Eastman Chemical (EMN) 8-K Unaudited Pro Forma Condensed Consolidated Financial Statements

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Unaudited Pro Forma Condensed Consolidated Statement of Financial Position as of September 30, 2010 has been presented after giving effect to the completion of the Transaction as if it had occurred on September 30, 2010.

The Unaudited Pro Forma Condensed Consolidated Statements of Earnings for the nine months ended September 30, 2010 and 2009 and for the years ended December 31, 2009, 2008, and 2007, have been presented after giving effect to the completion of the Transaction as if it had occurred on January 1, 2007 and do not assume interest income on expected cash proceeds.

The unaudited pro forma condensed consolidated financial statements as of and for the respective periods presented have been derived primarily from the historical audited consolidated financial statements of the Company contained in its Annual Report on Form 10-K for the year ended December 31, 2009 as well as the unaudited consolidated financial statements of the Company contained in its quarterly report on Form 10-Q for the quarter ended September 30, 2010. The unaudited pro forma condensed consolidated financial statements are based upon available information and assumptions that the Company believes are reasonable under the circumstances and were prepared to illustrate the estimated effects of the Transaction, if the Transaction occurred as of and on the dates specified above. As the Transaction has not been completed, the Company has not finalized its accounting for discontinued operations for the periods presented herein, and therefore amounts reported in future financial statements with the Securities and Exchange Commission for the periods presented herein could differ from these pro forma estimates.

The unaudited pro forma condensed consolidated financial statements have been provided for informational purposes and should not be considered indicative of the financial condition or results of operations that would have been achieved had the Transaction occurred as of or for the periods presented. In addition, the unaudited pro forma condensed consolidated financial statements do not purport to indicate financial position or results of operations as of any future date or for any future period, including expected benefits and incremental earnings that may arise, if any, from the Transaction. The unaudited pro forma financial statements, including the related notes, should be read in conjunction with the historical audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 and the historical unaudited condensed consolidated financial statements included in the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2010.

The PET business, assets, and technology to be sold by the Company in the Transaction are substantially all of the Performance Polymers segment. Performance Polymers segment operating results will be presented as discontinued operations in the Company’s future filings with the SEC. Corporate costs which were allocated to the Performance Polymers segment will be reallocated to other segments in the Company’s financial statements.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of September 30, 2010

			Adjustments
			Resulting
			from Disposal
(In millions)			of PET
	Historical(a)		Business			Pro Forma
Assets
Current assets
Cash and cash equivalents	$	642	$	600	(b)	$	1,242
Trade receivables, net		701		(113)	(c)		588
Miscellaneous receivables		66		(1)	(c)		65
Inventories		652		(93)	(c)		559
Other current assets		40		(3)	(d)		37
Total current assets		2,101		390			2,491
Properties and equipment, net		3,166		(374)	(c)		2,792
Goodwill		377		—			377
Other noncurrent assets		345		(23)	(c)		322
Total assets	$	5,989	$	(7	)	$	5,982
Liabilities and Stockholders’ Equity
Current liabilities
Payables and other current liabilities	$	936	$	(56)	(c)	$	993
				(15)	(d)
				128	(e)
Borrowings due within one year		4		—			4
Total current liabilities		940		57			997
Long-term borrowings		1,602		—			1,602
Deferred income tax liabilities		297		(90)	(d)		207
Post-employment obligations		1,198		—			1,198
Other long-term liabilities		142		(3)	(c)		139
Total liabilities		4,179		(36	)		4,143
Total stockholders’ equity		1,810		29	(f)		1,839
Total liabilities and stockholders’ equity	$	5,989	$	(7	)	$	5,982

See notes to these unaudited pro forma condensed consolidated financial statements.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
For the Nine Months Ended September 30, 2010

			Adjustments
			Resulting
			from Disposal
(In millions, except per share amounts)			of PET
	Historical(a)		Business(g)			Pro Forma
Sales	$	5,017	$	(638	)	$	4,379
Cost of sales		3,847		(589	)		3,258
Gross profit		1,170		(49	)		1,121
Selling, general and administrative expenses		333		(22	)		311
Research and development expenses		115		(7	)		108
Asset impairments and restructuring charges, net		3		—			3
Operating earnings		719		(20	)		699
Net interest expense		75		—			75
Other charges (income), net		11		—			11
Earnings from continuing operations before income taxes		633		(20	)		613
Provision for income taxes from continuing operations		214		(8	)		206
Earnings from continuing operations	$	419	$	(12	)	$	407
Earnings per share from continuing operations
Basic	$	5.81	$	(0.17	)	$	5.64
Diluted	$	5.70	$	(0.17	)	$	5.53
Shares (in millions) used for earnings per share calculation
Basic		72.1					72.1
Diluted		73.6					73.6

See notes to these unaudited pro forma condensed consolidated financial statements.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
For the Nine Months Ended September 30, 2009

