Eastman Chemical (EMN) 8-K Financial statements and exhibits

For Release July 29, 2004	Contacts:
5:00 p.m. EDT	Media: Tracy Bledsoe
	423-224-0498 / tracyb@eastman.com
	Investors: Greg Riddle
	423-229-8692 / griddle@eastman.com

Eastman Announces Second-Quarter 2004 Earnings

KINGSPORT, Tenn., July 29, 2004 – Eastman Chemical Company (NYSE:EMN) today announced earnings of $1.07 per diluted share for second quarter 2004 versus earnings of $0.46 per diluted share for second quarter 2003. Excluding the items described below for both periods, second-quarter 2004 earnings per diluted share were $0.82 compared with second-quarter 2003 earnings per diluted share of $0.61. For reconciliation to reported earnings per diluted share, see Table 7 in the accompanying second-quarter 2004 financial tables.

Included in second-quarter 2004 earnings were asset impairments and restructuring charges of $79 million and a net deferred tax benefit of $82 million. (For additional information concerning these items, see "Asset Impairments and Restructuring Charges and Net Deferred Tax Benefit" below.) Second-quarter 2003 earnings included asset impairments and restructuring charges of $16 million.

"We are gaining momentum in improving the financial performance of the company, as our second-quarter results indicate," said Brian Ferguson, chairman and CEO. "While we are benefiting from a strengthening economy and actions to improve our profitability, we also are confronted by historically high raw material and energy costs and, therefore, will continue our efforts to raise selling prices to offset these costs."

Operating earnings in second quarter 2004 were $41 million compared with operating earnings of $75 million in second quarter 2003. Excluding asset impairments and restructuring charges for both periods, second quarter 2004 operating earnings were $120 million compared with $91 million in second quarter 2003. (For reconciliation to reported operating earnings, see Table 7 in the accompanying second-quarter 2004 financial tables.) The improvement year-over-year was due primarily to increased sales volume throughout all segments, increased focus on more profitable businesses and product lines, and continued cost reduction efforts that were partially offset by higher raw material and energy costs.

Sales revenue for second quarter 2004 was $1.7 billion, a 13 percent increase over second quarter 2003, and was the highest quarterly sales revenue in the company’s history. The increase in sales revenue was primarily due to higher sales volume, which was the highest quarterly sales volume in the company’s history.

(In millions, except per share amounts)	2Q2004	2Q2003
Sales revenue	$1,676	$1,481
Earnings per diluted share	$1.07	$0.46
Earnings per diluted share excluding asset impairments and restructuring charges and net deferred tax benefit related to assets held for sale*	$0.82	$0.61
Net cash provided by operating activities	$216	$73

*For reconciliation to reported earnings per diluted share, see Table 7 in the accompanying second-quarter 2004 financial tables. Also see "Asset Impairments and Restructuring Charges and Net Deferred Tax Benefit" for additional information.

Division and Segment Results 2Q 2004 versus 2Q 2003

Eastman Division’ssecond-quarter 2004 external sales revenue increased by 9 percent compared with second quarter 2003 primarily due to increased sales volume. Second-quarter 2004 operating earnings for the division were $7 million compared with operating earnings of $31 million for second quarter 2003. Second-quarter 2004 and second-quarter 2003 operating earnings included asset impairments and restructuring charges of $77 million and $16 million, respectively. Excluding these charges for both periods, operating earnings increased year-over-year due primarily to higher sales volume, increased focus on more profitable businesses and pr oduct lines, and continued cost reduction efforts 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 (CASPI)– External sales revenue increased by 8 percent primarily due to higher sales volume. The sales volume increase, mostly in the coatings additives, solvents and adhesives raw materials businesses and product lines, was attributed to strengthening end markets and the marketing of new applications for existing products. Second-quarter 2004 and second-quarter 2003 operating results included asset impairments and restructuring charges of $69 million and $1 million respectively. The asset impairments charges in second quarter 2004 related to assets held for sale in the resins, mono mers, inks and graphic arts businesses and product lines. Excluding these charges for both periods, operating results improved throughout the segment. Operating earnings improved for the coatings additives, solvents and adhesives raw materials businesses and product lines due primarily to higher sales volume and cost reduction efforts. Operating results related to the businesses and product lines of the assets held for sale improved primarily due to cost reduction efforts and increased focus on more profitable businesses and product lines.

