EASTMAN CHEMICAL CO - Quarter Report: 2024 September (Form 10-Q)

Comprehensive Income Net earnings including noncontrolling interest$ $ $ $ Other comprehensive income (loss), net of tax: Change in cumulative translation adjustment () ()Defined benefit pension and other postretirement benefit plans: Amortization of unrecognized prior service credits()()()()Derivatives and hedging: Unrealized gain (loss) during period() ()()Reclassification adjustment for (gains) losses included in net income, net () ()Total other comprehensive income (loss), net of tax () ()Comprehensive income including noncontrolling interest Less: Comprehensive income attributable to noncontrolling interest Comprehensive income attributable to Eastman$ $ $ $ Retained Earnings Retained earnings at beginning of period$ $ $ $ Benefit from deferred income taxes()()Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:(Increase) decrease in trade receivables() (Increase) decrease in inventories() Increase (decrease) in trade payables ()Pension and other postretirement contributions (in excess of) less than expenses()()Variable compensation payments (in excess of) less than expenses Other items, net

Net cash provided by operating activities

Investing activitiesAdditions to properties and equipment()()Proceeds from sale of businesses Acquisition, net of cash acquired ()Additions to capitalized software()()Other items, net

Net cash used in investing activities

()()Financing activities

Net increase in commercial paper and other borrowings

Proceeds from borrowings Repayment of borrowings ()()Dividends paid to stockholders()()Treasury stock purchases ()()

Other items, net

()

Net cash used in financing activities

()()Effect of exchange rate changes on cash and cash equivalents ()Net change in cash and cash equivalents ()Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period$ $

The accompanying notes are an integral part of these consolidated financial statements.


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million and $ million, respectively, and $ billion and $ billion in first nine months 2024 and 2023, respectively.

The Company works with suppliers to optimize payment terms and conditions on accounts payable to enhance timing of working capital and cash flows. Under a supplier finance program, the Company's suppliers may voluntarily sell receivables due from Eastman to a participating financial institution. Eastman's responsibility is limited to making payments on the terms originally negotiated with suppliers, regardless of whether the suppliers sell their receivables to the financial institution. The range of payment terms Eastman negotiates with suppliers are consistent, regardless of whether a supplier participates in the program. No fees are paid by Eastman for the supplier finance platform or services fees. Eastman or the financial institution may terminate the program at any time with immediate effect upon 90 days' notice. Confirmed obligations in the supplier finance program of $ million and $ million at September 30, 2024 and December 31, 2023, respectively, are included in "Payables and other current liabilities" on the Unaudited Consolidated Statements of Financial Position.

2. $ Work in process Raw materials and supplies Total inventories at FIFO or average cost Less: LIFO reserve Total inventories$ $

percent of total inventories at both September 30, 2024 and December 31, 2023.


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%$ %$ %$ %

Third quarter and first nine months 2024 provision for income taxes includes an increase of $ million and $ million, respectively, related to uncertain tax positions. First nine months 2023 provision for income taxes includes a $ million decrease due to state tax law changes that were enacted in second quarter 2023 that extend the carryforward period to utilize certain existing state tax credits and a $ million increase as a result of state guidance issued in first quarter 2023 interpreting certain provisions of the 2017 Tax Cuts and Jobs Act.

At September 30, 2024 and December 31, 2023, Eastman had $ million and $ million, respectively, in unrecognized tax benefits. At September 30, 2024, it is reasonably possible that, as a result of the resolution of federal, state, and foreign examinations and appeals, and the expiration of various statutes of limitation, the total amounts of unrecognized tax benefits could decrease by up to $ million within the next 12 months.

4.% debentures due

$ $

% debentures due

% notes due

% notes due (1)

% debentures due

% notes due

% notes due (2)

% notes due

2024 Term Loan 2027 Term Loan Total borrowings Less: Borrowings due within one year Long-term borrowings$ $

In third quarter 2024, the Company issued $ million aggregate principal amount of 5.0% notes due August 2029 (the "2029 Notes"). Proceeds from the sale of the 2029 Notes, net of original issue discount and issuance costs, were $ million. The Company also redeemed $ million aggregate principal amount of the 3.80% notes due March 2025 (the "2025 Notes") during third quarter 2024. Redemption of the 2025 Notes resulted in an immaterial gain on extinguishment of debt.

In second quarter 2024, the Company repaid the $ million 7.625% debentures due June 2024. There were no debt extinguishment costs associated with the repayment.


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million aggregate principal amount of 5.625% notes due February 2034 (the "2034 Notes"). Proceeds from the sale of the 2034 Notes, net of original issue discounts and issuance costs, were $ million. The Company also repaid the $ million 7.25% debentures due January 2024 during first quarter 2024. There were no debt extinguishment costs associated with the repayment.

All proceeds from the issued notes and the redemption of the debentures are reported under financing activities on the Unaudited Consolidated Statements of Cash Flows.

Credit Facility, Term Loans, and Commercial Paper Borrowings

The Company has access to a $ billion revolving credit agreement (the "Credit Facility"). In February 2024, the Credit Facility was amended to extend the maturity to February 2029. All other material terms of the Credit Facility remain unchanged. Borrowings under the Credit Facility are subject to interest at varying spreads above quoted market rates and a commitment fee is paid on the total unused commitment. The Credit Facility includes sustainability-linked pricing terms, provides available liquidity for general corporate purposes, and supports commercial paper borrowings. Commercial paper borrowings are classified as short-term. At September 30, 2024 and December 31, 2023, the Company had outstanding borrowings under the Credit Facility and commercial paper borrowings.

In third quarter 2024, the Company repaid $ million of the $ million five-year term loan (the "2027 Term Loan"). In first quarter 2024, the Company repaid the $ million delayed draw two-year term loan (the "2024 Term Loan"). There were no extinguishment costs associated with repayments of either term loan. The outstanding balance on the 2027 Term Loan was $ million at September 30, 2024 and $ million at December 31, 2023, with variable interest rates of % and %, respectively. The 2027 Term Loan is subject to interest at varying spreads above quoted market rates.

The Credit Facility and the 2027 Term Loan contain customary covenants, including requirements to maintain certain financial ratios, that determine the events of default, amounts available, and terms of borrowings. The Company was in compliance with all applicable covenants at both September 30, 2024 and December 31, 2023.

Fair Value of Borrowings

Eastman has classified its total borrowings at September 30, 2024 and December 31, 2023 under the fair value hierarchy as defined in the accounting policies in Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K. The fair value for fixed-rate debt securities is based on quoted market prices for the same or similar debt instruments and is classified as Level 2. The fair value for the 2027 Term Loan equals the carrying value and is classified as Level 2. The Company's fair value of total borrowings was $ billion and $ billion at September 30, 2024 and December 31, 2023, respectively. The Company had borrowings classified as Level 1 or Level 3 as of September 30, 2024 and December 31, 2023.


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million notional amount designated as an interest rate swap on the 3.80% notes due March 2025, resulting in an immaterial cash loss which is included as part of operating activities in the Unaudited Consolidated Statements of Cash Flows.

Net Investment Hedges

Net investment hedges are defined as derivative or non-derivative instruments designated as and used to hedge the foreign currency exposure of the net investments in certain foreign operations. The net of the change in the hedge instrument and item being hedged for qualifying net investment hedges is reported as a component of the "Cumulative Translation Adjustment" ("CTA") within AOCI on the Unaudited Consolidated Statements of Financial Position. Cash flows from the CTA component are classified as operating activities in the Unaudited Consolidated Statements of Cash Flows. Recognition in earnings of amounts previously recognized in CTA is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. In the event of a complete or substantially complete liquidation of the net investment, cash flows from net investment hedges are classified as investing activities in the Unaudited Consolidated Statements of Cash Flows.

