(Mark
One)
|
|
[X]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended March 31, 2019
|
|
OR
|
[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
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
|
incorporation or organization)
|
identification no.)
|
|
|
200 South Wilcox Drive
|
|
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]
|
|
Accelerated filer
|
[ ]
|
Non-accelerated filer
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[ ]
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(Do not check if a smaller reporting company)
|
Smaller reporting company
|
[ ]
|
|
|
|
Emerging growth company
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[ ]
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Class
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Number of Shares Outstanding at March 31, 2019
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Common Stock, par value $0.01 per share
|
138,578,592
|
ITEM
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|
PAGE
|
|
||
|
|
|
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||
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||
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||
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||
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First Quarter
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||||||
(Dollars in millions, except per share amounts)
|
2019
|
|
2018
|
||||
Sales
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$
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2,380
|
|
|
$
|
2,607
|
|
Cost of sales
|
1,806
|
|
|
2,026
|
|
||
Gross profit
|
574
|
|
|
581
|
|
||
Selling, general and administrative expenses
|
187
|
|
|
190
|
|
||
Research and development expenses
|
58
|
|
|
56
|
|
||
Asset impairments and restructuring charges, net
|
32
|
|
|
2
|
|
||
Other components of post-employment (benefit) cost, net
|
(21
|
)
|
|
(30
|
)
|
||
Other (income) charges, net
|
(2
|
)
|
|
(46
|
)
|
||
Earnings before interest and taxes
|
320
|
|
|
409
|
|
||
Net interest expense
|
56
|
|
|
59
|
|
||
Earnings before income taxes
|
264
|
|
|
350
|
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||
Provision for income taxes
|
55
|
|
|
60
|
|
||
Net earnings
|
209
|
|
|
290
|
|
||
Less: Net earnings attributable to noncontrolling interest
|
—
|
|
|
—
|
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||
Net earnings attributable to Eastman
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$
|
209
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|
|
$
|
290
|
|
|
|
|
|
||||
Basic earnings per share attributable to Eastman
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$
|
1.50
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|
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$
|
2.03
|
|
Diluted earnings per share attributable to Eastman
|
$
|
1.49
|
|
|
$
|
2.00
|
|
Comprehensive Income
|
|
|
|
||||
Net earnings including noncontrolling interest
|
$
|
209
|
|
|
$
|
290
|
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Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
||
Change in cumulative translation adjustment
|
30
|
|
|
27
|
|
||
Defined benefit pension and other postretirement benefit plans:
|
|
|
|
||||
Amortization of unrecognized prior service credits
|
(7
|
)
|
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(7
|
)
|
||
Derivatives and hedging:
|
|
|
|
||||
Unrealized gain (loss) during period
|
10
|
|
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(23
|
)
|
||
Reclassification adjustment for (gains) losses included in net income, net
|
(2
|
)
|
|
—
|
|
||
Total other comprehensive income (loss), net of tax
|
31
|
|
|
(3
|
)
|
||
Comprehensive income including noncontrolling interest
|
240
|
|
|
287
|
|
||
Less: Comprehensive income attributable to noncontrolling interest
|
—
|
|
|
—
|
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||
Comprehensive income attributable to Eastman
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$
|
240
|
|
|
$
|
287
|
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Retained Earnings
|
|
|
|
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Retained earnings at beginning of period
|
$
|
7,573
|
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|
$
|
6,802
|
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Cumulative effect adjustment resulting from adoption of new accounting standards
|
(20
|
)
|
|
16
|
|
||
Net earnings attributable to Eastman
|
209
|
|
|
290
|
|
||
Cash dividends declared
|
(87
|
)
|
|
(82
|
)
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||
Retained earnings at end of period
|
$
|
7,675
|
|
|
$
|
7,026
|
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|
March 31,
|
|
December 31,
|
||||
(Dollars in millions, except per share amounts)
|
2019
|
|
2018
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
195
|
|
|
$
|
226
|
|
Trade receivables, net of allowance for doubtful accounts
|
1,297
|
|
|
1,154
|
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||
Miscellaneous receivables
|
285
|
|
|
329
|
|
||
Inventories
|
1,704
|
|
|
1,583
|
|
||
Other current assets
|
70
|
|
|
73
|
|
||
Total current assets
|
3,551
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|
|
3,365
|
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||
Properties
|
|
|
|
||||
Properties and equipment at cost
|
12,796
|
|
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12,731
|
|
||
Less: Accumulated depreciation
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7,220
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|
|
7,131
|
|
||
Net properties
|
5,576
|
|
|
5,600
|
|
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Goodwill
|
4,477
|
|
|
4,467
|
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||
Intangible assets, net of accumulated amortization
|
2,130
|
|
|
2,185
|
|
||
Other noncurrent assets
|
627
|
|
|
378
|
|
||
Total assets
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$
|
16,361
|
|
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$
|
15,995
|
|
|
|
|
|
||||
Liabilities and Stockholders' Equity
|
|
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|
||||
Current liabilities
|
|
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|
||||
Payables and other current liabilities
|
$
|
1,490
|
|
|
$
|
1,608
|
|
Borrowings due within one year
|
862
|
|
|
243
|
|
||
Total current liabilities
|
2,352
|
|
|
1,851
|
|
||
Long-term borrowings
|
5,602
|
|
|
5,925
|
|
||
Deferred income tax liabilities
|
892
|
|
|
884
|
|
||
Post-employment obligations
|
915
|
|
|
925
|
|
||
Other long-term liabilities
|
681
|
|
|
532
|
|
||
Total liabilities
|
10,442
|
|
|
10,117
|
|
||
Stockholders' equity
|
|
|
|
||||
Common stock ($0.01 par value – 350,000,000 shares authorized; shares issued – 219,523,859 and 219,140,523 for 2019 and 2018, respectively)
|
2
|
|
|
2
|
|
||
Additional paid-in capital
|
2,060
|
|
|
2,048
|
|
||
Retained earnings
|
7,675
|
|
|
7,573
|
|
||
Accumulated other comprehensive income (loss)
|
(194
|
)
|
|
(245
|
)
|
||
|
9,543
|
|
|
9,378
|
|
||
Less: Treasury stock at cost (80,996,065 shares for 2019 and 79,413,989 shares for 2018)
|
3,700
|
|
|
3,575
|
|
||
Total Eastman stockholders' equity
|
5,843
|
|
|
5,803
|
|
||
Noncontrolling interest
|
76
|
|
|
75
|
|
||
Total equity
|
5,919
|
|
|
5,878
|
|
||
Total liabilities and stockholders' equity
|
$
|
16,361
|
|
|
$
|
15,995
|
|
|
First Three Months
|
||||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Operating activities
|
|
|
|
||||
Net earnings
|
$
|
209
|
|
|
$
|
290
|
|
Adjustments to reconcile net earnings to net cash used in operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
155
|
|
|
152
|
|
||
Gain from property insurance
|
—
|
|
|
(50
|
)
|
||
Provision for deferred income taxes
|
4
|
|
|
11
|
|
||
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
|
|
|
|
||||
(Increase) decrease in trade receivables
|
(149
|
)
|
|
(223
|
)
|
||
(Increase) decrease in inventories
|
(122
|
)
|
|
(80
|
)
|
||
Increase (decrease) in trade payables
|
(42
|
)
|
|
8
|
|
||
Pension and other postretirement contributions (in excess of) less than expenses
|
(36
|
)
|
|
(36
|
)
|
||
Variable compensation (in excess of) less than expenses
|
(77
|
)
|
|
(77
|
)
|
||
Other items, net
|
53
|
|
|
(30
|
)
|
||
Net cash used in operating activities
|
(5
|
)
|
|
(35
|
)
|
||
Investing activities
|
|
|
|
||||
Additions to properties and equipment
|
(106
|
)
|
|
(128
|
)
|
||
Proceeds from property insurance
|
—
|
|
|
50
|
|
||
Acquisitions, net of cash acquired
|
(19
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(125
|
)
|
|
(78
|
)
|
||
Financing activities
|
|
|
|
||||
Net increase (decrease) in commercial paper and other borrowings
|
370
|
|
|
199
|
|
||
Proceeds from borrowings
|
125
|
|
|
275
|
|
||
Repayment of borrowings
|
(175
|
)
|
|
(175
|
)
|
||
Dividends paid to stockholders
|
(87
|
)
|
|
(80
|
)
|
||
Treasury stock purchases
|
(125
|
)
|
|
(100
|
)
|
||
Other items, net
|
(6
|
)
|
|
(3
|
)
|
||
Net cash provided by financing activities
|
102
|
|
|
116
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(3
|
)
|
|
—
|
|
||
Net change in cash and cash equivalents
|
(31
|
)
|
|
3
|
|
||
Cash and cash equivalents at beginning of period
|
226
|
|
|
191
|
|
||
Cash and cash equivalents at end of period
|
$
|
195
|
|
|
$
|
194
|
|
|
|
Page
|
|
|
|
Derivative and Non-Derivative Financial Instruments
|
||
Environmental Matters and Asset Retirement Obligations
|
||
1.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
INVENTORIES
|
|
March 31,
|
|
December 31,
|
||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Finished goods
|
$
|
1,201
|
|
|
$
|
1,143
|
|
Work in process
|
260
|
|
|
262
|
|
||
Raw materials and supplies
|
572
|
|
|
515
|
|
||
Total inventories at FIFO or average cost
|
2,033
|
|
|
1,920
|
|
||
Less: LIFO reserve
|
329
|
|
|
337
|
|
||
Total inventories
|
$
|
1,704
|
|
|
$
|
1,583
|
|
3.
