Delaware | 1-12626 | 62-1539359 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
200 South Wilcox Drive, Kingsport, TN | 37662 | |
(Address of Principal Executive Offices) | (Zip Code) |
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 |
EASTMAN CHEMICAL COMPANY - EMN |
EASTMAN CHEMICAL COMPANY - EMN |
Eastman Chemical Company | ||
By: /s/ Scott V. King Scott V. King Vice President, Controller and Chief Accounting Officer | ||
Date: October 25, 2012 |
(In millions, except per share amounts) | 3Q2012 | 3Q2011 | ||
Sales revenue | $2,259 | $1,812 | ||
Pro forma combined sales revenue* | $2,259 | $2,330 | ||
Earnings per diluted share from continuing operations | $0.99 | $1.22 | ||
Earnings per diluted share from continuing operations excluding costs related to the Solutia acquisition and asset impairments and restructuring charges** | $1.57 | $1.26 | ||
Net cash provided by operating activities | $353 | $212 | ||
Item | Page | ||
Table 1 | Statements of Earnings | 1 | |
Table 2A | Segment Sales Information | 2 | |
Table 2B | Segment Sales Information (Eastman and Solutia Combined Pro Forma) | 2 | |
Table 2C | Sales Revenue Change | 3 | |
Table 2D | Sales Revenue Change (Eastman and Solutia Combined Pro Forma) | 4 | |
Table 2E | Sales by Region | 5 | |
Table 2F | Sales by Region (Eastman and Solutia Combined Pro Forma) | 5 | |
Table 3A | Operating Earnings, Asset Impairments and Restructuring Charges (Gains), Net, Mark-to-Market Pension and Other Postretirement Benefits Adjustment, and Transaction and Integration Costs; Segment Operating Earnings Reconciliations | 6 | |
Table 3B | Operating Earnings, Asset Impairments and Restructuring Charges (Gains), Net, Mark-to-Market Pension and Other Postretirement Benefits Adjustment, and Transaction and Integration Costs; Segment Operating Earnings Reconciliations (Eastman and Solutia Combined Pro Forma) | 8 | |
Table 4 | Operating Earnings, Earnings, and Earnings Per Share from Continuing Operations Reconciliation | 10 | |
Table 5 | Statements of Cash Flows | 12 | |
Table 5A | Total Cash and Cash Equivalents and Short-Term Time Deposits | 13 | |
Table 5B | Net Cash Provided By Operating Activities Reconciliation and Free Cash Flow | 13 | |
Table 6 | Selected Balance Sheet Items | 13 |
Table 1 – Statements of Earnings | |||||||||||||
Third Quarter | First Nine Months | ||||||||||||
(Dollars in millions, except per share amounts; unaudited) | 2012 | 2011 | 2012 | 2011 | |||||||||
Sales | $ | 2,259 | $ | 1,812 | $ | 5,933 | $ | 5,455 | |||||
Cost of sales(1) | 1,734 | 1,379 | 4,496 | 4,090 | |||||||||
Gross profit | 525 | 433 | 1,437 | 1,365 | |||||||||
Selling, general and administrative expenses(1) | 173 | 114 | 420 | 340 | |||||||||
Research and development expenses | 52 | 41 | 136 | 115 | |||||||||
Asset impairments and restructuring charges (gains), net | 37 | 7 | 37 | (8 | ) | ||||||||
Operating earnings | 263 | 271 | 844 | 918 | |||||||||
Net interest expense | 48 | 20 | 95 | 57 | |||||||||
Other charges (income), net | (3 | ) | (3 | ) | 19 | (14 | ) | ||||||
Earnings from continuing operations before income taxes | 218 | 254 | 730 | 875 | |||||||||
Provision for income taxes from continuing operations | 64 | 80 | 240 | 281 | |||||||||
Earnings from continuing operations | 154 | 174 | 490 | 594 | |||||||||
Earnings from discontinued operations, net of tax | — | — | — | 9 | |||||||||
Gain from disposal of discontinued operations, net of tax | — | — | 1 | 31 | |||||||||
Net earnings | $ | 154 | $ | 174 | $ | 491 | $ | 634 | |||||
