Eastman(EMN) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information This document is a Quarterly Report on Form 10-Q for Eastman Chemical Company, covering the period ended June 30, 2025, with the company classified as a large accelerated filer Filing Details This document is a Quarterly Report on Form 10-Q for Eastman Chemical Company, covering the period ended June 30, 2025, with the company classified as a large accelerated filer and not a shell company - Filing Type: Quarterly Report (Form 10-Q) for the period ended June 30, 2025[2] - Registrant: Eastman Chemical Company (Commission file number 1-12626), incorporated in Delaware[2][3] - Filer Status: Large accelerated filer[4] Common Stock Outstanding | Class | Number of Shares Outstanding at June 30, 2025 | | :--- | :--- | | Common Stock, par value $0.01 per share | 114,832,412 | Forward-Looking Statements This section outlines that the report contains forward-looking statements, which are subject to inherent risks and uncertainties, with actual results potentially differing materially from expectations Nature and Risks of Forward-Looking Statements This section outlines that the report contains forward-looking statements, which are subject to inherent risks and uncertainties, with actual results potentially differing materially from expectations due to inaccurate assumptions or unrealized conditions, as detailed in the 'Risk Factors' section - Forward-looking statements are identified by terms such as 'anticipates', 'believes', 'estimates', 'expects', 'intends', 'may', 'plans', 'projects', 'forecasts', 'will', 'would', 'could', and similar expressions[10] - These statements are based on underlying assumptions, internal estimates, market conditions, management expectations, and economic conditions, and are subject to inherent risks and uncertainties[11] - Known material factors, risks, and uncertainties that could cause actual results to differ are discussed under 'Risk Factors' in Part II, Item 1A[11] - The Company cautions against undue reliance on forward-looking statements and undertakes no obligation to publicly update or alter them, except as required by law[12] PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the company ITEM 1. Financial Statements This section presents the unaudited consolidated financial statements for Eastman Chemical Company, including statements of earnings, comprehensive income, retained earnings, financial position, and cash flows for the second quarter and first six months of 2025 and 2024, along with detailed notes on significant accounting policies, inventories, income taxes, borrowings, derivative instruments, retirement plans, environmental matters, legal matters, stockholders' equity, earnings per share, asset impairments, share-based compensation, and segment information Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings This section presents the unaudited consolidated statements of earnings, comprehensive income, and retained earnings, highlighting key financial performance metrics for the second quarter and first six months of 2025 and 2024 Second Quarter Performance (YoY Change) | Metric | 2025 (Millions $) | 2024 (Millions $) | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales | 2,287 | 2,363 | (76) | (3.2%) | | Gross profit | 506 | 599 | (93) | (15.5%) | | Net earnings attributable to Eastman | 140 | 230 | (90) | (39.1%) | | Basic EPS attributable to Eastman | 1.22 | 1.96 | (0.74) | (37.8%) | | Diluted EPS attributable to Eastman | 1.20 | 1.94 | (0.74) | (38.1%) | First Six Months Performance (YoY Change) | Metric | 2025 (Millions $) | 2024 (Millions $) | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales | 4,577 | 4,673 | (96) | (2.1%) | | Gross profit | 1,073 | 1,131 | (58) | (5.1%) | | Net earnings attributable to Eastman | 322 | 395 | (73) | (18.5%) | | Basic EPS attributable to Eastman | 2.80 | 3.37 | (0.57) | (16.9%) | | Diluted EPS attributable to Eastman | 2.77 | 3.33 | (0.56) | (16.8%) | - Retained earnings at the end of the period increased to $10,143 million in Q2 2025 from $9,694 million in Q2 2024[15] Unaudited Consolidated Statements of Financial Position This section provides the unaudited consolidated statements of financial position, detailing assets, liabilities, and equity at June 30, 2025, compared to December 31, 2024 Financial Position (June 30, 2025 vs. December 31, 2024) | Asset/Liability | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total assets | 