Eastman Chemical (EMN) 8-K 8K Announcing Earnings Release

 Contacts:

 Media: Nancy Ledford

 423-229-5264 / nledford@eastman.com

 Investors: Greg Riddle

 423-229-8692 / griddle@eastman.com

Eastman Announces Fourth-Quarter, Year-End 2003 Financial Results

KINGSPORT, Tenn., Jan. 29, 2004 – Eastman Chemical Company (NYSE:EMN) today announced earnings of $0.13 per diluted share for fourth quarter 2003 versus a loss of $0.16 per diluted share for fourth quarter 2002.

Included in the results for fourth quarter 2003 is a gain of $13 million ($8 million net of tax) from the previously announced sale of the colorant product lines and related assets in the company’s coatings, adhesives, specialty polymers and inks (CASPI) segment. Also included in fourth-quarter 2003 results are asset impairments and restructuring charges of $9 million ($8 million net of tax). Fourth-quarter 2002 results included asset impairments and restructuring charges of $6 million ($4 million net of tax). Excluding these items for both periods, fourth-quarter 2003 earnings per diluted share were $0.13, while the fourth-quarter 2002 loss per diluted share was $0.12. For reconciliation to reported earnings (loss) per diluted share, see Table 6 in the accompanying fourth-quarter and ful l-year 2003 financial tables.

"While encouraged by the year-over-year improvement in our bottom line results, we remain focused on executing the plans we have in place to further improve our profitability in 2004," said Brian Ferguson, chairman and CEO. "We expect to benefit both from the actions we are taking internally and from an improving economic environment."

(In millions, except per share amounts)	4Q2003	4Q2002	FY2003	FY2002
Revenue	$1,434	$1,315	$5,800	$5,320
Earnings (Loss) per diluted share	$0.13	$(0.16)	$(3.50)	$0.79
Earnings (Loss) per diluted share excluding certain items*	$0.13	$(0.12)	$1.08	$1.05
Net cash provided by operating activities	$198	$260	$244	$801

 

*Certain items are asset impairments and restructuring charges, goodwill impairments, other operating income from the sale of certain assets and the cumulative effect of changes in accounting principle. For reconciliation to reported earnings (loss) per diluted share, see Table 6 in the accompanying fourth-quarter and full-year 2003 financial tables.

Operating earnings for fourth quarter 2003 were $39 million compared with an operating loss of $11 million for fourth quarter 2002. Fourth-quarter 2003 results included asset impairments and restructuring charges and a gain from the sale of the colorant product lines and related assets, while fourth-quarter 2002 results included asset impairments and restructuring charges. Operating results increased year-over-year due primarily to higher selling prices, the continuing impact of the company’s 2003 cost reduction measures and the favorable effect of foreign currency exchange rates, particularly for the euro, that were partially offset by higher raw material and energy costs.Sales revenue for fourth quarter 2003 was $1.43 billion, an increase of 9 percent compared with fourth quarter 2002. The increase was primarily the result of higher selling prices, favorable foreign currency exchange rates and increased sales volume.

Division and Segment Results 4Q 2003 versus 4Q 2002

Eastman Division’sfourth-quarter 2003 external sales revenue increased 5 percent compared with fourth quarter 2002, primarily due to favorable foreign currency exchange rates and slightly higher selling prices. The division’s fourth-quarter 2003 operating earnings were $16 million compared with an operating loss of $8 million in fourth quarter 2002. Fourth- quarter 2003 division operating earnings included a $13 million gain from the sale of the colorant product lines and related assets as well as $7 million of asset impairments and restructuring charges. Fourth-quarter 2002 operating results included $5 million of asset impairments and restructuring charges. Excluding these items in both periods, Eastman Division’s operating earnings for fourth quarter 2003 increased due to higher selling prices, continued cost reduction efforts and favorable foreign currency exchange rates that were partially offset by higher raw material and energy costs. Segments within Eastman Division had the following results:

Coatings, Adhesives, Specialty Polymers and Inks– External sales revenue increased 7 percent compared with the year-ago period due primarily to favorable foreign currency exchange rates and slightly higher selling prices. Operating results increased as higher selling prices, continued cost reduction efforts and favorable foreign currency exchange rates were partially offset by higher raw material and energy costs. Fourth-quarter 2003 operating earnings included a gain of $13 million from the sale of the Accurate Dispersions colorant product lines and related assets as well as asset impairments and restructuring charges of $6 million. Fourth-quarter 2002 segment operating results included asset impairments and restructuring charges of $6 million. In addition, the segment benefited from lower depreciation expense in fourth quarter 2003 due to the asset impairments completed in third quarter 2003. 

