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

Comprehensive IncomeNet 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$ $ Net earnings attributable to Eastman Cash dividends declared()()Retained earnings at end of period$ $

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


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UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


	March 31,	December 31,
(Dollars in millions, except per share amounts)	2024	2023
Assets
Current assets
Cash and cash equivalents	$	$
Trade receivables, net of allowance for credit losses
Miscellaneous receivables
Inventories
Other current assets
Total current assets
Properties
Properties and equipment at cost
Less: Accumulated depreciation
Net properties
Goodwill
Intangible assets, net of accumulated amortization
Other noncurrent assets
Total assets	$	$

Liabilities and Stockholders' Equity
Current liabilities
Payables and other current liabilities	$	$
Borrowings due within one year
Total current liabilities
Long-term borrowings
Deferred income tax liabilities
Post-employment obligations
Other long-term liabilities
Total liabilities
Stockholders' equity
Common stock ($ par value – shares authorized; shares issued – and as of March 31, 2024 and December 31, 2023, respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)	()	()

Less: Treasury stock at cost ( shares as of March 31, 2024 and December 31, 2023)
Total Eastman stockholders' equity
Noncontrolling interest
Total equity
Total liabilities and stockholders' equity	$	$

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


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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


	First Three Months
(Dollars in millions)	2024	2023
Operating activities
Net earnings	$	$
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
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 used in operating activities	()	()
Investing activities
Additions 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 decrease in commercial paper and other borrowings		()
Proceeds from borrowings
Repayment of borrowings	()
Dividends paid to stockholders	()	()
Other items, net	()	()
Net cash 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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million and $ million, 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 March 31, 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 March 31, 2024 and December 31, 2023.


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%$ %

First quarter 2024 provision for income taxes includes a decrease related to the foreign rate variance due to the Company's mix of earnings, partially offset by an increase related to uncertain tax positions. First quarter 2023 provision for income taxes included 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 March 31, 2024 and December 31, 2023, Eastman had $ million and $ million, respectively, in unrecognized tax benefits. At March 31, 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 first quarter 2024, the Company issued $ 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.


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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 March 31, 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 $499 million at both March 31, 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 March 31, 2024 and December 31, 2023.

Fair Value of Borrowings

Eastman has classified its total borrowings at March 31, 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 at March 31, 2024 and $ billion December 31, 2023. The Company had borrowings classified as Level 1 or Level 3 as of March 31, 2024 and December 31, 2023.


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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 March 31, 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 first quarter 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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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 March 31, 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 — ()

The Company enters into foreign exchange derivatives denominated in multiple currencies which are transacted and settled in the same quarter. These derivatives are not designated as hedges due to the short-term nature and the gains or losses on these derivatives are marked-to-market in line item "Other (income) charges, net" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings. As a result of these derivatives, the Company recognized a net loss of $ million during both first quarter 2024 and first quarter 2023.

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 March 31, 2024 and December 31, 2023, respectively. Gains in AOCI increased between December 31, 2023 and March 31, 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 March 31, 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$()$ $ $ $ $()

billion as a result of exiting an agreement with a supplier after contract negotiations. Eastman had remaining debt and other commitments at March 31, 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 March 31, 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 March 31, 2024$

Environmental Asset Retirement Obligations

An asset retirement obligation is an obligation for the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development, or normal operation of that long-lived asset. Environmental asset retirement obligations primarily consist of closure and post-closure costs. For sites that have environmental asset retirement obligations, the best estimate recognized to date for these environmental asset retirement obligation costs were $ million at both March 31, 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 March 31, 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 (3)

() ()()()Distributions to noncontrolling interest ()()Balance at March 31, 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)

()

Distributions to Noncontrolling Interest

()

Balance at March 31, 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 March 31, 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.

)$()$()$()Defined benefit pension and other postretirement benefit plans:Amortization of unrecognized prior service credits()()()()Derivatives and hedging:Unrealized gain (loss) during period ()()Reclassification adjustment for (gains) losses included in net income, net()()()()Total other comprehensive income (loss)$()$()$()$()


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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 first quarter 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. No shares were repurchased in first quarter 2024 or 2023.

and $ per share for first quarter 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".

(2)First quarter 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 quarter 2023 related to the closure of this facility.

Changes in Reserves

$ $ $()$ 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 March 31, 2024 are expected to be paid within one year.

