Eastman Announces Fourth-Quarter and Full-Year 2015 Financial Results
KINGSPORT, Tenn., Jan. 28, 2016 - Eastman Chemical Company (NYSE:EMN) today announced earnings, excluding non-core items, of $1.59 per diluted share for fourth quarter 2015 versus $1.64 per diluted share for fourth quarter 2014. Reported earnings were $0.83 per diluted share in fourth quarter 2015 versus $0.11 per diluted share in fourth quarter 2014. For detail of the excluded items and reconciliation to reported company and segment earnings, see Tables 3A and 4.
“We delivered our sixth consecutive year of solid earnings growth and record cash from operations in 2015,” said Mark Costa, chairman and CEO. “These results reflect the strength and robustness of our strategy to transform towards a specialty portfolio as we managed through a very challenging global business environment. We benefitted from volume growth in specialty businesses, mix upgrade in Advanced Materials from growth of high value, innovative products, accretion from high quality specialty acquisitions, and continued disciplined cost management.” See “Outlook” for the items excluded from annual earnings comparisons.
|
| | | | |
| (In millions, except per share amounts) | 4Q2015 | 4Q2014 | FY2015 | FY2014 |
| Sales revenue | $2,225 | $2,349 | $9,648 | $9,527 |
| Earnings per diluted share | $0.83 | $0.11 | $5.66 | $4.95 |
| Earnings per diluted share excluding non-core items* | $1.59 | $1.64 | $7.28 | $7.07 |
| Net cash provided by operating activities | $562 | $460 | $1,612 | $1,408 |
*For reconciliation to reported company and segment earnings, see Tables 3A and 4.
Corporate Results 4Q 2015 versus 4Q 2014
Sales revenue for fourth quarter 2015 was $2.2 billion versus $2.3 billion for fourth quarter 2014, primarily due to lower selling prices more than offsetting sales revenue from the Taminco Corporation and Commonwealth Laminating & Coating, Inc. businesses acquired in December 2014. Excluding non-core items, fourth-quarter 2015 operating earnings were $343 million compared with $362 million for fourth quarter 2014 as earnings from the acquired businesses and increased Advanced Materials sales volume were more than offset by propane hedges and lower acetate tow sales volume. Reported fourth-quarter 2015 operating earnings were $172 million compared with $27 million for fourth quarter 2014. Fourth-quarter 2015 and 2014 non-core items included losses from annual mark-to-market of pension and other post-retirement benefit plans, and fourth quarter 2015 non-core items included restructuring severance costs.
Segment Results 4Q 2015 versus 4Q 2014
Additives & Functional Products - Sales revenue increased primarily due to sales of products of the acquired Taminco specialty amines and crop protection businesses. These revenues were partially offset by lower coatings and other formulated products selling prices, primarily due to lower raw material and energy costs. Excluding non-core items in fourth quarter 2014, operating earnings decreased to $97 million for fourth
quarter 2015 compared with $99 million for fourth quarter 2014 as earnings from the acquired businesses were more than offset by propane hedges.
Adhesives & Plasticizers - Sales revenue decreased primarily due to lower selling prices. Lower plasticizers selling prices were primarily in response to lower raw material and energy costs and continued competitive pressure resulting from weak demand in Asia Pacific. Operating earnings increased to $49 million for fourth quarter 2015 compared with $41 million for fourth quarter 2014 primarily due to lower raw material and energy costs exceeding lower selling prices.
Advanced Materials - Sales revenue increased primarily due to increased sales volume and sales of products of the acquired Commonwealth performance films business. These revenues were partially offset by lower selling prices primarily for copolyesters due to lower raw material and energy costs. Excluding non-core items in fourth quarter 2014, operating earnings increased to $83 million for fourth quarter 2015 compared with $62 million for fourth quarter 2014 primarily due to higher sales volume and earnings from the acquired business.
Fibers - Sales revenue decreased primarily due to lower acetate tow sales volume, especially in China. Excluding non-core items in fourth quarter 2015, operating earnings decreased to $107 million for fourth quarter 2015 compared with $122 million for fourth quarter 2014 primarily due to lower acetate tow sales volume.
Specialty Fluids & Intermediates - Sales revenue decreased primarily due to lower selling prices and lower chemical and other intermediates sales volume more than offsetting sales of products of the acquired Taminco functional amines business. The lower selling prices were primarily in response to lower raw material and energy costs. Excluding non-core items in fourth quarter 2014, operating earnings decreased to $20 million for fourth quarter 2015 compared to $49 million for fourth quarter 2014 as propane hedges and lower selling prices more than offset lower raw material and energy costs and earnings from the acquired business.
