EASTMAN CHEMICAL CO
For the period ended Mar 31, 2024. Filed Apr 26, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed Apr 26, 2024
Extracted filing text, with the paragraph anchors used by the comparison.
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Item 2. Results of Operations
Table of Contents
RESULTS OF OPERATIONS
Sales
| First Quarter | ||||||
|---|---|---|---|---|---|---|
| Change | ||||||
| (Dollars in millions) · 2024 · 2023 · $ · % | ||||||
| Sales | $2,310 | $2,412 | $(102) | (4)% | ||
| Volume / product mix effect | 63 | 3% | ||||
| Price effect | (164) | (7)% | ||||
| Exchange rate effect | (1) | —% | ||||
Sales revenue decreased in first quarter 2024 compared to first quarter 2023 primarily as a result of decreases in the CI and AFP segments, partially offset by increases in the Fibers and AM segments. Further discussion by operating segment is presented in "Summary by Operating Segment" in this MD&A.
Gross Profit
| First Quarter | |||
|---|---|---|---|
| (Dollars in millions) | 2024 | 2023 | Change |
| Gross profit | $532 | $529 | 1% |
| Accelerated depreciation | — | 23 | |
| Steam line incident costs (insurance proceeds), net | — | (8) | |
| Gross profit excluding non-core and unusual items | $532 | $544 | (2)% |
Gross profit in first quarter 2023 included insurance proceeds from the steam line incident and accelerated depreciation resulting from the previously reported closure of an acetate yarn manufacturing facility in Europe in the Fibers segment. Excluding these non-core and unusual items, gross profit decreased in first quarter 2024 compared to first quarter 2023 as a result of decreases in the CI and AFP segments, partially offset by increases in the Fibers and AM segments. Further discussion of sales revenue and EBIT changes is presented in "Summary by Operating Segment" in this MD&A.
Selling, General and Administrative Expenses
| First Quarter | |||
|---|---|---|---|
| (Dollars in millions) | 2024 | 2023 | Change |
| Selling, general and administrative expenses | $191 | $191 | —% |
Selling, general and administrative expenses remained unchanged in first quarter 2024 compared to first quarter 2023 as higher variable compensation costs were offset by lower spend due to cost reduction initiatives.
Research and Development Expenses
| First Quarter | |||
|---|---|---|---|
| (Dollars in millions) | 2024 | 2023 | Change |
| Research and development expenses | $59 | $62 | (5)% |
R&D expenses decreased in first quarter 2024 compared to first quarter 2023 primarily due to targeted cost reduction initiatives.
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Asset Impairments and Restructuring Charges, Net
| First Quarter | ||
|---|---|---|
| (Dollars in millions) | 2024 | 2023 |
| Severance charges | $11 | $16 |
| Site closure and other restructuring charges | — | 6 |
| Total | $11 | $22 |
For detailed information regarding asset impairments and restructuring charges, net see Note 12, "Asset Impairments and Restructuring Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.
Other Components of Post-employment (Benefit) Cost, Net
| First Quarter | ||
|---|---|---|
| (Dollars in millions) | 2024 | 2023 |
| Other components of post-employment (benefit) cost, net | $(5) | $(3) |
For more information regarding other components of post-employment (benefit) cost, net see Note 6, "Retirement Plans", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.
Other (Income) Charges, Net
| First Quarter | ||
|---|---|---|
| (Dollars in millions) | 2024 | 2023 |
| Foreign exchange transaction losses, net | $5 | $2 |
| (Income) loss from equity investments and other investment (gains) losses, net | — | 6 |
| Other, net | 8 | 3 |
| Other (income) charges, net | $13 | $11 |
Other (income) charges, net increased in first quarter 2024 compared to first quarter 2023 primarily due to higher factoring fees and increases in foreign exchange transaction losses partially offset by valuation adjustments in equity investments in first quarter 2023. For more information regarding components of foreign exchange transaction losses, see Note 5, "Derivative and Non-Derivative Financial Instruments", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.
