(Mark
One)
|
|
[X]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended June 30, 2015
|
|
OR
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from ______________ to ______________
|
Delaware
|
62-1539359
|
(State or other jurisdiction of
|
(I.R.S. employer
|
incorporation or organization)
|
identification no.)
|
|
|
200 South Wilcox Drive
|
|
Kingsport, Tennessee
|
37662
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer
|
[X]
|
|
Accelerated filer
|
[ ]
|
Non-accelerated filer
|
[ ]
|
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
[ ]
|
Class
|
Number of Shares Outstanding at June 30, 2015
|
Common Stock, par value $0.01 per share
|
148,664,334
|
ITEM
|
|
PAGE
|
|
||
|
|
|
|
||
|
||
|
||
|
||
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions, except per share amounts)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Sales
|
$
|
2,533
|
|
|
$
|
2,460
|
|
|
$
|
4,976
|
|
|
$
|
4,765
|
|
Cost of sales
|
1,813
|
|
|
1,803
|
|
|
3,600
|
|
|
3,513
|
|
||||
Gross profit
|
720
|
|
|
657
|
|
|
1,376
|
|
|
1,252
|
|
||||
Selling, general and administrative expenses
|
194
|
|
|
172
|
|
|
374
|
|
|
340
|
|
||||
Research and development expenses
|
57
|
|
|
56
|
|
|
113
|
|
|
109
|
|
||||
Asset impairments and restructuring charges (gains), net
|
—
|
|
|
(7
|
)
|
|
109
|
|
|
6
|
|
||||
Operating earnings
|
469
|
|
|
436
|
|
|
780
|
|
|
797
|
|
||||
Net interest expense
|
66
|
|
|
45
|
|
|
132
|
|
|
87
|
|
||||
Other (income) charges, net
|
—
|
|
|
(8
|
)
|
|
(11
|
)
|
|
(11
|
)
|
||||
Earnings from continuing operations before income taxes
|
403
|
|
|
399
|
|
|
659
|
|
|
721
|
|
||||
Provision for income taxes from continuing operations
|
104
|
|
|
107
|
|
|
188
|
|
|
195
|
|
||||
Earnings from continuing operations
|
299
|
|
|
292
|
|
|
471
|
|
|
526
|
|
||||
Earnings from discontinued operations, net of tax
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Net earnings
|
$
|
299
|
|
|
$
|
294
|
|
|
$
|
471
|
|
|
$
|
528
|
|
Less: Net earnings attributable to noncontrolling interest
|
2
|
|
|
2
|
|
|
3
|
|
|
3
|
|
||||
Net earnings attributable to Eastman
|
$
|
297
|
|
|
$
|
292
|
|
|
$
|
468
|
|
|
$
|
525
|
|
Amounts attributable to Eastman stockholders
|
|
|
|
|
|
|
|
||||||||
Earnings from continuing operations, net of tax
|
$
|
297
|
|
|
$
|
290
|
|
|
$
|
468
|
|
|
$
|
523
|
|
Earnings from discontinued operations, net of tax
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Net earnings attributable to Eastman stockholders
|
$
|
297
|
|
|
$
|
292
|
|
|
$
|
468
|
|
|
$
|
525
|
|
Basic earnings per share attributable to Eastman
|
|
|
|
|
|
|
|
||||||||
Earnings from continuing operations
|
$
|
2.00
|
|
|
$
|
1.94
|
|
|
$
|
3.15
|
|
|
$
|
3.47
|
|
Earnings from discontinued operations
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.02
|
|
||||
Basic earnings per share attributable to Eastman
|
$
|
2.00
|
|
|
$
|
1.96
|
|
|
$
|
3.15
|
|
|
$
|
3.49
|
|
Diluted earnings per share attributable to Eastman
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings from continuing operations
|
$
|
1.98
|
|
|
$
|
1.92
|
|
|
$
|
3.12
|
|
|
$
|
3.43
|
|
Earnings from discontinued operations
|
—
|
|
|
0.01
|
|
|
—
|
|
|
0.02
|
|
||||
Diluted earnings per share attributable to Eastman
|
$
|
1.98
|
|
|
$
|
1.93
|
|
|
$
|
3.12
|
|
|
$
|
3.45
|
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions, except per share amounts)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings including noncontrolling interest
|
$
|
299
|
|
|
$
|
294
|
|
|
$
|
471
|
|
|
$
|
528
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in cumulative translation adjustment
|
76
|
|
|
9
|
|
|
(136
|
)
|
|
13
|
|
||||
Defined benefit pension and other postretirement benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of unrecognized prior service credits included in net periodic costs
|
(7
|
)
|
|
(4
|
)
|
|
(11
|
)
|
|
(8
|
)
|
||||
Derivatives and hedging:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized gain (loss) during period
|
(16
|
)
|
|
6
|
|
|
39
|
|
|
6
|
|
||||
Reclassification adjustment for (gain) loss included in net income
|
25
|
|
|
(6
|
)
|
|
22
|
|
|
(9
|
)
|
||||
Total other comprehensive income (loss), net of tax
|
78
|
|
|
5
|
|
|
(86
|
)
|
|
2
|
|
||||
Comprehensive income including noncontrolling interest
|
377
|
|
|
299
|
|
|
385
|
|
|
530
|
|
||||
Comprehensive income attributable to noncontrolling interest
|
2
|
|
|
2
|
|
|
3
|
|
|
3
|
|
||||
Comprehensive income attributable to Eastman
|
$
|
375
|
|
|
$
|
297
|
|
|
$
|
382
|
|
|
$
|
527
|
|
Retained Earnings
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retained earnings at beginning of period
|
$
|
4,656
|
|
|
$
|
4,191
|
|
|
$
|
4,545
|
|
|
$
|
4,012
|
|
Net earnings attributable to Eastman
|
297
|
|
|
292
|
|
|
468
|
|
|
525
|
|
||||
Cash dividends declared
|
(60
|
)
|
|
(52
|
)
|
|
(120
|
)
|
|
(106
|
)
|
||||
Retained earnings at end of period
|
$
|
4,893
|
|
|
$
|
4,431
|
|
|
$
|
4,893
|
|
|
$
|
4,431
|
|
|
June 30,
|
|
December 31,
|
||||
(Dollars in millions, except per share amounts)
|
2015
|
|
2014
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
268
|
|
|
$
|
214
|
|
Trade receivables, net
|
1,021
|
|
|
936
|
|
||
Miscellaneous receivables
|
167
|
|
|
264
|
|
||
Inventories
|
1,439
|
|
|
1,509
|
|
||
Other current assets
|
272
|
|
|
250
|
|
||
Total current assets
|
3,167
|
|
|
3,173
|
|
||
Properties
|
|
|
|
|
|
||
Properties and equipment at cost
|
10,945
|
|
|
11,026
|
|
||
Less: Accumulated depreciation
|
5,934
|
|
|
5,939
|
|
||
Net properties
|
5,011
|
|
|
5,087
|
|
||
Goodwill
|
4,474
|
|
|
4,486
|
|
||
Intangible assets, net of accumulated amortization
|
2,777
|
|
|
2,905
|
|
||
Other noncurrent assets
|
457
|
|
|
421
|
|
||
Total assets
|
$
|
15,886
|
|
|
$
|
16,072
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
||
Current liabilities
|
|
|
|
|
|
||
Payables and other current liabilities
|
$
|
1,570
|
|
|
$
|
1,721
|
|
Borrowings due within one year
|
251
|
|
|
301
|
|
||
Total current liabilities
|
1,821
|
|
|
2,022
|
|
||
Long-term borrowings
|
7,072
|
|
|
7,248
|
|
||
Deferred income tax liabilities
|
962
|
|
|
946
|
|
||
Post-employment obligations
|
1,490
|
|
|
1,498
|
|
||
Other long-term liabilities
|
696
|
|
|
768
|
|
||
Total liabilities
|
12,041
|
|
|
12,482
|
|
||
Stockholders' equity
|
|
|
|
|
|
||
Common stock ($0.01 par value – 350,000,000 shares authorized; shares issued – 216,708,849 and 216,256,971 for 2015 and 2014, respectively)
|
2
|
|
|
2
|
|
||
Additional paid-in capital
|
1,840
|
|
|
1,817
|
|
||
Retained earnings
|
4,893
|
|
|
4,545
|
|
||
Accumulated other comprehensive loss
|
(363
|
)
|
|
(277
|
)
|
||
|
6,372
|
|
|
6,087
|
|
||
Less: Treasury stock at cost (68,095,313 shares for 2015 and 67,660,313 shares for 2014)
|
2,608
|
|
|
2,577
|
|
||
Total Eastman stockholders' equity
|
3,764
|
|
|
3,510
|
|
||
Noncontrolling interest
|
81
|
|
|
80
|
|
||
Total equity
|
3,845
|
|
|
3,590
|
|
||
Total liabilities and stockholders' equity
|
$
|
15,886
|
|
|
$
|
16,072
|
|
|
First Six Months
|
||||||
(Dollars in millions)
|
2015
|
|
2014
|
||||
Operating activities
|
|
|
|
||||
Net earnings
|
$
|
471
|
|
|
$
|
528
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
287
|
|
|
217
|
|
||
Asset impairment charges
|
89
|
|
|
8
|
|
||
Gain on sale of assets
|
—
|
|
|
(5
|
)
|
||
Provision (benefit) for deferred income taxes
|
(30
|
)
|
|
61
|
|
||
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
|
|
|
|
|
|
||
(Increase) decrease in trade receivables
|
(103
|
)
|
|
(191
|
)
|
||
(Increase) decrease in inventories
|
43
|
|
|
(54
|
)
|
||
Increase (decrease) in trade payables
|
(109
|
)
|
|
(44
|
)
|
||
Pension and other postretirement contributions (in excess of) less than expenses
|
(37
|
)
|
|
(45
|
)
|
||
Variable compensation (in excess of) less than expenses
|
(24
|
)
|
|
(53
|
)
|
||
Other items, net
|
95
|
|
|
(33
|
)
|
||
Net cash provided by operating activities
|
682
|
|
|
389
|
|
||
Investing activities
|
|
|
|
|
|
||
Additions to properties and equipment
|
(266
|
)
|
|
(254
|
)
|
||
Proceeds from sale of assets
|
4
|
|
|
12
|
|
||
Acquisitions, net of cash acquired
|
—
|
|
|
(283
|
)
|
||
Additions to capitalized software
|
(1
|
)
|
|
(1
|
)
|
||
Other items, net
|
(2
|
)
|
|
2
|
|
||
Net cash used in investing activities
|
(265
|
)
|
|
(524
|
)
|
||
Financing activities
|
|
|
|
|
|
||
Net increase in commercial paper borrowings
|
157
|
|
|
26
|
|
||
Proceeds from borrowings
|
250
|
|
|
615
|
|
||
Repayment of borrowings
|
(625
|
)
|
|
(125
|
)
|
||
Dividends paid to stockholders
|
(119
|
)
|
|
(106
|
)
|
||
Treasury stock purchases
|
(31
|
)
|
|
(360
|
)
|
||
Dividends paid to noncontrolling interest
|
(3
|
)
|
|
(9
|
)
|
||
Proceeds from stock option exercises and other items, net
|
12
|
|
|
30
|
|
||
Net cash (used in) provided by financing activities
|
(359
|
)
|
|
71
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(4
|
)
|
|
2
|
|
||
Net change in cash and cash equivalents
|
54
|
|
|
(62
|
)
|
||
Cash and cash equivalents at beginning of period
|
214
|
|
|
237
|
|
||
Cash and cash equivalents at end of period
|
$
|
268
|
|
|
$
|
175
|
|
ITEM
|
|
Page
|
|
|
|
Environmental Matters
and Asset Retirement Obligations
|
||
1.
