(Source: Business Wire)
Eastman Chemical Company (NYSE:EMN) today announced earnings per diluted
share of $1.38 for third quarter 2009 versus $1.33 for third quarter
2008. Earnings per diluted share for third quarter 2009 were reduced
$0.16 per share by the reversal of a previously recognized investment
tax credit for the company's Beaumont, Texas, industrial gasification
project as discussed below.
"We continued to make solid progress improving our profitability during
what remains a challenging economic environment," said Jim Rogers,
president and CEO. "Cash generation also continues to be a priority, and
we did a great job during the quarter generating well over $200 million
in free cash flow."
(In millions, except per share amounts) 3Q2009 3Q2008
Sales revenue $1,337 $1,819
Earnings per diluted share $1.38 $1.33
Earnings per diluted share excluding asset impairments and restructuring charges, net, accelerated depreciation costs, and net deferred tax benefits related to the previous divestiture of businesses* $1.38 $1.35
Net cash provided by operating activities $331 $214
*For reconciliations to reported company and segment earnings, see Tables 3 and 5 in the accompanying third-quarter 2009 financial tables.
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Sales revenue in third quarter 2009 was $1.3 billion compared with $1.8
billion in third quarter 2008. Sales revenue for third quarter 2008
included contract ethylene sales resulting from the fourth-quarter 2006
divestiture of the polyethylene business. Also included in third-quarter
2008 sales revenue were contract polymer intermediates sales resulting
from the fourth-quarter 2007 divestiture of PET polymers manufacturing
facilities and related businesses in Mexico and Argentina. Excluding
these items, sales revenue declined by 21 percent due to lower selling
prices in response to lower raw material and energy costs and a decline
in sales volume of 4 percent. For reconciliations to reported company
and segment sales revenue, see Table 4 in the accompanying third-quarter
2009 financial tables.
Operating earnings in third quarter 2009 were $191 million compared with
operating earnings of $174 million in third quarter 2008. Excluding
accelerated depreciation costs and asset impairments and restructuring
charges, net, operating earnings were $179 million in third quarter
2008. Operating earnings increased as lower raw material and energy
costs and cost reduction actions were partially offset by lower selling
prices and lower sales volume. The increased operating margin was
attributed to a favorable shift in company product mix due to a higher
percentage of overall sales revenue from the Fibers, CASPI, and
Specialty Plastics segments compared to the PCI and Performance Polymers
segments.
Segment Results 3Q 2009 versus 3Q 2008
Coatings, Adhesives, Specialty Polymers and Inks -- Sales revenue
declined by 18 percent primarily due to lower selling prices and lower
sales volume. The lower selling prices were in response to lower raw
material and energy costs. The lower sales volume was due to reduced
customer demand attributed to the global recession, particularly for
products sold into the automotive, building and construction, and
packaging markets. Operating earnings were $84 million in third quarter
2009 compared to $55 million in third quarter 2008. Operating earnings
increased primarily due to lower raw material and energy costs and cost
reduction actions, which more than offset lower selling prices and lower
sales volume.
Fibers -- Sales revenue declined by 5 percent as lower sales
volume more than offset higher selling prices. The lower sales volume
was primarily for acetyl chemical products. The higher selling prices
were in response to higher raw material costs, particularly for wood
pulp. Operating earnings increased to $79 million in third quarter 2009
compared with $65 million in third quarter 2008 due to higher selling
prices and cost reduction actions partially offset by lower sales volume.
Performance Chemicals and Intermediates -- Sales revenue declined
by 40 percent, and excluding contract ethylene sales resulting from the
divestiture of the polyethylene business, declined by 30 percent due to
lower selling prices. The lower selling prices were primarily due to
lower raw material and energy costs. Operating earnings were $33 million
in third quarter 2009 compared with $65 million in third quarter 2008
excluding asset impairments and restructuring charges and accelerated
depreciation costs in third quarter 2008. The decline was due to lower
selling prices partially offset by lower raw material and energy costs
and cost reduction actions.
