EX-99.01 2 ex99_0120151231cctables.htm EXHIBIT 99.01 Exhibit


Eastman Announces Fourth-Quarter and Full-Year 2015 Financial Results
 
KINGSPORT, Tenn., Jan. 28, 2016 - Eastman Chemical Company (NYSE:EMN) today announced earnings, excluding non-core items, of $1.59 per diluted share for fourth quarter 2015 versus $1.64 per diluted share for fourth quarter 2014. Reported earnings were $0.83 per diluted share in fourth quarter 2015 versus $0.11 per diluted share in fourth quarter 2014. For detail of the excluded items and reconciliation to reported company and segment earnings, see Tables 3A and 4.

“We delivered our sixth consecutive year of solid earnings growth and record cash from operations in 2015,” said Mark Costa, chairman and CEO. “These results reflect the strength and robustness of our strategy to transform towards a specialty portfolio as we managed through a very challenging global business environment. We benefitted from volume growth in specialty businesses, mix upgrade in Advanced Materials from growth of high value, innovative products, accretion from high quality specialty acquisitions, and continued disciplined cost management.” See “Outlook” for the items excluded from annual earnings comparisons.

(In millions, except per share amounts)
4Q2015
4Q2014
FY2015
FY2014
Sales revenue
$2,225
$2,349
$9,648
$9,527
Earnings per diluted share
$0.83
$0.11
$5.66
$4.95
Earnings per diluted share excluding non-core items*
$1.59
$1.64
$7.28
$7.07
Net cash provided by operating activities
$562
$460
$1,612
$1,408
*For reconciliation to reported company and segment earnings, see Tables 3A and 4.

Corporate Results 4Q 2015 versus 4Q 2014

Sales revenue for fourth quarter 2015 was $2.2 billion versus $2.3 billion for fourth quarter 2014, primarily due to lower selling prices more than offsetting sales revenue from the Taminco Corporation and Commonwealth Laminating & Coating, Inc. businesses acquired in December 2014. Excluding non-core items, fourth-quarter 2015 operating earnings were $343 million compared with $362 million for fourth quarter 2014 as earnings from the acquired businesses and increased Advanced Materials sales volume were more than offset by propane hedges and lower acetate tow sales volume. Reported fourth-quarter 2015 operating earnings were $172 million compared with $27 million for fourth quarter 2014. Fourth-quarter 2015 and 2014 non-core items included losses from annual mark-to-market of pension and other post-retirement benefit plans, and fourth quarter 2015 non-core items included restructuring severance costs.

Segment Results 4Q 2015 versus 4Q 2014

Additives & Functional Products - Sales revenue increased primarily due to sales of products of the acquired Taminco specialty amines and crop protection businesses. These revenues were partially offset by lower coatings and other formulated products selling prices, primarily due to lower raw material and energy costs. Excluding non-core items in fourth quarter 2014, operating earnings decreased to $97 million for fourth


quarter 2015 compared with $99 million for fourth quarter 2014 as earnings from the acquired businesses were more than offset by propane hedges.

Adhesives & Plasticizers - Sales revenue decreased primarily due to lower selling prices. Lower plasticizers selling prices were primarily in response to lower raw material and energy costs and continued competitive pressure resulting from weak demand in Asia Pacific. Operating earnings increased to $49 million for fourth quarter 2015 compared with $41 million for fourth quarter 2014 primarily due to lower raw material and energy costs exceeding lower selling prices.

Advanced Materials - Sales revenue increased primarily due to increased sales volume and sales of products of the acquired Commonwealth performance films business. These revenues were partially offset by lower selling prices primarily for copolyesters due to lower raw material and energy costs. Excluding non-core items in fourth quarter 2014, operating earnings increased to $83 million for fourth quarter 2015 compared with $62 million for fourth quarter 2014 primarily due to higher sales volume and earnings from the acquired business.

Fibers - Sales revenue decreased primarily due to lower acetate tow sales volume, especially in China. Excluding non-core items in fourth quarter 2015, operating earnings decreased to $107 million for fourth quarter 2015 compared with $122 million for fourth quarter 2014 primarily due to lower acetate tow sales volume.