|
BASIS OF PRESENTATION
|
2.
|
ACQUISITIONS
|
Assets acquired and liabilities assumed
|
|
|
|
|
|
||||||
(Dollars in millions)
|
December 31, 2014
|
|
2015 Net Adjustments to Fair Value
|
|
June 30, 2015
|
||||||
Current assets
|
$
|
266
|
|
|
$
|
(3
|
)
|
|
$
|
263
|
|
Properties and equipment
|
658
|
|
|
(3
|
)
|
|
655
|
|
|||
Intangible assets
|
1,002
|
|
|
(13
|
)
|
|
989
|
|
|||
Other noncurrent assets
|
37
|
|
|
1
|
|
|
38
|
|
|||
Goodwill
|
1,509
|
|
|
32
|
|
|
1,541
|
|
|||
Current liabilities
|
(161
|
)
|
|
1
|
|
|
(160
|
)
|
|||
Long-term liabilities
|
(546
|
)
|
|
(15
|
)
|
|
(561
|
)
|
|||
Total purchase price, net of cash acquired
|
$
|
2,765
|
|
|
$
|
—
|
|
|
$
|
2,765
|
|
Intangible Assets acquired
|
|
|
|
||
(Dollars in millions)
|
Fair Value
|
|
Weighted-Average Amortization Period (Years)
|
||
Amortizable intangible assets
|
|
|
|
||
Customer relationships
|
$
|
604
|
|
|
24
|
Developed technologies
|
205
|
|
|
17
|
|
Contracts
|
180
|
|
|
5
|
|
Total
|
$
|
989
|
|
|
|
Goodwill
|
Goodwill by Segment
|
||
(Dollars in millions)
|
|
||
Additives & Functional Products
|
$
|
918
|
|
Specialty Fluids & Intermediates
|
623
|
|
|
Total
|
$
|
1,541
|
|
Assets acquired and liabilities assumed
|
|
||
(Dollars in millions)
|
As of December 11, 2014
|
||
Current assets
|
$
|
51
|
|
Machinery and equipment
|
38
|
|
|
Goodwill
|
274
|
|
|
Intangible assets
|
125
|
|
|
Long-term liabilities
|
(50
|
)
|
|
Total purchase price
|
$
|
438
|
|
Intangible Assets acquired
|
|
|
|
||
(Dollars in millions)
|
Fair Value
|
|
Weighted-Average Amortization Period (Years)
|
||
Amortizable intangible assets
|
|
|
|
||
Customer relationships
|
$
|
72
|
|
|
14
|
Developed technologies
|
41
|
|
|
18
|
|
Indefinite-lived intangible asset
|
|
|
|
||
Brand name
|
12
|
|
|
|
|
Total
|
$
|
125
|
|
|
|
3.
|
INVENTORIES
|
|
June 30,
|
|
December 31,
|
||||
(Dollars in millions)
|
2015
|
|
2014
|
||||
At FIFO or average cost (approximates current cost)
|
|
|
|
||||
Finished goods
|
$
|
1,120
|
|
|
$
|
1,130
|
|
Work in process
|
223
|
|
|
288
|
|
||
Raw materials and supplies
|
510
|
|
|
553
|
|
||
Total inventories
|
1,853
|
|
|
1,971
|
|
||
LIFO Reserve
|
(414
|
)
|
|
(462
|
)
|
||
Total inventories
|
$
|
1,439
|
|
|
$
|
1,509
|
|
4.
|
PAYABLES AND OTHER CURRENT LIABILITIES
|
|
June 30,
|
|
December 31,
|
||||
(Dollars in millions)
|
2015
|
|
2014
|
||||
Trade creditors
|
$
|
712
|
|
|
$
|
827
|
|
Derivative hedging liability
|
200
|
|
|
227
|
|
||
Accrued payrolls, vacation, and variable-incentive compensation
|
142
|
|
|
191
|
|
||
Accrued taxes
|
120
|
|
|
66
|
|
||
Other
|
396
|
|
|
410
|
|
||
Total payables and other current liabilities
|
$
|
1,570
|
|
|
$
|
1,721
|
|
5.
|
PROVISION FOR INCOME TAXES
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Provision for income taxes from continuing operations
|
$
|
104
|
|
|
$
|
107
|
|
|
$
|
188
|
|
|
$
|
195
|
|
Effective tax rate
|
26
|
%
|
|
27
|
%
|
|
29
|
%
|
|
27
|
%
|
6.
|
BORROWINGS
|
|
June 30,
|
|
December 31,
|
||||
(Dollars in millions)
|
2015
|
|
2014
|
||||
Borrowings consisted of:
|
|
|
|
||||
3% notes due 2015
|
$
|
250
|
|
|
$
|
250
|
|
2.4% notes due 2017
|
998
|
|
|
998
|
|
||
6.30% notes due 2018
|
168
|
|
|
169
|
|
||
5.5% notes due 2019
|
250
|
|
|
250
|
|
||
2.7% notes due 2020
|
798
|
|
|
798
|
|
||
4.5% notes due 2021
|
250
|
|
|
250
|
|
||
3.6% notes due 2022
|
897
|
|
|
903
|
|
||
7 1/4% debentures due 2024
|
244
|
|
|
244
|
|
||
7 5/8% debentures due 2024
|
54
|
|
|
54
|
|
||
3.8% notes due 2025
|
796
|
|
|
796
|
|
||
7.60% debentures due 2027
|
222
|
|
|
222
|
|
||
4.8% notes due 2042
|
497
|
|
|
497
|
|
||
4.65% notes due 2044
|
877
|
|
|
877
|
|
||
Credit facilities and commercial paper borrowings
|
1,017
|
|
|
1,235
|
|
||
Capital leases
|
5
|
|
|
6
|
|
||
Total borrowings
|
7,323
|
|
|
7,549
|
|
||
Borrowings due within one year
|
251
|
|
|
301
|
|
||
Long-term borrowings
|
$
|
7,072
|
|
|
$
|
7,248
|
|
|
|
|
|
Fair Value Measurements at June 30, 2015
|
||||||||||||||||
(Dollars in millions)
|
|
Recorded Amount
June 30, 2015 |
|
Total Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
||||||||||
Long-term borrowings
|
|
$
|
7,072
|
|
|
$
|
7,271
|
|
|
$
|
6,250
|
|
|
$
|
1,021
|
|
|
$
|
—
|
|
|
|
|
|
Fair Value Measurements at December 31, 2014
|
||||||||||||||||
(Dollars in millions)
|
|
Recorded Amount
December 31, 2014 |
|
Total Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
||||||||||
Long-term borrowings
|
|
$
|
7,248
|
|
|
$
|
7,557
|
|
|
$
|
6,366
|
|
|
$
|
1,191
|
|
|
$
|
—
|
|
7.
