Attached files
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| 8-K - FIRST QUARTER 2011 EARNINGS RELEASE - EASTMAN CHEMICAL CO | form8k_q12011.htm |
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 $1.43 per diluted share for first quarter 2010.
"We continue to demonstrate that we have established a new level of earnings performance for the company," said Jim Rogers, chairman and CEO. "We grew volume year over year in every business segment and in every region of the world. Furthermore, we remain well positioned for future growth with our solid balance sheet, which was further strengthened by the cash from the sale of the PET business."
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(In millions, except per share amounts)
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1Q2011
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1Q2010
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||
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Sales revenue
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$
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1,758
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$
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1,370
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Earnings per diluted share from continuing operations
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$
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2.52
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$
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1.43
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Net cash used in operating activities
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$
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(146)
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$
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(225)
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Net cash used in operating activities excluding impact of adoption of amended accounting guidance*
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$
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(146)
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$
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(25)
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*For reconciliations to reported company cash flows, see Table 4A in the accompanying first-quarter 2011 financial tables.
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||||
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
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423-224-0498 / tkbroadwater@eastman.com
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Investors: Greg Riddle
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212-835-1620 / griddle@eastman.com
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EASTMAN CHEMICAL COMPANY – EMN
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April 28, 2011
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5:00 PM EDT
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FINANCIAL INFORMATION
April 28, 2011
For use in the Eastman Chemical Company Conference Call
at 8:00 AM (EDT), April 29, 2011.
Table of Contents
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Item
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Page
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Statements of Earnings
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1
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|
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Segment Sales Information
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2
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|
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Sales Revenue Change
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2
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Sales by Region
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2
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Sales Revenue Change by Region
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2
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Operating Earnings by Segment
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3
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Statements of Cash Flows
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4
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Total Cash and Cash Equivalents and Short-Term Time Deposits
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4
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Net Cash Provided By (Used In) Operating Activities Reconciliation and Free Cash Flow
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5
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Selected Balance Sheet Items
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5
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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.
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EASTMAN CHEMICAL COMPANY – EMN
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April 28, 2011
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5:00 PM EDT
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Page 1
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First Quarter
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||||
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(Dollars in millions, except per share amounts; unaudited)
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2011
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2010
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||
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Sales
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$
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1,758
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$
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1,370
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Cost of sales
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1,325
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1,053
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Gross profit
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433
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317
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||
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Selling, general and administrative expenses
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113
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95
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||
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Research and development expenses
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36
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33
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||
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Operating earnings
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284
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189
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||
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Net interest expense
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19
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25
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||
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Other charges (income), net
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(6)
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7
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||
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Earnings from continuing operations before income taxes
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271
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157
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Provision for income taxes from continuing operations
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89
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52
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Earnings from continuing operations
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$
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182
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$
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105
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Earnings (loss) from discontinued operations, net of tax
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8
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(4)
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Gain from disposal of discontinued operations, net of tax
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30
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--
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Net earnings
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$
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220
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$
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101
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Basic earnings per share
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||||
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Earnings from continuing operations
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$
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2.57
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$
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1.45
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Earnings (loss) from discontinued operations
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0.54
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(0.06)
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Basic earnings per share
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$
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3.11
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$
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1.39
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Diluted earnings per share
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||||
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Earnings from continuing operations
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$
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2.52
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$
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1.43
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Earnings (loss) from discontinued operations
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0.52
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(0.06)
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Diluted earnings per share
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$
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3.04
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$
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1.37
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Shares (in millions) outstanding at end of period
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71.1
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72.4
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Shares (in millions) used for earnings per share calculation
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||||
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Basic
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70.7
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72.2
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Diluted
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72.3
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73.3
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EASTMAN CHEMICAL COMPANY – EMN
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April 28, 2011
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5:00 PM EDT
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Page 2