Corporate Results 2015 versus 2014
Sales revenue was $9.6 billion, a 1 percent increase compared with 2014 due to sales of products of acquired businesses partially offset by lower selling prices, particularly in the Specialty Fluids & Intermediates segment. Excluding the non-core items described in Tables 3A and 4, operating earnings for 2015 were $1.7 billion, a 6 percent increase compared with 2014 primarily due to earnings of the acquired businesses and lower raw material and energy costs exceeding lower selling prices. Reported 2015 operating earnings were $1.4 billion compared with $1.2 billion for 2014.
Segment Results 2015 versus 2014
Additives & Functional Products - Sales revenue increased primarily due to sales of products of the acquired Taminco specialty amines and crop protection businesses. These revenues were partially offset by lower coatings and other formulated products selling prices, primarily due to lower raw material and energy costs and an unfavorable shift in foreign currency exchange rates. Excluding non-core items in 2014, operating
earnings increased to $462 million for 2015 compared with $398 million for 2014 primarily due to earnings from acquired businesses and lower raw material and energy costs exceeding lower selling prices, partially offset by propane hedges.
Adhesives & Plasticizers - Sales revenue decreased primarily due to lower plasticizers selling prices and an unfavorable shift in foreign currency exchange rates. Lower plasticizers selling prices were primarily in response to lower raw material and energy costs and continued competitive pressure. Operating earnings increased to $239 million for 2015 compared with $196 million for 2014 primarily due to lower raw material and energy costs exceeding lower selling prices, partially offset by propane hedges and an unfavorable shift in foreign currency exchange rates.
Advanced Materials - Sales revenue increased due to increased sales volume and sales of products of the acquired Commonwealth performance films business, partially offset by an unfavorable shift in foreign currency exchange rates and lower selling prices, primarily for copolyesters due to lower raw material and energy costs. Excluding non-core items, operating earnings increased to $409 million for 2015 compared with $293 million for 2014 primarily due to higher sales volume and improved product mix, earnings from the acquired business, and lower raw material and energy costs exceeding lower selling prices, partially offset by an unfavorable shift in foreign currency exchange rates.
Fibers - Sales revenue decreased primarily due to lower acetate tow sales volume attributed to customer inventory destocking, especially in China, and lower acetyl chemicals sales volume due to decreased sales to the cellulose acetate flake joint venture in Kingsport. Excluding non-core items for 2015, operating earnings decreased to $390 million for 2015 compared with $474 million for 2014 primarily due to lower acetate tow and acetyl chemicals sales volume.
Specialty Fluids & Intermediates - Sales revenue decreased primarily due to lower selling prices and lower chemical and other intermediates sales volume more than offsetting sales of products of the acquired Taminco functional amines and aviation turbine oil businesses. The lower selling prices were primarily in response to lower raw material and energy costs. Excluding non-core items in 2014, operating earnings decreased to $253 million for 2015 compared to $305 million for 2014 primarily due to propane hedges more than offsetting earnings from the acquired businesses.
Provision for Income Taxes
Excluding the tax impact of non-core items, the fourth-quarter 2015 effective tax rate was 17 percent. The fourth quarter 2015 tax rate included benefit from the extension in December 2015 of favorable U.S. federal tax provisions. Excluding the tax impact of non-core items, the full-year 2015 effective tax rate was 25 percent compared to 26 percent for full year 2014.
Cash Flow
Cash from operating activities was $1.6 billion in 2015. Free cash flow (defined as cash from operating activities minus capital expenditures) was a record $960 million in 2015. During 2015 the company reduced net debt (defined as total borrowings less cash and cash equivalents) by $589 million, contributed $125 million to its U.S. defined benefit pension plans, and repurchased $103 million of shares.
Outlook
Commenting on the outlook for full year 2016, Costa said: “We enter 2016 well positioned to benefit from our strong portfolio of specialty businesses which leverage world-class technology platforms to deliver solid growth in attractive end markets and accelerated earnings growth from our high value, innovative specialty products. However, we face increasing challenges including stagnant global economic growth, the collapse in the price of oil, and weakening currencies in Asia and Europe. In this environment, we are taking decisive actions to accelerate our innovation and market development activities and significantly increase our cost reduction efforts. Given current business conditions, we are driving hard to deliver 2016 earnings per share that approach 2015 earnings per share.” Non-core and any non-recurring items are excluded from the earnings per share projection.
The earnings for 2014, 2013, 2012, 2011, 2010, and 2009 referenced in the second paragraph of this release are non-GAAP and exclude the non-core items detailed, with reconciliation to GAAP earnings, in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the company’s Annual Reports on Form 10-K for 2014, 2013, 2012, and 2011.