13.

million and $ million, respectively, were recognized as compensation expense before tax in selling, general and administrative expenses ("SG&A") in Unaudited Consolidated Statements of Earnings, Comprehensive Income, and Retained Earnings for all share-based awards, of which $ million each year was for stock options. The compensation expense is recognized over the substantive vesting period, which may be a shorter time period than the stated vesting period for qualifying termination eligible employees as defined in the award notices. For first quarter 2024 and 2023, $ million of stock option compensation expense was recognized each quarter due to qualifying termination eligibility preceding the requisite service period. The impact on net earnings for first quarter 2024 and 2023 of $ million and $ million, respectively, is net of deferred tax expense related to share-based award compensation for each period.

Stock Option Grants

In first quarter 2024 and 2023, the number of stock options granted under the 2021 Omnibus Stock Compensation Plan was approximately thousand and thousand, respectively. Options have an exercise price equal to the closing price of the Company's stock on the date of grant and a term of , with vesting periods that vary up to . Vesting usually occurs ratably over the vesting period or at the end of the vesting period. The Company utilizes the Black Scholes Merton option valuation model which relies on certain assumptions to estimate an option's fair value.


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%%Expected dividend yield%%Average risk-free interest rate%%Expected term years

The grant date exercise price and fair value of options granted during first quarter of 2024 were $ and $, respectively, and first quarter 2023 were $ and $, respectively.

For options unvested at March 31, 2024, $ million in compensation expense will be recognized over the next .

Other Share-Based Compensation Awards

In addition to stock option grants, the Company has awarded long-term performance shares, restricted stock and restricted stock units, and stock appreciation rights. The long-term performance share awards are based upon actual return on capital compared to a target return on capital and total stockholder return compared to a peer group ranking by total stockholder return over a three year performance period and pay out in unrestricted shares of common stock at the end of the performance period. The awards are valued using a Monte Carlo simulation based model and vest pro-ratably over the three year performance period. The number of long-term performance share target awards during first quarter 2024 and 2023 for the 2024-2026 and 2023-2025 periods were approximately thousand and thousand, respectively. The target shares awarded are assumed to be 100 percent. At the end of the three-year performance period, the actual number of shares awarded can range from zero to 250 percent of the target shares based on the award notice. The number of restricted stock unit awards, which pay out in unrestricted shares of common stock at the end of the vesting and performance (if any) period, during first quarter 2024 and 2023 were approximately thousand and thousand, respectively. The fair value of a restricted stock unit award is equal to the closing stock price of the Company's stock on the award date and normally vests over a period of . In first quarter 2024 and 2023, $ million and $ million, respectively, was recognized as compensation expense before tax for these other share-based awards and was included in the total compensation expense noted above for all share-based awards. The unrecognized compensation expense before tax for these same type awards at March 31, 2024 was approximately $ million and will be recognized primarily over a period of .

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 business operating segments and the geographical regions in which they operate. For disaggregation of revenue by major product lines and regions for each business 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 segment, see Part I, Item 1, "Business - Business Segments", in the Company's 2023 Annual Report on Form 10-K.


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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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


(Dollars in millions)	First Quarter
Earnings (Loss) Before Interest and Taxes by Segment	2024	2023
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	$	$


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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Page


Non-GAAP Financial Measures			26

Overview			29

Results of Operations			30

Summary by Operating Segment			34

Sales by Customer Location			36

Liquidity and Other Financial Information			37

Critical Accounting Estimates			39

Recently Issued Accounting Standards			39

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 elsewhere 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 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 due to an adjustment of the amount recognized in prior years resulting from recently issued state guidance related to the 2017 Tax Cuts and Jobs Act ("Tax Reform Act"). As with the prior years, management considers this increase unusual because of the infrequent nature of the underlying change in tax law and resulting impacts on earnings.

•In first quarter 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; and

•Accelerated depreciation resulting from the closure of a manufacturing facility.

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

•Increase to the provision for state income taxes due to adjustment of amounts recognized in prior years as a result of state guidance issued in first quarter 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.

Non-GAAP Financial Measures - Non-Core and Unusual Items Excluded from Earnings and Adjustments to Provision for Income Taxes First Quarter(Dollars in millions)20242023Non-core items impacting earnings before interest and taxes:Asset impairments and restructuring charges, net$11 $22 Accelerated depreciation— 23 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 taxes11 37 Less: Items impacting provision for income taxes:Tax effect of non-core and unusual items3 5 Adjustment from tax law changes— (23)Interim adjustment to tax provision(17)(6)Total items impacting provision for income taxes(14)(24)Total items impacting net earnings attributable to Eastman$25 $61


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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;

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

•Provision for 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:


	First Quarter
(Dollars in millions)	2024		2023
Sales	$	2,310	$	2,412
Earnings before interest and taxes	263		246
Earnings before interest and taxes excluding non-core and unusual items	274		283

Sales revenue decreased in first quarter 2024 compared to first quarter 2023 primarily due to lower selling prices, partially offset by higher sales volume. Lower selling prices were primarily due to lower raw material and energy prices and lower distribution prices. Higher sales volume was primarily attributed to reduced levels of customer destocking across many key end-markets.