Performance Polymers -- Sales revenue declined by 36 percent, and
excluding contract polymer intermediates sales to divested manufacturing
facilities in second quarter 2008 declined by 27 percent due to lower
selling prices while sales volume was unchanged. The lower selling
prices were attributed to a decline in raw material and energy costs,
particularly for paraxylene. Operating results were a loss of $10
million in third quarter 2009, compared with earnings of $1 million in
third quarter 2008 excluding asset impairments and restructuring charges
and accelerated depreciation costs. Operating results declined due to
lower selling prices and the impact on sales revenue and manufacturing
costs of continuing operational challenges with the IntegRex-based PET
manufacturing facility partially offset by lower raw material and energy
costs and cost reduction actions.
Specialty Plastics -- Sales revenue declined by 21 percent due to
lower sales volume and lower selling prices. The decline in sales volume
was attributed to the global recession which has weakened demand for
plastic resins, including copolyester products sold into the consumer
and durable goods markets, and for cellulosic plastics sold into various
markets. Operating earnings increased to $13 million in third quarter
2009 from $6 million in third quarter 2008. The increase was due to
lower raw material and energy costs and cost reduction actions partially
offset by lower sales volume, lower capacity utilization resulting in
higher unit costs, and an unfavorable shift in product mix with less
cellulosic plastics sold into various markets.
Income Taxes
During third quarter 2009, the company reversed a previously recognized
$12 million investment tax credit for the Beaumont, Texas, industrial
gasification project because of a later estimated project completion
date based on completed front-end engineering and design, and continuing
legislative and other uncertainties. Including the investment tax credit
reversal, the effective tax rate for the third quarter was 40 percent.
Cash Flow
Eastman generated $331 million in cash from operating activities during
third quarter 2009, which included solid net earnings, a continued
reduction in working capital, and approximately $100 million from a
combination of a refund of previously paid taxes and lower estimated tax
payments. The company generated $304 million of positive free cash flow
(cash from operations less capital expenditures and dividends) through
the first nine months of 2009.
Outlook
Commenting on the outlook for fourth quarter 2009, Rogers said: "We
expect to continue to benefit from a favorable shift in company product
mix and cost reduction actions we have taken. However, we also expect
volatility in raw material and energy costs and a decline in sales
volume due to normal seasonality to negatively impact our fourth quarter
results. We therefore expect fourth-quarter 2009 earnings per share to
decline sequentially, but to be slightly above the high end of analysts'
estimates on First Call, which is $0.85 per share."
Eastman will host a conference call with industry analysts on October 23
at 8:00 a.m. EDT. To listen to the live webcast of the conference call
and view the accompanying slides, go to www.investors.eastman.com,
Presentations. To listen via telephone, the dial-in number is (913)
981-5564, passcode number 2194056. A web replay and the accompanying
slides will be available at www.investors.eastman.com,
Presentations. A telephone replay will be available continuously from
11:00 a.m. Eastern time October 23 to 12:00 midnight Eastern time,
November 2, at (719) 457-0820, passcode number 2194056.
Eastman's chemicals, fibers and plastics are used as key ingredients in
products that people use every day. Approximately 10,000 Eastman
employees around the world blend technical expertise and innovation to
deliver practical solutions. The company is committed to finding
sustainable business opportunities within the diverse markets it serves.
A global company headquartered in Kingsport, Tennessee, USA, Eastman had
2008 sales of $6.7 billion. For more information, visit www.eastman.com.
Forward-Looking Statements: This news release includes
forward-looking statements concerning current expectations for future
economic and business conditions, the financial impact of cost reduction
actions, the relative mix of sales among the company's segments and
products within those segments, demand and sales volumes for the
company's products, raw material and energy costs, and earnings per
share for fourth quarter 2009. Such expectations are based upon certain
preliminary information, internal estimates, and management assumptions,
expectations, and plans, and are subject to a number of risks and
uncertainties inherent in projecting future conditions, events, and
results. Actual results could differ materially from expectations
expressed in the forward-looking statements if one or more of the
underlying assumptions or expectations prove to be inaccurate or are
unrealized. Important factors that could cause actual results to differ
materially from such expectations are and will be detailed in the
company's filings with the Securities and Exchange Commission, including
the Form 10-Q filed for second quarter 2009 available, and the Form 10-Q
to be filed for third quarter 2009 and to be available, on the Eastman
web site at www.eastman.com
in the Investors, SEC filings section.
