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Eastman_Black_300dpi.jpg
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period endedSeptember 30, 2024
 OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ______________ to ______________

Commission file number 1-12626

EASTMAN CHEMICAL COMPANY
(Exact name of registrant as specified in its charter)
Delaware62-1539359
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification no.)
  
200 South Wilcox Drive 
KingsportTennessee37662
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (423) 229-2000

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per share EMNNew York Stock Exchange
1.875% Notes Due 2026EMN26New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐  No  ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
Number of Shares Outstanding at September 30, 2024
Common Stock, par value $0.01 per share115,912,596
--------------------------------------------------------------------------------------------------------------------------------
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TABLE OF CONTENTS
ITEM PAGE

PART I.  FINANCIAL INFORMATION
 
   
 
 
 
 
   
   
   

PART II.  OTHER INFORMATION
   
5.
Other Information

SIGNATURES
 

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FORWARD-LOOKING STATEMENTS

Certain statements made or incorporated by reference in this Quarterly Report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act (Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). Forward-looking statements are all statements, other than statements of historical fact, that may be made by Eastman Chemical Company ("Eastman" or the "Company") from time to time. In some cases, you can identify forward-looking statements by terminology such as "anticipates", "believes", "estimates", "expects", "intends", "may", "plans", "projects", "forecasts", "will", "would", "could", and similar expressions, or expressions of the negative of these terms. Forward-looking statements may relate to, among other things, such matters as planned and expected capacity increases and utilization; anticipated capital spending; expected depreciation and amortization; environmental matters, opportunities and risks (including potential risks associated with physical and transitional impacts of climate change and related voluntary and regulatory carbon requirements); exposure to and effects of hedging raw material and energy prices and foreign currencies exchange and interest rates; disruption or interruption of operations and of raw material or energy supply; operating risks related to the Company’s information technology infrastructure, including potential service interruptions, data corruption and reputational damage as a result of cyber-based threats and attacks; global and regional economic, political, and business conditions, including heightened inflation, capital market volatility, interest rate and currency fluctuations, and economic slowdown or recession; competition; growth opportunities; supply and demand, volume, price, cost, margin and sales; pending, threatened and future legal proceedings; earnings, cash flow, dividends, stock repurchases and other financial results, events, decisions, and conditions; expectations, strategies, and plans for individual assets and products, businesses, and operating segments, as well as for the whole of Eastman; cash sources and requirements and uses of available cash; financing plans and activities; pension expenses and funding; credit ratings; anticipated and other future restructuring, acquisition, divestiture, and consolidation activities; cost reduction and control efforts and targets; the timing and costs of, benefits from the integration of, and expected business and financial performance of acquired businesses, as well as the subsequent impairment assessments of acquired long-lived assets; strategic, technology, and product innovation initiatives and development, production, commercialization and acceptance of new products, services and technologies and related costs; asset, business, and product portfolio changes; and expected tax rates and interest costs.

Forward-looking statements are based upon certain underlying assumptions as of the date such statements were made. Such assumptions are based upon internal estimates and other analyses of current market conditions and trends, management expectations, plans, and strategies, economic conditions, and other factors. Forward-looking statements and the assumptions underlying them are necessarily subject to risks and uncertainties inherent in projecting future conditions and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions and expectations proves to be inaccurate or is unrealized. The known material factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements are identified and discussed under "Risk Factors" in Part II, Item 1A of this Quarterly Report. Other factors, risks or uncertainties of which management is not aware, or presently deems immaterial, could also cause actual results to differ materially from those in the forward-looking statements.