Eastman will host a conference call with industry analysts on January 29, 2016 at 8:00 a.m. ET. 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 913-312-1403, passcode number 694500. 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. ET, January 29, to 11:00 a.m. ET, February 8, at 888-203-1112 or 719-457-0820, passcode 694500.
Forward-Looking Statements: This news release includes forward-looking statements concerning current expectations for future global economic conditions; competitive position and acceptance of specialty products in key markets; mix of products sold; foreign currency exchange rates; raw material and energy prices and costs, and other prices and costs; non-core costs, charges, income, and gains; revenue and earnings from acquired businesses; and revenue, earnings, and cash flow for full year 2016. 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-Q filed for third quarter 2015 available, and the Form 10-K to be filed for 2015 and to be available, on the Eastman web site at www.eastman.com in the Investors, SEC filings section.
Eastman is a global specialty chemical company that produces a broad range of products found in items people use every day. With a portfolio of specialty businesses, Eastman works with customers to deliver innovative products and solutions while maintaining a commitment to safety and sustainability. Its market-driven approaches take advantage of world-class technology platforms and leading positions in attractive end-markets such as transportation, building and construction and consumables. Eastman focuses on creating consistent, superior value for all
stakeholders. As a globally diverse company, Eastman serves customers in approximately 100 countries and had 2015 revenues of approximately $9.6 billion. The company is headquartered in Kingsport, Tennessee, USA and employs approximately 15,000 people around the world. For more information, visit www.eastman.com.
# # #
Contacts:
Media: Tracy Kilgore
423-224-0498 / tjkilgore@eastman.com
Investors: Greg Riddle
212-835-1620 / griddle@eastman.com
FINANCIAL INFORMATION
January 28, 2016
For Eastman Chemical Company Fourth Quarter and Full Year 2015 Financial Results Release
Table of Contents
| Table 1 – Statements of Earnings |
| | | | | | | | | | | | | | | |
| | Fourth Quarter | | Twelve Months |
| (Dollars in millions, except per share amounts; unaudited) | 2015 | | 2014 | | 2015 | | 2014 |
| Sales | $ | 2,225 |
| | $ | 2,349 |
| | $ | 9,648 |
| | $ | 9,527 |
|
Cost of sales (1) | 1,716 |
| | 2,016 |
| | 7,068 |
| | 7,306 |
|
| Gross profit | 509 |
| | 333 |
| | 2,580 |
| | 2,221 |
|
Selling, general and administrative expenses (1) | 210 |
| | 244 |
| | 762 |
| | 755 |
|
Research and development expenses (1) | 74 |
| | 62 |
| | 251 |
| | 227 |
|
| Asset impairments and restructuring charges, net | 53 |
| | — |
| | 183 |
| | 77 |
|
| Operating earnings | 172 |
| | 27 |
| | 1,384 |
| | 1,162 |
|
| Net interest expense | 65 |
| | 55 |
| | 263 |
| | 187 |
|
| Other charges (income), net | (10 | ) | | 1 |
| | (8 | ) | | (15 | ) |
| Earnings (loss) from continuing operations before income taxes | 117 |
| | (29 | ) | | 1,129 |
| | 990 |
|
| Provision (benefit) for income taxes from continuing operations | (8 | ) | | (46 | ) | | 275 |
| | 235 |
|
| Earnings from continuing operations | 125 |
| | 17 |
| | 854 |
| | 755 |
|
| Earnings from discontinued operations, net of tax | — |
| | — |
| | — |
| | 2 |
|
| Net earnings | 125 |
| | 17 |
| | 854 |
| | 757 |
|
| Less: net earnings attributable to noncontrolling interest | 1 |
| | 1 |
| | 6 |
| | 6 |
|
| Net earnings attributable to Eastman | $ | 124 |
| | $ | 16 |
| | $ | 848 |
| | $ | 751 |
|
| Amounts attributable to Eastman stockholders: | | | | | | | |
