52	$	49	$	(7	)	$	42
Trademarks		9		—			9		16		(1	)		15
Customer relationships		52		(10	)		42		94		(14	)		80
Total intangible assets	$	113	$	(10	)	$	103	$	159	$	(22	)	$	137

	Severance and Employee Benefits			Environmental Remediation		Asset Sales			Asset Impairment and Accelerated Depreciation			Other			Total
	(In millions)
Reserve at September 30, 2017	$	1		$	2	$	—		$	—		$	—		$	3
Charges		—			—		—			—			1			1
Accrual for refundable land deposit		—			—		(4	)		—			—			(4	)
Cash received (paid)		—			—		4			—			(1	)		3
Reserve at December 31, 2017	$	1		$	2	$	—		$	—		$	—		$	3
Charges (gain)		1			—		(11	)		1			—			(9	)
Costs charged against assets / (liabilities)		—			—		2			(1	)		—			1
Cash received		(1	)		—		9			—			—			8
Reserve at March 31, 2018	$	1		$	2	$	—		$	—		$	—		$	3

Level 1	—	Quoted market prices in active markets for identical assets or liabilities

Level 2	—	Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs)

Level 3	—	Significant unobservable inputs

	Forecast for the Year Ended September 30, ~~2018~~2019
Effective tax rate		~~224~~20	%
Impact of discrete tax items:
Unusual or infrequent items		~~(180~~6	)%
Items related to uncertain tax positions		(1	)%
Other discrete tax items		—	%
Impact of certain items		(223	)%
Operating tax rate		2124	%

Exhibit No.		Description

Exhibit 3.1		Restated Certificate of Incorporation of Cabot Corporation effective January 9, 2009 (incorporated herein by reference to Exhibit 3.1 of Cabot’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2008, file reference 1-5667, filed with the SEC on February 9, 2009).

Exhibit 3.2		The By-laws of Cabot Corporation as amended January 8, 2016 (incorporated herein by reference to Exhibit 3.1 of Cabot Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2015, file reference 1-5667, filed with the SEC on February 5, 2016).

Exhibit 31.1*		Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.

Exhibit 31.2*		Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.

Exhibit 32**		Certifications of the Principal Executive Officer and the Principal Financial Officer pursuant to 18 U.S.C. Section 1350.

Exhibit 101.INS*		XBRL Instance Document.

Exhibit 101.SCH*		XBRL Taxonomy Extension Schema Document.

Exhibit 101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

Exhibit 101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

Exhibit 101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

	CABOT CORPORATION

Date: May 9, ~~2018~~2019	By:	/s/ E~~duardo~~ ~~E. Cordeiro~~Erica McLaughlin
		~~Eduardo E. Cordeiro~~Erica McLaughlin
		~~Executive~~Senior Vice President and Chief Financial Officer
		(Duly Authorized Officer)


Date: May 9, ~~2018~~2019	By:	/s/ James P. Kelly
		James P. Kelly
		Vice President and Controller (Chief Accounting Officer)