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: January 31, 2013 |
(In millions, except per share amounts) | 4Q12 | 4Q11 | FY12 | FY11 | ||||||||
Sales revenue | $ | 2,169 | $ | 1,723 | $ | 8,102 | $ | 7,178 | ||||
Pro forma combined sales revenue* | $ | 2,169 | $ | 2,250 | $ | 9,120 | $ | 9,275 | ||||
Earnings (loss) per diluted share from continuing operations | $ | (0.35 | ) | $ | 0.09 | $ | 2.92 | $ | 4.24 | |||
Earnings per diluted share from continuing operations excluding MTM pension and OPEB losses and gains, Solutia acquisition-related costs, and asset impairments and restructuring charges and gains** | $ | 1.19 | $ | 0.78 | $ | 5.38 | $ | 4.81 | ||||
Net cash provided by operating activities | $ | 440 | $ | 352 | $ | 1,128 | $ | 625 |
Item | Page | |
Table 1 | Statements of Earnings (Loss) | |
Table 2A | Segment Sales Information | |
Table 2B | Segment Sales Information (Eastman and Solutia Pro Forma Combined) | |
Table 2C | Sales Revenue Change | |
Table 2D | Sales Revenue Change (Eastman and Solutia Pro Forma Combined) | |
Table 2E | Sales by Region | |
Table 2F | Sales by Region (Eastman and Solutia Pro Forma Combined) | |
Table 3A | Company, Segment, and Other Operating Earnings (Loss), and Non-GAAP Operating Earnings Reconciliations | |
Table 3B | Company, Segment, and Other Operating Earnings (Loss), and Non-GAAP Operating Earnings Reconciliations (Eastman and Solutia Pro Forma Combined) | |
Table 4 | Operating Earnings (Loss), Earnings (Loss), and Earnings (Loss) Per Share from Continuing Operations Non-GAAP Reconciliations | |
Table 5 | Statements of Cash Flows | |
Table 5A | Total Cash and Cash Equivalents and Short-Term Time Deposits | |
Table 5B | Net Cash Provided By Operating Activities to Free Cash Flow Reconciliation | |
Table 6 | Selected Balance Sheet Items |
Table 1 – Statements of Earnings (Loss) | |||||||||||||||
Fourth Quarter | Twelve Months | ||||||||||||||
(Dollars in millions, except per share amounts; unaudited) | 2012 | 2011 | 2012 | 2011 | |||||||||||
Sales | $ | 2,169 | $ | 1,723 | $ | 8,102 | $ | 7,178 | |||||||
Cost of sales(1) | 1,844 | 1,519 | 6,340 | 5,609 | |||||||||||
Gross profit | 325 | 204 | 1,762 | 1,569 | |||||||||||
Selling, general and administrative expenses(1) | 224 | 141 | 644 | 481 | |||||||||||
Research and development expenses(1) | 62 | 44 | 198 | 159 | |||||||||||
Asset impairments and restructuring charges (gains), net | 83 | — | 120 | (8 | ) | ||||||||||
Operating earnings (loss) | (44 | ) | 19 | 800 | 937 | ||||||||||
Net interest expense | 48 | 19 | 143 | 76 | |||||||||||
Other charges (income), net | (6 | ) | (5 | ) | 8 | (20 | ) | ||||||||
Earnings (loss) from continuing operations before income taxes | (86 | ) | 5 | 649 | 881 | ||||||||||
Provision (benefit) for income taxes from continuing operations | (34 | ) | (7 | ) | 206 | 274 | |||||||||
Earnings (loss) from continuing operations | (52 | ) | 12 | 443 | 607 | ||||||||||
Earnings from discontinued operations, net of tax | — | — | — | 9 | |||||||||||
Gain from disposal of discontinued operations, net of tax | — | — | 1 | 31 | |||||||||||
Net earnings (loss) | (52 | ) | 12 | 444 | 647 | ||||||||||
Less: net income attributable to noncontrolling interest | 2 | — | 7 | 1 | |||||||||||
Net earnings (loss) attributable to Eastman | $ | (54 | ) | $ | 12 | $ | 437 | $ | 646 | ||||||
Amounts attributable to Eastman stockholders: | |||||||||||||||
Earnings (loss) from continuing operations, net of tax | $ | (54 | ) | $ | 12 | $ | 436 | $ | 606 | ||||||
Earnings from discontinued operations, net of tax | — | — | 1 | 40 | |||||||||||
Net earnings (loss) attributable to Eastman stockholders | $ | (54 | ) | $ | 12 | $ | 437 | $ | 646 | ||||||
Basic earnings per share attributable to Eastman | |||||||||||||||
Earnings (loss) from continuing operations | $ | (0.35 | ) | $ | 0.09 | $ | 2.99 | $ | 4.34 | ||||||
Earnings from discontinued operations | — | — | 0.01 | 0.29 | |||||||||||
Basic earnings (loss) per share attributable to Eastman | $ | (0.35 | ) | $ | 0.09 | $ | 3.00 | $ | 4.63 | ||||||
Diluted earnings per share attributable to Eastman | |||||||||||||||
Earnings (loss) from continuing operations | $ | (0.35 | ) | $ | 0.09 | $ | 2.92 | $ | 4.24 | ||||||