For derivative cross-currency interest rate swap net investment hedges, gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in CTA within AOCI and recognized in earnings through the periodic swap interest accruals. The cross-currency interest rate swaps designated as net investment hedges are included as part of "Other long-term liabilities", "Other noncurrent assets", "Payables and other current liabilities", or "Other current assets" on the Unaudited Consolidated Statements of Financial Position. Cash flows from excluded components are classified as operating activities in the Unaudited Consolidated Statements of Cash Flows.

Eastman enters into fixed-to-fixed cross-currency swaps and designates these swaps to hedge a portion of its net investment in a non-U.S. dollar functional currency denominated subsidiary against foreign currency fluctuations. These contracts involve the exchange of fixed U.S. dollars with fixed foreign currency interest payments periodically over the life of the contracts and an exchange of the notional amounts at maturity.

In third quarter 2024, in conjunction with the partial repayment of the 3.80% notes due March 2025, the Company terminated a fixed-to-fixed cross-currency swap of $ million (€ million) maturing in March 2025. The termination of this cross-currency swap resulted in a $ million gain recognized in CTA. In first quarter 2024, in conjunction with the repayment of the 7.25% debentures due January 2024, the Company terminated fixed-to-fixed cross-currency swaps of $ million (€ million) maturing January 2024. The termination of the cross-currency swap resulted in a $ million gain recognized in CTA. The related cash flows were classified as investing activities in the Unaudited Consolidated Statements of Cash Flows.


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million (€ million) maturing December 2028, $ million (€ million) maturing September 2029, and $ million (€ million) maturing February 2034.

Summary of Financial Position and Financial Performance of Hedging Instruments

€Commodity Forward and Collar ContractsEnergy (in million british thermal units) Derivatives designated as fair value hedges:Fixed-for-floating interest rate swaps (in millions) $Derivatives designated as net investment hedges:Cross-currency interest rate swaps (in millions)EUR/USD (in EUR)€€JPY/USD (in JPY)¥¥Non-derivatives designated as net investment hedges:Foreign Currency Net Investment Hedges (in millions)EUR/USD (in EUR)€€

Fair Value Measurements

All the Company's derivative assets and liabilities are currently classified as Level 2. Level 2 fair value is based on estimates using standard pricing models. These standard pricing models use inputs that are derived from or corroborated by observable market data such as interest rate yield curves and currency spot and forward rates. The fair value of commodity contracts is derived using forward curves supplied by an industry recognized and unrelated third party. In addition, on an ongoing basis, the Company compares a subset of its valuations against valuations received from counterparties to validate the accuracy of its standard pricing models. The Company had derivatives classified as Level 3 as of September 30, 2024 and December 31, 2023. Counterparties to these derivative contracts are highly rated financial institutions which the Company believes carry minimal risk of nonperformance, and the Company diversifies its positions among such counterparties to reduce its exposure to counterparty risk and credit losses. The Company monitors the creditworthiness of its counterparties on an ongoing basis. The Company did not recognize a credit loss during third quarter and first nine months 2024 or 2023.

All the Company's derivative contracts are subject to master netting arrangements, or similar agreements, which provide for the option to settle contracts on a net basis when they settle on the same day and in the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event. The Company does not have any cash collateral due under such agreements.

The Company has elected to present derivative contracts on a gross basis on the Unaudited Consolidated Statements of Financial Position.


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$ Derivatives designated as net investment hedges:Cross-currency interest rate swapsOther current assets Cross-currency interest rate swapsOther noncurrent assets Total Derivative Assets$ $ Derivatives designated as cash flow hedges:Commodity contractsPayables and other current liabilities$ $ Foreign exchange contractsPayables and other current liabilities Foreign exchange contractsOther long-term liabilities Derivatives designated as fair value hedges:Fixed-for-floating interest rate swapLong-term borrowings Derivatives designated as net investment hedges:

Cross-currency interest rate swaps

Payables and other current liabilities Cross-currency interest rate swapsOther long-term liabilities Total Derivative Liabilities$ $ Total Net Derivative Assets (Liabilities) $()$()

In addition to the fair value associated with derivative instruments designated as cash flow hedges, fair value hedges, and net investment hedges, the Company had non-derivative instruments designated as foreign currency net investment hedges with a carrying value of $ million at September 30, 2024 and $ million at December 31, 2023. The designated foreign currency-denominated borrowings are included as part of "Borrowings due within one year" and "Long-term borrowings" on the Unaudited Consolidated Statements of Financial Position.

For additional fair value measurement information, see Note 1, "Significant Accounting Policies", and Note 10, "Derivative and Non-Derivative Financial Instruments", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K.


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)

)$()$ $()$— $— $(23)$(3)Foreign exchange contracts() () — 3 5 10 Forward starting interest rate and treasury lock swap contracts (1)— (2)(2)Non-derivatives in net investment hedging relationships (pre-tax):Net investment hedges () ()()— — — — Derivatives in net investment hedging relationships (pre-tax):Cross-currency interest rate swaps() () — — — — Cross-currency interest rate swaps excluded component () ()— — — —


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$ $ $ $ $ The effects of fair value and cash flow hedging:Gain or (loss) on fair value hedging relationships:Interest contracts (fixed-for-floating interest rate swaps):Hedged items Derivatives designated as hedging instruments Gain or (loss) on cash flow hedging relationships:Interest contracts (forward starting interest rate and treasury lock swap contracts):Amount reclassified from AOCI into earnings(1)— Commodity Contracts:Amount reclassified from AOCI into earnings— — Foreign Exchange Contracts:Amount reclassified from AOCI into earnings— 3



Location and Amount of Gain or (Loss) Recognized in Earnings from Fair Value and Cash Flow Hedging Relationships
	First Nine Months
	2024			2023
(Dollars in millions)	Sales	Cost of Sales	Net Interest Expense	Sales	Cost of Sales	Net Interest Expense
Total amounts of income and expense line items presented in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in which the effects of fair value or cash flow hedges are recognized	$	$	$	$	$	$
The effects of fair value and cash flow hedging:
Gain or (loss) on fair value hedging relationships:
Interest contracts (fixed-for-floating interest rate swaps):
Hedged items
Derivatives designated as hedging instruments			()			()
Gain or (loss) on cash flow hedging relationships:
Interest contracts (forward starting interest rate and treasury lock swap contracts):
Amount reclassified from AOCI into earnings			(2)			(2)
Commodity Contracts:
Amount reclassified from AOCI into earnings		(23)			(3)
Foreign Exchange Contracts:
Amount reclassified from AOCI into earnings	5			10


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million and $ million during third quarter and first nine months 2024, respectively, and recognized a net loss of $ million and $ million during third quarter and first nine months 2023, respectively.

Pre-tax monetized positions and mark-to-market gains and losses from raw materials and energy, currency, and certain interest rate hedges that were included in AOCI resulted in a net loss of $ million and $ million at September 30, 2024 and December 31, 2023, respectively. Losses in AOCI increased between December 31, 2023 and September 30, 2024 primarily as a result of a decrease in euro to U.S. dollar exchange rates. If recognized, approximately $ million in pre-tax losses as of September 30, 2024, would be reclassified into earnings during the next 12 months, including foreign exchange contracts prospectively dedesignated and monetized in fourth quarter 2022.


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$ $ $ $ $ Interest cost Expected return on assets()()()()()()Amortization of:Prior service credit, net ()()Net periodic benefit (credit) cost$()$ $ $ $ $()First Nine MonthsPension PlansOther Postretirement Benefit Plans2024202320242023(Dollars in millions)U.S.Non-U.S.U.S.Non-U.S.Service cost$ $ $ $ $ $ Interest cost Expected return on assets()()()()()()Amortization of:Prior service credit, net ()()Net periodic benefit (credit) cost$()$ $ $ $ $()

billion as a result of exiting an agreement with a supplier after contract negotiations. Eastman had remaining debt and other commitments at September 30, 2024 totaling approximately $ billion over a period of approximately years.