|
DERIVATIVES
|
(Dollars in millions)
|
|
|
|
Fair Value Measurement
|
||||||
Derivative Assets
|
|
Statement of Financial Position Location
|
|
June 30, 2015
|
|
December 31, 2014
|
||||
Interest rate swap
|
|
Other noncurrent assets
|
|
$
|
3
|
|
|
$
|
5
|
|
|
|
Second quarter
|
||||||||
(Dollars in millions)
|
|
Consolidated Statement of Earnings Location of Gain/(Loss) Recognized in Income on Derivatives
|
|
Amount of Gain/ (Loss) Recognized in Income on Derivatives
|
||||||
Derivatives in Fair Value Hedging Relationships
|
|
|
June 30, 2015
|
|
June 30, 2014
|
|||||
Interest rate swaps
|
|
Net interest expense
|
|
$
|
3
|
|
|
$
|
1
|
|
|
|
Six Months Ended
|
||||||||
(Dollars in millions)
|
|
Consolidated Statement of Earnings Location of Gain/(Loss) Recognized in Income on Derivatives
|
|
Amount of Gain/ (Loss) Recognized in Income on Derivatives
|
||||||
Derivatives in Fair Value Hedging Relationships
|
|
|
June 30, 2015
|
|
June 30, 2014
|
|||||
Interest rate swaps
|
|
Net interest expense
|
|
$
|
7
|
|
|
$
|
1
|
|
Total notional amounts
|
|
June 30, 2015
|
|
December 31, 2014
|
|||
|
|
|
|
|
|
||
Foreign Exchange Forward and Option Contracts (in millions)
|
|
|
|
|
|||
|
EUR/USD (in EUR)
|
|
€762
|
|
€810
|
||
|
EUR/USD (in approximate USD equivalent)
|
|
$865
|
|
$1,000
|
||
|
JPY/USD (in JPY)
|
|
¥3,600
|
|
¥4,800
|
||
|
JPY/USD (in approximate USD equivalent)
|
|
$30
|
|
$40
|
||
Commodity Forward and Collar Contracts
|
|
|
|
|
|||
|
Contract ethylene sales (in thousand metric tons)
|
|
3
|
|
|
14
|
|
|
Feedstock (in million barrels)
|
|
28
|
|
|
33
|
|
|
Feedstock (in thousand metric tons)
|
|
15
|
|
|
30
|
|
|
Energy (in million million british thermal units)
|
|
28
|
|
|
25
|
|
Interest rate swaps for the future issuance of debt (in millions)
|
|
$500
|
|
$500
|
(Dollars in millions)
|
|
|
|
Fair Value Measurements Significant Other Observable Inputs
|
||||||
Derivative Assets
|
|
Statement of Financial Position Location
|
|
June 30, 2015
|
|
December 31, 2014
|
||||
Cash Flow Hedges
|
|
|
|
|
|
|
||||
Commodity contracts
|
|
Other current assets
|
|
$
|
1
|
|
|
$
|
2
|
|
Foreign exchange contracts
|
|
Other current assets
|
|
74
|
|
|
61
|
|
||
Foreign exchange contracts
|
|
Other noncurrent assets
|
|
96
|
|
|
71
|
|
||
|
|
|
|
$
|
171
|
|
|
$
|
134
|
|
(Dollars in millions)
|
|
|
|
Fair Value Measurements Significant Other Observable Inputs
|
||||||
Derivative Liabilities
|
|
Statement of Financial Position Location
|
|
June 30, 2015
|
|
December 31, 2014
|
||||
Cash Flow Hedges
|
|
|
|
|
|
|
||||
Commodity contracts
|
|
Payables and other current liabilities
|
|
$
|
177
|
|
|
$
|
193
|
|
Commodity contracts
|
|
Other long-term liabilities
|
|
229
|
|
|
289
|
|
||
Foreign exchange contracts
|
|
Payables and other current liabilities
|
|
4
|
|
|
10
|
|
||
Forward starting interest rate swap contracts
|
|
Other long-term liabilities
|
|
8
|
|
|
16
|
|
||
|
|
|
|
$
|
418
|
|
|
$
|
508
|
|
|
|
Second Quarter
|
||||||||||||||||
(Dollars in millions)
|
|
Change in amount after tax of gain/(loss) recognized in Other Comprehensive Income on derivatives (effective portion)
|
|
Location of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)
|
|
Pre-tax amount of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)
|
||||||||||||
Derivatives' Cash Flow Hedging Relationships
|
|
June 30,
2015 |
|
June 30,
2014 |
|
June 30,
2015 |
|
June 30,
2014 |
||||||||||
Commodity contracts
|
|
$
|
22
|
|
|
$
|
(3
|
)
|
|
Sales
|
|
$
|
1
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Cost of Sales
|
|
(62
|
)
|
|
11
|
|
||||||
Foreign exchange contracts
|
|
(28
|
)
|
|
4
|
|
|
Sales
|
|
22
|
|
|
—
|
|
||||
Forward starting interest rate swap contracts
|
|
15
|
|
|
(1
|
)
|
|
Net interest expense
|
|
(2
|
)
|
|
(2
|
)
|
||||
|
|
$
|
9
|
|
|
$
|
—
|
|
|
|
|
$
|
(41
|
)
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
First Six Months
|
||||||||||||||||
(Dollars in millions)
|
|
Change in amount after tax of gain/(loss) recognized in Other Comprehensive Income on derivatives (effective portion)
|
|
Location of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)
|
|
Pre-tax amount of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)
|
||||||||||||
Derivatives' Cash Flow Hedging Relationships
|
|
June 30,
2015 |
|
June 30,
2014 |
|
June 30,
2015 |
|
June 30,
2014 |
||||||||||
Commodity contracts
|
|
$
|
27
|
|
|
$
|
(5
|
)
|
|
Sales
|
|
$
|
3
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Cost of sales
|
|
(78
|
)
|
|
19
|
|
||||||
Foreign exchange contracts
|
|
27
|
|
|
2
|
|
|
Sales
|
|
43
|
|
|
(1
|
)
|
||||
Forward starting interest rate swap contracts
|
|
7
|
|
|
—
|
|
|
Net interest expense
|
|
(4
|
)
|
|
(4
|
)
|
||||
|
|
$
|
61
|
|
|
$
|
(3
|
)
|
|
|
|
$
|
(36
|
)
|
|
$
|
14
|
|
(Dollars in millions)
|
|
|
|
Fair Value Measurements at June 30, 2015
|
||||||||||||
Description
|
|
June 30, 2015
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
||||||||
Derivative Assets
|
|
$
|
174
|
|
|
$
|
—
|
|
|
$
|
173
|
|
|
$
|
1
|
|
Derivative Liabilities
|
|
(418
|
)
|
|
—
|
|
|
(418
|
)
|
|
—
|
|
||||
|
|
$
|
(244
|
)
|
|
$
|
—
|
|
|
$
|
(245
|
)
|
|
$
|
1
|
|
(Dollars in millions)
|
|
|
|
Fair Value Measurements at December 31, 2014
|
||||||||||||
Description
|
|
December 31, 2014
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
||||||||
Derivative Assets
|
|
$
|
139
|
|
|
$
|
—
|
|
|
$
|
137
|
|
|
$
|
2
|
|
Derivative Liabilities
|
|
(508
|
)
|
|
—
|
|
|
(508
|
)
|
|
—
|
|
||||
|
|
$
|
(369
|
)
|
|
$
|
—
|
|
|
$
|
(371
|
)
|
|
$
|
2
|
|
8.
|
RETIREMENT PLANS
|
|
Second Quarter
|
||||||||||||||||||||||
|
Pension Plans
|
|
Other Postretirement Benefit Plans
|
||||||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||||||||
(Dollars in millions)
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
|
Non-U.S.
|
|
|
|
|
||||||||||||
Components of net periodic benefit (credit) cost:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
$
|
10
|
|
|
$
|
4
|
|
|
$
|
10
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Interest cost
|
22
|
|
|
7
|
|
|
25
|
|
|
8
|
|
|
10
|
|
|
11
|
|
||||||
Expected return on assets
|
(37
|
)
|
|
(10
|
)
|
|
(35
|
)
|
|
(9
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||||
Curtailment gain
(1)
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service (credit) cost
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(6
|
)
|
|
(6
|
)
|
||||||
Mark-to-market pension and other postretirement benefits loss
(2)
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic benefit (credit) cost
|
$
|
(6
|
)
|
|
$
|
(4
|
)
|
|
$
|
(1
|
)
|
|
$
|
2
|
|
|
$
|
5
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
First Six Months
|
||||||||||||||||||||||
|
Pension Plans
|
|
Other Postretirement Benefit Plans
|
||||||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||||||||
(Dollars in millions)
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
|
Non-U.S.
|
|
|
|
|
||||||||||||
Components of net periodic benefit (credit) cost:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
$
|
19
|
|
|
$
|
8
|
|
|
$
|
20
|
|
|
$
|
7
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Interest cost
|
44
|
|
|
13
|
|
|
50
|
|
|
16
|
|
|
20
|
|
|
22
|
|
||||||
Expected return on assets
|
(73
|
)
|
|
(19
|
)
|
|
(71
|
)
|
|
(19
|
)
|
|
(3
|
)
|
|
(3
|
)
|
||||||
Curtailment gain
(1)
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service (credit) cost
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(12
|
)
|
|
(12
|
)
|
||||||
Mark-to-market pension and other postretirement benefits loss
(2)
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic benefit (credit) cost
|
$
|
(12
|
)
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
$
|
4
|
|
|
$
|
9
|
|
|
$
|
11
|
|
(1)
|
Gain
in the Fibers segment due to the closure of the Workington, UK acetate tow manufacturing facility
.
