KINGSPORT, Tenn., October 27, 2016 – Eastman Chemical Company (NYSE:EMN) today announced reported earnings of $1.56 per diluted share for third quarter 2016 versus $1.71 per diluted share for third quarter 2015. Earnings excluding non-core items were $1.86 per diluted share for third quarter 2016 versus $1.84 per diluted share for third quarter 2015. For detail of the excluded non-core items and reconciliation to reported company and segment earnings, see Tables 3A and 4.
“We are continuing to demonstrate excellent execution of our specialty transformation strategy resulting in sustainable, long-term growth through innovation in attractive end markets, which is offsetting challenges in Fibers and Chemical Intermediates,” said Mark Costa, Board Chair and CEO. “Our strong third quarter results reflect broad-based volume growth, particularly in our specialty product lines, as well as continued disciplined cost management. We remain confident in the resiliency of our portfolio and the sustainability of our strong free cash flow going forward.”
(In millions, except per share amounts)
Sales revenue $2,287 $2,447
Operating earnings $356 $432
Operating earnings excluding non-core items* $416 $459
Earnings per diluted share $1.56 $1.71
Earnings per diluted share excluding
non-core items* $1.86 $1.84
Net cash provided by operating activities $450 $368
*For reconciliation to reported company and segment earnings, see Tables 3A and 4.
Corporate Results 3Q 2016 versus 3Q 2015
Sales revenue declined primarily due to lower selling prices and lower Fibers sales volume more than offsetting higher sales volume in the other segments. Operating earnings declined as an increase in Advanced Materials was more than offset by declines in the other segments. Segment Results 3Q 2016 versus 3Q 2015
Additives & Functional Products – Sales revenue decreased due to lower selling prices primarily attributed to lower raw material and energy costs, partially offset by higher sales volume, across the segment. Operating earnings decreased primarily due to lower selling prices more than offsetting lower raw material and energy costs and higher sales volume.
Advanced Materials – Sales revenue increased due to higher sales volume of premium products including Eastman Tritan™ copolyester, Saflex® acoustic interlayers, and performance films. This was partially offset by lower selling prices, primarily for other copolyesters, attributed to lower raw material and energy costs. Operating earnings increased primarily due to higher sales volume and improved product mix of premium products and lower unit costs due to higher capacity utilization.
Chemical Intermediates – Sales revenue decreased due to lower selling prices. The lower selling prices were primarily attributed to the negative impact of continued competitive pressures due to lower oil prices and weak demand in Asia Pacific. Operating earnings declined primarily due to lower selling prices more than offsetting lower raw material and energy costs and lower hedging costs.
Fibers – Sales revenue decreased primarily due to lower sales volume and lower selling prices, particularly for acetate tow. Lower acetate tow sales volume was primarily due to reduced sales in China. Operating earnings declined due to lower sales volume and lower selling prices, partially offset by lower raw material and energy costs and actions taken to reduce operating costs.
Eastman generated $450 million in cash from operating activities during third quarter 2016. Priorities for uses of available cash include payment of the quarterly dividend, repayment of debt, funding targeted growth initiatives, and repurchasing shares. Total borrowings decreased $196 million during the third quarter. The company contributed $50 million to its U.S. defined pension plans and repurchased $75 million of shares during the quarter.
Through the first nine months of 2016 the company returned $324 million to our stockholders through $120 million of share repurchases and $204 million of dividends. In addition, the company reduced total borrowings by $400 million and generated cash from operations of $991 million and $616 million of free cash flow (defined as cash from operating activities minus capital expenditures). See Tables 5A, 5B and 6A.
Commenting on the outlook for full-year 2016, Costa said: “Our solid third-quarter results demonstrate that we are doing an excellent job of executing our specialty strategy in what remains a challenging global business climate. We are continuing to benefit from strong growth of high value, innovative products as well as significant cost reductions. For full-year 2016, our outlook for adjusted earnings per share has improved to between $6.70 and $6.80.”
The full-year 2016 projected earnings exclude the non-core items in first nine months 2016 detailed in Tables 3A and 4 and will exclude any non-core, unusual, or non-recurring items in fourth quarter 2016. Our fourth-quarter 2016 financial results forecasts do not include non-core items (such as mark-to-market pension and other postretirement benefit gain or loss) or any unusual or non-recurring items, and we accordingly are unable to reconcile projected full-year 2016 earnings excluding non-core and any unusual or non-recurring items to reported GAAP earnings without unreasonable efforts.
This news release includes forward-looking statements concerning current expectations and assumptions for future global economic conditions; competitive position and acceptance of specialty products in key markets; mix of products sold; raw material and energy prices and costs, and other costs; and revenue, earnings, and cash flow for full year 2016. 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-Q filed for second quarter 2016 available, and the Form 10-Q to be filed for third quarter 2016 and to be available, on the Eastman web site at www.eastman.com in the Investors, SEC filings section.
Conference Call and Webcast Information
Eastman will host a conference call with industry analysts on October 28, 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 913-312-1238, passcode number 533497. 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, October 28, to 11:00 a.m. ET, November 7, at 888-203-1112 or 719-457-0820, passcode 533497.
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.
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