Specialty Fluids & Intermediates - Sales revenue decreased primarily due to lower selling prices and lower chemical and other intermediates sales volume more than offsetting sales of products of the acquired Taminco functional amines business. The lower selling prices were primarily in response to lower raw material and energy costs. Excluding non-core items in fourth quarter 2014, operating earnings decreased to $20 million for fourth quarter 2015 compared to $49 million for fourth quarter 2014 as propane hedges and lower selling prices more than offset lower raw material and energy costs and earnings from the acquired business.


Corporate Results 2015 versus 2014

Sales revenue was $9.6 billion, a 1 percent increase compared with 2014 due to sales of products of acquired businesses partially offset by lower selling prices, particularly in the Specialty Fluids & Intermediates segment. Excluding the non-core items described in Tables 3A and 4, operating earnings for 2015 were $1.7 billion, a 6 percent increase compared with 2014 primarily due to earnings of the acquired businesses and lower raw material and energy costs exceeding lower selling prices. Reported 2015 operating earnings were $1.4 billion compared with $1.2 billion for 2014.

Segment Results 2015 versus 2014
 
Additives & Functional Products - Sales revenue increased primarily due to sales of products of the acquired Taminco specialty amines and crop protection businesses. These revenues were partially offset by lower coatings and other formulated products selling prices, primarily due to lower raw material and energy costs and an unfavorable shift in foreign currency exchange rates. Excluding non-core items in 2014, operating


earnings increased to $462 million for 2015 compared with $398 million for 2014 primarily due to earnings from acquired businesses and lower raw material and energy costs exceeding lower selling prices, partially offset by propane hedges.
    
Adhesives & Plasticizers - Sales revenue decreased primarily due to lower plasticizers selling prices and an unfavorable shift in foreign currency exchange rates. Lower plasticizers selling prices were primarily in response to lower raw material and energy costs and continued competitive pressure. Operating earnings increased to $239 million for 2015 compared with $196 million for 2014 primarily due to lower raw material and energy costs exceeding lower selling prices, partially offset by propane hedges and an unfavorable shift in foreign currency exchange rates.
    
Advanced Materials - Sales revenue increased due to increased sales volume and sales of products of the acquired Commonwealth performance films business, partially offset by an unfavorable shift in foreign currency exchange rates and lower selling prices, primarily for copolyesters due to lower raw material and energy costs. Excluding non-core items, operating earnings increased to $409 million for 2015 compared with $293 million for 2014 primarily due to higher sales volume and improved product mix, earnings from the acquired business, and lower raw material and energy costs exceeding lower selling prices, partially offset by an unfavorable shift in foreign currency exchange rates.

Fibers - Sales revenue decreased primarily due to lower acetate tow sales volume attributed to customer inventory destocking, especially in China, and lower acetyl chemicals sales volume due to decreased sales to the cellulose acetate flake joint venture in Kingsport. Excluding non-core items for 2015, operating earnings decreased to $390 million for 2015 compared with $474 million for 2014 primarily due to lower acetate tow and acetyl chemicals sales volume.

Specialty Fluids & Intermediates - Sales revenue decreased primarily due to lower selling prices and lower chemical and other intermediates sales volume more than offsetting sales of products of the acquired Taminco functional amines and aviation turbine oil businesses. The lower selling prices were primarily in response to lower raw material and energy costs. Excluding non-core items in 2014, operating earnings decreased to $253 million for 2015 compared to $305 million for 2014 primarily due to propane hedges more than offsetting earnings from the acquired businesses.

Provision for Income Taxes

Excluding the tax impact of non-core items, the fourth-quarter 2015 effective tax rate was 17 percent. The fourth quarter 2015 tax rate included benefit from the extension in December 2015 of favorable U.S. federal tax provisions. Excluding the tax impact of non-core items, the full-year 2015 effective tax rate was 25 percent compared to 26 percent for full year 2014.