Performance Chemicals and Intermediates– External sales revenue for the segment increased 3 percent due primarily to favorable foreign currency exchange rates. Operating results declined primarily due to higher raw material and energy costs and increased research and development expenditures related to fulfilling a customer request. Fourth-quarter 2003 operating earnings included a $1 million asset impairments and restructuring charge, while fourth-quarter 2002 operating earnings included a $1 million credit related to previously recognized restructuring costs.

Specialty Plastics– External sales revenue increased 5 percent as favorable foreign currency exchange rates and improved product mix were partially offset by lower sales volume that was primarily due to the previously announced sale of the polyethylene color concentrates assets. Operating results increased as cost reduction measures and favorable foreign currency exchange rates were partially offset by higher raw material and energy costs.

Voridian Division’sfourth-quarter 2003 external sales revenue increased 12 percent compared with the year-ago period as higher selling prices, higher sales volume and favorable foreign currency exchange rates were partially offset by an unfavorable shift in product mix. The division’s fourth-quarter 2003 operating earnings were $36 million compared with operating earnings of $10 million in fourth quarter 2002. Operating results for the division increased as higher selling prices, increased sales volume, lower operating costs and favorable foreign currency exchange rates were partially offset by higher raw material and energy costs. Fourth-quarter 2003 operating earnings incl uded asset impairments and restructuring charges of $2 million, while fourth-quarter 2002 operating earnings included asset impairments and restructuring charges of $1 million. Segments within Voridian Division had the following results:

Polymers– External sales revenue increased 16 percent due to higher selling prices, favorable foreign currency exchange rates and slightly higher sales volume. Operating results improved primarily due to higher selling prices; higher sales volume, particularly for polyethylene; and cost reduction measures that were partially offset by higher raw material and energy costs. Both fourth-quarter 2003 and fourth-quarter 2002 operating results included $1 million of asset impairments and restructuring charges. In addition, fourth-quarter 2002 operating results included approximately $11 million in costs related to previously disclosed 2002 operational disruptions.

Fibers– External sales revenue increased 2 percent as higher sales volume and favorable foreign currency exchange rates more than offset an unfavorable shift in product mix that was due to increased sales volume for lower unit-priced acetyl chemicals. Operating earnings increased due to higher sales volume, including increased sales volume for acetate tow in the Asia Pacific region, and the impact of cost reduction efforts. Fourth-quarter 2003 operating earnings included $1 million of asset impairments and restructuring charges.

Developing Businesses Division’sfourth-quarter 2003 external sales revenue was $19 million compared with $8 million for the year-ago period. The increase was due primarily to continued implementation of customer contracts by Cendian Corporation. Division operating results improved primarily due to Cendian’s performance, partially offset by higher costs associated with other growth initiatives.

Corporate FY 2003 versus FY 2002

For the year 2003, Eastman reported a loss of $3.50 per diluted share compared with earnings of $0.79 per diluted share for full-year 2002. Included in the results for full-year 2003 were asset impairments and restructuring charges of $489 million ($343 million net of tax), goodwill impairments of $34 million ($34 million net of tax), a benefit from the cumulative effect of a change in accounting principle of $3 million ($3 million net of tax) and other operating income from the sale of assets of $33 million ($20 million net of tax). Full-year 2002 results included asset impairments and restructuring charges of $5 million ($3 million net of tax) and a charge related to the cumulative effect of changes in accounting principle of $18 million ($18 mil lion net of tax). Excluding these items for both periods, earnings per diluted share for full-year 2003 were $1.08, while full-year 2002 earnings per diluted share were $1.05. For reconciliation to reported earnings (loss) per diluted share, see Table 6 in the accompanying fourth-quarter and full-year 2003 financial tables.

