KINGSPORT, Tenn., April 30, 2020 (GLOBE NEWSWIRE) — Eastman Chemical Company (NYSE:EMN) announced its first-quarter 2020 financial results.*For non-core and unusual items excluded from adjusted earnings and for adjusted provision for income taxes, calculation of free cash flow and of adjusted EBIT margins, and reconciliations to reported company and segment earnings and to cash provided by (used in) operating activities, see Tables 1, 3A, 3B, 4A, 4B, 5A and 5B.“We delivered strong year-over-year earnings growth and impressive free cash flow, demonstrating the power of our innovation and the discipline of our operational execution,” said Mark Costa, Board Chair and CEO. “However, the impact of the COVID-19 global pandemic has resulted in unprecedented challenges as we move forward. I’m proud of how we have responded by taking actions to keep our employees safe and maintain the operational integrity of our manufacturing facilities. We also moved quickly to generate strong cash flow and ensure we had significant sources of liquidity. We are well-positioned to be resilient through this difficult period and to rebound strongly when global economic growth returns.”Corporate Results 1Q 2020 versus 1Q 2019Sales revenue decreased primarily due to lower selling prices. The lower selling prices were primarily due to lower raw material and energy prices and increased competitive activity, particularly for Chemical Intermediates and tire additives and adhesives resins product lines in the Additives & Functional Products segment. Sales volume modestly increased in personal care and wellness, water treatment, architectural coatings, agriculture, and consumables end markets. This growth was mostly offset by lower volume attributed to weak demand in transportation and textile end markets due to COVID-19.Reported and adjusted EBIT increased due to higher sales volume, lower raw material and energy costs, and lower variable compensation costs. This growth was partially offset by $20-$30 million lower volume and less favorable product mix as a result of COVID-19 and an unfavorable shift in foreign currency exchange rates. Adjusted EBIT margin increased by 220 basis points.Segment Results 1Q 2020 versus 1Q 2019Additives & Functional Products – Sales revenue decreased primarily due to lower selling prices across the segment and an unfavorable shift in foreign currency exchange rates partially offset by higher sales volume of care chemicals, water treatment, architectural coatings, and adhesives resins product lines. The lower selling prices were due to increased competitive activity for certain adhesives resins, tire additives, and animal nutrition products constituting the approximately one-third of segment revenue for which management is evaluating strategic alternatives. Lower raw material prices also contributed to price declines, particularly for care chemicals cost-pass-through contracts. Demand in transportation end markets was negatively impacted by COVID-19.Reported and adjusted EBIT was relatively unchanged primarily due to higher sales volume being offset by $5-$10 million lower volume and less favorable product mix as a result of COVID-19. Spreads were flat as lower selling prices were offset by lower raw material and energy costs.Advanced Materials – Sales revenue decreased due to lower selling prices, less favorable product mix and an unfavorable shift in foreign currency exchange rates. Lower selling prices were primarily due to lower raw material prices. COVID-19 negatively impacted demand for advanced interlayers and performance films, particularly in China, resulting in lower sales volumes and a less favorable product mix.Reported EBIT included an asset impairment charge in first quarter 2020. Adjusted EBIT increased primarily due to lower raw material costs more than offsetting lower selling prices, partially offset by $15-$20 million lower volume and less favorable product mix as a result of COVID-19, and an unfavorable shift in foreign currency exchange rates.Chemical Intermediates – Sales revenue decreased due to lower selling prices across the segment due to lower raw material prices.Reported and adjusted EBIT increased primarily due to lower costs and recognition of the first installment of technology licensing earnings. Spreads were flat as lower selling prices were offset by lower raw material and energy costs.Fibers – Sales revenue was relatively unchanged. Acetate tow sales volume was stable. Demand for textiles products was negatively impacted by COVID-19.EBIT increased primarily due to lower costs.Cash Flow
In first quarter 2020, cash from operating activities was $171 million and free cash flow (cash from operating activities less net capital expenditures) was $72 million, reflecting disciplined working capital management. In first quarter 2020, the company returned $120 million to stockholders, with $90 million of dividends and $30 million of share repurchases. See Tables 5A and 5B.Priorities for uses of available cash include payment of the quarterly dividend, repayment of substantially more than $400 million of debt, and modest share repurchases to offset dilution.2020 OutlookCommenting on the outlook for full-year 2020, Costa said: “In this extraordinarily challenging environment, visibility is severely limited. As a result, we are focused on the things we can control. First, we are substantially increasing our cost reduction targets to be approximately $150 million of net savings, including adjusting our operations to end-market demand, significantly reducing discretionary spend, and deferring some site turnarounds. In addition, we’ve taken steps to strengthen our cash flow including reducing capital expenditures by approximately $100 million to between $325 and $375 million. We also expect working capital to be a source of more than $250 million of cash flow beyond our previous expectations. Our capital allocation will remain disciplined, including funding our attractive dividend, reducing debt by substantially more than our original target of $400 million, and limiting share repurchases to offset dilution.”Due to the heightened level of uncertainty related to the impact of COVID-19, the company is withdrawing its 2020 full-year earnings and cash flow forecast guidance.Forward-Looking StatementsThis news release includes forward-looking statements concerning current expectations and assumptions for future global economic conditions and the impact of the COVID-19 coronavirus pandemic; competitive position and acceptance of specialty products in key markets; mix of products sold; and raw material and energy prices and costs, and other costs; and cash flow, liquidity, and debt repayment for full-year 2020. Such expectations and assumptions 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 and assumptions 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 2019 available, and the Form 10-Q to be filed for first quarter 2020 and to be available, on the Eastman web site at www.eastman.com in the Investors, SEC filings section.Conference Call and Webcast InformationEastman will host a conference call with industry analysts on May 1, 2020 at 8:00 a.m. ET. To listen to the live webcast of the conference call and view the accompanying slides and prepared remarks, go to www.investors.eastman.com, Events & Presentations. The slides and prepared remarks to be discussed during the call and webcast will be available at www.investors.eastman.com at approximately 5:00 p.m. ET on April 30, 2020. To listen via telephone, the dial-in number is 323-994-2093, passcode number 6063502. 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, May 1, 2020 to 11:00 a.m. ET, May 11, 2020 at 888-203-1112 or 719-457-0820, passcode 6063502.Founded in 1920, Eastman is a global specialty materials company that produces a broad range of products found in items people use every day. With the purpose of enhancing the quality of life in a material way, Eastman works with customers to deliver innovative products and solutions while maintaining a commitment to safety and sustainability. The company’s innovation-driven growth model takes advantage of world-class technology platforms, deep customer engagement, and differentiated application development to grow its leading positions in attractive end-markets such as transportation, building and construction, and consumables. As a globally inclusive and diverse company, Eastman employs approximately 14,500 people around the world and serves customers in more than 100 countries. The company had 2019 revenues of approximately $9.3 billion and is headquartered in Kingsport, Tennessee, USA. For more information, visit www.eastman.com.# # # Attachmentex99_01 2020.03.31 CC Tables 2020.04.30Contacts: Media: Tracy Kilgore Addington
423-224-0498 / tracy@eastman.com Investors: Greg Riddle
212-835-1620 / griddle@eastman.com
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