Other than the purchase obligations discussed above, there have been no material changes to the Company's commitments from those disclosed in Note 12, "Leases and Other Commitments", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K.


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$ Environmental contingencies, long-term Total$ $

Environmental Remediation

Estimated future environmental expenditures for undiscounted remediation costs ranged from the best estimate or minimum of $ million to the maximum of $ million and from the best estimate or minimum of $ million to the maximum of $ million at September 30, 2024 and December 31, 2023, respectively. The best estimate or minimum estimated future environmental expenditures are considered to be probable and reasonably estimable.

Reserves for environmental remediation include liabilities expected to be paid within . The amounts charged to pre-tax earnings for environmental remediation and related charges are recognized in "Cost of sales" and "Other (income) charges, net" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings.

Changes in estimates recognized in earnings and other Cash reductions()

Balance at December 31, 2023

Changes in estimates recognized in earnings and other Cash reductions()Balance at September 30, 2024$


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million at both September 30, 2024 and December 31, 2023.

Non-Environmental Asset Retirement Obligations

The Company has contractual asset retirement obligations not associated with environmental liabilities. Eastman's non-environmental asset retirement obligations are primarily associated with the future closure of leased manufacturing assets in Pace, Florida and Oulu, Finland. These non-environmental asset retirement obligations were $ million and $ million at September 30, 2024 and December 31, 2023, respectively, and are included in "Other long-term liabilities" on the Unaudited Consolidated Statements of Financial Position.


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10.

$ $ $()$()$ $ $ Net Earnings

Cash Dividends Declared (1)

($ per share)

() () ()Other Comprehensive Income (Loss)

Share-Based Compensation Expense (2)

Stock Option Exercises

Other

()() Share Repurchases ()() ()Balance at September 30, 2024$ $ $ $()$()$ $ $

(Dollars in millions, except per share amount)

Common Stock at Par Value

Additional Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Income (Loss)

Treasury Stock at Cost

Total Eastman Stockholders' Equity

Noncontrolling Interest

Total Equity

Balance at June 30, 2023

()

Net Earnings

Cash Dividends Declared (1)

($ per share)

()

Other Comprehensive Income (Loss)

()

Share-Based Compensation Expense (2)

Balance at September 30, 2023

()

(1)Cash dividends declared consists of cash dividends paid and dividends declared but unpaid.

(2)Share-based compensation expense is based on the fair value of share-based awards.


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$ $ $()$()$ $ $ Net Earnings

Cash Dividends Declared (1)

($ per share)

() () ()Other Comprehensive Income (Loss)

Share-Based Compensation Expense (2)

Stock Option Exercises

Other (3)

() ()() ()Share Repurchases ()() ()Distributions to Noncontrolling Interest ()()Balance at September 30, 2024$ $ $ $()$()$ $ $

(Dollars in millions, except per share amount)

Common Stock at Par Value

Additional Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Income (Loss)

Treasury Stock at Cost

Total Eastman Stockholders' Equity

Noncontrolling Interest

Total Equity

Balance at December 31, 2022

()

Net Earnings

Cash Dividends Declared (1)

($ per share)

()

Other Comprehensive Income (Loss)

()

Share-Based Compensation Expense (2)

Stock Option Exercises

Other (3)

()

Share Repurchases

()

Distributions to Noncontrolling Interest

()

Balance at September 30, 2023

()

(1)Cash dividends declared consists of cash dividends paid and dividends declared but unpaid.

(2)Share-based compensation expense is based on the fair value of share-based awards.

(3)Additional paid-in capital includes the value of shares withheld for employees' taxes on vesting of share-based compensation awards.


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)$ $()$()$()Period change()()() ()

Balance at December 31, 2023

() ()()()Period change () Balance at September 30, 2024$()$ $()$()$()

Amounts of other comprehensive income (loss) are presented net of applicable taxes. Eastman recognizes deferred income taxes on the CTA related to branch operations and income from other entities included in the Company's consolidated U.S. tax return. No deferred income taxes are recognized on the CTA of other subsidiaries outside the United States because the CTA is considered to be a component of indefinitely invested, unremitted earnings of these foreign subsidiaries.

$ $ $()Defined benefit pension and other postretirement benefit plans:Amortization of unrecognized prior service credits()()()()Derivatives and hedging:Unrealized gain (loss) during period()() Reclassification adjustment for (gains) losses included in net income, net ()()Total other comprehensive income (loss)$ $ $ $()First Nine Months20242023(Dollars in millions)Before TaxNet of TaxBefore TaxNet of TaxOther comprehensive income (loss)Change in cumulative translation adjustment$ $ $()$()Defined benefit pension and other postretirement benefit plans:Amortization of unrecognized prior service credits()()()()Derivatives and hedging:Unrealized gain (loss) during period()()()()Reclassification adjustment for (gains) losses included in net income, net ()()Total other comprehensive income (loss)$ $ $()$()


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11.

$ $ $ DenominatorWeighted average shares used for basic EPSDilutive effect of stock options and other awardsWeighted average shares used for diluted EPS(Calculated using whole dollars and shares)EPSBasic$ $ $ $ Diluted$ $ $ $

Shares underlying stock options of and for third quarter 2024 and 2023, respectively, and and for first nine months 2024 and 2023, respectively, were excluded from the calculations of diluted EPS because the grant date exercise price of these options was greater than the average market price of the Company's common stock and the effect of including them in the calculations of diluted EPS would have been antidilutive. The Company repurchased shares and shares in third quarter and first nine months 2024, respectively, and repurchased shares in first nine months 2023. shares were repurchased in third quarter 2023.

The Company declared cash dividends of $ and $ per share for third quarter 2024 and 2023, respectively. The Company declared cash dividends of $ and $ per share for first nine months 2024 and 2023, respectively.


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12.

$ $ $

Severance charges (1)(2)

Site closure and other charges (1)(3)(4)

Total$ $ $ $

(1)Third quarter and first nine months 2024 includes asset impairment charges of $ million, severance charges of $ million, and site closure costs of $ million related to the planned closure of a solvent-based resins production line at an advanced interlayers facility in North America. In addition, inventory adjustments of $ million and $ million in the Advanced Materials ("AM") segment and Additives & Functional Products ("AFP") segment, respectively, were recognized in "Cost of sales" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in third quarter and first nine months 2024 related to this closure.

(2)Third quarter and first nine months 2024 includes severance charges of $ million and $ million, respectively, as part of cost reduction initiatives which are reported in "Other". First nine months 2023 includes severance charges as part of fourth quarter 2022 cost reduction initiatives reported in "Other".

(3)Third quarter and first nine months 2024 includes other charges of $ million related to growth and profitability improvement initiatives.

(4)First nine months 2023 includes site closure costs of $ million related to the closure of an acetate yarn manufacturing facility in Europe in the Fibers segment. In addition, accelerated depreciation of $ million was recognized in "Cost of sales" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in first nine months 2023 related to the closure of this facility.

Changes in Reserves

$ $()$ $ Severance costs$ $ $ $()$ Other restructuring costs () Total$ $ $()$()$

(Dollars in millions)

Balance at January 1, 2023

Provision/ Adjustments

Non-cash Reductions/
Additions

Cash Reductions

Balance at December 31, 2023

Severance costs

()

Other restructuring costs

()

Total

()

Substantially all severance costs remaining as of September 30, 2024 are expected to be paid within one year.


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13.

million and $ million, respectively, of compensation expense before tax were recognized in "Selling, general and administrative expenses" ("SG&A") in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings, for all share-based awards. The impact on third quarter 2024 and 2023 net earnings of $ million and $ million, respectively, is net of deferred tax expense related to share-based award compensation for each period.