15,219 | 15,213 | 6 | 0.04% | | Total liabilities | 9,313 | 9,361 | (48) | (0.51%) | | Total equity | 5,906 | 5,852 | 54 | 0.92% | | Cash and cash equivalents | 423 | 837 | (414) | (49.5%) | | Inventories | 2,151 | 1,988 | 163 | 8.2% | | Long-term borrowings | 4,782 | 4,567 | 215 | 4.7% | - Current assets decreased from $4,101 million at December 31, 2024, to $4,021 million at June 30, 2025, primarily due to a significant decrease in cash and cash equivalents[17] - Total Eastman stockholders' equity increased to $5,835 million at June 30, 2025, from $5,779 million at December 31, 2024[17] Unaudited Consolidated Statements of Cash Flows This section presents the unaudited consolidated statements of cash flows, detailing operating, investing, and financing activities for the first six months of 2025 and 2024 Cash Flow Summary (First Six Months, YoY Change) | Activity | 2025 (Millions $) | 2024 (Millions $) | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 66 | 351 | (285) | (81.2%) | | Net cash used in investing activities | (278) | (300) | 22 | (7.3%) | | Net cash used in financing activities | (214) | (79) | (135) | 170.9% | | Net change in cash and cash equivalents | (414) | (34) | (380) | 1117.6% | - Cash and cash equivalents at the end of the period decreased significantly from $837 million at the beginning of the period to $423 million at June 30, 2025[20] Note 1. Significant Accounting Policies This note details the basis of presentation for the unaudited consolidated financial statements, affirming consistency with the 2024 Annual Report on Form 10-K and GAAP, and covers recently adopted accounting standards, working capital management, off-balance sheet arrangements, and government grants - Eastman adopted ASU 2023-05 (Joint Venture Formations) and ASU 2023-09 (Income Tax Disclosures) on January 1, 2025, with no significant impact on interim financial statements[28][29] - The Company engages in off-balance sheet, non-recourse accounts receivable factoring programs, selling $674 million in Q2 2025 and $1.4 billion in H1 2025[32] - The U.S. Department of Energy terminated an award for the Polyethylene Terephthalate Recycling Decarbonization Project on May 29, 2025, with Eastman receiving $14 million in reimbursements in H1 2025 and evaluating the impact[34] Note 2. Inventories This note provides a breakdown of inventory values, showing an increase in total inventories from $1,988 million at December 31, 2024, to $2,151 million at June 30, 2025, with approximately 50% valued using the LIFO method Inventories (Millions $) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Finished goods | 1,475 | 1,321 | | Work in process | 322 | 305 | | Raw materials and supplies | 699 | 737 | | Total inventories at FIFO or average cost | 2,496 | 2,363 | | Less: LIFO reserve | 345 | 375 | | Total inventories | 2,151 | 1,988 | - Inventories valued on the LIFO method constituted approximately 50% of total inventories at both June 30, 2025, and December 31, 2024[36] Note 3. Income Taxes The provision for income taxes for Q2 2025 was $29 million (17% effective tax rate), down from $56 million (20%) in Q2 2024, and for the first six months of 2025, it was $99 million (23%), compared to $105 million (21%) in 2024, with changes influenced by uncertain tax positions and foreign rate variances, and the Company is evaluating the potential impacts of the recently enacted 'One Big Beautiful Bill Act' Provision for Income Taxes and Tax Rate | Period | 2025 (Millions $) | 2025 (%) | 2024 (Millions $) | 2024 (%) | | :--- | :--- | :--- | :--- | :--- | | Second Quarter | 29 | 17% | 56 | 20% | | First Six Months | 99 | 23% | 105 | 21% | - The Q2 2025 provision includes an increase related to uncertain tax positions offset by a decrease from foreign rate variance due to the Company's mix of earnings[38] - Unrecognized tax benefits were $347 million at June 30, 2025, up from $321 million at December 31, 2024[39] - The Company is evaluating the potential impacts of the 'One Big Beautiful Bill Act' enacted on July 4, 2025, which includes modifications to federal income tax law[40] Note 4. Borrowings Total borrowings increased to $5,126 million at June 30, 2025, from $5,017 million at December 31, 2024, driven by issuing $250 million of 5.0% notes and repaying $450 million of 3.80% notes, while maintaining a $1.50 billion revolving credit facility and having $344 million in commercial paper borrowings Borrowings (Millions $) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total borrowings | 5,126 | 5,017 | | Less: Borrowings due within one year | 344 | 450 | | Long-term borrowings | 4,782 | 4,567 | | Commercial paper and short-term borrowings | 344 | — | | 5.0% notes due August 2029 | 742 | 495 | | 3.80% notes due March 2025 | — | 450 | - In Q1 2025, the Company issued an additional $250 million of 5.0% notes due August 2029 and repaid $450 million of 3.80% notes due March 2025[41] - Eastman has access to a $1.50 billion revolving credit agreement maturing in February 2029, with no outstanding borrowings at June 30, 2025[43] - Commercial paper borrowings were $344 million at June 30, 2025, with a weighted interest rate of 4.62%, compared to no commercial paper borrowings at December 31, 2024[43] - The Company repaid $100 million of the 2027 Term Loan in Q1 2025, reducing the outstanding balance to $150 million[44] Note 5. Derivative and Non-Derivative Financial Instruments Eastman uses derivative and non-derivative financial instruments to mitigate market risks from foreign currency exchange rates, raw material/energy prices, and interest rates, employing cash flow, fair value, and net investment hedges, with total net derivative liabilities increasing significantly to $201 million at June 30, 2025, primarily due to unrealized losses from euro to U.S. dollar exchange rate changes - Eastman uses derivative instruments (cash flow, fair value, net investment hedges) to manage foreign currency, raw material/energy, and interest rate risks, not for speculative purposes[47] - In Q1 2025, the Company entered into new fixed-to-fixed cross-currency swaps totaling $300 million and terminated/reentered other swaps, resulting in a $2 million loss recognized in CTA[55][56] Notional Outstanding of Derivatives (Millions) | Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | EUR/USD Foreign Exchange Forward and Option Contracts | €450 | €428 | | Energy Commodity Forward and Collar Contracts (million british thermal units) | 9 | 10 | | EUR/USD Cross-currency interest rate swaps | €1,449 | €1,543 | | JPY/USD Cross-currency interest rate swaps | ¥7,885 | ¥7,385 | | EUR/USD Non-derivatives designated as net investment hedges | €499 | €499 | Total Net Derivative Assets (Liabilities) (Millions $) | Date | Amount | | :--- | :--- | | June 30, 2025 | (201) | | December 31, 2024 | 35 | - Unrealized losses in Accumulated Other Comprehensive Income (AOCI) increased to $156 million at June 30, 2025, from a gain of $154 million at December 31, 2024, primarily due to an increase in euro to U.S. dollar exchange rates[71] Note 6. Retirement Plans Eastman maintains defined benefit pension plans and other postretirement benefit plans for eligible employees and retirees, with negligible net periodic benefit cost for pension plans in Q2 and H1 2025, while other postretirement benefit plans incurred costs of $5 million in Q2 2025 and $9 million in H1 2025 - Eastman provides defined benefit pension plans and life insurance/health reimbursement arrangements for eligible retirees[72] Net Periodic Benefit (Credit) Cost (Millions $) | Period | Pension Plans (U.S.) | Pension Plans (Non-U.S.) | Other Postretirement Benefit Plans | | :--- | :--- | :--- | :--- | | Second Quarter 2025 | — | — | 5 | | Second Quarter 2024 | 1 | 1 | 2 | | First Six Months 2025 | — | 1 | 9 | | First Six Months 2024 | — | 2 | 4 | Note 7. Environmental Matters and Asset Retirement Obligations Eastman faces environmental liabilities related to hazardous waste sites and remediation, with a total net environmental reserve of $325 million at June 30, 2025, up from $284 million at December 31, 2024, and estimated future remediation costs ranging from $293 million to $502 million, in addition to environmental and non-environmental asset retirement obligations - Eastman is a potentially responsible party (PRP) for hazardous waste site cleanups and incurs costs for environmental remediation and closure/post-closure[76] Environmental Reserve (Millions $) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Environmental contingencies, current | 15 | 15 | | Environmental contingencies, long-term | 310 | 269 | | Total | 325 | 284 | - Estimated future environmental expenditures for undiscounted remediation costs ranged from $293 million to $502 million at June 30, 2025[79] - Environmental asset retirement obligations were $32 million, and non-environmental asset retirement obligations were $55 million at June 30, 2025[81][82] Note 