| Earnings from continuing operations, net of tax | $ | 124 |
| | $ | 16 |
| | $ | 848 |
| | $ | 749 |
|
| Earnings from discontinued operations, net of tax | — |
| | — |
| | — |
| | 2 |
|
| Net earnings attributable to Eastman stockholders | $ | 124 |
| | $ | 16 |
| | $ | 848 |
| | $ | 751 |
|
| Basic earnings per share attributable to Eastman | |
| | |
| | |
| | |
|
| Earnings from continuing operations | $ | 0.83 |
| | $ | 0.11 |
| | $ | 5.71 |
| | $ | 5.01 |
|
| Earnings from discontinued operations | — |
| | — |
| | — |
| | 0.02 |
|
| Basic earnings per share attributable to Eastman | $ | 0.83 |
| | $ | 0.11 |
| | $ | 5.71 |
| | $ | 5.03 |
|
| Diluted earnings per share attributable to Eastman | |
| | |
| | |
| | |
|
| Earnings from continuing operations | $ | 0.83 |
| | $ | 0.11 |
| | $ | 5.66 |
| | $ | 4.95 |
|
| Earnings from discontinued operations | — |
| | — |
| | — |
| | 0.02 |
|
| Diluted earnings per share attributable to Eastman | $ | 0.83 |
| | $ | 0.11 |
| | $ | 5.66 |
| | $ | 4.97 |
|
| | | | | | | | |
| Shares (in millions) outstanding at end of period | 147.8 |
| | 148.6 |
| | 147.8 |
| | 148.6 |
|
| Shares (in millions) used for earnings per share calculation | | | | | | | |
| Basic | 148.4 |
| | 148.5 |
| | 148.6 |
| | 149.5 |
|
| Diluted | 149.5 |
| | 150.0 |
| | 149.8 |
| | 151.1 |
|
| |
(1) | Fourth quarter and twelve months 2015 included mark-to-market ("MTM") pension and other postretirement benefit plans net losses of $113 million and $115 million, respectively. Fourth quarter and twelve months 2014 included MTM pension and other postretirement benefit plans net losses of $304 million. See Table 3A for Non-GAAP earnings reconciliation by line item. |
| Table 2A – Segment Sales Information |
| | | | | | | | | | | | | | | | |
| | | Fourth Quarter | | Twelve Months |
| (Dollars in millions, unaudited) | | 2015 | | 2014 | | 2015 | | 2014 |
| Sales by Segment | | | | | | | | |
| Additives & Functional Products | | $ | 541 |
| | $ | 488 |
| | $ | 2,368 |
| | $ | 1,821 |
|
| Adhesives & Plasticizers | | 272 |
| | 313 |
| | 1,214 |
| | 1,363 |
|
| Advanced Materials | | 582 |
| | 562 |
| | 2,414 |
| | 2,378 |
|
| Fibers | | 316 |
| | 371 |
| | 1,219 |
| | 1,457 |
|
| Specialty Fluids & Intermediates | | 505 |
| | 606 |
| | 2,388 |
| | 2,490 |
|
| Total Sales by Segment | | 2,216 |
| | 2,340 |
| | 9,603 |
| | 9,509 |
|
| Other | | 9 |
| | 9 |
| | 45 |
| | 18 |
|
| Total Eastman Chemical Company | | $ | 2,225 |
| | $ | 2,349 |
| | $ | 9,648 |
| | $ | 9,527 |
|
| Table 2B – Sales Revenue Change |
| | | | | | | | | | |
| | Fourth Quarter 2015 Compared to Fourth Quarter 2014 |
| (Unaudited) | | Change in Sales Revenue Due To
|
| | Revenue % Change | Acquired Businesses Effect (1) | Volume / Product Mix Effect | Price Effect | Exchange Rate Effect |
| | | | | | |
| Additives & Functional Products | 11 | % | 23 | % | — | % | (10) | % | (2) | % |
| Adhesives & Plasticizers | (13) | % | — | % | 1 | % | (12) | % | (2) | % |
| Advanced Materials | 4 | % | 4 | % | 7 | % | (4) | % | (3) | % |
| Fibers | (15) | % | — | % | (12) | % | (2) | % | (1) | % |
| Specialty Fluids & Intermediates | (17) | % | 9 | % | (9) | % | (17) | % | — | % |
| | | | | | |
| Total Eastman Chemical Company | (5) | % | 8 | % | (2) | % | (9) | % | (2) | % |
| | |
| | Twelve Months 2015 Compared to Twelve Months 2014 |
| (Unaudited) | | Change in Sales Revenue Due To |
| | Revenue % Change | Acquired Businesses Effect (1) | Volume / Product Mix Effect | Price Effect | Exchange Rate Effect |
| | | | | | |
| Additives & Functional Products | 30 | % | 39 | % | 1 | % | (7) | % | (3) | % |
| Adhesives & Plasticizers | (11) | % | — | % | (1) | % | (7) | % | (3) | % |
