-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tq/vgzzrYnCP5DtASx1teTEDDNVIQ14Nv4bgbhuOUBAv8ggnupeSw2IpdKSWN1yo NLzHkplPmpvN+YYrgfI0dA== 0000915389-06-000067.txt : 20061026 0000915389-06-000067.hdr.sgml : 20061026 20061026170047 ACCESSION NUMBER: 0000915389-06-000067 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060930 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061026 DATE AS OF CHANGE: 20061026 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EASTMAN CHEMICAL CO CENTRAL INDEX KEY: 0000915389 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 621539359 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12626 FILM NUMBER: 061166508 BUSINESS ADDRESS: STREET 1: PO BOX 511 STREET 2: 200 SOUTH WILCOX DRIVE CITY: KINGSPORT STATE: TN ZIP: 37660 BUSINESS PHONE: 4232292000 MAIL ADDRESS: STREET 1: P O BOX BOX 511 B-54D CITY: KINGSPORT STATE: TN ZIP: 37662 8-K 1 thirdquarter20068k.htm 3Q 2006 PRESS RELEASE AND FINANCIAL TABLES 3Q 2006 Press Release and Financial Tables
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, DC 20549 

FORM 8-K 
CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the Securities and Exchange Act of 1934

Date of report (Date of earliest event reported):
October 26, 2006 

EASTMAN CHEMICAL COMPANY
(Exact Name of Registrant as Specified in Its Charter)

 
 
 
 
 
Delaware
 
1-12626
 
62-1539359
(State or Other Jurisdiction
of Incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
 

 
 
 
200 South Wilcox Drive, Kingsport, TN
 
37660
(Address of Principal Executive Offices)
 
(Zip Code)

(423) 229-2000
(Registrant’s Telephone Number, Including Area Code)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
 
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
 
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
 
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




EASTMAN CHEMICAL COMPANY - EMN 
 
 
 
October 26, 2006 
 
 
Item 2.02 Results of Operations and Financial Condition 
 
On October 26, 2006, the registrant publicly released its financial results for third quarter 2006. The full text of the release is furnished as Exhibit 99.01 to this Form 8-K, and is incorporated herein by reference. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
 
This Form 8-K includes the following non-GAAP financial measures:

Eastman Chemical Company Operating Earnings, Earnings Before Tax, Net Earnings and Diluted Earnings Per Share excluding asset impairments and restructuring charges.

Eastman’s management believes that the asset impairments and restructuring charges do not reflect ongoing business results. However, management believes that this item is indicative of the performance of certain businesses and product lines and results of continuous efforts and actions to improve the profitability of the company. Management believes that investors can better evaluate and analyze historical and future business trends if they also consider the reported results without the identified item. Management utilizes sales revenue and operating results excluding the identified item in the measures it uses to evaluate business performance and in determining certain performance-based compensation. This measure is not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to the GAAP measures of performance. Table 6 in the accompanying third quarter 2006 financial tables reconciles operating earnings, earnings before tax, net earnings and earnings per share on a GAAP basis, as reflected in Eastman’s Consolidated Statements of Earnings, to operating earnings, earnings before tax, net earnings and earnings per share excluding asset impairments and restructuring charges.

In addition, the Company has chosen to present sales revenue and operating earnings (loss) attributable to product lines being divested. Tables 4 and 5 in the accompanying third quarter 2006 financial tables provide this information on a GAAP basis.



 
 
EASTMAN CHEMICAL COMPANY - EMN 
 
October 26, 2006 
 
Item 9.01 Financial Statements and Exhibits:
 
(d) Exhibits
 
The following exhibit is furnished pursuant to Item 9.01:
 
99.01 Public release by the registrant on October 26, 2006 of third quarter 2006 financial results.
 




EASTMAN CHEMICAL COMPANY - EMN 
 
 
October 26, 2006
 
 
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, hereunto duly authorized.
 