Basic earnings per share | |||||||||||||
Earnings from continuing operations | $ | 1.01 | $ | 1.25 | $ | 3.43 | $ | 4.22 | |||||
Earnings from discontinued operations | — | — | 0.01 | 0.29 | |||||||||
Basic earnings per share | $ | 1.01 | $ | 1.25 | $ | 3.44 | $ | 4.51 | |||||
Diluted earnings per share | |||||||||||||
Earnings from continuing operations | $ | 0.99 | $ | 1.22 | $ | 3.35 | $ | 4.12 | |||||
Earnings from discontinued operations | — | — | — | 0.28 | |||||||||
Diluted earnings per share | $ | 0.99 | $ | 1.22 | $ | 3.35 | $ | 4.40 | |||||
Shares (in millions) outstanding at end of period | 153.4 | 137.6 | 153.4 | 137.6 | |||||||||
Shares (in millions) used for earnings per share calculation | |||||||||||||
Basic | 152.9 | 139.1 | 142.8 | 140.6 | |||||||||
Diluted | 156.4 | 142.4 | 146.3 | 144.1 |
(1) | Mark-to-market gain of $15 million in first nine months 2011 due to the interim remeasurement of the OPEB plan obligation, triggered by the exit of employees associated with the sale of the PET business. |
Table 2A – Segment Sales Information | ||||||||||||||||
Third Quarter | First Nine Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Sales by Segment | ||||||||||||||||
Additives & Functional Products | $ | 406 | $ | 262 | $ | 948 | $ | 822 | ||||||||
Adhesives & Plasticizers | 348 | 349 | 1,094 | 1,060 | ||||||||||||
Advanced Materials | 559 | 278 | 1,166 | 918 | ||||||||||||
Fibers | 349 | 334 | 990 | 955 | ||||||||||||
Specialty Fluids & Intermediates | 592 | 589 | 1,728 | 1,700 | ||||||||||||
Total Sales by Segment | 2,254 | 1,812 | 5,926 | 5,455 | ||||||||||||
Other | 5 | — | 7 | — | ||||||||||||
Total Eastman Chemical Company | $ | 2,259 | $ | 1,812 | $ | 5,933 | $ | 5,455 |
Table 2B – Segment Sales Information (Eastman and Solutia Combined Pro Forma) | ||||||||||||||||
Third Quarter | First Nine Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Sales by Segment | ||||||||||||||||
Additives & Functional Products | $ | 406 | $ | 412 | $ | 1,229 | $ | 1,278 | ||||||||
Adhesives & Plasticizers | 348 | 349 | 1,094 | 1,060 | ||||||||||||
Advanced Materials | 559 | 558 | 1,726 | 1,764 | ||||||||||||
Fibers | 349 | 334 | 990 | 955 | ||||||||||||
Specialty Fluids & Intermediates | 592 | 657 | 1,883 | 1,907 | ||||||||||||
Total Sales by Segment | 2,254 | 2,310 | 6,922 | 6,964 | ||||||||||||
Other | 5 | 20 | 29 | 61 | ||||||||||||
Total Eastman Chemical Company | $ | 2,259 | $ | 2,330 | $ | 6,951 | $ | 7,025 |
Table 2C – Sales Revenue Change | ||||||||
Third Quarter 2012 Compared to Third Quarter 2011 | ||||||||
(Unaudited) | Change in Sales Revenue Due To | |||||||
Revenue % Change | Volume Effect | Price Effect | Exchange Rate Effect | |||||
Additives & Functional Products | 55 | % | 66 | % | (10 | )% | (1 | )% |
Adhesives & Plasticizers | — | % | 6 | % | (4 | )% | (2 | )% |
Advanced Materials | 101 | % | 103 | % | (1 | )% | (1 | )% |
Fibers | 4 | % | — | % | 4 | % | — | % |
Specialty Fluids & Intermediates | 1 | % | 16 | % | (14 | )% | (1 | )% |
Total Eastman Chemical Company | 25 | % | 32 | % | (6 | )% | (1 | )% |
First Nine Months 2012 Compared to First Nine Months 2011 | ||||||||
(Unaudited) | Change in Sales Revenue Due To | |||||||
Revenue % Change | Volume Effect | Price Effect | Exchange Rate Effect | |||||
Additives & Functional Products | 15 | % | 20 | % | (4 | )% | (1 | )% |
Adhesives & Plasticizers | 3 | % | 4 | % | — | % | (1 | )% |
Advanced Materials | 27 | % | 25 | % | 3 | % | (1 | )% |
