Eastman Announces First-Quarter 2010 Financial Results

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KINGSPORT, Tenn.--(Business Wire)--
Eastman Chemical Company (NYSE:EMN) today announced earnings of $1.37 per
diluted share for first quarter 2010 versus $0.03 per diluted share for first
quarter 2009. Excluding restructuring charges of $26 million, first-quarter 2009
earnings were $0.25 per diluted share. For reconciliations to reported company
and segment earnings, see Tables 3 and 4 in the accompanying first-quarter 2010
financial tables.

"With volumes recovering and product mix improving, our first-quarter earnings
demonstrated the strength of our core businesses," said Jim Rogers, president
and CEO. "The combination of these solid businesses and the strategic actions we
have taken have positioned us well to take full advantage of the economic
recovery."

(In millions, except per share amounts) 1Q2010 1Q2009
Sales revenue $ 1,564 $ 1,129
Earnings per diluted share $ 1.37 $ 0.03
Earnings per diluted share excluding restructuring charges* $ 1.37 $ 0.25
Net cash provided by (used in) operating activities $ (225 ) $ 82
Net cash provided by (used in) operating activities excluding impact of adoption of amended accounting guidance* $ (25 ) $ 82

*For reconciliations to reported company and segment earnings and cash flows, see Tables 3, 4 and 5A in the accompanying first-quarter 2010 financial tables. See "Cash Flow" for explanation of the adoption of amended accounting guidance.

Sales revenue for first quarter 2010 was $1.6 billion, a 39 percent increase
compared with first quarter 2009 primarily due to higher sales volume, a
favorable shift in product mix, and higher selling prices. The higher sales
volume was due primarily to improved customer demand compared with the depressed
levels in first quarter 2009 and the increase in selling prices was in response
to higher raw material and energy costs.

Operating earnings in first quarter 2010 increased to $182 million compared with
operating earnings of $51 million excluding restructuring charges in first
quarter 2009. Operating earnings increased due to higher sales volume and higher
capacity utilization which led to lower unit costs and a favorable shift in
product mix. In addition, higher selling prices mostly offset higher raw
material and energy costs. First-quarter 2010 operating earnings included $12
million in sales revenue from an acetyl license and were negatively impacted
approximately $25 million by the previously announced outage at the company`s
Longview, Texas, manufacturing facility.

Segment Results 1Q 2010 versus 1Q 2009

Coatings, Adhesives, Specialty Polymers and Inks- Sales revenue increased by 49
percent primarily due to higher sales volume and a favorable shift in product
mix. The higher sales volume was due to improved customer demand compared to the
depressed levels in first quarter 2009. The favorable shift in product mix was
due to higher volumes in specialty polymers and specialty coalescents product
lines due to the demand recovery in coatings markets, particularly in the Asia
Pacific region. Operating earnings in first quarter 2010 increased to $66
million compared with operating earnings of $21 million excluding restructuring
charges in first quarter 2009. The increase was due to higher sales volume and
higher capacity utilization which led to lower unit costs and the favorable
shift in product mix. Operating earnings were negatively impacted by higher raw
material and energy costs and approximately $10 million by the outage at the
company`s Texas manufacturing facility.

Fibers- Sales revenue increased by 3 percent primarily as a result of higher
selling prices in response to higher raw material costs. Operating earnings in
first quarter 2010 increased to $79 million compared with operating earnings of
$73 million excluding restructuring charges in first quarter 2009. This increase
was due to higher selling prices and higher capacity utilization for acetate
yarn product lines.

Performance Chemicals and Intermediates- Sales revenue increased by 58 percent
due to higher sales volume, higher selling prices and a favorable shift in
product mix. The higher sales volume was due to improved customer demand
compared to the depressed levels in first quarter 2009. The higher selling
prices were primarily in olefin-based product lines in response to higher raw
material and energy costs. The favorable shift in product mix was due to
increased sales volume in higher priced olefin derivative product lines and
sales revenue from the acetyl license. Operating earnings in first quarter 2010
increased to $37 million compared with an operating loss of $4 million excluding
restructuring charges in first quarter 2009. The increase was due to higher
selling prices, higher sales volume and higher capacity utilization which led to
lower unit costs, and the favorable shift in product mix including sales revenue
from the acetyl license. Operating earnings were negatively impacted by higher
raw material and energy costs and approximately $12 million by the outage at the
company`s Texas manufacturing facility.