Cash Flow

Cash from operating activities was $1.6 billion in 2015. Free cash flow (defined as cash from operating activities minus capital expenditures) was a record $960 million in 2015. During 2015 the company reduced net debt (defined as total borrowings less cash and cash equivalents) by $589 million, contributed $125 million to its U.S. defined benefit pension plans, and repurchased $103 million of shares.



Outlook
    
Commenting on the outlook for full year 2016, Costa said: “We enter 2016 well positioned to benefit from our strong portfolio of specialty businesses which leverage world-class technology platforms to deliver solid growth in attractive end markets and accelerated earnings growth from our high value, innovative specialty products. However, we face increasing challenges including stagnant global economic growth, the collapse in the price of oil, and weakening currencies in Asia and Europe. In this environment, we are taking decisive actions to accelerate our innovation and market development activities and significantly increase our cost reduction efforts. Given current business conditions, we are driving hard to deliver 2016 earnings per share that approach 2015 earnings per share.” Non-core and any non-recurring items are excluded from the earnings per share projection.

The earnings for 2014, 2013, 2012, 2011, 2010, and 2009 referenced in the second paragraph of this release are non-GAAP and exclude the non-core items detailed, with reconciliation to GAAP earnings, in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the company’s Annual Reports on Form 10-K for 2014, 2013, 2012, and 2011.

Eastman will host a conference call with industry analysts on January 29, 2016 at 8:00 a.m. ET. To listen to the live webcast of the conference call and view the accompanying slides, go to www.investors.eastman.com, Events & Presentations. To listen via telephone, the dial-in number is 913-312-1403, passcode number 694500. A web replay, a replay in downloadable MP3 format, and the accompanying slides will be available at www.investors.eastman.com, Events & Presentations. A telephone replay will be available continuously from 11:00 a.m. ET, January 29, to 11:00 a.m. ET, February 8, at 888-203-1112 or 719-457-0820, passcode 694500.

Forward-Looking Statements: This news release includes forward-looking statements concerning current expectations for future global economic conditions; competitive position and acceptance of specialty products in key markets; mix of products sold; foreign currency exchange rates; raw material and energy prices and costs, and other prices and costs; non-core costs, charges, income, and gains; revenue and earnings from acquired businesses; and revenue, earnings, and cash flow for full year 2016. Such expectations are based upon certain preliminary information, internal estimates, and management assumptions, expectations, and plans, and are subject to a number of risks and uncertainties inherent in projecting future conditions, events, and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations prove to be inaccurate or are unrealized. Important factors that could cause actual results to differ materially from such expectations are and will be detailed in the company's filings with the Securities and Exchange Commission, including the Form 10-Q filed for third quarter 2015 available, and the Form 10-K to be filed for 2015 and to be available, on the Eastman web site at www.eastman.com in the Investors, SEC filings section.

Eastman is a global specialty chemical company that produces a broad range of products found in items people use every day. With a portfolio of specialty businesses, Eastman works with customers to deliver innovative products and solutions while maintaining a commitment to safety and sustainability. Its market-driven approaches take advantage of world-class technology platforms and leading positions in attractive end-markets such as transportation, building and construction and consumables. Eastman focuses on creating consistent, superior value for all


stakeholders. As a globally diverse company, Eastman serves customers in approximately 100 countries and had 2015 revenues of approximately $9.6 billion. The company is headquartered in Kingsport, Tennessee, USA and employs approximately 15,000 people around the world. For more information, visit www.eastman.com.


# # #

Contacts:

Media:  Tracy Kilgore
423-224-0498 / tjkilgore@eastman.com

Investors:  Greg Riddle
212-835-1620 / griddle@eastman.com




FINANCIAL INFORMATION
January 28, 2016


For Eastman Chemical Company Fourth Quarter and Full Year 2015 Financial Results Release