Fibers | 4 | % | (1 | )% | 5 | % | — | % |
Specialty Fluids & Intermediates | 2 | % | 6 | % | (4 | )% | — | % |
Total Eastman Chemical Company | 9 | % | 10 | % | — | % | (1 | )% |
Table 2D – Sales Revenue Change (Eastman and Solutia Combined Pro Forma) | ||||||||
Third Quarter 2012 Compared to Third Quarter 2011 | ||||||||
(Unaudited) | Change in Sales Revenue Due To | |||||||
Revenue % Change | Volume Effect | Price Effect | Exchange Rate Effect | |||||
Additives & Functional Products | (1 | )% | 8 | % | (8 | )% | (1 | )% |
Adhesives & Plasticizers | — | % | 6 | % | (4 | )% | (2 | )% |
Advanced Materials | — | % | 3 | % | (1 | )% | (2 | )% |
Fibers | 4 | % | — | % | 4 | % | — | % |
Specialty Fluids & Intermediates | (10 | )% | 3 | % | (12 | )% | (1 | )% |
Total Eastman Chemical Company | (3 | )% | 3 | % | (5 | )% | (1 | )% |
First Nine Months 2012 Compared to First Nine Months 2011 | ||||||||
(Unaudited) | Change in Sales Revenue Due To | |||||||
Revenue % Change | Volume Effect | Price Effect | Exchange Rate Effect | |||||
Additives & Functional Products | (4 | )% | — | % | (3 | )% | (1 | )% |
Adhesives & Plasticizers | 3 | % | 4 | % | — | % | (1 | )% |
Advanced Materials | (2 | )% | (2 | )% | 2 | % | (2 | )% |
Fibers | 4 | % | (1 | )% | 5 | % | — | % |
Specialty Fluids & Intermediates | (1 | )% | 2 | % | (3 | )% | — | % |
Total Eastman Chemical Company | (1 | )% | — | % | — | % | (1 | )% |
Table 2E – Sales by Region | ||||||||||||||||
Third Quarter | First Nine Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Sales by Region | ||||||||||||||||
United States and Canada | $ | 1,036 | $ | 978 | $ | 3,026 | $ | 2,900 | ||||||||
Asia Pacific | 627 | 433 | 1,470 | 1,264 | ||||||||||||
Europe, Middle East, and Africa | 468 | 323 | 1,143 | 1,048 | ||||||||||||
Latin America | 128 | 78 | 294 | 243 | ||||||||||||
Total Eastman Chemical Company | $ | 2,259 | $ | 1,812 | $ | 5,933 | $ | 5,455 |
Table 2F – Sales by Region (Eastman and Solutia Combined Pro Forma) | ||||||||||||||||
Third Quarter | First Nine Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Sales by Region | ||||||||||||||||
United States and Canada | $ | 1,036 | $ | 1,115 | $ | 3,295 | $ | 3,314 | ||||||||
Asia Pacific | 627 | 588 | 1,778 | 1,733 | ||||||||||||
Europe, Middle East, and Africa | 468 | 506 | 1,506 | 1,619 | ||||||||||||
Latin America | 128 | 121 | 372 | 359 | ||||||||||||
Total Eastman Chemical Company | $ | 2,259 | $ | 2,330 | $ | 6,951 | $ | 7,025 |
Table 3A - Operating Earnings, Asset Impairments and Restructuring Charges (Gains), Net, Mark-to-Market Pension and Postretirement Benefits Adjustment, and Transaction and Integration Costs; Segment Operating Earnings Reconciliations | ||||||||||||||||
Third Quarter | First Nine Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Operating Earnings by Segment and Item | ||||||||||||||||
Additives & Functional Products | ||||||||||||||||
Operating earnings | $ | 86 | $ | 51 | $ | 215 | $ | 182 | ||||||||
Additional costs of acquired Solutia inventories (1) | 19 | — | 19 | — | ||||||||||||
Excluding item | 105 | 51 | 234 | 182 | ||||||||||||
Adhesives & Plasticizers | ||||||||||||||||
Operating earnings | 73 | 61 | 211 | 201 | ||||||||||||
Advanced Materials | ||||||||||||||||
Operating earnings | 18 | 34 | 86 | 111 | ||||||||||||
Additional costs of acquired Solutia inventories (1) | 39 | — | 39 | — | ||||||||||||
Excluding item | 57 | 34 | 125 | 111 | ||||||||||||
Fibers | ||||||||||||||||
Operating earnings | 98 | 98 | 295 | 281 | ||||||||||||
