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EASTMAN CHEMICAL CO - Quarter Report: 2024 June (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) provided by 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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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

million and $ million, respectively, and $ billion and $ billion in first six 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 June 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 June 30, 2024 and December 31, 2023.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3.
  %$()()%$  %$  %

Second quarter and first six months 2024 provision for income taxes includes a decrease due to the Company's mix of earnings, partially offset by an increase related to uncertain tax positions. Second quarter and first six months 2023 provision for income taxes includes a $ million decrease due to state tax law changes that were enacted in second quarter 2023 that extended the carryforward period to utilize existing state tax credits. Additionally, first six months 2023 provision for income taxes includes 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 (the "Tax Reform Act").

At June 30, 2024 and December 31, 2023, Eastman had $ million and $ million, respectively, in unrecognized tax benefits. At June 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
  
% notes due
  
% notes due
  2024 Term Loan  2027 Term Loan  Total borrowings  Less: Borrowings due within one year  Long-term borrowings$ $ 

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. This redemption is reported under financing activities on the Unaudited Consolidated Statements of Cash Flows.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 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. Both the proceeds from the 2034 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 June 30, 2024 and December 31, 2023, the Company had outstanding borrowings under the Credit Facility and commercial paper borrowings.

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 the repayment of this term loan. The outstanding balance on the $500 million term loan that matures in 2027 (the "2027 Term Loan") was $ million at both June 30, 2024 and 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 June 30, 2024 and December 31, 2023.

Fair Value of Borrowings

Eastman has classified its total borrowings at June 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 June 30, 2024 and December 31, 2023, respectively. The Company had borrowings classified as Level 1 or Level 3 as of June 30, 2024 and December 31, 2023.

5.


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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 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.

Additionally, in first quarter 2024, Eastman entered into fixed-to-fixed cross-currency swaps of $ million (€ million) maturing December 2028, $ million (€ million) maturing September 2029, and $ million (€ million) maturing February 2034.


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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
€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 June 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 second quarter and first six 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.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 $ Foreign exchange contractsOther noncurrent assets  Derivatives designated as fair value hedges:Fixed-for-floating interest rate swapOther current assets  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 swap
Payables and other current liabilities
  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 June 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.

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)$— Long-term borrowings— 72 — ()

 $()$ $()$(23)$(2)$(23)$(3)Foreign exchange contracts () ()3 2 5 7 Forward starting interest rate and treasury lock swap contracts    — (1)(1)(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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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 $ $ $ $ $ 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(23)(2)Foreign Exchange Contracts:Amount reclassified from AOCI into earnings3 2 
Location and Amount of Gain or (Loss) Recognized in Earnings from Fair Value and Cash Flow Hedging Relationships
First Six Months
20242023
(Dollars in millions)SalesCost of SalesNet Interest ExpenseSalesCost of SalesNet 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(1)(2)
Commodity Contracts:
Amount reclassified from AOCI into earnings(23)(3)
Foreign Exchange Contracts:
Amount reclassified from AOCI into earnings5 7 
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
million and a net loss of $ million during second quarter and first six months 2024, respectively, and recognized a net loss of $ million and $ million during second quarter and first six 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 gain of $ million and a net loss of $ million at June 30, 2024 and December 31, 2023, respectively. Gains in AOCI increased between December 31, 2023 and June 30, 2024 primarily as a result of a decrease in euro to U.S. dollar exchange rates. If recognized, approximately $ million in pre-tax gains as of June 30, 2024, would be reclassified into earnings during the next 12 months, including foreign exchange contracts prospectively dedesignated and monetized in fourth quarter 2022.

6.


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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 $ $ $ $ $ Interest cost      Expected return on assets()()()()()()Amortization of:Prior service credit, net    ()()Net periodic benefit (credit) cost$ $ $ $ $ $()First Six MonthsPension PlansOther Postretirement Benefit Plans2024202320242023(Dollars in millions)U.S.Non-U.S.U.S.Non-U.S.Service cost$ $ $ $ $ $ Interest cost      Expected return on assets()()()()()()Amortization of:Prior service credit, net    ()()Net periodic benefit (credit) cost$ $ $ $ $ $()

7.

billion as a result of exiting an agreement with a supplier after contract negotiations. Eastman had remaining debt and other commitments at June 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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8.