In both first nine months 2024 and 2023, $ million of compensation expense before tax was recognized in SG&A in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings for all share-based awards. The impact on first nine months 2024 and 2023 net earnings of $ million and $ million, respectively, is net of deferred tax expense related to share-based award compensation for each period.

For additional information regarding share-based compensation plans and awards, see Note 18, "Share-Based Compensation Plans and Awards", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K.

14.

operating segments: Advanced Materials ("AM"), Additives & Functional Products ("AFP"), Chemical Intermediates ("CI"), and Fibers. The economic factors that impact the nature, amount, timing, and uncertainty of revenue and cash flows vary among the Company's operating segments and the geographical regions in which they operate. For disaggregation of revenue by major product lines and regions for each operating segment, see Note 20, "Segment and Regional Sales Information", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K. For additional financial and product information for each operating segment, see Part I, Item 1, "Business - Business Segments", in the Company's 2023 Annual Report on Form 10-K.

$ $ $ Additives & Functional Products Chemical Intermediates Fibers Total Sales by Operating Segment Other Total Sales$ $ $ $


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$ $ $ Additives & Functional Products Chemical Intermediates Fibers Total Earnings Before Interest and Taxes by Operating Segment Other Growth initiatives and businesses not allocated to operating segments()()()()Pension and other postretirement benefits income (expense), net not allocated to operating segments () ()Asset impairments, restructuring, and other charges, net() ()()Steam line incident (costs) insurance proceeds, net Other income (charges), net not allocated to operating segments ()()()Total Earnings Before Interest and Taxes$ $ $ $

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is based upon the unaudited consolidated financial statements of Eastman Chemical Company ("Eastman" or the "Company"), which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), and should be read in conjunction with the Company's audited consolidated financial statements, including related notes, and MD&A contained in the Company's 2023 Annual Report on Form 10-K, and the unaudited consolidated financial statements, including related notes, included in Part I, Item 1, in this Quarterly Report. All references to earnings per share ("EPS") contained in this report are diluted EPS unless otherwise noted.


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures, and the accompanying reconciliations of the non-GAAP financial measures to the most comparable GAAP measures, are presented below in this section and in "Overview", "Results of Operations", "Summary by Operating Segment", and "Liquidity and Other Financial Information - Cash Flows" in this MD&A.

Management discloses non-GAAP financial measures, and the related reconciliations to the most comparable GAAP financial measures, because it believes investors use these metrics in evaluating longer term period-over-period performance, and to allow investors to better understand and evaluate the information used by management to assess the Company's and its operating segments' performances, make resource allocation decisions, and evaluate organizational and individual performances in determining certain performance-based compensation. Non-GAAP financial measures do not have definitions under GAAP, and may be defined differently by, and not be comparable to, similarly titled measures used by other companies. As a result, management cautions investors not to place undue reliance on any non-GAAP financial measure, but to consider such measures alongside the most directly comparable GAAP financial measure.

Company Use of Non-GAAP Financial Measures

Non-Core Items and any Unusual or Non-Recurring Items Excluded from Non-GAAP Earnings

In addition to evaluating Eastman's financial condition, results of operations, liquidity, and cash flows as reported in accordance with GAAP, management evaluates Company and operating segment performance, and makes resource allocation and performance evaluation decisions, excluding the effect of transactions, costs, and losses or gains that do not directly result from Eastman's normal, or "core", business and operations, or are otherwise of an unusual or non-recurring nature.

•Non-core transactions, costs, and losses or gains relate to, among other things, cost reductions, growth and profitability improvement initiatives, changes in businesses and assets, and other events outside of the Company's core business operations, and have included asset impairments, restructuring, and other charges and gains, costs of and related to acquisitions, gains and losses from and costs related to dispositions, closures, or shutdowns of businesses or assets, financing transaction costs, environmental and other costs related to previously divested businesses or non-operational sites and product lines, and mark-to-market losses or gains for pension and other postretirement benefit plans.

•In first nine months 2023, the Company recognized unusual insurance proceeds, net of costs from the previously reported January 31, 2022 operational incident at its Kingsport site as a result of a steam line failure (the "steam line incident"). Management considered the steam line incident unusual because of the Company's operational and safety history and the magnitude of the unplanned disruption.

Because non-core, unusual, or non-recurring transactions, costs, and losses or gains may materially affect the Company's, or any particular operating segment's, financial condition or results in a specific period in which they are recognized, management believes it is appropriate to evaluate the financial measures prepared and calculated in accordance with both GAAP and the related non-GAAP financial measures excluding the effect on the Company's results of these non-core, unusual, or non-recurring items. In addition to using such measures to evaluate results in a specific period, management evaluates such non-GAAP measures, and believes that investors may also evaluate such measures, because such measures may provide more complete and consistent comparisons of the Company's, and its segments', operational performance on a period-over-period historical basis and, as a result, provide a better indication of expected future trends.


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Adjusted Tax Rate and Provision for Income Taxes

In interim periods, Eastman discloses non-GAAP earnings with an adjusted effective tax rate and a resulting adjusted provision for income taxes using the Company's forecasted tax rate for the full year as of the end of the interim period. The adjusted effective tax rate and resulting adjusted provision for income taxes are equal to the Company's projected full year effective tax rate and provision for income taxes on earnings excluding non-core, unusual, or non-recurring items for completed periods. The adjusted effective tax rate and resulting adjusted provision for income taxes may fluctuate during the year for changes in events and circumstances that change the Company's forecasted annual effective tax rate and resulting provision for income taxes excluding non-core, unusual, or non-recurring items. Management discloses this adjusted effective tax rate, and the related reconciliation to the GAAP effective tax rate, to provide investors more complete and consistent comparisons of the Company's operational performance on a period-over-period interim basis and on the same basis as management evaluates quarterly financial results to provide a better indication of expected full year results.

Non-GAAP Debt Measure

Eastman from time to time evaluates and discloses to investors and securities and credit analysts the non-GAAP debt measure "net debt", which management defines as total borrowings less cash and cash equivalents. Management believes this metric is useful to investors and securities and credit analysts to provide them with information similar to that used by management in evaluating the Company's overall financial position, liquidity, and leverage and because management believes investors, securities analysts, credit analysts and rating agencies, and lenders often use a similar measure to assess and compare companies' relative financial position and liquidity.

Non-GAAP Measures in this Quarterly Report

The following non-core items are excluded by management in its evaluation of certain earnings results in this Quarterly Report:

•Asset impairments, restructuring, and other charges, net;

•Cost of sales impact from restructuring activities; and

•Environmental and other costs from previously divested or non-operational sites and product lines.

The following unusual items are excluded by management in its evaluation of certain earnings results in this Quarterly Report:

•Steam line incident costs (insurance proceeds), net.

As described above, the alternative non-GAAP measure of debt, "net debt", is also presented in this Quarterly Report.

Non-GAAP Financial Measures - Non-Core and Unusual Items Excluded from Earnings and Adjustments to Provision for Income Taxes


	Third Quarter				First Nine Months
(Dollars in millions)	2024		2023		2024		2023
Non-core items impacting earnings before interest and taxes:
Asset impairments, restructuring, and other charges, net	$	30	$	—	$	41	$	22
Cost of sales impact from restructuring activities	7		—		7		23
Environmental and other costs	—		—		16		13
Unusual item impacting earnings before interest and taxes:
Steam line incident costs (insurance proceeds), net	—		—		—		(8)
Total non-core and unusual items impacting earnings before interest and taxes	37		—		64		50
Less: Items impacting provision for income taxes:
Tax effect of non-core and unusual items	10		—		16		9
Interim adjustment to tax provision	(59)		3		(89)		17
Total items impacting provision for income taxes	(49)		3		(73)		26
Total items impacting net earnings attributable to Eastman	$	86	$	(3)	$	137	$	24


Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

This MD&A includes an analysis of the effect of the foregoing on the following GAAP financial measures:

•Gross profit;

•Other (income) charges, net;

•Earnings before interest and taxes ("EBIT");

•Provision for income taxes;

•Net earnings attributable to Eastman;

•Diluted EPS; and

•Total borrowings.