|
PAYABLES AND OTHER CURRENT LIABILITIES
|
|
March 31,
|
|
December 31,
|
||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Trade creditors
|
$
|
857
|
|
|
$
|
914
|
|
Accrued payroll and variable compensation
|
115
|
|
|
197
|
|
||
Accrued taxes
|
67
|
|
|
94
|
|
||
Other
|
451
|
|
|
403
|
|
||
Total payables and other current liabilities
|
$
|
1,490
|
|
|
$
|
1,608
|
|
4.
|
INCOME TAXES
|
|
First Quarter
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
||||||||||
|
$
|
|
%
|
|
$
|
|
%
|
||||||
Provision for income taxes and tax rate
|
$
|
55
|
|
|
21
|
%
|
|
$
|
60
|
|
|
17
|
%
|
5.
|
BORROWINGS
|
|
March 31,
|
|
December 31,
|
||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Borrowings consisted of:
|
|
|
|
||||
2.7% notes due January 2020
|
$
|
250
|
|
|
$
|
250
|
|
4.5% notes due January 2021
|
185
|
|
|
185
|
|
||
3.5% notes due December 2021
|
298
|
|
|
297
|
|
||
3.6% notes due August 2022
|
739
|
|
|
739
|
|
||
1.50% notes due May 2023 (1)
|
840
|
|
|
855
|
|
||
7 1/4% debentures due January 2024
|
197
|
|
|
197
|
|
||
7 5/8% debentures due June 2024
|
43
|
|
|
43
|
|
||
3.8% notes due March 2025
|
692
|
|
|
691
|
|
||
1.875% notes due November 2026 (1)
|
556
|
|
|
566
|
|
||
7.60% debentures due February 2027
|
195
|
|
|
195
|
|
||
4.5% notes due December 2028
|
492
|
|
|
492
|
|
||
4.8% notes due September 2042
|
493
|
|
|
493
|
|
||
4.65% notes due October 2044
|
872
|
|
|
872
|
|
||
Commercial paper and short-term borrowings
|
612
|
|
|
243
|
|
||
Credit facilities borrowings
|
—
|
|
|
50
|
|
||
Total borrowings
|
6,464
|
|
|
6,168
|
|
||
Borrowings due within one year
|
862
|
|
|
243
|
|
||
Long-term borrowings
|
$
|
5,602
|
|
|
$
|
5,925
|
|
(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.
|
6.
|
DERIVATIVE AND NON-DERIVATIVE FINANCIAL INSTRUMENTS
|
Notional Outstanding
|
|
March 31, 2019
|
|
December 31, 2018
|
|||
|
|
|
|
|
|
||
Derivatives designated as cash flow hedges:
|
|
|
|
|
|||
Foreign Exchange Forward and Option Contracts (in millions)
|
|
|
|
|
|||
|
EUR/USD (in EUR)
|
|
€203
|
|
€263
|
||
Commodity Forward and Collar Contracts
|
|
|
|
|
|||
|
Feedstock (in million barrels)
|
|
4
|
|
|
5
|
|
|
Energy (in million british thermal units)
|
|
31
|
|
|
40
|
|
|
|
|
|
|
|||
Derivatives designated as fair value hedges:
|
|
|
|
|
|||
Fixed-for-floating interest rate swaps (in millions)
|
|
$75
|
|
$75
|
|||
|
|
|
|
|
|||
Derivatives designated as net investment hedges:
|
|
|
|
|
|||
Cross-currency interest rate swaps (in millions)
|
|
|
|
|
|||
|
EUR/USD (in EUR)
|
|
€851
|
|
€851
|
||
|
|
|
|
|
|||
Non-derivatives designated as net investment hedges:
|
|
|
|
|
|||
Foreign Currency Net Investment Hedges (in millions)
|
|
|
|
|
|||
|
EUR/USD (in EUR)
|
|
€1,242
|
|
€1,241
|
(Dollars in millions)
|
|
Carrying amount of the hedged liabilities
|
|
Cumulative amount of fair value hedging loss adjustment included in the carrying amount of the hedged liability
|
||||||||||||
Line item in the Unaudited Consolidated Statements of Financial Position in which the hedged item is included
|
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||
Long-term borrowings (1)
|
|
$
|
759
|
|
|
$
|
759
|
|
|
$
|
(10
|
)
|
|
$
|
(12
|
)
|
(1)
|
At both March 31, 2019 and December 31, 2018, the cumulative amount of fair value hedging loss adjustment remaining for hedged liabilities for which hedge accounting has been discontinued was $7 million.