8. Legal Matters Eastman is involved in various lawsuits, claims, investigations, and proceedings in the ordinary course of business, with management believing that their ultimate resolution will not have a material adverse effect on the Company's financial position, results of operations, or cash flows - The Company is party to various legal matters including product liability, personal injury, asbestos, patent, environmental, and employment matters[84] - Management does not believe the ultimate resolution of pending legal matters will have a material adverse effect on the Company's overall financial position, results of operations, or cash flows[84] Note 9. Stockholders' Equity Eastman's total equity increased to $5,906 million at June 30, 2025, from $5,852 million at December 31, 2024, driven by net earnings, partially offset by dividends and share repurchases, while accumulated other comprehensive income (loss) decreased due to unrealized losses on derivative instruments Changes in Total Eastman Stockholders' Equity (Millions $) | Item | First Six Months 2025 | First Six Months 2024 | | :--- | :--- | :--- | | Balance at beginning of period | 5,779 | 5,458 | | Net Earnings | 322 | 395 | | Cash Dividends Declared | (192) | (191) | | Other Comprehensive Income (Loss) | (39) | 17 | | Share-Based Compensation Expense | 25 | 35 | | Stock Option Exercises | 2 | 22 | | Share Repurchases | (50) | (100) | | Balance at end of period | 5,835 | 5,627 | Accumulated Other Comprehensive Income (Loss), Net of Tax (Millions $) | Component | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cumulative Translation Adjustment | (315) | (317) | | Unrecognized Prior Service Credits | 3 | 3 | | Unrealized Gains (Losses) on Derivative Instruments | (40) | 1 | | Unrealized Losses on Investments | (1) | (1) | | Total | (353) | (314) | - The period change in Accumulated Other Comprehensive Income (Loss) for the first six months of 2025 was a loss of $39 million, compared to a gain of $17 million in the same period of 2024[92] Note 10. Earnings and Dividends Per Share Diluted EPS attributable to Eastman decreased to $1.20 in Q2 2025 from $1.94 in Q2 2024, and to $2.77 in H1 2025 from $3.33 in H1 2024, while cash dividends declared were $0.83 per share for Q2 2025 and $1.66 per share for H1 2025 Earnings Per Share (EPS) Attributable to Eastman | Period | 2025 Basic EPS ($) | 2025 Diluted EPS ($) | 2024 Basic EPS ($) | 2024 Diluted EPS ($) | | :--- | :--- | :--- | :--- | :--- | | Second Quarter | 1.22 | 1.20 | 1.96 | 1.94 | | First Six Months | 2.80 | 2.77 | 3.37 | 3.33 | - Weighted average shares used for diluted EPS were 116.2 million in Q2 2025, down from 118.6 million in Q2 2024[94] - Cash dividends declared were $0.83 per share for Q2 2025 (up from $0.81 in Q2 2024) and $1.66 per share for H1 2025 (up from $1.62 in H1 2024)[95] Note 11. Asset Impairments, Restructuring, and Other Charges, Net Total asset impairments, restructuring, and other charges, net, were $13 million in Q2 2025 (up from $0 in Q2 2024) and $22 million in H1 2025 (up from $11 million in H1 2024), primarily including severance related to corporate cost reduction initiatives and restructuring charges for a heat-transfer fluids production line closure Asset Impairments, Restructuring, and Other Charges, Net (Millions $) | Category | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Severance charges | 10 | — | 11 | 11 | | Restructuring and other charges | 3 | — | 11 | — | | Total | 13 | — | 22 | 11 | - Q2 and H1 2025 severance charges of $10 million and $11 million, respectively, relate to corporate cost reduction initiatives[97] - H1 2025 includes $3 million in restructuring charges for the closure of a heat-transfer fluids production line in the Additives & Functional Products segment[97] - Reserves for asset impairments and restructuring decreased from $26 million at January 1, 2025, to $19 million at June 30, 2025, after provisions and cash reductions[98] Note 12. Share-Based Compensation Awards Eastman recognized $2 million in share-based compensation expense (before tax) in Q2 2025, down from $14 million in Q2 2024, and for the first six months of 2025, the expense was $25 million, down from $35 million in H1 2024, with these expenses recorded in 'Selling, general and administrative expenses' Share-Based Compensation Expense (Before Tax, Millions $) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Second Quarter | 2 | 14 | | First Six Months | 25 | 35 | - The