Adjusted EBIT decreased in first quarter 2024 compared to first quarter 2023 primarily due to lower raw material and energy costs and distribution costs, net of lower selling prices being more than offset by higher manufacturing costs.

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

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


	First Quarter
	2024				2023
(Dollars in millions, except EPS)	$		EPS		$		EPS
Net earnings attributable to Eastman	$	165	$	1.39	$	134	$	1.12
Total non-core and unusual items, net of tax	8		0.07		55		0.45
Interim adjustment to tax provision	17		0.15		6		0.06
Adjusted net earnings	$	190	$	1.61	$	195	$	1.63

Cash used in operating activities was $16 million in first three months 2024 and $2 million in first three months 2023.


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Sales


	First Quarter
					Change
(Dollars in millions)	2024		2023		$		%
Sales	$	2,310	$	2,412	$	(102)	(4)	%
Volume / product mix effect					63		3	%
Price effect					(164)		(7)	%
Exchange rate effect					(1)		—	%

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

Gross Profit


	First Quarter
(Dollars in millions)	2024		2023		Change
Gross profit	$	532	$	529	1	%

Accelerated depreciation	—		23
Steam line incident costs (insurance proceeds), net	—		(8)
Gross profit excluding non-core and unusual items	$	532	$	544	(2)	%

Gross profit in first quarter 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 decreased in first quarter 2024 compared to first quarter 2023 as a result of decreases in the CI and AFP segments, partially offset by increases in the Fibers and AM 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


	First Quarter
(Dollars in millions)	2024		2023		Change
Selling, general and administrative expenses	$	191	$	191	—	%

Selling, general and administrative expenses remained unchanged in first quarter 2024 compared to first quarter 2023 as higher variable compensation costs were offset by lower spend due to cost reduction initiatives.

Research and Development Expenses


	First Quarter
(Dollars in millions)	2024		2023		Change
Research and development expenses	$	59	$	62	(5)	%

R&D expenses decreased in first quarter 2024 compared to first quarter 2023 primarily due to targeted cost reduction initiatives.


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Asset Impairments and Restructuring Charges, Net


	First Quarter
(Dollars in millions)	2024		2023
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


	First Quarter
(Dollars in millions)	2024		2023
Other components of post-employment (benefit) cost, net	$	(5)	$	(3)

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


	First Quarter
(Dollars in millions)	2024		2023
Foreign exchange transaction losses, net	$	5	$	2

(Income) loss from equity investments and other investment (gains) losses, net	—		6

Other, net	8		3
Other (income) charges, net	$	13	$	11

Other (income) charges, net increased in first quarter 2024 compared to first quarter 2023 primarily due to higher factoring fees and increases in foreign exchange transaction losses partially offset by valuation adjustments in equity investments in first quarter 2023. 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


	First Quarter
(Dollars in millions)	2024		2023		Change
Earnings before interest and taxes	$	263	$	246	7	%

Asset impairments and restructuring charges, net	11		22

Accelerated depreciation	—		23
Steam line incident costs (insurance proceeds), net	—		(8)

Earnings before interest and taxes excluding non-core and unusual items	$	274	$	283	(3)	%


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Net Interest Expense


	First Quarter
(Dollars in millions)	2024		2023		Change
Gross interest costs	$	58	$	58	—	%
Less: Capitalized interest	5		3
Interest expense	53		55
Less: Interest income	4		3
Net interest expense	$	49	$	52	(6)	%

Net interest expense decreased in first quarter 2024 compared to first quarter 2023 primarily as a result of higher capitalized interest and interest income.

Provision for Income Taxes


	First Quarter
	2024				2023
(Dollars in millions)	$		%		$		%
Provision for income taxes and effective tax rate	$	49	23	%	$	60	31	%
Tax provision for non-core and unusual items (1)	3				5
Adjustment from tax law changes (2)	—				(23)
Interim adjustment to tax provision (3)	(17)				(6)
Adjusted provision for income taxes and effective tax rate	$	35	16	%	$	36	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)Increase to the provision for state income taxes due to adjustment of amounts recognized in prior years as a result of state guidance issued in first quarter 2023 related to the Tax Reform Act.

