UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM | | | | | | | | |
| (Mark One) |
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the quarterly period ended | |
| | OR |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the transition period from ______________ to ______________ |
Commission file number
MPANY
(Exact name of registrant as specified in its charter) | | | | | | | | |
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| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification no.) |
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| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: ()
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | |
| ☒ | | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | | Smaller reporting company | |
| | | Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. | | | | | |
| Class | Number of Shares Outstanding at June 30, 2025 |
| Common Stock, par value $0.01 per share | |
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PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION
SIGNATURES
FORWARD-LOOKING STATEMENTS
Certain statements made or incorporated by reference in this Quarterly Report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act (Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). Forward-looking statements are all statements, other than statements of historical fact, that may be made by Eastman Chemical Company ("Eastman" or the "Company") from time to time. In some cases, you can identify forward-looking statements by terminology such as "anticipates", "believes", "estimates", "expects", "intends", "may", "plans", "projects", "forecasts", "will", "would", "could", and similar expressions, or expressions of the negative of these terms. Forward-looking statements may relate to, among other things, such matters as planned and expected capacity increases and utilization; anticipated capital spending; expected depreciation and amortization; environmental matters and opportunities (including potential risks associated with physical and transitional impacts of climate change and related voluntary and regulatory carbon requirements); exposure to and effects of hedging raw material and energy prices and costs and foreign currency exchange and interest rates; disruption or interruption of operations and of raw material or energy supply (including as a result of cyber-attacks or other breaches of the Company's information security systems); global and regional economic, political, and business conditions, including heightened inflation, capital market volatility, interest rate and currency fluctuations, and economic slowdown or recession; impacts from U.S. tariffs, reciprocal tariffs, and global trade disruption; competition; growth opportunities; supply and demand, volume, price, cost, margin and sales; pending and future legal proceedings; earnings, cash flow, dividends, stock repurchases and other expected financial results, events, decisions, and conditions; expectations, strategies, and plans for individual assets and products, businesses, and operating segments, as well as for the whole of Eastman; cash sources and requirements and uses of available cash; financing plans and activities; pension expenses and funding; credit ratings; anticipated and other future restructuring, acquisition, divestiture, and consolidation activities; cost reduction and control efforts and targets; the timing and costs of, benefits from the integration of, and expected business and financial performance of acquired businesses, as well as the subsequent impairment assessments of acquired long-lived assets; strategic, technology, and product innovation initiatives and development, production, commercialization and acceptance of new products, services and technologies and related costs; asset, business, and product portfolio changes; and expected tax rates and interest costs.
Forward-looking statements are based upon certain underlying assumptions as of the date such statements were made. Such assumptions are based upon internal estimates and other analyses of current market conditions and trends, management expectations, plans, and strategies, economic conditions, and other factors. Forward-looking statements and the assumptions underlying them are necessarily subject to risks and uncertainties inherent in projecting future conditions and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions and expectations proves to be inaccurate or is unrealized. The known material factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements are identified and discussed under "Risk Factors" in Part II, Item 1A of this Quarterly Report. Other factors, risks or uncertainties of which management is not aware, or presently deems immaterial, could also cause actual results to differ materially from those in the forward-looking statements.
The Company cautions you not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report. Except as may be required by law, the Company undertakes no obligation to publicly update or alter these forward-looking statements, whether as a result of new information, future events, or otherwise. Investors are advised, however, to consult any further public Company disclosures (such as filings with the Securities and Exchange Commission, Company press releases, or pre-noticed public investor presentations) on related subjects.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS,
COMPREHENSIVE INCOME AND RETAINED EARNINGS | | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | First Six Months |
| (Dollars in millions, except per share amounts) | 2025 | | 2024 | | 2025 | | 2024 |
| Sales | $ | | | | $ | | | | $ | | | | $ | | |
| Cost of sales | | | | | | | | | | | |
| Gross profit | | | | | | | | | | | |
| Selling, general and administrative expenses | | | | | | | | | | | |
| Research and development expenses | | | | | | | | | | | |
Asset impairments, restructuring, and other charges, net | | | | | | | | | | | |
| Other components of post-employment (benefit) cost, net | () | | | () | | | () | | | () | |
| Other (income) charges, net | | | | | | | | | | | |
| | |
| Earnings before interest and taxes | | | | | | | | | | | |
| Net interest expense | | | | | | | | | | | |
| | |
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| | |
| 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 | $ | | | | $ | | | | $ | | | | $ | | |
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| 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 activities | | | |
| Additions to properties and equipment | () | | | () | |
Government incentives | | | | | |
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| Other items, net | | | | | |
Net cash used in investing activities | () | | | () | |
| Financing activities | | | |
Net increase in commercial paper and other borrowings | | | | | |
| Proceeds from borrowings | | | | | |
| Repayment of borrowings | () | | | () | |
| Dividends paid to stockholders | () | | | () | |
| Treasury stock purchases | () | | | () | |
|
Other items, net | () | | | | |
| Net cash used in financing activities | () | | | () | |
| Effect of exchange rate changes on cash and cash equivalents | | | | () | |
| Net change in cash and cash equivalents | () | | | () | |
| Cash and cash equivalents at beginning of period | | | | | |
| Cash and cash equivalents at end of period | $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 program or services fees. Eastman or the financial institution may terminate the program at any time upon 90 days' notice. Confirmed obligations in the supplier finance program of $ million and $ million at June 30, 2025 and December 31, 2024, respectively, are included in "Payables and other current liabilities" on the Unaudited Consolidated Statements of Financial Position.
Government Grants
On May 29, 2025, the U.S. Department of Energy ("DOE") terminated an award related to the Company’s Polyethylene Terephthalate Recycling Decarbonization Project in Longview, Texas. The Company continues to record reimbursements for amounts incurred prior to the date of the award termination and for which the Company is contractually entitled to under an assistance agreement with the DOE. The Company requested $ million in reimbursements and has received $ million in reimbursements from the DOE during the first six months of 2025. The Company continues to pursue reinstatement of the award and is actively evaluating the impact of the termination on the project’s scope, timeline, and carrying values of associated assets.
For additional government grant information, see Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2024 Annual Report on Form 10-K.
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, 2025 and December 31, 2024.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3.
| | | % | | $ | | | | | % | | $ | | | | | % | | $ | | | | | % | | | | | | | | | | | |
| | | | | | | | | | |
Second quarter and first six months 2025 provision for income taxes includes an increase related to uncertain tax positions offset by a decrease related to the foreign rate variance due to the Company's mix of earnings. 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.
At June 30, 2025 and December 31, 2024, Eastman had $ million and $ million, respectively, in unrecognized tax benefits.
