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: April 25, 2013 |
(In millions, except per share amounts) | 1Q2013 | 1Q2012 | ||
Sales revenue | $2,307 | $1,821 | ||
Pro forma combined sales revenue* | $2,307 | $2,319 | ||
Earnings per diluted share from continuing operations | $1.57 | $1.13 | ||
Earnings per diluted share from continuing operations excluding Solutia acquisition-related costs and charges** | $1.62 | $1.22 | ||
Net cash provided by operating activities | $5 | $19 | ||
Item | Page | |
Table 1 | Statements of Earnings | |
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, Earnings, and Earnings Per Share from Continuing Operations Non-GAAP Reconciliations | |
Table 5 | Statements of Cash Flows | |
Table 5A | Net Cash Provided By Operating Activities to Free Cash Flow Reconciliation | |
Table 6 | Selected Balance Sheet Items |
Table 1 – Statements of Earnings | |||||||
First Quarter | |||||||
(Dollars in millions, except per share amounts; unaudited) | 2013 | 2012 | |||||
Sales | $ | 2,307 | $ | 1,821 | |||
Cost of sales | 1,691 | 1,390 | |||||
Gross profit | 616 | 431 | |||||
Selling, general and administrative expenses | 171 | 126 | |||||
Research and development expenses | 49 | 41 | |||||
Asset impairments and restructuring charges | 3 | — | |||||
Operating earnings | 393 | 264 | |||||
Net interest expense | 47 | 19 | |||||
Other charges (income), net | 1 | — | |||||
Earnings from continuing operations before income taxes | 345 | 245 | |||||
Provision for income taxes from continuing operations | 97 | 85 | |||||
Earnings from continuing operations | 248 | 160 | |||||
Loss from disposal of discontinued operations, net of tax | — | (1 | ) | ||||
Net earnings | 248 | 159 | |||||
Less: net income attributable to noncontrolling interest | 1 | 1 | |||||
Net earnings attributable to Eastman | $ | 247 | $ | 158 | |||
Amounts attributable to Eastman stockholders: | |||||||
Earnings from continuing operations, net of tax | $ | 247 | $ | 159 | |||
Loss from discontinued operations, net of tax | — | (1 | ) | ||||
Net earnings attributable to Eastman stockholders | $ | 247 | $ | 158 | |||
Basic earnings per share attributable to Eastman | |||||||
Basic earnings per share attributable to Eastman | $ | 1.60 | $ | 1.15 | |||
Diluted earnings per share attributable to Eastman | |||||||
Earnings from continuing operations | $ | 1.57 | $ | 1.13 | |||
Loss from discontinued operations | — | (0.01 | ) | ||||
Diluted earnings per share attributable to Eastman | $ | 1.57 | $ | 1.12 | |||
Shares (in millions) outstanding at end of period | 154.8 | 138.0 | |||||
Shares (in millions) used for earnings per share calculation | |||||||
Basic | 154.4 | 137.3 | |||||
Diluted | 156.7 | 140.7 |
Table 2A – Segment Sales Information | ||||||||
First Quarter | ||||||||
(Dollars in millions, unaudited) | 2013 | 2012 | ||||||
Sales by Segment | ||||||||
Additives & Functional Products | $ | 419 | $ | 263 | ||||
Adhesives & Plasticizers | 345 | 374 | ||||||
Advanced Materials | 584 | 292 | ||||||
Fibers | 346 | 323 | ||||||
Specialty Fluids & Intermediates | 607 | 569 | ||||||
Total Sales by Segment | 2,301 | 1,821 | ||||||
Other | 6 | — | ||||||
Total Eastman Chemical Company | $ | 2,307 | $ | 1,821 |
Table 2B – Segment Sales Information (Eastman and Solutia Pro Forma Combined) | ||||||||
First Quarter | ||||||||
(Dollars in millions, unaudited) | 2013 | 2012 | ||||||
Sales by Segment | ||||||||
Additives & Functional Products | $ | 419 | $ | 400 | ||||