|
(2)
|
Mark-to-market
loss due to the interim remeasurement of the Workington, UK pension plan, triggered by the closure of the Workington, UK acetate tow manufacturing facility.
|
9.
|
COMMITMENTS
|
10.
|
ENVIRONMENTAL MATTERS AND ASSET RETIREMENT OBLIGATIONS
|
(Dollars in millions)
|
Environmental Remediation Liabilities
|
||
Balance at December 31, 2014
|
$
|
324
|
|
Changes in estimates recognized in earnings
|
4
|
|
|
Cash reductions
|
(14
|
)
|
|
Balance at June 30, 2015
|
$
|
314
|
|
(Dollars in millions)
|
June 30, 2015
|
|
December 31, 2014
|
||||
Environmental contingent liabilities, current
|
$
|
35
|
|
|
$
|
35
|
|
Environmental contingent liabilities, long-term
|
302
|
|
|
310
|
|
||
Total
|
$
|
337
|
|
|
$
|
345
|
|
11.
|
LEGAL MATTERS
|
12.
|
STOCKHOLDERS' EQUITY
|
(Dollars in millions)
|
Common Stock at Par Value
$
|
|
Paid-in Capital
$
|
|
Retained Earnings
$
|
|
Accumulated Other Comprehensive Income (Loss)
$
|
|
Treasury Stock at Cost
$
|
|
Total Stockholders' Equity Attributed to Eastman
$
|
|
Noncontrolling Interest $
|
|
Total Stockholders' Equity $
|
||||||||
Balance at December 31, 2014
|
2
|
|
|
1,817
|
|
|
4,545
|
|
|
(277
|
)
|
|
(2,577
|
)
|
|
3,510
|
|
|
80
|
|
|
3,590
|
|
Net Earnings
|
—
|
|
|
—
|
|
|
468
|
|
|
—
|
|
|
—
|
|
|
468
|
|
|
3
|
|
|
471
|
|
Cash Dividends Declared
(1)
($.40 per share)
|
—
|
|
|
—
|
|
|
(120
|
)
|
|
—
|
|
|
—
|
|
|
(120
|
)
|
|
—
|
|
|
(120
|
)
|
Other Comprehensive Income
|
—
|
|
|
—
|
|
|
—
|
|
|
(86
|
)
|
|
—
|
|
|
(86
|
)
|
|
—
|
|
|
(86
|
)
|
Share-Based Compensation Expense
(2)
|
—
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
21
|
|
Stock Option Exercises
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
Other
(3)
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
Share Repurchase
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31
|
)
|
|
(31
|
)
|
|
—
|
|
|
(31
|
)
|
Distributions to Noncontrolling Interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
Balance at June 30, 2015
|
2
|
|
|
1,840
|
|
|
4,893
|
|
|
(363
|
)
|
|
(2,608
|
)
|
|
3,764
|
|
|
81
|
|
|
3,845
|
|
(1)
|
Includes cash dividends paid and dividends declared, but unpaid.
|
(2)
|
Includes the fair value of equity share-based awards recognized for share-based compensation.
|
(3)
|
Paid in capital includes tax benefits/charges relating to the differences between the amounts deductible for federal income taxes over the amounts charged to income for book value purposes and other items. Equity attributable to noncontrolling interest includes adjustments for currency revaluation.
|
(Dollars in millions)
|
Cumulative Translation Adjustment
|
|
Benefit Plans Unrecognized Prior Service Credits
|
|
Unrealized Gains (Losses) on Derivative Instruments
|
|
Unrealized Losses on Investments
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||||||
Balance at December 31, 2013
|
$
|
133
|
|
|
$
|
78
|
|
|
$
|
(39
|
)
|
|
$
|
(1
|
)
|
|
$
|
171
|
|
Period change
|
(201
|
)
|
|
(17
|
)
|
|
(230
|
)
|
|
—
|
|
|
(448
|
)
|
|||||
Balance at December 31, 2014
|
(68
|
)
|
|
61
|
|
|
(269
|
)
|
|
(1
|
)
|
|
(277
|
)
|
|||||
Period change
|
(136
|
)
|
|
(11
|
)
|
|
61
|
|
|
—
|
|
|
(86
|
)
|
|||||
Balance at June 30, 2015
|
$
|
(204
|
)
|
|
$
|
50
|
|
|
$
|
(208
|
)
|
|
$
|
(1
|
)
|
|
$
|
(363
|
)
|
|
Second Quarter
|
||||||||||||||
|
2015
|
|
2014
|
||||||||||||
(Dollars in millions)
|
Before Tax
|
|
Net of Tax
|
|
Before Tax
|
|
Net of Tax
|
||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
||||||||
Change in cumulative translation adjustment
|
$
|
76
|
|
|
$
|
76
|
|
|
$
|
9
|
|
|
$
|
9
|
|
Defined benefit pension and other postretirement benefit plans:
|
|
|
|
|
|
|
|
|
|||||||
Amortization of unrecognized prior service credits included in net periodic costs
(1)
|
(10
|
)
|
|
(7
|
)
|
|
(7
|
)
|
|
(4
|
)
|
||||
Derivatives and hedging:
(2)
|
|
|
|
|
|
|
|
|
|||||||
Unrealized gain (loss)
|
(26
|
)
|
|
(16
|
)
|
|
9
|
|
|
6
|
|
||||
Reclassification adjustment for (gain) loss included in net income
|
40
|
|
|
25
|
|
|
(9
|
)
|
|
(6
|
)
|
||||
Change in derivatives and hedging
|
14
|
|
|
9
|
|
|
—
|
|
|
—
|
|
||||
Total other comprehensive income (loss)
|
$
|
80
|
|
|
$
|
78
|
|
|
$
|
2
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
||||||||
|
First Six Months
|
||||||||||||||
|
2015
|
|
2014
|
||||||||||||
(Dollars in millions)
|
Before Tax
|
|
Net of Tax
|
|
Before Tax
|
|
Net of Tax
|
||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
||||||||
Change in cumulative translation adjustment
|
$
|
(136
|
)
|
|
$
|
(136
|
)
|
|
$
|
12
|
|
|
$
|
13
|
|
Defined benefit pension and other postretirement benefit plans:
|
|
|
|
|
|
|
|
|
|||||||
Amortization of unrecognized prior service credits included in net periodic costs
(1)
|
(17
|
)
|
|
(11
|
)
|
|
(14
|
)
|
|
(8
|
)
|
||||
Derivatives and hedging:
(2)
|
|
|
|
|
|
|
|
|
|||||||
Unrealized gain (loss)
|
63
|
|
|
39
|
|
|
9
|
|
|
6
|
|
||||
Reclassification adjustment for (gain) loss included in net income
|
35
|
|
|
22
|
|
|
(14
|
)
|
|
(9
|
)
|
||||
Change in derivatives and hedging
|
98
|
|
|
61
|
|
|
(5
|
)
|
|
(3
|
)
|
||||
Total other comprehensive income (loss)
|
$
|
(55
|
)
|
|
$
|
(86
|
)
|
|
$
|
(7
|
)
|
|
$
|
2
|
|
(1)
|
Included in the calculation of net periodic benefit costs for pension and other postretirement benefit plans. See Note
8
, "
Retirement Plans
".
|
(2)
|
For additional information regarding the impact of reclassifications into earnings, refer to Note
7
, "
Derivatives
".
|
13.
|
EARNINGS AND DIVIDENDS PER SHARE
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
(In millions, except per share amounts)
|
|
|
|
|
|
|
|
||||||||
Numerator
|
|
|
|
|
|
|
|
||||||||
Earnings attributable to Eastman:
|
|
|
|
|
|
|
|
||||||||
Earnings from continuing operations, net of tax
|
$
|
297
|
|
|
$
|
290
|
|
|
$
|
468
|
|
|
$
|
523
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator
|
|
|
|
|
|
|
|
||||||||
Weighted average shares used for basic EPS
|
148.6
|
|
|
149.5
|
|
|
148.6
|
|
|
150.4
|
|
||||
Dilutive effect of stock options and other awards
|
1.2
|
|
|
1.8
|
|
|
1.2
|
|
|
1.8
|
|
||||
Weighted average shares used for diluted EPS
|
149.8
|
|
|
151.3
|
|
|
149.8
|
|
|
152.2
|
|
||||
|
|
|
|
|
|
|
|
||||||||
EPS from continuing operations
(1)
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
2.00
|
|
|
$
|
1.94
|
|
|
$
|
3.15
|
|
|
$
|
3.47
|
|
Diluted
|
$
|
1.98
|
|
|
$
|
1.92
|
|
|
$
|
3.12
|
|
|
$
|
3.43
|
|
(1)
|
Earnings per share are calculated using whole dollars and shares.
|
14.