Earnings from discontinued operations | — | — | 0.01 | 0.28 | |||||||||||
Diluted earnings (loss) per share attributable to Eastman | $ | (0.35 | ) | $ | 0.09 | $ | 2.93 | $ | 4.52 | ||||||
Shares (in millions) outstanding at end of period | 153.9 | 137.0 | 153.9 | 137.0 | |||||||||||
Shares (in millions) used for earnings per share calculation | |||||||||||||||
Basic | 153.6 | 136.9 | 145.5 | 139.7 | |||||||||||
Diluted | 153.6 | 140.1 | 149.1 | 143.1 |
(1) | Fourth quarter and twelve months 2012 included mark-to-market pension and other post-retirement benefits (MTM) losses of $276 million in both periods. Fourth quarter and twelve months 2011 included MTM losses of $159 million in both periods. Twelve months 2011 also included MTM gain of $15 million 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 | ||||||||||||||||
Fourth Quarter | Twelve Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Sales by Segment | ||||||||||||||||
Additives & Functional Products | $ | 384 | $ | 245 | $ | 1,332 | $ | 1,067 | ||||||||
Adhesives & Plasticizers | 338 | 321 | 1,432 | 1,381 | ||||||||||||
Advanced Materials | 528 | 277 | 1,694 | 1,195 | ||||||||||||
Fibers | 325 | 324 | 1,315 | 1,279 | ||||||||||||
Specialty Fluids & Intermediates | 590 | 556 | 2,318 | 2,256 | ||||||||||||
Total Sales by Segment | 2,165 | 1,723 | 8,091 | 7,178 | ||||||||||||
Other | 4 | — | 11 | — | ||||||||||||
Total Eastman Chemical Company | $ | 2,169 | $ | 1,723 | $ | 8,102 | $ | 7,178 |
Table 2B – Segment Sales Information (Eastman and Solutia Pro Forma Combined) | ||||||||||||||||
Fourth Quarter | Twelve Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Sales by Segment | ||||||||||||||||
Additives & Functional Products | $ | 384 | $ | 399 | $ | 1,613 | $ | 1,677 | ||||||||
Adhesives & Plasticizers | 338 | 321 | 1,432 | 1,381 | ||||||||||||
Advanced Materials | 528 | 549 | 2,254 | 2,313 | ||||||||||||
Fibers | 325 | 324 | 1,315 | 1,279 | ||||||||||||
Specialty Fluids & Intermediates | 590 | 641 | 2,473 | 2,548 | ||||||||||||
Total Sales by Segment | 2,165 | 2,234 | 9,087 | 9,198 | ||||||||||||
Other | 4 | 16 | 33 | 77 | ||||||||||||
Total Eastman Chemical Company | $ | 2,169 | $ | 2,250 | $ | 9,120 | $ | 9,275 |
Table 2C – Sales Revenue Change | ||||||||
Fourth Quarter 2012 Compared to Fourth Quarter 2011 | ||||||||
(Unaudited) | Change in Sales Revenue Due To | |||||||
Revenue % Change | Volume Effect | Price Effect | Exchange Rate Effect | |||||
Additives & Functional Products | 57 | % | 61 | % | (4 | )% | — | % |
Adhesives & Plasticizers | 5 | % | 8 | % | (2 | )% | (1 | )% |
Advanced Materials | 91 | % | 92 | % | (1 | )% | — | % |
Fibers | — | % | (4 | )% | 4 | % | — | % |
Specialty Fluids & Intermediates | 6 | % | 12 | % | (6 | )% | — | % |
Total Eastman Chemical Company | 26 | % | 29 | % | (3 | )% | — | % |
Twelve Months 2012 Compared to Twelve Months 2011 | ||||||||
(Unaudited) | Change in Sales Revenue Due To | |||||||
Revenue % Change | Volume Effect | Price Effect | Exchange Rate Effect | |||||
Additives & Functional Products | 25 | % | 29 | % | (4 | )% | — | % |
Adhesives & Plasticizers | 4 | % | 5 | % | — | % | (1 | )% |
Advanced Materials | 42 | % | 40 | % | 2 | % | — | % |
Fibers | 3 | % | (2 | )% | 5 | % | — | % |
Specialty Fluids & Intermediates | 3 | % | 7 | % | (4 | )% | — | % |
Total Eastman Chemical Company | 13 | % | 14 | % | (1 | )% | — | % |
Table 2D – Sales Revenue Change (Eastman and Solutia Pro Forma Combined) | ||||||||
Fourth Quarter 2012 Compared to Fourth Quarter 2011 | ||||||||
(Unaudited) | Change in Sales Revenue Due To | |||||||
Revenue % Change | Volume Effect | Price Effect | Exchange Rate Effect | |||||
Additives & Functional Products | (4 | )% | 1 | % | (4 | )% | (1 | )% |
Adhesives & Plasticizers | 5 | % | 8 | % | (2 | )% | (1 | )% |
Advanced Materials | (4 | )% | (2 | )% | (1 | )% | (1 | )% |
Fibers | — | % | (4 | )% | 4 | % | — | % |
Specialty Fluids & Intermediates | (8 | )% | (4 | )% | (4 | )% | — | % |
Total Eastman Chemical Company | (4 | )% | (1 | )% | (2 | )% | (1 | )% |
Twelve Months 2012 Compared to Twelve 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 | 4 | % | 5 | % | — | % | (1 | )% |
Advanced Materials | (3 | )% | (2 | )% | 1 | % | (2 | )% |
Fibers | 3 | % | (2 | )% | 5 | % | — | % |
