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Form 8-K EASTMAN CHEMICAL CO For: Apr 18

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April 18, 2016 8:50 AM EDT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, DC 20549 

FORM 8-K 

CURRENT REPORT
Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934

Date of report (Date of earliest event reported):
April 18, 2016

EASTMAN CHEMICAL COMPANY
(Exact Name of Registrant as Specified in Its Charter)

 
 
 
 
 
 
Delaware
 
1-12626
 
62-1539359
(State or Other Jurisdiction
of Incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
 

 
 
 
200 South Wilcox Drive, Kingsport, TN
 
37662
(Address of Principal Executive Offices)
 
(Zip Code)

Registrant's Telephone Number, Including Area Code: (423) 229-2000
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Item 8.01 -- Other Events
As previously announced in January 2016, Eastman Chemical Company (the "Company") has changed its organizational and management structure following completion of the integration of recently acquired businesses to better align similar strategies and business models. As a result, beginning first quarter of 2016, the Company's products and operations are managed and reported in four operating segments: Additives & Functional Products, Advanced Materials, Fibers, and Chemical Intermediates. Beginning with the filing of its Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, the Company will report its results in these four segments. For comparability purposes, this report presents selected quarterly unaudited financial information recast for changes in segments for the years ended December 31, 2015, 2014, and 2013.

Because the operating results of the new segments for prior years will not be reported until the Form 10-Q is filed for each quarter of 2016 and the Form 10-K for 2016, management desires to provide more timely information to investors to enhance understanding of operating performance of the Company's new segments. As a result, the Company is filing this Current Report on Form 8-K to supplement financial disclosures included in the Company's previously filed reports and to recast previously disclosed segment financial information under the new reporting structure. The recast of the previous segment financial information is not a restatement of previous financial statements and does not affect the Company's consolidated reported net income, earnings per share, operating income, or total assets or liabilities for any of the previously reported periods.

Item 9.01(d) -- Exhibits

The following exhibit is filed pursuant to Item 9.01:
 
Exhibit 99.01 Unaudited Financial Information Recast for Changes in Segments





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 hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
 
EASTMAN CHEMICAL COMPANY
 
 
 
 
By:  
 /s/ Scott V. King
 
 
Name:  
Scott V. King
 
 
Title:  
Vice President, Corporate Controller and Chief Accounting Officer
 
Date: April 18, 2016
 
 
 
 




Exhibit 99.01

As reported in the 2015 Annual Report on Form 10-K, the Company's products and operations were managed and reported in five operating segments: Additives & Functional Products ("AFP"), Adhesives & Plasticizers ("A&P"), Advanced Materials ("AM"), Fibers, and Specialty Fluids & Intermediates ("SFI"). Beginning first quarter 2016, as a result of changes in the Company's organizational structure and management, the Company's products and operations are managed and reported in four operating segments: AFP, AM, Fibers, and Chemical Intermediates ("CI"). The new structure supports the Company's strategy to transform towards a specialty portfolio by better aligning similar businesses in a more streamlined structure. 

Under the new structure, the adhesives resins product line of the former A&P segment is moved to the AFP segment, the specialty fluids product line of the former SFI segment is moved to the AFP segment, and the plasticizers product line of the former A&P segment is moved to the new CI segment. In addition to the product line changes, there were shifts in products among product lines in different segments. Acetyl and olefin products with animal nutrition and food ingredient applications of the former SFI segment are moved to the AFP segment as part of the care chemicals and animal nutrition product lines. Distribution solvents, ethylene oxide derivatives, and ethyl acetate products are moved from the AFP segment to the new CI segment in the other intermediates product line.

The new segments with product lines are summarized below:

•
Additives and Functional Products product lines consist of coatings and inks, adhesives resins, tire additives, care chemicals, specialty fluids, animal nutrition, and crop protection.
•
Advanced Materials product lines consist of specialty plastics, interlayers, and performance films.
•
Chemical Intermediates product lines consist of chemical intermediates, other intermediates, plasticizers, and functional amines.
•
Fibers product lines consist of acetate tow, acetate yarn, and acetyl chemical products.

Beginning first quarter 2016, all historical financial information, including management's discussion and analysis, will be presented on the new segment basis in accordance with accounting principles generally accepted in the United States ("GAAP").