The company reported an operating loss of $267 million for full-year 2003 compared with operating earnings of $208 million during full-year 2002. Full-year 2003 operating results included asset impairments and restructuring charges of $489 million, goodwill impairments of $34 million and other operating income from the sale of certain assets of $33 million. 2002 operating earnings included $5 million of asset impairments and restructuring charges. Excluding these items in both periods, operating earnings increased slightly for 2003 as higher selling prices, cost reduction efforts and favorable foreign currency rates were partially offset by higher raw material and energy costs.

Operating results in 2003 were impacted by margin compression of approximately $100 million due to higher raw material and energy costs that were partially offset by higher selling prices. Cost reduction efforts in 2003 included a change in vacation policy that favorably impacted results by approximately $40 million for the year. Operating results in 2003 also included a $14 million gain from an insurance settlement related to the 2002 polymers segment’s operational disruptions. Operating results in 2002 were negatively impacted by approximately $39 million due to the same operational disruptions.

Eastman’s full-year 2003 sales revenue was $5.8 billion, a 9 percent increase compared with full-year 2002. The higher sales revenue was due primarily to increased selling prices, particularly for the polymers and the performance chemicals and intermediates segments, and favorable foreign currency exchange rates.

Division and Segment Results FY 2003 versus FY 2002

Eastman Division’s2003 external sales revenue increased 6 percent compared with 2002, as favorable foreign currency exchange rates and higher selling prices more than offset lower sales volume. Operating results were a loss of $384 million compared with 2002 operating earnings of $106 million. Results for 2003 included asset impairments and restructuring charges of $486 million, goodwill impairments of $34 million and other operating income from asset sales of $33 million. Results for 2002 included asset impairments and restructuring charges of $4 million. Excluding these items in both periods, operating results declined slightly for 2003 as higher raw material and energy costs were mostly offset by higher selling prices, cost reduction efforts and favorable foreign currency exchange rates.

Coatings, Adhesives, Specialty Polymers and Inks– External sales revenue increased 4 percent for 2003 compared with 2002 as favorable foreign currency exchange rates, improved product mix and slightly higher selling prices more than offset lower sales volume.The lower sales volume was due primarily to restructuring and divestiture actions that were taken during the year and forgoing sales of certain low-margin products.Operating results for the segment were a loss of $358 million for 2003 compared with earnings of $58 million in 2002. In 2003, operating results included $386 million in asset impairments and restructuring charges, $34 million of goodwill impairments and $13 million of other operating income resulting from the sale of the Accurate Dispersions colorant product lines and related assets. Results in 2002 included asset impairments and restructuring charges of $5 million. Excluding these items in both periods, operating results for 2003 declined as higher raw material and energy costs and lower sales volume were partially offset by cost reduction efforts, higher selling prices and favorable foreign currency exchange rates.

Performance Chemicals and Intermediates– 2003 external sales revenue increased 9 percent due primarily to higher selling prices and favorable foreign currency exchange rates. 2003 operating results were a loss of $89 million compared with operating earnings of $14 million in 2002. The segment’s 2003 operating results included asset impairments and restructuring charges of $99 million, while 2002 operating results included a credit of $1 million related to previously recognized restructuring costs. Excluding these items for both periods, operating results for 2003 declined slightly as higher raw material and energy costs were mostly offset by higher selling prices and cost re duction efforts.

Specialty Plastics– External sales revenue increased 6 percent primarily due to favorable foreign currency exchange rates. Sales volume was impacted by the previously announced sale of the polyethylene color concentrates assets. The segment’s operating earnings increased in 2003 compared with 2002 as cost reduction efforts and favorable foreign currency exchange rates were partially offset by higher raw material and energy costs. 2003 operating results also included a $20 million gain from the previously announced sale of certain assets and a $1 million asset impairments and restructuring charge.

Voridian Division’sfull-year 2003 external sales revenue increased 11 percent compared with 2002, due primarily to higher selling prices, particularly for the polymers segment, and favorable foreign currency exchange rates that were partially offset by an unfavorable shift in product mix. Operating earnings increased to $187 million in 2003 compared with $168 million in 2002, due primarily to higher selling prices, cost reduction efforts and favorable foreign currency exchange rates that were partially offset by higher raw material and energy costs. The 2003 operating earnings included asset impairments and restructuring charges of $3 million and a $14 million gain from an insurance settlement related to the previously announced 2002 operational disruptions. The 2002 earnings from operations were negatively impacted by approximately $39 million in costs related to the operational disruptions and an asset impairments and restructuring charge of $1 million.