Adhesives & Plasticizers | 345 | 374 | ||||||
Advanced Materials | 584 | 567 | ||||||
Fibers | 346 | 323 | ||||||
Specialty Fluids & Intermediates | 607 | 642 | ||||||
Total Sales by Segment | 2,301 | 2,306 | ||||||
Other | 6 | 13 | ||||||
Total Eastman Chemical Company | $ | 2,307 | $ | 2,319 |
Table 2C – Sales Revenue Change | ||||||||
First Quarter 2013 Compared to First Quarter 2012 | ||||||||
(Unaudited) | Change in Sales Revenue Due To | |||||||
Revenue % Change | Volume Effect | Price Effect | Exchange Rate Effect | |||||
Additives & Functional Products | 59 | % | 60 | % | (1) | % | — | % |
Adhesives & Plasticizers | (8) | % | (7) | % | — | % | (1) | % |
Advanced Materials | 100 | % | 100 | % | 1 | % | (1) | % |
Fibers | 7 | % | 3 | % | 4 | % | — | % |
Specialty Fluids & Intermediates | 7 | % | 9 | % | (2) | % | — | % |
Total Eastman Chemical Company | 27 | % | 27 | % | — | % | — | % |
Table 2D – Sales Revenue Change (Eastman and Solutia Pro Forma Combined) | ||||||||
First Quarter 2013 Compared to First Quarter 2012 | ||||||||
(Unaudited) | Change in Sales Revenue Due To | |||||||
Revenue % Change | Volume Effect | Price Effect | Exchange Rate Effect | |||||
Additives & Functional Products | 5 | % | 7 | % | (2) | % | — | % |
Adhesives & Plasticizers | (8) | % | (7) | % | — | % | (1) | % |
Advanced Materials | 3 | % | 3 | % | — | % | — | % |
Fibers | 7 | % | 3 | % | 4 | % | — | % |
Specialty Fluids & Intermediates | (5) | % | (3) | % | (2) | % | — | % |
Total Eastman Chemical Company | (1) | % | — | % | (1) | % | — | % |
Table 2E – Sales by Region | ||||||||
First Quarter | ||||||||
(Dollars in millions, unaudited) | 2013 | 2012 | ||||||
Sales by Region | ||||||||
United States and Canada | $ | 1,081 | $ | 1,002 | ||||
Asia Pacific | 595 | 388 | ||||||
Europe, Middle East, and Africa | 513 | 346 | ||||||
Latin America | 118 | 85 | ||||||
Total Eastman Chemical Company | $ | 2,307 | $ | 1,821 |
Table 2F – Sales by Region (Eastman and Solutia Pro Forma Combined) | ||||||||
First Quarter | ||||||||
(Dollars in millions, unaudited) | 2013 | 2012 | ||||||
Sales by Region | ||||||||
United States and Canada | $ | 1,081 | $ | 1,132 | ||||
Asia Pacific | 595 | 537 | ||||||
Europe, Middle East, and Africa | 513 | 528 | ||||||
Latin America | 118 | 122 | ||||||
Total Eastman Chemical Company | $ | 2,307 | $ | 2,319 |
Table 3A - Company, Segment, and Other Operating Earnings (Loss), and Non-GAAP Operating Earnings Reconciliations | ||||||||
First Quarter | ||||||||
(Dollars in millions, unaudited) | 2013 | 2012 | ||||||
Operating Earnings by Segment and Item | ||||||||
Additives & Functional Products | ||||||||
Operating earnings | $ | 98 | $ | 56 | ||||
Adhesives & Plasticizers | ||||||||
Operating earnings | 49 | 66 | ||||||
Advanced Materials | ||||||||
Operating earnings | 65 | 30 | ||||||
Fibers | ||||||||
Operating earnings | 114 | 101 | ||||||
Specialty Fluids & Intermediates | ||||||||
Operating earnings | 95 | 53 | ||||||
Total Operating Earnings by Segment | ||||||||
Operating earnings | 421 | 306 | ||||||
Other (1) | ||||||||
Operating loss | ||||||||
Growth initiatives and businesses not allocated to segments (2) | (21 | ) | (26 | ) | ||||
Pension and OPEB credits (costs) not allocated to operating segments | 3 | (7 | ) | |||||
Transaction, integration, and restructuring costs related to the acquisition of Solutia | (10 | ) | (9 | ) | ||||
Operating loss before exclusions | (28 | ) | (42 | ) | ||||
Transaction and integration costs related to the acquisition of Solutia | 7 | 9 | ||||||