On July 4, 2025, the "One Big Beautiful Bill Act" was enacted into law in the United States. The legislation includes modifications to federal income tax law, including but not limited to, changes to the treatment of research and development expenditures and the extension of several international tax provisions that originated as part of the 2017 Tax Cuts and Jobs Act. These changes were not enacted as of the balance sheet date and the Company is currently evaluating the potential impacts of this legislation.
4.% notes due
$ | | | | $ | | |
% notes due (1) | | | | | |
% debentures due | | | | | |
% notes due | | | | | |
% notes due | | | | | |
% notes due | | | | | |
% notes due | | | | | |
% notes due | | | | | |
% notes due | | | | | |
|
| 2027 Term Loan | | | | | |
|
| Commercial paper and short-term borrowings | | | | | |
| Total borrowings | | | | | |
| Less: Borrowings due within one year | | | | | |
| Long-term borrowings | $ | | | | $ | | |
In first quarter 2025, the Company issued an additional $ million aggregate principal amount of the 5.0% notes due August 2029 in a registered public offering (the "2029 Notes"), which was originally issued in August 2024, resulting in an aggregate principal amount of $ million. The net proceeds from first quarter 2025 issuance were $ million. The Company also repaid the $ million 3.80% notes due March 2025. There were no debt extinguishment costs associated with the repayment of this debt. All proceeds from the issued notes and the redemption of the 3.8% notes are reported under financing activities on the Unaudited Consolidated Statements of Cash Flows.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In first quarter 2025, the Company repaid $ million of the remaining $ million five-year term loan (the "2027 Term Loan"). There were no extinguishment costs associated with the partial repayment of the loan. The outstanding balance on the 2027 Term Loan was $ million at June 30, 2025 and $ million at December 31, 2024, with variable interest rates of % and %, respectively. The 2027 Term Loan is subject to interest at a spread 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, 2025 and December 31, 2024.
Fair Value of Borrowings
Eastman has classified its total borrowings at June 30, 2025 and December 31, 2024 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 2024 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 of the Company's other borrowings, including the 2027 Term Loan and commercial paper, equals the carrying value and is classified as Level 2. The Company's fair value of total borrowings was $ billion at June 30, 2025 and $ billion at December 31, 2024. The Company had borrowings classified as Level 1 or Level 3 as of June 30, 2025 and December 31, 2024.
5.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Additionally, in first quarter 2025, Eastman voluntarily terminated and reentered into fixed-to-fixed cross-currency swaps of $ million (€ million terminated; € million reentered) maturing December 2028, and $ million (€ million terminated; € million reentered) maturing March 2033. The Company also voluntarily terminated fixed-to-fixed cross-currency swaps of $ million (¥ billion) maturing March 2025, and $ million (€ million) maturing March 2025. The termination of cross-currency swaps in first quarter 2025 resulted in a $ million loss recognized in CTA. The related cash flows were classified as investing activities in the Unaudited Consolidated Statements of Cash Flows.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| € | |
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| Commodity Forward and Collar Contracts | | | | |
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| Energy (in million british thermal units) | | | | | | |
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| 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 the counterparties to validate the accuracy of its standard pricing models. The Company had derivatives classified as Level 1 or Level 3 as of June 30, 2025 and December 31, 2024. 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 realize a credit loss related to these counterparties during second quarter 2025 or 2024.
All the Company's derivative contracts are subject to master netting arrangements, or similar agreements, which provide for the option to settle contracts on a net basis when they settle on the same day and in the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event. The Company does not have any cash collateral due under such agreements.
The Company has elected to present derivative contracts on a gross basis within the Unaudited Consolidated Statements of Financial Position.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | |
| Foreign exchange contracts | | Other current assets | | | | | | |
| Foreign exchange contracts | | Other noncurrent assets | | | | | | |
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| Derivatives designated as net investment hedges: | | | | | | |
| Cross-currency interest rate swaps | | Other current assets | | | | | | |
| Cross-currency interest rate swaps | | Other noncurrent assets | | | | | | |
| Total Derivative Assets | | | | $ | | | | $ | | |
| | | | | | |
| Derivatives designated as cash flow hedges: | | | | | | |
| Commodity contracts | | Payables and other current liabilities | | $ | | | | $ | | |
| |
| Foreign exchange contracts | | Payables and other current liabilities | | | | | | |
| Foreign exchange contracts | | Other long-term liabilities | | | | | | |
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| Derivatives designated as net investment hedges: | | | | | | |
Cross-currency interest rate swaps | | Payables and other current liabilities | | | | | | |
| Cross-currency interest rate swaps | | Other 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 a carrying value of $ million at June 30, 2025 and $ million at December 31, 2024 associated with non-derivative instruments designated as foreign currency net investment hedges. The designated foreign currency-denominated borrowings are included as part of "Borrowings due within one year" and "Long-term borrowings" on the Unaudited Consolidated Statements of Financial Position.
For additional fair value measurement information, see Note 1, "Significant Accounting Policies", and Note 10, "Derivative and Non-Derivative Financial Instruments", to the consolidated financial statements in Part II, Item 8 of the Company's 2024 Annual Report on Form 10-K.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | $ | | | | $ | | | | $ | (3) | | | $ | (23) | | | $ | (3) | | | $ | (23) | | | Foreign exchange contracts | | () | | | | | | () | | | | | | (4) | | | 3 | | | — | | | 5 | |
| Forward starting interest rate and treasury lock swap contracts | | | | | | | | | | | | | | (1) | | | — | | | (2) | | | (1) | |
| 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 | | () | | | | | | | | | | | | — | | | — | | | — | | | — | |
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | 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 | | | | (3) | | | | | | | (23) | | | |
| Foreign Exchange Contracts: | | | | | | | | | | | | |
| Amount reclassified from AOCI into earnings | | (4) | | | | | | | 3 | | | | | |
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 | | | | | | (2) | | | | | | | (1) | |
| Commodity Contracts: | | | | | | | | | | | | |
| Amount reclassified from AOCI into earnings | | | | (3) | | | | | | | (23) | | | |
| Foreign Exchange Contracts: | | | | | | | | | | | | |
| Amount reclassified from AOCI into earnings | | — | | | | | | | 5 | | | | | |
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 gain of $ million and $ million during second quarter and first six months 2025, respectively, and recognized a net gain of $ million and a net loss of $ million during second quarter and first six months 2024, 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 unrealized loss of $ million and a net unrealized gain of $ million at June 30, 2025 and December 31, 2024, respectively. Unrealized losses in AOCI increased between December 31, 2024 and June 30, 2025 primarily as a result of an increase in euro to U.S. dollar exchange rates. If realized, approximately $ million in pre-tax losses as of June 30, 2025, would be reclassified into earnings during the next 12 months, including foreign exchange contracts prospectively dedesignated and monetized in 2024.