Specialty Fluids & Intermediates | ||||||||||||||||
Operating earnings | 79 | 54 | 204 | 179 | ||||||||||||
Additional costs of acquired Solutia inventories (1) | 17 | — | 17 | — | ||||||||||||
Asset impairments and restructuring charges (2) | — | 7 | — | 7 | ||||||||||||
Excluding items | 96 | 61 | 221 | 186 | ||||||||||||
Total Operating Earnings by Segment | ||||||||||||||||
Operating earnings | 354 | 298 | 1,011 | 954 | ||||||||||||
Additional costs of acquired Solutia inventories | 75 | — | 75 | — | ||||||||||||
Asset impairments and restructuring charges | — | 7 | — | 7 | ||||||||||||
Excluding items | $ | 429 | $ | 305 | $ | 1,086 | $ | 961 |
(1) | As required by purchase accounting, the acquired inventories were marked to fair value. These inventories were sold in third quarter 2012 resulting in a one-time increase in cost of sales, net of the LIFO impact for these inventories. |
(2) | Restructuring charges primarily for severance associated with the acquisition and integration of Sterling. |
Table 3A - Operating Earnings, Asset Impairments and Restructuring Charges (Gains), Net, Mark-to-Market Pension and Postretirement Benefits Adjustment, and Transaction and Integration Costs; Segment Operating Earnings Reconciliations (Continued) | ||||||||||||||||
Third Quarter | First Nine Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Other (1) | ||||||||||||||||
Operating earnings (loss) | ||||||||||||||||
Growth initiatives (1) | $ | (36 | ) | $ | (17 | ) | $ | (84 | ) | $ | (29 | ) | ||||
Pension and OPEB costs not allocated to operating segments | (5 | ) | (10 | ) | (18 | ) | (7 | ) | ||||||||
Transaction, integration, and severance costs related to the acquisition of Solutia | (50 | ) | — | (65 | ) | — | ||||||||||
Operating loss before exclusions | (91 | ) | (27 | ) | (167 | ) | (36 | ) | ||||||||
Transaction and integration costs related to the acquisition of Solutia | 22 | — | 37 | — | ||||||||||||
Mark-to-market pension and other postretirement benefits adjustment (2) | — | — | — | (15 | ) | |||||||||||
Asset impairments and restructuring charges (gains), net (3) | 37 | — | 37 | (15 | ) | |||||||||||
Operating loss excluding items | (32 | ) | (27 | ) | (93 | ) | (66 | ) | ||||||||
Total Eastman Chemical Company | ||||||||||||||||
Total operating earnings | 263 | 271 | 844 | 918 | ||||||||||||
Additional costs of acquired Solutia inventories | 75 | — | 75 | — | ||||||||||||
Transaction and integration costs related to the acquisition of Solutia | 22 | — | 37 | — | ||||||||||||
Mark-to-market pension and other postretirement benefits adjustment | — | — | — | (15 | ) | |||||||||||
Asset impairments and restructuring charges (gains), net | 37 | 7 | 37 | (8 | ) | |||||||||||
Total operating earnings excluding items | $ | 397 | $ | 278 | $ | 993 | $ | 895 |
(1) | Research and development, pension and OPEB, and other expenses not identifiable to an operating segment are not included in segment operating results for either of the periods presented and are shown as "other" operating earnings (loss). |
(2) | Mark-to-market gain in first nine months 2011 due to the interim remeasurement of the OPEB plan obligation, triggered by the exit of employees associated with the sale of the PET business. |
(3) | Third quarter and first nine months 2012 severance related to the acquisition and integration of Solutia and asset impairments, primarily for land retained from Beaumont, Texas gasification project. Third quarter 2011 reflected $15 million gain from the sale of the previously impaired methanol and ammonia assets related to the terminated Beaumont, Texas industrial gasification project. |