Performance Chemicals and Intermediates– External sales revenue increased by 10 percent due primarily to higher sales volume and higher selling prices. The higher sales volume was attributed to a strengthening economy, primarily in North America. Second-quarter 2004 and second-quarter 2003 operating earnings included asset impairments and restructuring charges of $4 million and $15 million respectively. Excluding these charges for both periods, operating earnings declined slightly as higher sales volume, higher selling prices and cost reduction efforts were more than offset by higher raw material and energy costs.

Specialty Plastics– External sales revenue increased by 12 percent due primarily to higher sales volume. The higher sales volume was attributed to stronger demand in end markets, particularly in Asia and Europe. Second-quarter operating earnings improved significantly due to higher sales volume, increased focus on more profitable businesses and product lines, and cost reduction efforts that were partially offset by higher raw material and energy costs. Second-quarter operating earnings included restructuring charges of $4 million.

Voridian Division’ssecond-quarter 2004 external sales revenue increased by 16 percent compared with the year-ago period primarily due to higher sales volume. Second-quarter 2004 operating earnings were $53 million compared with operating earnings of $62 million in second quarter 2003. Operating earnings declined as higher sales volume and cost reduction efforts were more than offset by higher raw material and energy costs. Second-quarter 2004 operating earnings included severance charges of $1 million. Segments within Voridian Division had the following results:

Polymers– External sales revenue increased by 19 percent due primarily to higher sales volume. The increased sales volume was due to continued strong end-market demand for PET polymers, especially in North America, and below normal sales volume in second quarter 2003. Operating earnings declined as higher sales volume and cost reduction efforts were more than offset by higher raw material and energy costs. Second-quarter 2004 operating earnings included severance charges of $1 million.

Fibers– External sales revenue increased by 9 percent due to higher sales volume, particularly for acetyl chemicals and acetate tow in Asia Pacific, and improved product mix, partially offset by lower selling prices. Operating earnings declined slightly as higher sales volume was more than offset by higher raw material and energy costs.

Developing Businesses Division’ssecond-quarter 2004 external sales revenue was $37 million compared with $16 million in second quarter 2003. The increase was due primarily to the implementation of customer contracts for Cendian Corporation. Division operating results declined slightly year-over-year. Second-quarter 2004 operating results included a $1 million severance charge.

Asset Impairments and Restructuring Charges and Net Deferred Tax Benefit

During second quarter 2004, Eastman recognized pretax asset impairments and restructuring charges of $79 million. Included in these charges were non-cash asset impairments of $62 million and restructuring charges of $17 million.

As previously reported, during second quarter 2004 the company agreed to sell certain assets, businesses and product lines within its CASPI segment. The non-cash asset impairments charges reflect the recording of these assets held for sale and the adjustment of asset values to the expected sale proceeds. The company also recognized a net deferred tax benefit of $82 million to recognize the expected utilization of capital loss carryforwards that will result from the assets held for sale.

In addition, the company recognized restructuring charges of approximately $17 million during second quarter 2004 related to severance benefits provided as part of the previously announced employee separation programs and ongoing cost reduction efforts.

The asset impairments and restructuring charges and the net deferred tax benefit include estimates that are based on the best information currently available. Adjustments to such estimates, if any, would be reflected in the financial statements included in future filings with the Securities and Exchange Commission.