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| TABLE 2A – SEGMENT SALES INFORMATION |
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First Quarter
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||||
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(Dollars in millions, unaudited)
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2011
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2010
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Sales by Segment
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||||
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Coatings, Adhesives, Specialty Polymers, and Inks
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$
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467
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$
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373
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Fibers
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290
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267
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||
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Performance Chemicals and Intermediates
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694
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482
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Specialty Plastics
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307
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248
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Total Eastman Chemical Company
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$
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1,758
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$
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1,370
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TABLE 2B – SALES REVENUE CHANGE
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First Quarter 2011 Compared to First Quarter 2010
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|||||||||
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(Unaudited)
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Change in Sales Revenue Due To
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Revenue
% Change
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Volume Effect
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Price Effect
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Product
Mix
Effect
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Exchange
Rate
Effect
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|||||
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Coatings, Adhesives, Specialty Polymers, and Inks
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25 %
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12 %
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15 %
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(1) %
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(1) %
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||||
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Fibers
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8 %
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6 %
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2 %
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-- %
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-- %
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||||
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Performance Chemicals and Intermediates
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44 %
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32 %
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16 %
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(4) %
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-- %
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Specialty Plastics
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24 %
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9 %
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14 %
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2 %
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(1) %
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Total Eastman Chemical Company
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28 %
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17 %
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13 %
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(1) %
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(1) %
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||||
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TABLE 2C – SALES BY REGION
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First Quarter
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||||
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(Dollars in millions, unaudited)
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2011
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2010
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Sales by Region
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||||
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United States and Canada
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$
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918
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$
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691
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Asia Pacific
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397
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334
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Europe, Middle East, and Africa
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355
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276
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Latin America
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88
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69
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| Total Eastman Chemical Company |
$
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1,758
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$
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1,370
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TABLE 2D – SALES REVENUE CHANGE BY REGION
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First Quarter 2011 Compared to First Quarter 2010
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|||||||||
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Change in Sales Revenue Due To
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|||||||||
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(Unaudited)
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Change
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Volume Effect
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Price Effect
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Product
Mix Effect
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Exchange
Rate
Effect
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||||
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United States and Canada
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33 %
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22 %
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13 %
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(2) %
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-- %
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||||
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Asia Pacific
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19 %
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7 %
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10 %
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1 %
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1 %
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||||
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Europe, Middle East, and Africa
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29 %
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20 %
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13 %
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-- %
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(4) %
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||||
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Latin America
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28 %
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17 %
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15 %
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(4) %
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-- %
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||||
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Total Eastman Chemical Company
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28 %
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17 %
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13 %
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(1) %
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(1) %
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||||
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EASTMAN CHEMICAL COMPANY – EMN
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April 28, 2011
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5:00 PM EDT
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Page 3
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| TABLE 3 – OPERATING EARNINGS BY SEGMENT |
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First Quarter
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||||
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(Dollars in millions, unaudited)
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2011
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2010
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||
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Operating Earnings by Segment
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||||
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Coatings, Adhesives, Specialty Polymers, and Inks
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$
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98
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$
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65
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Fibers
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81
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78
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Performance Chemicals and Intermediates
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88
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35
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Specialty Plastics
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30
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19
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Total Operating Earnings by Segment
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297
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197
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Other (1)
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(13)
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(8)
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Total Eastman Chemical Company
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||||
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Total Operating Earnings
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$
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284
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$
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189
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(1) Expenses not identifiable to an operating segment are not included in segment operating results and are shown as "other" operating losses.