Table 3B - Operating Earnings, Asset Impairments and Restructuring Charges (Gains), Net, Mark-to-Market Pension and Postretirement Benefits Adjustment, and Transaction and Integration Costs; Segment Operating Earnings Reconciliations (Eastman and Solutia Combined Pro Forma) | ||||||||||||||||
Third Quarter | First Nine Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Operating Earnings by Segment and Item | ||||||||||||||||
Additives & Functional Products | ||||||||||||||||
Operating earnings | $ | 86 | $ | 84 | $ | 287 | $ | 314 | ||||||||
Additional costs of acquired Solutia inventories | 19 | — | 19 | — | ||||||||||||
Other operating income (expense) (1) | — | — | — | (17 | ) | |||||||||||
Excluding items | 105 | 84 | 306 | 297 | ||||||||||||
Adhesives & Plasticizers | ||||||||||||||||
Operating earnings | 73 | 61 | 211 | 201 | ||||||||||||
Advanced Materials | ||||||||||||||||
Operating earnings | 18 | 63 | 137 | 214 | ||||||||||||
Additional costs of acquired Solutia inventories | 39 | — | 39 | — | ||||||||||||
Asset impairments and restructuring charges (2) | — | — | 5 | — | ||||||||||||
Excluding items | 57 | 63 | 181 | 214 | ||||||||||||
Fibers | ||||||||||||||||
Operating earnings | 98 | 98 | 295 | 281 | ||||||||||||
Specialty Fluids & Intermediates | ||||||||||||||||
Operating earnings | 79 | 69 | 249 | 224 | ||||||||||||
Additional costs of acquired Solutia inventories | 17 | — | 17 | — | ||||||||||||
Asset impairments and restructuring charges (3) | — | 7 | — | 7 | ||||||||||||
Excluding items | 96 | 76 | 266 | 231 | ||||||||||||
Total Operating Earnings by Segment | ||||||||||||||||
Operating earnings | 354 | 375 | 1,179 | 1,234 | ||||||||||||
Additional costs of acquired Solutia inventories | 75 | — | 75 | — | ||||||||||||
Asset impairments and restructuring charges | — | 7 | — | 7 | ||||||||||||
Other operating income (expense) | — | — | — | (17 | ) | |||||||||||
Excluding items | $ | 429 | $ | 382 | $ | 1,254 | $ | 1,224 |
(1) | Gains on certain other rubber chemicals divestitures. |
(2) | Acquisition related expenses on the Southwall Technologies Inc. acquisition. |
(3) | Restructuring charges primarily for severance associated with the acquisition and integration of Sterling. |
Table 3B - Operating Earnings, Asset Impairments and Restructuring Charges (Gains), Net, Mark-to-Market Pension and Postretirement Benefits Adjustment, and Transaction and Integration Costs; Segment Operating Earnings Reconciliations (Eastman and Solutia Combined Pro Forma) (continued) | ||||||||||||||||
Third Quarter | First Nine Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Other (1) | ||||||||||||||||
Operating earnings (loss) | ||||||||||||||||
Growth initiatives (1) | $ | (36 | ) | $ | 10 | $ | (87 | ) | $ | (5 | ) | |||||
Pension and OPEB costs not allocated to operating segments | (5 | ) | (10 | ) | (18 | ) | (6 | ) | ||||||||
Transaction, integration, and severance costs related to the acquisition of Solutia | (50 | ) | — | (90 | ) | — | ||||||||||
Operating loss before exclusions | (91 | ) | — | (195 | ) | (11 | ) | |||||||||
Transaction and integration costs related to the acquisition of Solutia | 22 | — | 62 | — | ||||||||||||
Mark-to-market pension and other postretirement benefits adjustment (2) | — | — | — | (15 | ) | |||||||||||
Asset impairments and restructuring charges (gains), net (3)(4)(5) | 37 | 6 | 37 | 4 | ||||||||||||