OVERVIEW

Eastman's products and operations are managed and reported in four operating segments: Advanced Materials ("AM"), Additives & Functional Products ("AFP"), Chemical Intermediates ("CI"), and Fibers. Eastman uses an innovation-driven growth model which consists of leveraging world class scalable technology platforms, delivering differentiated application development capabilities, and relentlessly engaging the market. The Company's world class technology platforms form the foundation of sustainable growth by differentiated products through significant scale advantages in research and development ("R&D") and advantaged global market access. Molecular recycling technologies continue to be an area of investment focus for the Company and extends the level of differentiation afforded by our world class technology platforms. Differentiated application development converts market complexity into opportunities for growth and accelerates innovation by enabling a deeper understanding of the value of Eastman's products and how they perform within customers' and end-user products. Key areas of application development include thermoplastic conversion, functional films, coatings formulations, textiles and nonwovens, and personal and home care formulations. The Company engages the market by working directly with customers and downstream users, targeting attractive niche markets, and leveraging disruptive macro trends. Management believes that these elements of the Company's innovation-driven growth model, combined with disciplined portfolio management and balanced capital deployment, will result in consistent, sustainable earnings growth and strong cash flow from operations.

Sales, EBIT, and EBIT excluding non-core and unusual items were as follows:


	Third Quarter				First Nine Months
(Dollars in millions)	2024		2023		2024		2023
Sales	$	2,464	$	2,267	$	7,137	$	7,003
Earnings before interest and taxes	329		256		929		825
Earnings before interest and taxes excluding non-core and unusual items	366		256		993		875

Sales revenue increased in third quarter 2024 compared to third quarter 2023 primarily due to higher sales volume. Sales revenue increased in first nine months 2024 compared to first nine months 2023 primarily due to higher sales volume, partially offset by lower selling prices. Higher sales volume was primarily attributed to the end of customer inventory destocking across most end-markets. Lower selling prices were primarily due to lower raw material and energy prices and lower distribution prices.

EBIT excluding non-core and unusual items increased in third quarter 2024 compared to third quarter 2023 primarily due to higher sales volume, higher selling prices, and lower raw material and energy costs. These impacts were partially offset by higher SG&A expenses. EBIT excluding non-core and unusual items increased in first nine months 2024 compared to first nine months 2023 primarily due to higher sales volume and lower raw material and energy costs, net of lower selling prices. These impacts were partially offset by higher SG&A expenses.

Further discussion of sales revenue and EBIT changes is presented in "Results of Operations" and "Summary by Operating Segment" in this MD&A.


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Net earnings and EPS and adjusted net earnings and EPS were as follows:


	Third Quarter
	2024				2023
(Dollars in millions, except EPS)	$		EPS		$		EPS
Net earnings attributable to Eastman	$	180	$	1.53	$	178	$	1.49
Total non-core and unusual items, net of tax	27		0.23		—		—
Interim adjustment to tax provision	59		0.50		(3)		(0.02)
Adjusted net earnings	$	266	$	2.26	$	175	$	1.47

	First Nine Months
	2024				2023
(Dollars in millions, except EPS)	$		EPS		$		EPS
Net earnings attributable to Eastman	$	575	$	4.86	$	584	$	4.89
Total non-core and unusual items, net of tax	48		0.41		41		0.34
Interim adjustment to tax provision	89		0.75		(17)		(0.14)
Adjusted net earnings	$	712	$	6.02	$	608	$	5.09

Cash provided by operating activities was $747 million in first nine months 2024 and $922 million in first nine months 2023.

RESULTS OF OPERATIONS

Sales


	Third Quarter								First Nine Months
					Change								Change
(Dollars in millions)	2024		2023		$		%		2024		2023		$		%
Sales	$	2,464	$	2,267	$	197	9	%	$	7,137	$	7,003	$	134	2	%
Volume / product mix effect					186		8	%					404		6	%
Price effect					15		1	%					(256)		(4)	%
Exchange rate effect					(4)		—	%					(14)		—	%

Sales revenue increased in third quarter 2024 compared to third quarter 2023 primarily as a result of increases across all segments. Sales revenue increased in first nine months 2024 compared to first nine months 2023 as a result of increases in the AM and Fibers segments, partially offset by a decrease in the AFP segment. Further discussion by operating segment is presented in "Summary by Operating Segment" in this MD&A.


Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Gross Profit


	Third Quarter						First Nine Months
(Dollars in millions)	2024		2023		Change		2024		2023		Change
Gross profit	$	605	$	484	25	%	$	1,736	$	1,597	9	%

Cost of sales impact of restructuring activities	7		—				7		23
Steam line incident costs (insurance proceeds), net	—		—				—		(8)
Gross profit excluding non-core and unusual items	$	612	$	484	26	%	$	1,743	$	1,612	8	%

Gross profit in third quarter and first nine months 2024 included inventory adjustments related to the planned closure of a solvent-based resins production line at an advanced interlayers facility in North America. Gross profit in first nine months 2023 included insurance proceeds from the steam line incident and accelerated depreciation resulting from the previously reported closure of an acetate yarn manufacturing facility in Europe in the Fibers segment. Excluding these non-core and unusual items, gross profit increased in third quarter 2024 compared to third quarter 2023 in all segments. Gross profit increased in first nine months 2024 compared to first nine months 2023 primarily as a result of increases in the AM and Fibers segments, partially offset by a decrease in the CI segment. Further discussion of sales revenue and EBIT changes is presented in "Summary by Operating Segment" in this MD&A.

Selling, General and Administrative Expenses


	Third Quarter						First Nine Months
(Dollars in millions)	2024		2023		Change		2024		2023		Change
Selling, general and administrative expenses	$	183	$	160	14	%	$	554	$	536	3	%

SG&A expenses increased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily due to higher variable compensation costs partially offset by cost reduction initiatives.

Research and Development Expenses


	Third Quarter						First Nine Months
(Dollars in millions)	2024		2023		Change		2024		2023		Change
Research and development expenses	$	65	$	60	8	%	$	184	$	182	1	%

R&D expenses increased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily due to strategic investment in innovation.

Asset Impairments, Restructuring, and Other Charges, Net


(Dollars in millions)	Third Quarter				First Nine Months
	2024		2023		2024		2023
Asset impairments	$	5	$	—	$	5	$	—
Severance charges	10		—		21		16
Site closure and other charges	15		—		15		6
Total	$	30	$	—	$	41	$	22

For detailed information regarding asset impairments, restructuring, and other charges, net see Note 12, "Asset Impairments, Restructuring, and Other Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Other Components of Post-employment (Benefit) Cost, Net


	Third Quarter				First Nine Months
(Dollars in millions)	2024		2023		2024		2023
Other components of post-employment (benefit) cost, net	$	(5)	$	(2)	$	(14)	$	(8)

For more information regarding other components of post-employment (benefit) cost, net see Note 6, "Retirement Plans", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

Other (Income) Charges, Net


	Third Quarter				First Nine Months
(Dollars in millions)	2024		2023		2024		2023
Foreign exchange transaction losses, net	$	3	$	3	$	12	$	8

(Income) loss from equity investments and other investment (gains) losses, net	(3)		—		(4)		5

Other, net	3		7		34		$	27
Other (income) charges, net	$	3	$	10	$	42	$	40
Environmental and other costs	—		—		(16)		(13)