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


	First Three Months (1)
	2024		2023
Effective tax rate	23	%	31	%
Discrete tax items (2)	(1)	%	—	%
Tax impact of current year non-core and unusual items (3)	1	%	(8)	%
Changes in tax contingencies and valuation allowances	(1)	%	(1)	%
Forecasted full year impact of expected tax events	(6)	%	(6)	%
Forecasted full year adjusted effective tax rate	16	%	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 three months 2024 and 2023.

(2)"Discrete tax items" are items that are excluded from a company's estimated annual effective tax rate and recognized entirely in the quarter in which the item occurs. Discrete items for 2024 are related to share based compensation expense.

(3)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


	First Quarter
	2024				2023
(Dollars in millions, except EPS)	$		EPS		$		EPS
Net earnings and diluted earnings per share attributable to Eastman	$	165	$	1.39	$	134	$	1.12
Non-core items, net of tax: (1)

Asset impairments and restructuring charges, net	8		0.07		18		0.14
Accelerated depreciation	—		—		20		0.17



Unusual items, net of tax: (1)
Steam line incident costs (insurance proceeds), net	—		—		(6)		(0.05)


Adjustment from tax law changes	—		—		23		0.19
Interim adjustment to tax provision	17		0.15		6		0.06
Adjusted net earnings and diluted earnings per share attributable to Eastman	$	190	$	1.61	$	195	$	1.63

(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


	First Quarter
					Change
	2024		2023		$		%
(Dollars in millions)
Sales	$	748	$	742	$	6	1	%

Volume / product mix effect					32		4	%
Price effect					(23)		(3)	%
Exchange rate effect					(3)		—	%

Earnings before interest and taxes	$	104	$	86	$	18	21	%

Sales revenue in first quarter 2024 increased compared to first quarter 2023 primarily due to higher sales volume partially offset by lower selling prices. Higher sales volume was the result of reduced levels of customer inventory destocking, particularly in the durables and electronics end-market. Higher sales volume was partially offset by continued customer inventory destocking in the medical end-market and lower sales volume in the performance films product line.

EBIT increased in first quarter 2024 compared to first quarter 2023 primarily due to $21 million lower raw material and energy costs and distribution costs, net of lower selling prices.

Additives & Functional Products Segment


	First Quarter
					Change
	2024		2023		$		%
(Dollars in millions)
Sales	$	704	$	777	$	(73)	(9)	%

Volume / product mix effect					(8)		(1)	%
Price effect					(67)		(8)	%
Exchange rate effect					2		—	%


Earnings before interest and taxes	$	109	$	124	$	(15)	(12)	%

Sales revenue in first quarter 2024 decreased compared to first quarter 2023 primarily due to lower selling prices. Lower selling prices were primarily attributable to cost pass-through contracts. Sales volume was relatively unchanged as lower sales volume, primarily attributed to the timing of the fulfillment of heat transfer fluid projects and continued customer inventory destocking in the agriculture end-market, was mostly offset by favorable mix in the coatings additives product line and higher sales volume in the care additives product line.

EBIT decreased in first quarter 2024 compared to first quarter 2023 primarily due to $26 million lower sales volume and higher manufacturing costs, including planned maintenance shutdowns. These impacts were partially offset by $15 million lower raw material and energy costs and distribution costs, net of lower selling prices.


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Chemical Intermediates Segment


	First Quarter
					Change
	2024		2023		$		%
(Dollars in millions)
Sales	$	523	$	589	$	(66)	(11)	%

Volume / product mix effect					13		2	%
Price effect					(80)		(13)	%
Exchange rate effect					1		—	%

Earnings before interest and taxes	$	16	$	42	$	(26)	(62)	%

Sales revenue in first quarter 2024 decreased compared to first quarter 2023 primarily due to lower selling prices. Lower selling prices were attributed to weak market conditions as well as lower raw material and energy prices. Lower prices were partially offset by higher sales volume driven by growth in the plasticizers product line attributed to reduced levels of customer inventory destocking, particularly in the building and construction end-market.

EBIT decreased in first quarter 2024 compared to first quarter 2023 primarily due to $25 million lower selling prices, net of lower raw material and energy costs and distribution costs.

Fibers Segment


	First Quarter
					Change
	2024		2023		$		%
(Dollars in millions)
Sales	$	331	$	303	$	28	9	%
Volume / product mix effect					23		7	%
Price effect					6		2	%
Exchange rate effect					(1)		—	%

Earnings before interest and taxes	$	117	$	65	$	52	80	%

Asset impairments and restructuring charges, net	—		6		(6)
Accelerated depreciation	—		23		(23)
Earnings before interest and taxes excluding non-core items	117		94		23		24	%

Sales revenue in first quarter 2024 increased compared to first quarter 2023 primarily due to higher sales volume in textiles and higher selling prices in acetate tow, driven by an increase in industry capacity utilization.