For use in the Eastman Chemical Company Conference Call at 8:00 AM (EDT), October 23, 2009.
Table of Contents
Item Page
TABLE 1 Statements of Earnings 1
TABLE 2A Segment Sales Information 2
TABLE 2B Sales Revenue Change 2
TABLE 2C Sales by Region 3
TABLE 2D Percentage Growth in Sales Volume by Region 3
TABLE 3 Operating Earnings (Loss), Accelerated Depreciation Costs, and Asset Impairments and Restructuring Charges, Net 4
TABLE 4 Eastman Chemical Company Detail of Sales Revenue 5
TABLE 5 Operating Earnings, Earnings, and Earnings Per Share from Continuing Operations Reconciliation 6
TABLE 6 Statements of Cash Flows 8
TABLE 7 Selected Balance Sheet Items 9
During 2007 and first quarter 2008, the company took strategic actions in its Performance Polymers segment for its underperforming polyethylene terephthalate ("PET") manufacturing facilities outside the United States. During second quarter 2007, the company sold its PET manufacturing facility in Spain. In first quarter 2008, the company sold its PET polymers and purified terephthalic acid ("PTA") production facilities in the Netherlands and its PET production facility in the United Kingdom and the related assets and businesses. Because the company exited the PET business in the European region, results from sales of PET products manufactured at the Spain, the Netherlands, and the United Kingdom facilities, including impairments and restructuring charges of those operations, and gains and losses from disposal of those assets and businesses, are presented in the first nine months of 2008 as discontinued operations and are therefore not included in results from continuing operations for the company or the Performance Polymers segment under generally accepted accounting principles.
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TABLE 1 -- STATEMENTS OF EARNINGS
Third Quarter First Nine Months
(Dollars in millions, except per share amounts) 2009 2008 2009 2008
Sales $ 1,337 $ 1,819 $ 3,719 $ 5,380
Cost of sales 1,009 1,497 2,952 4,400
Gross profit 328 322 767 980
Selling, general and administrative expenses 104 107 296 324
Research and development expenses 33 39 101 120
Asset impairments and restructuring charges, net -- 2 23 22
Operating earnings 191 174 347 514
Net interest expense 19 19 58 53
Other charges (income), net 2 7 11 7
Earnings from continuing operations before income taxes 170 148 278 454
Provision for income taxes from continuing operations 69 48 110 124
Earnings from continuing operations 101 100 168 330
Earnings from disposal of discontinued operations, net of tax -- -- -- 18
Net earnings $ 101 $ 100 $ 168 $ 348
Basic earnings per share
Earnings from continuing operations $ 1.40 $ 1.35 $ 2.31 $ 4.34
Earnings from discontinued operations -- -- -- 0.23
Basic earnings per share $ 1.40 $ 1.35 $ 2.31 $ 4.57
Diluted earnings per share
Earnings from continuing operations $ 1.38 $ 1.33 $ 2.29 $ 4.27
Earnings from discontinued operations -- -- -- 0.23
Diluted earnings per share $ 1.38 $ 1.33 $ 2.29 $ 4.50
Shares (in millions) outstanding at end of period 72.7 72.5 72.7 72.5
Shares (in millions) used for earnings per share calculation
Basic 72.6 74.2 72.5 76.1
Diluted 73.5 75.1 73.3 77.2
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TABLE 2A -- SEGMENT SALES INFORMATION
Third Quarter First Nine Months
(Dollars in millions) 2009 2008 2009 2008
Sales by Segment
Coatings, Adhesives, Specialty Polymers, and Inks $ 338 $ 410 $ 890 $ 1,213
Fibers 257 269 779 783
Performance Chemicals and Intermediates 355 594 943 1,768
Performance Polymers 187 293 563 886