|
|
|
Change in amount of after tax gain (loss) recognized in OCI on derivatives
|
|
Pre-tax amount of gain (loss) reclassified from OCI into earnings
|
||||||||||||
(Dollars in millions)
|
|
First Quarter
|
|
First Quarter
|
||||||||||||
Hedging Relationships
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
||||||||
Commodity contracts
|
|
$
|
7
|
|
|
$
|
(11
|
)
|
|
$
|
(3
|
)
|
|
$
|
(2
|
)
|
Foreign exchange contracts
|
|
1
|
|
|
(13
|
)
|
|
6
|
|
|
3
|
|
||||
Forward starting interest rate and treasury lock swap contracts
|
|
1
|
|
|
1
|
|
|
(1
|
)
|
|
(1
|
)
|
||||
Non-derivatives in net investment hedging relationships (pre-tax):
|
|
|
|
|
|
|
|
|
||||||||
Net investment hedges
|
|
26
|
|
|
(42
|
)
|
|
—
|
|
|
—
|
|
||||
Derivatives in net investment hedging relationships (pre-tax):
|
|
|
|
|
|
|
|
|
||||||||
Cross-currency interest rate swaps
|
|
19
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
||||
Cross-currency interest rate swaps excluded component
|
|
6
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
Location and Amount of Gain or (Loss) Recognized in Earnings on Fair Value and Cash Flow Hedging Relationships
|
||||||||||||||||||||||||
|
|
First quarter
|
||||||||||||||||||||||
|
|
2019
|
|
2018
|
||||||||||||||||||||
(Dollars in millions)
|
|
Sales
|
|
Cost of Sales
|
|
Net Interest Expense
|
|
Sales
|
|
Cost of Sales
|
|
Net Interest Expense
|
||||||||||||
Total amounts of income and expense line items presented in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in which the effects of fair value or cash flow hedges are recognized
|
|
$
|
2,380
|
|
|
$
|
1,806
|
|
|
$
|
56
|
|
|
$
|
2,607
|
|
|
$
|
2,026
|
|
|
$
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
The effects of fair value and cash flow hedging:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gain or (loss) on cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest contracts (forward starting interest rate and treasury lock swap contracts):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Amount reclassified from AOCI into earnings
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
(1
|
)
|
||||||||||
Commodity Contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Amount reclassified from AOCI into earnings
|
|
|
|
(3
|
)
|
|
|
|
|
|
(2
|
)
|
|
|
||||||||||
Foreign Exchange Contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Amount reclassified from AOCI into earnings
|
|
6
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
RETIREMENT PLANS
|
|
First Quarter
|
||||||||||||||||||||||
|
Pension Plans
|
|
Other Postretirement Benefit Plans
|
||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
(Dollars in millions)
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
|
Non-U.S.
|
|
|
|
|
||||||||||||
Service cost
|
$
|
7
|
|
|
$
|
3
|
|
|
$
|
9
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
19
|
|
|
5
|
|
|
17
|
|
|
5
|
|
|
6
|
|
|
6
|
|
||||||
Expected return on assets
|
(32
|
)
|
|
(8
|
)
|
|
(37
|
)
|
|
(9
|
)
|
|
(1
|
)
|
|
(2
|
)
|
||||||
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service credit, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
(10
|
)
|
||||||
Net periodic benefit (credit) cost
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
(11
|
)
|
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
$
|
(6
|
)
|
8.
|
LEASES AND OFF BALANCE SHEET ITEMS
|
(Dollars in millions)
|
|
Operating lease liabilities
|
||
Remainder of 2019
|
|
$
|
50
|
|
2020
|
|
55
|
|
|
2021
|
|
43
|
|
|
2022
|
|
32
|
|
|
2023
|
|
21
|
|
|
2024 and beyond
|
|
35
|
|
|
Total minimum lease payments
|
|
236
|
|
|
Less: amounts of lease payments representing interest
|
|
26
|
|
|
Present value of future minimum lease payments
|
|
210
|
|
|
Less: current obligations under leases
|
|
57
|
|
|
Long-term lease obligations
|
|
$
|
153
|
|
(Dollars in millions)
|
First Quarter 2019
|
|||
Lease costs:
|
|
|||
|
Operating lease costs
|
$
|
15
|
|
|
Short-term lease costs
|
11
|
|
|
|
Total
|
$
|
26
|
|
|
|
|
||
Other operating lease information:
|
|
|||
|
Cash paid for amounts included in the measurement of lease liabilities
|
$
|
17
|
|
|
Right-to-use assets obtained in exchange for new lease liabilities
|
$
|
11
|
|
|
Weighted-average remaining lease term, in years
|
5
|
|
|
|
Weighted-average discount rate
|
4.2
|
%
|
9.
|
ENVIRONMENTAL MATTERS AND ASSET RETIREMENT OBLIGATIONS
|
(Dollars in millions)
|
March 31, 2019
|
|
December 31, 2018
|
||||
Environmental contingent liabilities, current
|
$
|
25
|
|
|
$
|
25
|
|
Environmental contingent liabilities, long-term
|
269
|
|
|
271
|
|
||
Total
|
$
|
294
|
|
|
$
|
296
|
|
(Dollars in millions)
|
Environmental Remediation Liabilities
|
||
Balance at December 31, 2018
|
$
|
271
|
|
Changes in estimates recognized in earnings and other
|
1
|
|
|
Cash reductions
|
(3
|
)
|
|
Balance at March 31, 2019
|
$
|
269
|
|
10.
|
LEGAL MATTERS
|
11.
|
STOCKHOLDERS' EQUITY
|
(Dollars in millions)
|
Common Stock at Par Value
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Treasury Stock at Cost
|
|
Total Eastman Stockholders' Equity
|
|
Noncontrolling Interest
|
|
Total Equity
|
||||||||||||||||
Balance at December 31, 2018
|
$
|
2
|
|
|
$
|
2,048
|
|
|
$
|
7,573
|
|
|
$
|
(245
|
)
|
|
$
|
(3,575
|
)
|
|
$
|
5,803
|
|
|
$
|
75
|
|
|
$
|
5,878
|
|
Cumulative Effect of Adoption of New Accounting Standards (1)
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Net Earnings
|
—
|
|
|
—
|
|
|
209
|
|
|
—
|
|
|
—
|
|
|
209
|
|
|
—
|
|
|
209
|
|
||||||||
Cash Dividends Declared (2)
($0.62 per share)
|
—
|
|
|
—
|
|
|
(87
|
)
|
|
—
|
|
|
—
|
|
|
(87
|
)
|
|
—
|
|
|
(87
|
)
|
||||||||
Other Comprehensive Income
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
31
|
|
||||||||
Share-Based Compensation Expense (3)
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
||||||||
Stock Option Exercises
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||||||
Other (4)
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
1
|
|
|
(9
|
)
|
||||||||
Share Repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(125
|
)
|
|
(125
|
)
|
|
—
|
|
|
(125
|
)
|
||||||||
Balance at March 31, 2019
|
$
|
2
|
|
|
$
|
2,060
|
|
|
$
|
7,675
|
|
|
$
|
(194
|
)
|
|
$
|
(3,700
|
)
|
|
$
|
5,843
|
|
|
$
|
76
|
|
|
$
|
5,919
|
|
(Dollars in millions)
|
Common Stock at Par Value
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Treasury Stock at Cost
|
|
Total Eastman Stockholders' Equity
|
|
Noncontrolling Interest
|
|
Total Equity
|
||||||||||||||||
Balance at December 31, 2017
|
$
|
2
|
|
|
$
|
1,983
|
|
|
$
|
6,802
|
|
|
$
|
(209
|
)
|
|
$
|
(3,175
|
)
|
|
$
|
5,403
|
|
|
$
|
77
|
|
|
$
|
5,480
|
|
Cumulative Effect of Adoption of New Accounting Standards (5)
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
16
|
|
||||||||
Net Earnings
|
—
|
|
|
—
|
|
|
290
|
|
|
—
|
|
|
—
|
|
|
290
|
|
|
—
|
|
|
290
|
|
||||||||
Cash Dividends Declared (2)
($0.56 per share)
|
—
|
|
|
—
|
|
|
(82
|
)
|
|
—
|
|
|
—
|
|
|
(82
|
)
|
|
—
|
|
|
(82
|
)
|
||||||||
Other Comprehensive Loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
||||||||
Share-Based Compensation Expense (3)
|
—
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
||||||||
Stock Option Exercises
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
||||||||
Other (4)
|
—
|
|
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
—
|
|
|
(16
|
)
|
||||||||
Share Repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
(100
|
)
|
|
—
|
|
|
(100
|
)
|
||||||||
Distributions to Noncontrolling Interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
||||||||
Balance at March 31, 2018
|
$
|
2
|
|
|
$
|
2,004
|
|
|
$
|
7,026
|
|
|
$
|
(212
|
)
|
|
$
|
(3,275
|
)
|
|
$
|
5,545
|
|
|
$
|
75
|
|
|
$
|
5,620
|
|
(1)
|
On January 1, 2019, the Company adopted a new accounting standard for reporting comprehensive income, which resulted in a reclassification of stranded tax effects from the Tax Reform Act from AOCI to retained earnings. See Note 1, "Significant Accounting Policies", for additional information.