Cash Flow

Eastman generated $216 million in cash from operating activities during the second quarter of 2004, an increase of $143 million compared to second quarter 2003. In the second quarters of 2004 and 2003, the company made $0 and $50 million, respectively, in contributions to its U.S. defined benefit pension plans. In addition, cash provided by operating activities benefited from reduced working capital requirements primarily due to an increase in trade payables. The increase in trade payables was largely the result of higher raw material and energy costs, increased sales volume and timing of payments.

Outlook

Commenting on the outlook for third quarter 2004, Ferguson said: "We expect continued strong sales volume in the third quarter as we benefit from improving economic conditions. However, high raw material and energy costs are expected to remain at elevated levels. Pricing will, therefore, be a key determinant of our profitability. As a result, we expect third-quarter 2004 net earnings to be somewhat higher than the current third-quarter 2004 First Call analysts’ mean estimate of $0.63 and somewhat below our second-quarter 2004 net earnings of $0.82, excluding asset impairments and restructuring charges in both periods and the net deferred tax benefit in second quarter 2004."

Eastman will host a conference call with industry analysts on July 30, 2004, at 8:00 a.m. EDT. To listen to the live webcast of the conference call, go towww.eastman.com,Investors, Event Information, Audio Archivesfor the link to the live webcast. To listen via telephone, the dial-in number is 913-981-5507, passcode number 272303. A telephone replay will be available co ntinuously from 11:00 a.m. EDT, July 30, to 12:00 a.m. EDT, Aug. 6, 2004, at 888-203-1112, passcode number 272303.

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, visitwww.eastman.com. To learn more about Voridian Division and its products, visitwww.voridian.com.

###

Forward Looking Statements 

Forward-looking Statements: This news release includes forward-looking statements concerning current expectations for future economic and business conditions; raw material and energy costs; company strategies, actions and efforts to control and reduce costs and to increase overall selling prices and improve financial performance; future adjustments to asset impairments and restructuring charges and net deferred tax benefits; completion of restructuring, divestiture and consolidation of CASPI businesses and product lines; and overall selling prices, sales volume, raw material and energy costs, and earnings in the third quarter of 2004. Such expectations are based upon certain preliminary information, internal estimates, and management assumptions, e xpectations 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 2003 and the Form 10-Q to be filed for second quarter 2004 (available on the Eastman web site atwww.eastman.comin the investors, SEC filings section).

EASTMAN CHEMICAL COMPANY – EMN	July 29, 2004
	5:30 PM EDT

FINANCIAL INFORMATION

July 29, 2004

For use in the Eastman Chemical Company Conference Call

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

Table of Contents

Item		Page
TABLE 1	Statements of Earnings	1
TABLE 2	Other Sales Information	2-3
TABLE 3	Operating Earnings (Loss), Asset Impairments and Restructuring Charges and Other Operating Income	4
TABLE 4	CASPI segment detail of Sales Revenue, Operating Earnings (Loss), and Asset Impairments and Restructuring Charges	5
TABLE 5	Sales Revenue Change – External Sales	6
TABLE 6	Percentage Growth in Sales Volume	7-8
TABLE 7	Operating Earnings, Net Earnings, and Earnings Per Share Reconciliation	9
TABLE 8	Statements of Cash Flows	10
TABLE 9	Selected Balance Sheet Items	11

EASTMAN CHEMICAL COMPANY – EMN	July 29, 2004
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	Page 1