|
ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES (GAINS), NET
|
(Dollars in millions)
|
Balance at January 1, 2015
|
|
Provision/ Adjustments
|
|
Non-cash Reductions
|
|
Cash Reductions
|
|
Balance at June 30, 2015
|
||||||||||
Non-cash charges
|
$
|
—
|
|
|
$
|
89
|
|
|
$
|
(89
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Severance costs
|
13
|
|
|
12
|
|
|
1
|
|
|
(16
|
)
|
|
10
|
|
|||||
Site closure and restructuring costs
|
15
|
|
|
8
|
|
|
1
|
|
|
(10
|
)
|
|
14
|
|
|||||
Total
|
$
|
28
|
|
|
$
|
109
|
|
|
$
|
(87
|
)
|
|
$
|
(26
|
)
|
|
$
|
24
|
|
(Dollars in millions)
|
Balance at January 1, 2014
|
|
Provision/ Adjustments
|
|
Non-cash Reductions
|
|
Cash Reductions
|
|
Balance at December 31, 2014
|
||||||||||
Non-cash charges
|
$
|
—
|
|
|
$
|
52
|
|
|
$
|
(52
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Severance costs
|
22
|
|
|
13
|
|
|
—
|
|
|
(22
|
)
|
|
13
|
|
|||||
Site closure and restructuring costs
|
14
|
|
|
12
|
|
|
(4
|
)
|
|
(7
|
)
|
|
15
|
|
|||||
Total
|
$
|
36
|
|
|
$
|
77
|
|
|
$
|
(56
|
)
|
|
$
|
(29
|
)
|
|
$
|
28
|
|
15.
|
SHARE-BASED COMPENSATION AWARDS
|
16.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
(Dollars in millions)
|
First Six Months
|
||||||
|
2015
|
|
2014
|
||||
Other current assets
|
$
|
15
|
|
|
$
|
21
|
|
Other noncurrent assets
|
17
|
|
|
16
|
|
||
Payables and other current liabilities
|
139
|
|
|
(28
|
)
|
||
Long-term liabilities and equity
|
(76
|
)
|
|
(42
|
)
|
||
Total
|
$
|
95
|
|
|
$
|
(33
|
)
|
17.
|
SEGMENT INFORMATION
|
|
Second Quarter
|
||||||
(Dollars in millions)
|
2015
|
|
2014
|
||||
Sales
|
|
|
|
||||
Additives & Functional Products
|
$
|
616
|
|
|
$
|
452
|
|
Adhesives & Plasticizers
|
317
|
|
|
358
|
|
||
Advanced Materials
|
647
|
|
|
631
|
|
||
Fibers
|
299
|
|
|
386
|
|
||
Specialty Fluids & Intermediates
|
642
|
|
|
633
|
|
||
Total Sales by Segment
|
2,521
|
|
|
2,460
|
|
||
Other
|
12
|
|
|
—
|
|
||
Total Sales
|
$
|
2,533
|
|
|
$
|
2,460
|
|
|
|
|
|
||||
|
First Six Months
|
||||||
(Dollars in millions)
|
2015
|
|
2014
|
||||
Sales
|
|
|
|
||||
Additives & Functional Products
|
$
|
1,225
|
|
|
$
|
875
|
|
Adhesives & Plasticizers
|
637
|
|
|
703
|
|
||
Advanced Materials
|
1,208
|
|
|
1,212
|
|
||
Fibers
|
583
|
|
|
740
|
|
||
Specialty Fluids & Intermediates
|
1,299
|
|
|
1,234
|
|
||
Total Sales by Segment
|
4,952
|
|
|
4,764
|
|
||
Other
|
24
|
|
|
1
|
|
||
Total Sales
|
$
|
4,976
|
|
|
$
|
4,765
|
|
|
Second Quarter
|
||||||
(Dollars in millions)
|
2015
|
|
2014
|
||||
Operating Earnings (Loss)
|
|
|
|
||||
Additives & Functional Products
|
$
|
119
|
|
|
$
|
105
|
|
Adhesives & Plasticizers
|
63
|
|
|
56
|
|
||
Advanced Materials
|
135
|
|
|
80
|
|
||
Fibers
|
93
|
|
|
123
|
|
||
Specialty Fluids & Intermediates
|
83
|
|
|
94
|
|
||
Total Operating Earnings by Segment
|
493
|
|
|
458
|
|
||
Other
|
|
|
|
|
|
||
Growth initiatives and businesses not allocated to segments
|
(22
|
)
|
|
(15
|
)
|
||
Pension and other postretirement benefit income (expense), net not allocated to operating segments
|
8
|
|
|
3
|
|
||
Acquisition integration, transaction, and restructuring costs
|
(10
|
)
|
|
(10
|
)
|
||
Total Operating Earnings
|
$
|
469
|
|
|
$
|
436
|
|
|
|
|
|
||||
|
|
|
|
||||
|
First Six Months
|
||||||
(Dollars in millions)
|
2015
|
|
2014
|
||||
Operating Earnings (Loss)
|
|
|
|
||||
Additives & Functional Products
|
$
|
239
|
|
|
$
|
199
|
|
Adhesives & Plasticizers
|
116
|
|
|
103
|
|
||
Advanced Materials
|
203
|
|
|
141
|
|
||
Fibers
|
86
|
|
|
240
|
|
||
Specialty Fluids & Intermediates
|
185
|
|
|
158
|
|
||
Total Operating Earnings by Segment
|
829
|
|
|
841
|
|
||
Other
|
|
|
|
||||
Growth initiatives and businesses not allocated to segments
|
(48
|
)
|
|
(28
|
)
|
||
Pension and other postretirement benefit income (expense), net not allocated to operating segments
|
17
|
|
|
6
|
|
||
Acquisition integration, transaction, and restructuring costs
|
(18
|
)
|
|
(22
|
)
|
||
Total Operating Earnings
|
$
|
780
|
|
|
$
|
797
|
|
|
June 30,
|
|
December 31,
|
||||
(Dollars in millions)
|
2015
|
|
2014
|
||||
Assets by Segment
(1)
|
|
|
|
||||
Additives & Functional Products
|
$
|
4,843
|
|
|
$
|
4,900
|
|
Adhesives & Plasticizers
|
965
|
|
|
1,011
|
|
||
Advanced Materials
|
4,259
|
|
|
4,235
|
|
||
Fibers
|
973
|
|
|
986
|
|
||
Specialty Fluids & Intermediates
|
3,606
|
|
|
3,710
|
|
||
Total Assets by Segment
|
14,646
|
|
|
14,842
|
|
||
Corporate Assets
|
1,240
|
|
|
1,230
|
|
||
Total Assets
|
$
|
15,886
|
|
|
$
|
16,072
|
|
(1)
|
The chief operating decision maker holds segment management accountable for accounts receivable, inventory, fixed assets, goodwill, and intangible assets.
|
18.
|
RECENTLY ISSUED ACCOUNTING STANDARDS
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Asset impairments and restructuring charges (gains), net, of which asset impairments are non-cash transactions impacting profitability;
|
•
|
Costs resulting from the sale of acquired inventories at fair value, net of the last-in, first-out ("LIFO") impact for certain of these inventories (as required by purchase accounting, these inventories were marked to fair value);
|
•
|
Acquisition integration and transaction costs; and
|
•
|
MTM pension and other postretirement benefit plans loss due to an interim remeasurement of the Workington, UK pension plan obligation triggered by the closure of the Workington, UK acetate tow manufacturing facility.
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Non-core items impacting operating earnings:
|
|
|
|
|
|
|
|
|
|||||||
Asset impairments and restructuring charges (gains), net
(1)
|
$
|
0
|
|
|
$
|
(7
|
)
|
|
$
|
109
|
|
|
$
|
6
|
|
Acquisition integration and transaction costs
|
|
9
|
|
|
10
|
|
|
17
|
|
|
19
|
|
|||
Additional costs of acquired inventories
|
|
—
|
|
|
2
|
|
|
7
|
|
|
2
|
|
|||
Mark-to-market pension and other postretirement benefits loss
|
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
(1)
|
See Results of Operations - Earnings from Continuing Operations and Diluted Earnings per Share for additional item excluded only from earnings per share.
|
•
|
Gross profit,
|
•
|
Selling, general, and administrative ("SG&A") expenses,
|
•
|
Operating earnings,
|
•
|
Earnings from continuing operations, and
|
•
|
Diluted earnings per share.