EBIT in first quarter 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 first quarter 2024 compared to first quarter 2023 primarily due to $14 million higher selling prices and lower raw material and energy costs, and $12 million higher sales volume.


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Other


	First Quarter
	2024		2023
(Dollars in millions)
Sales	$	4	$	1

Loss before interest and taxes
Growth initiatives and businesses not allocated to operating segments	$	(68)	$	(51)
Pension and other postretirement benefits income (expense), net not allocated to operating segments	2		(4)
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	(6)		(8)
Loss before interest and taxes	$	(83)	$	(71)
Asset impairments and restructuring charges, net	11		16
Steam line incident costs (insurance proceeds), net	—		(8)
Loss before interest and taxes excluding non-core and unusual items	(72)		(63)

Sales and costs related to growth initiatives, including circular economy and the cellulosics biopolymer platform, R&D costs, certain components of pension and other postretirement benefits, and other expenses and income not identifiable to an operating segment are not included in operating segment results for any of the periods presented and are included in "Other". First quarter 2024 also includes pre-production costs for the Kingsport methanolysis facility.

EBIT in first quarter 2024 and 2023 included severance primarily in accordance with foreign regulatory requirements as a result of cost reduction initiatives in fourth quarter 2023 and 2022, respectively. In addition, first quarter 2023 included insurance proceeds from the steam line incident. For more information, see "Non-GAAP Financial Measures" in this MD&A. 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.

SALES BY CUSTOMER LOCATION


	Sales Revenue
	First Quarter
					Change
(Dollars in millions)	2024		2023		$		%
United States and Canada	$	969	$	1,065	$	(96)	(9)	%
Europe, Middle East, and Africa	659		709		(50)		(7)	%
Asia Pacific	564		521		43		8	%
Latin America	118		117		1		1	%
Total Eastman	$	2,310	$	2,412	$	(102)	(4)	%

4,298

(1)Includes non-cash decrease of $12 million and increase of $20 million in 2024 and 2023, respectively, resulting from foreign currency exchange rates.

Capital Expenditures

Capital expenditures were $185 million and $174 million in first three months 2024 and 2023, respectively. Capital expenditures in first three months 2024 were primarily for the AM segment methanolysis plastic-to-plastic molecular recycling manufacturing facilities, and other targeted growth initiatives and site modernization projects. The Company expects that 2024 capital expenditures will be between $700 million and $750 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"). No shares were repurchased during first quarter 2024 or 2023. As of March 31, 2024, a total of 8,601,749 shares have been repurchased under the 2021 authorization for $785 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 March 31, 2024, a 10 percent fluctuation in the euro currency rate would have had a $232 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 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 Securities Exchange Act of 1934 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 March 31, 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 first 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 March 31, 2024, a total of 8,601,749 shares have been repurchased under the 2021 authorization for $785 million. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders. No shares were repurchased during first quarter 2024. For additional information, see Note 10, "Stockholders' Equity", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

ITEM 5. OTHER INFORMATION

None of the Company's directors or officers (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) 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 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 5.625% Notes due 2034 (incorporated herein by reference to Exh ibit 4.2 to the Comp any's Cur rent Report of Form 8-K dated February 20, 2024 )

31.01 *						Rule 13a – 14(a) Certification by Mark J. Costa, Chief Executive Officer, for the quarter ended March 31, 2024

31.02 *						Rule 13a – 14(a) Certification by William T. McLain, Jr., Executive Vice President and Chief Financial Officer, for the quarter ended March 31, 2024

32.01 *						Section 1350 Certification by Mark J. Costa, Chief Executive Officer, for the quarter ended March 31, 2024

32.02 *						Section 1350 Certification by William T. McLain, Jr., Executive Vice President and Chief Financial Officer, for the quarter ended March 31, 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.

** Management contract or compensatory plan or arrangement filed pursuant to Item 601(b) (10) (iii) of Regulations S-K.


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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:	April 26, 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	16
Note 7.	Other Commitments	17
Note 8.	Environmental Matters and Asset Retirement Obligations	17
Note 9.	Legal Matters	19
Note 10.	Stockholders' Equity	19
Note 11.	Earnings and Dividends Per Share	21
Note 12.	Asset Impairments and Restructuring Charges, Net	22
Note 13.	Share-Based Compensation Awards	22
Note 14.	Segment Information	23

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

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