TABLE 1 – STATEMENTS OF EARNINGS

	Second Quarter				First Six Months
(Dollars in millions, except per share amounts)	2004			2003	2004		2003
Sales	$	1,676	$	1,481	$	3,273	$	2,922
Cost of sales		1,406		1,240		2,768		2,497
Gross profit		270		241		505		425
Selling and general administrative expenses		112		108		222		208
Research and development expenses		38		42		81		85
Asset impairments and restructuring charges, net		79		16		146		18
Other operating income		--		--		--		(20)
Operating earnings		41		75		56		134
Interest expense, net		30		31		59		62
Other (income) charges, net		1		(5)		--		(6)
Earnings (loss) before income taxes and cumulative effect of changes in accounting principle		10		49		(3)		78
Provision (benefit) for income taxes		(74)		14		(81)		25
Earnings before cumulative effect of changes in accounting principle		84		35		78		53
Cumulative effect of changes in accounting principle, net		--		--		--		3
Net earnings	$	84	$	35	$	78	$	56
Earnings per share
Basic
Before cumulative effect of changes in
accounting principle	$	1.08	$	0.46	$	1.01	$	0.69
Cumulative effect of changes in accounting principle, net		--		--		--		0.04
Net earnings per share	$	1.08	$	0.46	$	1.01	$	0.73
Diluted
Before cumulative effect of changes in
accounting principle	$	1.07	$	0.46	$	1.00	$	0.69
Cumulative effect of changes in accounting principle, net		--		--		--		0.04
Net earnings per share	$	1.07	$	0.46	$	1.00	$	0.73
Shares (in millions) outstanding at end of period		77.8		77.4		77.8		77.4
Shares (in millions) used for earnings per share calculation
Basic		77.4		77.1		77.3		77.1
Diluted		78.1		77.3		78.0		77.3

EASTMAN CHEMICAL COMPANY – EMN	July 29, 2004
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TABLE 2 - OTHER SALES INFORMATION   

	Second Quarter, 2004
(Dollars in millions)		External Sales			Interdivisional Sales		Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$	476		$	--	$	476
Performance Chemicals and Intermediates		313			140		453
Specialty Plastics		154			13		167
Total Eastman Division		943			153		1,096
Voridian Division
Polymers		515			15		530
Fibers		181			23		204
Total Voridian Division		696			38		734
Developing Businesses Division
Developing Businesses		37			111		148
Total Developing Businesses Division		37			111		148
Total Eastman Chemical Company	$	1,676		$	302	$	1,978
	Second Quarter, 2003*
			External Sales		Interdivisional Sales		Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$		441	$	--	$	441
Performance Chemicals and Intermediates			286		115		401
Specialty Plastics			138		12		150
Total Eastman Division			865		127		992
Voridian Division
Polymers			434		19		453
Fibers			166		19		185
Total Voridian Division			600		38		638
Developing Businesses Division
Developing Businesses			16		94		110
Total Developing Businesses Division			16		94		110
Total Eastman Chemical Company	$		1,481	$	259	$	1,740

* Sales revenues for 2003 have been realigned to reflect certain product movements between the CASPI and PCI segments effective in the first quarter 2004.

EASTMAN CHEMICAL COMPANY – EMN	July 29, 2004
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TABLE 2 - OTHER SALES INFORMATION (Continued)   

	First Six Months, 2004
(Dollars in millions)		External Sales			Interdivisional Sales		Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$	915		$	--	$	915
Performance Chemicals and Intermediates		603			281		884
Specialty Plastics		311			25		336
Total Eastman Division		1,829			306		2,135
Voridian Division
Polymers		1,030			33		1,063
Fibers		353			44		397
Total Voridian Division		1,383			77		1,460
Developing Businesses Division
Developing Businesses		61			220		281
Total Developing Businesses Division		61			220		281
Total Eastman Chemical Company	$	3,273		$	603	$	3,876
	First Six Months, 2003*
			External Sales		Interdivisional Sales		Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$		852	$	--	$	852
Performance Chemicals and Intermediates			583		240		823
Specialty Plastics			282		26		308
Total Eastman Division			1,717		266		1,983
Voridian Division
Polymers			864		40		904
Fibers			312		40		352
Total Voridian Division			1,176		80		1,256
Developing Businesses Division
Developing Businesses			29		192		221
Total Developing Businesses Division			29		192		221
Total Eastman Chemical Company	$		2,922	$	538	$	3,460

* Sales revenues for 2003 have been realigned to reflect certain product movements between the CASPI and PCI segments effective in the first quarter 2004.

