Eastman Announces First-Quarter 2011 Financial Results
KINGSPORT, Tenn., April 28, 2011 – Eastman Chemical Company (NYSE:EMN) today announced earnings from continuing operations of $2.52 per diluted share for first quarter 2011 versus $1.43 per diluted share for first quarter 2010.
"We continue to demonstrate that we have established a new level of earnings performance for the company," said Jim Rogers, chairman and CEO. "We grew volume year over year in every business segment and in every region of the world. Furthermore, we remain well positioned for future growth with our solid balance sheet, which was further strengthened by the cash from the sale of the PET business."
| (In millions, except per share amounts) | | 1Q2011 | | 1Q2010 |
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| Sales revenue | $ | 1,758 | $ | 1,370 |
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| Earnings per diluted share from continuing operations | $ | 2.52 | $ | 1.43 |
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| Net cash used in operating activities | $ | (146) | $ | (225) |
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| Net cash used in operating activities excluding impact of adoption of amended accounting guidance* | $ | (146) | $ | (25) |
*For reconciliations to reported company cash flows, see Table 4A in the accompanying first-quarter 2011 financial tables. |
Sales revenue for first quarter 2011 was $1.8 billion, a 28 percent increase compared with first quarter 2010 due to higher sales volume and higher selling prices. The higher sales volume was attributed to strengthened end-use demand primarily in the packaging, transportation, and other markets and the positive impact of growth initiatives. The higher selling prices were in response to higher raw material and energy costs and were also attributed to strengthened demand, particularly in the U.S., and tight industry supply.
Operating earnings in first quarter 2011 increased to $284 million compared with operating earnings of $189 million in first quarter 2010. Operating earnings increased due to higher selling prices and higher sales volume, which more than 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 $20 million by an outage at the company’s Longview, Texas, manufacturing facility.
Segment Results 1Q 2011 versus 1Q 2010
Coatings, Adhesives, Specialty Polymers and Inks – Sales revenue increased by 25 percent due to higher selling prices and higher sales volume. The increase in selling prices was in response to higher raw material and energy costs and also attributed to strengthened demand, particularly in the U.S., and tight industry supply. The higher sales volume was attributed primarily to strengthened end-use demand in the transportation, industrial, and packaging markets, particularly in the U.S. Operating earnings in first quarter 2011 increased to $98 million compared with operating earnings of $65 million in first quarter 2010. The increase was due to higher selling prices, higher sales volume, and the increased benefits from cracking propane to produce low-cost propylene, which more than offset higher raw material and energy costs. First-quarter 2010 operating earnings were negatively impacted approximately $8 million by an outage at the company’s Texas manufacturing facility.
Fibers – Sales revenue increased by 8 percent primarily due to higher sales volume. The higher sales volume was mainly due to increased utilization of the recently completed Korean acetate tow manufacturing facility. Operating earnings in first quarter 2011 increased to $81 million compared with $78 million in first quarter 2010 due to higher sales volume partially offset by higher raw material and energy costs.
Performance Chemicals and Intermediates – Sales revenue increased by 44 percent due to higher sales volume and higher selling prices. The higher sales volume was primarily due to the restart of a previously idled cracking unit at the company’s Texas facility and growth in plasticizer product lines, which include the acquired Genovique Specialties plasticizer product lines. The higher selling prices were in response to higher raw material and energy costs and also attributed to strengthened demand in the U.S. and tight industry supply, particularly for olefin-derivative product lines. Operating earnings in first quarter 2011 increased to $88 million compared to $35 million in first quarter 2010. The increase was due primarily to higher selling prices, higher sales volume, and the increased benefits from cracking propane to produce low-cost propylene, which more than 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 $10 million by an outage at the company’s Texas manufacturing facility.
Specialty Plastics – Sales revenue increased by 24 percent primarily due to increased selling prices and higher sales volume. The increased selling prices were in response to higher raw material and energy costs, particularly for paraxylene. The increase in sales volume was attributed to strengthened 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 in first quarter 2011 increased to $30 million compared with operating earnings of $19 million in first quarter 2010. The increase was due to higher sales volume and increased capacity utilization, particularly for the new Eastman Tritan™ copolyester resin manufacturing facility, which led to lower unit costs, and increased selling prices partially offset by higher raw material and energy costs.
Cash Flow
Eastman used $146 million in cash from operating activities during first quarter 2011, including a $100 million contribution to the U.S. defined benefit pension plan. Working capital increased by $270 million primarily due to increased sales revenue. First-quarter 2011 cash flows also included the receipt of approximately $615 million from the sale of the PET business of the Performance Polymers segment which is reflected in cash flows from investing activities. During first quarter 2011, share repurchases totaled $74 million.
Outlook
Commenting on the outlook for second quarter and full year 2011, Rogers said: "We began the year with a very strong first quarter, driven mainly by volume growth throughout the company and higher selling prices. We expect the momentum from the first quarter will continue into the second quarter and for the full year. As a result, we expect second quarter 2011 earnings per share to be slightly higher than first quarter 2011 and full year 2011 earnings per share to be slightly higher than $9. Key variables include whether inflationary pressures negatively impact global demand and the volatility of raw material and energy costs, particularly the spread between prices for propane and propylene."
Eastman will host a conference call with industry analysts on April 29 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 913-312-1230, passcode number 2415544. A web replay, a replay in downloadable MP3 format, 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 29, to 11:00 a.m. EDT, May 9, at (888) 203-1112 or (719) 457-0820, passcode 2415544.
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 2010 sales of $6 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, demand, and inflation; sales volumes and prices; raw material and energy costs, including for propane and propylene; and earnings per share for second quarter and full-year 2011. 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 2010 available, and the Form 10-Q to be filed for first quarter 2011 and to be available, on the Eastman web site at www.eastman.com in the Investors, SEC filings section.
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| Contacts: |
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| Media: Tracy Broadwater |
423-224-0498 / tkbroadwater@eastman.com |
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| Investors: Greg Riddle |
212-835-1620 / griddle@eastman.com |
The Company completed the sale of the polyethylene terephthalate ("PET") business, related assets at the Columbia, South Carolina, site, and technology of its Performance Polymers segment on January 31, 2011. The PET business, assets, and technology sold were substantially all of the Performance Polymers segment. Performance Polymers segment operating results are presented as discontinued operations for all periods presented and are therefore not included in results from continuing operations under accounting principles generally accepted in the United States.