Specialty Fluids & Intermediates | (3 | )% | — | % | (3 | )% | — | % |
Total Eastman Chemical Company | (2 | )% | — | % | (1 | )% | (1 | )% |
Table 2E – Sales by Region | ||||||||||||||||
Fourth Quarter | Twelve Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Sales by Region | ||||||||||||||||
United States and Canada | $ | 969 | $ | 924 | $ | 3,995 | $ | 3,824 | ||||||||
Asia Pacific | 618 | 417 | 2,088 | 1,681 | ||||||||||||
Europe, Middle East, and Africa | 462 | 304 | 1,605 | 1,352 | ||||||||||||
Latin America | 120 | 78 | 414 | 321 | ||||||||||||
Total Eastman Chemical Company | $ | 2,169 | $ | 1,723 | $ | 8,102 | $ | 7,178 |
Table 2F – Sales by Region (Eastman and Solutia Pro Forma Combined) | ||||||||||||||||
Fourth Quarter | Twelve Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Sales by Region | ||||||||||||||||
United States and Canada | $ | 969 | $ | 1,050 | $ | 4,264 | $ | 4,364 | ||||||||
Asia Pacific | 618 | 582 | 2,396 | 2,315 | ||||||||||||
Europe, Middle East, and Africa | 462 | 500 | 1,968 | 2,119 | ||||||||||||
Latin America | 120 | 118 | 492 | 477 | ||||||||||||
Total Eastman Chemical Company | $ | 2,169 | $ | 2,250 | $ | 9,120 | $ | 9,275 |
Table 3A - Company, Segment, and Other Operating Earnings (Loss), and Non-GAAP Operating Earnings Reconciliations | ||||||||||||||||
Fourth Quarter | Twelve Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Operating Earnings by Segment and Item | ||||||||||||||||
Additives & Functional Products | ||||||||||||||||
Operating earnings | $ | 70 | $ | 33 | $ | 285 | $ | 215 | ||||||||
Additional costs of acquired Solutia inventories (1) | 2 | — | 21 | — | ||||||||||||
Asset impairments and restructuring charges(2)(3) | 17 | — | 17 | — | ||||||||||||
Excluding items | 89 | 33 | 323 | 215 | ||||||||||||
Adhesives & Plasticizers | ||||||||||||||||
Operating earnings | 49 | 49 | 260 | 250 | ||||||||||||
Asset impairments and restructuring charges(2) | 3 | — | 3 | — | ||||||||||||
Excluding item | 52 | 49 | 263 | 250 | ||||||||||||
Advanced Materials | ||||||||||||||||
Operating earnings | (2 | ) | 14 | 84 | 125 | |||||||||||
Additional costs of acquired Solutia inventories (1) | 2 | — | 41 | — | ||||||||||||
Asset impairments and restructuring charges(2)(3) | 29 | — | 29 | — | ||||||||||||
Excluding items | 29 | 14 | 154 | 125 | ||||||||||||
Fibers | ||||||||||||||||
Operating earnings | 90 | 84 | 385 | 365 | ||||||||||||
Asset impairments and restructuring charges(2) | 3 | — | 3 | — | ||||||||||||
Excluding item | 93 | 84 | 388 | 365 | ||||||||||||
Specialty Fluids & Intermediates | ||||||||||||||||
Operating earnings | 84 | 25 | 288 | 204 | ||||||||||||
Additional costs of acquired Solutia inventories (1) | — | — | 17 | — | ||||||||||||
Asset impairments and restructuring charges (2)(3)(4) | 9 | — | 9 | 7 | ||||||||||||
Excluding items | 93 | 25 | 314 | 211 | ||||||||||||
Total Operating Earnings by Segment | ||||||||||||||||
Operating earnings | 291 | 205 | 1,302 | 1,159 | ||||||||||||
Additional costs of acquired Solutia inventories | 4 | — | 79 | — | ||||||||||||
Asset impairments and restructuring charges | 61 | — | 61 | 7 | ||||||||||||
Excluding items | $ | 356 | $ | 205 | $ | 1,442 | $ | 1,166 |
(1) | As required by purchase accounting, the acquired inventories were marked to fair value. These inventories were sold in 2012 resulting in an increase in cost of sales, net of the LIFO impact for these inventories in fourth quarter and twelve months 2012. |
(2) | Fourth quarter and twelve months 2012 include asset impairments and restructuring charges of $9 million, $3 million, $5 million, $3 million, and $6 million in the Additives & Functional Products, Adhesives & Plasticizers, Advanced Materials, Fibers and Specialty Fluids & Intermediates segments, respectively, primarily related to discontinuance of a project to modify existing utility assets in order to meet requirements of recently enacted environmental regulations controlling air emissions from boilers. |
(3) | Fourth quarter and twelve months 2012 include asset impairments and restructuring charges of $8 million, $24 million, and $3 million in the Additives & Functional Products, Advanced Materials, and Specialty Fluids & Intermediates segments, respectively, for the fourth quarter termination of an operating agreement at the acquired Solutia manufacturing facility in Sao Jose Dos Campos, Brazil and related manufacturing facility closure costs. |