	Second Quarter				First Six Months
(Dollars in millions)		2004		2003		2004		2003
Sales by Region – External Sales
United States and Canada	$	949	$	849	$	1,815	$	1,673
Europe, Middle East, and Africa		394		355		804		697
Asia Pacific		186		162		370		321
Latin America		147		115		284		231
	$	1,676	$	1,481	$	3,273	$	2,922

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

						Second Quarter				First Six Months
(Dollars in millions)						2004		2003**		2004		2003**
Operating Earnings (Loss) by Segment and Certain Items
	Eastman Division Segments
		Coatings, Adhesives, Specialty Polymers, and Inks
				Operating earnings (loss)	$	(24)	$	19	$	6	$	16
				Asset impairments and restructuring charges		69		1		75		3
		Performance Chemicals and Intermediates
				Operating earnings		12		3		20		9
				Asset impairments and restructuring charges		4		15		7		15
		Specialty Plastics
				Operating earnings (loss)		19		9		(4)		41
				Asset impairments and restructuring charges		4		--		50		--
				Other operating income		--		--		--		(20)
			Total operating earnings		$	7	$	31	$	22	$	66
			Total asset impairments and restructuring charges		$	77	$	16	$	132	$	18
			Total other operating income		$	--	$	--	$	--	$	(20)
	Voridian Division Segments
		Polymers
				Operating earnings	$	20	$	26	$	8	$	54
				Asset impairments and restructuring charges		1		--		12		--
		Fibers
				Operating earnings		33		36		66		61
			Total operating earnings		$	53	$	62	$	74	$	115
			Total asset impairments and restructuring charges		$	1	$	--	$	12	$	--
	Developing Business Division Segment
		Developing Businesses
				Operating loss	$	(19)	$	(16)	$	(39)	$	(39)
				Asset impairments and restructuring charges		1		--		2		--
			Total operating loss		$	(19)	$	(16)	$	(39)	$	(39)
			Total asset impairments and restructuring charges		$	1	$	--	$	2	$	--
	Eliminations to operating earnings				$	--	$	(2)	$	(1)	$	(8)
Total Eastman Chemical Company
			Total operating earnings		$	41	$	75	$	56	$	134
			Total asset impairments and restructuring charges		$	79	$	16	$	146	$	18
			Total other operating income		$	--	$	--	$	--	$	(20)

** Operating earnings for 2003 have been realigned to reflect certain product movements between the CASPI and PCI segments effective in the first quarter 2004.

EASTMAN CHEMICAL COMPANY – EMN	July 29, 2004
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TABLE 4 – CASPI SEGMENT DETAIL OF SALES REVENUE, OPERATING EARNINGS (LOSS) AND ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES

		First Quarter		Second Quarter		First Six Months
(Dollars in millions)		2004		2004		2004
Sales Revenue
Sales revenue – restructured, divested, and consolidated product lines(1)	$	174	$	193	$	367
Sales revenue – continuing product lines		265		283		548
Total sales revenue		439		476		915
Operating Earnings (Loss) and Asset Impairments and Restructuring Charges
Operating loss – restructured, divested, and consolidated product lines(1) (2)		(11)		(72)		(83)
Operating earnings – continuing product lines		41		48		89
Total Operating earnings (loss)		30		(24)		6
Asset impairments and restructuring charges – restructured, divested, and consolidated product lines(1)		5		66		71
Asset impairments and restructuring charges – continuing product lines		1		3		4
Total asset impairments and restructuring charges		6		69		75

		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Twelve Months
(Dollars in millions)		2003		2003		2003		2003		2003
Sales Revenue
Sales revenue – restructured, divested, and consolidated product lines(1)	$	174	$	190	$	185	$	170	$	719
Sales revenue – continuing product lines		237		251		236		240		964
Total sales revenue		411		441		421		410		1,683
Operating Earnings (Loss) and Asset Impairments and Restructuring Charges
Operating loss – restructured, divested, and consolidated product lines(1) (2)		(31)		(28)		(464)		(15)		(538)
Operating earnings – continuing product lines		28		47		29		32		136
Total Operating earnings (loss)		(3)		19		(435)		17		(402)
Asset impairments and restructuring charges – restructured, divested, and consolidated product lines(1)		1		1		449		(6)		445
Asset impairments and restructuring charges – continuing product lines		1		--		2		1		4
Total asset impairments and restructuring charges		2		1		451		(5)		449

⁽¹⁾Product lines that have been or will be sold or eliminated as a result of restructuring, divestiture, or consolidation including those associated with assets held for sale.