Table of Contents




Table 1 – Statements of Earnings
 
Fourth Quarter
 
Twelve Months
(Dollars in millions, except per share amounts; unaudited)
2015
 
2014
 
2015
 
2014
Sales
$
2,225

 
$
2,349

 
$
9,648

 
$
9,527

Cost of sales (1)
1,716

 
2,016

 
7,068

 
7,306

Gross profit
509

 
333

 
2,580

 
2,221

Selling, general and administrative expenses (1)
210

 
244

 
762

 
755

Research and development expenses (1)
74

 
62

 
251

 
227

Asset impairments and restructuring charges, net
53

 
—

 
183

 
77

Operating earnings
172

 
27

 
1,384

 
1,162

Net interest expense
65

 
55

 
263

 
187

Other charges (income), net
(10
)
 
1

 
(8
)
 
(15
)
Earnings (loss) from continuing operations before income taxes
117

 
(29
)
 
1,129

 
990

Provision (benefit) for income taxes from continuing operations
(8
)
 
(46
)
 
275

 
235

Earnings from continuing operations
125

 
17

 
854

 
755

Earnings from discontinued operations, net of tax
—

 
—

 
—

 
2

Net earnings
125

 
17

 
854

 
757

Less: net earnings attributable to noncontrolling interest
1

 
1

 
6

 
6

Net earnings attributable to Eastman
$
124

 
$
16

 
$
848

 
$
751

Amounts attributable to Eastman stockholders:
 
 
 
 
 
 
 
Earnings from continuing operations, net of tax
$
124

 
$
16

 
$
848

 
$
749

Earnings from discontinued operations, net of tax
—

 
—

 
—

 
2

Net earnings attributable to Eastman stockholders
$
124

 
$
16

 
$
848

 
$
751

Basic earnings per share attributable to Eastman
 

 
 

 
 

 
 

Earnings from continuing operations
$
0.83

 
$
0.11

 
$
5.71

 
$
5.01

Earnings from discontinued operations
—

 
—

 
—

 
0.02

Basic earnings per share attributable to Eastman
$
0.83

 
$
0.11

 
$
5.71

 
$
5.03

Diluted earnings per share attributable to Eastman
 

 
 

 
 

 
 

Earnings from continuing operations
$
0.83

 
$
0.11

 
$
5.66

 
$
4.95

Earnings from discontinued operations
—

 
—

 
—

 
0.02

Diluted earnings per share attributable to Eastman
$
0.83

 
$
0.11

 
$
5.66

 
$
4.97

 
 
 
 
 
 
 
 
Shares (in millions) outstanding at end of period
147.8

 
148.6

 
147.8

 
148.6

Shares (in millions) used for earnings per share calculation
 
 
 
 
 
 
 
Basic
148.4

 
148.5

 
148.6

 
149.5

Diluted
149.5

 
150.0

 
149.8

 
151.1


(1) 
Fourth quarter and twelve months 2015 included mark-to-market ("MTM") pension and other postretirement benefit plans net losses of $113 million and $115 million, respectively. Fourth quarter and twelve months 2014 included MTM pension and other postretirement benefit plans net losses of $304 million. See Table 3A for Non-GAAP earnings reconciliation by line item.




1


Table 2A – Segment Sales Information
 
 
Fourth Quarter
 
Twelve Months
(Dollars in millions, unaudited)
 
2015
 
2014
 
2015
 
2014
Sales by Segment
 
 
 
 
 
 
 
 
Additives & Functional Products
 
$
541

 
$
488

 
$
2,368

 
$
1,821

Adhesives & Plasticizers
 
272

 
313

 
1,214

 
1,363

Advanced Materials
 
582

 
562

 
2,414

 
2,378

Fibers
 
316

 
371

 
1,219

 
1,457

Specialty Fluids & Intermediates
 
505

 
606

 
2,388

 
2,490

Total Sales by Segment
 
2,216

 
2,340

 
9,603

 
9,509

Other
 
9

 
9

 
45

 
18

Total Eastman Chemical Company
 
$
2,225

 
$
2,349

 
$
9,648

 
$
9,527

 
Table 2B – Sales Revenue Change
 
Fourth Quarter 2015 Compared to Fourth Quarter 2014
(Unaudited)
 
Change in Sales Revenue Due To

 
Revenue
% Change
Acquired Businesses Effect (1)
Volume / Product Mix Effect
Price Effect
Exchange
Rate
Effect
 