compensation expense is recognized in 'Selling, general and administrative expenses' and includes awards such as restricted stock, restricted stock units, stock options, and performance shares[101][102] Note 13. Segment Information Eastman operates in four segments: Advanced Materials (AM), Additives & Functional Products (AFP), Chemical Intermediates (CI), and Fibers, with segment performance evaluated based on Adjusted EBIT, and total sales by operating segment decreased in Q2 and H1 2025, while total assets by operating segment increased at June 30, 2025 - Eastman's four operating segments are Advanced Materials (AM), Additives & Functional Products (AFP), Chemical Intermediates (CI), and Fibers[105] - Segment operating performance is evaluated based on Adjusted EBIT, which excludes non-core, unusual, or non-recurring items[105] Sales by Segment (Millions $) | Segment | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Advanced Materials | 777 | 795 | 1,496 | 1,543 | | Additives & Functional Products | 769 | 718 | 1,502 | 1,422 | | Chemical Intermediates | 463 | 515 | 1,008 | 1,038 | | Fibers | 274 | 330 | 562 | 661 | | Total Sales by Operating Segment | 2,283 | 2,358 | 4,568 | 4,664 | Adjusted EBIT by Segment (Millions $) | Segment | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Advanced Materials | 121 | 131 | 237 | 235 | | Additives & Functional Products | 153 | 123 | 294 | 232 | | Chemical Intermediates | (30) | 22 | (11) | 38 | | Fibers | 81 | 122 | 169 | 239 | Assets by Segment (Millions $) | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Advanced Materials | 5,901 | 5,735 | | Additives & Functional Products | 4,809 | 4,608 | | Chemical Intermediates | 1,676 | 1,586 | | Fibers | 1,114 | 1,075 | | Total Assets by Operating Segment | 13,500 | 13,004 | ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Eastman's financial condition and results of operations, including an overview of its innovation-driven growth model and detailed analysis of sales, EBIT, net earnings, and EPS, along with discussions on non-GAAP financial measures, segment performance, sales by customer location, liquidity, cash flows, debt, capital expenditures, stock repurchases, and critical accounting estimates Non-GAAP Financial Measures Management uses non-GAAP financial measures, such as EBIT excluding non-core items, adjusted tax rate, and net debt, to evaluate period-over-period performance and resource allocation, with these measures excluding unusual or non-recurring items to provide a clearer view of core business operations and reconciled to the most comparable GAAP measures - Non-GAAP measures are used by management to evaluate longer-term performance, understand operational performance, and make resource allocation decisions[124] - Non-core items excluded from non-GAAP earnings include asset impairments, restructuring, acquisition/disposition costs, environmental costs, and mark-to-market pension adjustments[125] - The non-GAAP measure 'net debt' is defined as total borrowings less cash and cash equivalents, used to assess overall financial position, liquidity, and leverage[129] Total Non-Core Items Impacting Net Earnings Attributable to Eastman (Millions $) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Second Quarter | 46 | 26 | | First Six Months | 86 | 51 | Overview Eastman's innovation-driven growth model leverages technology platforms, application development, and market engagement, with a focus on molecular recycling, while sales revenue decreased in Q2 and H1 2025 due to lower sales volume and continued weakness in key end markets, partially offset by growth in the AFP segment, and EBIT excluding non-core items also decreased due to lower sales volume, lower selling prices, and higher costs - Eastman's innovation-driven growth model focuses on world-class scalable technology platforms, differentiated application development, and market engagement, with molecular recycling as a key investment area[136] Sales and EBIT (Millions $) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales | 2,287 | 2,363 | 4,577 | 4,673 | | Earnings before interest and taxes (EBIT) | 222 | 337 | 524 | 600 | | EBIT excluding non-core items | 275 | 353 | 586 | 627 | - Sales revenue decreased in Q2 and H1 2025 primarily due to lower sales volume from weak end markets and an unplanned outage in the CI segment, partially offset by higher volume in AFP[137] - EBIT excluding non-core items decreased due to lower sales volume, lower