|
(2)
|
Cash dividends declared includes cash dividends paid and dividends declared but unpaid.
|
(3)
|
Share-based compensation expense is the fair value of share-based awards.
|
(4)
|
Additional paid-in capital includes value of shares withheld for employees' taxes on vesting of share-based compensation awards.
|
(5)
|
On January 1, 2018, the Company adopted new accounting standards for revenue recognition, income taxes, and derivatives and hedging, which resulted in adjustments to beginning retained earnings. See Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2018 Annual Report on Form 10-K for specific amounts related to each standard.
|
(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, 2017
|
$
|
(296
|
)
|
|
$
|
136
|
|
|
$
|
(48
|
)
|
|
$
|
(1
|
)
|
|
$
|
(209
|
)
|
Period change
|
(13
|
)
|
|
(30
|
)
|
|
7
|
|
|
—
|
|
|
(36
|
)
|
|||||
Balance at December 31, 2018
|
(309
|
)
|
|
106
|
|
|
(41
|
)
|
|
(1
|
)
|
|
(245
|
)
|
|||||
Period change (1)
|
30
|
|
|
22
|
|
|
(1
|
)
|
|
—
|
|
|
51
|
|
|||||
Balance at March 31, 2019
|
$
|
(279
|
)
|
|
$
|
128
|
|
|
$
|
(42
|
)
|
|
$
|
(1
|
)
|
|
$
|
(194
|
)
|
(1)
|
Benefit plans unrecognized prior service credits includes $29 million reclassification of stranded tax expense from AOCI to retained earnings and unrealized gains (losses) on derivative instruments includes $9 million reclassification of stranded tax benefit from AOCI to retained earnings. See Note 1, "Significant Accounting Policies", for additional information.
|
|
First Quarter
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
(Dollars in millions)
|
Before Tax
|
|
Net of Tax
|
|
Before Tax
|
|
Net of Tax
|
||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
||||||||
Change in cumulative translation adjustment
|
$
|
30
|
|
|
$
|
30
|
|
|
$
|
27
|
|
|
$
|
27
|
|
Defined benefit pension and other postretirement benefit plans:
|
|
|
|
|
|
|
|
||||||||
Amortization of unrecognized prior service credits
|
(10
|
)
|
|
(7
|
)
|
|
(10
|
)
|
|
(7
|
)
|
||||
Derivatives and hedging:
|
|
|
|
|
|
|
|
||||||||
Unrealized gain (loss) during period
|
13
|
|
|
10
|
|
|
(31
|
)
|
|
(23
|
)
|
||||
Reclassification adjustment for (gains) losses included in net income, net
|
(3
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
||||
Total other comprehensive income (loss)
|
$
|
30
|
|
|
$
|
31
|
|
|
$
|
(14
|
)
|
|
$
|
(3
|
)
|
12.
|
EARNINGS AND DIVIDENDS PER SHARE
|
|
First Quarter
|
||||||
(In millions, except per share amounts)
|
2019
|
|
2018
|
||||
Numerator
|
|
|
|
||||
Earnings attributable to Eastman, net of tax
|
$
|
209
|
|
|
$
|
290
|
|
|
|
|
|
||||
Denominator
|
|
|
|
||||
Weighted average shares used for basic EPS
|
139.0
|
|
|
142.8
|
|
||
Dilutive effect of stock options and other awards
|
1.1
|
|
|
2.0
|
|
||
Weighted average shares used for diluted EPS
|
140.1
|
|
|
144.8
|
|
||
|
|
|
|
||||
(Calculated using whole dollars and shares)
|
|
|
|
||||
EPS
|
|
|
|
||||
Basic
|
$
|
1.50
|
|
|
$
|
2.03
|
|
Diluted
|
$
|
1.49
|
|
|
$
|
2.00
|
|
13.
|
ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES, NET
|
|
First Quarter
|
||||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Severance charges
|
$
|
28
|
|
|
$
|
2
|
|
Other restructuring costs
|
4
|
|
|
—
|
|
||
Total
|
$
|
32
|
|
|
$
|
2
|
|
(Dollars in millions)
|
Balance at January 1, 2019
|
|
Provision/ Adjustments
|
|
Non-cash Reductions/
Additions |
|
Cash Reductions
|
|
Balance at March 31, 2019
|
||||||||||
Severance costs
|
$
|
6
|
|
|
$
|
28
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
32
|
|
Other restructuring costs
|
8
|
|
|
4
|
|
|
1
|
|
|
(1
|
)
|
|
12
|
|
|||||
Total
|
$
|
14
|
|
|
$
|
32
|
|
|
$
|
1
|
|
|
$
|
(3
|
)
|
|
$
|
44
|
|
(Dollars in millions)
|
Balance at January 1, 2018
|
|
Provision/ Adjustments
|
|
Non-cash Reductions/
Additions
|
|
Cash Reductions
|
|
Balance at December 31, 2018
|
||||||||||
Non-cash charges
|
$
|
—
|
|
|
$
|
39
|
|
|
$
|
(39
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Severance costs
|
19
|
|
|
6
|
|
|
1
|
|
|
(20
|
)
|
|
6
|
|
|||||
Other restructuring costs
|
10
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
8
|
|
|||||
Total
|
$
|
29
|
|
|
$
|
45
|
|
|
$
|
(38
|
)
|
|
$
|
(22
|
)
|
|
$
|
14
|
|
14.
|
SHARE-BASED COMPENSATION AWARDS
|
|
|
First Quarter
|
||
Assumptions
|
|
2019
|
|
2018
|
Expected volatility rate
|
|
19.61%
|
|
19.03%
|
Expected dividend yield
|
|
2.41%
|
|
2.48%
|
Average risk-free interest rate
|
|
2.56%
|
|
2.61%
|
Expected term years
|
|
5.7
|
|
5.1
|
15.
|
OTHER (INCOME) CHARGES, NET
|
|
First Quarter
|
||||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Currency transaction costs resulting from tax law changes and outside-U.S. entity reorganizations
|
$
|
—
|
|
|
$
|
8
|
|
(Income) loss from equity investments and other investment (gains) losses, net
|
(3
|
)
|
|
(5
|
)
|
||
Coal gasification incident property insurance
|
—
|
|
|
(50
|
)
|
||
Other, net
|
1
|
|
|
1
|
|
||
Other (income) charges, net
|
$
|
(2
|
)
|
|
$
|
(46
|
)
|
16.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
(Dollars in millions)
|
First Three Months
|
||||||
|
2019
|
|
2018
|
||||
Other current assets
|
$
|
2
|
|
|
$
|
(29
|
)
|
Other noncurrent assets
|
6
|
|
|
14
|
|
||
Payables and other current liabilities
|
59
|
|
|
(14
|
)
|
||
Long-term liabilities and equity
|
(14
|
)
|
|
(1
|
)
|
||
Total
|
$
|
53
|
|
|
$
|
(30
|
)
|
17.
