(Mark
One)
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|
[X]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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|
For the quarterly period ended June 30, 2017
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OR
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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|
For the transition period from ______________ to ______________
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Delaware
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62-1539359
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(State or other jurisdiction of
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(I.R.S. employer
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incorporation or organization)
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identification no.)
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|
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200 South Wilcox Drive
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Kingsport, Tennessee
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37662
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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[X]
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Accelerated filer
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[ ]
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Non-accelerated filer
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[ ]
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(Do not check if a smaller reporting company)
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Smaller reporting company
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[ ]
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|
|
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Emerging growth company
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[ ]
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Class
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Number of Shares Outstanding at June 30, 2017
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Common Stock, par value $0.01 per share
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144,879,098
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ITEM
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PAGE
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||
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Second Quarter
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First Six Months
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||||||||||||
(Dollars in millions, except per share amounts)
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2017
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2016
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2017
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2016
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||||||||
Sales
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$
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2,419
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|
|
$
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2,297
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|
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$
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4,722
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$
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4,533
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Cost of sales
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1,768
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1,692
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3,446
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3,294
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||||
Gross profit
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651
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|
|
605
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1,276
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1,239
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||||
Selling, general and administrative expenses
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176
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|
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174
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|
|
350
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|
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357
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||||
Research and development expenses
|
55
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55
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109
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109
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||||
Asset impairments and restructuring gains, net
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—
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|
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—
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|
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—
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(2
|
)
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||||
Operating earnings
|
420
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|
|
376
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|
817
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775
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||||
Net interest expense
|
61
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|
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63
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|
|
121
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|
|
127
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|
||||
Early debt extinguishment costs
|
—
|
|
|
9
|
|
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—
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9
|
|
||||
Other (income) charges, net
|
—
|
|
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(20
|
)
|
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(4
|
)
|
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(8
|
)
|
||||
Earnings before income taxes
|
359
|
|
|
324
|
|
|
700
|
|
|
647
|
|
||||
Provision for income taxes
|
65
|
|
|
67
|
|
|
127
|
|
|
139
|
|
||||
Net earnings
|
294
|
|
|
257
|
|
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573
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|
|
508
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||||
Less: Net earnings attributable to noncontrolling interest
|
2
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|
|
2
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|
|
3
|
|
|
2
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||||
Net earnings attributable to Eastman
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$
|
292
|
|
|
$
|
255
|
|
|
$
|
570
|
|
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$
|
506
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|
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|
|
|
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||||||||
Basic earnings per share attributable to Eastman
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$
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2.01
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$
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1.73
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$
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3.91
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|
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$
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3.43
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Diluted earnings per share attributable to Eastman
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$
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2.00
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$
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1.71
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$
|
3.89
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$
|
3.40
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Comprehensive Income
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|
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|
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|
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||||||
Net earnings including noncontrolling interest
|
$
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294
|
|
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$
|
257
|
|
|
$
|
573
|
|
|
$
|
508
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
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||||
Change in cumulative translation adjustment
|
36
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(70
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)
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43
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|
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36
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||||
Defined benefit pension and other postretirement benefit plans:
|
|
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|
|
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||||||
Amortization of unrecognized prior service credits included in net periodic costs
|
(6
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)
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(7
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)
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(13
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)
|
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(14
|
)
|
||||
Derivatives and hedging:
|
|
|
|
|
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||||||
Unrealized gain (loss) during period
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(18
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)
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38
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|
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(39
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)
|
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20
|
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||||
Reclassification adjustment for losses included in net income, net
|
8
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|
|
33
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|
|
4
|
|
|
37
|
|
||||
Total other comprehensive income (loss), net of tax
|
20
|
|
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(6
|
)
|
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(5
|
)
|
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79
|
|
||||
Comprehensive income including noncontrolling interest
|
314
|
|
|
251
|
|
|
568
|
|
|
587
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||||
Less: Comprehensive income attributable to noncontrolling interest
|
2
|
|
|
2
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|
|
3
|
|
|
2
|
|
||||
Comprehensive income attributable to Eastman
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$
|
312
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|
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$
|
249
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|