| Advanced Materials | 2 | % | 5 | % | 4 | % | (3) | % | (4) | % |
| Fibers | (16) | % | — | % | (15) | % | (1 | )% | — | % |
| Specialty Fluids & Intermediates | (4) | % | 17 | % | (4) | % | (16) | % | (1) | % |
| | | | | | |
| Total Eastman Chemical Company | 1 | % | 13 | % | (2) | % | (8) | % | (2) | % |
| |
(1) | Contribution to revenue of businesses acquired which are not in 2014 comparable periods. |
| Table 2C – Sales by Customer Location |
| | | | | | | | | | | | | | | | |
| | | Fourth Quarter | | Twelve Months |
| (Dollars in millions, unaudited) | | 2015 | | 2014 | | 2015 | | 2014 |
| Sales by Customer Location | | | | | | | | |
| United States and Canada | | $ | 959 |
| | $ | 1,042 |
| | $ | 4,350 |
| | $ | 4,384 |
|
| Asia Pacific | | 592 |
| | 654 |
| | 2,333 |
| | 2,540 |
|
| Europe, Middle East, and Africa | | 557 |
| | 513 |
| | 2,422 |
| | 2,091 |
|
| Latin America | | 117 |
| | 140 |
| | 543 |
| | 512 |
|
| Total Eastman Chemical Company | | $ | 2,225 |
| | $ | 2,349 |
| | $ | 9,648 |
| | $ | 9,527 |
|
Table 3 - Segment, Other, and Company Non-GAAP Operating Earnings (Loss) (1) |
| | | | | | | | | | | | | | | |
| | Fourth Quarter | | Twelve Months |
| (Dollars in millions, unaudited) | 2015 | | 2014 | | 2015 | | 2014 |
Additives & Functional Products
| $ | 97 |
| | $ | 99 |
| | $ | 462 |
| | $ | 398 |
|
Adhesives & Plasticizers
| 49 |
| | 41 |
| | 239 |
| | 196 |
|
Advanced Materials
| 83 |
| | 62 |
| | 409 |
| | 293 |
|
Fibers
| 107 |
| | 122 |
| | 390 |
| | 474 |
|
Specialty Fluids & Intermediates
| 20 |
| | 49 |
| | 253 |
| | 305 |
|
| Total segment operating earnings excluding non-core items | $ | 356 |
| | $ | 373 |
| | $ | 1,753 |
| | $ | 1,666 |
|
| Total Other | (13 | ) | | (11 | ) | | (36 | ) | | (53 | ) |
| Total operating earnings excluding non-core items | $ | 343 |
| | $ | 362 |
| | $ | 1,717 |
| | $ | 1,613 |
|
| |
(1) | For identification of excluded non-core items and reconciliations to GAAP operating earnings, see Table 3A. |
| Table 3A - Segment, Other, and Company Non-GAAP Operating Earnings (Loss) Reconciliations |
| | | | | | | | | | | | | | | |
| | Fourth Quarter | | Twelve Months |
| (Dollars in millions, unaudited) | 2015 | | 2014 | | 2015 | | 2014 |
| Additives & Functional Products | | | | | | | |
| Operating earnings | $ | 97 |
| | $ | 93 |
| | $ | 462 |
| | $ | 329 |
|
Asset impairments and restructuring charges (gains), net (1) | — |
| | (1 | ) | | — |
| | 62 |
|
Additional costs of acquired inventories (1) | — |
| | 7 |
| | — |
| | 7 |
|
| Excluding non-core items | 97 |
| | 99 |
| | 462 |
| | 398 |
|
| Adhesives & Plasticizers | |
| | |
| | |
| | |
|
| Operating earnings | 49 |
| | 41 |
| | 239 |
| | 196 |
|
| Advanced Materials | |
| | |
| | |
| | |
|
| Operating earnings | 83 |
| | 59 |
| | 384 |
| | 276 |
|
Asset impairments and restructuring charges, net (1) | — |
| | 2 |
| | 18 |
| | 16 |
|
Additional costs of acquired inventories (1) | — |
| | 1 |
| | 7 |
| | 1 |
|
| Excluding non-core items | 83 |
| | 62 |
| | 409 |
| | 293 |
|
| Fibers | |
| | |
| | |
| | |
|
| Operating earnings | 104 |
| | 122 |
| | 292 |
| | 474 |
|
Asset impairments and restructuring charges, net (1)(2) | 3 |
| | — |
| | 98 |
| | — |
|
| Excluding non-core items | 107 |
| | 122 |
| | 390 |
| | 474 |
|
| Specialty Fluids & Intermediates | | | | | | | |
| Operating earnings | 20 |
| | 41 |
| | 253 |
| | 289 |
|
Additional costs of acquired inventories (1) | — |
| | 8 |
| | — |
| | 16 |
|
| Excluding non-core items | 20 |
| | 49 |
| | 253 |
| | 305 |
|
| Other | | | | | | | |
| Operating loss | (181 | ) | | (329 | ) | | (246 | ) | | (402 | ) |
Mark-to-market pension and other postretirement benefit plans loss, net (3) | 113 |
| | 304 |
| | 115 |
| | 304 |
|