Asset impairments and restructuring charges (3) | 3 | — | ||||||
Operating loss excluding items | (18 | ) | (33 | ) | ||||
Total Eastman Chemical Company | ||||||||
Total operating earnings | 393 | 264 | ||||||
Transaction and integration costs related to the acquisition of Solutia | 7 | 9 | ||||||
Asset impairments and restructuring charges | 3 | — | ||||||
Total operating earnings excluding items | $ | 403 | $ | 273 |
(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). |
(2) | Businesses not allocated to segments include the Perennial WoodTM and Photovoltaics businesses. |
(3) | Restructuring charges for severance associated with the continued integration of Solutia. |
Table 3B - Company, Segment, and Other Operating Earnings (Loss), and Non-GAAP Operating Earnings Reconciliations (Eastman and Solutia Pro Forma Combined) | ||||||||
First Quarter | ||||||||
(Dollars in millions, unaudited) | 2013 | 2012 | ||||||
Operating Earnings by Segment and Item | ||||||||
Additives & Functional Products | ||||||||
Operating earnings | $ | 98 | $ | 94 | ||||
Adhesives & Plasticizers | ||||||||
Operating earnings | 49 | 66 | ||||||
Advanced Materials | ||||||||
Operating earnings | 65 | 57 | ||||||
Asset impairments and restructuring charges (1) | — | 4 | ||||||
Excluding item | 65 | 61 | ||||||
Fibers | ||||||||
Operating earnings | 114 | 101 | ||||||
Specialty Fluids & Intermediates | ||||||||
Operating earnings | 95 | 73 | ||||||
Total Operating Earnings by Segment | ||||||||
Operating earnings | 421 | 391 | ||||||
Asset impairments and restructuring charges (1) | — | 4 | ||||||
Excluding items | 421 | 395 | ||||||
Other (2) | ||||||||
Operating loss | ||||||||
Growth initiatives and businesses not allocated to segments (3) | (21 | ) | (25 | ) | ||||
Pension and OPEB credits (costs) not allocated to operating segments | 3 | (7 | ) | |||||
Transaction, integration, and restructuring costs related to the acquisition of Solutia | (10 | ) | (20 | ) | ||||
Operating loss before exclusions | (28 | ) | (52 | ) | ||||
Transaction and integration costs related to the acquisition of Solutia | 7 | 20 | ||||||
Asset impairments and restructuring charges (4) | 3 | — | ||||||
Operating loss excluding items | (18 | ) | (32 | ) | ||||
Total Eastman Chemical Company | ||||||||
Total operating earnings | 393 | 339 | ||||||
Transaction and integration costs related to the acquisition of Solutia | 7 | 20 | ||||||
Asset impairments and restructuring charges | 3 | 4 | ||||||
Total operating earnings excluding items | $ | 403 | $ | 363 |
(1) | Acquisition-related expenses of $4 million for Solutia's Southwall Technologies Inc. acquisition. |
(2) | 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). |
(3) | Businesses not allocated to segments include the Perennial WoodTM and Photovoltaics businesses. |
(4) | Restructuring charges for severance associated with the continued integration of Solutia. |
Table 4 – Operating Earnings, Earnings, and Earnings Per Share from Continuing Operations Non-GAAP Reconciliations | ||||||||||||||||
First Quarter 2013 | ||||||||||||||||
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 | $ | 393 | $ | 345 | $ | 247 | $ | 1.57 | ||||||||
Certain Items: | ||||||||||||||||
Solutia integration costs (1) | 7 | 7 | 4 | 0.03 | ||||||||||||
Asset impairments and restructuring charges (2) | 3 | 3 | 2 | 0.02 | ||||||||||||
Excluding items | $ | 403 | $ | 355 | $ | 253 | $ | 1.62 |
First Quarter 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 | $ | 264 | $ | 245 | $ | 159 | $ | 1.13 | ||||||||