 
 
 
 
 
Additives & Functional Products
11
 %
23
%
—
 %
(10)
 %
(2)
 %
Adhesives & Plasticizers
(13)
 %
—
%
1
 %
(12)
 %
(2)
 %
Advanced Materials
4
 %
4
%
7
 %
(4)
 %
(3)
 %
Fibers
(15)
 %
—
%
(12)
 %
(2)
 %
(1)
 %
Specialty Fluids & Intermediates
(17)
 %
9
%
(9)
 %
(17)
 %
—
 %
 
 
 
 
 
 
Total Eastman Chemical Company
(5)
 %
8
%
(2)
 %
(9)
 %
(2)
 %
 
 
 
Twelve Months 2015 Compared to Twelve Months 2014
(Unaudited)
 
Change in Sales Revenue Due To
 
Revenue
% Change
Acquired Businesses Effect (1)
Volume / Product Mix Effect
Price Effect
Exchange
Rate
Effect
 
 
 
 
 
 
Additives & Functional Products
30
 %
39
%
1
 %
(7)
 %
(3)
 %
Adhesives & Plasticizers
(11)
 %
—
%
(1)
 %
(7)
 %
(3)
 %
Advanced Materials
2
 %
5
%
4
 %
(3)
 %
(4)
 %
Fibers
(16)
 %
—
%
(15)
 %
(1
)%
—
 %
Specialty Fluids & Intermediates
(4)
 %
17
%
(4)
 %
(16)
 %
(1)
 %
 
 
 
 
 
 
Total Eastman Chemical Company
1
 %
13
%
(2)
 %
(8)
 %
(2)
 %

(1) 
Contribution to revenue of businesses acquired which are not in 2014 comparable periods.


2


Table 2C – Sales by Customer Location
 
 
Fourth Quarter
 
Twelve Months
(Dollars in millions, unaudited)
 
2015
 
2014
 
2015
 
2014
Sales by Customer Location
 
 
 
 
 
 
 
 
United States and Canada
 
$
959

 
$
1,042

 
$
4,350

 
$
4,384

Asia Pacific
 
592

 
654

 
2,333

 
2,540

Europe, Middle East, and Africa
 
557

 
513

 
2,422

 
2,091

Latin America
 
117

 
140

 
543

 
512

Total Eastman Chemical Company
 
$
2,225

 
$
2,349

 
$
9,648

 
$
9,527



3


Table 3 - Segment, Other, and Company Non-GAAP Operating Earnings (Loss) (1) 
 
Fourth Quarter
 
Twelve Months
(Dollars in millions, unaudited)
2015
 
2014
 
2015
 
2014
Additives & Functional Products

$
97

 
$
99

 
$
462

 
$
398

Adhesives & Plasticizers

49

 
41

 
239

 
196

Advanced Materials

83

 
62

 
409

 
293

Fibers

107

 
122

 
390

 
474

Specialty Fluids & Intermediates

20

 
49

 
253

 
305

Total segment operating earnings excluding non-core items
$
356

 
$
373

 
$
1,753

 
$
1,666

Total Other
(13
)
 
(11
)
 
(36
)
 
(53
)
Total operating earnings excluding non-core items
$
343

 
$
362

 
$
1,717

 
$
1,613

 

(1) 
For identification of excluded non-core items and reconciliations to GAAP operating earnings, see Table 3A.

 
 
 
 
 
 
 
 

4


Table 3A - Segment, Other, and Company Non-GAAP Operating Earnings (Loss) Reconciliations
 
Fourth Quarter
 
Twelve Months
(Dollars in millions, unaudited)
2015
 
2014
 
2015
 
2014
Additives & Functional Products
 
 
 
 
 
 
 
Operating earnings
$
97

 
$
93

 
$
462

 
$
329

Asset impairments and restructuring charges (gains), net (1)
—

 
(1
)
 
—

 
62

Additional costs of acquired inventories (1)
—

 
7

 
—

 
7

Excluding non-core items
97

 
99

 
462

 
398

Adhesives & Plasticizers
 

 
 