Asset impairments and restructuring charges (gains), net (1)(4) | 50 |
| | (1 | ) | | 67 |
| | (1 | ) |
Acquisition integration and transaction costs (1)(5) | 5 |
| | 15 |
| | 28 |
| | 46 |
|
| Excluding non-core items | (13 | ) | | (11 | ) | | (36 | ) | | (53 | ) |
| | | | | | | | |
| Total Eastman Chemical Company | | | | | | | |
| Operating earnings | 172 |
| | 27 |
| | 1,384 |
| | 1,162 |
|
| Mark-to-market pension and other postretirement benefit plans loss, net | 113 |
| | 304 |
| | 115 |
| | 304 |
|
| Asset impairments and restructuring charges, net | 53 |
| | — |
| | 183 |
| | 77 |
|
| Acquisition integration and transaction costs | 5 |
| | 15 |
| | 28 |
| | 46 |
|
| Additional costs of acquired inventories | — |
| | 16 |
| | 7 |
| | 24 |
|
| Total operating earnings excluding non-core items | $ | 343 |
| | $ | 362 |
| | $ | 1,717 |
| | $ | 1,613 |
|
| | | | | | | | |
| Company Non-GAAP Operating Earnings Reconciliations by Line Items | | | | | | | |
| Operating earnings | $ | 172 |
| | $ | 27 |
| | $ | 1,384 |
| | $ | 1,162 |
|
| Costs of sales | 82 |
| | 256 |
| | 91 |
| | 264 |
|
| Selling, general and administrative expenses | 23 |
| | 72 |
| | 46 |
| | 103 |
|
| Research and development expenses | 13 |
| | 7 |
| | 13 |
| | 7 |
|
| Asset impairment and restructuring charges, net | 53 |
| | — |
| | 183 |
| | 77 |
|
| Total operating earnings excluding non-core items | $ | 343 |
| | $ | 362 |
| | $ | 1,717 |
| | $ | 1,613 |
|
| |
(1) | See "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Annual Report on Form 10-K for 2014 and the Company's Quarterly Report on Form 10-Q for third quarter 2015 for descriptions of non-core items. |
| |
(2) | Included in fourth quarter and twelve months 2015 earnings are asset impairments and restructuring charges, net due to the closure of the Workington, UK acetate tow manufacturing facility. |
| |
(3) | Fourth quarter and twelve months 2015 and 2014 included MTM pension and other postretirement benefit plans net loss. |
| |
(4) | Included in fourth quarter and twelve months 2015 earnings are asset impairments and restructuring charges, net primarily due to severance costs for a corporate reduction in force of $51 million. |
| |
(5) | Included in fourth quarter and twelve months 2015 earnings are integration and transaction costs primarily for the completed acquisitions of Taminco Corporation and Commonwealth Laminating & Coating, Inc. |
| Table 4 – Operating Earnings, Earnings, and Earnings Per Share from Continuing Operations Non-GAAP Reconciliations |
| | | | | | | | | | | | | | | | |
| | | Fourth Quarter 2015 |
| | | Operating Earnings | | Earnings from Continuing Operations Before Income Taxes | | Earnings from Continuing Operations Attributable to Eastman |
| (Dollars in millions, except per share amounts, unaudited) | | | After Tax (1) | | Per Diluted Share |
| As reported | | $ | 172 |
| | $ | 117 |
| | $ | 124 |
| | $ | 0.83 |
|
| Non-Core Items: | | |
| | |
| | | | |
Mark-to-market pension and other postretirement benefit plans loss, net (2) | | 113 |
| | 113 |
| | 69 |
| | 0.46 |
|
Asset impairments and restructuring charges, net (2) | | 53 |
| | 53 |
| | 42 |
| | 0.28 |
|
Acquisition integration and transaction costs (2) | | 5 |
| | 5 |
| | 4 |
| | 0.02 |
|
| Excluding non-core items | | $ | 343 |
| | $ | 288 |
| | $ | 239 |
| | $ | 1.59 |
|
|
| | | | | | | | | | | | | | | | |
| | | Fourth Quarter 2014 |
| | | Operating Earnings | | Earnings from Continuing Operations Before Income Taxes | | Earnings from Continuing Operations Attributable to Eastman |
| (Dollars in millions, except per share amounts, unaudited) | | | After Tax (1) | | Per Diluted Share |
| As reported | | $ | 27 |
| | $ | (29 | ) | | $ | 16 |
| | $ | 0.11 |
|
| Non-Core Items: | | | | | | | | |