|
|
Second Quarter
|
||||||||||||||
|
2015
|
|
2014
|
||||||||||||
(Dollars in millions, except diluted EPS)
|
$
|
|
EPS
|
|
$
|
|
EPS
|
||||||||
Earnings from continuing operations, net of tax
|
$
|
297
|
|
|
$
|
1.98
|
|
|
$
|
290
|
|
|
$
|
1.92
|
|
Total non-core items
|
3
|
|
|
0.03
|
|
|
1
|
|
|
0.00
|
|||||
Earnings from continuing operations excluding non-core items, net of tax
|
$
|
300
|
|
|
$
|
2.01
|
|
|
$
|
291
|
|
|
$
|
1.92
|
|
|
|
|
|
|
|
|
|
||||||||
|
First Six Months
|
||||||||||||||
|
2015
|
|
2014
|
||||||||||||
(Dollars in millions, except diluted EPS)
|
$
|
|
EPS
|
|
$
|
|
EPS
|
||||||||
Earnings from continuing operations, net of tax
|
$
|
468
|
|
|
$
|
3.12
|
|
|
$
|
523
|
|
|
$
|
3.43
|
|
Total non-core items
|
108
|
|
|
0.73
|
|
|
15
|
|
|
0.11
|
|
||||
Earnings from continuing operations excluding non-core items, net of tax
|
$
|
576
|
|
|
$
|
3.85
|
|
|
$
|
538
|
|
|
$
|
3.54
|
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
$
|
|
%
|
|
2015
|
|
2014
|
|
$
|
|
%
|
||||||||||||||
Sales
|
$
|
2,533
|
|
|
$
|
2,460
|
|
|
$
|
73
|
|
|
3
|
%
|
|
$
|
4,976
|
|
|
$
|
4,765
|
|
|
$
|
211
|
|
|
4
|
%
|
Acquired business effect
|
|
|
|
|
364
|
|
|
15
|
%
|
|
|
|
|
|
752
|
|
|
16
|
%
|
||||||||||
Volume / product mix effect
|
|
|
|
|
(48
|
)
|
|
(2
|
)%
|
|
|
|
|
|
(114
|
)
|
|
(3
|
)%
|
||||||||||
Price effect
|
|
|
|
|
(173
|
)
|
|
(7
|
)%
|
|
|
|
|
|
(299
|
)
|
|
(6
|
)%
|
||||||||||
Exchange rate effect
|
|
|
|
|
(70
|
)
|
|
(3
|
)%
|
|
|
|
|
|
(128
|
)
|
|
(3
|
)%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||
Gross Profit
|
$
|
720
|
|
|
$
|
657
|
|
|
10
|
%
|
|
$
|
1,376
|
|
|
$
|
1,252
|
|
|
10
|
%
|
Additional costs of acquired inventories
|
—
|
|
|
2
|
|
|
|
|
7
|
|
|
2
|
|
|
|
||||||
Mark-to-market pension and other postretirement benefits loss
|
2
|
|
|
—
|
|
|
|
|
|
2
|
|
|
—
|
|
|
|
|
||||
Gross Profit excluding non-core items
|
$
|
722
|
|
|
$
|
659
|
|
|
10
|
%
|
|
$
|
1,385
|
|
|
$
|
1,254
|
|
|
10
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||
Selling, General and Administrative Expenses
|
$
|
194
|
|
|
$
|
172
|
|
|
13
|
%
|
|
$
|
374
|
|
|
$
|
340
|
|
|
10
|
%
|
Acquisition integration and transaction costs
|
(9
|
)
|
|
(10
|
)
|
|
|
|
|
(17
|
)
|
|
(19
|
)
|
|
|
|
||||
Selling, General, and Administrative Expenses excluding non-core items
|
$
|
185
|
|
|
$
|
162
|
|
|
14
|
%
|
|
$
|
357
|
|
|
$
|
321
|
|
|
11
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||
Research and Development Expenses
|
$
|
57
|
|
|
$
|
56
|
|
|
2
|
%
|
|
$
|
113
|
|
|
$
|
109
|
|
|
4
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||
Operating earnings
|
$
|
469
|
|
|
$
|
436
|
|
|
8
|
%
|
|
$
|
780
|
|
|
$
|
797
|
|
|
(2
|
)%
|
Asset impairments and restructuring charges (gains), net
|
—
|
|
|
(7
|
)
|
|
|
|
|
109
|
|
|
6
|
|
|
|
|||||
Acquisition integration and transaction costs
|
9
|
|
|
10
|
|
|
|
|
|
17
|
|
|
19
|
|
|
|
|||||
Additional costs of acquired inventories
|
—
|
|
|
2
|
|
|
|
|
7
|
|
|
2
|
|
|
|
||||||
Mark-to-market pension and other postretirement benefits loss
|
2
|
|
|
—
|
|
|
|
|
|
2
|
|
|
—
|
|
|
|
|
||||
Operating earnings excluding non-core items
|
$
|
480
|
|
|
$
|
441
|
|
|
9
|
%
|
|
$
|
915
|
|
|
$
|
824
|
|
|
11
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||
Gross interest costs
|
$
|
72
|
|
|
$
|
50
|
|
|
|
|
$
|
144
|
|
|
$
|
97
|
|
|
|
||
Less: Capitalized interest
|
2
|
|
|
2
|
|
|
|
|
4
|
|
|
4
|
|
|
|
||||||
Interest expense
|
70
|
|
|
48
|
|
|
46
|
%
|
|
140
|
|
|
93
|
|
|
51
|
%
|
||||
Interest income
|
4
|
|
|
3
|
|
|
|
|
|
8
|
|
|
6
|
|
|
|
|
||||
Net interest expense
|
$
|
66
|
|
|
$
|
45
|
|
|
47
|
%
|
|
$
|
132
|
|
|
$
|
87
|
|
|
52
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Foreign exchange transaction (gains) losses, net
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
$
|
—
|
|
(Income) loss from equity investments and other investment (gains) losses, net
|
(4
|
)
|
|
(2
|
)
|
|
(8
|
)
|
|
(5
|
)
|
||||
Other, net
|
2
|
|
|
(6
|
)
|
|
3
|
|
|
(6
|
)
|
||||
Other charges (income), net
|
$
|
1
|
|
|
$
|
(8
|
)
|
|
$
|
(10
|
)
|
|
$
|
(11
|
)
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Provision for income taxes, as reported
|
$
|
104
|
|
|
$
|
107
|
|
|
$
|
188
|
|
|
$
|
195
|
|
Effective tax rate
|
26
|
%
|
|
27
|
%
|
|
29
|
%
|
|
27
|
%
|
|
Second Quarter
|
||||||||||||||
|
2015
|
|
2014
|
||||||||||||
(Dollars in millions, except diluted EPS)
|
$
|
|
EPS
|
|
$
|
|
EPS
|
||||||||
Earnings from continuing operations, net of tax
|
$
|
297
|
|
|
$
|
1.98
|
|
|
$
|
290
|
|
|
$
|
1.92
|
|
Asset impairments and restructuring charges (gains), net of tax
(1)
|
(4
|
)
|
|
(0.02
|
)
|
|
(6
|
)
|
|
(0.04
|
)
|
||||
Acquisition integration and transaction costs, net of tax
|
6
|
|
|
0.04
|
|
|
6
|
|
|
0.04
|
|
||||
Additional costs of acquired inventories, net of tax
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Mark-to-market pension and other post-employment benefits loss, net of tax
|
1
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
||||
Earnings from continuing operations excluding non-core items, net of tax
|
$
|
300
|
|
|
$
|
2.01
|
|
|
$
|
291
|
|
|
$
|
1.92
|
|
(1)
Second quarter 2015 tax adjustment related to Workington, UK acetate tow facility closure.
|
|
|
|
|
|||||||||||
|
First Six Months
|
||||||||||||||
|
2015
|
|
2014
|
||||||||||||
(Dollars in millions, except diluted EPS)
|
$
|
|
EPS
|
|
$
|
|
EPS
|
||||||||
Earnings from continuing operations, net of tax
|
$
|
468
|
|
|
$
|
3.12
|
|
|
$
|
523
|
|
|
$
|
3.43
|
|
Asset impairments and restructuring charges (gains), net of tax
|
92
|
|
|
0.62
|
|
|
3
|
|
|
0.02
|
|
||||
Acquisition transaction and integration costs, net of tax
|
11
|
|
|
0.07
|
|
|
11
|
|
|
0.08
|
|
||||
Additional costs of acquired inventories, net of tax
|
4
|
|
|
0.03
|
|
|
1
|
|
|
0.01
|
|
||||
Mark-to-market pension and other post-employment benefits loss, net of tax
|
1
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
||||
Earnings from continuing operations excluding non-core items, net of tax
|
$
|
576
|
|
|
$
|
3.85
|
|
|
$
|
538
|
|
|
$
|
3.54
|
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
$
|
|
%
|
|
2015
|
|
2014
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Sales
|
$
|
616
|
|
|
$
|
452
|
|
|
$
|
164
|
|
|
36
|
%
|
|
$
|
1,225
|
|
|
$
|
875
|
|
|
$
|
350
|
|
|
40
|
%
|
Acquired business effect
|
|
|
|
|
191
|
|
|
42
|
%
|
|
|
|
|
|
401
|
|
|
46
|
%
|
||||||||||
Volume / product mix effect
|
|
|
|
|
22
|
|
|
5
|
%
|
|
|
|
|
|
|
|
23
|
|
|
3
|
%
|
||||||||
Price effect
|
|
|
|
|
(33
|
)
|
|
(7
|
)%
|
|
|
|
|
|
|
|
(43
|
)
|
|
(5
|
)%
|
||||||||
Exchange rate effect
|
|
|
|
|
(16
|
)
|
|
(4
|
)%
|
|
|
|
|
|
|
|
(31
|
)
|
|
(4
|
)%
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating earnings
|
119
|
|
|
105
|
|
|
14
|
|
|
13
|
%
|
|
239
|
|
|
199
|
|
|
40
|
|
|
20
|
%
|
||||||
Asset impairments and restructuring charges (gains), net
|
—
|
|
|
(2
|
)
|
|
2
|
|
|
|
|
—
|
|
|
(2
|
)
|
|
2
|
|
|
|
||||||||
Operating earnings excluding non-core items
|
119
|
|
|
103
|
|
|
16
|
|
|
16
|
%
|
|
239
|
|
|
197
|
|
|
42
|
|
|
21
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
$
|
|
%
|
|
2015
|
|
2014
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Sales
|
$
|
317
|
|
|
$
|
358
|
|
|
$
|
(41
|
)
|
|
(11
|
)%
|
|
$
|
637
|
|
|
$
|
703
|
|
|
$
|
(66
|
)
|
|
(9
|
)%
|