6.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | Interest cost | | | | | | | | | | | | | | | | | |
| Expected return on assets | () | | | () | | | () | | | () | | | () | | | () | |
| | | | | | |
| Amortization of: | | | | | | | | | | | |
| Prior service credit, net | | | | | | | | | | | | | | | | () | |
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| Net periodic benefit (credit) cost | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | | | |
| First Six Months |
| Pension Plans | | Other Postretirement Benefit Plans |
| 2025 | | 2024 | | 2025 | | 2024 |
| (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.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | Environmental contingencies, long-term | | | | | |
| Total | $ | | | | $ | | |
Environmental Remediation
Estimated future environmental expenditures for undiscounted remediation costs ranged from $ million to $ million and from $ million to $ million at June 30, 2025 and December 31, 2024, 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, 2024 | | |
| Changes in estimates recognized in earnings and other | | |
| Cash reductions | () | |
| Balance at June 30, 2025 | $ | | |
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 was $ million at both June 30, 2025 and December 31, 2024.
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, 2025 and December 31, 2024, respectively, and are included in "Other long-term liabilities" on the Unaudited Consolidated Statements of Financial Position.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
8.
9.
| | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | |
| Net Earnings | | | | | | | | | | | | | | | | | | | | | | | |
Cash Dividends Declared (1) ($ per share) | | | | | | | () | | | | | | | | | () | | | | | | () | |
| Other Comprehensive Income (Loss) | | | | | | | | | | () | | | | | | () | | | | | | () | |
Share-Based Compensation Expense (2) | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Share Repurchases | | | | | | | | | | | | | () | | | () | | | | | | () | |
| Distributions to noncontrolling interest | | | | | | | | | | | | | | | | | | | () | | | () | |
| Balance at June 30, 2025 | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 March 31, 2024 | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | | |
| 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 | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | | | $ | | |
(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.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | |
| 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, 2025 | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| (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, 2023 | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | | |
| 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 | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | | |
(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
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | $ | () | | | $ | () | | | $ | () | | | Period change | () | | | () | | | | | | | | | | |
Balance at December 31, 2024 | () | | | | | | | | | () | | | () | |
| Period change | | | | | | | () | | | | | | () | |
| Balance at June 30, 2025 | $ | () | | | $ | | | | $ | () | | | $ | () | | | $ | () | |
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 Months |
| 2025 | | 2024 |
| (Dollars in millions) | Before Tax | | Net of Tax | | Before Tax | | Net of Tax |
| Other 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) | $ | () | | | $ | () | | | $ | | | | $ | | |
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10.
| | $ | | | | $ | | | | $ | | | | | |
| | |
| | | | | | | |
| Denominator | | | | | | | |
| Weighted average shares used for basic EPS | | | | | | | |
| Dilutive effect of stock options and other awards | | | | | | | |
| Weighted average shares used for diluted EPS | | | | | | | |
| | | | | | | |
| (Calculated using whole dollars and shares) | | | | | | | |
| EPS | | | | | | | |
| Basic | $ | | | | $ | | | | $ | | | | $ | | |
| Diluted | $ | | | | $ | | | | $ | | | | $ | | |
Shares underlying stock options of and for second quarter 2025 and 2024, respectively, and and for first six months 2025 and 2024, 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 and shares in both second quarter and first six months 2025 and 2024, respectively, for $ million and $ million, respectively.
and $ per share for second quarter 2025 and 2024, respectively, and $ and $ per share for first six months 2025 or 2024.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
11.
| | $ | | | | $ | | | | | | Restructuring and other charges (2)(4) | | | | | | | | | | | |
| Total | $ | | | | $ | | | | $ | | | | $ | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
(1)Second quarter 2025 and first six months 2025 includes severance charges of $ million related to corporate cost reduction initiatives reported in "Other".
(2)First six months 2025 includes severance charges of $ million and restructuring charges of $ million related to the closure of a heat-transfer fluids production line at a North America specialty fluids and energy facility in the Additives & Functional Products segment.
(3)Severance charges in first six months 2024 related to corporate cost reduction initiatives which are reported in "Other".
million and $ million, respectively, related to profitability improvement initiatives which are reported in "Other".
Changes in Reserves
| | $ | | | | $ | | | | $ | () | | | $ | | |
| Restructuring and other charges | | | | | | | | | | () | | | | |
| Total | $ | | | | $ | | | | $ | | | | $ | () | | | $ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | Balance at January 1, 2024 | | Provision/ Adjustments | | Non-cash Reductions/
Additions | | Cash Reductions | | Balance at December 31, 2024 |
| Non-cash charges | $ | | | | $ | | | | $ | () | | | $ | | | | $ | | |
| Severance charges | | | | | | | | | | () | | | | |
| Restructuring and other charges | | | | | | | | | | () | | | | |
| Total | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | |
Substantially all severance charges remaining as of June 30, 2025 are expected to be paid within one year.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
12.
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 2025 and 2024 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 2025 and 2024, $ 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 2025 and 2024 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 2024 Annual Report on Form 10-K.
13.
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. This operating segment structure is used by the Chief Operating Decision Maker ("CODM"), who has been determined to be the Chief Executive Officer, to make key operating decisions and assess performance of the Company. The CODM evaluates segment operating performance, and makes resource allocation and performance evaluation decisions, based on Adjusted EBIT, defined as the GAAP measure earnings before interest and taxes ("EBIT"), adjusted for non-core, unusual, or non-recurring items. These adjustments allow the CODM to evaluate segment operating performance 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. 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 2024 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 2024 Annual Report on Form 10-K.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | |
| Cost of sales | | | | | | | | | | | | | | |
| | | | |
| Selling, general and administrative expenses | | | | | | | | | | | | | | |
Other segment items (1) | | | | | | | | | | | | | | |
Adjusted EBIT | | | | | | | () | | | | | | | |
| | | | | | | | | |
| Reconciliation of segment Adjusted EBIT to consolidated earnings before income taxes ("EBT"): | |
Other adjusted EBIT (2) | | | | | | | | | () | |
| Non-core items impacting EBIT | | | | |
|
Asset impairments, restructuring, and other charges, net (3) | | | | () | |
|
Environmental and other costs (4) | | | | () | |
| Net interest expense | | | | () | |
| Consolidated EBT | | | | | | | | | $ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Second Quarter 2025 |
| Advanced Materials | | Additives & Functional Products | | Chemical Intermediates | | Fibers | | Total Operating Segments | | Other | | Total Consolidated |
| Depreciation and amortization expense | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| Capital expenditures | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
(1)Other segment items for each reportable segment includes research and development ("R&D") expenses, other components of post-employment (benefit) cost, net and other (income) charges, net.