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$
|
565
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$
|
585
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Retained Earnings
|
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Retained earnings at beginning of period
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$
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5,925
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|
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$
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5,330
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$
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5,721
|
|
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$
|
5,146
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Net earnings attributable to Eastman
|
292
|
|
|
255
|
|
|
570
|
|
|
506
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||||
Cash dividends declared
|
(75
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)
|
|
(68
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)
|
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(149
|
)
|
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(135
|
)
|
||||
Retained earnings at end of period
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$
|
6,142
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$
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5,517
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|
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$
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6,142
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$
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5,517
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June 30,
|
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December 31,
|
||||
(Dollars in millions, except per share amounts)
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Current assets
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|
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||||
Cash and cash equivalents
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$
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222
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|
|
$
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181
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|
Trade receivables, net of allowance for doubtful accounts
|
1,018
|
|
|
812
|
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||
Miscellaneous receivables
|
419
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|
|
399
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|
||
Inventories
|
1,540
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|
1,404
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Other current assets
|
63
|
|
|
70
|
|
||
Total current assets
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3,262
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2,866
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Properties
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|
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||||
Properties and equipment at cost
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11,966
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11,699
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Less: Accumulated depreciation
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6,563
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|
6,423
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Net properties
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5,403
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|
|
5,276
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Goodwill
|
4,507
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|
4,461
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Intangible assets, net of accumulated amortization
|
2,433
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|
|
2,469
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Other noncurrent assets
|
359
|
|
|
385
|
|
||
Total assets
|
$
|
15,964
|
|
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$
|
15,457
|
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Liabilities and Stockholders' Equity
|
|
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|
||||
Current liabilities
|
|
|
|
||||
Payables and other current liabilities
|
$
|
1,384
|
|
|
$
|
1,512
|
|
Borrowings due within one year
|
212
|
|
|
283
|
|
||
Total current liabilities
|
1,596
|
|
|
1,795
|
|
||
Long-term borrowings
|
6,669
|
|
|
6,311
|
|
||
Deferred income tax liabilities
|
1,286
|
|
|
1,206
|
|
||
Post-employment obligations
|
1,004
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|
|
1,018
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|
||
Other long-term liabilities
|
519
|
|
|
519
|
|
||
Total liabilities
|
11,074
|
|
|
10,849
|
|
||
Stockholders' equity
|
|
|
|
||||
Common stock ($0.01 par value – 350,000,000 shares authorized; shares issued – 218,274,450 and 217,707,600 for 2017 and 2016, respectively)
|
2
|
|
|
2
|
|
||
Additional paid-in capital
|
1,954
|
|
|
1,915
|
|
||
Retained earnings
|
6,142
|
|
|
5,721
|
|
||
Accumulated other comprehensive income (loss)
|
(286
|
)
|
|
(281
|
)
|
||
|
7,812
|
|
|
7,357
|
|
||
Less: Treasury stock at cost (73,446,150 shares for 2017 and 71,269,474 shares for 2016)
|
3,000
|
|
|
2,825
|
|
||
Total Eastman stockholders' equity
|
4,812
|
|
|
4,532
|
|
||
Noncontrolling interest
|
78
|
|
|
76
|
|
||
Total equity
|
4,890
|
|
|
4,608
|
|
||
Total liabilities and stockholders' equity
|
$
|
15,964
|
|
|
$
|
15,457
|
|
|
First Six Months
|
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Operating activities
|
|
|
|
||||
Net earnings
|
$
|
573
|
|
|
$
|
508
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
292
|
|
|
291
|
|
||
Early debt extinguishment costs
|
—
|
|
|
9
|
|
||
Gain on sale of equity investment
|
—
|
|
|
(17
|
)
|
||
Provision for deferred income taxes
|
36
|
|
|
47
|
|
||
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
|
|
|
|
||||
(Increase) decrease in trade receivables
|
(166
|
)
|
|
(151
|
)
|
||
(Increase) decrease in inventories
|
(108
|
)
|
|
41
|
|
||
Increase (decrease) in trade payables
|
(28
|
)
|
|
(76
|
)
|
||
Pension and other postretirement contributions (in excess of) less than expenses
|
(56
|
)
|
|
(51
|
)
|
||
Variable compensation (in excess of) less than expenses
|
(34
|
)
|
|
(67
|
)
|
||
Other items, net
|
(26
|
)
|
|
11
|
|
||
Net cash provided by operating activities
|
483
|
|
|
545
|
|
||
Investing activities
|
|
|
|
||||
Additions to properties and equipment
|
(279
|
)
|
|
(234
|
)
|
||
Proceeds from sale of assets
|
1
|
|
|
41
|
|
||
Acquisitions, net of cash acquired
|
(4
|
)
|
|
(22
|
)
|
||
Other items, net
|
(1
|
)
|
|
3
|
|
||
Net cash used in investing activities
|
(283
|
)
|
|
(212
|
)
|
||
Financing activities
|
|
|
|
||||
Net increase (decrease) in commercial paper and other borrowings
|
(95
|
)
|
|
(208
|
)
|
||
Proceeds from borrowings
|
500
|
|
|
807
|
|
||
Repayment of borrowings
|
(250
|
)
|
|
(807
|
)
|
||
Dividends paid to stockholders
|
(149
|
)
|
|
(136
|
)
|
||
Treasury stock purchases
|
(175
|
)
|
|
(45
|
)
|
||
Dividends paid to noncontrolling interest
|
(1
|
)
|
|
(4
|
)
|
||
Proceeds from stock option exercises and other items, net
|
12
|
|
|
8
|
|
||
Net cash used in financing activities
|
(158
|
)
|
|
(385
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(1
|
)
|
|
(1
|
)
|
||
Net change in cash and cash equivalents
|
41
|
|
|
(53
|
)
|
||
Cash and cash equivalents at beginning of period
|
181
|
|
|
293
|
|
||
Cash and cash equivalents at end of period
|
$
|
222
|
|
|
$
|
240
|
|
ITEM
|
|
Page
|
|
|
|
Derivative
and Non-Derivative Financial Instruments
|
||
Environmental Matters
and Asset Retirement Obligations
|
||
1.
|
BASIS OF PRESENTATION
|
2.
|
INVENTORIES
|
|
June 30,
|
|
December 31,
|
||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Finished goods
|
$
|
1,103
|
|
|
$
|
997
|
|
Work in process
|
220
|
|
|
198
|
|
||
Raw materials and supplies
|
478
|
|
|
473
|
|
||
Total inventories at FIFO or average cost
|
1,801
|
|
|
1,668
|
|
||
Less: LIFO reserve
|
261
|
|
|
264
|
|
||
Total inventories
|
$
|
1,540
|
|
|
$
|
1,404
|
|
3.
|
PAYABLES AND OTHER CURRENT LIABILITIES
|
|
June 30,
|
|
December 31,
|
||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Trade creditors
|
$
|
675
|
|
|
$
|
704
|
|
Accrued payrolls, vacation, and variable-incentive compensation
|
125
|
|
|
196
|
|
||
Accrued taxes
|
90
|
|
|
106
|
|
||
Post-employment obligations
|
84
|
|
|
110
|
|
||
Derivative hedging liability
|
82
|
|
|
72
|
|
||
Other
|
328
|
|
|
324
|
|
||
Total payables and other current liabilities
|
$
|
1,384
|
|
|
$
|
1,512
|
|
4.
|
PROVISION FOR INCOME TAXES
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||||||
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Provision for income taxes and tax rate
|
$
|
65
|
|
|
18
|
%
|
|
$
|
67
|
|
|
21
|
%
|
|
$
|
127
|
|
|
18
|
%
|
|
$
|
139
|
|
|
22
|
%
|
5.
|
BORROWINGS
|
|
June 30,
|
|
December 31,
|
||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Borrowings consisted of:
|
|
|
|
||||
5.5% notes due November 2019
|
$
|
250
|
|
|
$
|
249
|
|
2.7% notes due January 2020
|
796
|
|
|
796
|
|
||
4.5% notes due January 2021
|
184
|
|
|
184
|
|
||
3.6% notes due August 2022
|
739
|
|
|
741
|
|
||
1.50% notes due May 2023
(1)
|
852
|
|
|
786
|
|
||
7 1/4% debentures due January 2024
|
197
|
|
|
197
|
|
||
7 5/8% debentures due June 2024
|
43
|
|
|
43
|
|
||
3.8% notes due March 2025
|
690
|
|
|
689
|
|
||
1.875% notes due November 2026
(1)
|
563
|
|
|
519
|
|
||
7.60% debentures due February 2027
|
195
|
|
|
195
|
|
||
4.8% notes due September 2042
|
493
|
|
|
493
|
|
||
4.65% notes due October 2044
|
871
|
|
|
870
|
|
||
Credit facilities borrowings
|
799
|
|
|
549
|
|
||
Commercial paper borrowings
|
200
|
|
|
280
|
|
||
Capital leases and other
|
9
|
|
|
3
|
|
||
Total borrowings
|
6,881
|
|
|
6,594
|
|
||
Borrowings due within one year
|
212
|
|
|
283
|
|
||
Long-term borrowings
|
$
|
6,669
|
|
|
$
|
6,311
|
|
(1)
|
The carrying value of the euro-denominated 1.50% notes due May 2023 and 1.875% notes due November 2026 will fluctuate with changes in the euro exchange rate. The carrying value of these euro-denominated borrowings have been designated as non-derivative net investment hedges of a portion of the Company's net investments in euro functional-currency denominated subsidiaries to offset foreign currency fluctuations. During the
six months ended
June 30, 2017
and
2016
, pre-tax losses of
$109 million
and gains of
$3 million
, respectively, were recognized in "Other comprehensive income (loss)" ("OCI") for revaluation of these notes.
|
|
|
|
|
Fair Value Measurements at June 30, 2017
|
||||||||||||
(Dollars in millions)
|
|
Recorded Amount
June 30, 2017 |
|
Total Fair Value
|
|
Quoted Prices in Active Markets for Identical Liabilities (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
||||||||
Long-term borrowings
|
|
$
|
6,669
|
|
|
$
|
7,069
|
|
|
$
|
6,273
|
|
|
$
|
796
|
|
|
|
|
|
Fair Value Measurements at December 31, 2016
|
||||||||||||
(Dollars in millions)
|
|
Recorded Amount
December 31, 2016 |
|
Total Fair Value
|
|
Quoted Prices in Active Markets for Identical Liabilities (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
||||||||
Long-term borrowings
|
|
$
|
6,311
|
|
|
$
|
6,586
|
|
|
$
|
6,036
|
|
|
$
|
550
|
|
6.