Unaudited Financial Information Recast for Changes in Segments

Following is selected quarterly unaudited financial information recast for changes in segments for the years ended December 31, 2015, 2014, and 2013. The unaudited recast segment information is based on and should be read in conjunction with the historical consolidated financial statements and accompanying notes and the "Management's Discussion and Analysis of Financial Condition and Results of Operations", including the description of "Non-GAAP Financial Measures" in the Company's 2015 Annual Report on Form 10-K.




2015 Segment Information
(Dollars in millions, unaudited)
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
2015
 
 
 
 
 
 
 
 
 
 
 
Additives and Functional Products
 
 
 
 
 
 
 
 
 
 
Sales
$
804

$
830

$
794

$
731

$
3,159

Operating earnings
 
157

 
178

 
176

 
149

 
660

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
203

Advanced Materials
 
 
 
 
 
 
 
 
 
 
Sales
$
561

$
647

$
624

$
582

$
2,414

Operating earnings
 
68

 
135

 
98

 
83

 
384

Asset impairments and restructuring charges, net (1)
 
—

 
—

 
18

 
—

 
18

Additional costs of acquired inventories (2)
 
7

 
—

 
—

 
—

 
7

Operating earnings excluding non-core items
 
75

 
135

 
116

 
83

 
409

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
161

Chemical Intermediates
 
 
 
 
 
 
 
 
 
 
Sales
$
782

$
745

$
697

$
587

$
2,811

Operating earnings
 
118

 
87

 
72

 
17

 
294

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
149

Fibers
 
 
 
 
 
 
 
 
 
 
Sales
$
284

$
299

$
320

$
316

$
1,219

Operating earnings (loss)
 
(7
)
 
93

 
102

 
104

 
292

Asset impairments and restructuring charges (gains), net (3)
 
97

 
(2
)
 
—

 
3

 
98

Operating earnings excluding non-core items
 
90

 
91

 
102

 
107

 
390

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
55


(1) 
Included in third quarter 2015 earnings are indefinite-lived intangible asset impairments of $18 million to reduce the carrying value of trade names in the window films market to their estimated current fair values.
(2) 
Included in first quarter 2015 earnings are additional costs of acquired inventories. As required by purchase accounting, acquired Commonwealth Laminating and Coating, Inc. inventories were marked to fair value. In first quarter 2015, the remaining portion of these inventories were sold resulting in an increase in cost of sales.
(3) 
Included in first, second, and fourth quarter 2015 earnings are asset impairments and restructuring charges (gains), net for the closure of the Workington, UK, acetate tow manufacturing site.




2015 Segment Information (continued)
(Dollars in millions, unaudited)
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
2015
 
 
 
 
 
 
 
 
 
 
 
Other
 
 
 
 
 
 
 
 
 
 
Sales
$
12

$
12

$
12

$
9

$
45

Operating (loss) earnings
 
 
 
 
 
 
 
 
 
 
Growth initiatives and businesses not allocated to segments
 
(26
)
 
(22
)
 
(18
)
 
(21
)
 
(87
)
Pension and other postretirement benefit income (expense) and gain (loss) not allocated to operating segments
 
9

 
8

 
11

 
(104
)
 
(76
)
Acquisition integration, transaction, and restructuring costs
 
(8
)
 
(10
)
 
(9
)
 
(56
)
 
(83
)
Operating loss before non-core items
 
(25
)
 
(24
)
 
(16
)
 
(181
)
 
(246
)
Asset impairments and restructuring charges, net (4)(5)(6)
 
12

 
2

 
3

 
50

 
67

Mark-to-market pension and other postretirement benefit plans loss, net(7)
 
—

 
2

 
—

 
113

 
115

Acquisition integration and transaction costs (8)
 
8

 
9

 
6

 
5

 
28

Operating loss excluding non-core items
 
(5
)
 
(11
)
 
(7
)
 
(13
)
 
(36
)
Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
3

TOTAL EASTMAN CHEMICAL
 
 
 
 
 
 
 
 
 