 $ 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 June 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 June 30, 2024$ 

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
million and $ million at June 30, 2024 and December 31, 2023, respectively.

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 June 30, 2024 and December 31, 2023, respectively, and are included in "Other long-term liabilities" on the Unaudited Consolidated Statements of Financial Position.

9.


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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 June 30, 2024$ $ $ $()$()$ $ $ 
(Dollars in millions, except per share amount)Common Stock at Par ValueAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury Stock at CostTotal Eastman Stockholders' EquityNoncontrolling InterestTotal Equity
Balance at March 31, 2023$ $ $ $()$()$ $ $ 
Net Earnings        
Cash Dividends Declared (1)
($ per share)
  ()  () ()
Other Comprehensive Income (Loss)   () () ()
Share-Based Compensation Expense (2)
        
Other
      ()()
Share Repurchases
    ()() ()
Distributions to Noncontrolling Interest      ()()
Balance at June 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 June 30, 2024$ $ $ $()$()$ $ $ 
(Dollars in millions, except per share amount)Common Stock at Par ValueAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury Stock at CostTotal Eastman Stockholders' EquityNoncontrolling InterestTotal 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 June 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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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
)$ $()$()$()Period change()()() ()
Balance at December 31, 2023
() ()()()Period change()()   Balance at June 30, 2024$()$ $()$()$()

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 Six 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 second quarter 2024 and 2023, respectively, and and for first six 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 in both second quarter and first six months 2024. The Company repurchased shares in both second quarter and first six months 2023.

The Company declared cash dividends of $ and $ per share for second quarter 2024 and 2023, respectively. The Company declared cash dividends of $ and $ per share for first six months 2024 and 2023, respectively.
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12.
 $   
Site closure and other restructuring charges (2)
    Total$ $ $ $ 

(1)Severance charges as part of fourth quarter 2022 and 2023 cost reduction initiatives reported in "Other". See Note 14, "Segment Information".
(2)First six months 2023 site closure costs 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 six months 2023 related to the closure of this facility.

Changes in Reserves

 $ $ $()$ Total$ $ $ $()$ 

(Dollars in millions)		Balance at January 1, 2023Provision/ AdjustmentsNon-cash Reductions/
Additions		Cash ReductionsBalance at December 31, 2023
Severance costs$ $ $ $()$ 
Other restructuring costs   () 
Total$ $ $ $()$ 

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

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 second 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 first six months 2024 and 2023, $ million and $ million, respectively, of compensation expense before tax were 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 six 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.

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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$ $ $ $ 


(Dollars in millions)Second QuarterFirst Six Months
Earnings (Loss) Before Interest and Taxes by Segment2024202320242023
Advanced Materials$ $ $ $ 
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 and restructuring 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 core business operations, and have included asset impairments and restructuring 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 quarter 2023, the Company increased the provision for state income taxes as a result of state guidance issued in first quarter 2023 related to the 2017 Tax Cuts and Jobs Act ("Tax Reform Act"). In second quarter 2023, the Company decreased the provision for state income taxes due to state tax law changes impacting credit carryforward periods that were enacted in second quarter 2023. These state tax law changes impacted provisions from prior periods related to the Tax Reform Act. As with the prior years, management considers adjustments related to the Tax Reform Act as unusual because of the infrequent nature and resulting impacts on earnings.

•In first six 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 and restructuring charges, net;
•Accelerated depreciation resulting from the closure of a manufacturing facility; 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; and
•Adjustments to the provision for state income taxes due to an adjustment of amounts recognized in prior years as a result of state guidance issued and laws enacted in 2023 related to the Tax Reform Act.