Earnings Before Interest and Taxes
| First Quarter | |||
|---|---|---|---|
| (Dollars in millions) | 2024 | 2023 | Change |
| Earnings before interest and taxes | $263 | $246 | 7% |
| Asset impairments and restructuring charges, net | 11 | 22 | |
| Accelerated depreciation | — | 23 | |
| Steam line incident costs (insurance proceeds), net | — | (8) | |
| Earnings before interest and taxes excluding non-core and unusual items | $274 | $283 | (3)% |
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Net Interest Expense
| First Quarter | |||
|---|---|---|---|
| (Dollars in millions) | 2024 | 2023 | Change |
| Gross interest costs | $58 | $58 | —% |
| Less: Capitalized interest | 5 | 3 | |
| Interest expense | 53 | 55 | |
| Less: Interest income | 4 | 3 | |
| Net interest expense | $49 | $52 | (6)% |
Net interest expense decreased in first quarter 2024 compared to first quarter 2023 primarily as a result of higher capitalized interest and interest income.
Provision for Income Taxes
| First Quarter | ||||
|---|---|---|---|---|
| 2024 | 2023 | |||
| (Dollars in millions) | $ | % | $ | % |
| Provision for income taxes and effective tax rate | $49 | 23% | $60 | 31% |
| Tax provision for non-core and unusual items (1) | 3 | 5 | ||
| Adjustment from tax law changes (2) | — | (23) | ||
| Interim adjustment to tax provision (3) | (17) | (6) | ||
| Adjusted provision for income taxes and effective tax rate | $35 | 16% | $36 | 16% |
(1)Provision for income taxes for non-core and unusual items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
(2)Increase to the provision for state income taxes due to adjustment of amounts recognized in prior years as a result of state guidance issued in first quarter 2023 related to the Tax Reform Act.
(3)First quarter 2024 provision for income taxes was adjusted to reflect the current forecasted full year effective tax rate. First quarter 2023 provision for income taxes was adjusted to reflect the then current forecasted full year effective tax rate.
| First Three Months (1) | ||
|---|---|---|
| 2024 | 2023 | |
| Effective tax rate | 23% | 31% |
| Discrete tax items (2) | (1)% | —% |
| Tax impact of current year non-core and unusual items (3) | 1% | (8)% |
| Changes in tax contingencies and valuation allowances | (1)% | (1)% |
| Forecasted full year impact of expected tax events | (6)% | (6)% |
| Forecasted full year adjusted effective tax rate | 16% | 16% |
(1)Effective tax rate percentages are rounded to the nearest whole percent. The forecasted full year effective tax rate is 15.5 percent in both first three months 2024 and 2023.
(2)"Discrete tax items" are items that are excluded from a company's estimated annual effective tax rate and recognized entirely in the quarter in which the item occurs. Discrete items for 2024 are related to share based compensation expense.
(3)Provision for income taxes for non-core and unusual items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
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Net Earnings Attributable to Eastman and Diluted Earnings per Share
| First Quarter | ||||
|---|---|---|---|---|
| 2024 | 2023 | |||
| (Dollars in millions, except EPS) | $ | EPS | $ | EPS |
| Net earnings and diluted earnings per share attributable to Eastman | $165 | $1.39 | $134 | $1.12 |
| Non-core items, net of tax: (1) | ||||
| Asset impairments and restructuring charges, net | 8 | 0.07 | 18 | 0.14 |
| Accelerated depreciation | — | — | 20 | 0.17 |
| Unusual items, net of tax: (1) | ||||
| Steam line incident costs (insurance proceeds), net | — | — | (6) | (0.05) |
| Adjustment from tax law changes | — | — | 23 | 0.19 |
| Interim adjustment to tax provision | 17 | 0.15 | 6 | 0.06 |
| Adjusted net earnings and diluted earnings per share attributable to Eastman | $190 | $1.61 | $195 | $1.63 |
(1)Provision for income taxes for non-core and unusual items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
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