Specialty Plastics 200 253 544 730
Total Eastman Chemical Company $ 1,337 $ 1,819 $ 3,719 $ 5,380
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TABLE 2B -- SALES REVENUE CHANGE
Third Quarter 2009 Compared to Third Quarter 2008
Change in Sales Revenue Due To
Revenue% Change VolumeEffect PriceEffect ProductMixEffect ExchangeRateEffect
Coatings, Adhesives, Specialty Polymers, and Inks (18) % (7) % (11) % -- % -- %
Fibers (5) % (12) % 7 % -- % -- %
Performance Chemicals and Intermediates ((1)) (40) % (10) % (32) % 2 % -- %
Performance Polymers ((2)) (36) % (11) % (28) % 3 % -- %
Specialty Plastics (21) % (13) % (7) % (2) % 1 %
Total Eastman Chemical Company (27) % (10) % (17) % -- % -- %
First Nine Months 2009 Compared to First Nine Months 2008
Change in Sales Revenue Due To
Revenue% Change VolumeEffect PriceEffect ProductMixEffect ExchangeRateEffect
Coatings, Adhesives, Specialty Polymers, and Inks (27) % (19) % (5) % (3) % -- %
Fibers -- % (10) % 9 % 1 % -- %
Performance Chemicals and Intermediates ((1)) (47) % (25) % (23) % 1 % -- %
Performance Polymers ((2)) (36) % (13) % (25) % 2 % -- %
Specialty Plastics (25) % (17) % (5) % (3) % -- %
Total Eastman Chemical Company (31) % (18) % (13) % -- % -- %
((1)) Included in 2009 and 2008 sales revenue are contract ethylene sales under the transition supply agreement related to the divestiture of the polyethylene ("PE") businesses. Refer to Table 4 for more information.
((2)) Sales revenue in 2008 included contract polymer intermediates sales under the transition supply agreement related to the divestiture of the PET manufacturing facilities and related businesses in Mexico and Argentina in fourth quarter 2007. Refer to Table 4 for more information.
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TABLE 2C -- SALES BY REGION
Third Quarter First Nine Months
(Dollars in millions) 2009 2008 2009 2008
Sales by Region
United States and Canada ((1)) $ 737 $ 1,124 $ 2,096 $ 3,287
Asia Pacific 282 309 769 921
Europe, Middle East, and Africa 222 248 607 774
Latin America ((2)) 96 138 247 398
$ 1,337 $ 1,819 $ 3,719 $ 5,380
((1)) Included in 2009 and 2008 sales revenue are contract ethylene sales under the transition supply agreement related to the divestiture of the PE businesses. Refer to Table 4 for more information.
((2)) Included in 2008 sales revenue are contract polymer intermediates sales under the transition supply agreement related to the divestiture of the Mexican and Argentine businesses. Refer to Table 4 for more information.
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TABLE 2D -- PERCENTAGE GROWTH IN SALES VOLUME BY REGION
Third Quarter First Nine Months
Regional sales volume growth
United States and Canada ((1)) (12) % (20) %
Asia Pacific 8 % (6) %
Europe, Middle East, and Africa (11) % (33) %
Latin America ((2)) (17) % (30) %
((1)) Included in 2009 and 2008 sales revenue are contract ethylene sales under the transition supply agreement related to the divestiture of the PE businesses. Refer to Table 4 for more information.
((2)) Included in 2008 sales revenue are contract polymer intermediates sales under the transition supply agreement related to the divestiture of the Mexican and Argentine businesses. Refer to Table 4 for more information.
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TABLE 3 - OPERATING EARNINGS (LOSS), ACCELERATED DEPRECIATION COSTS, AND ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES, NET
Third Quarter First Nine Months
(Dollars in millions) 2009 2008 2009 2008
Operating Earnings (Loss) by Segment and Items A service of YellowBrix, Inc.