 
 
Eastman Chemical Company 
 
 
     
 
By: /s/ Curtis E. Espeland 
    Curtis E. Espeland
    Vice President and Chief Accounting Officer
 
 
 
Date:  October 26, 2006

EX-99.01 2 ex99_01.htm EXHIBIT 99.01 PRESS RELEASE AND FINANCIAL TABLES Exhibit 99.01 Press Release and Financial Tables
For Release October 26, 2006      Contacts:
5:00 p.m. EDT        Media: Nancy Ledford
                                                                                                                        423-229-5264 / nledford@eastman.com
                                                                                                                        Investors: Greg Riddle
                                        212-835-1620 / griddle@eastman.com


Eastman Announces Third-Quarter 2006 Financial Results, Record Quarterly Sales

KINGSPORT, Tenn., Oct. 26, 2006 - Eastman Chemical Company (NYSE:EMN) today announced earnings of $1.15 per diluted share for third quarter 2006 versus earnings of $1.50 per diluted share for third quarter 2005. Excluding asset impairments and restructuring charges, third-quarter 2006 earnings were $1.24 per diluted share, while third-quarter 2005 earnings were $1.53 per diluted share. For reconciliation to reported earnings per diluted share, see Table 6 in the accompanying third-quarter 2006 financial tables.

"In the third quarter, we established a record for sales revenue in a quarter driven by higher selling prices needed to offset high raw material and energy costs," said Brian Ferguson, chairman and CEO. "We continue to deliver strong results, particularly in our solid base of businesses that include the fibers; the coatings, adhesives, specialty polymers and inks; and the specialty plastics segments."

(In millions, except per share amounts)                                                    
  
3Q2006
  
3Q2005
Sales revenue                                                                       
$
1,966
$
1,816
Earnings per diluted share                                          
$
1.15
$
1.50
Earnings per diluted share excluding asset impairments and
        
restructuring charges* 
$
1.24
$
1.53
Net cash provided by operating activities
$
70
$
165
         

* For reconciliation to reported operating earnings and earnings per diluted share, see Table 6 in the accompanying third-quarter 2006 financial tables. 
NOTE: Sales revenue and operating earnings for product lines being divested are in Tables 4 and 5 in the accompanying third-quarter 2006 financial tables.
 
Sales revenue for third quarter 2006 was $2 billion, an 8 percent increase over third quarter 2005. The increase in sales revenue was due to higher selling prices throughout the company.

Operating earnings in third quarter 2006 were $158 million compared with operating earnings of $198 million in third quarter 2005. Excluding asset impairments and restructuring charges for both periods, operating earnings were $171 million in third quarter 2006 compared with $202 million in third quarter 2005. The year-over-year decline was due to increased raw material and energy costs and minor operational disruptions that were partially offset by higher selling prices. The company's third-quarter 2006 raw material and energy costs increased by approximately $175 million compared with third quarter 2005.

Segment Results 3Q 2006 versus 3Q 2005

Coatings, Adhesives, Specialty Polymers and Inks - Sales revenue increased by 10 percent due to higher selling prices. The higher selling prices were in response to higher raw material and energy costs. Operating earnings declined, particularly for cyclical commodity and for adhesives product lines, as increased raw material and energy costs were partially offset by higher selling prices.

Fibers - Sales revenue was flat as higher selling prices were offset by lower sales volume and an unfavorable shift in product mix. The lower sales volume was primarily a result of reduced operating rates due to minor operational disruptions. Operating earnings declined slightly as higher raw material and energy costs and lower sales volume were partially offset by higher selling prices.

Performance Chemicals and Intermediates - Sales revenue increased by 7 percent due to higher selling prices, particularly for intermediates product lines, in response to higher raw material and energy costs. Third-quarter 2006 operating earnings included an asset impairment charge of $11 million related to the pending divestiture of the Arkansas manufacturing facility, assets and product lines. Third-quarter 2005 operating earnings included $10 million from the achievement of certain milestones under an acetyls technology licensing agreement.

Performance Polymers - Sales revenue increased by 10 percent due to higher selling prices that were partially offset by lower sales volume. The lower sales volume, primarily for PET polymers in North America and for polyethylene, was due to continued high levels of Asian PET polymers imports and minor polyethylene operational disruptions. The higher selling prices were due to efforts to offset higher raw material and energy costs. Operating earnings declined as increased raw material and energy costs and lower sales volume, particularly for PET polymers in North America, were partially offset by higher selling prices.

Specialty Plastics - Sales revenue increased by 16 percent due primarily to higher sales volume and higher selling prices. The higher sales volume was attributed to continued market development efforts, particularly for copolyester product lines. Operating earnings increased slightly as higher sales volume and higher selling prices were mostly offset by higher raw material and energy costs.