(2)Other is not considered an operating segment. Other includes the following which are not allocated to operating segments: 1) sales and costs from growth initiatives and businesses, 2) pension and other postretirement benefit plans income (expense), net, and 3) other income (charges), net.
(3)See Note 11, "Asset Impairments, Restructuring, and Other Charges, Net", for a description of included items.
(4)Environmental and other costs from previously divested or non-operational sites and product lines primarily related to increased chemical costs for groundwater treatment and new and extended remediation costs reported in "Other" to be paid out over 30 years.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | |
| Cost of sales | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | | | | | | | | | | | | |
Other segment items (1) | | | | | | | | | | | | | | |
| Adjusted EBIT | | | | | | | | | | | | | | |
| | | | | | | | | |
| Reconciliation of segment Adjusted EBIT to consolidated EBT: | |
Other adjusted EBIT (2) | | | | | | | | | () | |
| Non-core items impacting EBIT | | | | |
|
|
Environmental and other costs (3) | | | | () | |
|
|
| Net interest expense | | | | | | | | | () | |
| Consolidated EBT | | | | | | | | | $ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Second Quarter 2024 |
| Advanced Materials | | Additives & Functional Products | | Chemical Intermediates | | Fibers | | Total Operating Segments | | Other | | Total Consolidated |
| Depreciation and amortization expense | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| Capital expenditures | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
(1)Other segment items for each reportable segment includes R&D expenses, other components of post-employment (benefit) cost, net and other (income) charges, net.
(2)Other is not considered an operating segment. Other includes the following which are not allocated to operating segments: 1) sales and costs from growth initiatives and businesses, 2) pension and other postretirement benefit plans income (expense), net, and 3) other income (charges), net.
(3)Environmental and other costs from previously divested or non-operational sites and product lines.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | |
| Cost of sales | | | | | | | | | | | | | | |
| | | | |
| Selling, general and administrative expenses | | | | | | | | | | | | | | |
Other segment items (1) | | | | | | | | | | | | | | |
Adjusted EBIT | | | | | | | () | | | | | | | |
| | | | | | | | | |
| Reconciliation of segment Adjusted EBIT to consolidated earnings before income taxes ("EBT"): | |
Other adjusted EBIT (2) | | | | | | | | | () | |
| Non-core items impacting EBIT | | | | |
|
Asset impairments, restructuring, and other charges, net (3) | | | | () | |
|
Environmental and other costs (4) | | | | () | |
| Net interest expense | | | | () | |
| Consolidated EBT | | | | | | | | | $ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| First Six Months 2025 |
| Advanced Materials | | Additives & Functional Products | | Chemical Intermediates | | Fibers | | Total Operating Segments | | Other | | Total Consolidated |
| Depreciation and amortization expense | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| Capital expenditures | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
(1)Other segment items for each reportable segment includes R&D expenses, other components of post-employment (benefit) cost, net and other (income) charges, net.
(2)Other is not considered an operating segment. Other includes the following which are not allocated to operating segments: 1) sales and costs from growth initiatives and businesses, 2) pension and other postretirement benefit plans income (expense), net, and 3) other income (charges), net.
(3)See Note 11, "Asset Impairments, Restructuring, and Other Charges, Net", for a description of included items.
(4)Environmental and other costs from previously divested or non-operational sites and product lines primarily related to increased chemical costs for groundwater treatment and new and extended remediation costs reported in "Other" to be paid out over 30 years.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | |
| Cost of sales | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | | | | | | | | | | | | |
Other segment items (1) | | | | | | | | | | | | | | |
| Adjusted EBIT | | | | | | | | | | | | | | |
| | | | | | | | | |
| Reconciliation of segment Adjusted EBIT to consolidated EBT: | |
Other adjusted EBIT (2) | | | | | | | | | () | |
| Non-core items impacting EBIT | | | | |
Asset impairments, restructuring, and other charges, net (3) | | | | () | |
|
Environmental and other costs (4) | | | | () | |
|
|
| Net interest expense | | | | | | | | | () | |
| Consolidated EBT | | | | | | | | | $ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| First Six Months 2024 |
| Advanced Materials | | Additives & Functional Products | | Chemical Intermediates | | Fibers | | Total Operating Segments | | Other | | Total Consolidated |
| Depreciation and amortization expense | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| Capital expenditures | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
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 2024 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NON-GAAP FINANCIAL MEASURES
Non-GAAP financial measures, and the accompanying reconciliations of the non-GAAP financial measures to the most comparable GAAP measures, are presented below in this section and in "Overview", "Results of Operations", "Summary by Operating Segment", and "Liquidity and Other Financial Information - Cash Flows" in this MD&A.
Management discloses non-GAAP financial measures, and the related reconciliations to the most comparable GAAP financial measures, because it believes investors use these metrics in evaluating longer term period-over-period performance, and to allow investors to better understand and evaluate the information used by management to assess the Company's and its operating segments' performances, make resource allocation decisions, and evaluate organizational and individual performances in determining certain performance-based compensation. Non-GAAP financial measures do not have definitions under GAAP, and may be defined differently by, and not be comparable to, similarly titled measures used by other companies. As a result, management cautions investors not to place undue reliance on any non-GAAP financial measure, but to consider such measures alongside the most directly comparable GAAP financial measure.
Company Use of Non-GAAP Financial Measures
Non-Core Items and any Unusual or Non-Recurring Items Excluded from Non-GAAP Earnings
In addition to evaluating Eastman's financial condition, results of operations, liquidity, and cash flows as reported in accordance with GAAP, management evaluates Company and operating segment performance, and makes resource allocation and performance evaluation decisions, excluding the effect of transactions, costs, and losses or gains that do not directly result from Eastman's normal, or "core", business and operations, or are otherwise of an unusual or non-recurring nature.
•Non-core transactions, costs, and losses or gains relate to, among other things, cost reductions, growth and profitability improvement initiatives, changes in businesses and assets, and other events outside of the Company's core business operations, and have included asset impairments, restructuring, and other charges and gains, costs of and related to acquisitions, gains and losses from and costs related to dispositions, closures, or shutdowns of businesses or assets, financing transaction costs, environmental and other costs related to previously divested businesses or non-operational sites and product lines, and mark-to-market losses or gains for pension and other postretirement benefit plans.
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.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Non-GAAP Debt Measure
Eastman, from time to time, evaluates and discloses to investors and securities and credit analysts the non-GAAP debt measure "net debt", which management defines as total borrowings less cash and cash equivalents. Management believes this metric is useful to investors and securities and credit analysts to provide them with information similar to that used by management in evaluating the Company's overall financial position, liquidity, and leverage and because management believes investors, securities analysts, credit analysts and rating agencies, and lenders often use a similar measure to assess and compare companies' relative financial position and liquidity.