|
SEGMENT INFORMATION
|
(Dollars in millions)
|
First Quarter
|
||||||
Sales by Segment
|
2019
|
|
2018
|
||||
Additives & Functional Products
|
$
|
855
|
|
|
$
|
939
|
|
Advanced Materials
|
657
|
|
|
693
|
|
||
Chemical Intermediates
|
655
|
|
|
730
|
|
||
Fibers
|
213
|
|
|
245
|
|
||
Total Sales by Operating Segment
|
2,380
|
|
|
2,607
|
|
||
Other
|
—
|
|
|
—
|
|
||
Total Sales
|
$
|
2,380
|
|
|
$
|
2,607
|
|
(Dollars in millions)
|
First Quarter
|
||||||
Earnings Before Interest and Taxes by Segment
|
2019
|
|
2018
|
||||
Additives & Functional Products
|
$
|
146
|
|
|
$
|
176
|
|
Advanced Materials
|
102
|
|
|
135
|
|
||
Chemical Intermediates
|
73
|
|
|
70
|
|
||
Fibers
|
42
|
|
|
43
|
|
||
Total Earnings Before Interest and Taxes by Operating Segment
|
363
|
|
|
424
|
|
||
Other
|
|
|
|
|
|
||
Growth initiatives and businesses not allocated to operating segments
|
(27
|
)
|
|
(26
|
)
|
||
Pension and other postretirement benefits income (expense), net not allocated to operating segments
|
12
|
|
|
21
|
|
||
Asset impairments and restructuring charges, net
|
(28
|
)
|
|
(2
|
)
|
||
Other income (charges), net not allocated to operating segments
|
—
|
|
|
(8
|
)
|
||
Total Earnings Before Interest and Taxes
|
$
|
320
|
|
|
$
|
409
|
|
(Dollars in millions)
|
March 31,
|
|
December 31,
|
||||
Assets by Segment (1)
|
2019
|
|
2018
|
||||
Additives & Functional Products
|
$
|
6,561
|
|
|
$
|
6,545
|
|
Advanced Materials
|
4,610
|
|
|
4,456
|
|
||
Chemical Intermediates
|
2,890
|
|
|
2,934
|
|
||
Fibers
|
1,050
|
|
|
978
|
|
||
Total Assets by Operating Segment
|
15,111
|
|
|
14,913
|
|
||
Corporate Assets
|
1,250
|
|
|
1,082
|
|
||
Total Assets
|
$
|
16,361
|
|
|
$
|
15,995
|
|
(1)
|
Segment assets include accounts receivable, inventory, fixed assets, goodwill, and intangible assets.
|
(Dollars in millions)
|
First Quarter
|
||||||
Sales by Customer Location
|
2019
|
|
2018
|
||||
United States and Canada
|
$
|
1,000
|
|
|
$
|
1,100
|
|
Asia Pacific
|
553
|
|
|
642
|
|
||
Europe, Middle East, and Africa
|
689
|
|
|
727
|
|
||
Latin America
|
138
|
|
|
138
|
|
||
Total Sales
|
$
|
2,380
|
|
|
$
|
2,607
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Non-core transactions, costs, and losses or gains relate to, among other things, cost reductions, growth and profitability improvement initiatives, and other events outside of core business operations, and have included asset impairments and restructuring charges and gains, costs of and related to acquisitions, gains and losses from and costs related to dispositions of businesses, financing transaction costs, and mark-to-market losses or gains for pension and other postretirement benefit plans.
|
•
|
In first quarter 2018, the Company recognized unusual costs, net of insurance, of the disruption, repairs, and reconstruction of the Kingsport site's coal gasification operations area resulting from the previously reported October 4, 2017 explosion (the "coal gasification incident"). Management considers the coal gasification incident unusual because of the Company's operational and safety history and the magnitude of the unplanned disruption.
|
•
|
In first quarter 2018, the Company recognized unusual costs resulting from the fourth quarter 2017 Tax Cuts and Jobs Act ("Tax Reform Act") and related outside-U.S. entity reorganizations as part of the transition to an international treasury services center. In first quarter 2019, the Company recognized an unusual net decrease to earnings from adjustments of the provision for income taxes resulting from tax law changes, primarily the Tax Reform Act, and the tax impact of the related outside-U.S. entity reorganizations. Management considers these actions and associated costs and income unusual because of the infrequent nature of such changes in tax law and resulting actions and the significant one-time impacts on earnings.
|
•
|
Asset impairments and restructuring charges, net.
|
•
|
Costs from coal gasification incident in excess of insurance,
|
•
|
Costs of currency transaction and professional fees resulting from fourth quarter 2017 tax law changes and related outside-U.S. entity reorganizations, and
|
•
|
Adjustments to the provision for income taxes resulting from tax law changes, primarily the Tax Reform Act, and related outside-U.S. entity reorganizations.
|
|
First Quarter
|
||||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Non-core item impacting earnings before interest and taxes:
|
|
|
|
||||
Asset impairments and restructuring charges, net
|
$
|
32
|
|
|
$
|
2
|
|
Unusual items impacting earnings before interest and taxes:
|
|
|
|
||||
Net coal gasification incident costs
|
—
|
|
|
37
|
|
||
Costs resulting from tax law changes and outside-U.S. entity reorganizations
|
—
|
|
|
11
|
|
||
Total non-core and unusual items impacting earnings before interest and taxes
|
32
|
|
|
50
|
|
||
Less: Items impacting provision for income taxes:
|
|
|
|
||||
Tax effect of non-core and unusual items
|
6
|
|
|
11
|
|
||
Adjustments from tax law changes and outside-U.S. entity reorganizations
|
(10
|
)
|
|
—
|
|
||
Interim adjustment to tax provision
|
(3
|
)
|
|
5
|
|
||
Total items impacting provision for income taxes
|
(7
|
)
|
|
16
|
|
||
Total items impacting net earnings attributable to Eastman
|
$
|
39
|
|
|
$
|
34
|
|
•
|
Gross profit,
|
•
|
Selling, general and administrative expenses ("SG&A"),
|
•
|
Asset impairments and restructuring charges, net,
|
•
|
Other (income) charges, net,
|
•
|
Earnings before interest and taxes ("EBIT"),
|
•
|
Provision for income taxes,
|
•
|
Net earnings attributable to Eastman,
|
•
|
Diluted EPS, and
|
•
|
Net cash used in operating activities.
|
|
First Quarter
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
(Dollars in millions, except EPS)
|
$
|
|
EPS
|
|
$
|
|
EPS
|
||||||||
Net earnings attributable to Eastman
|
$
|
209
|
|
|
$
|
1.49
|
|
|
$
|
290
|
|
|
$
|
2.00
|
|
Total non-core and unusual items, net of tax (1)(2)
|
36
|
|
|
0.25
|
|
|
39
|
|
|
0.27
|
|
||||
Interim adjustment to tax provision (1)
|
3
|
|
|
0.03
|
|
|
(5
|
)
|
|
(0.04
|
)
|
||||
Adjusted net earnings
|
$
|
248
|
|
|
$
|
1.77
|
|
|
$
|
324
|
|
|
$
|
2.23
|
|
(1)
|
See "Results of Operations - Provision for Income Taxes" for adjusted provision for income taxes for first quarter 2019 and 2018.
|
(2)
|
Provision for income taxes for non-core and unusual items are calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible. See "Results of Operations - Net Earnings Attributable to Eastman and Diluted Earnings per Share" for the tax effected amount of non-core and unusual items.