(4) | Twelve months 2011 included restructuring charges of $7 million primarily for severance associated with the acquisition and integration of Sterling Chemicals. |
Table 3A - Company, Segment, and Other Operating Earnings (Loss), and Non-GAAP Operating Earnings Reconciliations (Continued) | ||||||||||||||||
Fourth Quarter | Twelve Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Other (1) | ||||||||||||||||
Operating loss | ||||||||||||||||
Growth initiatives and businesses not allocated to segments (1) | $ | (48 | ) | $ | (20 | ) | $ | (132 | ) | $ | (49 | ) | ||||
Pension and OPEB costs not allocated to operating segments | (276 | ) | (166 | ) | (294 | ) | (173 | ) | ||||||||
Transaction, integration, and restructuring costs related to the acquisition of Solutia | (11 | ) | — | (76 | ) | — | ||||||||||
Operating loss before exclusions | (335 | ) | (186 | ) | (502 | ) | (222 | ) | ||||||||
Transaction and integration costs related to the acquisition of Solutia | 7 | — | 44 | — | ||||||||||||
Mark-to-market pension and other postretirement benefits losses (gains), net (2) | 276 | 159 | 276 | 144 | ||||||||||||
Asset impairments and restructuring charges (gains), net (3) | 22 | — | 59 | (15 | ) | |||||||||||
Operating loss excluding items | (30 | ) | (27 | ) | (123 | ) | (93 | ) | ||||||||
Total Eastman Chemical Company | ||||||||||||||||
Total operating (loss) earnings | (44 | ) | 19 | 800 | 937 | |||||||||||
Additional costs of acquired Solutia inventories | 4 | — | 79 | — | ||||||||||||
Transaction and integration costs related to the acquisition of Solutia | 7 | — | 44 | — | ||||||||||||
Mark-to-market pension and other postretirement benefits losses (gains), net | 276 | 159 | 276 | 144 | ||||||||||||
Asset impairments and restructuring charges (gains), net | 83 | — | 120 | (8 | ) | |||||||||||
Total operating earnings excluding items | $ | 326 | $ | 178 | $ | 1,319 | $ | 1,073 |
(1) | Research and development, pension and OPEB, and other expenses not identifiable to an operating segment are not included in segment operating results and are shown as "other" operating earnings (loss). Businesses not allocated to segments include the Perennial WoodTM and Photovoltaics businesses. |
(2) | Fourth quarter and twelve months 2012 and 2011 included MTM losses and gains, net, for pension and OPEB plans actuarial adjustments. Twelve months 2011 included MTM gain of $15 million in 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) | Fourth quarter and twelve months 2012 included restructuring charges of $4 million and $32 million, respectively, primarily for severance related to the acquisition and integration of Solutia. Fourth quarter and twelve months 2012 also included restructuring charges of $17 million for inventory costs in excess of recoverable value of certain discontinued Perennial WoodTM product lines and to accrue for losses on take-or-pay contracts with third parties, and asset impairments and restructuring charges of $1 million and $4 million, respectively, for termination of the research and development activities of a site acquired in 2011. Twelve months 2012 also included a charge of $6 million for the impairment of land retained from the terminated Beaumont, Texas industrial gasification project. Twelve 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. |
Table 3B - Company, Segment, and Other Operating Earnings (Loss), and Non-GAAP Operating Earnings Reconciliations (Eastman and Solutia Pro Forma Combined) | ||||||||||||||||
Fourth Quarter | Twelve Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Operating Earnings by Segment and Item | ||||||||||||||||
Additives & Functional Products | ||||||||||||||||
Operating earnings | $ | 70 | $ | 68 | $ | 357 | $ | 382 | ||||||||
Additional costs of acquired Solutia inventories(1) | 2 | — | 21 | — | ||||||||||||
Asset impairments and restructuring charges(2)(3) | 17 | — | 17 | — | ||||||||||||
Other operating (income) (4) | — | — | — | (17 | ) | |||||||||||
Excluding items | 89 | 68 | 395 | 365 | ||||||||||||