Cash Flow

Eastman generated $70 million in cash from operating activities during third quarter 2006 reflecting continued strong net earnings partially offset by an increase in working capital.  During the quarter, the company made a $25 million contribution to its U.S. defined benefit pension plan, completing its planned 2006 contribution of $75 million.

Outlook

Commenting on the outlook for the fourth quarter, Ferguson said, "We anticipate normal seasonality will reduce demand in some of our businesses and product lines during the quarter. We also expect volatility in raw material and energy costs, particularly for paraxylene and propane. However, we expect continued solid results from our strong base of businesses and expect fourth-quarter 2006 earnings per share excluding gains and charges related to ongoing strategic decisions to be at or above fourth-quarter 2005 earnings per share of $0.90 excluding asset impairments and restructuring charges."
 
Eastman will host a conference call with industry analysts on Oct. 27 at 8:00 a.m. EDT. To listen to the live webcast of the conference call, go to www.investors.eastman.com. To listen via telephone, the dial-in number is 913-981-5571, passcode number 9177448. A telephone replay will be available continuously from 11:00 a.m. EDT, Oct. 27, to 12:00 midnight EDT, Nov. 3, at 888-203-1112, passcode number 9177448.

Eastman manufactures and markets chemicals, fibers and plastics worldwide. It provides key differentiated coatings, adhesives and specialty plastics products; is the world’s largest producer of PET polymers for packaging; and is a major supplier of cellulose acetate fibers. Founded in 1920 and headquartered in Kingsport, Tenn., Eastman is a FORTUNE 500 company with 2005 sales of $7 billion and approximately 12,000 employees. For more information about Eastman and its products, visit www.eastman.com.
##

Forward Looking Statements: This news release includes forward-looking statements concerning current expectations for fourth-quarter 2006 sales volume, raw material and energy costs and earnings for the company and for certain segments and product lines, and gains and charges in fourth quarter 2006 related to recent and possible future strategic actions and decisions.  Such expectations are based upon certain preliminary information, internal estimates, and management assumptions, expectations and plans, and are subject to a number of risks and uncertainties inherent in projecting future conditions, events, and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations prove to be inaccurate or are unrealized. Important factors that could cause actual results to differ materially from such expectations are and will be detailed in the company’s filings with the Securities and Exchange Commission, including the Form 10-Q for second quarter 2006 and the Form 10-Q to be filed for third quarter 2006, available on the Eastman web site at www.eastman.com, Investors, SEC Filings.

EASTMAN CHEMICAL COMPANY - EMN
October 26, 2006
 
5:00 PM EDT
   

FINANCIAL INFORMATION
October 26, 2006


For use in the Eastman Chemical Company Conference Call
at 8:00 AM (EDT), October 27, 2006.
 

Table of Contents

Item
  
Page
     
TABLE 1
1
     
TABLE 2A
2
     
TABLE 2B
2
     
TABLE 2C
3
     
TABLE 2D
3
     
TABLE 2E
3
     
TABLE 3
4
     
TABLE 4
5
     
TABLE 5
6
     
TABLE 6
7
     
TABLE 7
9
     
TABLE 8
10




EASTMAN CHEMICAL COMPANY - EMN
October 26, 2006
 
5:00 PM EDT
 
Page 1

TABLE 1 - STATEMENTS OF EARNINGS

   
Third Quarter
  
First Nine Months
 (Dollars in millions, except per share amounts)
  
2006
  
2005
  
2006
  
2005
                 
Sales
$
1,966
$
1,816
$
5,698
$
5,330
Cost of sales
  
1,650
  
1,464
  
4,701
  
4,205
Gross profit
  
316
  
352
  
997
  
1,125
                 
Selling, general and administrative expenses
  
105
  
108
  
316
  
339
Research and development expenses
  
40
  
42
  
126
  
120
Asset impairments and restructuring charges, net
  
13
  
4
  
23
  
23
Other operating income
  
--
  
--
  
--
  
(2)
Operating earnings
 
158
  
198
  
532
  
645
                 
Interest expense, net
  
21
  
23
  
62
  
77
Income from equity investment in Genencor
  
--
  
--
  
--
  
(173)
Early debt extinguishment costs
  
--
  
--
  
--
  
46
Other (income) charges, net
  
1
  
(2)
  