 
 

 
 

Operating earnings
49

 
41

 
239

 
196

Advanced Materials
 

 
 

 
 

 
 

Operating earnings
83

 
59

 
384

 
276

Asset impairments and restructuring charges, net (1)
—

 
2

 
18

 
16

Additional costs of acquired inventories (1)
—

 
1

 
7

 
1

Excluding non-core items
83

 
62

 
409

 
293

Fibers
 

 
 

 
 

 
 

Operating earnings
104

 
122

 
292

 
474

Asset impairments and restructuring charges, net (1)(2)
3

 
—

 
98

 
—

Excluding non-core items
107

 
122

 
390

 
474

Specialty Fluids & Intermediates
 
 
 
 
 
 
 
Operating earnings
20

 
41

 
253

 
289

Additional costs of acquired inventories (1)
—

 
8

 
—

 
16

Excluding non-core items
20

 
49

 
253

 
305

Other
 
 
 
 
 
 
 
Operating loss
(181
)
 
(329
)
 
(246
)
 
(402
)
Mark-to-market pension and other postretirement benefit plans loss, net (3)
113

 
304

 
115

 
304

Asset impairments and restructuring charges (gains), net (1)(4)
50

 
(1
)
 
67

 
(1
)
Acquisition integration and transaction costs (1)(5)
5

 
15

 
28

 
46

Excluding non-core items
(13
)
 
(11
)
 
(36
)
 
(53
)
 
 
 
 
 
 
 
 
Total Eastman Chemical Company
 
 
 
 
 
 
 
Operating earnings
172

 
27

 
1,384

 
1,162

Mark-to-market pension and other postretirement benefit plans loss, net
113

 
304

 
115

 
304

     Asset impairments and restructuring charges, net
53

 
—

 
183

 
77

Acquisition integration and transaction costs
5

 
15

 
28

 
46

Additional costs of acquired inventories
—

 
16

 
7

 
24

Total operating earnings excluding non-core items
$
343

 
$
362

 
$
1,717

 
$
1,613

 
 
 
 
 
 
 
 
Company Non-GAAP Operating Earnings Reconciliations by Line Items
 
 
 
 
 
 
 
Operating earnings
$
172

 
$
27

 
$
1,384

 
$
1,162

Costs of sales
82

 
256

 
91

 
264

Selling, general and administrative expenses
23

 
72

 
46

 
103

Research and development expenses
13

 
7

 
13

 
7

Asset impairment and restructuring charges, net
53

 
—

 
183

 
77

Total operating earnings excluding non-core items
$
343

 
$
362

 
$
1,717

 
$
1,613

 

(1) 
See "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Annual Report on Form 10-K for 2014 and the Company's Quarterly Report on Form 10-Q for third quarter 2015 for descriptions of non-core items.
(2) 
Included in fourth quarter and twelve months 2015 earnings are asset impairments and restructuring charges, net due to the closure of the Workington, UK acetate tow manufacturing facility.
(3) 
Fourth quarter and twelve months 2015 and 2014 included MTM pension and other postretirement benefit plans net loss.
(4) 
Included in fourth quarter and twelve months 2015 earnings are asset impairments and restructuring charges, net primarily due to severance costs for a corporate reduction in force of $51 million.
(5) 
Included in fourth quarter and twelve months 2015 earnings are integration and transaction costs primarily for the completed acquisitions of Taminco Corporation and Commonwealth Laminating & Coating, Inc.

5


Table 4 – Operating Earnings, Earnings, and Earnings Per Share from Continuing Operations Non-GAAP Reconciliations
 
 
Fourth Quarter 2015
 
 
Operating
Earnings
 
Earnings from Continuing Operations Before Income Taxes
 
Earnings from Continuing Operations
 Attributable to Eastman
(Dollars in millions, except per share amounts, unaudited)
 
 
After Tax (1)
 
Per Diluted Share
As reported
 
$
172

 
$
117

 
$
124

 
$
0.83

Non-Core Items:
 
 

 
 

 
 
 
 
Mark-to-market pension and other postretirement benefit plans loss, net (2)
 