Adhesives & Plasticizers | ||||||||||||||||
Operating earnings | 49 | 49 | 260 | 250 | ||||||||||||
Asset impairments and restructuring charges(2) | 3 | — | 3 | — | ||||||||||||
Excluding item | 52 | 49 | 263 | 250 | ||||||||||||
Advanced Materials | ||||||||||||||||
Operating earnings | (2 | ) | 37 | 135 | 251 | |||||||||||
Additional costs of acquired Solutia inventories(1) | 2 | — | 41 | — | ||||||||||||
Asset impairments and restructuring charges (2)(3)(5) | 29 | — | 34 | — | ||||||||||||
Excluding items | 29 | 37 | 210 | 251 | ||||||||||||
Fibers | ||||||||||||||||
Operating earnings | 90 | 84 | 385 | 365 | ||||||||||||
Asset impairments and restructuring charges(2) | 3 | — | 3 | — | ||||||||||||
Excluding item | 93 | 84 | 388 | 365 | ||||||||||||
Specialty Fluids & Intermediates | ||||||||||||||||
Operating earnings | 84 | 47 | 333 | 271 | ||||||||||||
Additional costs of acquired Solutia inventories(1) | — | — | 17 | — | ||||||||||||
Asset impairments and restructuring charges(2)(3)(6) | 9 | — | 9 | 7 | ||||||||||||
Excluding items | 93 | 47 | 359 | 278 | ||||||||||||
Total Operating Earnings by Segment | ||||||||||||||||
Operating earnings | 291 | 285 | 1,470 | 1,519 | ||||||||||||
Additional costs of acquired Solutia inventories | 4 | — | 79 | — | ||||||||||||
Asset impairments and restructuring charges | 61 | — | 66 | 7 | ||||||||||||
Other operating (income) | — | — | — | (17 | ) | |||||||||||
Excluding items | $ | 356 | $ | 285 | $ | 1,615 | $ | 1,509 |
(1) | As required by purchase accounting, the acquired inventories were marked to fair value. These inventories were sold in 2012 resulting in an increase in cost of sales, net of the LIFO impact for these inventories in fourth quarter and twelve months 2012. |
(2) | Fourth quarter and twelve months 2012 include asset impairments and restructuring charges of $9 million, $3 million, $5 million, $3 million, and $6 million in the Additives & Functional Products, Adhesives & Plasticizers, Advanced Materials, Fibers and Specialty Fluids & Intermediates segments, respectively, primarily related to discontinuance of a project to modify existing utility assets in order to meet requirements of recently enacted environmental regulations controlling air emissions from boilers. |
(3) | Fourth quarter and twelve months 2012 include asset impairments and restructuring charges of $8 million, $24 million, and $3 million in the Additives & Functional Products, Advanced Materials, and Specialty Fluids & Intermediates segments, respectively, for the fourth quarter termination of an operating agreement at the acquired Solutia manufacturing facility in Sao Jose Dos Campos, Brazil and related manufacturing facility closure costs. |
(4) | Twelve months 2011 included gains on certain other Solutia rubber chemicals divestitures of $17 million. |
(5) | Twelve months 2012 included acquisition related expenses of $5 million for Solutia's Southwall Technologies Inc. acquisition. |
(6) | Twelve months 2011 included restructuring charges of $7 million primarily for severance associated with the acquisition and integration of Sterling Chemicals. |
Table 3B - Company, Segment, and Other Operating Earnings (Loss), and Non-GAAP Operating Earnings Reconciliations (Eastman and Solutia Pro Forma Combined) (Continued) | ||||||||||||||||
Fourth Quarter | Twelve Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Other (1) | ||||||||||||||||
Operating loss | ||||||||||||||||
Growth initiatives and businesses not allocated to segments (1) | $ | (48 | ) | $ | (24 | ) | $ | (135 | ) | $ | (27 | ) | ||||
Pension and OPEB costs not allocated to operating segments | (276 | ) | (230 | ) | (294 | ) | (238 | ) | ||||||||
Transaction, integration, and restructuring costs related to the acquisition of Solutia | (11 | ) | — | (101 | ) | — | ||||||||||
Operating loss before exclusions | (335 | ) | (254 | ) | (530 | ) | (265 | ) | ||||||||
Transaction and integration costs related to the acquisition of Solutia | 7 | — | 69 | — | ||||||||||||
Mark-to-market pension and other postretirement benefits losses (gains), net (2) | 276 | 224 | 276 | 209 | ||||||||||||
Asset impairments and restructuring charges (gains), net (3)(4)(5) | 22 | — | 59 | 4 | ||||||||||||