|
DERIVATIVE AND NON-DERIVATIVE FINANCIAL INSTRUMENTS
|
Notional Outstanding
|
June 30, 2017
|
|
December 31, 2016
|
|||
|
|
|
|
|
||
Derivatives designated as cash flow hedges:
|
|
|
|
|||
Foreign Exchange Forward and Option Contracts (in millions)
|
|
|
|
|||
|
EUR/USD (in EUR)
|
€360
|
|
€378
|
||
|
EUR/USD (in approximate USD equivalent)
|
$411
|
|
$398
|
||
|
JPY/USD (in JPY)
|
¥900
|
|
¥1,800
|
||
|
JPY/USD (in approximate USD equivalent)
|
$8
|
|
$15
|
||
Commodity Forward and Collar Contracts
|
|
|
|
|||
|
Feedstock (in million barrels)
|
10
|
|
|
11
|
|
|
Energy (in million million british thermal units)
|
20
|
|
|
23
|
|
|
|
|
|
|||
Derivatives designated as fair value hedges:
|
|
|
|
|||
Fixed-for-floating interest rate swaps (in millions)
|
$75
|
|
$75
|
|||
|
|
|
|
|||
Non-derivatives designated as net investment hedges:
|
|
|
|
|||
Foreign Currency Net Investment Hedges (in millions)
|
|
|
|
|||
|
EUR/USD (in EUR)
|
€1,239
|
|
€1,238
|
The Financial Position and Fair Value Measurements of Hedging Instruments on a Gross Basis
|
||||||||||
(Dollars in millions)
|
|
|
|
|
|
|
||||
Derivative Type
|
|
Statements of Financial
Position Classification
|
|
June 30, 2017
Level 2
|
|
December 31, 2016
Level 2
|
||||
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
|
||||
Commodity contracts
|
|
Other current assets
|
|
$
|
1
|
|
|
$
|
5
|
|
Commodity contracts
|
|
Other noncurrent assets
|
|
—
|
|
|
2
|
|
||
Foreign exchange contracts
|
|
Other current assets
|
|
35
|
|
|
49
|
|
||
Foreign exchange contracts
|
|
Other noncurrent assets
|
|
16
|
|
|
47
|
|
||
|
|
|
|
|
|
|
||||
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
||||
Fixed-for-floating interest rate swap
|
|
Other current assets
|
|
1
|
|
|
1
|
|
||
Total Derivative Assets
|
|
|
|
$
|
53
|
|
|
$
|
104
|
|
|
|
|
|
|
|
|
||||
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
|
||||
Commodity contracts
|
|
Payables and other current liabilities
|
|
$
|
75
|
|
|
$
|
62
|
|
Commodity contracts
|
|
Other long-term liabilities
|
|
58
|
|
|
69
|
|
||
Foreign exchange contracts
|
|
Payables and other current liabilities
|
|
1
|
|
|
—
|
|
||
Foreign exchange contracts
|
|
Other long-term liabilities
|
|
1
|
|
|
—
|
|
||
|
|
|
|
|
|
|
||||
Derivatives designated as fair value hedges:
|
|
|
|
|
|
|
||||
Fixed-for-floating interest rate swap
|
|
Long-term borrowings
|
|
3
|
|
|
4
|
|
||
Total Derivative Liabilities
|
|
|
|
$
|
138
|
|
|
$
|
135
|
|
Total Net Derivative Liabilities
|
|
|
|
$
|
85
|
|
|
$
|
31
|
|
(Dollars in millions)
|
|
Change in amount of after tax gain/(loss) recognized in OCI on derivatives (effective portion)
|
|
Pre-tax amount of gain/(loss) reclassified from Accumulated OCI into income (effective portion)
|
|
Additional pre-tax gain/(loss) recognized in earnings (effective portion)
|
|
|
||||||||||||||||||
|
|
Second Quarter
|
|
Second Quarter
|
|
Second Quarter
|
|
|
||||||||||||||||||
Hedging Relationships
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Income Statement Classification
|
||||||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commodity contracts
|
|
$
|
9
|
|
|
$
|
79
|
|
|
$
|
(20
|
)
|
|
$
|
(65
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Cost of sales
|
Foreign exchange contracts
|
|
(20
|
)
|
|
1
|
|
|
10
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
Sales
|
||||||
Forward starting interest rate and treasury lock swap contracts
|
|
1
|
|
|
(9
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
Net interest expense
|
||||||
Derivatives in fair value hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed-for-floating interest rate swaps
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
3
|
|
|
Net interest expense
|
||||||
Non-derivatives in net investment hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment hedges (pre-tax)
|
|
(91
|
)
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
||||||
Derivatives not designated as hedges:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign Exchange Contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
23
|
|
|
Other (income) charges, net
|
(1)
|
The gains or losses on derivatives that are not designated as hedges are marked to market and represent foreign exchange derivatives denominated in multiple currencies and are transacted and settled in the same quarter.
|
(Dollars in millions)
|
|
Change in amount of after tax gain/(loss) recognized in OCI on derivatives (effective portion)
|
|
Pre-tax amount of gain/(loss) reclassified from Accumulated OCI into income (effective portion)
|
|
Additional pre-tax gain/(loss) recognized in earnings (effective portion)
|
|
|
||||||||||||||||||
|
|
First Six Months
|
|
First Six Months
|
|
First Six Months
|
|
|
||||||||||||||||||
Hedging Relationships
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Income Statement Classification
|
||||||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commodity contracts
|
|
$
|
(7
|
)
|
|
$
|
109
|
|
|
$
|
(27
|
)
|
|
$
|
(85
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Cost of sales
|
Foreign exchange contracts
|
|
(30
|
)
|
|
(25
|
)
|
|
22
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
Sales
|
||||||
Forward starting interest rate and treasury lock swap contracts
|
|
2
|
|
|
(27
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
Net interest expense
|
||||||
Derivatives in fair value hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed-for-floating interest rate swaps
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
7
|
|
|
Net interest expense
|
||||||
Non-derivatives in net investment hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment hedges (pre-tax)
|
|
(109
|
)
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
||||||
Derivatives not designated as hedges:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign Exchange Contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
14
|
|
|
Other (income) charges, net
|
(1)
|
The gains or losses on derivatives that are not designated as hedges are marked to market and represent foreign exchange derivatives denominated in multiple currencies and are transacted and settled in the same quarter.
|
7.
|
RETIREMENT PLANS
|
|
Second Quarter
|
||||||||||||||||||||||
|
Pension Plans
|
|
Other Postretirement Benefit Plans
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||
(Dollars in millions)
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
|
Non-U.S.
|
|
|
|
|
||||||||||||
Components of net periodic benefit (credit) cost:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
$
|
9
|
|
|
$
|
4
|
|
|
$
|
10
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
16
|
|
|
4
|
|
|
19
|
|
|
6
|
|
|
6
|
|
|
7
|
|
||||||
Expected return on assets
|
(35
|
)
|
|
(9
|
)
|
|
(34
|
)
|
|
(8
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||||
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service credit, net
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(10
|
)
|
|
(10
|
)
|
||||||
Net periodic benefit (credit) cost
|
$
|
(11
|
)
|
|
$
|
(1
|
)
|
|
$
|
(6
|
)
|
|
$
|
1
|
|
|
$
|
(4
|
)
|
|
$
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
First Six Months
|
||||||||||||||||||||||
|
Pension Plans
|
|
Other Postretirement Benefit Plans
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||
(Dollars in millions)
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
|
Non-U.S.