(2)
  
(3)
Earnings before income taxes
  
136
  
177
  
472
  
698
Provision for income taxes
  
41
  
54
  
158
  
207
Net earnings
$
95
$
123
$
314
$
491
                 
Earnings per share
                
Basic
$
1.16
$
1.51
$
3.84
$
6.10
Diluted
$
1.15
$
1.50
$
3.79
$
6.01
                 
Shares (in millions) outstanding at end of period
  
82.3
  
81.5
  
82.3
  
81.5
                 
Shares (in millions) used for earnings per share calculation
                
Basic
  
82.1
  
81.3
  
81.8
  
80.5
Diluted
  
83.1
  
82.0
  
82.8
  
81.7
                 



EASTMAN CHEMICAL COMPANY - EMN
October 26, 2006
 
5:00 PM EDT
 
Page 2

TABLE 2A - OTHER SALES INFORMATION

   
Third Quarter
  
First Nine Months
(Dollars in millions)
  
2006
  
2005
  
2006
  
2005
Sales by Segment
                
Coatings, Adhesives, Specialty Polymers, and Inks
$
367
$
333
$
1,078
$
977
Fibers
  
228
  
228
  
696
  
633
Performance Chemicals and Intermediates
  
457
  
428
  
1,321
  
1,214
Performance Polymers
  
707
  
646
  
2,007
  
1,944
Specialty Plastics
  
207
  
179
  
596
  
536
Total Sales by Segment
  
1,966
  
1,814
  
5,698
  
5,304
Other
  
--
  
2
  
--
  
26
Total Eastman Chemical Company
$
1,966
$
1,816
$
5,698
$
5,330
                 


TABLE 2B - SALES REVENUE CHANGE

 
Third Quarter 2006 Compared to Third Quarter 2005
     
Change in Sales Revenue Due To
 
 
Revenue
% Change
  
 
Volume 
Effect
  
 
Price
Effect
  
Product
Mix
Effect
  
Exchange
Rate
Effect
                   
Coatings, Adhesives, Specialty Polymers, and Inks
10 %
  
(1) %
  
10 %
  
-- %
  
1 %
Fibers
-- %
  
(3) %
  
6 %
  
(3) %
  
-- %
Performance Chemicals and Intermediates
7 %
  
-- %
  
8 %
  
(1) %
  
-- %
Performance Polymers
10 %
  
(3) %
  
12 %
  
-- %
  
1 %
Specialty Plastics
16 %
  
15 %
  
4 %
  
(3) %
  
-- %
 
 
                
Total Eastman Chemical Company
8 %
  
-- %
  
9 %
  
(1) %
  
-- %
   
   
 
First Nine Months 2006 Compared to First Nine Months 2005
     
Change in Sales Revenue Due To
 
 
Revenue
% Change
  
 
Volume
Effect
  
 
Price
Effect
  
Product
Mix
Effect
  
Exchange
Rate
Effect
                   
Coatings, Adhesives, Specialty Polymers, and Inks
10 %
  
-- %
  
10 %
  
1 %
  
(1) %
Fibers
10 %
  
6 %
  
8 %
  
(4) %
  
-- %
Performance Chemicals and Intermediates
9 %
  
-- %
  
9 %
  
-- %
  
-- %
Performance Polymers
3 %
  
-- %
  
3 %
  
-- %
  
-- %
Specialty Plastics
11 %
  
9 %
  
5 %
  
(2) %
  
(1) %
 
 
                
Total Eastman Chemical Company
7 %
  
1 %
  
7 %
  
(1) %
  
-- %





EASTMAN CHEMICAL COMPANY - EMN
October 26, 2006
 
5:00 PM EDT
 
Page 3


TABLE 2C - PERCENTAGE GROWTH IN SALES VOLUME

 
Third Quarter 2006 Compared to Third Quarter 2005
   
Coatings, Adhesives, Specialty Polymers, and Inks
-- %
Fibers
(3) %
Performance Chemicals and Intermediates
-- %
Performance Polymers
(4) %
Specialty Plastics
14 %
   