Other operating (income) (6) | — | — | — | (29 | ) | |||||||||||
Operating loss excluding items | (30 | ) | (30 | ) | (126 | ) | (81 | ) | ||||||||
Total Eastman Chemical Company | ||||||||||||||||
Total operating earnings (loss) | (44 | ) | 31 | 940 | 1,254 | |||||||||||
Additional costs of acquired Solutia inventories | 4 | — | 79 | — | ||||||||||||
Transaction and integration costs related to the acquisition of Solutia | 7 | — | 69 | — | ||||||||||||
Mark-to-market pension and other postretirement benefits losses (gains), net | 276 | 224 | 276 | 209 | ||||||||||||
Asset impairments and restructuring charges (gains), net | 83 | — | 125 | 11 | ||||||||||||
Other operating (income) | — | — | — | (46 | ) | |||||||||||
Total operating earnings excluding items | $ | 326 | $ | 255 | $ | 1,489 | $ | 1,428 |
(1) | Research and development, pension and OPEB, and other expenses not identifiable to an operating segment are not included in segment operating results and are shown as "other" operating earnings (loss). Businesses not allocated to segments include the Perennial WoodTM and Photovoltaics businesses. |
(2) | Fourth quarter and twelve months 2012 and 2011 included MTM losses (gains), net, for pension and OPEB plans actuarial adjustments. Twelve months 2011 included MTM gain of $15 million in 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) | Fourth quarter and twelve months 2012 included restructuring charges of $4 million and $32 million, respectively, primarily for severance related to the acquisition and integration of Solutia. Fourth quarter and twelve months 2012 also included restructuring charges of $17 million for inventory costs in excess of recoverable value of certain discontinued Perennial WoodTM product lines and to accrue for losses on take-or-pay contracts with third parties, and asset impairments and restructuring charges of $1 million and $4 million, respectively, for termination of the research and development activities of a site acquired in 2011. Twelve months 2012 also included a charge of $6 million for the impairment of land retained from the terminated Beaumont, Texas industrial gasification project. Twelve 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) | Twelve months 2011 included severance, pension settlement, and other charges of $14 million related to the relocation of Solutia European regional headquarters. |
(5) | Twelve months 2011 included severance of $3 million and share-based compensation costs of Solutia executive officer separation agreement of $2 million. |
(6) | Twelve months 2011 included gain from the sale of Solutia's remaining ownership interest in Ascend Performance Materials Holdings Inc. |
Table 4 – Operating Earnings (Loss), Earnings (Loss), and Earnings (Loss) Per Share from Continuing Operations Non-GAAP Reconciliations | ||||||||||||||||
Fourth Quarter 2012 | ||||||||||||||||
Operating Earnings (Loss) | Earnings (Loss) from Continuing Operations Before Tax | Earnings (Loss) from Continuing Operations Attributable to Eastman Stockholders | ||||||||||||||
(Dollars in millions, unaudited) | After Tax | Per Diluted Share | ||||||||||||||
As reported | $ | (44 | ) | $ | (86 | ) | $ | (54 | ) | $ | (0.35 | ) | ||||
Certain Items: | ||||||||||||||||
Additional costs of acquired Solutia inventories | 4 | 4 | 3 | 0.02 | ||||||||||||
Solutia transaction and integration costs | 7 | 7 | 4 | 0.03 | ||||||||||||
Mark-to-market pension and other postretirement benefit losses (gains), net (1) | 276 | 276 | 178 | 1.14 | ||||||||||||
Asset impairments and restructuring charges (gains), net(2) | 83 | 83 | 56 | 0.35 | ||||||||||||
Excluding items (3) | $ | 326 | $ | 284 | $ | 187 | $ | 1.19 |
Fourth Quarter 2011 | ||||||||||||||||
Operating Earnings | Earnings from Continuing Operations Before Tax | Earnings from Continuing Operations Attributable to Eastman Stockholders | ||||||||||||||
(Dollars in millions, unaudited) | After Tax | Per Diluted Share | ||||||||||||||
As reported | $ | 19 | $ | 5 | $ | 12 | $ | 0.09 | ||||||||
Certain Item: | ||||||||||||||||
Mark-to-market pension and other postretirement benefit losses (gains), net (1) | 159 | 159 | 98 | 0.69 | ||||||||||||
Excluding item | $ | 178 | $ | 164 | $ | 110 | $ | 0.78 |