Certain Item: | ||||||||||||||||
Solutia transaction and financing costs (1) | 9 | 14 | 13 | 0.09 | ||||||||||||
Excluding item | $ | 273 | $ | 259 | $ | 172 | $ | 1.22 |
(1) | Integration costs of $7 million in first quarter 2013 and transaction costs of $9 million in first quarter 2012 included in selling, general and administrative expenses and $5 million financing costs in first quarter 2012 included in other charges (income), net. |
(2) | Restructuring charges for severance associated with the continued integration of Solutia. |
Table 5 – Statements of Cash Flows | |||||||
First Quarter | |||||||
(Dollars in millions, unaudited) | 2013 | 2012 | |||||
Cash flows from operating activities | |||||||
Net earnings including noncontrolling interest | $ | 248 | $ | 159 | |||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 110 | 69 | |||||
Provision for deferred income taxes | 26 | 13 | |||||
Pension and other postretirement contributions (in excess of) less than expenses | (25 | ) | (27 | ) | |||
Variable compensation (in excess of) less than expenses | (57 | ) | (71 | ) | |||
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: | |||||||
(Increase) decrease in trade receivables | (155 | ) | (103 | ) | |||
(Increase) decrease in inventories | (53 | ) | 14 | ||||
Increase (decrease) in trade payables | (27 | ) | (20 | ) | |||
Other items, net | (62 | ) | (15 | ) | |||
Net cash provided by operating activities | 5 | 19 | |||||
Cash flows from investing activities | |||||||
Additions to properties and equipment | (87 | ) | (90 | ) | |||
Proceeds from redemption of short-term time deposits | — | 120 | |||||
Proceeds from sale of assets and investments | 5 | 6 | |||||
Acquisitions and investments in joint ventures, net of cash acquired | — | (10 | ) | ||||
Additions to capitalized software | (1 | ) | (1 | ) | |||
Other items, net | — | (35 | ) | ||||
Net cash used in investing activities | (83 | ) | (10 | ) | |||
Cash flows from financing activities | |||||||
Net increase (decrease) in commercial paper, credit facility and other borrowings | 200 | (1 | ) | ||||
Proceeds from borrowings | — | 5 | |||||
Repayment of borrowings | (200 | ) | — | ||||
Dividends paid to stockholders | (1 | ) | (36 | ) | |||
Treasury stock purchases | (32 | ) | — | ||||
Dividends paid to noncontrolling interests | (3 | ) | — | ||||
Proceeds from stock option exercises and other items, net | 46 | 15 | |||||
Net cash provided by (used in) financing activities | 10 | (17 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (3 | ) | — | ||||
Net change in cash and cash equivalents | (71 | ) | (8 | ) | |||
Cash and cash equivalents at beginning of period | 249 | 577 | |||||
Cash and cash equivalents at end of period | $ | 178 | $ | 569 |
Table 5A – Net Cash Provided By Operating Activities to Free Cash Flow Reconciliation | ||||||||
First Quarter | ||||||||
(Dollars in millions, unaudited) | 2013 | 2012 | ||||||
Net cash provided by operating activities | $ | 5 | $ | 19 | ||||
Additions to properties and equipment | (87 | ) | (90 | ) | ||||
Dividends paid to stockholders | (1 | ) | (36 | ) | ||||
Free Cash Flow | $ | (83 | ) | $ | (107 | ) |
Table 6 – Selected Balance Sheet Items | ||||||||
March 31, | December 31, | |||||||
(Dollars in millions, unaudited) | 2013 | 2012 | ||||||
Cash | $ | 178 | $ | 249 | ||||
Short-term Borrowings | 4 | 4 | ||||||
Long-term Borrowings | 4,779 | 4,779 | ||||||
Total Eastman Stockholders' Equity | 3,105 | 2,943 |