Other operating income (expense) (6) | — | (29 | ) | — | (29 | ) | ||||||||||
Operating loss excluding items | (32 | ) | (23 | ) | (96 | ) | (51 | ) | ||||||||
Total Eastman Chemical Company | ||||||||||||||||
Total operating earnings | 263 | 375 | 984 | 1,223 | ||||||||||||
Additional costs of acquired Solutia inventories | 75 | — | 75 | — | ||||||||||||
Transaction and integration costs related to the acquisition of Solutia | 22 | — | 62 | — | ||||||||||||
Mark-to-market pension and other postretirement benefits adjustment | — | — | — | (15 | ) | |||||||||||
Asset impairments and restructuring charges (gains), net | 37 | 13 | 42 | 11 | ||||||||||||
Other operating income (expense) | — | (29 | ) | — | (46 | ) | ||||||||||
Total operating earnings excluding items | $ | 397 | $ | 359 | $ | 1,163 | $ | 1,173 |
(1) | Research and development, pension and OPEB, and other expenses not identifiable to an operating segment are not included in segment operating results for either of the periods presented and are shown as "other" operating earnings (loss). |
(2) | Mark-to-market gain in first six months 2011 due to the interim remeasurement of the OPEB plan obligation, triggered by the exit of employees associated with the sale of the PET business. |
(3) | Third quarter and first nine months 2012 severance related to the acquisition and integration of Solutia and asset impairments, primarily for land retained from Beaumont, Texas gasification project. First nine months 2011 reflected $15 million gain from the sale of the previously impaired methanol and ammonia assets related to the terminated Beaumont, Texas industrial gasification project. |
(4) | Third quarter and first nine months 2011 severance, pension settlement, and other charges of $1 million and $14 million, respectively, related to the relocation of European regional headquarters. |
(5) | Third quarter and first nine months 2011 severance of $3 million and share-based compensation costs on executive officer separation agreement of $2 million. |
(6) | Gain related to the sale of remaining ownership interest in Ascend Performance Materials Holdings Inc. |
Table 4 – Operating Earnings, Earnings, and Earnings Per Share From Continuing Operations Reconciliations | ||||||||||||||||
Third Quarter 2012 | ||||||||||||||||
Earnings from Continuing Operations | ||||||||||||||||
(Dollars in millions, unaudited) | Operating Earnings | Before Tax | After Tax | Per Diluted Share | ||||||||||||
As reported | $ | 263 | $ | 218 | $ | 154 | $ | 0.99 | ||||||||
Certain Items: | ||||||||||||||||
Additional costs of acquired Solutia inventories | 75 | 75 | 53 | 0.34 | ||||||||||||
Solutia transaction and integration costs | 22 | 22 | 15 | 0.10 | ||||||||||||
Asset impairments and restructuring charges (gains), net(1) | 37 | 37 | 24 | 0.14 | ||||||||||||
Excluding items | $ | 397 | $ | 352 | $ | 246 | $ | 1.57 |
Third Quarter 2011 | ||||||||||||||||
Earnings from Continuing Operations | ||||||||||||||||
(Dollars in millions, unaudited) | Operating Earnings | Before Tax | After Tax | Per Diluted Share | ||||||||||||
As reported | $ | 271 | $ | 254 | $ | 174 | $ | 1.22 | ||||||||
Certain Item: | ||||||||||||||||
Asset impairments and restructuring charges (gains), net(2) | 7 | 7 | 5 | 0.04 | ||||||||||||
Excluding item | $ | 278 | $ | 261 | $ | 179 | $ | 1.26 |
(1) | Severance charges of $28 million related to the acquisition and integration of Solutia and $9 million of asset impairments, primarily for land retained from Beaumont, Texas gasification project. |