Polymers Segment– Full-year 2003 versus full-year 2002 external sales revenue increased 16 percent due primarily to higher selling prices and favorable foreign currency exchange rates. Operating earnings for 2003 were $62 million compared with $35 million for 2002. Results for 2003 included a $14 million gain from an insurance settlement related to the operational disruptions and $2 million of asset impairments and restructuring charges, while 2002 results included $39 million of charges related to the operational disruptions and a $1 million asset impairments and restructuring charge. Full-year 2003 versus full-year 2002, the segment’s operating earnings benefited from impr oved conditions in the polyethylene market and overall cost reduction efforts, while being negatively impacted by higher raw material and energy costs and significant new capacity addition of polyethylene terephthalate (PET) in North America.

Fibers– External sales revenue for 2003 declined slightly compared with 2002 as a negative shift in product mix was mostly offset by higher sales volume and favorable foreign currency exchange rates. The negative shift in product mix was mainly due to increased sales volume for lower unit-priced acetyl chemicals products. Operating earnings were $125 million, below 2002 operating earnings of $133 million, but in line with the company’s previously reported expectations. The decline was due primarily to lower demand for acetate tow, principally in North America, partially offset by higher sales volume outside of North America. 2003 operating earnings included $1 million of ass et impairments and restructuring charges.

Developing Businesses Division’sexternal sales revenue for full-year 2003 was $69 million compared with $16 million for 2002, due primarily to continued implementation of customer contracts by Cendian Corporation. Operating results for full-year 2003 were improved to a loss of $65 million compared with a loss of $70 million in 2002. The change in the division’s results was due primarily to improved operating performance at Cendian Corporation, offset by higher costs associated with other growth initiatives.

Cash Flow

Eastman generated $244 million in cash from operating activities in 2003. The company also contributed $238 million to its U.S. defined benefit pension plans during the year. The company expects to contribute between $0 and $40 million to its U.S. defined benefit pension plans in 2004, with the amount dependent on action by the U.S. Congress to establish a pension discount interest rate for 2004 and 2005. Net debt, defined as total borrowings less cash and cash equivalents, at the end of 2003 was $2.04 billion, $55 million above net debt at the end of 2002, which is in line with previously reported expectations.

Outlook

"As we begin 2004, we have seen economic conditions begin to improve," Ferguson said. "However, with raw material and energy costs remaining at historically high levels, pricing will be a key driver of our profitability in 2004. We also expect the actions we are taking internally to improve profitability will have a positive impact throughout the year. As a result, we expect earnings in first quarter 2004 to be in line with the current first-quarter 2004 analysts’ mean estimate on First Call, which is $0.22 per share."

Cumulative Effect of Changes in Accounting Principle

As required by Statement of Financial Accounting Standard (SFAS) No. 143, "Accounting for Asset Retirement Obligations," at Jan.1, 2003, the company recognized existing asset retirement obligations adjusted for cumulative accretion to the date of adoption, asset retirement costs capitalized as an increase to the carrying amount of the associated long-lived asset and accumulated depreciation on those capitalized costs. As a result of the adoption of this standard, the company recognized an after-tax credit to earnings of $3 million in first quarter 2003, primarily related to a reduction in certain environmental liabilities.

SFAS No. 142, "Goodwill and Other Intangible Assets," which became effective Jan.1, 2002, requires the company to complete an impairment assessment at least annually and that goodwill and other indefinite-lived intangibles be written down only in periods in which it is determined that the fair value is less than the recorded value. In connection with the company’s 2002 impairment assessment, it was determined that the fair value of certain trademarks related to the CASPI segment was less than the recorded value. Accordingly, the company recognized an after-tax charge of approximately $18 million in first quarter 2002.

Eastman will host a conference call with industry analysts on Jan. 30, 2004, at 8:00 a.m. EST. To listen to the live webcast of the conference call, go to www.eastman.com, investors, event information, audio archives for the link to the live webcast. To listen via telephone, the dial-in number is 913-981-5507, passcode number 531811. Following the conference call, supplemental information for fourth quarter and year-end 2003 will be available at www.eastman.com, investors, financial information section.