(1) | MTM losses and gains for pension and OPEB plans actuarial adjustments. |
(2) | Restructuring charges of $4 million primarily for severance related to the acquisition and integration of Solutia and $79 million of other asset impairments and restructuring charges, primarily for the fourth quarter termination of an operating agreement at the acquired Solutia manufacturing facility in Sao Jose Dos Campos, Brazil and related manufacturing facility closure costs; discontinuance of a project to modify existing utility assets in order to meet requirements of recently enacted environmental regulations controlling air emissions from boilers; restructuring charges for inventory costs in excess of recoverable value of certain discontinued Perennial WoodTM product lines and to accrue for losses on take-or-pay contracts with third parties; and termination of the research and development activities of a site acquired in 2011. |
(3) | Earnings per share calculated using diluted shares of 157.1 million. |
Table 4 – Operating Earnings (Loss), Earnings (Loss), and Earnings (Loss) Per Share from Continuing Operations Non-GAAP Reconciliations (Continued) | ||||||||||||||||
Twelve Months 2012 | ||||||||||||||||
Operating Earnings | Earnings from Continuing Operations Before Tax | Earnings from Continuing Operations Attributable to Eastman Stockholders | ||||||||||||||
(Dollars in millions, unaudited) | After Tax | Per Diluted Share | ||||||||||||||
As reported | $ | 800 | $ | 649 | $ | 436 | $ | 2.92 | ||||||||
Certain Items: | ||||||||||||||||
Additional costs of acquired Solutia inventories | 79 | 79 | 56 | 0.37 | ||||||||||||
Solutia transaction, integration, and financing costs (1) | 44 | 76 | 52 | 0.35 | ||||||||||||
Mark-to-market pension and other postretirement benefit losses (gains), net (2) | 276 | 276 | 178 | 1.20 | ||||||||||||
Asset impairments and restructuring charges (gains), net (3) | 120 | 120 | 80 | 0.54 | ||||||||||||
Excluding items | $ | 1,319 | $ | 1,200 | $ | 802 | $ | 5.38 |
Twelve Months 2011 | ||||||||||||||||
Operating Earnings | Earnings from Continuing Operations Before Tax | Earnings from Continuing Operations Attributable to Eastman Stockholders | ||||||||||||||
(Dollars in millions, unaudited) | After Tax | Per Diluted Share | ||||||||||||||
As reported | $ | 937 | $ | 881 | $ | 606 | $ | 4.24 | ||||||||
Certain Items: | ||||||||||||||||
Mark-to-market pension and other postretirement benefit losses (gains), net (2) | 144 | 144 | 88 | 0.60 | ||||||||||||
Asset impairments and restructuring charges (gains), net (4) | (8 | ) | (8 | ) | (5 | ) | (0.03 | ) | ||||||||
Excluding items | $ | 1,073 | $ | 1,017 | $ | 689 | $ | 4.81 |
(1) | Transaction and integration costs of $44 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) | MTM losses and gains for pension and OPEB plans actuarial adjustments. |
(3) | Restructuring charges of $32 million primarily for severance related to the acquisition and integration of Solutia and $88 million of other asset impairments and restructuring charges, primarily for the fourth quarter termination of an operating agreement at the acquired Solutia manufacturing facility in Sao Jose Dos Campos, Brazil and related manufacturing facility closure costs; discontinuance of a project to modify existing utility assets in order to meet requirements of recently enacted environmental regulations controlling air emissions from boilers; impairment of land retained from the Beaumont, Texas gasification project; restructuring charges for inventory costs in excess of recoverable value of certain discontinued Perennial WoodTM product lines and to accrue for losses on take-or-pay contracts with third parties; and termination of the research and development activities of a site acquired in 2011. |
(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. |
Table 5 – Statements of Cash Flows | |||||||||||||||
Fourth Quarter | Twelve Months | ||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | |||||||||||
Cash flows from operating activities | |||||||||||||||
Net earnings (loss) including noncontrolling interest | $ | (52 | ) | $ | 12 | $ | 444 | $ | 647 | ||||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | |||||||||||||||
Depreciation and amortization | 108 | 69 | 360 | 273 | |||||||||||