|
|
First Quarter
|
|||||||||||||
|
|
|
|
|
Change
|
|||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Sales
|
$
|
2,380
|
|
|
$
|
2,607
|
|
|
$
|
(227
|
)
|
|
(9
|
)%
|
Volume / product mix effect
|
|
|
|
|
(147
|
)
|
|
(6
|
)%
|
|||||
Price effect
|
|
|
|
|
(34
|
)
|
|
(1
|
)%
|
|||||
Exchange rate effect
|
|
|
|
|
(46
|
)
|
|
(2
|
)%
|
|
First Quarter
|
|||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
Change
|
|||||
Gross profit
|
$
|
574
|
|
|
$
|
581
|
|
|
(1
|
)%
|
Net coal gasification incident costs
|
—
|
|
|
87
|
|
|
|
|||
Gross profit excluding unusual item
|
$
|
574
|
|
|
$
|
668
|
|
|
(14
|
)%
|
|
First Quarter
|
|||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
Change
|
|||||
Selling, general and administrative expenses
|
$
|
187
|
|
|
$
|
190
|
|
|
(2
|
)%
|
Costs resulting from tax law changes and outside-U.S. entity reorganizations
|
—
|
|
|
(3
|
)
|
|
|
|
||
Selling, general and administrative expenses excluding unusual item
|
$
|
187
|
|
|
$
|
187
|
|
|
—
|
%
|
|
First Quarter
|
|||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
Change
|
|||||
Research and development expenses
|
$
|
58
|
|
|
$
|
56
|
|
|
4
|
%
|
|
First Quarter
|
||||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Severance charges
|
$
|
28
|
|
|
$
|
2
|
|
Other restructuring costs
|
4
|
|
|
—
|
|
||
Total
|
$
|
32
|
|
|
$
|
2
|
|
|
First Quarter
|
||||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Other components of post-employment (benefit) cost, net
|
$
|
(21
|
)
|
|
$
|
(30
|
)
|
|
First Quarter
|
||||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Currency transaction costs resulting from tax law changes and outside-U.S. entity reorganizations
|
$
|
—
|
|
|
$
|
8
|
|
(Income) loss from equity investments and other investment (gains) losses, net
|
(3
|
)
|
|
(5
|
)
|
||
Coal gasification incident property insurance
|
—
|
|
|
(50
|
)
|
||
Other, net
|
1
|
|
|
1
|
|
||
Other (income) charges, net
|
$
|
(2
|
)
|
|
$
|
(46
|
)
|
Currency transaction costs resulting from tax law changes and outside-U.S. entity reorganizations
|
—
|
|
|
(8
|
)
|
||
Coal gasification incident property insurance
|
—
|
|
|
50
|
|
||
Other (income) charges, net excluding non-core and unusual items
|
$
|
(2
|
)
|
|
$
|
(4
|
)
|
|
First Quarter
|
|||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
Change
|
|||||
Earnings before interest and taxes
|
$
|
320
|
|
|
$
|
409
|
|
|
(22
|
)%
|
Costs resulting from tax law changes and outside-U.S. entity reorganizations
|
—
|
|
|
11
|
|
|
|
|||
Asset impairments and restructuring charges, net
|
32
|
|
|
2
|
|
|
|
|||
Net coal gasification incident costs
|
—
|
|
|
37
|
|
|
|
|||
Earnings before interest and taxes excluding non-core and unusual items
|
$
|
352
|
|
|
$
|
459
|
|
|
(23
|
)%
|
|
First Quarter
|
|||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
Change
|
|||||
Gross interest costs
|
$
|
58
|
|
|
$
|
61
|
|
|
|
|
Less: Capitalized interest
|
1
|
|
|
1
|
|
|
|
|||
Interest expense
|
57
|
|
|
60
|
|
|
|
|||
Less: Interest income
|
1
|
|
|
1
|
|
|
|
|
||
Net interest expense
|
$
|
56
|
|
|
$
|
59
|
|
|
(5
|
)%
|
|
First Quarter
|
||||||||||||
|
2019
|
|
2018
|
||||||||||
(Dollars in millions)
|
$
|
|
%
|
|
$
|
|
%
|
||||||
Provision for income taxes and effective tax rate
|
$
|
55
|
|
|
21
|
%
|
|
$
|
60
|
|
|
17
|
%
|
Tax provision for non-core and unusual items (1)
|
6
|
|
|
|
|
11
|
|
|
|
||||
Adjustments from tax law changes and outside-U.S. entity reorganizations
|
(10
|
)
|
|
|
|
—
|
|
|
|
||||
Interim adjustment to tax provision (2)
|
(3
|
)
|
|
|
|
5
|
|
|
|
||||
Adjusted provision for income taxes and effective tax rate
|
$
|
48
|
|
|
17
|
%
|
|
$
|
76
|
|
|
19
|
%
|
(1)
|
Provision for income taxes for non-core and unusual items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
|
(2)
|
First quarter 2019 provision for income taxes were adjusted to reflect the current forecasted full year effective tax rate. First quarter 2018 provision for income taxes were adjusted to reflect the then forecasted full year effective tax rate. The adjusted provision for income taxes for first three months 2019 and 2018 are calculated applying the forecasted full year effective tax rate as shown below.
|
|
First Three Months
|
||||
|
2019
|
|
2018
|
||
Effective tax rate
|
21
|
%
|
|
17
|
%
|
Discrete tax items (1)
|
—
|
%
|
|
1
|
%
|
Tax impact of non-core and unusual items (2)
|
(2
|
)%
|
|
2
|
%
|
Forecasted full year impact of expected tax events
|
(2
|
)%
|
|
(1
|
)%
|
Forecasted full year effective tax rate
|
17
|
%
|
|
19
|
%
|
(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 three months 2018 discrete item relates to an adjustment of prior year income tax returns.
|
(2)
|
Provision for income taxes for non-core and unusual items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
|
|
First Quarter
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
(Dollars in millions, except EPS)
|
$
|
|
EPS
|
|
$
|
|
EPS
|
||||||||
Net earnings and diluted earnings per share attributable to Eastman
|
$
|
209
|
|
|
$
|
1.49
|
|
|
$
|
290
|
|
|
$
|
2.00
|
|
Non-core item, net of tax: (1)
|
|
|
|
|
|
|
|
||||||||
Asset impairments and restructuring charges, net
|
26
|
|
|
0.18
|
|
|
2
|
|
|
0.01
|
|
||||
Unusual items, net of tax: (1)
|
|
|
|
|
|
|
|
||||||||
Net coal gasification incident costs
|
—
|
|
|
—
|
|
|
29
|
|
|
0.20
|
|
||||
Costs resulting from tax law changes and outside-U.S. entity reorganizations
|
—
|
|
|
—
|
|
|
8
|
|
|
0.06
|
|
||||
Adjustments from tax law changes and outside-U.S. entity reorganizations
|
10
|
|
|
0.07
|
|
|
—
|
|
|
—
|
|
||||
Interim adjustment to tax provision
|
3
|
|
|
0.03
|
|
|
(5
|
)
|
|
(0.04
|
)
|
||||
Adjusted net earnings and diluted earnings per share attributable to Eastman
|
$
|
248
|
|
|
$
|
1.77
|
|
|
$
|
324
|
|
|
$
|
2.23
|
|
|
|
|
|
|
|
|
|
(1)
|
Provision for income taxes for non-core and unusual items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
|
|
First Quarter
|
|||||||||||||
|
|
|
|
|
Change
|
|||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|||||||