Headquartered in Kingsport, Tenn., Eastman manufactures and markets chemicals, fibers and plastics worldwide. The company has approximately 15,000 employees in more than 30 countries and had 2003 sales of $5.8 billion. To learn more about Eastman and its products, visit www.eastman.com. To learn more about Voridian Division and its products, visit www.voridian.com.

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Forward-looking Statements: This news release includes forward-looking statements concerning current expectations for future economic and business conditions; raw material andenergy costs; company strategies, actions and efforts to control and reduce costs and to increase overall selling prices and improve financial performance; future pension plan funding; implementation of restructuring, divestiture, and consolidation alternatives for certain businesses and product lines; and overall selling prices and earnings in the first quarter of 2004. Such expectations are based upon certain preliminary information, internal estimates, and management assumptions and expectations, 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 ExchangeCommission, including the Form 10-Q filed for the third quarter 2003, the Form 10-K to be filed for 2003 and the supplemental information for fourth quarter and full-year 2003 on the Eastman web site at www.eastman.com in the investors, financial information section.

EASTMAN CHEMICAL COMPANY - EMN	January 29, 2004
	5:30 PM EDT

FINANCIAL INFORMATION

January 29, 2004

For use in the Eastman Chemical Company Conference Call

at 8:00 AM (EDT), January 30, 2004.

Item	Page
TABLE 1 - Statements of Earnings (Loss)	1
TABLE 2 - Other Sales Information	2-3
TABLE 3 - Operating Earnings (Loss), Asset Impairments and Restructuring Charges, Goodwill Impairments, and Other Operating Income	4
TABLE 4 - Sales Revenue Change – External Sales	5
TABLE 5 - Percentage Growth in Sales Volume	6-7
TABLE 6 – Earnings Per Share Reconciliation	8
TABLE 7 - Statements of Cash Flows	9
TABLE 8 - Selected Balance Sheet Items	10

EASTMAN CHEMICAL COMPANY - EMN	January 29, 2004
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	Page 1

TABLE 1 – STATEMENTS OF EARNINGS (LOSS)

	Fourth Quarter				Twelve Months
(Dollars in millions, except per share amounts)		2003		2002		2003		2002
Sales	$	1,434	$	1,315	$	5,800	$	5,320
Cost of sales		1,249		1,172		4,990		4,541
Gross profit		185		143		810		779
Selling and general administrative expenses		106		107		414		407
Research and development expenses		44		41		173		159
Asset impairments and restructuring charges, net		9		6		489		5
Goodwill impairments		--		--		34		--
Other operating income		(13)		--		(33)		--
Operating earnings (loss)		39		(11)		(267)		208
Interest expense, net		32		31		124		122
Other (income) charges, net		(5)		(5)		(10)		2
Earnings (loss) before income taxes and cumulative effect of changes in accounting principle		12		(37)		(381)		84
Provision (benefit) for income taxes		2		(24)		(108)		5
Earnings (loss) before cumulative effect of changes in accounting principle		10		(13)		(273)		79
Cumulative effect of changes in accounting principle, net		--		--		3		(18)
Net earnings (loss)	$	10	$	(13)	$	(270)	$	61
Earnings (loss) per share
Basic
Before cumulative effect of changes in
accounting principle	$	0.13	$	(0.16)	$	(3.54)	$	1.02
Cumulative effect of changes in accounting principle, net		--		--		0.04		(0.23)
Net earnings (loss) per share	$	0.13	$	(0.16)	$	(3.50)	$	0.79
Diluted
Before cumulative effect of changes in
accounting principle	$	0.13	$	(0.16)	$	(3.54)	$	1.02
Cumulative effect of changes in accounting principle, net		--		--		0.04		(0.23)
Net earnings (loss) per share	$	0.13	$	(0.16)	$	(3.50)	$	0.79
Shares (in millions) outstanding at end of period		77.4		77.3		77.4		77.3
Shares (in millions) used for earnings (loss) per share calculation
Basic		77.1		77.1		77.1		77.1
Diluted		77.5		77.1		77.1		77.2

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TABLE 2 - OTHER SALES INFORMATION   