selling prices (net of higher raw material/energy costs), and higher maintenance costs, partially offset by lower variable compensation[138] Results of Operations Net earnings attributable to Eastman decreased to $140 million in Q2 2025 (from $230 million in Q2 2024) and to $322 million in H1 2025 (from $395 million in H1 2024), with adjusted net earnings also declining, and sales revenue decreasing by 3% in Q2 and 2% in H1 2025, primarily due to volume/product mix effects, while gross profit, SG&A expenses, and EBIT also decreased, and R&D expenses and net interest expense increased Net Earnings and Diluted EPS Attributable to Eastman | Period | 2025 Net Earnings (Millions $) | 2025 Diluted EPS ($) | 2024 Net Earnings (Millions $) | 2024 Diluted EPS ($) | | :--- | :--- | :--- | :--- | :--- | | Second Quarter | 140 | 1.20 | 230 | 1.94 | | First Six Months | 322 | 2.77 | 395 | 3.33 | Sales Revenue Change (YoY) | Period | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | | Second Quarter | (76) | (3%) | | First Six Months | (96) | (2%) | Contributing Factors (H1 2025 vs H1 2024) | Factor | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | | Volume / product mix effect | (85) | (2%) | | Price effect | 6 | 0% | | Exchange rate effect | (17) | 0% | - Gross profit decreased by 16% in Q2 2025 and 5% in H1 2025, primarily due to decreases across all segments except AFP[143] - R&D expenses increased by 12% in Q2 2025 and 13% in H1 2025, driven by strategic investment in innovation[147] - Net interest expense increased slightly by 6% in Q2 2025 and 3% in H1 2025 due to higher borrowings[155] - The adjusted effective tax rate for both Q2 and H1 2025 was 16%, consistent with the forecasted full year adjusted effective tax rate[156][159] Summary by Operating Segment The Advanced Materials segment experienced sales and EBIT decreases in Q2 2025 due to weak demand, but a slight EBIT increase in H1 2025, while the Additives & Functional Products segment showed strong growth with increased sales and EBIT in both periods, driven by higher selling prices and favorable product mix, and Chemical Intermediates saw significant sales and EBIT declines due to lower volume, prices, and an unplanned outage, and the Fibers segment also faced sales and EBIT decreases from lower sales volume and global trade disputes Advanced Materials Segment Performance (YoY Change) | Metric | Q2 2025 (Millions $) | Q2 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 777 | 795 | (2%) | | EBIT | 121 | 131 | (8%) | | Metric | H1 2025 (Millions $) | H1 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 1,496 | 1,543 | (3%) | | EBIT | 237 | 235 | 1% | - AM sales decreased due to weak demand in building/construction and automotive, while H1 EBIT slightly increased due to lower SG&A[164][166] Additives & Functional Products Segment Performance (YoY Change) | Metric | Q2 2025 (Millions $) | Q2 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 769 | 718 | 7% | | EBIT (excluding non-core) | 153 | 123 | 24% | | Metric | H1 2025 (Millions $) | H1 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 1,502 | 1,422 | 6% | | EBIT (excluding non-core) | 294 | 232 | 27% | - AFP sales and EBIT increased due to higher selling prices, favorable product mix (care additives, heat transfer fluid projects), and lower SG&A[170][171][173] Chemical Intermediates Segment Performance (YoY Change) | Metric | Q2 2025 (Millions $) | Q2 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 463 | 515 | (10%) | | EBIT | (30) | 22 | (236%) | | Metric | H1 2025 (Millions $) | H1 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 1,008 | 1,038 | (3%) | | EBIT | (11) | 38 | (129%) | - CI sales and EBIT decreased significantly due to lower sales volume, lower selling prices (industrial end market), and an approximately $20 million impact from an unplanned outage[174][175][176] Fibers Segment Performance (YoY Change) | Metric | Q2 2025 (Millions $) | Q2 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 274 | 330 | (17%) | | EBIT | 81 | 122 | (34%) | | Metric | H1 2025 (Millions $) | H1 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 562 | 661 | (15%) | | EBIT | 169 | 239 | (29%) | - Fibers sales and EBIT decreased due to lower sales volume in acetate tow (destocking, capacity adjustments) and lower textiles sales into China (global trade dispute)[179][180] Sales by Customer Location Total sales revenue decreased by 3% in Q2 2025 and 2% in H1 2025, primarily