|
|
|
|
|
||||||||||||
Components of net periodic benefit (credit) cost:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
$
|
18
|
|
|
$
|
7
|
|
|
$
|
20
|
|
|
$
|
6
|
|
|
$
|
2
|
|
|
$
|
3
|
|
Interest cost
|
33
|
|
|
9
|
|
|
37
|
|
|
12
|
|
|
12
|
|
|
14
|
|
||||||
Expected return on assets
|
(70
|
)
|
|
(17
|
)
|
|
(68
|
)
|
|
(16
|
)
|
|
(3
|
)
|
|
(3
|
)
|
||||||
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service credit, net
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(20
|
)
|
|
(20
|
)
|
||||||
Net periodic benefit (credit) cost
|
$
|
(21
|
)
|
|
$
|
(1
|
)
|
|
$
|
(13
|
)
|
|
$
|
2
|
|
|
$
|
(9
|
)
|
|
$
|
(6
|
)
|
8.
|
COMMITMENTS AND OFF BALANCE SHEET ARRANGEMENTS
|
9.
|
ENVIRONMENTAL MATTERS AND ASSET RETIREMENT OBLIGATIONS
|
(Dollars in millions)
|
June 30, 2017
|
|
December 31, 2016
|
||||
Environmental contingent liabilities, current
|
$
|
30
|
|
|
$
|
30
|
|
Environmental contingent liabilities, long-term
|
288
|
|
|
291
|
|
||
Total
|
$
|
318
|
|
|
$
|
321
|
|
(Dollars in millions)
|
Environmental Remediation Liabilities
|
||
Balance at December 31, 2016
|
$
|
295
|
|
Changes in estimates recognized in earnings and other
|
5
|
|
|
Cash reductions
|
(9
|
)
|
|
Balance at June 30, 2017
|
$
|
291
|
|
10.
|
LEGAL MATTERS
|
11.
|
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, 2016
|
$
|
2
|
|
|
$
|
1,915
|
|
|
$
|
5,721
|
|
|
$
|
(281
|
)
|
|
$
|
(2,825
|
)
|
|
$
|
4,532
|
|
|
$
|
76
|
|
|
$
|
4,608
|
|
Net Earnings
|
—
|
|
|
—
|
|
|
570
|
|
|
—
|
|
|
—
|
|
|
570
|
|
|
3
|
|
|
573
|
|
||||||||
Cash Dividends Declared
(1)
($1.02 per share)
|
—
|
|
|
—
|
|
|
(149
|
)
|
|
—
|
|
|
—
|
|
|
(149
|
)
|
|
—
|
|
|
(149
|
)
|
||||||||
Other Comprehensive Income
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
||||||||
Share-Based Compensation Expense
(2)
|
—
|
|
|
27
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
—
|
|
|
27
|
|
||||||||
Stock Option Exercises
|
—
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
17
|
|
||||||||
Other
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(1
|
)
|
|
(6
|
)
|
||||||||
Share Repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(175
|
)
|
|
(175
|
)
|
|
—
|
|
|
(175
|
)
|
||||||||
Balance at June 30, 2017
|
$
|
2
|
|
|
$
|
1,954
|
|
|
$
|
6,142
|
|
|
$
|
(286
|
)
|
|
$
|
(3,000
|
)
|
|
$
|
4,812
|
|
|
$
|
78
|
|
|
$
|
4,890
|
|
(1)
|
Cash dividends declared includes cash dividends paid and dividends declared, but unpaid.
|
(2)
|
Share-based compensation expense is the fair value of share-based awards.
|
(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, 2015
|
$
|
(284
|
)
|
|
$
|
129
|
|
|
$
|
(234
|
)
|
|
$
|
(1
|
)
|
|
$
|
(390
|
)
|
Period change
|
(97
|
)
|
|
34
|
|
|
172
|
|
|
—
|
|
|
109
|
|
|||||
Balance at December 31, 2016
|
(381
|
)
|
|
163
|
|
|
(62
|
)
|
|
(1
|
)
|
|
(281
|
)
|
|||||
Period change
|
43
|
|
|
(13
|
)
|
|
(35
|
)
|
|
—
|
|
|
(5
|
)
|
|||||
Balance at June 30, 2017
|
$
|
(338
|
)
|
|
$
|
150
|
|
|
$
|
(97
|
)
|
|
$
|
(1
|
)
|
|
$
|
(286
|
)
|
|
Second Quarter
|
||||||||||||||
|
2017
|
|
2016
|
||||||||||||
(Dollars in millions)
|
Before Tax
|
|
Net of Tax
|
|
Before Tax
|
|
Net of Tax
|
||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
||||||||
Change in cumulative translation adjustment
|
$
|
36
|
|
|
$
|
36
|
|
|
$
|
(70
|
)
|
|
$
|
(70
|
)
|
Defined benefit pension and other postretirement benefit plans:
|
|
|
|
|
|
|
|
||||||||
Amortization of unrecognized prior service credits included in net periodic costs
(1)
|
(11
|
)
|
|
(6
|
)
|
|
(11
|
)
|
|
(7
|
)
|
||||
Derivatives and hedging:
(2)
|
|
|
|
|
|
|
|
||||||||
Unrealized gain (loss) during period
|
(28
|
)
|
|
(18
|
)
|
|
62
|
|
|
38
|
|
||||
Reclassification adjustment for losses included in net income, net
|
13
|
|
|
8
|
|
|
53
|
|
|
33
|
|
||||
Total other comprehensive income (loss)
|
$
|
10
|
|
|
$
|
20
|
|
|
$
|
34
|
|
|
$
|
(6
|
)
|
|
First Six Months
|
||||||||||||||
|
2017
|
|
2016
|
||||||||||||
(Dollars in millions)
|
Before Tax
|
|
Net of Tax
|
|
Before Tax
|
|
Net of Tax
|
||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
||||||||
Change in cumulative translation adjustment
|
$
|
43
|
|
|
$
|
43
|
|
|
$
|
36
|
|
|
$
|
36
|
|
Defined benefit pension and other postretirement benefit plans:
|
|
|
|
|
|
|
|
||||||||
Amortization of unrecognized prior service credits included in net periodic costs
(1)
|
(22
|
)
|
|
(13
|
)
|
|
(22
|
)
|
|
(14
|
)
|
||||
Derivatives and hedging:
(2)
|
|
|
|
|
|
|
|
|
|||||||
Unrealized gain (loss) during period
|
(62
|
)
|
|
(39
|
)
|
|
32
|
|
|
20
|
|
||||
Reclassification adjustment for losses included in net income, net
|
7
|
|
|
4
|
|
|
60
|
|
|
37
|
|
||||
Total other comprehensive income (loss)
|
$
|
(34
|
)
|
|
$
|
(5
|
)
|
|
$
|
106
|
|
|
$
|
79
|
|
(1)
|
Included in the calculation of net periodic benefit costs for pension and other postretirement benefit plans. See
Note 7, "Retirement Plans"
.
|
(2)
|
For additional information regarding the impact of reclassifications into earnings, see
Note 6, "Derivative and Non-Derivative Financial Instruments"
.
|
12.