Performance Polymers - Sales revenue increased by 22 percent due to higher
selling prices and higher sales volume. The higher selling prices were primarily
due to higher raw material and energy costs, particularly for paraxylene. Sales
volume increased due to improved operations of the IntegRex-based PET facility.
Operating results were a loss of $13 million in first quarter 2010 compared with
a loss excluding restructuring charges of $14 million in first quarter 2009 as
higher selling prices and the favorable impact of improved IntegRex operations
were mostly offset by higher raw material and energy costs. First-quarter 2010
results were negatively impacted by continued difficult market conditions for
PET in North America.

Specialty Plastics - Sales revenue increased by 59 percent due primarily to
higher sales volume and a favorable shift in product mix. The increase in sales
volume was due to improved customer demand compared to the depressed levels in
first quarter 2009 and the positive impact of growth initiatives for core
copolyesters and Eastman Tritan copolyester product lines. The favorable shift
in product mix was due to higher sales volume for cellulosic plastics sold into
the LCD market. Operating earnings in first quarter 2010 increased to $21
million compared with an operating loss of $13 million excluding restructuring
charges in first quarter 2009. The increase was due to higher sales volume and
higher capacity utilization which led to lower unit costs and the favorable
shift in product mix.

Cash Flow

Eastman used $225 million in cash from operating activities during first quarter
2010. Excluding the $200 million impact of the adoption of amended accounting
guidance, Eastman used $25 million in cash from operating activities primarily
due to increased accounts receivable from increased sales. In first quarter
2010, Eastman adopted amended accounting guidance for the transfers of financial
assets which changed the financial statement presentation of activity under the
company`s accounts receivable securitization program. As a result, $200 million
of receivables, previously accounted for as sold and removed from the balance
sheet when transferred under the accounts receivable securitization program, are
included on the first-quarter balance sheet as trade receivables, net. This
increase in receivables reduced cash from operations by $200 million in first
quarter 2010. Excluding the impact of the adoption of this amended accounting
guidance, the company expects to generate free cash flow between $200 million
and $300 million for full year 2010. Free cash flow is defined as cash from
operating activities minus capital expenditures and dividends.

Outlook

Commenting on the outlook for second quarter and full year 2010, Rogers said:
"During the first quarter, there were clear signs of a global recovery in our
sales volume. Looking forward, we expect to continue to benefit from improved
sales volume and higher capacity utilization which results in lower unit costs.
We also expect raw material and energy costs to remain volatile. As a result, we
expect second quarter 2010 earnings per share to be between $1.50 and $1.60 per
share. In addition, due primarily to the combination of the stronger recovery in
2010 and the strategic actions we have taken, we expect full year 2010 earnings
per share to be between $5.00 and $5.25." Any charges related to restructuring
actions are excluded from earnings per share projections.

Eastman will host a conference call with industry analysts on April 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, Events & Presentations. To
listen via telephone, the dial-in number is (913) 312-1433, passcode number
1063974. A web replay and the accompanying slides will be available at
www.investors.eastman.com, Events & Presentations. A telephone replay will be
available continuously from 11:00 a.m. EDT, April 23, to 11:00 a.m. EDT, May 3,
at (719) 457-0820, passcode number 1063974.

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,
Tenn., USA, Eastman had 2009 sales of $5 billion. For more information, visit
www.eastman.com.

Forward Looking Statements: This news release includes forward-looking
statements concerning current expectations for global economic recovery, sales
volumes, capacity utilization, unit costs, raw material and energy costs, and
earnings per share for second quarter and full-year 2010. 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-K filed for 2009 available, and the Form 10-Q
to be filed for first quarter 2010 and to be available, on the Eastman web site
at www.eastman.com in the Investors, SEC filings section.

FINANCIAL INFORMATION
April 22, 2010

For use in the Eastman Chemical Company Conference Call at 8:00 AM (EDT), April 23, 2010.