Non-GAAP Measures in this Quarterly Report
The following non-core items are excluded by management in its evaluation of certain earnings results in this Quarterly Report:
•Asset impairments, restructuring, and other charges, net; and
•Environmental and other costs from previously divested or non-operational sites and product lines.
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 Items Excluded from Earnings and Adjustments to Provision for Income Taxes | | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | First Six Months |
| (Dollars in millions) | 2025 | | 2024 | | 2025 | | 2024 |
| Non-core items impacting earnings before interest and taxes: | | | | | | | |
Asset impairments, restructuring, and other charges, net | $ | 13 | | | $ | — | | | $ | 22 | | | $ | 11 | |
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| Environmental and other costs | 40 | | | 16 | | | 40 | | | 16 | |
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Total non-core items impacting earnings before interest and taxes | 53 | | | 16 | | | 62 | | | 27 | |
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| Less: Items impacting provision for income taxes: | | | | | | | |
Tax effect of non-core items | 14 | | | 3 | | | 15 | | | 6 | |
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| Interim adjustment to tax provision | (7) | | | (13) | | | (39) | | | (30) | |
| Total items impacting provision for income taxes | 7 | | | (10) | | | (24) | | | (24) | |
| Total items impacting net earnings attributable to Eastman | $ | 46 | | | $ | 26 | | | $ | 86 | | | $ | 51 | |
This MD&A includes an analysis of the effect of the foregoing on the following GAAP financial measures:
•Other (income) charges, net;
•Earnings before interest and taxes ("EBIT");
•Provision for income taxes;
•Net earnings attributable to Eastman;
•Diluted EPS; and
•Total borrowings.
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, scale advantage, and sustainability macrotrends form the foundation of the Company's research and development ("R&D") and innovation initiatives. 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. Eastman began operating one of the world's largest molecular recycling facilities in 2024. 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 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 items were as follows:
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| | Second Quarter | | First Six Months |
| (Dollars in millions) | 2025 | | 2024 | | 2025 | | 2024 |
| Sales | $ | 2,287 | | | $ | 2,363 | | | $ | 4,577 | | | $ | 4,673 | |
| Earnings before interest and taxes | 222 | | | 337 | | | 524 | | | 600 | |
Earnings before interest and taxes excluding non-core items | 275 | | | 353 | | | 586 | | | 627 | |
Sales revenue decreased in second quarter and first six months 2025 compared to second quarter and first six months 2024 due to lower sales volume primarily driven by continued weakness across key end markets as well as the negative impact of an unplanned outage in the CI segment, partially offset by higher sales volume in the AFP segment.
EBIT excluding non-core items decreased in second quarter and first six months 2025 compared to second quarter and first six months 2024 primarily due to lower sales volume, lower selling prices, net of higher raw material and energy costs, and higher maintenance costs. These factors were partially offset by lower variable compensation costs across the segments.
Further discussion of sales revenue and EBIT changes is presented in "Results of Operations" and "Summary by Operating Segment" in this MD&A.
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 |
| 2025 | | 2024 |
| (Dollars in millions, except EPS) | $ | | EPS | | $ | | EPS |
| Net earnings attributable to Eastman | $ | 140 | | | $ | 1.20 | | | $ | 230 | | | $ | 1.94 | |
Total non-core items, net of tax | 39 | | | 0.34 | | | 13 | | | 0.10 | |
| Interim adjustment to tax provision | 7 | | | 0.06 | | | 13 | | | 0.11 | |
| Adjusted net earnings | $ | 186 | | | $ | 1.60 | | | $ | 256 | | | $ | 2.15 | |
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| First Six Months |
| 2025 | | 2024 |
| (Dollars in millions, except EPS) | $ | | EPS | | $ | | EPS |
| Net earnings attributable to Eastman | $ | 322 | | | $ | 2.77 | | | $ | 395 | | | $ | 3.33 | |
| Total non-core and unusual items, net of tax | 47 | | | 0.40 | | | 21 | | | 0.17 | |
| Interim adjustment to tax provision | 39 | | | 0.34 | | | 30 | | | 0.26 | |
| Adjusted net earnings | $ | 408 | | | $ | 3.51 | | | $ | 446 | | | $ | 3.76 | |
Cash provided by operating activities was $66 million in first six months 2025 and $351 million in first six months 2024.
RESULTS OF OPERATIONS
Sales | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Second Quarter | | First Six Months |
| | | | | Change | | | | | | Change |
| (Dollars in millions) | 2025 | | 2024 | | $ | | % | | 2025 | | 2024 | | $ | | % |
| Sales | $ | 2,287 | | | $ | 2,363 | | | $ | (76) | | | (3) | % | | $ | 4,577 | | | $ | 4,673 | | | $ | (96) | | | (2) | % |
| Volume / product mix effect | | | | | (77) | | | (3) | % | | | | | | (85) | | | (2) | % |
| Price effect | | | | | (6) | | | — | % | | | | | | 6 | | | — | % |
| Exchange rate effect | | | | | 7 | | | — | % | | | | | | (17) | | | — | % |
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Sales revenue decreased in second quarter and first six months 2025 compared to second quarter and first six months 2024 primarily due to decreases in all segments except the AFP segment.
Gross Profit | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | First Six Months |
| (Dollars in millions) | 2025 | | 2024 | | Change | | 2025 | | 2024 | | Change |
| Gross profit | $ | 506 | | | $ | 599 | | | (16) | % | | $ | 1,073 | | | $ | 1,131 | | | (5) | % |
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Gross profit decreased in second quarter and first six months 2025 compared to second quarter and first six months 2024 due to decreases in all segments except the AFP segment. Further discussion of sales revenue and EBIT changes is presented in "Summary by Operating Segment" in this MD&A.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Selling, General and Administrative Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | First Six Months |
| (Dollars in millions) | 2025 | | 2024 | | Change | | 2025 | | 2024 | | Change |
| Selling, general and administrative expenses | $ | 157 | | | $ | 180 | | | (13) | % | | $ | 339 | | | $ | 371 | | | (9) | % |
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Selling, general and administrative ("SG&A") expenses decreased in second quarter and first six months 2025 compared to second quarter and first six months 2024 primarily due to lower variable compensation costs.
Research and Development Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | First Six Months |
| (Dollars in millions) | 2025 | | 2024 | | Change | | 2025 | | 2024 | | Change |
| Research and development expenses | $ | 67 | | | $ | 60 | | | 12 | % | | $ | 134 | | | $ | 119 | | | 13 | % |
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R&D expenses increased in second quarter and first six months 2025 compared to second quarter and first six months 2024 primarily due to strategic investment in innovation.
