Business News

Eastman Announces Record Earnings in Third Quarter 2010

Friday 29. October 2010 - Eastman Chemical Company (NYSE:EMN) today announced earnings of $2.33 per diluted share for third quarter 2010 versus $1.38 per diluted share for third quarter 2009.

“Our core businesses continued to deliver strong results in the third quarter, leading us to our second consecutive record quarter of earnings per share,” said Jim Rogers, president and CEO. “Key factors driving the record earnings continue to be the strong volume across the company and in all regions, significant contributions from our growth initiatives, and the positive impact of strategic actions that have improved our portfolio of businesses and our cost structure.”


(In millions, except per share amounts)

3Q2010

3Q2009
Sales revenue $1,729 $1,337
Earnings per diluted share $2.33 $1.38
Net cash provided by operating activities $316 $331
*See Table 4 for additional information about historical earnings per diluted share.

Sales revenue for third quarter 2010 was $1.7 billion, a 29 percent increase compared with third quarter 2009 primarily due to higher sales volume and higher selling prices. The higher sales volume was attributed primarily to improved end-use demand in packaging, durable goods, and other markets and the positive impact of growth initiatives. The increase in selling prices was in response to higher raw material and energy costs.

Operating earnings in third quarter 2010 increased to $280 million compared with operating earnings of $191 million in third quarter 2009. Operating earnings increased due to higher sales volume and higher capacity utilization which led to lower unit costs. In addition, higher selling prices more than offset higher raw material and energy costs. Third-quarter 2010 operating earnings also included $22 million from the partial settlement of an insurance claim related to the first-quarter 2010 power outage at the company’s Longview, Texas, manufacturing facility.

Segment Results 3Q 2010 versus 3Q 2009

Coatings, Adhesives, Specialty Polymers and Inks – Sales revenue increased by 20 percent due to higher selling prices and higher sales volume. The higher selling prices were in response to higher raw material and energy costs. The higher sales volume was attributed primarily to improved end-use demand in the packaging and transportation markets in Europe and the U.S., and the positive impact of growth initiatives. Operating earnings in third quarter 2010 increased to $91 million compared with operating earnings of $84 million in third quarter 2009. Third-quarter 2010 operating earnings included $9 million from the partial settlement of the Longview, Texas, insurance claim. In addition, higher raw material and energy costs and increased costs for growth initiatives were mostly offset by higher selling prices and higher sales volume.

Fibers – Sales revenue increased by 17 percent due to higher sales volume, particularly for acetate tow attributed to customer buying patterns, and acetate yarn product lines. Operating earnings in third quarter 2010 increased to a quarterly record of $90 million compared with operating earnings of $79 million in third quarter 2009. The increase was due primarily to increased sales volume, particularly for acetate tow, and higher acetyl stream capacity utilization.

Performance Chemicals and Intermediates – Sales revenue increased by 42 percent due primarily to higher sales volume and higher selling prices. The higher sales volume was attributed primarily to growth in plasticizer product lines, which includes the addition of new plasticizer product lines from the acquisition of Genovique Specialties Corporation, and improved end-use demand in markets such as industrial chemicals and processing, agriculture and health and wellness. The higher selling prices were in response to higher raw material and energy costs. Operating earnings in third quarter 2010 increased to $77 million compared with $31 million in third quarter 2009. The increase was due to higher selling prices which more than offset higher raw material and energy costs, and higher sales volume and higher capacity utilization which led to lower unit costs. Third-quarter 2010 operating earnings included $12 million from the partial settlement of the Longview, Texas, insurance claim.

Performance Polymers – Sales revenue increased by 34 percent due to higher sales volume and higher selling prices. Sales volume increased due to improved operations of the IntegRex-based PET manufacturing facility. The higher selling prices were due to sales in higher value end-use markets. Operating earnings in third quarter 2010 increased to $6 million from a loss of $8 million in third quarter 2009 primarily due to the favorable impact of improved IntegRex operations and higher selling prices which more than offset higher raw material and energy costs.

Specialty Plastics – Sales revenue increased by 33 percent due primarily to higher sales volume. The increase in sales volume was attributed to improved end-use demand for specialty packaging and consumer and durable goods, and the positive impact of growth initiatives for core copolyesters and Eastman Tritan copolyester product lines. Operating earnings increased to $31 million in third quarter 2010 compared with $13 million in third quarter 2009. The increase was due to higher sales volume, resulting in higher capacity utilization and lower unit costs which more than offset higher raw material and energy costs.

Cash Flow

Eastman generated $316 million of cash from operating activities during third quarter 2010 due primarily to strong net earnings. The company continues to expect to generate free cash flow of greater than $300 million for full year 2010, excluding the $200 million impact on cash from operating activities in first quarter 2010 resulting from the adoption of amended accounting guidance applied to the company’s accounts receivable securitization program. This expectation includes a contribution to the U.S. defined benefit pension plan of $135 million, of which $100 million is expected to be contributed in the fourth quarter. Free cash flow is defined as cash from operating activities less capital expenditures and dividends. See Table 5A for reconciliation of cash provided by operating activities to free cash flow.

Outlook

Commenting on the outlook for fourth quarter 2010, Rogers said: “Other than normal seasonal declines, we expect strong volumes will continue across the company and in all regions. We also expect raw material and energy costs will increase, particularly for paraxylene, which could negatively impact operating margins. As a result, we expect fourth-quarter 2010 earnings per share will be between $1.40 and $1.50.” Charges related to restructuring actions are excluded from earnings per share projections.