	Fourth Quarter, 2003
(Dollars in millions)		External Sales			Interdivisional Sales		Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$	388		$	--	$	388
Performance Chemicals and Intermediates		275			135		410
Specialty Plastics		142			9		151
Total Eastman Division		805			144		949
Voridian Division
Polymers		450			14		464
Fibers		160			20		180
Total Voridian Division		610			34		644
Developing Businesses Division
Developing Businesses		19			100		119
Total Developing Businesses Division		19			100		119
Total Eastman Chemical Company	$	1,434		$	278	$	1,712
	Fourth Quarter, 2002*
			External Sales		Interdivisional Sales		Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$		362	$	--	$	362
Performance Chemicals and Intermediates			268		106		374
Specialty Plastics			134		9		143
Total Eastman Division			764		115		879
Voridian Division
Polymers			387		16		403
Fibers			156		17		173
Total Voridian Division			543		33		576
Developing Businesses Division
Developing Businesses			8		94		102
Total Developing Businesses Division			8		94		102
Total Eastman Chemical Company	$		1,315	$	242	$	1,557

*Sales revenues for 2002 have been reclassified to reflect the Company’s new organizational structure and segments effective in the first quarter 2003.

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TABLE 2 - OTHER SALES INFORMATION (Continued)   

	Twelve Months, 2003
(Dollars in millions)		External Sales			Interdivisional Sales			Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$	1,597	$		--		$	1,597
Performance Chemicals and Intermediates		1,184			495			1,679
Specialty Plastics		559			49			608
Total Eastman Division		3,340			544			3,884
Voridian Division
Polymers		1,756			68			1,824
Fibers		635			80			715
Total Voridian Division		2,391			148			2,539
Developing Businesses Division
Developing Businesses		69			396			465
Total Developing Businesses Division		69			396			465
Total Eastman Chemical Company	$	5,800	$		1,088		$	6,888
	Twelve Months, 2002*
		External Sales				Interdivisional Sales		Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$	1,540		$		--	$	1,540
Performance Chemicals and Intermediates		1,084				383		1,467
Specialty Plastics		528				45		573
Total Eastman Division		3,152				428		3,580
Voridian Division
Polymers		1,510				55		1,565
Fibers		642				72		714
Total Voridian Division		2,152				127		2,279
Developing Businesses Division
Developing Businesses		16				330		346
Total Developing Businesses Division		16				330		346
Total Eastman Chemical Company	$	5,320		$		885	$	6,205

*Sales revenues for 2002 have been reclassified to reflect the Company’s new organizational structure and segments effective in the first quarter 2003.

	Fourth Quarter				Twelve Months
(Dollars in millions)		2003		2002		2003		2002
Sales by Region – External Sales
United States and Canada	$	797	$	737	$	3,302	$	3,040
Europe, Middle East, and Africa		335		284		1,368		1,170
Asia Pacific		165		165		643		636
Latin America		137		129		487		474
	$	1,434	$	1,315	$	5,800	$	5,320

EASTMAN CHEMICAL COMPANY - EMN	January 29, 2004
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TABLE 3 - OPERATING EARNINGS (LOSS), ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES, GOODWILL IMPAIRMENTS, AND OTHER OPERATING INCOME

		Fourth Quarter				Twelve Months
(Dollars in millions)		2003		2002		2003		2002
Operating Earnings (Loss) by Segment and Certain Items
Eastman Division Segments
Coatings, Adhesives, Specialty Polymers,
and Inks
Operating earnings (loss)	$	18	$	(14)	$	(358)	$	58
Asset impairments and restructuring charges		6		6		386		5
Goodwill impairments		--		--		34		--
Other operating income		(13)		--		(13)		--
Performance Chemicals and Intermediates
Operating earnings (loss)		(12)		2		(89)		14
Asset impairments and restructuring charges		1		(1)		99		(1)
Specialty Plastics
Operating earnings		10		4		63		34
Asset impairments and restructuring charges		--		--		1		--
Other operating income		--		--		(20)		--
Total operating earnings (loss)	$	16	$	(8)	$	(384)	$	106
Total asset impairments and restructuring charges		7		5		486		4
Total goodwill impairments		--		--		34		--
Total other operating income		(13)		--		(33)		--
Voridian Division Segments
Polymers
Operating earnings (loss)	$	6	$	(14)	$	62	$	35
Asset impairments and restructuring charges		1		1		2		1
Fibers
Operating earnings		30		24		125		133
Asset impairments and restructuring charges		1		--		1		--
Total operating earnings	$	36	$	10	$	187	$	168
Total asset impairments and restructuring charges		2		1		3		1
Developing Business Division Segment
Developing Businesses
Operating loss	$	(13)	$	(20)	$	(65)	$	(70)
Total operating loss	$	(13)	$	(20)	$	(65)	$	(70)
Eliminations to operating earnings (loss)	$	--	$	7	$	(5)	$	4
Total Eastman Chemical Company
Total operating earnings (loss)	$	39	$	(11)	$	(267)	$	208
Total asset impairments and restructuring charges		9		6		489		5
Total goodwill impairments		--		--		34		--
Total other operating income		(13)		--		(33)		--

