KINGSPORT, Tenn., April 25, 2013 - Eastman Chemical Company (EMN) today announced earnings, excluding Solutia acquisition-related costs and charges in both periods, of $1.62 per diluted share for first quarter 2013 versus $1.22 per diluted share for first quarter 2012. Reported earnings were $1.57 per diluted share in first quarter 2013 versus $1.13 per diluted share in first quarter 2012. For reconciliation to reported company and segment earnings, see Tables 3 and 4 in the accompanying first-quarter 2013 financial tables.
"Our portfolio of specialty businesses continued to deliver strong earnings in the first quarter despite uncertain global economic conditions," said Jim Rogers, Chairman and CEO. "For full year 2013, we remain on track to achieve a fourth consecutive year of double-digit earnings growth while also generating strong cash flow." See "Outlook" paragraphs for items excluded from earnings comparisons.
|(In millions, except per share amounts)||1Q2013||1Q2012|
|Pro forma combined sales revenue*||$2,307||$2,319|
| Earnings per diluted share from
| Earnings per diluted share from
continuing operations excluding Solutia
acquisition-related costs and charges**
|Net cash provided by operating activities||$5||$19|
| *See Table 2.
**For reconciliation to reported company and segment earnings, see Tables 3 and 4.
Corporate 1Q 2013 versus 1Q 2012
Sales revenue for first quarter 2013 was $2.3 billion, a 27 percent increase compared with first quarter 2012. First quarter 2013 included sales revenue from the acquired Solutia businesses. Pro forma combined sales revenue declined 1 percent.
Operating earnings in first quarter 2013 were $393 million compared with $264 million in first quarter 2012. Excluding Solutia acquisition-related costs and charges in both periods, operating earnings were $403 million in first quarter 2013 and $273 million in first quarter 2012. First quarter 2013 included operating earnings from the acquired Solutia businesses. Pro forma combined operating earnings, excluding Solutia acquisition-related costs and charges, were $403 million in first quarter 2013 compared with $363 million in first quarter 2012. Pro forma combined operating earnings increased primarily due to lower raw material and energy costs partially offset by lower selling prices. Operating earnings and pro forma combined operating earnings included the "Other" operating losses detailed in Table 3.
Segment Results 1Q 2013 versus 1Q 2012
Additives & Functional Products - First quarter 2013 included sales revenue and operating earnings from the acquired Solutia rubber additives product lines. Pro forma combined sales revenue increased primarily due to higher sales volume of solvents product lines attributed to strengthened coatings demand in the U.S. building and construction market. First-quarter 2013 sales revenue included revenue from sales of certain products primarily sold into the tires market which were formerly reported in the Adhesives & Plasticizers segment. Pro forma combined operating earnings increased to $98 million in first quarter 2013 compared with $94 million in first quarter 2012. The increase was primarily due to lower raw material and energy costs, particularly for propane, and higher sales volume more than offsetting lower selling prices. Also impacting first quarter 2013 operating earnings was lower capacity utilization of rubber additives manufacturing facilities compared to higher capacity utilization in first quarter 2012 to build inventory.
Adhesives & Plasticizers - Sales revenue declined primarily due to lower sales volume attributed to weakened demand for adhesives resins sold into consumables markets, particularly packaging. Substitution of phthalate plasticizers with non-phthalate plasticizers continued during the quarter. First-quarter 2012 sales revenue included revenue from sales of certain products primarily sold into the tires market which now are reported in the Additives & Functional Products segment. Operating earnings declined to $49 million in first quarter 2013 compared with $66 million in first quarter 2012 primarily due to lower sales volume in adhesives resins product lines and resulting lower capacity utilization.
Advanced Materials - First quarter 2013 included sales revenue and operating earnings from the acquired Solutia interlayers and performance films product lines. Pro forma combined sales revenue increased primarily due to higher sales volume of interlayers products, particularly in Asia, attributed to strengthened demand in the transportation market, and higher sales volume for Eastman Tritan(TM) copolyester. Excluding first-quarter 2012 restructuring charges, pro forma combined operating earnings increased to $65 million in first quarter 2013 compared with $61 million in first quarter 2012 primarily due to slightly higher sales volume and increased sales of higher-margin products, including interlayers with acoustic properties, Eastman Tritan(TM) copolyester, and V-Kool® brand window films.