Asset Impairments, Restructuring, and Other Charges, Net
| | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | Second Quarter | | First Six Months |
| 2025 | | 2024 | | 2025 | | 2024 |
| | |
| | |
Severance charges | $ | 10 | | | $ | — | | | $ | 11 | | | $ | 11 | |
Restructuring and other charges | 3 | | | — | | | 11 | | | — | |
| Total | $ | 13 | | | $ | — | | | $ | 22 | | | $ | 11 | |
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For detailed information regarding asset impairments, restructuring, and other charges, net see Note 11, "Asset Impairments, Restructuring, and Other 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 Quarter | | First Six Months |
| (Dollars in millions) | 2025 | | 2024 | | 2025 | | 2024 |
| Other components of post-employment (benefit) cost, net | $ | (2) | | | $ | (4) | | | $ | (3) | | | $ | (9) | |
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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 Quarter | | First Six Months |
| (Dollars in millions) | 2025 | | 2024 | | 2025 | | 2024 |
Foreign exchange transaction losses, net | $ | 4 | | | $ | 4 | | | $ | 4 | | | $ | 9 | |
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| (Income) loss from equity investments and other investment (gains) losses, net | 1 | | | (1) | | | 2 | | | (1) | |
| Environmental and other costs | 40 | | | 16 | | | 40 | | | 16 | |
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| Other, net | 4 | | | 7 | | | 11 | | | 15 | |
| Other (income) charges, net | $ | 49 | | | $ | 26 | | | $ | 57 | | | $ | 39 | |
| Environmental and other costs | (40) | | | (16) | | | (40) | | | (16) | |
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| Other (income) charges, net excluding non-core item | $ | 9 | | | $ | 10 | | | $ | 17 | | | $ | 23 | |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other (income) charges, net in second quarter and first six months 2025 and 2024 included environmental and other costs related to previously divested businesses or non-operational sites and product lines. Excluding these non-core items, Other (income) charges, net decreased in second quarter 2025 compared to second quarter 2024 primarily due to lower factoring fees, and decreased in first six months 2025 compared to first six months 2024 primarily due to lower foreign exchange transaction losses and lower factoring fees, partially offset by losses from 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 Quarter | | First Six Months |
| (Dollars in millions) | 2025 | | 2024 | | Change | | 2025 | | 2024 | | Change |
| Earnings before interest and taxes | $ | 222 | | | $ | 337 | | | (34) | % | | $ | 524 | | | $ | 600 | | | (13) | % |
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Asset impairments, restructuring, and other charges, net | 13 | | | — | | | | | 22 | | | 11 | | | |
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| Environmental and other costs | 40 | | | 16 | | | | | 40 | | | 16 | | | |
Earnings before interest and taxes excluding non-core items | $ | 275 | | | $ | 353 | | | (22) | % | | $ | 586 | | | $ | 627 | | | (7) | % |
Net Interest Expense
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| | Second Quarter | | First Six Months |
| (Dollars in millions) | 2025 | | 2024 | | Change | | 2025 | | 2024 | | Change |
| Gross interest costs | $ | 59 | | | $ | 58 | | | 2 | % | | $ | 117 | | | $ | 116 | | | 1 | % |
| Less: Capitalized interest | 3 | | | 4 | | | | | 8 | | | 9 | | | |
| Interest expense | 56 | | | 54 | | | | | 109 | | | 107 | | | |
| Less: Interest income | 3 | | | 4 | | | | | 7 | | | 8 | | | |
| Net interest expense | $ | 53 | | | $ | 50 | | | 6 | % | | $ | 102 | | | $ | 99 | | | 3 | % |
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Net interest expense increased slightly in second quarter and first six months 2025 compared to second quarter and first six months 2024 due to higher borrowings.
Provision for Income Taxes
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| Second Quarter | | First Six Months |
| 2025 | | 2024 | | 2025 | | 2024 |
| (Dollars in millions) | $ | | % | | $ | | % | | $ | | % | | $ | | % |
Provision for income taxes and effective tax rate | $ | 29 | | | 17 | % | | $ | 56 | | | 20 | % | | $ | 99 | | | 23 | % | | $ | 105 | | | 21 | % |
Tax provision for non-core items (1) | 14 | | | | | 3 | | | | | 15 | | | | | 6 | | | |
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Interim adjustment to tax provision (2) | (7) | | | | | (13) | | | | | (39) | | | | | (30) | | | |
| Adjusted provision for income taxes and effective tax rate | $ | 36 | | | 16 | % | | $ | 46 | | | 16 | % | | $ | 75 | | | 16 | % | | $ | 81 | | | 16 | % |
(1)Provision for income taxes for non-core items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
(2)Second quarter 2025 provision for income taxes was adjusted to reflect the current forecasted full year effective tax rate. Second quarter 2024 provision for income taxes was adjusted to reflect the then current forecasted full year effective tax rate.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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| First Six Months (1) |
| 2025 | | 2024 |
| Effective tax rate | 23 | % | | 21 | % |
Discrete tax items (2) | (1) | % | | — | % |
Tax impact of current year non-core items (3) | 4 | % | | 1 | % |
| Changes in tax contingencies and valuation allowances | (2) | % | | (1) | % |
Forecasted full year impact of expected tax events (4) | (8) | % | | (5) | % |
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| 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 rates are 15.5 percent in both first six months 2025 and 2024, respectively.
(2)"Discrete tax items" are items that are excluded from the Company's estimated annual effective tax rate and recognized entirely in the quarter in which the item occurs. Discrete tax items for first six months 2025 are related to share based compensation expense and adjustments to certain prior year tax returns.
(3)Provision for income taxes for non-core items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
(4)Expected future tax events may include finalization of tax returns; federal, state, and foreign examinations or the expiration of statutes of limitation; and corporate restructurings.