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

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Non-GAAP Financial Measures - Non-Core and Unusual Items Excluded from Earnings and Adjustments to Provision for Income Taxes
 Second QuarterFirst Six Months
(Dollars in millions)2024202320242023
Non-core items impacting earnings before interest and taxes:
Asset impairments and restructuring charges, net$— $— $11 $22 
Accelerated depreciation— — — 23 
Environmental and other costs16 13 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 taxes16 13 27 50 
Less: Items impacting provision for income taxes:
Tax effect of non-core and unusual items3 4 6 9 
Adjustment from tax law changes— 23 — — 
Interim adjustment to tax provision(13)20 (30)14 
Total items impacting provision for income taxes(10)47 (24)23 
Total items impacting net earnings attributable to Eastman$26 $(34)$51 $27 

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 (benefit from) income taxes;
•Net earnings attributable to Eastman;
•Diluted EPS; and
•Total borrowings.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

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:
 Second QuarterFirst Six Months
(Dollars in millions)2024202320242023
Sales$2,363 $2,324 $4,673 $4,736 
Earnings before interest and taxes337 323 600 569 
Earnings before interest and taxes excluding non-core and unusual items353 336 627 619 

Sales revenue increased in second quarter 2024 compared to second quarter 2023 primarily due to higher sales volume, partially offset by lower selling prices. Sales revenue decreased in first six months 2024 compared to first six months 2023 primarily due to lower selling prices, mostly offset by higher sales volume. 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 items increased in second quarter and first six months 2024 compared to second quarter and first six months 2023 primarily due to higher sales volume and lower manufacturing costs, including higher capacity utilization. These impacts were partially offset by lower selling prices, net of lower raw material and energy costs and lower distribution costs.

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:
Second Quarter
20242023
(Dollars in millions, except EPS)$EPS$EPS
Net earnings attributable to Eastman$230 $1.94 $272 $2.27 
Total non-core and unusual items, net of tax13 0.10 (14)(0.11)
Interim adjustment to tax provision13 0.11 (20)(0.17)
Adjusted net earnings$256 $2.15 $238 $1.99 
First Six Months
20242023
(Dollars in millions, except EPS)
 $
EPS
 $
EPS
Net earnings attributable to Eastman$395 $3.33 $406 $3.39 
Total non-core and unusual items, net of tax21 0.17 41 0.34 
Interim adjustment to tax provision30 0.26 (14)(0.11)
Adjusted net earnings$446 $3.76 $433 $3.62 
Cash provided by operating activities was $351 million in first six months 2024 and $408 million in first six months 2023.

RESULTS OF OPERATIONS

Sales
Second QuarterFirst Six Months
ChangeChange
(Dollars in millions)20242023 $%20242023 $%
Sales$2,363 $2,324 $39 2 %$4,673 $4,736 $(63)(1)%
Volume / product mix effect129 6 %218 5 %
Price effect(82)(4)%(270)(6)%
Exchange rate effect(8)— %(11)— %

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

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Gross Profit
 Second QuarterFirst Six Months
(Dollars in millions)20242023Change20242023Change
Gross profit$599 $584 3 %$1,131 $1,113 2 %
Accelerated depreciation— — — 23 
Steam line incident costs (insurance proceeds), net— — — (8)
Gross profit excluding non-core and unusual items$599 $584 3 %$1,131 $1,128 — %

Gross profit in first six 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 second quarter and first six months 2024 compared to second quarter and first six months 2023 as a result of increases in the AM and Fibers segments, partially offset by decreases in the CI and AFP segments. Further discussion of sales revenue and EBIT changes is presented in "Summary by Operating Segment" in this MD&A.

Selling, General and Administrative Expenses
 Second QuarterFirst Six Months
(Dollars in millions)20242023Change20242023Change
Selling, general and administrative expenses$180 $185 (3)%$371 $376 (1)%

Selling, general and administrative expenses decreased in second quarter 2024 compared to second quarter 2023 due to cost reduction initiatives, and decreased in first six months 2024 compared to first six months 2023 due to cost reduction initiatives, partially offset by higher variable compensation costs.

Research and Development Expenses
 Second QuarterFirst Six Months
(Dollars in millions)20242023Change20242023Change
Research and development expenses$60 $60 — %$119 $122 (2)%

R&D expenses were unchanged in second quarter 2024 compared to second quarter 2023 and decreased in the first six months 2024 compared to first six months 2023 primarily due to targeted cost reduction initiatives.