 
Sales
$
2,443

$
2,533

$
2,447

$
2,225

$
9,648

Operating earnings
 
311

 
469

 
432

 
172

 
1,384

Asset impairments and restructuring charges, net
 
109

 
—

 
21

 
53

 
183

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

 
2

 
—

 
113

 
115

Acquisition integration and transaction costs
 
8

 
9

 
6

 
5

 
28

Additional costs of acquired inventories
 
7

 
—

 
—

 
—

 
7

Total operating earnings excluding non-core items
 
435

 
480

 
459

 
343

 
1,717

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
571

 
(4) 
Included in first quarter 2015 earnings are asset impairment and restructuring charges of $12 million resulting from the decision to discontinue a growth initiative reported in "other".
(5) 
Included in second and third quarter 2015 earnings are severance costs primarily associated with the integration of Taminco Corporation of $2 million and $2 million, respectively.
(6) 
Included in fourth quarter 2015 earnings are asset impairments and restructuring charges, net primarily due to severance costs for a corporate reduction in force of $51 million.
(7) 
Included in second quarter 2015 earnings is a mark-to-market loss on a UK pension plan obligation triggered by the closure of the Workington, UK acetate tow manufacturing facility.
(8) 
Included in 2015 earnings are integration and transaction costs primarily for the completed acquisitions of Taminco Corporation and Commonwealth Laminating & Coating, Inc.





2014 Segment Information
(Dollars in millions, unaudited)
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
2014
 
 
 
 
 
 
 
 
 
 
 
Additives and Functional Products
 
 
 
 
 
 
 
 
 
 
Sales
$
608

$
682

$
675

$
675

$
2,640

Operating earnings
 
124

 
154

 
68

 
116

 
462

Asset impairments and restructuring charges (gains), net (1)(2)(3)(4)
 
—

 
(2
)
 
65

 
(1
)
 
62

Additional costs of acquired inventories (5)(6)
 
—

 
2

 
6

 
7

 
15

Operating earnings excluding non-core items
 
124

 
154

 
139

 
122

 
539

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
140

Advanced Materials
 
 
 
 
 
 
 
 
 
 
Sales
$
581

$
631

$
604

$
562

$
2,378

Operating earnings
 
61

 
80

 
76

 
59

 
276

Asset impairments and restructuring charges, net (4)(7)
 
10

 
—

 
4

 
2

 
16

Additional costs of acquired inventories (8)
 
—

 
—

 
—

 
1

 
1

Operating earnings excluding non-core items
 
71

 
80

 
80

 
62

 
293

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
143

Chemical Intermediates
 
 
 
 
 
 
 
 
 
 
Sales
$
761

$
761

$
780

$
732

$
3,034

Operating earnings
 
81

 
101

 
111

 
59

 
352

Additional costs of acquired inventories (9)
 
—

 
—

 
—

 
8

 
8

Operating earnings excluding non-core item
 
81

 
101

 
111

 
67

 
360

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
99

Fibers
 
 
 
 
 
 
 
 
 
 
Sales
$
354

$
386

$
346

$
371

$
1,457

Operating earnings
 
117

 
123

 
112

 
122

 
474

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
66


(1) 
Included in second and fourth quarter 2014 earnings are gains of $2 million and $1 million, respectively, related to the sale of previously impaired assets at a former polymers production facility in China.
(2) 
Included in third quarter 2014 earnings are asset impairments and restructuring charges of $42 million for costs of the planned closure of a Crystex® research and development facility in France.
(3) 
Included in third quarter 2014 earnings is a $22 million asset impairment of the Crystex® tradename.
(4) 
Included in third quarter 2014 earnings are asset impairments and restructuring charges of $1 million and $4 million in the Additives and Functional Products and Advanced Materials segments, respectively, related to a change in estimate of certain costs of the fourth quarter 2012 termination of the operating agreement for the Sao Jose dos Campos, Brazil site.
(5) 
Included in second and third quarter 2014 earnings are additional costs of acquired inventories. As required by purchase accounting, acquired inventories were marked to fair value. Approximately $8 million from the acquired global aviation turbine engine oil business inventories was sold in 2014, resulting in an increase in cost of sales.
(6) 
Included in fourth quarter 2014 earnings are additional costs of acquired inventories. As required by purchase accounting, acquired Taminco Corporation inventories were marked to fair value. Approximately $7 million were sold in 2014 resulting in an increase in cost of sales.
(7) 
Included in first and fourth quarter 2014 earnings are asset impairments and restructuring charges of $10 million and $2 million, respectively, primarily for the closure of a production facility in Taiwan for the Flexvue® performance films product line.
(8) 
Included in fourth quarter 2014 earnings are additional costs acquired inventories. As required by purchase accounting, acquired Commonwealth Laminating and Coating, Inc. inventories were marked to fair value. Approximately $1 million were sold in fourth quarter 2014 resulting in an increase in cost of sales.
(9) 
Included in fourth quarter 2014 earnings are additional costs of acquired inventories. As required by purchase accounting, acquired inventories were marked to fair value. Approximately $8 million from the acquired Taminco Corporation inventories was sold in 2014, resulting in an increase in cost of sales.