Net Earnings Attributable to Eastman and Diluted Earnings per Share | | | | | | | | | | | | | | | | | | | | | | | |
| Second Quarter |
| 2025 | | 2024 |
| (Dollars in millions, except EPS) | $ | | EPS | | $ | | EPS |
| Net earnings and diluted earnings per share attributable to Eastman | $ | 140 | | | $ | 1.20 | | | $ | 230 | | | $ | 1.94 | |
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Asset impairments, restructuring, and other charges, net | 8 | | | 0.08 | | | — | | | — | |
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| Environmental and other costs | 31 | | | 0.26 | | | 13 | | | 0.10 | |
Unusual items, net of tax: (1) | | | | | | | |
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| Interim adjustment to tax provision | 7 | | | 0.06 | | | 13 | | | 0.11 | |
| Adjusted net earnings and diluted earnings per share attributable to Eastman | $ | 186 | | | $ | 1.60 | | | $ | 256 | | | $ | 2.15 | |
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| First Six Months |
| 2025 | | 2024 |
| (Dollars in millions, except EPS) | $ | | EPS | | $ | | EPS |
| Net earnings and diluted earnings per share attributable to Eastman | $ | 322 | | | $ | 2.77 | | | $ | 395 | | | $ | 3.33 | |
Non-core items, net of tax: (1) | | | | | | | |
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Asset impairments, restructuring, and other charges, net | 16 | | | 0.14 | | | 8 | | | 0.07 | |
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| Environmental and other costs | 31 | | | 0.26 | | | 13 | | | 0.10 | |
Unusual items, net of tax: (1) | | | | | | | |
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| Interim adjustment to tax provision | 39 | | | 0.34 | | | 30 | | | 0.26 | |
| Adjusted net earnings and diluted earnings per share attributable to Eastman | $ | 408 | | | $ | 3.51 | | | $ | 446 | | | $ | 3.76 | |
(1)Provision for income taxes for non-core items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
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 2024 Annual Report on Form 10-K. Advanced Materials Segment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Second Quarter | | First Six Months |
| | | | | Change | | | | | | Change |
| 2025 | | 2024 | | $ | | % | | 2025 | | 2024 | | $ | | % |
| (Dollars in millions) | | | | | | | | | | | | | | | |
| Sales | $ | 777 | | | $ | 795 | | | $ | (18) | | | (2) | % | | $ | 1,496 | | | $ | 1,543 | | | $ | (47) | | | (3) | % |
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| Volume / product mix effect | | | | | (12) | | | (2) | % | | | | | | (5) | | | — | % |
| Price effect | | | | | (7) | | | — | % | | | | | | (34) | | | (2) | % |
| Exchange rate effect | | | | | 1 | | | — | % | | | | | | (8) | | | (1) | % |
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| Earnings before interest and taxes | $ | 121 | | | $ | 131 | | | $ | (10) | | | (8) | % | | $ | 237 | | | $ | 235 | | | $ | 2 | | | 1 | % |
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Sales revenue decreased in second quarter 2025 compared to second quarter 2024 due to ongoing weak primary demand in key end markets including the building and construction and automotive end markets, partially offset by growth in the specialty plastics product line.
Sales revenue decreased in first six months 2025 compared to first six months 2024 primarily due to lower selling prices across all product lines.
EBIT decreased in second quarter 2025 compared to second quarter 2024 primarily due to $8 million unfavorable sales volume mix.
EBIT slightly increased in first six months 2025 compared to first six months 2024 as $16 million lower SG&A expenses were mostly offset by a $7 million unfavorable shift in foreign currency rates and $6 million higher R&D expenses.
Additives & Functional Products Segment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Second Quarter | | First Six Months |
| | | | | Change | | | | | | Change |
| 2025 | | 2024 | | $ | | % | | 2025 | | 2024 | | $ | | % |
| (Dollars in millions) | | | | | | | | | | | | | | | |
| Sales | $ | 769 | | | $ | 718 | | | $ | 51 | | | 7 | % | | $ | 1,502 | | | $ | 1,422 | | | $ | 80 | | | 6 | % |
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| Volume / product mix effect | | | | | 16 | | | 2 | % | | | | | | 29 | | | 2 | % |
| Price effect | | | | | 30 | | | 4 | % | | | | | | 56 | | | 4 | % |
| Exchange rate effect | | | | | 5 | | | 1 | % | | | | | | (5) | | | — | % |
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| Earnings before interest and taxes | $ | 153 | | | $ | 123 | | | $ | 30 | | | 24 | % | | $ | 290 | | | $ | 232 | | | $ | 58 | | | 25 | % |
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| Asset impairments, restructuring, and other charges, net | — | | | — | | | — | | | | | 4 | | | — | | | 4 | | | |
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| Earnings before interest and taxes excluding non-core item | 153 | | | 123 | | | 30 | | | 24 | % | | 294 | | | 232 | | | 62 | | | 27 | % |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales revenue increased in second quarter and first six months 2025 compared to second quarter and first six months 2024 primarily due to higher selling prices and favorable product mix. Higher selling prices were driven by cost-pass-through contracts and higher sales volume and favorable product mix was attributable to the care additives product line and heat transfer fluid project fulfillments.
EBIT increased in second quarter 2025 compared to second quarter 2024 primarily due to $19 million favorable sales volume mix, $8 million higher selling prices, net of higher raw material and energy costs, and $7 million lower SG&A expenses.
EBIT in first six months 2025 included asset impairments, restructuring, and other charges, net of $4 million related to the closure of a heat-transfer fluids production line at a specialty fluids and energy facility in North America. For more information see Note 11, "Asset Impairments, Restructuring, and Other Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.
Excluding this non-core item, EBIT increased in first six months 2025 compared to first six months 2024 primarily due to $30 million favorable sales volume mix, $21 million higher selling prices, net of higher raw material and energy costs, and $9 million lower SG&A expenses.
Chemical Intermediates Segment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Second Quarter | | First Six Months |
| | | | | Change | | | | | | Change |
| 2025 | | 2024 | | $ | | % | | 2025 | | 2024 | | $ | | % |
| (Dollars in millions) | | | | | | | | | | | | | | | |
| Sales | $ | 463 | | | $ | 515 | | | $ | (52) | | | (10) | % | | $ | 1,008 | | | $ | 1,038 | | | $ | (30) | | | (3) | % |
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| Volume / product mix effect | | | | | (26) | | | (5) | % | | | | | | (18) | | | (2) | % |
| Price effect | | | | | (27) | | | (5) | % | | | | | | (10) | | | (1) | % |
| Exchange rate effect | | | | | 1 | | | — | % | | | | | | (2) | | | — | % |
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| Earnings before interest and taxes | $ | (30) | | | $ | 22 | | | $ | (52) | | | (236) | % | | $ | (11) | | | $ | 38 | | | $ | (49) | | | (129) | % |
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Sales revenue decreased in second quarter and first six months 2025 compared to second quarter and first six months 2024 due to lower sales volume and lower selling prices primarily due to the industrial end market as well as an unplanned outage resulting in a lack of available volume.
EBIT decreased in second quarter 2025 compared to second quarter 2024 due to $31 million lower selling prices and higher raw material and energy costs, net of lower distribution costs, and $27 million lower sales volume and higher manufacturing costs, including an approximately $20 million impact from an unplanned outage.