Other (income) charges, net excluding non-core item	$	3	$	10	$	26	$	27

Other (income) charges, net in first nine months 2024 and 2023 included environmental and other costs related to previously divested businesses or non-operational sites and product lines. Excluding these non-core items, Other (income) charges, net decreased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily due to income from equity investments partially offset by increases in foreign exchange transaction losses. For more information regarding components of foreign exchange transaction losses, see Note 5, "Derivative and Non-Derivative Financial Instruments", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

Earnings Before Interest and Taxes


	Third Quarter						First Nine Months
(Dollars in millions)	2024		2023		Change		2024		2023		Change
Earnings before interest and taxes	$	329	$	256	29	%	$	929	$	825	13	%

Asset impairments, restructuring, and other charges, net	30		—				41		22

Cost of sales impact of restructuring activities	7		—				7		23
Steam line incident costs (insurance proceeds), net	—		—				—		(8)
Environmental and other costs	—		—				16		13
Earnings before interest and taxes excluding non-core and unusual items	$	366	$	256	43	%	$	993	$	875	13	%


Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Net Interest Expense


	Third Quarter						First Nine Months
(Dollars in millions)	2024		2023		Change		2024		2023		Change
Gross interest costs	$	58	$	64	(9)	%	$	174	$	183	(5)	%
Less: Capitalized interest	5		5				14		12
Interest expense	53		59				160		171
Less: Interest income	4		2				12		8
Net interest expense	$	49	$	57	(14)	%	$	148	$	163	(9)	%

Net interest expense decreased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily as a result of lower total borrowings and higher interest income.

Provision for Income Taxes


	Third Quarter								First Nine Months
	2024				2023				2024				2023
(Dollars in millions)	$		%		$		%		$		%		$		%
Provision for income taxes and effective tax rate	$	99	35	%	$	20	10	%	$	204	26	%	$	77	12	%
Tax provision for non-core and unusual items (1)	10				—				16				9

Interim adjustment to tax provision (2)	(59)				3				(89)				17
Adjusted provision for income taxes and effective tax rate	$	50	16	%	$	23	12	%	$	131	16	%	$	103	15	%

(1)Provision for income taxes for non-core and unusual items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.

(2)Third quarter 2024 provision for income taxes was adjusted to reflect the current forecasted full year effective tax rate. Third quarter 2023 provision for income taxes was adjusted to reflect the then current forecasted full year effective tax rate.


	First Nine Months (1)
	2024		2023
Effective tax rate	26	%	12	%
Tax impact of current year non-core and unusual items (2)	2	%	1	%
Changes in tax contingencies and valuation allowances	(1)	%	1	%
Forecasted full year impact of expected tax events (3)	(11)	%	1	%
Forecasted full year adjusted effective tax rate	16	%	15	%

(1)Effective tax rate percentages are rounded to the nearest whole percent. The forecasted full year effective tax rates are 15.5 percent and 14.5 percent in first nine months 2024 and 2023, respectively.

(2)Provision for income taxes for non-core and unusual items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.

(3)Expected future tax events may include finalization of tax returns; federal, state, and foreign examinations or the expiration of statutes of limitation; and corporate restructurings.


Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Net Earnings Attributable to Eastman and Diluted Earnings per Share


	Third Quarter
	2024				2023
(Dollars in millions, except EPS)	$		EPS		$		EPS
Net earnings and diluted earnings per share attributable to Eastman	$	180	$	1.53	$	178	$	1.49
Non-core items, net of tax: (1)

Asset impairments, restructuring, and other charges, net	22		0.19		—		—
Cost of sales impact of restructuring activities	5		0.04		—		—








Interim adjustment to tax provision	59		0.50		(3)		(0.02)
Adjusted net earnings and diluted earnings per share attributable to Eastman	$	266	$	2.26	$	175	$	1.47



	First Nine Months
	2024				2023
(Dollars in millions, except EPS)	$		EPS		$		EPS
Net earnings and diluted earnings per share attributable to Eastman	$	575	$	4.86	$	584	$	4.89
Non-core items, net of tax: (1)

Asset impairments, restructuring, and other charges, net	30		0.27		18		0.14

Cost of sales impact of restructuring activities	5		0.04		20		0.17
Environmental and other costs	13		0.10		9		0.08
Unusual items, net of tax: (1)
Steam line incident costs (insurance proceeds), net	—		—		(6)		(0.05)


Interim adjustment to tax provision	89		0.75		(17)		(0.14)
Adjusted net earnings and diluted earnings per share attributable to Eastman	$	712	$	6.02	$	608	$	5.09

(1)Provision for income taxes for non-core and unusual items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.


Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

SUMMARY BY OPERATING SEGMENT

Eastman's products and operations are managed and reported in four operating segments: Advanced Materials ("AM"), Additives & Functional Products ("AFP"), Chemical Intermediates ("CI"), and Fibers. For additional financial and product information for each operating segment, see Part I, Item 1, "Business - Business Segments" and Part II, Item 8, Note 20, "Segment and Regional Sales Information", in the Company's 2023 Annual Report on Form 10-K.

Advanced Materials Segment


	Third Quarter								First Nine Months
					Change								Change
	2024		2023		$		%		2024		2023		$		%
(Dollars in millions)
Sales	$	787	$	746	$	41	5	%	$	2,330	$	2,227	$	103	5	%

Volume / product mix effect					65		8	%					210		9	%
Price effect					(22)		(3)	%					(97)		(4)	%
Exchange rate effect					(2)		—	%					(10)		—	%

Earnings before interest and taxes	$	100	$	93	$	7	8	%	$	335	$	278	$	57	21	%
Asset impairments, restructuring, and other charges, net	18		—		18				18		—		18
Cost of sales impact of restructuring activities	4		—		4				4		—		4


Earnings before interest and taxes excluding non-core item	122		93		29		31	%	357		278		79		28	%

Sales revenue increased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily due to higher sales volume, partially offset by lower selling prices. Higher sales volume was primarily attributed to the end of customer inventory destocking in consumer durables, and product growth of premium interlayers products.

EBIT in third quarter 2024 and first nine months 2024 includes asset impairments, restructuring, and other charges, net, and inventory adjustments, related to the planned closure of a solvent-based resins production line. For more information regarding asset impairments, restructuring, and other charges see Note 12, "Asset Impairments, Restructuring, and Other Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

EBIT excluding non-core items increased third quarter 2024 compared to third quarter 2023 primarily due to $37 million higher sales volume and improved asset utilization, net of higher manufacturing costs associated with Kingsport methanolysis. These impacts were partially offset by $4 million higher SG&A expenses.

EBIT excluding non-core items increased in first nine months 2024 compared to first nine months 2023 primarily due to $88 million higher sales volume. This impact was partially offset by a $10 million unfavorable shift in foreign currency exchange rates.


Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Additives & Functional Products Segment


	Third Quarter								First Nine Months
					Change								Change
	2024		2023		$		%		2024		2023		$		%
(Dollars in millions)
Sales	$	744	$	670	$	74	11	%	$	2,166	$	2,194	$	(28)	(1)	%

Volume / product mix effect					77		11	%					80		4	%
Price effect					(2)		—	%					(107)		(5)	%
Exchange rate effect					(1)		—	%					(1)		—	%


Earnings before interest and taxes	$	127	$	105	$	22	21	%	$	359	$	369	$	(10)	(3)	%



Cost of sales impact of restructuring activities	3		—		3				3		—		3
Earnings before interest and taxes excluding non-core item	130		105		25		24	%	362		369		(7)		(2)	%

Sales revenue increased in third quarter 2024 compared to third quarter 2023 primarily due to higher sales volume and favorable mix in the functional amines and coatings additives product lines and the timing of heat transfer fluid projects.