Mark-to-market pension and other postretirement benefit plans loss, net (2) | | 304 |
| | 304 |
| | 202 |
| | 1.35 |
|
Additional costs of acquired inventories (2) | | 16 |
| | 16 |
| | 10 |
| | 0.07 |
|
Acquisition integration, transaction, and financing costs (2)(3) | | 15 |
| | 25 |
| | 18 |
| | 0.11 |
|
| Excluding non-core items | | $ | 362 |
| | $ | 316 |
| | $ | 246 |
| | $ | 1.64 |
|
| |
(1) | Excluding the tax impact of non-core items, fourth quarter 2015 and 2014 effective tax rates were 17 percent and 22 percent, respectively. The fourth quarter 2015 tax rate was reduced by changes in our geographic mix of earnings resulting in a higher percentage of earnings in jurisdictions with lower effective tax rates than the U.S., and a reduction in foreign income taxes. |
| |
(2) | See Table 3A for description of MTM net loss, asset impairments and restructuring charges, net, acquisition integration and transaction costs, and additional costs of acquired inventories. |
| |
(3) | Acquisition transaction and integration costs of $15 million in selling, general, and administrative expenses and acquisition financing cost of $10 million in other charges (income), net. |
|
| | | | | | | | | | | | | | | | |
| Table 4 – Operating Earnings, Earnings, and Earnings Per Share from Continuing Operations Non-GAAP Reconciliations (continued) |
| | | Twelve Months 2015 |
| | | Operating Earnings | | Earnings from Continuing Operations Before Income Taxes | | Earnings from Continuing Operations Attributable to Eastman |
| (Dollars in millions, except per share amounts, unaudited) | | | After Tax (1) | | Per Diluted Share |
| As reported | | $ | 1,384 |
| | $ | 1,129 |
| | $ | 848 |
| | $ | 5.66 |
|
| Non-Core Items: | | |
| | |
| | | | |
Asset impairments and restructuring charges, net (2) | | 183 |
| | 183 |
| | 151 |
| | 1.00 |
|
Mark-to-market pension and other postretirement benefit plans loss, net (2) | | 115 |
| | 115 |
| | 70 |
| | 0.47 |
|
Acquisition integration and transaction costs (2) | | 28 |
| | 28 |
| | 18 |
| | 0.12 |
|
Additional costs of acquired inventories (2) | | 7 |
| | 7 |
| | 4 |
| | 0.03 |
|
| Excluding non-core items | | $ | 1,717 |
| | $ | 1,462 |
| | $ | 1,091 |
| | $ | 7.28 |
|
|
| | | | | | | | | | | | | | | | |
| | | Twelve Months 2014 |
| | | Operating Earnings | | Earnings from Continuing Operations Before Income Taxes | | Earnings from Continuing Operations Attributable to Eastman |
| (Dollars in millions, except per share amounts, unaudited) | | | After Tax (1) | | Per Diluted Share |
| As reported | | $ | 1,162 |
| | $ | 990 |
| | $ | 749 |
| | $ | 4.95 |
|
| Non-Core Items: | | | | | | | | |
Mark-to-market pension and other postretirement benefit plans loss, net (2) | | 304 |
| | 304 |
| | 202 |
| | 1.34 |
|
Asset impairments and restructuring charges, net (2) | | 77 |
| | 77 |
| | 63 |
| | 0.42 |
|
Acquisition integration, transaction, and financing costs (2)(3) | | 46 |
| | 59 |
| | 39 |
| | 0.26 |
|
Additional costs of acquired inventories (2) | | 24 |
| | 24 |
| | 15 |
| | 0.10 |
|
| Excluding non-core items | | $ | 1,613 |
| | $ | 1,454 |
| | $ | 1,068 |
| | $ | 7.07 |
|
| |
(1) | Excluding the tax impact of non-core items, 2015 and 2014 effective tax rates were 25 percent and 26 percent, respectively. |
| |
(2) | See Table 3A for description of asset impairments and restructuring charges, net, MTM net loss, acquisition integration and transaction, costs, and additional costs of acquired inventories. |
| |
(3) | Acquisition transaction and integration costs of $46 million in selling, general, and administrative expenses and acquisition financing cost of $13 million in other charges (income), net. |
| Table 5 – Statements of Cash Flows |