Asset Impairments and Restructuring Charges, Net
Second QuarterFirst Six Months
(Dollars in millions)2024202320242023
Severance charges— — 11 16 
Site closure and other restructuring charges— — — 6 
Total$— $— $11 $22 

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

Other Components of Post-employment (Benefit) Cost, Net
 Second QuarterFirst Six Months
(Dollars in millions)2024202320242023
Other components of post-employment (benefit) cost, net$(4)$(3)$(9)$(6)

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

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
 Second QuarterFirst Six Months
(Dollars in millions)2024202320242023
Foreign exchange transaction losses, net
$4 $3 $9 $5 
(Income) loss from equity investments and other investment (gains) losses, net(1)(1)(1)5 
Other, net23 17 31 $20 
Other (income) charges, net$26 $19 $39 $30 
Environmental and other costs(16)(13)(16)(13)
Other (income) charges, net excluding non-core item$10 $6 $23 $17 

Other (income) charges, net in second quarter and first six 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 increased in second quarter and first six months 2024 compared to second quarter and first six months 2023 primarily due to increases in foreign exchange transaction losses partially offset by valuation adjustments in equity investments. 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
 Second QuarterFirst Six Months
(Dollars in millions)20242023Change20242023Change
Earnings before interest and taxes$337 $323 4 %$600 $569 5 %
Asset impairments and restructuring charges, net— — 11 22 
Accelerated depreciation— — — 23 
Steam line incident costs (insurance proceeds), net— — — (8)
Environmental and other costs16 13 16 13 
Earnings before interest and taxes excluding non-core and unusual items$353 $336 5 %$627 $619 1 %

Net Interest Expense
 Second QuarterFirst Six Months
(Dollars in millions)20242023Change20242023Change
Gross interest costs$58 $61 (5)%$116 $119 (3)%
Less: Capitalized interest4 4 9 7 
Interest expense54 57 107 112 
Less: Interest income4 3  8 6  
Net interest expense$50 $54 (7)%$99 $106 (7)%

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

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Provision for (Benefit From) Income Taxes
Second QuarterFirst Six Months
2024202320242023
(Dollars in millions)$%$%$%$%
Provision for (benefit from) income taxes and effective tax rate
$56 20 %$(3)(1)%$105 21 %$57 12 %
Tax provision for non-core and unusual items (1)
3 4 6 9 
Adjustment from tax law changes (2)
— 23 — — 
Interim adjustment to tax provision (3)
(13)20 (30)14 
Adjusted provision for income taxes and effective tax rate$46 16 %$44 16 %$81 16 %$80 16 %
(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)Second quarter and first six months 2023 included a decrease to the provision for state income taxes due to state tax law changes impacting credit carryforward periods that were enacted in second quarter 2023. These state tax law changes impacted provisions from prior periods related to the Tax Reform Act. Additionally, an increase in first six months 2023 was recognized as a result of state guidance issued in first quarter 2023 related to the Tax Reform Act.
(3)Second quarter 2024 provision for income taxes was adjusted to reflect the current forecasted full year effective tax rate. Second quarter 2023 provision for income taxes was adjusted to reflect the then current forecasted full year effective tax rate.