Total Eastman Chemical Company
(1) %
   

 
First Nine Months 2006 Compared to First Nine Months 2005
   
Coatings, Adhesives, Specialty Polymers, and Inks
-- %
Fibers
6 %
Performance Chemicals and Intermediates
(1) %
Performance Polymers
-- %
Specialty Plastics
8 %
   
Total Eastman Chemical Company
1 %
   

TABLE 2D - SALES BY REGION

   
Third Quarter
  
First Nine Months
(Dollars in millions)
  
2006
  
2005
  
2006
  
2005
                 
Sales by Region
               
United States and Canada
$
1,111
$
1,052
$
3,278
$
3,068
Europe, Middle East, and Africa
  
371
  
332
  
1,080
  
1,051
Asia Pacific
  
243
  
235
  
702
  
685
Latin America
 
241
  
197
  
638
  
526
 
$
1,966
$
1,816
$
5,698
$
5,330


TABLE 2E - PERCENTAGE GROWTH IN SALES VOLUME BY REGION

 
Third Quarter
  
First Nine Months
Regional sales volume growth
      
United States and Canada
(4) %
  
(1) %
Europe, Middle East, and Africa
3 %
  
-- %
Asia Pacific
(6) %
 
(4) %
Latin America
16 %
  
24 %



EASTMAN CHEMICAL COMPANY - EMN
October 26, 2006
 
5:00 PM EDT
 
Page 4

TABLE 3 - OPERATING EARNINGS (LOSS), ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES AND OTHER OPERATING INCOME

   
Third Quarter
  
First Nine Months
(Dollars in millions)
  
2006
  
2005
  
2006
  
2005
Operating Earnings by Segment and Certain Items
                
Coatings, Adhesives, Specialty Polymers, and Inks
                
Operating earnings
$
53
$
63
$
176
$
194
Asset impairments and restructuring charges
  
--
  
1
  
8
  
3
Other operating income
  
--
  
--
  
--
  
(2)
                 
Fibers
                
Operating earnings
  
55
  
60
  
182
  
155
                 
Performance Chemicals and Intermediates
                
Operating earnings
  
25
  
40
  
113
  
128
Asset impairments and restructuring charges
  
11
  
--
  
11
  
4
                 
Performance Polymers
                
Operating earnings
  
17
  
32
  
46
  
166
                 
Specialty Plastics
                
Operating earnings
  
18
  
17
  
50
  
59
                 
Total Operating Earnings by Segment and Certain Items
                
Total operating earnings
  
168
  
212
  
567
  
702
Total asset impairments and restructuring charges
  
11
  
1
  
19
  
7
Total other operating income
  
--
  
--
  
--
  
(2)
                 
Other
                
Operating loss
  
(10)
  
(14)
  
(35)
  
(57)
Asset impairments and restructuring charges
  
2
  
3
  
4
  
16
                 
                 
Total Eastman Chemical Company
                
Total operating earnings
$
158
$
198
$
532
$
645
Total asset impairments and restructuring charges
  
13
  
4
  
23
  
23
Total other operating income
  
--
  
--
  
--
  
(2)
                 
                 




EASTMAN CHEMICAL COMPANY - EMN
October 26, 2006
 
5:00 PM EDT
 
Page 5

TABLE 4 - EASTMAN CHEMICAL COMPANY DETAIL OF SALES REVENUE

   
First Quarter
  
Second Quarter
  
Third Quarter
        
(Dollars in millions)
  
2006
  
2006
  
2006
        
                     
Sales Revenue
$
1,803
$
1,929
$
1,966
        
Less:  assets held for sale
                    
Coatings, Adhesives, Specialty Polymers and Inks (1)
  
18
  
17
  
18
        
Performance Chemicals and Intermediates (2)
  
30
  
29
  
38
        
Performance Polymers (1)
  
180
  
168
  
169
        
Sales revenue - continuing product lines
$
1,575
$
1,715
$
1,741
        
                     

   
First Quarter
  
Second Quarter
  
Third Quarter
  
Fourth Quarter
  
Twelve Months
(Dollars in millions)
  
2005
  
2005
  
2005
  
2005
  
2005
                     
Sales Revenue
$
1,762
$
1,752
$
1,816
$
1,729
$
7,059
Less:  assets held for sale
                    
Coatings, Adhesives, Specialty Polymers and Inks (1)
  