| | | | | | | | | | | | | | | |
| | Fourth Quarter | | Twelve Months |
| (Dollars in millions, unaudited) | 2015 | | 2014 | | 2015 | | 2014 |
| Operating activities | | | | | | | |
| Net earnings | $ | 125 |
| | $ | 17 |
| | $ | 854 |
| | $ | 757 |
|
| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | |
| Depreciation and amortization | 142 |
| | 122 |
| | 571 |
| | 450 |
|
| Asset impairment charges | — |
| | 2 |
| | 107 |
| | 52 |
|
| Gain on sale of assets | — |
| | — |
| | — |
| | (5 | ) |
| Provision (benefit) for deferred income taxes | 31 |
| | 41 |
| | 60 |
| | 99 |
|
| Mark-to-market pension and other postretirement benefit plans loss (gain), net | 113 |
| | 304 |
| | 115 |
| | 304 |
|
| Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: | | | | | | | |
| (Increase) decrease in trade receivables | 168 |
| | 137 |
| | 114 |
| | 19 |
|
| (Increase) decrease in inventories | (3 | ) | | 15 |
| | (26 | ) | | (61 | ) |
| Increase (decrease) in trade payables | 37 |
| | (18 | ) | | (102 | ) | | (30 | ) |
| Pension and other postretirement contributions (in excess of) less than expenses | (110 | ) | | (89 | ) | | (259 | ) | | (165 | ) |
| Variable compensation (in excess of) less than expenses | 51 |
| | 35 |
| | 71 |
| | 27 |
|
| Other items, net | 8 |
| | (106 | ) | | 107 |
| | (39 | ) |
| Net cash provided by operating activities | 562 |
| | 460 |
| | 1,612 |
| | 1,408 |
|
| Investing activities | | | | | | | |
| Additions to properties and equipment | (226 | ) | | (187 | ) | | (652 | ) | | (593 | ) |
| Proceeds from sale of assets | — |
| | — |
| | 4 |
| | 13 |
|
| Acquisitions, net of cash acquired | — |
| | (3,184 | ) | | (45 | ) | | (3,509 | ) |
| Other items, net | — |
| | (2 | ) | | — |
| | (2 | ) |
| Net cash used in investing activities | (226 | ) | | (3,373 | ) | | (693 | ) | | (4,091 | ) |
| Financing activities | | | | | | | |
| Net increase (decrease) in commercial paper borrowings | 38 |
| | (5 | ) | | 195 |
| | (190 | ) |
| Proceeds from borrowings | — |
| | 2,950 |
| | 250 |
| | 3,565 |
|
| Repayment of borrowings | (275 | ) | | — |
| | (950 | ) | | (125 | ) |
| Dividends paid to stockholders | (59 | ) | | (51 | ) | | (238 | ) | | (210 | ) |
| Treasury stock purchases | (55 | ) | | — |
| | (103 | ) | | (410 | ) |
| Dividends paid to noncontrolling interests | — |
| | — |
| | (6 | ) | | (9 | ) |
| Proceeds from stock option exercises and other items, net | — |
| | 21 |
| | 20 |
| | 43 |
|
| Net cash used in financing activities | (351 | ) | | 2,915 |
| | (832 | ) | | 2,664 |
|
| Effect of exchange rate changes on cash and cash equivalents | (1 | ) | | 1 |
| | (8 | ) | | (4 | ) |
| Net change in cash and cash equivalents | (16 | ) | | 3 |
| | 79 |
| | (23 | ) |
| Cash and cash equivalents at beginning of period | 309 |
| | 211 |
| | 214 |
| | 237 |
|
| Cash and cash equivalents at end of period | $ | 293 |
| | $ | 214 |
| | $ | 293 |
| | $ | 214 |
|
| Table 5A – Net Cash Provided By Operating Activities to Free Cash Flow Reconciliation |
| | | | | | | | | | | | | | | | |
| | | Fourth Quarter | | Twelve Months |
| (Dollars in millions, unaudited) | | 2015 | | 2014 | | 2015 | | 2014 |
| Net cash provided by operating activities | | $ | 562 |
| | $ | 460 |
| | $ | 1,612 |
| | $ | 1,408 |
|
| Additions to properties and equipment | | (226 | ) | | (187 | ) | | (652 | ) | | (593 | ) |
| Free Cash Flow | | $ | 336 |
| | $ | 273 |
| | $ | 960 |
| | $ | 815 |
|
| Table 6 – Selected Balance Sheet Items |
| | | | | | | | |
| | | December 31, | | December 31, |
| (Dollars in millions, unaudited) | | 2015 | | 2014 |
| Cash and cash equivalents | | $ | 293 |
| | $ | 214 |
|
| Total borrowings | | 7,039 |
| | 7,549 |
|
| Total Eastman stockholders' equity | | 3,941 |
| | 3,510 |
|