2014 Segment Information (continued)
(Dollars in millions, unaudited)
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
2014
 
 
 
 
 
 
 
 
 
 
 
Other 
 
 
 
 
 
 
 
 
 
 
Sales
$
1

$
—

$
8

$
9

$
18

Operating (loss) earnings
 
 
 
 
 
 
 
 
 
 
Growth initiatives and businesses not allocated to segments
 
(13
)
 
(15
)
 
(18
)
 
(12
)
 
(58
)
Pension and other postretirement benefit income (expense) and gain (loss) not allocated to operating segments
 
3

 
3

 
3

 
(302
)
 
(293
)
Acquisition integration, transaction, and restructuring costs
 
(12
)
 
(10
)
 
(14
)
 
(15
)
 
(51
)
Operating loss before non-core items
 
(22
)
 
(22
)
 
(29
)
 
(329
)
 
(402
)
Mark-to-market pension and other postretirement benefit plans loss, net
 
—

 
—

 
—

 
304

 
304

Asset impairments and restructuring charges (gains), net (10)(11)
 
3

 
(5
)
 
2

 
(1
)
 
(1
)
Acquisition integration and transaction costs (12)(13)(14)(15)
 
9

 
10

 
12

 
15

 
46

Operating loss excluding non-core items
 
(10
)
 
(17
)
 
(15
)
 
(11
)
 
(53
)
Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
2

TOTAL EASTMAN CHEMICAL
 
 
 
 
 
 
 
 
 
 
Sales
$
2,305

$
2,460

$
2,413

$
2,349

$
9,527

Operating earnings
 
361

 
436

 
338

 
27

 
1,162

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

 
—

 
—

 
304

 
304

Asset impairments and restructuring charges (gains), net
 
13

 
(7
)
 
71

 
—

 
77

Acquisition integration and transaction costs
 
9

 
10

 
12

 
15

 
46

Additional costs of acquired inventories
 
—

 
2

 
6

 
16

 
24

Total operating earnings excluding non-core items
 
383

 
441

 
427

 
362

 
1,613

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
450

 
(10) 
Included in first and third quarter 2014 are restructuring charges of $3 million and $2 million, respectively, for severance associated with the continued integration of Solutia Inc.
(11) 
Included in second and fourth quarter 2014 earnings is a $5 million and $1 million gain, respectively, on sales of previously impaired assets at the former Photovoltaics production facility in Germany.
(12) 
Included in first quarter 2014 are integration costs of $9 million for the acquired Solutia Inc. business.
(13) 
Included in second quarter 2014 are transaction costs of $3 million for the acquisition of the global aviation turbine engine oil business from BP plc in June 2014 and integration costs of $7 million for the acquired Solutia Inc. and the global aviation turbine engine oil businesses.
(14) 
Included in third quarter 2014 earnings are transaction costs of $7 million for the pending acquisition of Taminco Corporation and Commonwealth Laminating & Coating, and for the completed acquisition of the global aviation turbine engine oil business from BP plc. Included in third quarter 2014 earnings are integration costs of $5 million for the acquired Solutia Inc. and global aviation turbine engine oil businesses.
(15) 
Included in fourth quarter 2014 earnings are transaction costs of $12 million primarily for the completed acquisitions of Taminco Corporation, Commonwealth Laminating & Coating, and the global aviation turbine engine oil business from BP plc. and integration costs of $3 million primarily for the acquired businesses including Solutia Inc., the global aviation turbine engine oil business from BP plc, Commonwealth Laminating & Coating, Inc. and Taminco Corporation.