16
  
17
  
15
  
16
  
64
Performance Chemicals and Intermediates (2)
  
26
  
27
  
22
  
29
  
104
Performance Polymers (1)
  
141
  
137
  
164
  
176
  
618
Sales revenue - continuing product lines
$
1,579
$
1,571
$
1,615
$
1,508
$
6,273
                     


(1) Definitive agreement entered into in October 2006 for the sale of the polyethylene and Epolene polymer businesses and related assets of the Performance Polymers and Coatings, Adhesives, Specialty Polymers, and Inks ("CASPI") segments located at the Longview, Texas site and the Company's ethylene pipeline.

(2) Definitive agreement entered into in July 2006 for the sale of the Company's Batesville, Arkansas manufacturing facility and related assets and the specialty organic chemicals product lines in the Performance Chemicals and Intermediates ("PCI") segment.




EASTMAN CHEMICAL COMPANY - EMN
October 26, 2006
 
5:00 PM EDT
 
Page 6

TABLE 5 - PERFORMANCE POLYMERS SEGMENT DETAIL OF SALES REVENUE AND OPERATING EARNINGS

   
First
Quarter
  
Second Quarter
  
Third
Quarter
        
(Dollars in millions)
  
2006
 
2006
 
2006
        
                     
Sales Revenue
                    
Performance Polymers assets held for sale
$
180
$
168
$
169
        
Continuing product lines
  
446
  
506
  
538
        
Total sales revenue
$
626
$
674
$
707
        
                     
Operating earnings
                    
Performance Polymers assets held for sale (1)
$
23
$
14
$
15
        
Continuing product lines
  
(6)
  
(2)
  
2
        
Total operating earnings
$
17
$
12
$
17
        
                     


   
First
Quarter
  
Second Quarter
  
Third
Quarter
  
Fourth Quarter
  
Twelve Months
(Dollars in millions)
  
2005
  
2005
  
2005
  
2005
  
2005
                     
Sales Revenue
                    
Performance Polymers assets held for sale
$
141
$
137
$
164
$
176
$
618
Continuing product lines
  
515
  
505
  
482
  
399
  
1,901
Total sales revenue
$
656
$
642
$
646
$
575
$
2,519
                     
Operating earnings
                    
Performance Polymers assets held for sale (1)
$
32
$
13
$
11
$
20
$
76
Continuing product lines
  
52
  
37
  
21
  
(8)
  
102
Total operating earnings
$
84
$
50
$
32
$
12
$
178
                     

(1) Includes allocated costs consistent with the Company’s historical practices, some of which may remain and could be reallocated to the remainder of the segment and other segments.



EASTMAN CHEMICAL COMPANY - EMN
October 26, 2006
 
5:00 PM EDT
 
Page 7

TABLE 6 - OPERATING EARNINGS, NET EARNINGS, AND EARNINGS PER SHARE RECONCILIATION 

EARNINGS PER DILUTED SHARE EXCLUDING CERTAIN ITEMS
   
Third Quarter 2006
(Dollars in millions)
  
Operating
Earnings
  
Earnings
Before
 Tax
  
Net
Earnings
  
Net
 earnings
 per diluted share
                 
As reported
$
158
$
136
$
95
$
1.15
                 
Certain Items:
                
Asset impairments and restructuring charges
  
13
  
13
  
8
  
0.09
Excluding certain items
$
171
$
149
$
103
$
1.24

   
Third Quarter 2005
(Dollars in millions)
  
Operating
Earnings
  
Earnings
Before 
Tax
  
Net
Earnings
  
Net
earnings
per diluted
share
                 
As reported
$
198
$
177
$
123
$
1.50
                 
Certain Items:
                
Asset impairments and restructuring charges
 
4
  
4
  
3
  
0.03
Excluding certain items
$
202
$
181
$
126
$
1.53




EASTMAN CHEMICAL COMPANY - EMN
October 26, 2006
 
5:00 PM EDT
 
Page 8

TABLE 6 - OPERATING EARNINGS, NET EARNINGS, AND EARNINGS PER SHARE RECONCILIATION 

EARNINGS PER DILUTED SHARE EXCLUDING CERTAIN ITEMS (CONTINUED)
   
First Nine Months 2006
(Dollars in millions)
  