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TABLE 4 – SALES REVENUE CHANGE – EXTERNAL SALES

	Fourth Quarter, 2003 Compared to Fourth Quarter, 2002
		Change in External Sales Revenue Due To
	Revenue % Change	Volume Effect	Price Effect	Product Mix Effect	Exchange Rate Effect
Eastman Division
Coatings, Adhesives, Specialty Polymers,
andInks	7 %	-- %	2 %	-- %	5 %
Performance Chemicals and Intermediates	3 %	-- %	1 %	-- %	2 %
Specialty Plastics	5 %	(3) %	1 %	3 %	4 %
Total Eastman Division	5 %	(1) %	2 %	-- %	4 %
Voridian Division
Polymers	16 %	2 %	8 %	1 %	5 %
Fibers	2 %	12 %	1 %	(14) %	3 %
Total Voridian Division	12 %	5 %	6 %	(4) %	5 %
Developing Businesses Division
Developing Businesses	> 100 %	-- %	-- %	> 100 %	-- %
Total Developing Businesses Division	> 100 %	-- %	-- %	> 100 %	-- %
Total Eastman Chemical Company	9 %	2 %	3 %	-- %	4 %

	Twelve Months, 2003 Compared to Twelve Months, 2002
		Change in External Sales Revenue Due To
	Revenue % Change	Volume Effect	Price Effect	Product Mix Effect	Exchange Rate Effect
Eastman Division
Coatings, Adhesives, Specialty Polymers,
andInks	4 %	(6) %	2 %	3 %	5 %
Performance Chemicals and Intermediates	9 %	-- %	7 %	-- %	2 %
Specialty Plastics	6 %	1 %	-- %	1 %	4 %
Total Eastman Division	6 %	(3) %	3 %	2 %	4 %
Voridian Division
Polymers	16 %	2 %	11 %	(1) %	4 %
Fibers	(1) %	4 %	1 %	(9) %	3 %
Total Voridian Division	11 %	2 %	8 %	(3) %	4 %
Developing Businesses Division
Developing Businesses	> 300 %	-- %	-- %	> 300 %	-- %
Total Developing Businesses Division	> 300 %	-- %	-- %	> 300 %	-- %
Total Eastman Chemical Company	9 %	(1) %	5 %	1 %	4 %

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TABLE 5 – PERCENTAGE GROWTH IN SALES VOLUME

	Fourth Quarter, 2003 Compared to
	Fourth Quarter, 2002
			Total
	External	Interdivisional	Including
	Volume	Volume	Interdivisional
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	(1) %	-- %	(1) %
Performance Chemicals and Intermediates	-- %	3 %	1 %
Specialty Plastics	(3) %	(5) %	(3) %
Total Eastman Division	(1) %	3 %	-- %
Voridian Division
Polymers	3 %	(31) %	1 %
Fibers	12 %	(1) %	5 %
Total Voridian Division	4 %	(7) %	2 %
Developing Businesses Division
Developing Businesses	-- %	-- %	-- %
Total Developing Businesses Division	-- %	-- %	-- %
Total Eastman Chemical Company	1 %
Regional sales volume growth
United States and Canada	5 %
Europe, Middle East, and Africa	2 %
Asia Pacific	(14) %
Latin America	(2) %

EASTMAN CHEMICAL COMPANY - EMN	January 29, 2004
	5:30 PM EDT
	Page 7

TABLE 5 – PERCENTAGE GROWTH IN SALES VOLUME (Continued)