driven by lower sales volume and unfavorable product mix in Europe, Middle East, and Africa (EMEA) and United States and Canada (US&C) regions, partially offset by higher sales volume and favorable product mix in Asia Pacific and Latin America Sales Revenue by Customer Location (Millions $) | Region | Q2 2025 | Q2 2024 | Q2 Change ($ Millions) | Q2 Change (%) | | :--- | :--- | :--- | :--- | :--- | | United States and Canada | 963 | 994 | (31) | (3%) | | Europe, Middle East, and Africa | 610 | 650 | (40) | (6%) | | Asia Pacific | 583 | 590 | (7) | (1%) | | Latin America | 131 | 129 | 2 | 2% | | Total Eastman | 2,287 | 2,363 | (76) | (3%) | Sales Revenue by Customer Location (Millions $) | Region | H1 2025 | H1 2024 | H1 Change ($ Millions) | H1 Change (%) | | :--- | :--- | :--- | :--- | :--- | | United States and Canada | 1,983 | 1,963 | 20 | 1% | | Europe, Middle East, and Africa | 1,220 | 1,309 | (89) | (7%) | | Asia Pacific | 1,122 | 1,154 | (32) | (3%) | | Latin America | 252 | 247 | 5 | 2% | | Total Eastman | 4,577 | 4,673 | (96) | (2%) | - Lower sales in EMEA and US&C were partially offset by higher sales in Asia Pacific and Latin America[185][186] Liquidity and Other Financial Information Eastman's cash provided by operating activities decreased significantly to $66 million in H1 2025 from $351 million in H1 2024, primarily due to lower accounts payable, lower net earnings, and higher variable compensation payouts, while cash used in financing activities increased due to lower net borrowings, and the Company prioritizes capital expenditures, dividends, net debt reduction, and share repurchases, maintaining an investment-grade credit rating, with net debt increasing to $4,703 million at June 30, 2025 Cash Flow Summary (First Six Months, Millions $) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | 66 | 351 | | Net cash used in investing activities | (278) | (300) | | Net cash used in financing activities | (214) | (79) | | Net change in cash and cash equivalents | (414) | (34) | - Operating cash flow decreased by $285 million in H1 2025, mainly due to lower accounts payable, lower net earnings, and higher variable compensation payout[191] - Cash used in financing activities increased by $135 million in H1 2025 due to lower net borrowings activity[193] - Priorities for cash use include capital expenditures, quarterly dividends, net debt reduction, and share repurchases[193] Net Debt (Millions $) | Date | Total Borrowings | Cash and Cash Equivalents | Net Debt | | :--- | :--- | :--- | :--- | | June 30, 2025 | 5,126 | 423 | 4,703 | | December 31, 2024 | 5,017 | 837 | 4,180 | Critical Accounting Estimates Management's critical accounting estimates, which require significant judgment and impact reported financial amounts, include impairment of long-lived assets, environmental costs, pension and other postretirement benefits, litigation and contingent liabilities, and income taxes, with these estimates based on historical experience and reasonable assumptions, but actual results may differ - Critical accounting estimates include impairment of long-lived assets, environmental costs, pension and other postretirement benefits, litigation and contingent liabilities, and income taxes[210] - These estimates involve significant management judgments and are based on historical experience and various assumptions, with actual results potentially differing[210] Recently Issued Accounting Standards Information regarding the impact of recently issued accounting standards is detailed in Note 1, 'Significant Accounting Policies,' of the unaudited consolidated financial statements - Refer to Note 1, 'Significant Accounting Policies,' for details on recently issued accounting standards[211] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk Eastman is exposed to market risks from foreign currency exchange rates, commodity prices, and interest rates, which it manages through hedging strategies, with a 10% adverse move in the U.S. dollar against foreign currencies potentially resulting in a $51 million loss in fair value from derivative transactions, and a 10% fluctuation in the euro currency rate potentially impacting designated net investment values by $228 million, generally offset by hedging instruments - Eastman manages market risks (foreign currency, commodity prices, interest rates) using pricing, inventory management, and hedging strategies[214] - A 10% adverse move in the U.S. dollar relative to foreign currencies could