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Eastman Announces Record Quarterly Sales Revenue and Solid Third-Quarter Earnings

Published on 2005-10-28. Author : SpecialChem

KINGSPORT, Tenn. -- Eastman Chemical Company (NYSE:EMN - News) announced record sales revenue of $1.82 billion and earnings of $1.50 per diluted share for third quarter 2005 versus earnings of $0.49 per diluted share for third quarter 2004. Excluding the items described below for both periods, third-quarter 2005 earnings were $1.53 per diluted share, while third-quarter 2004 earnings were $0.79 per diluted share.

Included in the results for third quarter 2005 were asset impairments and restructuring charges of $4 million. Third-quarter 2004 results included asset impairments and restructuring charges of $42 million and a net deferred tax benefit of $8 million.

"Our strong base continued to deliver solid earnings despite the margin compression that occurred toward the end of the quarter due to volatile raw material and energy costs," said Brian Ferguson, chairman and CEO. "Year-over-year, our third-quarter earnings per share excluding the items described above increased by over 90 percent, and we remain on track for one of the best years in our company's history."

Operating earnings in third quarter 2005 were $198 million compared with operating earnings of $73 million in third quarter 2004. Excluding asset impairments and restructuring charges in both periods, operating earnings were $202 million in third quarter 2005 compared with $115 million in third quarter 2004. The year-over-year increase was due primarily to higher selling prices, higher sales volume from continuing product lines and ongoing cost reduction efforts. Third-quarter 2005 operating earnings increased despite raw material and energy costs that were more than $100 million over third-quarter 2004 levels.

Sales revenue for third quarter 2005 was $1.82 billion, a 10 percent increase over third quarter 2004 and a company record. The increase in sales revenue was due to higher selling prices throughout the company and increased sales volume from continuing product lines. Third-quarter 2004 sales revenue included sales revenue from restructured, divested and consolidated product lines in the coatings, adhesives, specialty polymers and inks (CASPI) segment. Excluding sales revenue from those product lines for third quarter 2004, year-over-year sales revenue increased by 15 percent and sales volume increased by 3 percent.

Eastman Division Results 3Q 2005 versus 3Q 2004

Coatings, Adhesives, Specialty Polymers and Inks - External sales revenue decreased by 7 percent as a result of the restructured, divested and consolidated product lines in third quarter 2004. Sales revenue for continuing product lines in the segment increased by 17 percent primarily due to higher selling prices for cyclical commodity product lines. Operating earnings increased as higher selling prices and continued cost reduction efforts more than offset higher raw material and energy costs.

Performance Chemicals and Intermediates - External sales revenue increased by 16 percent primarily due to higher selling prices. Operating earnings increased substantially as a result of higher selling prices and continued cost reduction efforts that more than offset higher raw material and energy costs. Third-quarter operating earnings included $10 million of operating earnings from the achievement of certain milestones under an acetyls technology licensing agreement.

Specialty Plastics - External sales revenue increased by 8 percent as higher selling prices more than offset lower sales volume. The lower sales volume was attributed mainly to the impact on demand of higher selling prices that were largely the result of efforts to offset increased raw material and energy costs. Lower acetate sales volume for use in photographic film also contributed to the segment's overall lower sales volume. Operating earnings declined as higher sales revenue was more than offset by increased raw material and energy costs and expenditures related to growth efforts.

Voridian Division Results 3Q 2005 versus 3Q 2004

Polymers - External sales revenue increased by 19 percent primarily due to higher selling prices and increased sales volume. The higher selling prices were mainly the result of efforts to offset volatile raw material and energy costs. Operating earnings increased as higher selling prices and ongoing cost reduction efforts more than offset the higher raw material and energy costs.

Fibers - External sales revenue increased by 24 percent as a result of higher selling prices and increased sales volume. The higher sales volume was attributed to stronger demand for acetate tow and acetate yarn resulting from structural changes in their respective markets. Operating earnings increased as higher selling prices and increased sales volume more than offset higher raw material and energy costs.

Developing Businesses Division Results 3Q 2005 versus 3Q 2004 - External sales revenue for third quarter 2005 was $2 million compared with $31 million for third quarter 2004. The decline was attributed primarily to the shutdown of Cendian Corporation. Division third-quarter 2005 operating results included asset impairments and restructuring charges of $3 million related to the Cendian actions.

Cash Flow

Eastman generated $165 million in cash from operating activities in third quarter 2005 compared with cash from operating activities of $119 million in third quarter 2004. The increase is primarily attributed to strong operating results. In addition, the company made a contribution of $103 million to its U.S. defined benefit pension plans during the third quarter and has contributed $165 million year-to-date.

Outlook

Commenting on the outlook for the fourth quarter 2005, Ferguson said, "There is currently limited visibility regarding the degree to which the aftermath of the hurricanes in the Gulf Coast will affect the costs and availability of key raw materials and economic growth for the remainder of 2005. In addition, normal seasonality typically reduces demand in some of our businesses and product lines in the fourth quarter. We remain focused on pricing as a key determinant of our profitability, particularly in the current business environment."

Eastman manufactures and markets chemicals, fibers and plastics worldwide. It provides key differentiated coatings, adhesives and specialty plastics products; is the world's largest producer of PET polymers for packaging; and is a major supplier of cellulose acetate fibers. Founded in 1920 and headquartered in Kingsport, Tenn., Eastman is a FORTUNE 500 company with 2004 sales of $6.6 billion and approximately 12,000 employees.

Forward-Looking Statements: This news release includes forward-looking statements concerning current expectations for future economic and business conditions; raw material and energy costs; company strategies, actions and efforts to control and reduce costs and to increase overall selling prices and continue to improve operating and financial performance; and overall operating and financial performance for the fourth quarter of 2005. 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 second quarter 2005 and the Form 10-Q to be filed for third quarter 2005, available on the Eastman web site at in the Investors, SEC filings section.

Source: Eastman Chemical Company


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