|
EARNINGS AND DIVIDENDS PER SHARE
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(In millions, except per share amounts)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator
|
|
|
|
|
|
|
|
||||||||
Earnings attributable to Eastman:
|
|
|
|
|
|
|
|
||||||||
Earnings, net of tax
|
$
|
292
|
|
|
$
|
255
|
|
|
$
|
570
|
|
|
$
|
506
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator
|
|
|
|
|
|
|
|
||||||||
Weighted average shares used for basic EPS
|
145.3
|
|
|
147.8
|
|
|
145.7
|
|
|
147.8
|
|
||||
Dilutive effect of stock options and other awards
|
1.1
|
|
|
1.1
|
|
|
1.1
|
|
|
1.1
|
|
||||
Weighted average shares used for diluted EPS
|
146.4
|
|
|
148.9
|
|
|
146.8
|
|
|
148.9
|
|
||||
|
|
|
|
|
|
|
|
||||||||
(Calculated using whole dollars and shares)
|
|
|
|
|
|
|
|
||||||||
EPS
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
2.01
|
|
|
$
|
1.73
|
|
|
$
|
3.91
|
|
|
$
|
3.43
|
|
Diluted
|
$
|
2.00
|
|
|
$
|
1.71
|
|
|
$
|
3.89
|
|
|
$
|
3.40
|
|
13.
|
ASSET IMPAIRMENTS AND RESTRUCTURING
|
|
|
|
|
|
|
(Dollars in millions)
|
Balance at January 1, 2017
|
|
Provision/ Adjustments
|
|
Non-cash Reductions/
Additions |
|
Cash Reductions
|
|
Balance at June 30, 2017
|
||||||||||
Severance costs
|
$
|
42
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(22
|
)
|
|
$
|
20
|
|
Site closure and restructuring costs
|
13
|
|
|
—
|
|
|
1
|
|
|
(2
|
)
|
|
12
|
|
|||||
Total
|
$
|
55
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(24
|
)
|
|
$
|
32
|
|
(Dollars in millions)
|
Balance at January 1, 2016
|
|
Provision/ Adjustments
|
|
Non-cash Reductions/
Additions
|
|
Cash Reductions
|
|
Balance at December 31, 2016
|
||||||||||
Non-cash charges
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
(12
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Severance costs
|
55
|
|
|
32
|
|
|
—
|
|
|
(45
|
)
|
|
42
|
|
|||||
Site closure and restructuring costs
|
11
|
|
|
1
|
|
|
4
|
|
|
(3
|
)
|
|
13
|
|
|||||
Total
|
$
|
66
|
|
|
$
|
45
|
|
|
$
|
(8
|
)
|
|
$
|
(48
|
)
|
|
$
|
55
|
|
14.
|
SHARE-BASED COMPENSATION AWARDS
|
15.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
(Dollars in millions)
|
First Six Months
|
||||||
|
2017
|
|
2016
|
||||
Other current assets
|
$
|
(3
|
)
|
|
$
|
(13
|
)
|
Other noncurrent assets
|
7
|
|
|
14
|
|
||
Payables and other current liabilities
|
(30
|
)
|
|
40
|
|
||
Long-term liabilities and equity
|
—
|
|
|
(30
|
)
|
||
Total
|
$
|
(26
|
)
|
|
$
|
11
|
|
16.
|
SEGMENT INFORMATION
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Sales
|
|
|
|
|
|
|
|
||||||||
Additives & Functional Products
|
$
|
830
|
|
|
$
|
770
|
|
|
$
|
1,603
|
|
|
$
|
1,507
|
|
Advanced Materials
|
657
|
|
|
646
|
|
|
1,291
|
|
|
1,235
|
|
||||
Chemical Intermediates
|
703
|
|
|
633
|
|
|
1,373
|
|
|
1,253
|
|
||||
Fibers
|
215
|
|
|
234
|
|
|
428
|
|
|
514
|
|
||||
Total Sales by Segment
|
2,405
|
|
|
2,283
|
|
|
4,695
|
|
|
4,509
|
|
||||
Other
|
14
|
|
|
14
|
|
|
27
|
|
|
24
|
|
||||
Total Sales
|
$
|
2,419
|
|
|
$
|
2,297
|
|
|
$
|
4,722
|
|
|
$
|
4,533
|
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Operating Earnings (Loss)
|
|
|
|
|
|
|
|
||||||||
Additives & Functional Products
|
$
|
159
|
|
|
$
|
168
|
|
|
$
|
311
|
|
|
$
|
321
|
|
Advanced Materials
|
137
|
|
|
132
|
|
|
258
|
|
|
240
|
|
||||
Chemical Intermediates
|
83
|
|
|
15
|
|
|
165
|
|
|
82
|
|
||||
Fibers
|
55
|
|
|
72
|
|
|
107
|
|
|
158
|
|
||||
Total Operating Earnings by Segment
|
434
|
|
|
387
|
|
|
841
|
|
|
801
|
|
||||
Other
|
|
|
|
|
|
|
|
|
|
||||||
Growth initiatives and businesses not allocated to segments
|
(32
|
)
|
|
(24
|
)
|
|
(60
|
)
|
|
(42
|
)
|
||||
Pension and other postretirement benefits income, net not allocated to operating segments
|
18
|
|
|
13
|
|
|
36
|
|
|
25
|
|
||||
Acquisition integration and transaction costs
|
—
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
||||
Total Operating Earnings
|
$
|
420
|
|
|
$
|
376
|
|
|
$
|
817
|
|
|
$
|
775
|
|
|
June 30,
|
|
December 31,
|
||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Assets by Segment
(1)
|
|
|
|
||||
Additives & Functional Products
|
$
|
6,497
|
|
|
$
|
6,255
|
|
Advanced Materials
|
4,382
|
|
|
4,247
|
|
||
Chemical Intermediates
|
2,997
|
|
|
2,927
|
|
||
Fibers
|
950
|
|
|
920
|
|
||
Total Assets by Segment
|
14,826
|
|
|
14,349
|
|
||
Corporate Assets
|
1,138
|
|
|
1,108
|
|
||
Total Assets
|
$
|
15,964
|
|
|
$
|
15,457
|
|
(1)
|
Segment assets include accounts receivable, inventory, fixed assets, goodwill, and intangible assets. Segment asset balances for shared fixed assets within the CI and Fibers segments as of December 31, 2016 have been reclassified to conform to current period allocation methodology.
|
17.
|
RECENTLY ISSUED ACCOUNTING STANDARDS
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Asset impairments and restructuring gains, net, of which asset impairments are non-cash transactions impacting profitability;
|
•
|
Acquisition integration and transaction costs;
|
•
|
Early debt extinguishment costs resulting from repayment of $500 million of the 2.4% notes due June 2017;
|
•
|
Cost of disposition of claims against operations that were discontinued by Solutia, Inc., ("Solutia") prior to the Company's acquisition of Solutia in 2012; and
|
•
|
Gain from the sale of the Company's 50 percent interest in the Primester joint venture.
|
|
Second Quarter
|
|
First Six Months
|
|||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|||||||||||
Non-core items impacting operating earnings:
|
|
|
|
|
|
|
|
|||||||||||
Asset impairments and restructuring gains, net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|||
Acquisition integration and transaction costs
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|||||||
Total non-core items impacting operating earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|||||||
Non-core items impacting earnings before income taxes:
|
|
|
|
|
|
|
|
|||||||||||
Early debt extinguishment costs
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
|||||||
Cost of disposition of claims against discontinued Solutia operations
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|||||||
Gain from sale of equity investment in Primester joint venture
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
(17
|
)
|
|||||||
Total non-core items impacting earnings before income taxes
|
—
|
|
—
|
|
(8
|
)
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
||||
Less: Items impacting provision for income taxes:
|
|
|
|
|
|
|
|
|||||||||||
Tax effect for non-core items
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
5
|
|
|||||||
Adjustment to tax provision
|
3
|
|
|
—
|
|
|
12
|
|
|
|
||||||||
Total items impacting provision for income taxes
|
3
|
|
|
(3
|
)
|
|
12
|
|
|
5
|
|
|||||||
Total items impacting net earnings attributable to Eastman
|
$
|
(3
|
)
|
|
$
|
(5
|
)
|
|
$
|
(12
|
)
|
|
$
|
(1
|
)
|
•
|
Selling, general and administrative ("SG&A") expenses,
|
•
|
Operating earnings,
|
•
|
Other (income) charges, net
,
|
•
|
Provision for income taxes,
|
•
|
Net earnings attributable to Eastman, and
|
•
|
Diluted earnings per share.