Fibers - Sales revenue increased due to higher selling prices in response to higher raw material and energy costs, particularly for wood pulp, and higher sales volume due to customer buying patterns for acetate tow products. Operating earnings increased to $114 million in first quarter 2013 compared with $101 million in first quarter 2012 due to higher selling prices more than offsetting higher raw material and energy costs.
Specialty Fluids & Intermediates - First quarter 2013 included sales revenue and operating earnings from the acquired Solutia specialty fluids product lines. Pro forma combined sales revenue declined primarily due to lower sales volume resulting from increased internal use of olefins in the manufacture of higher-value downstream derivatives. The decline was also due to lower selling prices primarily for ethylene products due to lower raw material and energy costs, particularly for propane. Pro forma combined operating earnings increased to $95 million in first quarter 2013 compared with $73 million in first quarter 2012. The increase was primarily due to lower raw material and energy costs more than offsetting lower selling prices.
Eastman generated $5 million in cash from operating activities during first quarter 2013. Working capital increased by $235 million during first quarter 2013 primarily due to increased receivables resulting from higher sales revenue. The company contributed $11 million to the U.S. defined benefit pension plans during the quarter, and expects to contribute approximately $120 million in full year 2013. The fourth-quarter 2012 dividend of $45 million ($.30 per share) was paid in December 2012 rather than January 2013. Share repurchases totaled $32 million during first quarter 2013.
Commenting on the outlook for full year 2013, Rogers said: "We expect our leadership positions in key end-markets, the diversity of the end-markets we serve, and our broad geographic footprint to continue to position us well for strong earnings growth. However, global economic uncertainty continues with particular weakness in Europe, and raw material and energy costs remain volatile. Taking all of these factors into consideration, we continue to expect 2013 earnings per share to be between $6.30 and $6.40." Solutia integration costs, any asset impairments and restructuring charges, and mark-to-market pension and OPEB gains or losses are excluded from the earnings per share projection.
The earnings for 2012, 2011, 2010, and 2009 referenced in the second paragraph of this release are non-GAAP and exclude Solutia acquisition-related costs, asset impairments and restructuring charges and gains, mark-to-market pension and OPEB gains and losses, and early debt extinguishment costs. Reconciliations to 2012, 2011, 2010, and 2009 GAAP earnings and other associated disclosures, including descriptions of the excluded items, are available in the "Management`s Discussion and Analysis of Financial Condition and Results of Operations" section of the company`s Annual Report on Form 10-K for 2012 and 2011.
Forward-Looking Statements: This news release includes forward-looking statements concerning current expectations for future economic, business, and competitive conditions, financial impact and related costs and charges of the Solutia acquisition, raw material and energy costs, pension and OPEB gains and losses, defined benefit pension plan contributions, and earnings and cash flow for full year 2013. 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 2012 available, and the Form 10-Q to be filed for first quarter 2013 and to be available, on the SEC website at www.sec.gov and the Eastman Chemical website at www.eastman.com in the Investors, SEC filings section.
Eastman will host a conference call with industry analysts on April 26, 2013 at 8:00 a.m. Eastern Time. To listen to the live webcast of the conference call and view the accompanying slides, go to www.investors.eastman.com, Presentations. To listen via telephone, the dial-in number is (913) 312-1514, passcode number 9292143. A web and telephone replay will be available continuously from 11:00 a.m. Eastern Time, April 26, to 11:00 a.m. Eastern Time, May 6, 2013, at (888) 203-1112 or (719) 457-0820, passcode 9292143.
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 2012 pro forma combined revenues, giving effect to the Solutia acquisition, of approximately $9 billion. The company is headquartered in Kingsport, Tennessee, USA and employs approximately 13,500 people around the world. For more information, visit www.eastman.com.
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