Sales revenue decreased in first nine months 2024 compared to first nine months 2023 primarily due to lower selling prices, partially offset by higher sales volume and favorable mix. Lower selling prices were primarily attributed to lower raw material costs, including cost pass-through contracts. Higher sales volume and favorable mix was primarily attributable to the coatings additives and care additives product lines, partially offset by the reduction of heat transfer fluid projects.

EBIT in third quarter 2024 and first nine months 2024 includes inventory adjustments related to the planned closure of a solvent-based resins production line. For more information see Note 12, "Asset Impairments, Restructuring, and Other Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

EBIT excluding non-core items increased in third quarter 2024 compared to third quarter 2023 primarily due to $37 million higher sales volume, partially offset by $9 million SG&A expenses.

EBIT excluding non-core items decreased in first nine months 2024 compared to first nine months 2023 primarily due to $8 million higher SG&A expenses. Lower raw material and energy costs and distribution costs, net of lower selling prices were offset primarily by lower sales volume and higher manufacturing costs.

Chemical Intermediates Segment


	Third Quarter								First Nine Months
					Change								Change
	2024		2023		$		%		2024		2023		$		%
(Dollars in millions)
Sales	$	593	$	527	$	66	13	%	$	1,631	$	1,630	$	1	—	%

Volume / product mix effect					35		7	%					79		5	%
Price effect					32		6	%					(77)		(5)	%
Exchange rate effect					(1)		—	%					(1)		—	%

Earnings before interest and taxes	$	43	$	6	$	37	>100%		$	81	$	87	$	(6)	(7)	%


Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Sales revenue increased in third quarter 2024 compared to third quarter 2023 primarily due to higher sales volume and higher selling prices. Sales revenue in first nine months 2024 was relatively unchanged compared to first nine months 2023 due to higher sales volume being offset by lower selling prices. Higher sales volume was primarily attributed to the end of customer inventory destocking and improved market conditions in 2024. Fluctuations in selling prices were driven by changes in raw material and energy prices.

EBIT increased in third quarter 2024 compared to third quarter 2023 primarily due to $28 million higher selling prices, net of higher raw material and energy costs and $10 million lower manufacturing costs, including higher capacity utilization, partially offset by $5 million higher SG&A expenses.

EBIT decreased in first nine months 2024 compared to first nine months 2023 due to $33 million lower selling prices, net of lower raw material and energy costs. These impacts were partially offset by $28 million lower manufacturing costs, including higher capacity utilization.

Fibers Segment


	Third Quarter								First Nine Months
					Change								Change
	2024		2023		$		%		2024		2023		$		%
(Dollars in millions)
Sales	$	336	$	323	$	13	4	%	$	997	$	949	$	48	5	%
Volume / product mix effect					6		2	%					25		3	%
Price effect					7		2	%					25		3	%
Exchange rate effect					—		—	%					(2)		(1)	%

Earnings before interest and taxes	$	112	$	109	$	3	3	%	$	351	$	280	$	71	25	%

Asset impairments, restructuring, and other charges, net	—		—		—				—		6		(6)
Cost of sales impact of restructuring activities	—		—		—				—		23		(23)
Earnings before interest and taxes excluding non-core items	112		109		3		3	%	351		309		42		14	%

Sales revenue increased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily due to higher selling prices in acetate tow and higher sales volume in textiles.

EBIT in first nine months 2023 included asset impairments, restructuring, and other charges, net, and accelerated depreciation from a previously announced manufacturing facility closure. For more information regarding asset impairments, restructuring, and other charges, net see Note 12, "Asset Impairments, Restructuring, and Other Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

EBIT increased in third quarter 2024 compared to third quarter 2023 primarily due to $7 million higher selling prices, partially offset by $5 million higher SG&A expenses.

EBIT excluding non-core items increased in first nine months 2024 compared to first nine months 2023 primarily due to $32 million higher selling prices and lower raw material and energy costs, and $11 million higher sales volume. These impacts were partially offset by $4 million higher SG&A expenses.


Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Other


	Third Quarter				First Nine Months
	2024		2023		2024		2023
(Dollars in millions)
Sales	$	4	$	1	$	13	$	3

Loss before interest and taxes
Growth initiatives and businesses not allocated to operating segments	$	(43)	$	(49)	$	(155)	$	(145)
Pension and other postretirement benefits income (expense), net not allocated to operating segments	2		(4)		6		(12)
Asset impairments, restructuring, and other charges, net	(12)		—		(23)		(16)
Steam line incident (costs) insurance proceeds, net	—		—		—		8
Other income (charges), net not allocated to operating segments	—		(4)		(25)		(24)
Loss before interest and taxes	$	(53)	$	(57)	$	(197)	$	(189)
Asset impairments, restructuring, and other charges, net	12		—		23		16
Steam line incident costs (insurance proceeds), net	—		—		—		(8)
Environmental and other costs	—		—		16		13
4,298

(1)Includes non-cash increase of $8 million and $20 million in 2024 and 2023, respectively, resulting from foreign currency exchange rates.

Capital Expenditures

Capital expenditures were $420 million and $649 million in first nine months 2024 and 2023, respectively. Capital expenditures in first nine months 2024 were primarily for the AM segment methanolysis plastic-to-plastic molecular recycling manufacturing facilities, other targeted growth initiatives, and site modernization projects. The Company expects that 2024 capital expenditures will be approximately $625 million.

Stock Repurchases

In December 2021, the Company's Board of Directors authorized the repurchase of up to $2.5 billion of the Company's outstanding common stock at such times, in such amounts, and on such terms, as determined by management to be in the best interest of the Company and its stockholders (the "2021 authorization"). During third quarter and first nine months 2024, the Company repurchased 1,018,269 and 2,018,274 shares of common stock, respectively, for $100 million and $200 million, respectively. As of September 30, 2024, a total of 10,629,023 shares have been repurchased under the 2021 authorization for $985 million. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders.

CRITICAL ACCOUNTING ESTIMATES

In preparing the consolidated financial statements in conformity with GAAP, management must make decisions which impact the reported amounts and the related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and assumptions on which to base estimates and judgments that affect the reported amounts of assets, liabilities, sales revenue and expenses, fair value of disposal groups, and related disclosure of contingent assets and liabilities. On an ongoing basis, Eastman evaluates its estimates, including those related to impairment of long-lived assets, environmental costs, pension and other postretirement benefits, litigation and contingent liabilities, and income taxes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the critical accounting estimates described in Part II, Item 7 of the Company's 2023 Annual Report on Form 10-K are the most important to the fair presentation of the Company's financial condition and results. These estimates require management's most significant judgments in the preparation of the Company's consolidated financial statements.

RECENTLY ISSUED ACCOUNTING STANDARDS

For information regarding the impact of recently issued accounting standards, see Note 1, "Significant Accounting Policies", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.


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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Eastman has exposure to various market risks principally due to changes in foreign currency exchange rates, the pricing of various commodities, and interest rates. In an effort to manage these risks, the Company employs various strategies, including pricing, inventory management, and hedging. The Company enters into derivative contracts which are governed by policies, procedures, and internal processes set forth by its Board of Directors.

The Company determines its exposures to market risk by utilizing sensitivity analyses, which measure the potential losses in fair value resulting from one or more selected hypothetical changes in foreign currency exchange rates, commodity prices, or interest rates. For more information regarding exposures, refer to Part II, Item 7A of the Company's 2023 Annual Report on Form 10-K.

At September 30, 2024, a 10 percent fluctuation in the euro currency rate would have had a $228 million impact on the designated net investment values in the foreign subsidiaries. As a result of the designation of the euro-denominated borrowings and designated cross-currency interest rate swaps as hedges of the net investments, foreign currency translation gains and losses on the borrowings and designated cross-currency interest rate swaps are recorded as a component of the "Change in cumulative translation adjustment" within "Other comprehensive income (loss), net of tax" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in Part I, Item 1 of this Quarterly Report. Therefore, a foreign currency change in the designated investment values of the foreign subsidiaries will generally be offset by a foreign currency change in the carrying value of the euro-denominated borrowings or the foreign currency change in the designated cross-currency interest rate swaps.