(2) | Restructuring charges primarily for severance associated with the acquisition and integration of Sterling Chemicals, Inc. |
Table 4 – Operating Earnings, Earnings, and Earnings Per Share From Continuing Operations Reconciliations (continued) | ||||||||||||||||
First Nine Months 2012 | ||||||||||||||||
Earnings from Continuing Operations | ||||||||||||||||
(Dollars in millions, unaudited) | Operating Earnings | Before Tax | After Tax | Per Diluted Share | ||||||||||||
As reported | $ | 844 | $ | 730 | $ | 490 | $ | 3.35 | ||||||||
Certain Items: | ||||||||||||||||
Additional costs of acquired Solutia inventories | 75 | 75 | 53 | 0.36 | ||||||||||||
Solutia transaction, integration, and financing costs (1) | 37 | 69 | 48 | 0.32 | ||||||||||||
Asset impairments and restructuring charges (gains), net (2) | 37 | 37 | 24 | 0.17 | ||||||||||||
Excluding items | $ | 993 | $ | 911 | $ | 615 | $ | 4.20 |
First Nine Months 2011 | ||||||||||||||||
Earnings from Continuing Operations | ||||||||||||||||
(Dollars in millions, unaudited) | Operating Earnings | Before Tax | After Tax | Per Diluted Share | ||||||||||||
As reported | $ | 918 | $ | 875 | $ | 594 | $ | 4.12 | ||||||||
Certain Items: | ||||||||||||||||
Mark-to-market pension and other postretirement benefit adjustment (3) | (15 | ) | (15 | ) | (10 | ) | (0.07 | ) | ||||||||
Asset impairments and restructuring charges (gains), net (4) | (8 | ) | (8 | ) | (5 | ) | (0.03 | ) | ||||||||
Excluding items | $ | 895 | $ | 852 | $ | 579 | $ | 4.02 |
(1) | Transaction and integration costs of $37 million in selling, general and administrative expenses, financing costs of $9 million in net interest expense, and $23 million in other charges (income), net, related to the acquisition of Solutia. |
(2) | Severance charges related to the acquisition and integration of Solutia of $28 million and asset impairments, primarily for land retained from Beaumont, Texas gasification project, of $9 million. |
(3) | Mark-to-market gain due to the interim remeasurement of the OPEB plan obligation, triggered by the exit of employees associated with the sale of the PET business. |
(4) | Gain of $15 million from the sale of the previously impaired methanol and ammonia assets related to the terminated Beaumont, Texas industrial gasification project and restructuring charges of $7 million primarily for severance associated with the acquisition and integration of Sterling Chemicals, Inc. |
Table 5 – Statements of Cash Flows | |||||||||||||||
Third Quarter | First Nine Months | ||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | |||||||||||
Cash flows from operating activities | |||||||||||||||
Net earnings | $ | 154 | $ | 174 | $ | 491 | $ | 634 | |||||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | |||||||||||||||
Depreciation and amortization | 112 | 69 | 252 | 204 | |||||||||||
Asset impairment charges | 9 | — | 9 | — | |||||||||||
Gain on sale of assets | — | — | — | (70 | ) | ||||||||||
Provision for deferred income taxes | 40 | 19 | 63 | 5 | |||||||||||
Pension and other postretirement contributions (in excess of) less than expenses | (40 | ) | (7 | ) | (85 | ) | (119 | ) | |||||||
Variable compensation (in excess of) less than expenses | 31 | 31 | (5 | ) | (14 | ) | |||||||||
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: | |||||||||||||||
(Increase) decrease in trade receivables | 40 | 65 | (63 | ) | (147 | ) | |||||||||