⁽²⁾Includes allocated costs consistent with the Company’s historical practices, some of which may remain and could be reallocated to the remainder of the segment and other segments.

EASTMAN CHEMICAL COMPANY – EMN	July 29, 2004
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TABLE 5 – SALES REVENUE CHANGE – EXTERNAL SALES

	Second Quarter, 2004 Compared to Second Quarter, 2003
		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	8 %	7 %	(1) %	-- %	2 %
Performance Chemicals and Intermediates	10 %	8 %	3 %	(2) %	1 %
Specialty Plastics	12 %	11 %	(1) %	-- %	2 %
Total Eastman Division	9 %	8 %	-- %	(1) %	2 %
Voridian Division
Polymers	19 %	16 %	1 %	-- %	2 %
Fibers	9 %	5 %	(2) %	5 %	1 %
Total Voridian Division	16 %	13 %	-- %	1 %	2 %
Developing Businesses Division
Developing Businesses	> 100 %	-- %	-- %	> 100 %	-- %
Total Developing Businesses Division	> 100 %	-- %	-- %	> 100 %	-- %
Total Eastman Chemical Company	13 %	10 %	-- %	1 %	2 %

	First Six Months, 2004 Compared to First Six Months, 2003
		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 %	4 %	-- %	(1) %	4 %
Performance Chemicals and Intermediates	4 %	2 %	4 %	(3) %	1 %
Specialty Plastics	10 %	6 %	1 %	-- %	3 %
Total Eastman Division	7 %	4 %	2 %	(2) %	3 %
Voridian Division
Polymers	19 %	13 %	2 %	-- %	4 %
Fibers	13 %	16 %	(3) %	(2) %	2 %
Total Voridian Division	18 %	14 %	1 %	-- %	3 %
Developing Businesses Division
Developing Businesses	> 100 %	-- %	-- %	> 100 %	-- %
Total Developing Businesses Division	> 100 %	-- %	-- %	> 100 %	-- %
Total Eastman Chemical Company	12 %	8 %	1 %	-- %	3 %

EASTMAN CHEMICAL COMPANY – EMN	July 29, 2004
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TABLE 6 – PERCENTAGE GROWTH IN SALES VOLUME

	Second Quarter, 2004 Compared to
	Second Quarter, 2003
			Total
	External	Interdivisional	Including
	Volume	Volume	Interdivisional
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	9 %	-- %	9 %
Performance Chemicals and Intermediates	6 %	17 %	10 %
Specialty Plastics	13 %	5 %	12 %
Total Eastman Division	8 %	16 %	9 %
Voridian Division
Polymers	15 %	(30) %	13 %
Fibers	5 %	5 %	9 %
Total Voridian Division	13 %	13 %	12 %
Developing Businesses Division
Developing Businesses	-- %	-- %	-- %
Total Developing Businesses Division	-- %	-- %	-- %
Total Eastman Chemical Company	10 %
Regional sales volume growth
United States and Canada	10 %
Europe, Middle East, and Africa	6 %
Asia Pacific	4 %
Latin America	31 %

EASTMAN CHEMICAL COMPANY – EMN	July 29, 2004
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TABLE 6 – PERCENTAGE GROWTH IN SALES VOLUME (Continued)