Asset impairment charges | 37 | — | 46 | — | |||||||||||
Gain on sale of assets | — | — | — | (70 | ) | ||||||||||
Provision for deferred income taxes | (15 | ) | (27 | ) | 48 | (22 | ) | ||||||||
Pension and other postretirement contributions (in excess of) less than expenses | 235 | 104 | 150 | (15 | ) | ||||||||||
Variable compensation (in excess of) less than expenses | 31 | 29 | 26 | 15 | |||||||||||
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: | |||||||||||||||
(Increase) decrease in trade receivables | 111 | 74 | 48 | (73 | ) | ||||||||||
(Increase) decrease in inventories | 8 | 69 | 38 | (156 | ) | ||||||||||
Increase (decrease) in trade payables | (3 | ) | (85 | ) | 10 | (51 | ) | ||||||||
Other items, net | (20 | ) | 107 | (42 | ) | 77 | |||||||||
Net cash provided by operating activities | 440 | 352 | 1,128 | 625 | |||||||||||
Cash flows from investing activities | |||||||||||||||
Additions to properties and equipment | (168 | ) | (124 | ) | (465 | ) | (457 | ) | |||||||
Proceeds from redemption of short-term time deposits | — | — | 200 | — | |||||||||||
Proceeds from sale of assets and investments | — | — | 7 | 651 | |||||||||||
Acquisitions and investments in joint ventures, net of cash acquired | (1 | ) | (2 | ) | (2,669 | ) | (156 | ) | |||||||
Additions to short-term time deposits | — | — | — | (200 | ) | ||||||||||
Additions to capitalized software | (1 | ) | (2 | ) | (5 | ) | (9 | ) | |||||||
Other items, net | 3 | 2 | (30 | ) | 29 | ||||||||||
Net cash used in investing activities | (167 | ) | (126 | ) | (2,962 | ) | (142 | ) | |||||||
Cash flows from financing activities | |||||||||||||||
Net increase (decrease) in commercial paper, credit facility and other borrowings | — | — | (1 | ) | 1 | ||||||||||
Proceeds from borrowings | — | (36 | ) | 3,511 | (36 | ) | |||||||||
Repayment of borrowings | (200 | ) | — | (1,866 | ) | (2 | ) | ||||||||
Dividends paid to stockholders | (85 | ) | (36 | ) | (192 | ) | (136 | ) | |||||||
Treasury stock purchases | — | (24 | ) | — | (316 | ) | |||||||||
Dividends paid to noncontrolling interests | — | — | (4 | ) | (3 | ) | |||||||||
Proceeds from stock option exercises and other items, net | 24 | (1 | ) | 56 | 69 | ||||||||||
Net cash provided by (used in) financing activities | (261 | ) | (97 | ) | 1,504 | (423 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | 2 | 1 | |||||||||||
Net change in cash and cash equivalents | 12 | 129 | (328 | ) | 61 | ||||||||||
Cash and cash equivalents at beginning of period | 237 | 448 | 577 | 516 | |||||||||||
Cash and cash equivalents at end of period | $ | 249 | $ | 577 | $ | 249 | $ | 577 |
Table 5A – Total Cash and Cash Equivalents and Short-Term Time Deposits | ||||||||
(Dollars in millions, unaudited) | December 31, 2012 | December 31, 2011 | ||||||
Cash and cash equivalents at end of period | $ | 249 | $ | 577 | ||||
Short-term time deposits | — | 200 | ||||||
Total cash and cash equivalents and short-term time deposits | $ | 249 | $ | 777 |
Table 5B – Net Cash Provided By Operating Activities to Free Cash Flow Reconciliation | ||||||||||||||||
Fourth Quarter | Twelve Months | |||||||||||||||
(Dollars in millions, unaudited) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Net cash provided by operating activities | $ | 440 | $ | 352 | $ | 1,128 | $ | 625 | ||||||||
Impact of tax payment on the sale of the PET business(1) | — | 27 | — | 110 | ||||||||||||
Net cash provided by operating activities excluding items | 440 | 379 | 1,128 | 735 | ||||||||||||
Additions to properties and equipment | (168 | ) | (124 | ) | (465 | ) | (457 | ) | ||||||||
Dividends paid to stockholders | (85 | ) | (36 | ) | (192 | ) | (136 | ) | ||||||||
Free Cash Flow | $ | 187 | $ | 219 | $ | 471 | $ | 142 |
(1) | Twelve months 2011 cash from operating activities included the use of $110 million for tax payments for the tax gain on the sale of the PET business completed in first quarter 2011. |
Table 6 – Selected Balance Sheet Items | ||||||||
December 31, | December 31, | |||||||
(Dollars in millions) | 2012 | 2011 | ||||||
Cash | $ | 249 | $ | 577 | ||||
Short-term Borrowings | 4 | 153 | ||||||
Long-term Borrowings | 4,779 | 1,445 | ||||||
Total Eastman Stockholders' Equity | 2,944 | 1,870 |