|
|
Second Quarter
|
||||||||||||||
|
2017
|
|
2016
|
||||||||||||
(Dollars in millions, except diluted EPS)
|
$
|
|
EPS
|
|
$
|
|
EPS
|
||||||||
Net earnings attributable to Eastman
|
$
|
292
|
|
|
$
|
2.00
|
|
|
$
|
255
|
|
|
$
|
1.71
|
|
Total non-core items, net of tax
(1)
|
—
|
|
|
|
|
(5
|
)
|
|
|
||||||
Adjustment to tax provision
(1)
|
(3
|
)
|
|
|
|
—
|
|
|
|
||||||
Adjusted net earnings
|
$
|
289
|
|
|
$
|
1.98
|
|
|
$
|
250
|
|
|
$
|
1.68
|
|
|
|
|
|
|
|
|
|
||||||||
|
First Six Months
|
||||||||||||||
|
2017
|
|
2016
|
||||||||||||
(Dollars in millions, except diluted EPS)
|
$
|
|
EPS
|
|
$
|
|
EPS
|
||||||||
Net earnings attributable to Eastman
|
$
|
570
|
|
|
$
|
3.89
|
|
|
$
|
506
|
|
|
$
|
3.40
|
|
Total non-core items, net of tax
(1)
|
—
|
|
|
|
|
(1
|
)
|
|
|
||||||
Adjustment to tax provision
(1)
|
(12
|
)
|
|
|
|
—
|
|
|
|
||||||
Adjusted net earnings
|
$
|
558
|
|
|
$
|
3.80
|
|
|
$
|
505
|
|
|
$
|
3.39
|
|
(1)
|
See "Results of Operations - Provision for Income Taxes" for adjusted provision for income taxes for
second quarter
and
first six months 2017
and the tax effected amount of total non-core items for
second quarter
and
first six months 2016
.
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
Sales
|
$
|
2,419
|
|
|
$
|
2,297
|
|
|
$
|
122
|
|
|
5
|
%
|
|
$
|
4,722
|
|
|
$
|
4,533
|
|
|
$
|
189
|
|
|
4
|
%
|
Volume / product mix effect
|
|
|
|
|
70
|
|
|
3
|
%
|
|
|
|
|
|
146
|
|
|
3
|
%
|
||||||||||
Price effect
|
|
|
|
|
75
|
|
|
3
|
%
|
|
|
|
|
|
84
|
|
|
2
|
%
|
||||||||||
Exchange rate effect
|
|
|
|
|
(23
|
)
|
|
(1
|
)%
|
|
|
|
|
|
(41
|
)
|
|
(1
|
)%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
Gross Profit
|
$
|
651
|
|
|
$
|
605
|
|
|
8
|
%
|
|
$
|
1,276
|
|
|
$
|
1,239
|
|
|
3
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
Selling, General and Administrative Expenses
|
$
|
176
|
|
|
$
|
174
|
|
|
1
|
%
|
|
$
|
350
|
|
|
$
|
357
|
|
|
(2
|
)%
|
Acquisition integration and transaction costs
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
(9
|
)
|
|
|
|
||||
Selling, General and Administrative Expenses excluding non-core items
|
$
|
176
|
|
|
$
|
174
|
|
|
1
|
%
|
|
$
|
350
|
|
|
$
|
348
|
|
|
1
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
Research and Development Expenses
|
$
|
55
|
|
|
$
|
55
|
|
|
—
|
%
|
|
$
|
109
|
|
|
$
|
109
|
|
|
—
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Gain on sale of assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
Operating earnings
|
$
|
420
|
|
|
$
|
376
|
|
|
12
|
%
|
|
$
|
817
|
|
|
$
|
775
|
|
|
5
|
%
|
Asset impairments and restructuring gains, net
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(2
|
)
|
|
|
||||||
Acquisition integration and transaction costs
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
9
|
|
|
|
||||||
Operating earnings excluding non-core items
|
$
|
420
|
|
|
$
|
376
|
|
|
12
|
%
|
|
$
|
817
|
|
|
$
|
782
|
|
|
4
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
Gross interest costs
|
$
|
70
|
|
|
$
|
73
|
|
|
|
|
$
|
138
|
|
|
$
|
146
|
|
|
|
||
Less: Capitalized interest
|
1
|
|
|
2
|
|
|
|
|
3
|
|
|
5
|
|
|
|
||||||
Interest expense
|
69
|
|
|
71
|
|
|
(3
|
)%
|
|
135
|
|
|
141
|
|
|
(4
|
)%
|
||||
Less: Interest income
|
8
|
|
|
8
|
|
|
|
|
|
14
|
|
|
14
|
|
|
|
|
||||
Net interest expense
|
$
|
61
|
|
|
$
|
63
|
|
|
(3
|
)%
|
|
$
|
121
|
|
|
$
|
127
|
|
|
(5
|
)%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Foreign exchange transaction (gains) losses, net
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
14
|
|
(Income) loss from equity investments and other investment (gains) losses, net
|
(4
|
)
|
|
(4
|
)
|
|
(7
|
)
|
|
(6
|
)
|
||||
Gain from sale of equity investment in Primester joint venture
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
(17
|
)
|
||||
Other, net
|
1
|
|
|
(2
|
)
|
|
1
|
|
|
1
|
|
||||
Other (income) charges, net
|
$
|
—
|
|
|
$
|
(20
|
)
|
|
$
|
(4
|
)
|
|
$
|
(8
|
)
|
Cost of disposition of claims against discontinued Solutia operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
||||
Gain from sale of equity investment in Primester joint venture
|
—
|
|
|
17
|
|
|
—
|
|
|
17
|
|
||||
Other (income) charges, net excluding non-core item
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
(4
|
)
|
|
$
|
4
|
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||||||
(Dollars in millions)
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Provision for income taxes and effective tax rate
|
$
|
65
|
|
|
18
|
%
|
|
$
|
67
|
|
|
21
|
%
|
|
$
|
127
|
|
|
18
|
%
|
|
$
|
139
|
|
|
22
|
%
|
Tax provision for non-core items
(1)
|
—
|
|
|
|
|
(3
|
)
|
|
|
|
—
|
|
|
|
|
5
|
|
|
|
||||||||
Adjustment to tax provision
(2) (3)
|
3
|
|
|
|
|
—
|
|
|
|
|
12
|
|
|
|
|
—
|
|
|
|
||||||||
Adjusted provision for income taxes and effective tax rate
|
$
|
68
|
|
|
19
|
%
|
|
$
|
64
|
|
|
20
|
%
|
|
$
|
139
|
|
|
20
|
%
|
|
$
|
144
|
|
|
22
|
%
|
(1)
|
Provision for income taxes for non-core items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
|
(2)
|
Second quarter 2017
provision for income taxes was adjusted to reflect the current forecasted full year effective tax rate.
|
(3)
|
The adjusted provision for income taxes for
first six months 2017
is calculated applying the forecasted full year effective tax rate as shown below.
|
|
First Six Months
|
|
|
2017
|
|
Effective tax rate
|
18
|
%
|
Discrete tax items
(1)
|
3
|
%
|
Forecasted full year impact of expected tax events
|
(1
|
)%
|
Forecasted full year effective tax rate
|
20
|
%
|
(1)
|
"Discrete tax items" are items that are excluded from a company's estimated annual effective tax rate and recognized entirely in the quarter in which the item occurs. First six months 2017 discrete items consist of planned amendments to and finalization of prior years' income tax returns.