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 Sales Revenue Change by Region 3

TABLE 3 Operating Earnings (Loss) and Asset Impairments and Restructuring Charges, Net 4

TABLE 4 Operating Earnings, Earnings, and Earnings Per Share Reconciliation 5

TABLE 5 Statements of Cash Flows 6

TABLE 5A Net Cash Provided By (Used In) Operating Activities Reconciliation and Free Cash Flow 7

TABLE 6 Selected Balance Sheet Items 7

TABLE 1 - STATEMENTS OF EARNINGS

First Quarter
(Dollars in millions, except per share amounts) 2010 2009

Sales $ 1,564 $ 1,129
Cost of sales 1,243 950
Gross profit 321 179

Selling, general and administrative expenses 103 94
Research and development expenses 36 34
Asset impairments and restructuring charges, net -- 26
Operating earnings 182 25

Net interest expense 25 19
Other charges (income), net 6 4
Earnings before income taxes 151 2
Provision for income taxes 50 --
Net earnings $ 101 $ 2

Earnings per share
Basic $ 1.39 $ 0.03
Diluted $ 1.37 $ 0.03

Shares (in millions) outstanding at end of period 72.4 72.6

Shares (in millions) used for earnings per share calculation
Basic 72.2 72.5
Diluted 73.3 72.9

TABLE 2A - SEGMENT SALES INFORMATION

First Quarter
(Dollars in millions) 2010 2009
Sales by Segment
Coatings, Adhesives, Specialty Polymers, and Inks $ 373 $ 250
Fibers 267 259
Performance Chemicals and Intermediates 482 304
Performance Polymers 194 159
Specialty Plastics 248 157
Total Eastman Chemical Company $ 1,564 $ 1,129

TABLE 2B - SALES REVENUE CHANGE

First Quarter 2010 Compared to First Quarter 2009
Change in Sales Revenue Due To
Revenue Volume Price Product Exchange

% Change
Effect
Effect Mix Rate

Effect
Effect

Coatings, Adhesives, Specialty Polymers, and Inks 49 % 34 % 3 % 10 % 2 %
Fibers 3 % -- % 2 % 1 % -- %
Performance Chemicals and Intermediates 58 % 22 % 19 % 16 % 1 %
Performance Polymers 22 % 6 % 18 % (2 )% -- %
Specialty Plastics 59 % 50 % (6 )% 13 % 2 %

Total Eastman Chemical Company 39 % 22 % 8 % 8 % 1 %

TABLE 2C - SALES BY REGION

First Quarter
(Dollars in millions) 2010 2009

Sales by Region
United States and Canada $ 837 $ 671
Asia Pacific 334 210
Europe, Middle East, and Africa 276 178
Latin America 117 70
$ 1,564 $ 1,129

TABLE 2D - SALES REVENUE CHANGE BY REGION

First Quarter 2010 Compared to First Quarter 2009
Change in Sales Revenue Due To
(Dollars in millions) Change Volume Price Product Exchange

Effect
Effect
Mix Rate

Effect
Effect

United States and Canada 25 % 13 % 9 % 3 % -- %
Asia Pacific 60 % 34 % 9 % 16 % 1 %
Europe, Middle East, and Africa 55 % 28 % (1 )% 22 % 6 %
Latin America 66 % 46 % 18 % 2 % -- %

Total Eastman Chemical Company 39 % 22 % 8 % 8 % 1 %

TABLE 3 - OPERATING EARNINGS (LOSS) AND ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES, NET

First Quarter
(Dollars in millions) 2010 2009
Operating Earnings (Loss) by Segment and Items
Coatings, Adhesives, Specialty Polymers, and Inks
Operating earnings $ 66 $ 14
Asset impairments and restructuring charges, net(1) -- 7
Operating earnings excluding item 66 21

Fibers
Operating earnings 79 69
Asset impairments and restructuring charges, net(1) -- 4
Operating earnings excluding item 79 73

Performance Chemicals and Intermediates
Operating earnings (loss) 37 (10 )
Asset impairments and restructuring charges, net(1) -- 6
Operating earnings excluding item 37 (4 )

Performance Polymers
Operating loss (13 ) (18 )
Asset impairments and restructuring charges, net(1) -- 4
Operating loss excluding item (13 ) (14 )

Specialty Plastics
Operating earnings (loss) 21 (18 )
Asset impairments and restructuring charges, net(1) -- 5
Operating earnings (loss) excluding item 21 (13 )

Total Operating Earnings by Segment and Item
Total operating earnings 190 37
Total asset impairments and restructuring charges, net -- 26
Total operating earnings excluding item 190 63

Other(2)
Operating loss (8 ) (12 )

Total Eastman Chemical Company
Total operating earnings $ 182 $ 25
Total asset impairments and restructuring charges, net -- 26
Total operating earnings excluding item $ 182 $ 51

(1) Includes severance costs for a reduction in force in first quarter 2009.
(2) Expenses not identifiable to an operating segment are not included in segment operating results and are shown as "other" operating losses.