			Adjustments
			Resulting
			from Disposal
(In millions, except per share amounts)			of PET
	Historical(a)		Business(g)			Pro Forma
Sales	$	3,719	$	(509	)	$	3,210
Cost of sales		2,952		(474	)		2,478
Gross profit		767		(35	)		732
Selling, general and administrative expenses		296		(23	)		273
Research and development expenses		101		(10	)		91
Asset impairments and restructuring charges, net		23		(4	)		19
Operating earnings		347		2			349
Net interest expense		58		—			58
Other charges (income), net		11		—			11
Earnings from continuing operations before income taxes		278		2			280
Provision for income taxes from continuing operations		110		—			110
Earnings from continuing operations	$	168	$	2		$	170
Earnings per share from continuing operations
Basic	$	2.31	$	0.02		$	2.33
Diluted	$	2.29	$	0.02		$	2.31
Shares (in millions) used for earnings per share calculation
Basic		72.5					72.5
Diluted		73.3					73.3

See notes to these unaudited pro forma condensed consolidated financial statements.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
For the Year Ended December 31, 2009

			Adjustments
			Resulting
			from Disposal
(In millions, except per share amounts)			of PET
	Historical(h)		Business(g)			Pro Forma
Sales	$	5,047	$	(651	)	$	4,396
Cost of sales		3,994		(631	)		3,363
Gross profit		1,053		(20	)		1,033
Selling, general and administrative expenses		399		(31	)		368
Research and development expenses		137		(13	)		124
Asset impairments and restructuring charges, net		200		(4	)		196
Operating earnings		317		28			345
Net interest expense		78		—			78
Other charges (income), net		13		—			13
Earnings from continuing operations before income taxes		226		28			254
Provision for income taxes from continuing operations		90		10			100
Earnings from continuing operations	$	136	$	18		$	154
Earnings per share from continuing operations
Basic	$	1.88	$	0.24		$	2.12
Diluted	$	1.85	$	0.25		$	2.10
Shares (in millions) used for earnings per share calculation
Basic		72.5					72.5
Diluted		73.4					73.4

See notes to these unaudited pro forma condensed consolidated financial statements.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
For the Year Ended December 31, 2008

				Adjustments
				Resulting
				from Disposal
(In millions, except per share amounts)				of PET
	Historical(h)			Business(g)			Pro Forma
Sales	$	6,726		$	(791	)	$	5,935
Cost of sales		5,600			(747	)		4,853
Gross profit		1,126			(44	)		1,082
Selling, general and administrative expenses		419			(37	)		382
Research and development expenses		158			(15	)		143
Asset impairments and restructuring charges, net		46			(24	)		22
Other operating income, net		(16	)		—			(16	)
Operating earnings		519			32			551
Net interest expense		70			—			70
Other charges (income), net		20			—			20
Earnings from continuing operations before income taxes		429			32			461
Provision for income taxes from continuing operations		101			17			118
Earnings from continuing operations	$	328		$	15		$	343
Earnings per share from continuing operations
Basic	$	4.36		$	0.20		$	4.56
Diluted	$	4.31		$	0.20		$	4.51
Shares (in millions) used for earnings per share calculation
Basic		75.2						75.2
Diluted		76.0						76.0

See notes to these unaudited pro forma condensed consolidated financial statements.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
For the Year Ended December 31, 2007

				Adjustments
				Resulting
				from Disposal
(In millions, except per share amounts)				of PET
	Historical(h)			Business(g)			Pro Forma
Sales	$	6,830		$	(1,317	)	$	5,513
Cost of sales		5,638			(1,317	)		4,321
Gross profit		1,192			—			1,192
Selling, general and administrative expenses		420			(49	)		371
Research and development expenses		156			(17	)		139
Asset impairments and restructuring charges, net		112			(113	)		(1	)
Operating earnings		504			179			683
Net interest expense		62			—			62
Other charges (income), net		(28	)		—			(28	)
Earnings from continuing operations before income taxes		470			179			649
Provision for income taxes from continuing operations		149			67			216
Earnings from continuing operations	$	321		$	112		$	433
Earnings per share from continuing operations
Basic	$	3.89		$	1.35		$	5.24
Diluted	$	3.84		$	1.33		$	5.17
Shares (in millions) used for earnings per share calculation
Basic		82.8						82.8
Diluted		83.9						83.9

See notes to these unaudited pro forma condensed consolidated financial statements.

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NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(a)	Condensed Consolidated Statement of Earnings and Condensed Consolidated Statement of Financial Position, as applicable, included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.
(b)	The total cash proceeds from the Transaction are expected to be $600 million before transaction fees and working capital adjustments at closing.
(c)	Amounts reflect the assets to be acquired and the liabilities to be assumed by the buyer in the Transaction.
(d)	Amounts reported for deferred taxes as of September 30, 2010 have been reclassified to current taxes payable to reflect the estimated tax liability due on consummation of the Transaction.
(e)	Estimated current taxes payable and estimated transaction fees.
(f)	Reflects the gain on sale, net of estimated taxes and transaction fees. The actual gain on sale of the PET business is subject to adjustment based on final working capital and reserves.
(g)	Excludes corporate costs historically allocated to the Performance Polymers segment which will be reallocated to other segments in historical and future financial statements.
(h)	Condensed Consolidated Statements of Earnings derived from the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 for the respective periods presented.

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