113

 
113

 
69

 
0.46

Asset impairments and restructuring charges, net (2)
 
53

 
53

 
42

 
0.28

Acquisition integration and transaction costs (2)
 
5

 
5

 
4

 
0.02

Excluding non-core items
 
$
343

 
$
288

 
$
239

 
$
1.59



 
 
Fourth Quarter 2014
 
 
Operating
Earnings
 
Earnings from Continuing Operations
 Before Income Taxes
 
Earnings from Continuing Operations
 Attributable to Eastman
(Dollars in millions, except per share amounts, unaudited)
 
 
After Tax (1)
 
Per Diluted Share
As reported
 
$
27

 
$
(29
)
 
$
16

 
$
0.11

Non-Core Items:
 
 
 
 
 
 
 
 
Mark-to-market pension and other postretirement benefit plans loss, net (2)
 
304

 
304

 
202

 
1.35

Additional costs of acquired inventories (2)
 
16

 
16

 
10

 
0.07

Acquisition integration, transaction, and financing costs (2)(3)
 
15

 
25

 
18

 
0.11

Excluding non-core items
 
$
362

 
$
316

 
$
246

 
$
1.64


(1) 
Excluding the tax impact of non-core items, fourth quarter 2015 and 2014 effective tax rates were 17 percent and 22 percent, respectively. The fourth quarter 2015 tax rate was reduced by changes in our geographic mix of earnings resulting in a higher percentage of earnings in jurisdictions with lower effective tax rates than the U.S., and a reduction in foreign income taxes.
(2) 
See Table 3A for description of MTM net loss, asset impairments and restructuring charges, net, acquisition integration and transaction costs, and additional costs of acquired inventories.
(3) 
Acquisition transaction and integration costs of $15 million in selling, general, and administrative expenses and acquisition financing cost of $10 million in other charges (income), net.




6


Table 4 – Operating Earnings, Earnings, and Earnings Per Share from Continuing Operations Non-GAAP Reconciliations (continued)
 
 
Twelve Months 2015
 
 
Operating
Earnings
 
Earnings from Continuing Operations
 Before Income Taxes
 
Earnings from Continuing Operations
 Attributable to Eastman
(Dollars in millions, except per share amounts, unaudited)
 
 
After Tax (1)
 
Per Diluted Share
As reported
 
$
1,384

 
$
1,129

 
$
848

 
$
5.66

Non-Core Items:
 
 

 
 

 
 
 
 
Asset impairments and restructuring charges, net (2)
 
183

 
183

 
151

 
1.00

Mark-to-market pension and other postretirement benefit plans loss, net (2)
 
115

 
115

 
70

 
0.47

Acquisition integration and transaction costs (2)
 
28

 
28

 
18

 
0.12

Additional costs of acquired inventories (2)
 
7

 
7

 
4

 
0.03

Excluding non-core items
 
$
1,717

 
$
1,462

 
$
1,091

 
$
7.28



 
 
Twelve Months 2014
 
 
Operating
Earnings
 
Earnings from Continuing Operations
 Before Income Taxes
 
Earnings from Continuing Operations
 Attributable to Eastman
(Dollars in millions, except per share amounts, unaudited)
 
 
After Tax (1)
 
Per Diluted Share
As reported
 
$
1,162

 
$
990

 
$
749

 
$
4.95

Non-Core Items:
 
 
 
 
 
 
 
 
Mark-to-market pension and other postretirement benefit plans loss, net (2)
 
304

 
304

 
202

 
1.34

Asset impairments and restructuring charges, net (2)
 
77

 
77

 
63

 
0.42

Acquisition integration, transaction, and financing costs (2)(3)
 
46

 
59

 
39

 
0.26

Additional costs of acquired inventories (2)
 
24

 
24

 
15

 
0.10

Excluding non-core items
 
$
1,613

 
$
1,454

 
$
1,068

 
$
7.07


(1) 
Excluding the tax impact of non-core items, 2015 and 2014 effective tax rates were 25 percent and 26 percent, respectively.
(2) 
See Table 3A for description of asset impairments and restructuring charges, net, MTM net loss, acquisition integration and transaction, costs, and additional costs of acquired inventories.
(3) 
Acquisition transaction and integration costs of $46 million in selling, general, and administrative expenses and acquisition financing cost of $13 million in other charges (income), net.