Other than the foreign currency risk discussed above, there have been no material changes to the Company's market risks from those disclosed in Part II, Item 7A of the Company's 2023 Annual Report on Form 10-K.

ITEM 4.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Eastman maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. An evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that as of September 30, 2024, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed was accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company's internal control over financial reporting that occurred during the third quarter of 2024 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.


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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

General

From time to time, Eastman and its operations are parties to, or targets of, lawsuits, claims, investigations and proceedings, including product liability, personal injury, asbestos, patent and intellectual property, commercial, contract, environmental, antitrust, health and safety, and employment matters, which are handled and defended in the ordinary course of business. While the Company is unable to predict the outcome of these matters, it does not believe, based upon currently available facts, that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations, or cash flows. Consistent with the requirements of Regulation S-K, Item 103, the Company's threshold for disclosing any environmental legal proceeding involving a governmental authority is potential monetary sanctions that management believes will meet or exceed $1 million.

Solutia Legacy Torts Claims Litigation

Pursuant to an Amended and Restated Settlement Agreement effective February 28, 2008 between Solutia, Inc. ("Solutia") and Monsanto Company ("Monsanto") in connection with Solutia's emergence from Chapter 11 bankruptcy proceedings (the "Monsanto Settlement Agreement"), Monsanto is responsible for the defense and indemnification of Solutia against any Legacy Tort Claims (as defined in the Monsanto Settlement Agreement) and Solutia has agreed to retain responsibility for certain tort claims, if any, that may arise from Solutia's conduct after its spinoff from Pharmacia Corporation (f/k/a Monsanto), which occurred on September 1, 1997. Solutia, which became a wholly-owned subsidiary of Eastman upon Eastman's acquisition of Solutia in July 2012, has been named as a defendant in several such proceedings, and has submitted the matters to Monsanto, which was acquired by Bayer AG in June 2018, as Legacy Tort Claims. To the extent these matters are not within the meaning of Legacy Tort Claims, Solutia could potentially be liable thereunder. In connection with the completion of its acquisition of Solutia, Eastman guaranteed the obligations of Solutia and Eastman was added as an indemnified party under the Monsanto Settlement Agreement.

ITEM 1A.RISK FACTORS

For information regarding the Company's material known risk factors which could materially adversely affect the Company, its business, financial condition, or results of operations, see "Risk Factors" in Part I, Item 1A of the Company's 2023 Annual Report on Form 10-K.


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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In December 2021, the Company's Board of Directors authorized the repurchase of up to $2.5 billion of the Company's outstanding common stock at such times, in such amounts, and on such terms, as determined by management to be in the best interest of the Company and its stockholders (the "2021 authorization"). As of September 30, 2024, a total of 10,629,023 shares have been repurchased under the 2021 authorization for $985 million. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders. During third quarter and first nine months 2024, the Company repurchased 1,018,269 and 2,018,274 shares of common stock, respectively, for $100 million and $200 million, respectively. For additional information, see Note 10, "Stockholders' Equity", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.



Period	Total Number of Shares Purchased	Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program	Approximate Dollar Value that May Yet Be Purchased Under the Plan or Program
July 1-31, 2024	30,000	$	102.71	30,000	$	1.612	billion
August 1-31, 2024	485,455	$	96.65	485,455	$	1.565	billion
September 1-30, 2024	502,814	$	99.44	502,814	$	1.515	billion
Total	1,018,269	$	98.21	1,018,269

(1)Average price paid per share reflects the weighted average purchase price paid for shares.


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ITEM 5. OTHER INFORMATION

A portion of our directors’ and officers’ compensation is in the form of equity awards and, from time to time, they may engage in open-market transactions involving Company securities for diversification or other personal reasons. All such transactions in Company securities by directors and officers must comply with the Company’s Insider Trading Policy, which requires that transactions be in accordance with applicable U.S. federal securities laws that prohibit trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables directors and officers to prearrange transactions in the Company’s securities in a manner that avoids concerns about initiating transactions while in possession of material nonpublic information. The Company’s Insider Trading Policy permits our directors and executive officers to enter into trading plans designed to comply with Rule 10b5-1.

The following table describes the contracts, instructions or written plans for the purchase or sale of securities adopted by our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) during the three months ended September 30, 2024, that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). No other Rule 10b5-1 trading arrangements or "non-Rule 10b5-1 trading arrangements" (as defined by Regulation S-K Item 408(c)) were entered into or terminated by our directors or officers during such period.


Name and Title	Date of Adoption of Rule 10b5-1 Trading Plan	Expiration Date of Rule 10b5-1 Trading Plan (1)	Aggregate Number of Securities to be Purchased or Sold
Adrian Holt Senior Vice President and Chief Human Resources Officer	8/5/2024	8/1/2025	Sale of up to 4,869 shares of common stock
Christopher M. Killian Senior Vice President and Chief Technology Officer	8/6/2024	7/31/2025	Sale of up to 5,310 shares of common stock

(1)The plan duration is until the date listed in this column or such earlier date upon the completion of all trades under the plan (or the expiration of the orders relating to such trades without execution) or the occurrence of such other termination events as specified in the plan.


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ITEM 6.EXHIBITS

Exhibits filed as part of this report are listed in the Exhibit Index.


						EXHIBIT INDEX
Exhibit Number						Description

3.01						Amended and Restated Certificate of Incorporation of Eastman Chemical Company (incorporated herein by reference to Exhibit 3.01 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)

3.02						Amended and Restated Bylaws of Eastman Chemical Company (incorporated herein by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K dated December 1, 2022)

4.01						F orm of 5.000% Notes due 2029 (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report o n Form 8-K dated August 1, 2024

31.01 *						Rule 13a – 14(a) Certification by Mark J. Costa, Chief Executive Officer, for the quarter ended September 30, 2024

31.02 *						Rule 13a – 14(a) Certification by William T. McLain, Jr., Executive Vice President and Chief Financial Officer, for the quarter ended September 30, 2024

32.01 *						Section 1350 Certification by Mark J. Costa, Chief Executive Officer, for the quarter ended September 30, 2024

32.02 *						Section 1350 Certification by William T. McLain, Jr., Executive Vice President and Chief Financial Officer, for the quarter ended September 30, 2024

101.INS						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH *						Inline XBRL Taxonomy Extension Schema Document

101.CAL *						Inline XBRL Taxonomy Calculation Linkbase Document

101.DEF *						Inline XBRL Definition Linkbase Document

101.LAB *						Inline XBRL Taxonomy Label Linkbase Document

101.PRE *						Inline XBRL Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* Denotes exhibit filed or furnished herewith.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Eastman Chemical Company



Date:	November 1, 2024	By:	/s/ William T. McLain, Jr.
			William T. McLain, Jr.
			Executive Vice President and Chief Financial Officer


		Page

Note 1.	Significant Accounting Policies	8
Note 2.	Inventories	9
Note 3.	Income Taxes	10
Note 4.	Borrowings	10
Note 5.	Derivative and Non-Derivative Financial Instruments	11
Note 6.	Retirement Plans	17
Note 7.	Other Commitments	18
Note 8.	Environmental Matters and Asset Retirement Obligations	19
Note 9.	Legal Matters	20
Note 10.	Stockholders' Equity	21
Note 11.	Earnings and Dividends Per Share	24
Note 12.	Asset Impairments , Restructuring , and Other Charges, Net	25
Note 13.	Share-Based Compensation Awards	26
Note 14.	Segment Information	26

EASTMAN CHEMICAL CO - Quarter Report: 2024 September (Form 10-Q)

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