First Six Months (1)
20242023
Effective tax rate21 %12 %
Tax impact of current year non-core and unusual items (2)
1 %2 %
Changes in tax contingencies and valuation allowances(1)%2 %
Forecasted full year impact of expected tax events(5)%— %
Forecasted full year adjusted effective tax rate16 %16 %
(1)Effective tax rate percentages are rounded to the nearest whole percent. The forecasted full year effective tax rate is 15.5 percent in both first six months 2024 and 2023.
(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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Net Earnings Attributable to Eastman and Diluted Earnings per Share
Second Quarter
20242023
(Dollars in millions, except EPS)$EPS$EPS
Net earnings and diluted earnings per share attributable to Eastman$230 $1.94 $272 $2.27 
Non-core items, net of tax: (1)
Environmental and other costs13 0.10 9 0.08 
Unusual items, net of tax: (1)
Adjustment from tax law changes— — (23)(0.19)
Interim adjustment to tax provision13 0.11 (20)(0.17)
Adjusted net earnings and diluted earnings per share attributable to Eastman$256 $2.15 $238 $1.99 
First Six Months
20242023
(Dollars in millions, except EPS)$EPS$EPS
Net earnings and diluted earnings per share attributable to Eastman$395 $3.33 $406 $3.39 
Non-core items, net of tax: (1)
Asset impairments and restructuring charges, net8 0.07 18 0.14 
Accelerated depreciation— — 20 0.17 
Environmental and other costs13 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 provision30 0.26 (14)(0.11)
Adjusted net earnings and diluted earnings per share attributable to Eastman$446 $3.76 $433 $3.62 
(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.
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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
Second QuarterFirst Six Months
Change  Change
20242023 $%20242023 $%
(Dollars in millions)
Sales$795 $739 $56 8 %$1,543 $1,481 $62 4 %
Volume / product mix effect91 12 %  133 9 %
Price effect(30)(4)%  (62)(4)%
Exchange rate effect(5)— %  (9)(1)%
Earnings before interest and taxes$131 $99 $32 32 %$235 $185 $50 27 %
Sales revenue in second quarter and first six months 2024 increased compared to second quarter and first six 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, particularly in the consumer durables and packaging end-markets, and premium interlayers product growth in the automotive end-market. Lower selling prices were primarily attributable to lower raw material and energy prices.

EBIT increased in second quarter 2024 compared to second quarter 2023 primarily due to $50 million higher sales volume and lower manufacturing costs, including higher capacity utilization, partially offset by $16 million lower selling prices, net of lower raw material and energy costs and distribution costs.

EBIT increased in first six months 2024 compared to first six months 2023 primarily due to $53 million higher sales volume and lower manufacturing costs, including higher capacity utilization, and $5 million lower raw material and energy costs and distribution costs, net of lower selling prices. These impacts were partially offset by a $9 million unfavorable shift in foreign currency exchange rates.

Additives & Functional Products Segment
Second QuarterFirst Six Months
Change  Change
20242023 $%20242023 $%
(Dollars in millions)
Sales$718 $747 $(29)(4)%$1,422 $1,524 $(102)(7)%
Volume / product mix effect— — %  14 1 %
Price effect(27)(4)%  (116)(8)%
Exchange rate effect(2)— %  — — %
Earnings before interest and taxes$123 $140 $(17)(12)%$232 $264 $(32)(12)%

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Sales revenue in second quarter and first six months 2024 decreased compared to second quarter and first six months 2023 primarily due to lower selling prices. Lower selling prices were primarily attributed to lower raw material costs, including cost pass-through contracts. Sales volume was relatively unchanged as growth in the coatings additives and care additives product lines were offset by lower sales volume, primarily due to the reduction of heat transfer fluid projects.

EBIT decreased in second quarter 2024 compared to second quarter 2023 primarily due to $21 million unfavorable sales volume and product mix and $8 million lower selling prices, net of lower raw material and energy costs. These impacts were partially offset by $11 million lower manufacturing costs, including higher capacity utilization.
EBIT decreased in first six months 2024 compared to first six months 2023 primarily due to $39 million unfavorable sales volume and product mix, partially offset by $7 million lower raw material and energy costs, net of lower selling prices.
Chemical Intermediates Segment
Second QuarterFirst Six Months
Change  Change
20242023 $%20242023 $%
(Dollars in millions)
Sales$515 $514 $1 — %$1,038 $1,103 $(65)(6)%
Volume / product mix effect32 6 %  44 4 %
Price effect(31)(6)%  (109)(10)%
Exchange rate effect— — %  — — %
Earnings before interest and taxes$22 $39 $(17)(44)%$38 $81 $(43)(53)%
Sales revenue in second quarter 2024 was relatively unchanged compared to second quarter 2023 and decreased in first six months 2024 compared to first six months 2023 due to lower selling prices partially offset by higher sales volume. Lower selling prices were attributed to lower raw material and energy prices. Higher sales volume was primarily attributed to the end of customer inventory destocking.