(Increase) decrease in inventories | 32 | (104 | ) | 30 | (225 | ) | |||||||||
Increase (decrease) in trade payables | 44 | (36 | ) | 13 | 34 | ||||||||||
Other items, net | (69 | ) | 1 | (17 | ) | (29 | ) | ||||||||
Net cash provided by operating activities | 353 | 212 | 688 | 273 | |||||||||||
Cash flows from investing activities | |||||||||||||||
Additions to properties and equipment | (120 | ) | (127 | ) | (297 | ) | (333 | ) | |||||||
Proceeds from redemption of short-term time deposits | — | — | 200 | — | |||||||||||
Proceeds from sale of assets and investments | 1 | 7 | 7 | 651 | |||||||||||
Acquisitions and investments in joint ventures | (2,658 | ) | (154 | ) | (2,668 | ) | (154 | ) | |||||||
Additions to short-term time deposits | — | — | — | (200 | ) | ||||||||||
Additions to capitalized software | (1 | ) | (2 | ) | (4 | ) | (7 | ) | |||||||
Other items, net | 2 | 33 | (33 | ) | 27 | ||||||||||
Net cash used in investing activities | (2,776 | ) | (243 | ) | (2,795 | ) | (16 | ) | |||||||
Cash flows from financing activities | |||||||||||||||
Net increase in commercial paper, credit facility and other borrowings | — | — | (1 | ) | 1 | ||||||||||
Proceeds from borrowings | 1,450 | — | 3,761 | — | |||||||||||
Repayment of borrowings | (1,770 | ) | — | (1,916 | ) | (2 | ) | ||||||||
Dividends paid to stockholders | (36 | ) | (33 | ) | (107 | ) | (100 | ) | |||||||
Treasury stock purchases | — | (115 | ) | — | (292 | ) | |||||||||
Proceeds from stock option exercises and other items, net | 14 | (8 | ) | 28 | 67 | ||||||||||
Net cash provided by (used in) financing activities | (342 | ) | (156 | ) | 1,765 | (326 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 2 | 1 | 2 | 1 | |||||||||||
Net change in cash and cash equivalents | (2,763 | ) | (186 | ) | (340 | ) | (68 | ) | |||||||
Cash and cash equivalents at beginning of period | 3,000 | 634 | 577 | 516 | |||||||||||
Cash and cash equivalents at end of period | $ | 237 | $ | 448 | $ | 237 | $ | 448 |
Table 5A – Total Cash and Cash Equivalents and Short-Term Time Deposits | ||||||||
(Dollars in millions, unaudited) | September 30, 2012 | September 30, 2011 | ||||||
Cash and cash equivalents at end of period | $ | 237 | $ | 448 | ||||
Short-term time deposits | — | 201 | ||||||
Total cash and cash equivalents and short-term time deposits | $ | 237 | $ | 649 |
Table 5B – Net Cash Provided by Operating Activities Reconciliation and Free Cash Flow | ||||||||||||||||
Third Quarter | First Nine Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Net cash provided by operating activities | $ | 353 | $ | 212 | $ | 688 | $ | 273 | ||||||||
Impact of tax payment on the sale of the PET business(1) | — | 28 | — | 83 | ||||||||||||
Net cash provided by operating activities excluding items | 353 | 240 | 688 | 356 | ||||||||||||
Additions to properties and equipment | (120 | ) | (127 | ) | (297 | ) | (333 | ) | ||||||||
Dividends paid to stockholders | (36 | ) | (33 | ) | (107 | ) | (100 | ) | ||||||||
Free Cash Flow | $ | 197 | $ | 80 | $ | 284 | $ | (77 | ) |
(1) | First nine months 2011 cash flows included $83 million of a total $110 million tax payment for the tax gain on the sale of the PET business completed in first quarter 2011. |
Table 6 – Selected Balance Sheet Items | ||||||||
September 30, | December 31, | |||||||
(Dollars in millions) | 2012 | 2011 | ||||||
(unaudited) | ||||||||
Cash | $ | 237 | $ | 577 | ||||
Short-term Borrowings | 120 | 153 | ||||||
Long-term Borrowings | 4,865 | 1,445 | ||||||
Stockholders' Equity | 3,010 | 1,870 |