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
|
2017
|
|
2017
|
||||||||||||
(Dollars in millions, except diluted EPS)
|
$
|
|
EPS
|
|
$
|
|
EPS
|
||||||||
Net earnings and diluted earnings per share attributable to Eastman
|
$
|
292
|
|
|
$
|
2.00
|
|
|
$
|
570
|
|
|
$
|
3.89
|
|
Less: Adjustment to tax provision
|
3
|
|
|
|
|
12
|
|
|
|
||||||
Adjusted net earnings and diluted earnings per share
|
$
|
289
|
|
|
$
|
1.98
|
|
|
$
|
558
|
|
|
$
|
3.80
|
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
|
2016
|
|
2016
|
||||||||||||
(Dollars in millions, except diluted EPS)
|
$
|
|
EPS
|
|
$
|
|
EPS
|
||||||||
Net earnings and diluted earnings per share attributable to Eastman
|
$
|
255
|
|
|
$
|
1.71
|
|
|
$
|
506
|
|
|
$
|
3.40
|
|
Non-core items:
|
|
|
|
|
|
|
|
||||||||
Asset impairments and restructuring gains, net
|
—
|
|
|
|
|
(2
|
)
|
|
|
||||||
Acquisition integration and transaction costs
|
—
|
|
|
|
|
9
|
|
|
|
||||||
Early debt extinguishment costs
|
9
|
|
|
|
|
9
|
|
|
|
||||||
Cost of disposition of claims against discontinued Solutia operations
|
—
|
|
|
|
|
5
|
|
|
|
||||||
Gain from sale of equity investment in Primester joint venture
|
(17
|
)
|
|
|
|
(17
|
)
|
|
|
||||||
Total non-core items
|
(8
|
)
|
|
|
|
4
|
|
|
|
||||||
Less: Tax effect for non-core items
|
(3
|
)
|
|
|
|
5
|
|
|
|
||||||
Adjusted net earnings and diluted earnings per share
|
$
|
250
|
|
|
$
|
1.68
|
|
|
$
|
505
|
|
|
$
|
3.39
|
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Sales
|
$
|
830
|
|
|
$
|
770
|
|
|
$
|
60
|
|
|
8
|
%
|
|
$
|
1,603
|
|
|
$
|
1,507
|
|
|
$
|
96
|
|
|
6
|
%
|
Volume / product mix effect
|
|
|
|
|
55
|
|
|
7
|
%
|
|
|
|
|
|
|
|
113
|
|
|
7
|
%
|
||||||||
Price effect
|
|
|
|
|
17
|
|
|
2
|
%
|
|
|
|
|
|
|
|
4
|
|
|
—
|
%
|
||||||||
Exchange rate effect
|
|
|
|
|
(12
|
)
|
|
(1
|
)%
|
|
|
|
|
|
|
|
(21
|
)
|
|
(1
|
)%
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating earnings
|
$
|
159
|
|
|
$
|
168
|
|
|
$
|
(9
|
)
|
|
(5
|
)%
|
|
$
|
311
|
|
|
$
|
321
|
|
|
$
|
(10
|
)
|
|
(3
|
)%
|
Asset impairments and restructuring gains, net
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(2
|
)
|
|
2
|
|
|
|
||||||||
Operating earnings excluding non-core item
|
$
|
159
|
|
|
$
|
168
|
|
|
$
|
(9
|
)
|
|
(5
|
)%
|
|
$
|
311
|
|
|
$
|
319
|
|
|
$
|
(8
|
)
|
|
(3
|
)%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Sales
|
$
|
657
|
|
|
$
|
646
|
|
|
$
|
11
|
|
|
2
|
%
|
|
$
|
1,291
|
|
|
$
|
1,235
|
|
|
$
|
56
|
|
|
5
|
%
|
Volume / product mix effect
|
|
|
|
|
15
|
|
|
3
|
%
|
|
|
|
|
|
|
|
73
|
|
|
6
|
%
|
||||||||
Price effect
|
|
|
|
|
2
|
|
|
—
|
%
|
|
|
|
|
|
|
|
(6
|
)
|
|
—
|
%
|
||||||||
Exchange rate effect
|
|
|
|
|
(6
|
)
|
|
(1
|
)%
|
|
|
|
|
|
|
|
(11
|
)
|
|
(1
|
)%
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating earnings
|
$
|
137
|
|
|
$
|
132
|
|
|
$
|
5
|
|
|
4
|
%
|
|
$
|
258
|
|
|
$
|
240
|
|
|
$
|
18
|
|
|
8
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Sales
|
$
|
703
|
|
|
$
|
633
|
|
|
$
|
70
|
|
|
11
|
%
|
|
$
|
1,373
|
|
|
$
|
1,253
|
|
|
$
|
120
|
|
|
10
|
%
|
Volume / product mix effect
|
|
|
|
|
(5
|
)
|
|
(1
|
)%
|
|
|
|
|
|
|
|
(9
|
)
|
|
(1
|
)%
|
||||||||
Price effect
|
|
|
|
|
80
|
|
|
13
|
%
|
|
|
|
|
|
|
|
137
|
|
|
11
|
%
|
||||||||
Exchange rate effect
|
|
|
|
|
(5
|
)
|
|
(1
|
)%
|
|
|
|
|
|
|
|
(8
|
)
|
|
—
|
%
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating earnings
|
$
|
83
|
|
|
$
|
15
|
|
|
$
|
68
|
|
|
453
|
%
|
|
$
|
165
|
|
|
$
|
82
|
|
|
$
|
83
|
|
|
101
|
%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Sales
|
$
|
215
|
|
|
$
|
234
|
|
|
$
|
(19
|
)
|
|
(8
|
)%
|
|
$
|
428
|
|
|
$
|
514
|
|
|
$
|
(86
|
)
|
|
(17
|
)%
|
Volume / product mix effect
|
|
|
|
|
5
|
|
|
2
|
%
|
|
|
|
|
|
|
|
(34
|
)
|
|
(7
|
)%
|
||||||||
Price effect
|
|
|
|
|
(24
|
)
|
|
(10
|
)%
|
|
|
|
|
|
|
|
(51
|
)
|
|
(10
|
)%
|
||||||||
Exchange rate effect
|
|
|
|
|
—
|
|
|
—
|
%
|
|
|
|
|
|
|
|
(1
|
)
|
|
—
|
%
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating earnings
|
$
|
55
|
|
|
$
|
72
|
|
|
$
|
(17
|
)
|
|
(24
|
)%
|
|
$
|
107
|
|
|
$
|
158
|
|
|
$
|
(51
|
)
|
|
(32
|
)%
|
|
Second Quarter
|
|
First Six Months
|
||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Sales
|
$
|
14
|
|
|
$
|
14
|
|
|
$
|
27
|
|
|
$
|
24
|
|
|
|
|
|
|
|
|
|
||||||||
Operating loss
|
|
|
|
|
|
|
|
||||||||
Growth initiatives and businesses not allocated to segments
|
$
|
(32
|
)
|
|
$
|
(24
|
)
|
|
$
|
(60
|
)
|
|
$
|
(42
|
)
|
Pension and other postretirement benefits income, net not allocated to operating segments
|
18
|
|
|
13
|
|
|
36
|
|
|
25
|
|
||||
Acquisition integration and transaction costs
|
—
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
||||
Operating loss before non-core items
|
(14
|
)
|
|
(11
|
)
|
|
(24
|
)
|
|
(26
|
)
|
||||
Acquisition integration and transaction costs
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
||||
Operating loss excluding non-core items
|
$
|
(14
|
)
|
|
$
|
(11
|
)
|
|
$
|
(24
|
)
|
|
$
|
(17
|
)
|
|
Sales Revenue
|
||||||||||||||||||||||||||
|
Second Quarter
|
|
First Six Months
|
||||||||||||||||||||||||
|
|
|
|
|
Change
|
|
|
|
|
Change
|
|||||||||||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
$
|
%
|
|
2017
|
|
2016
|
|
$
|
%
|
||||||||||||||
United States and Canada