	First Six Months, 2004 Compared to
	First Six Months, 2003
			Total
	External	Interdivisional	Including
	Volume	Volume	Interdivisional
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	6 %	-- %	6 %
Performance Chemicals and Intermediates	-- %	11 %	4 %
Specialty Plastics	7 %	(6) %	4 %
Total Eastman Division	3 %	9 %	5 %
Voridian Division
Polymers	13 %	(29) %	11 %
Fibers	16 %	10 %	13 %
Total Voridian Division	14 %	2 %	11 %
Developing Businesses Division
Developing Businesses	-- %	-- %	-- %
Total Developing Businesses Division	-- %	-- %	-- %
Total Eastman Chemical Company	8 %
Regional sales volume growth
United States and Canada	6 %
Europe, Middle East, and Africa	7 %
Asia Pacific	6 %
Latin America	23 %

EASTMAN CHEMICAL COMPANY – EMN	July 29, 2004
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TABLE 7 – OPERATING EARNINGS, NET EARNINGS, AND EARNINGS PER SHARE RECONCILIATION

OPERATING EARNINGS, NET EARNINGS, AND NET EARNINGS PER DILUTED SHARE

		Second Quarter2004
(Dollars in millions)		Operating Earnings		Net Earnings		Net earnings per diluted share
As reported	$	41	$	84	$	1.07
Certain Items:
Asset impairments and restructuring charges		79		62		0.79
Net deferred tax benefit related to assets held for sale		--		(82)		(1.04)
Excluding certain items	$	120	$	64	$	0.82

		Second Quarter2003
(Dollars in millions)		Operating Earnings		Net Earnings		Net earnings per diluted share
As reported	$	75	$	35	$	0.46
Certain Items:
Asset impairments and restructuring charges		16		12		0.15
Excluding certain items	$	91	$	47	$	0.61

EASTMAN CHEMICAL COMPANY – EMN	July 29, 2004
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TABLE 8 – STATEMENTS OF CASH FLOWS

		First Six Months
(Dollars in millions)		2004		2003
Cash flows from operating activities
Net earnings	$	78	$	56
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		165		193
Cumulative effect of changes in accounting principles, net		--		(3)
Asset impairments		103		15
Gain on sale of assets		--		(20)
Provision (benefit) for deferred income taxes		(84)		28
Changes in operating assets and liabilities:
Increase in receivables		(152)		(114)
Increase in inventories		(6)		(6)
Increase (decrease) in trade payables		70		(52)
Increase (decrease) in liabilities for employee benefits and incentive pay		14		(164)
Other items, net		(6)		(28)
Net cash provided by (used in) operating activities		182		(95)
Cash flows from investing activities
Additions to properties and equipment		(117)		(100)
Proceeds from sale of assets		1		28
Additions to capitalized software		(7)		(8)
Other items, net		(4)		18
Net cash used in investing activities		(127)		(62)
Cash flows from financing activities
Net increase (decrease) in commercial paper, credit facility and other short-term borrowings		89		(33)
Proceeds from long-term borrowings		--		248
Repayment of borrowings		(500)		--
Dividends paid to stockholders		(68)		(68)
Other items		13		2
Net cash provided by (used in) financing activities		(466)		149
Net change in cash and cash equivalents		(411)		(8)
Cash and cash equivalents at beginning of period		558		77
Cash and cash equivalents at end of period	$	147	$	69

EASTMAN CHEMICAL COMPANY – EMN	July 29, 2004
	5:30 PM EDT
	Page 11

TABLE 9 – SELECTED BALANCE SHEET ITEMS

	June 30,		December 31,
(Dollars in millions)	2004		2003
Current Assets	$	1,717	$	2,010
Net Properties		3,267		3,419
Other Assets		824		801
Total Assets	$	5,808	$	6,230
Payables and Other Current Liabilities	$	1,008	$	973
Short-term Borrowings		1		504
Long-term Borrowings		2,153		2,089
Other Liabilities		1,601		1,621
Stockholders’ Equity		1,045		1,043
Total Liabilities and Stockholders’ Equity	$	5,808	$	6,230