Sales
|
$
|
855
|
|
|
$
|
939
|
|
|
$
|
(84
|
)
|
|
(9
|
)%
|
Volume / product mix effect
|
|
|
|
|
(45
|
)
|
|
(5
|
)%
|
|||||
Price effect
|
|
|
|
|
(16
|
)
|
|
(2
|
)%
|
|||||
Exchange rate effect
|
|
|
|
|
(23
|
)
|
|
(2
|
)%
|
|||||
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|||||||
Earnings before interest and taxes
|
$
|
146
|
|
|
$
|
176
|
|
|
$
|
(30
|
)
|
|
(17
|
)%
|
Asset impairments and restructuring charges, net
|
4
|
|
|
—
|
|
|
4
|
|
|
|
||||
Net coal gasification incident costs
|
—
|
|
|
2
|
|
|
(2
|
)
|
|
|
||||
Earnings before interest and taxes excluding non-core and unusual items
|
150
|
|
|
178
|
|
|
(28
|
)
|
|
(16
|
)%
|
|
First Quarter
|
|||||||||||||
|
|
|
|
|
Change
|
|||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|||||||
Sales
|
$
|
657
|
|
|
$
|
693
|
|
|
$
|
(36
|
)
|
|
(5
|
)%
|
Volume / product mix effect
|
|
|
|
|
(29
|
)
|
|
(4
|
)%
|
|||||
Price effect
|
|
|
|
|
8
|
|
|
1
|
%
|
|||||
Exchange rate effect
|
|
|
|
|
(15
|
)
|
|
(2
|
)%
|
|||||
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|||||||
Earnings before interest and taxes
|
$
|
102
|
|
|
$
|
135
|
|
|
$
|
(33
|
)
|
|
(24
|
)%
|
Net coal gasification incident costs
|
—
|
|
|
3
|
|
|
(3
|
)
|
|
|
||||
Earnings before interest and taxes excluding unusual item
|
102
|
|
|
138
|
|
|
(36
|
)
|
|
(26
|
)%
|
|
First Quarter
|
|||||||||||||
|
|
|
|
|
Change
|
|||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|||||||
Sales
|
$
|
655
|
|
|
$
|
730
|
|
|
$
|
(75
|
)
|
|
(10
|
)%
|
Volume / product mix effect
|
|
|
|
|
(47
|
)
|
|
(6
|
)%
|
|||||
Price effect
|
|
|
|
|
(21
|
)
|
|
(3
|
)%
|
|||||
Exchange rate effect
|
|
|
|
|
(7
|
)
|
|
(1
|
)%
|
|||||
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|||||||
Earnings before interest and taxes
|
$
|
73
|
|
|
$
|
70
|
|
|
$
|
3
|
|
|
4
|
%
|
Net coal gasification incident costs
|
—
|
|
|
19
|
|
|
(19
|
)
|
|
|
||||
Earnings before interest and taxes excluding unusual item
|
73
|
|
|
89
|
|
|
(16
|
)
|
|
(18
|
)%
|
|
First Quarter
|
|||||||||||||
|
|
|
|
|
Change
|
|||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
(Dollars in millions)
|
|
|
|
|
|
|
|
|||||||
Sales
|
$
|
213
|
|
|
$
|
245
|
|
|
$
|
(32
|
)
|
|
(13
|
)%
|
Volume / product mix effect
|
|
|
|
|
(26
|
)
|
|
(11
|
)%
|
|||||
Price effect
|
|
|
|
|
(5
|
)
|
|
(2
|
)%
|
|||||
Exchange rate effect
|
|
|
|
|
(1
|
)
|
|
—
|
%
|
|||||
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|||||||
Earnings before interest and taxes
|
$
|
42
|
|
|
$
|
43
|
|
|
$
|
(1
|
)
|
|
(2
|
)%
|
Net coal gasification incident costs
|
—
|
|
|
13
|
|
|
(13
|
)
|
|
|
||||
Earnings before interest and taxes excluding unusual item
|
42
|
|
|
56
|
|
|
(14
|
)
|
|
(25
|
)%
|
|
First Quarter
|
||||||
|
2019
|
|
2018
|
||||
(Dollars in millions)
|
|
|
|
||||
Loss before interest and taxes
|
|
|
|
||||
Growth initiatives and businesses not allocated to operating segments
|
$
|
(27
|
)
|
|
$
|
(26
|
)
|
Pension and other postretirement benefits income (expense), net not allocated to operating segments
|
12
|
|
|
21
|
|
||
Asset impairments and restructuring charges, net
|
(28
|
)
|
|
(2
|
)
|
||
Other income (charges), net not allocated to operating segments
|
—
|
|
|
(8
|
)
|
||
Loss before interest and taxes before non-core and unusual items
|
$
|
(43
|
)
|
|
$
|
(15
|
)
|
Costs resulting from tax law changes and outside-U.S. entity reorganizations
|
—
|
|
|
11
|
|
||
Asset impairments and restructuring charges, net
|
28
|
|
|
2
|
|
||
Loss before interest and taxes excluding non-core and unusual items
|
(15
|
)
|
|
(2
|
)
|
|
Sales Revenue
|
|||||||||||||
|
First Quarter
|
|||||||||||||
|
|
|
|
|
Change
|
|||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
United States and Canada
|
$
|
1,000
|
|
|
$
|
1,100
|
|
|
$
|
(100
|
)
|
|
(9
|
)%
|
Asia Pacific
|
553
|
|
|
642
|
|
|
(89
|
)
|
|
(14
|
)%
|
|||
Europe, Middle East, and Africa
|
689
|
|
|
727
|
|
|
(38
|
)
|
|
(5
|
)%
|
|||
Latin America
|
138
|
|
|
138
|
|
|
—
|
|
|
—
|
%
|
|||
Total Eastman Chemical Company
|
$
|
2,380
|
|
|
$
|
2,607
|
|
|
$
|
(227
|
)
|
|
(9
|
)%
|
|
First Three Months
|
||||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Net cash provided by (used in)
|
|
|
|
||||
Operating activities
|
$
|
(5
|
)
|
|
$
|
(35
|
)
|
Investing activities
|
(125
|
)
|
|
(78
|
)
|
||
Financing activities
|
102
|
|
|
116
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(3
|
)
|
|
—
|
|
||
Net change in cash and cash equivalents
|
(31
|
)
|
|
3
|
|
||
Cash and cash equivalents at beginning of period
|
226
|
|
|
191
|
|
||
Cash and cash equivalents at end of period
|
$
|
195
|
|
|
$
|
194
|
|
|
First Three Months
|
||||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Net cash used in operating activities
|
$
|
(5
|
)
|
|
$
|
(35
|
)
|
Capital expenditures
|
|
|
|
||||
Additions to properties and equipment
|
(106
|
)
|
|
(128
|
)
|
||
Proceeds from property insurance (1)
|
—
|
|
|
50
|
|
||
Net capital expenditures
|
(106
|
)
|
|
(78
|
)
|
||
Free cash flow
|
$
|
(111
|
)
|
|
$
|
(113
|
)
|
(1)
|
Cash proceeds from insurance for coal gasification incident property damage.
|
•
|
earnings to benefit from a robust portfolio of specialty businesses in attractive niche end-markets, strong growth in high margin, innovative products, relatively unchanged manufacturing costs due to aggressive cost management, and $40 million of cost savings resulting from business improvement and cost reduction initiatives;
|
•
|
earnings to be negatively impacted by slow global economic growth, the U.S. - China trade dispute, a stronger U.S. dollar, and higher pension costs due to lower expected return on assets and higher interest costs;
|
•
|
interest expense of approximately $225 million;
|
•
|
the full-year effective tax rate on reported earnings before income tax to be approximately 17 percent;
|
•
|
depreciation and amortization of approximately $620 million;
|
•
|
capital expenditures between $475 million and $500 million;
|
•
|
reduction in debt to be lower than 2018; and
|
•
|
increased share repurchases compared to 2018.