result in a $51 million loss in fair value from foreign currency derivative transactions[216] - A 10% fluctuation in the euro currency rate could impact designated net investment values in foreign subsidiaries by $228 million, generally offset by euro-denominated borrowings or cross-currency interest rate swaps[217] ITEM 4. Controls and Procedures As of June 30, 2025, Eastman's disclosure controls and procedures were deemed effective by the CEO and CFO, providing reasonable assurance that required information is accumulated and communicated for timely disclosure decisions, with no material changes in internal control over financial reporting during Q2 2025 - As of June 30, 2025, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required for disclosure was accumulated and communicated to management[219] - No material changes in internal control over financial reporting occurred during Q2 2025[220] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity security sales, other disclosures, exhibits, and signatures for the report ITEM 1. Legal Proceedings Eastman is involved in various legal proceedings, including product liability, environmental, and intellectual property matters, handled in the ordinary course of business, with management believing these matters will not materially adversely affect the Company's financial condition, results of operations, or cash flows, and the Company's threshold for disclosing environmental legal proceedings is potential monetary sanctions of $1 million or more - Eastman is involved in various lawsuits, claims, investigations, and proceedings, including product liability, environmental, and intellectual property matters[222] - Management does not believe the ultimate resolution of these matters will have a material adverse effect on the Company's overall financial position, results of operations, or cash flows[222] - The Company's disclosure threshold for environmental legal proceedings involving a governmental authority is potential monetary sanctions of $1 million or more[222] - Eastman, through its subsidiary Solutia, is indemnified by Monsanto (now Bayer AG) for certain Legacy Tort Claims[223] ITEM 1A. Risk Factors This section refers to the 'Risk Factors' in Part I, Item 1A of the Company's 2024 Annual Report on Form 10-K for information regarding material known risk factors that could adversely affect the Company's business, financial condition, or results of operations - For material known risk factors, refer to 'Risk Factors' in Part I, Item 1A of the Company's 2024 Annual Report on Form 10-K[224] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds Eastman repurchased 643,791 shares of common stock for $50 million during Q2 and H1 2025 under the $2.5 billion 2021 authorization, with $1.1 billion used and approximately $1.365 billion remaining under the plan as of June 30, 2025 - The Board of Directors authorized a $2.5 billion common stock repurchase program in December 2021[226] - The Company repurchased 643,791 shares for $50 million during Q2 and H1 2025[226] - As of June 30, 2025, $1.1 billion has been used under the 2021 authorization, with approximately $1.365 billion remaining[226][227] ITEM 5. Other Information This section confirms that no Rule 10b5-1 trading arrangements or 'non-Rule 10b5-1 trading arrangements' were entered into, modified, or terminated by the Company's directors or officers during the second quarter of 2025 - No Rule 10b5-1 trading arrangements or 'non-Rule 10b5-1 trading arrangements' were entered into, modified, or terminated by directors or officers during Q2 2025[231] ITEM 6. Exhibits This section lists all exhibits filed as part of the report, including corporate governance documents, debt instruments, compensatory plans, various certifications by the CEO and CFO, and Inline XBRL documents - Exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), debt instruments (5.000% Note due 2029), and compensatory plans (Severance Agreement and Waiver)[234] - Certifications by the CEO and CFO (Rule 13a-14(a) and Section 1350) for the quarter ended June 30, 2025, are filed[234] - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are included[234] SIGNATURES The report is duly signed on behalf of Eastman Chemical Company by William T. McLain, Jr., Executive Vice President and Chief Financial Officer, on August 1, 2025 - The report was signed by William T. McLain, Jr., Executive Vice President and Chief Financial Officer, on August 1, 2025[237]