TABLE 4 - OPERATING EARNINGS, EARNINGS, AND EARNINGS PER SHARE RECONCILIATION

EARNINGS PER DILUTED SHARE EXCLUDING CERTAIN ITEM

First Quarter2010
(Dollars in millions) Operating Earnings Earnings Earnings
Earnings
Before
After
Per Diluted

Tax
Tax
Share

As reported $ 182 $ 151 $ 101 $ 1.37

First Quarter2009
(Dollars in millions) Operating Earnings Earnings Earnings
Earnings
Before
After
Per Diluted

Tax
Tax
Share

As reported $ 25 $ 2 $ 2 $ 0.03

Certain Item:
Asset impairments and restructuring charges, net 26 26 16 0.22
Excluding item $ 51 $ 28 $ 18 $ 0.25

TABLE 5 - STATEMENTS OF CASH FLOWS

First Three Months
(Dollars in millions) 2010 2009

Cash flows from operating activities
Net earnings $ 101 $ 2

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization 69 67
Provision (benefit) for deferred income taxes 16 (13 )
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
(Increase) decrease in trade receivables (414 ) 5
(Increase) decrease in inventories (58 ) 70
Increase (decrease) in trade payables 94 (17 )
Increase (decrease) in liabilities for employee benefits and incentive pay (45 ) (55 )
Other items, net 12 23

Net cash provided by (used in) operating activities (225 ) 82

Cash flows from investing activities
Additions to properties and equipment (31 ) (110 )
Proceeds from sale of assets and investments 4 24
Acquisitions of and investments in joint ventures (18 ) (20 )
Additions to capitalized software (2 ) (2 )

Net cash provided by (used in) investing activities (47 ) (108 )

Cash flows from financing activities
Net increase in commercial paper, credit facility and other borrowings 2 6
Dividends paid to stockholders (32 ) (32 )
Treasury stock purchases (20 ) --
Proceeds from stock option exercises and other items 12 5

Net cash used in financing activities (38 ) (21 )

Effect of exchange rate changes on cash and cash equivalents -- --

Net change in cash and cash equivalents (310 ) (47 )

Cash and cash equivalents at beginning of period 793 387

Cash and cash equivalents at end of period $ 483 $ 340

TABLE 5A - NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES RECONCILIATION AND FREE CASH FLOW

First Quarter
(Dollars in millions) 2010 2009

Net cash provided by (used in) operating activities $ (225 ) $ 82
Impact of adoption of amended accounting guidance(1) 200 --
Net cash provided by (used in) operating activities excluding item (25 ) 82

Additions to properties and equipment (31 ) (110 )
Dividends paid to stockholders (32 ) (32 )

Free Cash Flow $ (88 ) $ (60 )

(1) First quarter 2010 cash from operating activities reflected the adoption of amended accounting guidance for transfers of financial assets which resulted in $200 million of receivables, which were previously accounted for as sold and removed from the balance sheet when transferred under the accounts receivable securitization program, being included on the first quarter balance sheet as trade receivables, net. This increase in receivables reduced cash from operations by $200 million in first quarter
2010.

TABLE 6 - SELECTED BALANCE SHEET ITEMS

March 31, December 31,
(Dollars in millions) 2010 2009

Current Assets $ 1,877 $ 1,735

Net Properties and Equipment 3,167 3,110

Other Assets 604 670

Total Assets $ 5,648 $ 5,515

Payables and Other Current Liabilities $ 866 $ 800

Short-term Borrowings 4 --

Long-term Borrowings 1,603 1,604

Other Liabilities 1,606 1,598

Stockholders` Equity 1,569 1,513

Total Liabilities and Stockholders` Equity $ 5,648 $ 5,515

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Eastman Chemical Company
Media:
Tracy Broadwater, 423-224-0498
tkbroadwater@eastman.com
or
Investors:
Greg Riddle, 212-835-1620
griddle@eastman.com

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