Volume / product mix effect
|
|
|
|
|
|
(9
|
)
|
|
(2
|
)%
|
|
|
|
|
|
(13
|
)
|
|
(2
|
)%
|
|||||||||
Price effect
|
|
|
|
|
|
(18
|
)
|
|
(5
|
)%
|
|
|
|
|
|
(26
|
)
|
|
(3
|
)%
|
|||||||||
Exchange rate effect
|
|
|
|
|
|
(14
|
)
|
|
(4
|
)%
|
|
|
|
|
|
(27
|
)
|
|
(4
|
)%
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating earnings
|
63
|
|
|
56
|
|
|
7
|
|
|
13
|
%
|
|
116
|
|
|
103
|
|
|
13
|
|
|
13
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
$
|
|
%
|
|
2015
|
|
2014
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Sales
|
$
|
647
|
|
|
$
|
631
|
|
|
$
|
16
|
|
|
3
|
%
|
|
$
|
1,208
|
|
|
$
|
1,212
|
|
|
$
|
(4
|
)
|
|
—
|
%
|
Acquired business effect
|
|
|
|
|
36
|
|
|
6
|
%
|
|
|
|
|
|
66
|
|
|
6
|
%
|
||||||||||
Volume / product mix effect
|
|
|
|
|
35
|
|
|
6
|
%
|
|
|
|
|
|
|
|
25
|
|
|
2
|
%
|
||||||||
Price effect
|
|
|
|
|
(27
|
)
|
|
(4
|
)%
|
|
|
|
|
|
|
|
(44
|
)
|
|
(4
|
)%
|
||||||||
Exchange rate effect
|
|
|
|
|
(28
|
)
|
|
(5
|
)%
|
|
|
|
|
|
|
|
(51
|
)
|
|
(4
|
)%
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating earnings
|
135
|
|
|
80
|
|
|
55
|
|
|
69
|
%
|
|
203
|
|
|
141
|
|
|
62
|
|
|
44
|
%
|
||||||
Additional costs of acquired inventories
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
7
|
|
|
—
|
|
|
7
|
|
|
|
||||||||
Asset impairments and restructuring charges (gains), net
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
10
|
|
|
(10
|
)
|
|
|
|||||||
Operating earnings excluding non-core items
|
135
|
|
|
80
|
|
|
55
|
|
|
69
|
%
|
|
210
|
|
|
151
|
|
|
59
|
|
|
39
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
$
|
|
%
|
|
2015
|
|
2014
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Sales
|
$
|
299
|
|
|
$
|
386
|
|
|
$
|
(87
|
)
|
|
(23
|
)%
|
|
$
|
583
|
|
|
$
|
740
|
|
|
$
|
(157
|
)
|
|
(21
|
)%
|
Volume / product mix effect
|
|
|
|
|
|
(84
|
)
|
|
(22
|
)%
|
|
|
|
|
|
|
|
(157
|
)
|
|
(21
|
)%
|
|||||||
Price effect
|
|
|
|
|
|
(1
|
)
|
|
—
|
%
|
|
|
|
|
|
|
|
3
|
|
|
—
|
%
|
|||||||
Exchange rate effect
|
|
|
|
|
|
(2
|
)
|
|
(1
|
)%
|
|
|
|
|
|
|
|
(3
|
)
|
|
—
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating earnings
|
93
|
|
|
123
|
|
|
(30
|
)
|
|
(24
|
)%
|
|
86
|
|
|
240
|
|
|
(154
|
)
|
|
(64
|
)%
|
||||||
Asset impairments and restructuring charges (gains), net
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
|
|
95
|
|
|
—
|
|
|
95
|
|
|
|
||||||||
Operating earnings excluding non-core items
|
91
|
|
|
123
|
|
|
(32
|
)
|
|
(26
|
)%
|
|
181
|
|
|
240
|
|
|
(59
|
)
|
|
(25
|
)%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
$
|
|
%
|
|
2015
|
|
2014
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Sales
|
$
|
642
|
|
|
$
|
633
|
|
|
$
|
9
|
|
|
1
|
%
|
|
$
|
1,299
|
|
|
$
|
1,234
|
|
|
$
|
65
|
|
|
5
|
%
|
Acquired business effect
|
|
|
|
|
126
|
|
|
20
|
%
|
|
|
|
|
|
263
|
|
|
21
|
%
|
||||||||||
Volume / product mix effect
|
|
|
|
|
|
(13
|
)
|
|
(2
|
)%
|
|
|
|
|
|
|
|
7
|
|
|
—
|
%
|
|||||||
Price effect
|
|
|
|
|
|
(94
|
)
|
|
(15
|
)%
|
|
|
|
|
|
|
|
(189
|
)
|
|
(15
|
)%
|
|||||||
Exchange rate effect
|
|
|
|
|
|
(10
|
)
|
|
(2
|
)%
|
|
|
|
|
|
|
|
(16
|
)
|
|
(1
|
)%
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating earnings
|
83
|
|
|
94
|
|
|
(11
|
)
|
|
(12
|
)%
|
|
185
|
|
|
158
|
|
|
27
|
|
|
17
|
%
|
||||||
Additional costs of acquired inventories
|
—
|
|
|
2
|
|
|
(2
|
)
|
|
|
|
—
|
|
|
2
|
|
|
(2
|
)
|
|
|
||||||||
Operating earnings excluding non-core items
|
83
|
|
|
96
|
|
|
(13
|
)
|
|
(14
|
)%
|
|
185
|
|
|
160
|
|
|
25
|
|
|
16
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Sales
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
||||||||
Operating loss
|
|
|
|
|
|
|
|
||||||||
Growth initiatives and businesses not allocated to segments
|
$
|
(22
|
)
|
|
$
|
(15
|
)
|
|
$
|
(48
|
)
|
|
$
|
(28
|
)
|
Pension and other postretirement benefit income (expense), net not allocated to operating segments
|
8
|
|
|
3
|
|
|
17
|
|
|
6
|
|
||||
Acquisition integration, transaction, and restructuring costs
|
(10
|
)
|
|
(10
|
)
|
|
(18
|
)
|
|
(22
|
)
|
||||
Operating loss before exclusions
|
(24
|
)
|
|
(22
|
)
|
|
(49
|
)
|
|
(44
|
)
|
||||
Acquisition integration and transaction costs
|
9
|
|
|
10
|
|
|
17
|
|
|
19
|
|
||||
Mark-to-market pension and other postretirement benefits loss
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Asset impairments and restructuring charges (gains), net
|
2
|
|
|
(5
|
)
|
|
14
|
|
|
(2
|
)
|
||||
Operating loss excluding non-core items
|
$
|
(11
|
)
|
|
$
|
(17
|
)
|
|
$
|
(16
|
)
|
|
$
|
(27
|
)
|
|
Sales Revenue
|
||||||||||||||||||||
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||
(Dollars in millions)
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||
United States and Canada
|
$
|
1,142
|
|
|
$
|
1,138
|
|
|
—
|
%
|
|
$
|
2,302
|
|
|
$
|
2,211
|
|
|
4
|
%
|
Asia Pacific
|
624
|
|
|
654
|
|
|
(5
|
)%
|
|
1,141
|
|
|
1,255
|
|
|
(9
|
)%
|
||||
Europe, Middle East, and Africa
|
625
|
|
|
544
|
|
|
15
|
%
|
|
1,250
|
|
|
1,058
|
|
|
18
|
%
|
||||
Latin America
|
142
|
|
|
124
|
|
|
15
|
%
|
|
283
|
|
|
241
|
|
|
17
|
%
|
||||
|
$
|
2,533
|
|
|
$
|
2,460
|
|
|
3
|
%
|
|
$
|
4,976
|
|
|
$
|
4,765
|
|
|
4
|
%
|
|
First Six Months
|
||||||
(Dollars in millions)
|
2015
|
|
2014
|
||||
Net cash provided by (used in)
|
|
|
|
||||
Operating activities
|
$
|
682
|
|
|
$
|
389
|
|
Investing activities
|
(265
|
)
|
|
(524
|
)
|
||
Financing activities
|
(359
|
)
|
|
71
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(4
|
)
|
|
2
|
|
||
Net change in cash and cash equivalents
|
54
|
|
|
(62
|
)
|
||
Cash and cash equivalents at beginning of period
|
214
|
|
|
237
|
|
||
Cash and cash equivalents at end of period
|
$
|
268
|
|
|
$
|
175
|
|
(Dollars in millions)
|
Environmental Remediation Liabilities
|
||
Balance at December 31, 2014
|
$
|
324
|
|
Changes in estimates recognized in earnings
|
4
|
|
|
Cash reductions
|
(14
|
)
|
|
Balance at June 30, 2015
|
$
|
314
|
|
•
|
operating results to continue to benefit from recent acquisitions, organic growth, and improved product mix from continued market adoption of specialty products;
|
•
|
cash generated by operating activities of approximately $1.6 billion;
|
•
|
capital spending to be between
$700 million
and
$725 million
;
|
•
|
priorities for uses of available cash to be payment of the quarterly stock dividend, repayment of debt, funding targeted growth initiatives, pension funding, and stock repurchases primarily to offset dilution; and
|
•
|
the full year effective tax rate on reported earnings before income tax to be between
26 percent
and
27 percent
, excluding non-core items.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
PART II.
|
OTHER INFORMATION
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
Period
|
Total Number
of Shares
Purchased
(1)
|
|
Average Price Paid Per Share
(2)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans
or Programs
(3)
|
|
Approximate Dollar
Value (in millions) that May Yet Be Purchased Under the Plans or Programs
(3)
|
||||||
April 1 - 30, 2015
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
724
|
|
May 1 - 31, 2015
|
30,000
|
|
|
$
|
79.60
|
|
|
30,000
|
|
|
$
|
721
|
|
June 1 - 30, 2015
|
35,000
|
|
|
$
|
77.93
|
|
|
35,000
|
|
|
$
|
719
|
|
Total
|
65,000
|
|
|
$
|
78.71
|
|
|
65,000
|
|
|
|
(1)
|
All shares were repurchased under a Company announced repurchase plan.