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EASTMAN CHEMICAL COMPANY – EMN
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April 28, 2011
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5:00 PM EDT
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Page 4
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| TABLE 4 – STATEMENTS OF CASH FLOWS |
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First Three Months
|
||||
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(Dollars in millions, unaudited)
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2011
|
2010
|
||
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Cash flows from operating activities
|
||||
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Net earnings
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$
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220
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$
|
101
|
|
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
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||||
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Depreciation and amortization
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68
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69
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||
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Gain on sale of assets
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(52)
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--
|
||
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Provision (benefit) for deferred income taxes
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(52)
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16
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||
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Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
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||||
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(Increase) decrease in trade receivables
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(229)
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(414)
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(Increase) decrease in inventories
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(49)
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(58)
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Increase (decrease) in trade payables
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8
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94
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||
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Increase (decrease) in liabilities for employee benefits and incentive pay
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(184)
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(45)
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Other items, net
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124
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12
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||
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Net cash used in operating activities
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(146)
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(225)
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Cash flows from investing activities
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||||
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Additions to properties and equipment
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(97)
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(31)
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Proceeds from sale of assets and investments
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617
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4
|
||
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Additions to short-term time deposits
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(200)
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--
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||
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Acquisitions of and investments in joint ventures
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--
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(18)
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||
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Additions to capitalized software
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(2)
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(2)
|
||
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Other items, net
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(11)
|
--
|
||
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Net cash provided by (used in) investing activities
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307
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(47)
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||
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Cash flows from financing activities
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||||
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Net increase in commercial paper, credit facility and other borrowings
|
1
|
2
|
||
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Dividends paid to stockholders
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(34)
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(32)
|
||
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Treasury stock purchases
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(74)
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(20)
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||
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Proceeds from stock option exercises and other items
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70
|
12
|
||
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Net cash used in financing activities
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(37)
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(38)
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||
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Effect of exchange rate changes on cash and cash equivalents
|
--
|
--
|
||
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Net change in cash and cash equivalents
|
124
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(310)
|
||
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Cash and cash equivalents at beginning of period
|
516
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793
|
||
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Cash and cash equivalents at end of period
|
$
|
640
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$
|
483
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| TABLE 4A – TOTAL CASH AND CASH EQUIVALENTS AND SHORT-TERM TIME DEPOSITS |
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First Three Months
|
||||
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(Dollars in millions, unaudited)
|
2011
|
2010
|
||
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Cash and cash equivalents at end of period
|
$
|
640
|
$
|
483
|
|
Short-term time deposits
|
200
|
--
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||
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Total cash and cash equivalents and short-term time deposits
|
$
|
840
|
$
|
483
|
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EASTMAN CHEMICAL COMPANY – EMN
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April 28, 2011
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5:00 PM EDT
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Page 5
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| TABLE 4B – NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES RECONCILIATION AND FREE CASH FLOW |
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First Quarter
|
||||
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(Dollars in millions, unaudited)
|
2011
|
2010
|
||
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Net cash used in operating activities
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$
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(146)
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$
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(225)
|
|
Impact of adoption of amended accounting guidance (1)
|
--
|
200
|
||
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Net cash used in operating activities excluding item
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(146)
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(25)
|
||
|
Additions to properties and equipment
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(97)
|
(31)
|
||
|
Dividends paid to stockholders
|
(34)
|
(32)
|
||
|
Free Cash Flow
|
$
|
(277)
|
$
|
(88)
|
|
(1)
|
First quarter 2010 cash from operating activities reflected the adoption of amended accounting guidance for transfers of financial assets which resulted in $200 million of receivables, which were previously accounted for as sold and removed from the balance sheet when transferred under the accounts receivable securitization program, being included on the first quarter balance sheet as trade receivables, net. This increase in receivables reduced cash from operations by $200 million in first quarter 2010.
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| TABLE 5 – SELECTED BALANCE SHEET ITEMS |
|
March 31,
|
December 31,
|
|||
|
(Dollars in millions)
|
2011
|
2010
|
||
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(unaudited)
|
||||
|
Current Assets
|
$
|
2,434
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$
|
2,047
|
|
Net Properties and Equipment
|
2,886
|
3,219
|
||
|
Other Assets
|
689
|
720
|
||
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Total Assets
|
$
|
6,009
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$
|
5,986
|
|
Payables and Other Current Liabilities
|
$
|
1,048
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$
|
1,064
|
|
Short-term Borrowings
|
7
|
6
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Long-term Borrowings
|
1,596
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1,598
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||
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Other Liabilities
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1,541
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1,691
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Stockholders’ Equity
|
1,817
|
1,627
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||
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Total Liabilities and Stockholders’ Equity
|
$
|
6,009
|
$
|
5,986
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