EBIT decreased in second quarter 2024 compared to second quarter 2023 primarily due to $37 million lower selling prices, net of lower raw material and energy costs and distribution costs, partially offset by $18 million higher sales volume.

EBIT decreased in first six months 2024 compared to first six months 2023 due to $62 million lower selling prices, net of lower raw material and energy costs. These impacts were partially offset by $19 million lower manufacturing costs, including higher capacity utilization.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Fibers Segment
Second QuarterFirst Six Months
Change  Change
20242023 $%20242023 $%
(Dollars in millions)
Sales$330 $323 $7 2 %$661 $626 $35 6 %
Volume / product mix effect2 1 %  21 3 %
Price effect6 1 %  16 3 %
Exchange rate effect(1)— %  (2)— %
Earnings before interest and taxes$122 $106 $16 15 %$239 $171 $68 40 %
Asset impairments and restructuring charges, net— — — — 6 (6)
Accelerated depreciation— — — — 23 (23)
Earnings before interest and taxes excluding non-core items122 106 16 15 %239 200 39 20 %
Sales revenue in second quarter and first six months 2024 increased compared to second quarter and first six months 2023 primarily due to higher selling prices in acetate tow and higher sales volume in textiles.

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

EBIT excluding non-core items increased in second quarter and first six months 2024 compared to second quarter and first six months 2023 primarily due to $10 million and $18 million, respectively, higher sales volume and lower manufacturing costs, including higher capacity utilization, and $6 million and $25 million, respectively, higher selling prices and lower raw material and energy costs.
Other
Second QuarterFirst Six Months
2024202320242023
(Dollars in millions)
Sales$5 $1 $9 $2 
Loss before interest and taxes
Growth initiatives and businesses not allocated to operating segments$(44)$(45)$(112)$(96)
Pension and other postretirement benefits income (expense), net not allocated to operating segments2 (4)4 (8)
Asset impairments and restructuring charges, net— — (11)(16)
Steam line incident (costs) insurance proceeds, net— — — 8 
Other income (charges), net not allocated to operating segments(19)(12)(25)(20)
Loss before interest and taxes$(61)$(61)$(144)$(132)
Asset impairments and restructuring charges, net— — 11 16 
Steam line incident costs (insurance proceeds), net— — — (8)
Environmental and other costs16 13 16 13 
4,298 
(1)Includes non-cash decrease of $17 million in 2024 and non-cash increase of $20 million in 2023 resulting from foreign currency exchange rates.

Capital Expenditures

Capital expenditures were $300 million and $413 million in first six months 2024 and 2023, respectively. Capital expenditures in first six 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 between $650 million and $700 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 second quarter and first six months 2024, the Company repurchased 1,000,005 shares of common stock for $100 million. As of June 30, 2024, a total of 9,610,754 shares have been repurchased under the 2021 authorization for $885 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 June 30, 2024, a 10 percent fluctuation in the euro currency rate would have had a $230 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 June 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 second 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

(c) Purchases of Equity Securities by the Issuer

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 June 30, 2024, a total of 9,610,754 shares have been repurchased under the 2021 authorization for $885 million. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders. During second quarter and first six months 2024, the Company repurchased 1,000,005 shares of common stock for $100 million. For additional information, see Note 10, "Stockholders' Equity", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.
PeriodTotal 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
April 1-30, 2024— $— — $1.715  billion
May 1-31, 2024502,197 $99.56 502,197 $1.665  billion
June 1-30, 2024497,808 $100.44 497,808 $1.615  billion
Total1,000,005 $100.00 1,000,005 
(1)Average price paid per share reflects the weighted average purchase price paid for shares.

ITEM 5.    OTHER INFORMATION

(c) Director and Officer Trading Arrangements

None of the Company's directors or officers (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period covered by this report.
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ITEM 6.EXHIBITS

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

EXHIBIT INDEX
Exhibit NumberDescription
  
3.01
3.02
31.01 *
31.02 *
32.01 *
32.02 *
101.INSInline 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
104Cover 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:July 26, 2024By:/s/ William T. McLain, Jr.
William T. McLain, Jr.
Executive Vice President and Chief Financial Officer

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