	Twelve Months, 2003 Compared to
	Twelve Months, 2002
			Total
	External	Interdivisional	Including
	Volume	Volume	Interdivisional
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	(6) %	-- %	(6) %
Performance Chemicals and Intermediates	1 %	4 %	2 %
Specialty Plastics	1 %	11 %	2 %
Total Eastman Division	(3) %	5 %	(1) %
Voridian Division
Polymers	2 %	6 %	2 %
Fibers	4 %	7 %	6 %
Total Voridian Division	2 %	6 %	3 %
Developing Businesses Division
Developing Businesses	-- %	-- %	-- %
Total Developing Businesses Division	-- %	-- %	-- %
Total Eastman Chemical Company	(1) %
Regional sales volume growth
United States and Canada	2 %
Europe, Middle East, and Africa	-- %
Asia Pacific	(7) %
Latin America	(9) %

EASTMAN CHEMICAL COMPANY - EMN	January 29, 2004
	5:30 PM EDT
	Page 8

TABLE 6 – EARNINGS (LOSS) PER SHARE RECONCILIATION

EARNINGS (LOSS) PER SHARE EXCLUDING CERTAIN ITEMS

		Fourth Quarter				Tweleve Months
		2003		2002		2003		2002
Earnings (loss) per diluted share	$	0.13	$	(0.16)	$	(3.50)	$	0.79
Certain Items:
Other operating income		(0.10)		--		(0.26)		--
Asset impairments and restructuring charges, net		0.10		0.04		4.44		0.03
Goodwill impairments		--		--		0.44		--
Cumulative effect of a change in accounting principle		--		--		(0.04)		0.23
Earnings (loss) per diluted share excluding certain items	$	0.13	$	(0.12)	$	1.08	$	1.05

EASTMAN CHEMICAL COMPANY - EMN	January 29, 2004
	5:30 PM EDT
	Page 9

TABLE 7 – STATEMENTS OF CASH FLOWS

		Twelve Months
(Dollars in millions)		2003		2002
Cash flows from operating activities
Net earnings (loss)	$	(270)	$	61
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		367		397
Cumulative effect of changes in accounting principle, net of tax		(3)		18
Write-off of impaired assets		500		9
Gain recognized on sale of assets		(33)		--
Provision (benefit) for deferred income taxes		(140)		95
Changes in operating assets and liabilities, net of effect of acquisitions:
(Increase) decrease in trade receivables		(46)		70
(Increase) decrease in inventories		41		(41)
Increase (decrease) in trade payables		(2)		87
Increase (decrease) in liabilities for employee benefits and incentive pay		(214)		81
Other items, net		44		24
Net cash provided by operating activities		244		801
Cash flows from investing activities
Additions to properties and equipment		(230)		(427)
Proceeds from sale of assets		71		9
Acquisitions, net of cash acquired		--		(6)
Additions to capitalized software		(15)		(18)
Other items, net		14		(25)
Net cash used in investing activities		(160)		(467)
Cash flows from financing activities
Net increase (decrease) in commercial paper and other short-term borrowings		39		(573)
Proceeds from long-term borrowings		495		394
Repayment of borrowings		(5)		(8)
Dividends paid to stockholders		(136)		(135)
Other items		4		(1)
Net cash provided by (used in) financing activities		397		(323)
Net change in cash and cash equivalents		481		11
Cash and cash equivalents at beginning of period		77		66
Cash and cash equivalents at end of period	$	558	$	77

EASTMAN CHEMICAL COMPANY - EMN	January 29, 2004
	5:30 PM EDT
	Page 10

TABLE 8 – SELECTED BALANCE SHEET ITEMS

		December 31,
(Dollars in millions)		2003		2002
Current Assets	$	2,017	$	1,544
Net Properties		3,419		3,753
Other Assets		809		1,018
Total Assets	$	6,245	$	6,315
Payables and Other Current Liabilities	$	946	$	1,210
Short-term Borrowings		504		3
Long-term Borrowings		2,089		2,054
Other Liabilities		1,650		1,777
Stockholders’ Equity		1,056		1,271
Total Liabilities and Stockholders’ Equity	$	6,245	$	6,315