Operating
Earnings
  
Earnings
Before
 Tax
  
Net
Earnings
  
Net
earnings
per diluted
share
                 
As reported
$
532
$
472
$
314
$
3.79
                 
Certain Items:
                
Asset impairments and restructuring charges
  
23
  
23
  
17
  
0.21
Excluding certain items
$
555
$
495
$
331
$
4.00

   
First Nine Months 2005
(Dollars in millions)
  
Operating
Earnings
  
Earnings
Before
Tax
  
Net
Earnings
  
Net
earnings
 per diluted share
                 
As reported
$
645
$
698
$
491
$
6.01
                 
Certain Items:
                
Asset impairments and restructuring charges
  
23
  
23
  
16
  
0.18
Other operating income
  
(2)
  
(2)
  
(1)
  
(0.01)
Net deferred tax benefit related to sale of certain businesses, product lines, and assets in the CASPI segment
  
--
  
--
  
(12)
  
(0.14)
Early extinguishment of debt costs
  
--
  
46
  
28
  
0.35
Gain on sale of investment in Genencor
  
--
  
(171)
  
(111)
  
(1.35)
Excluding certain items
$
666
$
594
$
411
$
5.04



EASTMAN CHEMICAL COMPANY - EMN
October 26, 2006
 
5:00 PM EDT
 
Page 9

TABLE 7 - STATEMENTS OF CASH FLOWS

   
First Nine Months
(Dollars in millions)
 
2006
  
2005
         
Cash flows from operating activities
        
Net earnings
$
314
$
491
         
Adjustments to reconcile net earnings to net cash provided by operating activities:
        
Income from equity investment in Genencor
  
--
  
(173)
Depreciation and amortization
  
226
  
229
Gain on sale of assets
  
(5)
  
--
Early debt extinguishment costs
  
--
  
46
Asset impairments
 
20
  
1
Provision for deferred income taxes
  
49
  
130
Changes in operating assets and liabilities:
        
(Increase) decrease in receivables
  
(189)
  
(35)
(Increase) decrease in inventories
  
(134)
  
(141)
Increase (decrease) in trade payables
  
50
  
(5)
Increase (decrease) in liabilities for employee benefits and incentive pay
  
(60)
  
(108)
Other items, net
  
(38)
  
(58)
         
Net cash provided by operating activities
  
233
  
377
         
Cash flows from investing activities
        
Proceeds from sale of equity investment in Genencor, net
  
--
  
417
Additions to properties and equipment
  
(279)
  
(224)
Proceeds from sale of assets and investments
  
12
  
50
Additions to capitalized software
  
(12)
  
(8)
Other items, net
  
--
  
(5)
         
Net cash provided by (used in) investing activities
  
(279)
  
230
         
Cash flows from financing activities
        
Net increase (decrease) in commercial paper, credit facility and other borrowings
  
33
  
(84)
Repayment of borrowings
  
--
  
(544)
Dividends paid to stockholders
  
(108)
  
(106)
Proceeds from stock option exercises and other items
  
25
  
91
         
Net cash provided by (used in) financing activities
  
(50)
  
(643)
         
Effect of exchange rate changes on cash and cash equivalents
  
2
  
(3)
         
Net change in cash and cash equivalents
  
(94)
  
(39)
         
Cash and cash equivalents at beginning of period
  
524
  
325
         
Cash and cash equivalents at end of period
$
430
$
286
 

 
EASTMAN CHEMICAL COMPANY - EMN
October 26, 2006
 
5:00 PM EDT
 
Page 10

TABLE 8 - SELECTED BALANCE SHEET ITEMS

   
September 30,
  
December 31,
(Dollars in millions)
  
2006
  
2005
         
Current Assets
$
2,159
$
1,924
         
Net Properties
  
3,056
  
3,162
         
Other Assets
  
851
  
687
         
Total Assets
$
6,066
$
5,773
         
         
Payables and Other Current Liabilities
$
1,056
$
1,047
         
Short-term Borrowings
  
3
  
4
         
Long-term Borrowings
  
1,586
  
1,621
         
Other Liabilities
  
1,519
  
1,489
         
Stockholders’ Equity
  
1,902
  
1,612
         
Total Liabilities and Stockholders’ Equity
$
6,066
$
5,773




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