EBIT decreased in first six months 2025 compared to first six months 2024 due to $37 million lower sales volume and higher manufacturing costs, including an approximately $20 million impact from an unplanned outage, and $16 million lower selling prices and higher raw material and energy costs, net of lower distribution costs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fibers Segment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Second Quarter | | First Six Months |
| | | | | Change | | | | | | Change |
| 2025 | | 2024 | | $ | | % | | 2025 | | 2024 | | $ | | % |
| (Dollars in millions) | | | | | | | | | | | | | | | |
| Sales | $ | 274 | | | $ | 330 | | | $ | (56) | | | (17) | % | | $ | 562 | | | $ | 661 | | | $ | (99) | | | (15) | % |
| Volume / product mix effect | | | | | (54) | | | (16) | % | | | | | | (93) | | | (14) | % |
| Price effect | | | | | (2) | | | (1) | % | | | | | | (4) | | | (1) | % |
| Exchange rate effect | | | | | — | | | — | % | | | | | | (2) | | | — | % |
| | | | | | | | | | | | | | | |
| Earnings before interest and taxes | $ | 81 | | | $ | 122 | | | $ | (41) | | | (34) | % | | $ | 169 | | | $ | 239 | | | $ | (70) | | | (29) | % |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Sales revenue decreased in second quarter and first six months 2025 compared to second quarter and first six months 2024 primarily due to lower sales volume in the acetate tow product line attributed to destocking and industry capacity share adjustments, and lower textiles sales into China due to the global trade dispute.
EBIT decreased in second quarter 2025 compared to second quarter 2024 primarily due to $30 million lower sales volume and $8 million lower selling prices and higher raw material and energy costs.
EBIT decreased in first six months 2025 compared to first six months 2024 due to $55 million lower sales volume and $15 million lower selling prices and higher raw material and energy costs.
Other | | | | | | | | | | | | | | | | | | | | | | | |
| Second Quarter | | First Six Months |
| 2025 | | 2024 | | 2025 | | 2024 |
| (Dollars in millions) | | | | | | | |
| Sales | $ | 4 | | | $ | 5 | | | $ | 9 | | | $ | 9 | |
| | | | | | | |
| Loss before interest and taxes | | | | | | | |
| Growth initiatives and businesses not allocated to operating segments | $ | (47) | | | $ | (44) | | | $ | (98) | | | $ | (112) | |
| Pension and other postretirement benefits income (expense), net not allocated to operating segments | 1 | | | 2 | | | 2 | | | 4 | |
| Asset impairments, restructuring, and other charges, net | (13) | | | — | | | (18) | | | (11) | |
| | |
| | |
| Other income (charges), net not allocated to operating segments | (44) | | | (19) | | | (47) | | | (25) | |
| Loss before interest and taxes | $ | (103) | | | $ | (61) | | | $ | (161) | | | $ | (144) | |
| | |
| Asset impairments, restructuring, and other charges, net | 13 | | | — | | | 18 | | | 11 | |
| | |
| | |
| Environmental and other costs | 40 | | | 16 | | | 40 | | | 16 | |
| | |
| | |
|
|
|
| 4,180 | |
| |
| |
| |
| |
| |
(1)Includes non-cash increase of $66 million in 2025 and non-cash decrease of $32 million in 2024 resulting from foreign currency exchange rates.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Expenditures
Capital expenditures were $297 million and $300 million in first six months 2025 and 2024, respectively. Capital expenditures in first six months 2025 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 2025 capital expenditures will be approximately $550 million, primarily for targeted growth initiatives, including the AM segment methanolysis plastic-to-plastic molecular recycling manufacturing facilities, and site modernization projects.
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"). As of June 30, 2025, a total of 12,255,949 shares have been repurchased under the 2021 authorization for $1.1 billion. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders. The Company repurchased 643,791 shares of common stock during second quarter and first six months 2025 for $50 million.
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 2024 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.
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 2024 Annual Report on Form 10-K.
At June 30, 2025, the market risk associated with certain cash flows under foreign currency derivative transactions assuming a 10 percent adverse move in the U.S. dollar relative to these foreign currencies was $51 million, with an additional $5 million exposure for each additional one percentage point adverse change in those foreign currency rates. Since the Company utilizes currency-sensitive derivative instruments for hedging anticipated foreign currency transactions, a loss in fair value from those instruments is generally offset by an increase in the value of the underlying anticipated transactions.
At June 30, 2025, a 10 percent fluctuation in the euro currency rate would have had an impact of $228 million 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 Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in Part II, Item 8 of this Annual 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 2024 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, 2025, 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 second quarter 2025 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
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 2024 Annual Report on Form 10-K.
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, 2025, a total of 12,255,949 shares have been repurchased under the 2021 authorization for $1.1 billion. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders. The Company repurchased 643,791 shares of common stock during second quarter and first six months 2025 for $50 million. For additional information, see Note 9, "Stockholders' Equity", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Period | | Total Number
of Shares
Purchased | | Average Price Paid Per Share (1) | | Total Number of Shares Purchased as Part of Publicly Announced Plan
or Program | | Approximate Dollar
Value that May Yet Be Purchased Under the Plan or Program |
| April 1-30, 2025 | | 60,000 | | | $ | 76.18 | | | 60,000 | | | $ | 1.410 | billion |
| May 1-31, 2025 | | 583,791 | | | $ | 77.82 | | | 583,791 | | | $ | 1.365 | billion |
| June 1-30, 2025 | | — | | | $ | — | | | — | | | $ | 1.365 | billion |
| Total | | 643,791 | | | $ | 77.66 | | | 643,791 | | | |
ITEM 5. OTHER INFORMATION
(c) Director and Officer Trading Arrangements
A portion of our directors’ and officers’ compensation is in the form of equity awards and, from time to time, they may engage in open-market transactions involving Company securities for diversification or other personal reasons. All such transactions in Company securities by directors and officers must comply with the Company’s Insider Trading Policy, which requires that transactions be in accordance with applicable U.S. federal securities laws that prohibit trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables directors and officers to prearrange transactions in the Company’s securities in a manner that avoids concerns about initiating transactions while in possession of material nonpublic information. The Company’s Insider Trading Policy permits our directors and executive officers to enter into trading plans designed to comply with Rule 10b5-1.
No Rule 10b5-1 trading arrangements or "non-Rule 10b5-1 trading arrangements" (as defined by Regulation S-K Item 408(c)) were entered into, modified, or terminated by the Company's directors or officers during the quarterly period covered by this Report.
ITEM 6.EXHIBITS
Exhibits filed as part of this report are listed in the Exhibit Index.
| | | | | | | | |
| | EXHIBIT INDEX |
| Exhibit Number | | Description |
| | | |
| 3.01 | | |
| | |
| 3.02 | | |
| | |
4.01 | | |
| | |
10.01 * | | |
| | |
| 31.01 * | | |
| | |
| 31.02 * | | |
| | |
| 32.01 * | | |
| | |
| 32.02 * | | |
| | |
| 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 Regulation S-K.
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: | August 1, 2025 | By: | /s/ William T. McLain, Jr. |
| | | William T. McLain, Jr. |
| | | Executive Vice President and Chief Financial Officer |
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