|
(2)
|
Average price paid per share reflects the weighted average purchase price paid for shares.
|
(3)
|
In February 2014, the Board of Directors authorized repurchase of up to an additional $1 billion of the Company's outstanding common stock. As of
June 30, 2015
, a total of 3,368,029 shares have been repurchased under this authorization for a total amount of $281 million. During
first six months
2015
, the Company repurchased 435,000 shares of common stock for a cost of approximately $31 million. For additional information, see Note
12
, "
Stockholders' Equity
", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
|
ITEM 6.
|
EXHIBITS
|
|
|
|
Eastman Chemical Company
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
July 30, 2015
|
By:
|
/s/ Curtis E. Espeland
|
|
|
|
Curtis E. Espeland
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
EXHIBIT INDEX
|
|
|
Exhibit Number
|
|
Description
|
|
Sequential Page Number
|
|
|
|
|
|
3.01
|
|
Amended and Restated Certificate of Incorporation of Eastman Chemical Company (incorporated herein by reference to Exhibit 3.01 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)
|
|
|
|
|
|
|
|
3.02
|
|
Amended and Restated Bylaws of Eastman Chemical Company (incorporated herein by reference to Exhibit 3.02 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014)
|
|
|
|
|
|
|
|
4.01
|
|
Form of Eastman Chemical Company common stock certificate as amended February 1, 2001 (incorporated herein by reference to Exhibit 4.01 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)
|
|
|
|
|
|
|
|
4.02
|
|
Indenture, dated as of January 10, 1994, between Eastman Chemical Company and The Bank of New York, as Trustee (the "Indenture") (incorporated herein by reference to Exhibit 4(a) to the Company's Current Report on Form 8-K dated January 10, 1994)
|
|
|
|
|
|
|
|
4.03
|
|
Indenture, dated as of June 5, 2012, between Eastman Chemical Company and Wells Fargo Bank, as Trustee (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated June 5, 2012)
|
|
|
|
|
|
|
|
4.04
|
|
Form of 7 1/4% Debentures due January 15, 2024 (incorporated herein by reference to Exhibit 4(d) to the Company's Current Report on Form 8-K dated January 10, 1994)
|
|
|
|
|
|
|
|
4.05
|
|
Officers' Certificate pursuant to Sections 201 and 301 of the Indenture related to 7 5/8% Debentures due 2024 (incorporated herein by reference to Exhibit 4(a) to the Company's Current Report on Form 8-K dated June 8, 1994)
|
|
|
|
|
|
|
|
4.06
|
|
Form of 7 5/8% Debentures due June 15, 2024 (incorporated herein by reference to Exhibit 4(b) to the Company's Current Report on Form 8-K dated June 8, 1994)
|
|
|
|
|
|
|
|
4.07
|
|
Form of 7.60% Debentures due February 1, 2027 (incorporated herein by reference to Exhibit 4.08 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996)
|
|
|
|
|
|
|
|
4.08
|
|
Officer's Certificate pursuant to Sections 201 and 301 of the Indenture related to 7.60% Debentures due February 1, 2027 (incorporated herein by reference to Exhibit 4.09 to the Company's Annual Report on Form 10-K for the year ended December 31, 2006)
|
|
|
|
|
|
|
|
4.09
|
|
Form of 5.500% Notes due 2019 (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated November 2, 2009)
|
|
|
|
|
|
|
|
4.10
|
|
Form of 6.30% Notes due 2018 (incorporated herein by reference to Exhibit 4.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003)
|
|
|
|
|
|
|
|
4.11
|
|
Form of 3% Note due 2015 (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated December 10, 2010)
|
|
|
|
|
|
|
|
4.12
|
|
Form of 4.5% Note due 2021 (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated December 10, 2010)
|
|
|
|
|
|
|
|
4.13
|
|
Form of 2.4% Note due 2017 (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated June 5, 2012)
|
|
|
|
|
|
|
|
4.14
|
|
Form of 3.6% Note due 2022 (incorporated herein by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K dated June 5, 2012)
|
|
|
|
|
|
|
|
|
|
EXHIBIT INDEX
|
|
|
Exhibit Number
|
|
Description
|
|
Sequential Page Number
|
4.15
|
|
Form of 4.8% Note due 2042 (incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K dated June 5, 2012)
|
|
|
|
|
|
|
|
4.16
|
|
Form of 4.65% Note due 2044 (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated May 15, 2014)
|
|
|
|
|
|
|
|
4.17
|
|
Form of 2.70% Note due 2020 (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated November 20, 2014)
|
|
|
|
|
|
|
|
4.18
|
|
Form of 3.80% Note due 2025 (incorporated herein by reference to Exhibit 4.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014)
|
|
|
|
|
|
|
|
10.01
|
|
Amended and Restated $250,000,000 Accounts Receivable Securitization agreement dated July 9, 2008 between the Company and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as agent
|
|
60
|
|
|
|
|
|
12.01
|
|
Statement re: Computation of Ratios of Earnings to Fixed Charges
|
|
130
|
|
|
|
|
|
31.01
|
|
Rule 13a – 14(a) Certification by Mark J. Costa, Chief Executive Officer, for the quarter ended June 30, 2015
|
|
131
|
|
|
|
|
|
31.02
|
|
Rule 13a – 14(a) Certification by Curtis E. Espeland, Executive Vice President and Chief Financial Officer, for the quarter ended June 30, 2015
|
|
132
|
|
|
|
|
|
32.01
|
|
Section 1350 Certification by Mark J. Costa, Chief Executive Officer, for the quarter ended June 30, 2015
|
|
133
|
|
|
|
|
|
32.02
|
|
Section 1350 Certification by Curtis E. Espeland, Executive Vice President and Chief Financial Officer, for the quarter ended June 30, 2015
|
|
134
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Calculation Linkbase Document
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Definition Linkbase Document
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Label Linkbase Document
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
$250,000,000
|
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,
as a Victory Liquidity Bank
|
Short-Term S&P Rating
|
Long-Term S&P Rating
|
Short-Term Moody’s Rating
|
Long-Term Moody’s Rating
|
Allowable % of Net Eligible Receivables
(“
Concentration Limit
”)
|
A-1+
|
AAA
|
P-1
|
Aaa
|
10%
|
A-1
|
AA+, AA, AA- or A+
|
P-1
|
Aa1, Aa2, Aa3 or A1
|
8%
|
A-2
|
A, A- or BBB+
|
P-2
|
A2, A3 or Baa1
|
6.25%
|
A-3
|
BBB or BBB-
|
P-3
|
Baa2 or Baa3
|
4.15%
|
Below A-3 or Not Rated by either S&P or Moody’s
|
Below BBB- or Not Rated by either S&P or Moody’s
|
Below P-3 or Not Rated by either S&P or Moody’s
|
Below Baa3 or Not Rated by either S&P or Moody’s
|
2.5%; provided that up to two such Obligors may exceed 2.5% (but in no event exceed 3.1%) so long as (i) each other such Obligor is less than 2.5% and (ii) the sum of the percentages for the five Obligors within this category with the highest percentages (including any Obligor(s) with a percentage in excess of 2.5%) shall not exceed 12.5%.
|
C
|
NRB - AR
|
Aggregate Reduction
|
Required Notice Period
|
up to $25,000,000
|
2 Business Days
|
> $25,000,000
|
3 Business Days
|
|
|
|
|
|
|
|
|
|
||||
|
|
Second Quarter
|
|
First Six Months
|
||||||||
(Dollars in millions)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Earnings from continuing operations before income taxes excluding noncontrolling interest
|
$
|
401
|
|
$
|
397
|
|
$
|
656
|
|
$
|
718
|
|
Add:
|
|
|
|
|
|
|
|
|
||||
Interest expense
|
|
70
|
|
|
48
|
|
|
140
|
|
|
93
|
|
Appropriate portion of rental expense
(1)
|
|
6
|
|
|
6
|
|
|
13
|
|
|
11
|
|
Amortization of capitalized interest
|
|
2
|
|
|
2
|
|
|
3
|
|
|
4
|
|
Earnings as adjusted
|
$
|
479
|
|
$
|
453
|
|
$
|
812
|
|
$
|
826
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed charges:
|
|
|
|
|
|
|
|
|
||||
Interest expense
|
$
|
70
|
|
$
|
48
|
|
$
|
140
|
|
$
|
93
|
|
Appropriate portion of rental expense
(1)
|
|
6
|
|
|
6
|
|
|
13
|
|
|
11
|
|
Capitalized interest
|
|
2
|
|
|
2
|
|
|
4
|
|
|
4
|
|
Total fixed charges
|
$
|
78
|
|
$
|
56
|
|
$
|
157
|
|
$
|
108
|
|
|
|
|
|
|
|
|
|
|
||||
Ratio of earnings to fixed charges
|
|
6.1x
|
|
|
8.1x
|
|
|
5.2x
|
|
|
7.6x
|
|
(1)
|
For all periods presented, the interest component of rental expense is estimated to equal one-third of such expense.
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Eastman Chemical Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Eastman Chemical Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
|