|
$
|
1,088
|
|
|
$
|
1,030
|
|
|
$
|
58
|
|
6
|
%
|
|
$
|
2,154
|
|
|
$
|
2,036
|
|
|
$
|
118
|
|
6
|
%
|
Asia Pacific
|
581
|
|
|
530
|
|
|
51
|
|
10
|
%
|
|
1,093
|
|
|
1,025
|
|
|
68
|
|
7
|
%
|
||||||
Europe, Middle East, and Africa
|
624
|
|
|
603
|
|
|
21
|
|
3
|
%
|
|
1,224
|
|
|
1,215
|
|
|
9
|
|
1
|
%
|
||||||
Latin America
|
126
|
|
|
134
|
|
|
(8
|
)
|
(6
|
)%
|
|
251
|
|
|
257
|
|
|
(6
|
)
|
(2
|
)%
|
||||||
|
$
|
2,419
|
|
|
$
|
2,297
|
|
|
$
|
122
|
|
5
|
%
|
|
$
|
4,722
|
|
|
$
|
4,533
|
|
|
$
|
189
|
|
4
|
%
|
|
First Six Months
|
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Net cash provided by (used in)
|
|
|
|
||||
Operating activities
|
$
|
483
|
|
|
$
|
545
|
|
Investing activities
|
(283
|
)
|
|
(212
|
)
|
||
Financing activities
|
(158
|
)
|
|
(385
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(1
|
)
|
|
(1
|
)
|
||
Net change in cash and cash equivalents
|
41
|
|
|
(53
|
)
|
||
Cash and cash equivalents at beginning of period
|
181
|
|
|
293
|
|
||
Cash and cash equivalents at end of period
|
$
|
222
|
|
|
$
|
240
|
|
•
|
operating results to continue to benefit from organic growth and improved product mix from continued market adoption of specialty products;
|
•
|
cost reduction actions to result in cost savings of approximately $100 million;
|
•
|
cash generated by operating activities of approximately $1.6 billion;
|
•
|
capital spending to be approximately
$575 million
; and
|
•
|
priorities for uses of available cash in 2017 to include payment of the quarterly dividend, repayment of debt, funding targeted growth initiatives, and repurchasing shares. The Company expects to repay $350 million of debt in 2017.
|
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
|
Approximate Dollar
Value (in millions) that May Yet Be Purchased Under the Plans or Programs
|
||||||
April 1 - 30, 2017
|
160,000
|
|
$
|
81.58
|
|
160,000
|
|
$
|
414
|
|
May 1 - 31, 2017
|
775,619
|
|
$
|
79.42
|
|
775,619
|
|
$
|
352
|
|
June 1 - 30, 2017
|
297,358
|
|
$
|
84.07
|
|
297,358
|
|
$
|
327
|
|
Total
|
1,232,977
|
|
$
|
80.82
|
|
1,232,977
|
|
|
(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.
|
ITEM 5.
|
OTHER INFORMATION
|
•
|
designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of litigation;
|
•
|
add stockholder proponent and stockholder director nomination and nominee disclosure requirements;
|
•
|
give the Board of Directors explicit authority to postpone or reschedule a stockholder meeting;
|
•
|
clarify the power of the Chairman of a stockholder meeting over the conduct of such meeting; and
|
•
|
update certain provisions to reflect current practices, processes, and organizational structure.
|
ITEM 6.
|
EXHIBITS
|
|
|
|
Eastman Chemical Company
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
August 4, 2017
|
By:
|
/s/ Curtis E. Espeland
|
|
|
|
Curtis E. Espeland
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
EXHIBIT INDEX
|
Exhibit Number
|
|
Description
|
|
|
|
3.01
|
|
|
|
|
|
3.02 *
|
|
|
|
|
|
4.01
|
|
|
|
|
|
4.02
|
|
Indenture, dated as of January 10, 1994, between Eastman Chemical Company and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4(a) to the Company's Current Report on Form 8-K dated January 10, 1994)
|
|
|
|
4.03
|
|
|
|
|
|
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, 1996)
|
|
|
|
4.09
|
|
|
|
|
|
4.10
|
|
|
|
|
|
4.11
|
|
|
|
|
|
4.12
|
|
|
|
|
|
4.13
|
|
|
|
|
|
4.14
|
|
|
|
|
|
4.15
|
|
|
|
|
|
|
|
EXHIBIT INDEX
|
Exhibit Number
|
|
Description
|
4.16
|
|
|
|
|
|
4.17
|
|
|
|
|
|
12.01 *
|
|
|
|
|
|
31.01 *
|
|
|
|
|
|
31.02 *
|
|
|
|
|
|
32.01 *
|
|
|
|
|
|
32.02 *
|
|
|
|
|
|
99.01 *
|
|
|
|
|
|
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
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(Dollars in millions)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Earnings before income taxes excluding noncontrolling interest
|
|
$
|
357
|
|
|
$
|
322
|
|
|
$
|
697
|
|
|
$
|
645
|
|
Add:
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
|
69
|
|
|
71
|
|
|
135
|
|
|
141
|
|
||||
Appropriate portion of rental expense
(1)
|
|
8
|
|
|
6
|
|
|
15
|
|
|
13
|
|
||||
Amortization of capitalized interest
|
|
1
|
|
|
2
|
|
|
2
|
|
|
3
|
|
||||
Earnings as adjusted
|
|
$
|
435
|
|
|
$
|
401
|
|
|
$
|
849
|
|
|
$
|
802
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed charges:
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
|
$
|
69
|
|
|
$
|
71
|
|
|
$
|
135
|
|
|
$
|
141
|
|
Appropriate portion of rental expense
(1)
|
|
8
|
|
|
6
|
|
|
15
|
|
|
13
|
|
||||
Capitalized interest
|
|
2
|
|
|
2
|
|
|
4
|
|
|
4
|
|
||||
Total fixed charges
|
|
$
|
79
|
|
|
$
|
79
|
|
|
$
|
154
|
|
|
$
|
158
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ratio of earnings to fixed charges
|
|
5.5x
|
|
|
5.1x
|
|
|
5.5x
|
|
|
5.1x
|
|
(1)
|
For all periods presented, the interest component of rental expense is estimated to equal one-third of such expense. The appropriate portion of rental expense disclosed above for the three months ended June 30, 2016 and six months ended June 30, 2016 has been revised to correct the amounts previously disclosed of $7 million and $15 million, respectively, included in Exhibit 12.01 to the Company's 2016 Quarterly Report on Form 10-Q.
|
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.
|