2013 Segment Information
(Dollars in millions, unaudited)
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
2013
 
 
 
 
 
 
 
 
 
 
 
Additives and Functional Products
 
 
 
 
 
 
 
 
 
 
Sales
$
623

$
664

$
629

$
613

$
2,529

Operating earnings
 
122

 
142

 
137

 
110

 
511

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
122

Advanced Materials
 
 
 
 
 
 
 
 
 
 
Sales
$
584

$
625

$
583

$
557

$
2,349

Operating earnings
 
65

 
82

 
69

 
41

 
257

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

 
(1
)
 
—

 
4

 
3

Operating earnings excluding non-core items
 
65

 
81

 
69

 
45

 
260

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
144

Chemical Intermediates
 
 
 
 
 
 
 
 
 
 
Sales
$
748

$
782

$
757

$
726

$
3,013

Operating earnings
 
120

 
128

 
105

 
76

 
429

Asset impairments and restructuring charges, net (1)
 
—

 
3

 
—

 
—

 
3

Operating earnings excluding non-core item
 
120

 
131

 
105

 
76

 
432

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
98

Fibers
 
 
 
 
 
 
 
 
 
 
Sales
$
346

$
363

$
363

$
369

$
1,441

Operating earnings
 
114

 
116

 
113

 
119

 
462

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
65

 
(1) 
Included in second quarter 2013 earnings are restructuring charges of $2 million and $3 million in the Advanced Materials and Chemical Intermediates segments, respectively, primarily related to severance.
(2) 
Included in second quarter 2013 earnings is a reduction in previous charges associated with the fourth quarter 2012 termination of the operating agreement for the Sao Jose dos Campos, Brazil site, which is reported as reduction of $3 million in the Advanced Materials segment.
(3) 
Included in fourth quarter 2013 are asset impairments of $4 million for the fourth quarter decision to terminate efforts to develop a continuous resin process in Kuantan, Malaysia and Antwerp, Belgium.





2013 Segment Information (continued)

(Dollars in millions, unaudited)
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
2013
 
 
 
 
 
 
 
 
 
 
 
Other
 
 
 
 
 
 
 
 
 
 
Sales
$
6

$
6

$
6

$
—

$
18

Operating (loss) earnings
 
 
 
 
 
 
 
 
 
 
Growth initiatives and businesses not allocated to segments
 
(21
)
 
(32
)
 
(20
)
 
(59
)
 
(132
)
Pension and other postretirement benefit income (expense) and gain (loss) not allocated to operating segments
 
3

 
3

 
87

 
301

 
394

Acquisition integration, transaction, and restructuring costs
 
(10
)
 
(11
)
 
(12
)
 
(26
)
 
(59
)
Operating (loss) earnings before non-core items
 
(28
)
 
(40
)
 
55

 
216

 
203

Mark-to-market pension and other postretirement benefit plans (gains), net (4)
 
—

 
—

 
(86
)
 
(297
)
 
(383
)
Asset impairments and restructuring charges, net (5)(6)(7)
 
3

 
16

 
3

 
48

 
70

Acquisition integration and transaction costs (8)
 
7

 
8

 
9

 
12

 
36

Operating loss excluding non-core items
 
(18
)
 
(16
)
 
(19
)
 
(21
)
 
(74
)
Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
4

TOTAL EASTMAN CHEMICAL
 
 
 
 
 
 
 
 
 
 
Sales
$
2,307

$
2,440

$
2,338

$
2,265

$
9,350

Operating earnings
 
393

 
428

 
479

 
562

 
1,862

Mark-to-market pension and other postretirement benefit plans (gains), net
 
—

 
—

 
(86
)
 
(297
)
 
(383
)
Asset impairments and restructuring charges, net
 
3

 
18

 
3

 
52

 
76

Acquisition integration and transaction costs
 
7

 
8

 
9

 
12

 
36

Total operating earnings excluding non-core items
 
403

 
454

 
405

 
329

 
1,591

Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
433

 
(4) 
Included in third quarter 2013 earnings is a mark-to-market gain due to the interim remeasurement of the Eastman other postretirement benefit plan obligation, triggered by a plan change in life insurance benefits in third quarter 2013.
(5) 
Included in first, second, third, and fourth quarter 2013 earnings are restructuring charges of $3 million, $3 million, $3 million, and $15 million, respectively, primarily for severance associated with the continued integration of Solutia Inc.
(6) 
Included in second quarter 2013 earnings are asset impairments and restructuring charges of $13 million primarily for the closure of a production facility in Germany for the Photovoltaics product line.
(7) 
Included in fourth quarter 2013 are asset impairment and restructuring charges of approximately $30 million for management's decision not to pursue its Perennial WoodTM growth initiative.
(8) 
Included in 2013 earnings are transaction and integration costs related to the acquisition of Solutia Inc.






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