|
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
|
Average Price Paid Per Share (1)
|
Total Number of Shares Purchased as Part of Publicly Announced Plan
or Program
|
Approximate Dollar
Value that May Yet Be Purchased Under the Plan or Program
|
||||||
January 1 - 31, 2019
|
655,701
|
|
$
|
76.25
|
|
655,701
|
|
$
|
1.702
|
billion
|
February 1 - 28, 2019
|
587,459
|
|
$
|
81.80
|
|
587,459
|
|
$
|
1.654
|
billion
|
March 1 - 31, 2019
|
338,916
|
|
$
|
79.51
|
|
338,916
|
|
$
|
1.627
|
billion
|
Total
|
1,582,076
|
|
$
|
79.01
|
|
1,582,076
|
|
|
(1)
|
Average price paid per share reflects the weighted average purchase price paid for shares.
|
ITEM 6.
|
EXHIBITS
|
|
|
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
|
|
|
|
|
|
4.08
|
|
|
|
|
|
4.09
|
|
|
|
|
|
4.10
|
|
|
|
|
|
4.11
|
|
|
|
|
|
4.12
|
|
|
|
|
|
4.13
|
|
|
|
|
|
|
|
EXHIBIT INDEX
|
Exhibit Number
|
|
Description
|
4.14
|
|
|
|
|
|
4.15
|
|
|
|
|
|
4.16
|
|
|
|
|
|
4.17
|
|
|
|
|
|
4.18
|
|
|
|
|
|
10.01 *
|
|
|
|
|
|
31.01 *
|
|
|
|
|
|
31.02 *
|
|
|
|
|
|
32.01 *
|
|
|
|
|
|
32.02 *
|
|
|
|
|
|
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
|
|
|
|
Eastman Chemical Company
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
May 3, 2019
|
By:
|
/s/ Curtis E. Espeland
|
|
|
|
Curtis E. Espeland
|
|
|
|
Executive Vice President and Chief Financial Officer
|
Return on Invested Capital (ROIC) % Performance
|
||||||
Eastman TSR Relative to Comparison Group (rTSR)
|
> 6.51 to 7.50
|
7.51 to 8.50
|
8.51 to 9.50
|
9.51 to 10.50
|
10.51 to 11.50
|
>11.51
|
5th quintile
|
0.0
|
0.0
|
0.0
|
0.2
|
0.3
|
0.4
|
4th quintile
|
0.0
|
0.2
|
0.4
|
0.6
|
0.8
|
0.9
|
3rd quintile <50%
|
0.4
|
0.6
|
0.8
|
1.0
|
1.2
|
1.4
|
3rd quintile >50%
|
0.6
|
0.8
|
1.0
|
1.3
|
1.5
|
1.7
|
2nd quintile
|
1.0
|
1.2
|
1.4
|
1.7
|
1.9
|
2.1
|
1st quintile
|
1.0
|
1.8
|
2.0
|
2.3
|
2.4
|
2.5
|
•
|
your combined age and years of service with your Employer, the Company and its Subsidiaries equals or exceeds 75;
|
•
|
you have attained age 55 and 10 years of service with your Employer, the Company and its Subsidiaries;
|
•
|
you had attained age 50 or greater as of your hire date and you have attained 5 years of service with your Employer, the Company and its Subsidiaries; or
|
•
|
you have attained age 65.
|
European Union (“EU”) / European Economic Area (“EEA”)
|
Brazil
|
China
|
a.
|
If such termination occurs before the mid-point of the Performance Period, you (or your legal representative, as applicable) shall become vested in a number of Performance Shares equal to the Target Award; or
|
b.
|
If such termination occurs on or after the mid-point of the Performance Period, you (or your legal representative, as applicable) shall become vested in a number of Performance Shares equal to the Target Award multiplied by the multiplier as set forth in Exhibit A of this Award Notice corresponding to the Company's achievement of the most recent Performance Conditions available on the date of termination, as determined by the Committee in its sole discretion.
|
Finland
|
France
|
Hong Kong
|
Malaysia
|
held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that if you reside outside the United States, you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data, limit the processing of Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. Further, you understand that you are providing the consent herein on a purely voluntary basis. If you do not consent, or if you later seek to revoke your consent, your employment status or service and career with the Company will not be adversely affected; the only adverse consequence of refusing or withdrawing your consent is that the Company may not be able to grant you Performance Shares or other equity awards or administer or maintain such awards. Therefore, you understand that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.
|
Data, dalam bentuk elektronik atau lain-lain, bagi tujuan melaksanakan, mentadbir dan menguruskan penyertaan anda di dalam Pelan, termasuk segala pemindahan Data tersebut sebagaimana yang dikehendaki kepada broker, egen eskrow atau pihak ketiga dengan siapa Saham diterima semasa peletakhakan Performance Shares mungkin didepositkan. Anda memahami bahawa Data hanya akan disimpan selagi ia adalah diperlukan untuk melaksanakan, mentadbir, dan menguruskan penyertaan anda dalam Pelan. Anda memahami bahawa sekiranya anda menetap di luar Amerika Syarikat, anda boleh, pada bila-bila masa, melihat Data, meminta maklumat tambahan mengenai penyimpanan dan pemprosesan Data, meminta bahawa pindaan-pindaan dilaksanakan ke atas Data, mengehadkan pemprosesan Data atau menolak atau menarik balik persetujuan dalam ini, dalam mana-mana kes, tanpa kos, dengan menghubungi secara bertulis wakil sumber manusia tempatan. Selanjutnya, anda memahami bahawa anda memberikan persetujuan di sini secara sukarela semata-mata. Sekiranya anda tidak bersetuju, atau sekiranya anda kemudian membatalkan persetujuan anda, status pekerjaan atau perkhidmatan dan kerjaya anda dengan Syarikat tidak akan terjejas; satu-satunya akibat buruk sekiranya anda tidak bersetuju atau menarik balik persetujuan andaadalah bahawa Syarikat tidak akan dapat memberikan Perforamance Shares kepada anda atau anugerah ekuiti lain atau mentadbir atau mengekalkan anugerah-anugerah tersebut. Oleh itu, anda memahami bahawa keengganan atau penarikan balik persetujuan anda boleh menjejaskan keupayaan anda untuk mengambil bahagian dalam Pelan. Untuk maklumat lebih lanjut mengenai akibat-akibat keengganan anda untuk memberikan keizinan atau penarikan balik keizinan, anda memahami bahawa anda boleh menghubungi wakil sumber manusia tempatan.
|
Mexico
|
Netherlands
|
Singapore
|
South Korea
|
1)
|
COLLECTION AND USE OF YOUR PERSONAL DATA.
|
2)
|
PROVISION OF YOUR PERSONAL DATA TO A THIRD PART AND TRANSFER OF YOUR PERSONAL DATA OVERSEAS.
|
3)
|
PROCESSING OF YOUR UNIQUE IDENTIFYING INFORMATION (RESIDENT REGISTRATION NUMBER).
|
Switzerland
|
United Kingdom
|
Return on Invested Capital (ROIC) % Performance
|
||||||
Eastman TSR Relative to Comparison Group rTSR
|
> 6.51 to 7.50
|
7.51 to 8.50
|
8.51 to 9.50
|
9.51 to 10.50
|
10.51 to 11.50
|
>11.51
|
5th quintile
|
0.0
|
0.0
|
0.0
|
0.2
|
0.3
|
0.4
|
4th quintile
|
0.0
|
0.2
|
0.4
|
0.6
|
0.8
|
0.9
|
3rd quintile <50%
|
0.4
|
0.6
|
0.8
|
1.0
|
1.2
|
1.4
|
3rd quintile >50%
|
0.6
|
0.8
|
1.0
|
1.3
|
1.5
|
1.7
|
2nd quintile
|
1.0
|
1.2
|
1.4
|
1.7
|
1.9
|
2.1
|
1st quintile
|
1.0
|
1.8
|
2.0
|
2.3
|
2.4
|
2.5
|
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.
|