7


Table 5 – Statements of Cash Flows
 
Fourth Quarter
 
Twelve Months
(Dollars in millions, unaudited)
2015
 
2014
 
2015
 
2014
Operating activities
 
 
 
 
 
 
 
Net earnings
$
125

 
$
17

 
$
854

 
$
757

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
142

 
122

 
571

 
450

Asset impairment charges
—

 
2

 
107

 
52

Gain on sale of assets
—

 
—

 
—

 
(5
)
Provision (benefit) for deferred income taxes
31

 
41

 
60

 
99

Mark-to-market pension and other postretirement benefit plans loss (gain), net
113

 
304

 
115

 
304

Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
 
 
 
 
 
 
 
(Increase) decrease in trade receivables
168

 
137

 
114

 
19

(Increase) decrease in inventories
(3
)
 
15

 
(26
)
 
(61
)
Increase (decrease) in trade payables
37

 
(18
)
 
(102
)
 
(30
)
Pension and other postretirement contributions (in excess of) less than expenses
(110
)
 
(89
)
 
(259
)
 
(165
)
Variable compensation (in excess of) less than expenses
51

 
35

 
71

 
27

Other items, net
8

 
(106
)
 
107

 
(39
)
Net cash provided by operating activities
562

 
460

 
1,612

 
1,408

Investing activities
 
 
 
 
 
 
 
Additions to properties and equipment
(226
)
 
(187
)
 
(652
)
 
(593
)
Proceeds from sale of assets
—

 
—

 
4

 
13

Acquisitions, net of cash acquired
—

 
(3,184
)
 
(45
)
 
(3,509
)
Other items, net
—

 
(2
)
 
—

 
(2
)
Net cash used in investing activities
(226
)
 
(3,373
)
 
(693
)
 
(4,091
)
Financing activities
 
 
 
 
 
 
 
Net increase (decrease) in commercial paper borrowings
38

 
(5
)
 
195

 
(190
)
Proceeds from borrowings
—

 
2,950

 
250

 
3,565

Repayment of borrowings
(275
)
 
—

 
(950
)
 
(125
)
Dividends paid to stockholders
(59
)
 
(51
)
 
(238
)
 
(210
)
Treasury stock purchases
(55
)
 
—

 
(103
)
 
(410
)
Dividends paid to noncontrolling interests
—

 
—

 
(6
)
 
(9
)
Proceeds from stock option exercises and other items, net
—

 
21

 
20

 
43

Net cash used in financing activities
(351
)
 
2,915

 
(832
)
 
2,664

Effect of exchange rate changes on cash and cash equivalents
(1
)
 
1

 
(8
)
 
(4
)
Net change in cash and cash equivalents
(16
)
 
3

 
79

 
(23
)
Cash and cash equivalents at beginning of period
309

 
211

 
214

 
237

Cash and cash equivalents at end of period
$
293

 
$
214

 
$
293

 
$
214



8


 
Table 5A – Net Cash Provided By Operating Activities to Free Cash Flow Reconciliation
 
 
Fourth Quarter
 
Twelve Months
(Dollars in millions, unaudited)
 
2015
 
2014
 
2015
 
2014
Net cash provided by operating activities
 
$
562

 
$
460

 
$
1,612

 
$
1,408

Additions to properties and equipment
 
(226
)
 
(187
)
 
(652
)
 
(593
)
Free Cash Flow
 
$
336

 
$
273

 
$
960

 
$
815




9



Table 6 – Selected Balance Sheet Items
 
 
December 31,
 
December 31,
(Dollars in millions, unaudited)
 
2015
 
2014
Cash and cash equivalents
 
$
293

 
$
214

Total borrowings
 
7,039

 
7,549

Total Eastman stockholders' equity
 
3,941

 
3,510


 

10