The Company cautions you not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report. Except as may be required by law, the Company undertakes no obligation to update or alter these forward-looking statements, whether as a result of new information, future events, or otherwise. Investors are advised, however, to consult any further public Company disclosures (such as filings with the Securities and Exchange Commission, Company press releases, or pre-noticed public investor presentations) on related subjects.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS,
COMPREHENSIVE INCOME AND RETAINED EARNINGS
 Third QuarterFirst Nine Months
(Dollars in millions, except per share amounts)2024202320242023
Sales$2,464 $2,267 $7,137 $7,003 
Cost of sales1,859 1,783 5,401 5,406 
Gross profit605 484 1,736 1,597 
Selling, general and administrative expenses183 160 554 536 
Research and development expenses65 60 184 182 
Asset impairments, restructuring, and other charges, net
30 — 41 22 
Other components of post-employment (benefit) cost, net(5)(2)(14)(8)
Other (income) charges, net3 10 42 40 
Earnings before interest and taxes329 256 929 825 
Net interest expense49 57 148 163 
Earnings before income taxes280 199 781 662 
Provision for income taxes
99 20 204 77 
Net earnings181 179 577 585 
Less: Net earnings attributable to noncontrolling interest1 1 2 1 
Net earnings attributable to Eastman$180 $178 $575 $584 
Basic earnings per share attributable to Eastman$1.55 $1.50 $4.91 $4.92 
Diluted earnings per share attributable to Eastman$1.53 $1.49 $4.86 $4.89 
Comprehensive Income  
Net earnings including noncontrolling interest$181 $179 $577 $585 
Other comprehensive income (loss), net of tax:  
Change in cumulative translation adjustment39 (24)38 (67)
Defined benefit pension and other postretirement benefit plans:  
Amortization of unrecognized prior service credits(2)(6)(6)(16)
Derivatives and hedging:  
Unrealized gain (loss) during period(13)9 (6)(3)
Reclassification adjustment for (gains) losses included in net income, net— (2)15 (3)
Total other comprehensive income (loss), net of tax24 (23)41 (89)
Comprehensive income including noncontrolling interest205 156 618 496 
Less: Comprehensive income attributable to noncontrolling interest1 1 2 1 
Comprehensive income attributable to Eastman$204 $155 $616 $495 
Retained Earnings    
Retained earnings at beginning of period$9,694 $9,190 $9,490 $8,973 
Net earnings attributable to Eastman180 178 575 584 
Cash dividends declared(94)(94)(285)(283)
Retained earnings at end of period$9,780 $9,274 $9,780 $9,274 

The accompanying notes are an integral part of these consolidated financial statements.
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UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
September 30,December 31,
(Dollars in millions, except per share amounts)20242023
Assets
Current assets
Cash and cash equivalents$622 $548 
Trade receivables, net of allowance for credit losses980 826 
Miscellaneous receivables352 328 
Inventories1,904 1,683 
Other current assets79 96 
Total current assets3,937 3,481 
Properties
Properties and equipment at cost13,916 13,574 
Less: Accumulated depreciation8,327 8,026 
Net properties5,589 5,548 
Goodwill3,655 3,646 
Intangible assets, net of accumulated amortization1,072 1,138 
Other noncurrent assets807 820 
Total assets$15,060 $14,633 
Liabilities and Stockholders' Equity
Current liabilities
Payables and other current liabilities$2,142 $2,035 
Borrowings due within one year448 541 
Total current liabilities2,590 2,576 
Long-term borrowings4,606 4,305 
Deferred income tax liabilities517 601 
Post-employment obligations652 667 
Other long-term liabilities967 954 
Total liabilities9,332 9,103 
Stockholders' equity
Common stock ($0.01 par value – 350,000,000 shares authorized; shares issued – 223,349,426 and 222,762,317 as of September 30, 2024 and December 31, 2023, respectively)
2 2 
Additional paid-in capital2,435 2,368 
Retained earnings9,780 9,490 
Accumulated other comprehensive income (loss)(278)(319)
11,939 11,541 
Less: Treasury stock at cost (107,487,628 and 105,469,354 shares as of September 30, 2024 and December 31, 2023, respectively)
6,285 6,083 
Total Eastman stockholders' equity5,654 5,458 
Noncontrolling interest74 72 
Total equity5,728 5,530 
Total liabilities and stockholders' equity$15,060 $14,633 

The accompanying notes are an integral part of these consolidated financial statements.
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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
First Nine Months
(Dollars in millions)20242023
Operating activities
Net earnings$577 $585 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization380 380 
Asset impairment charges5 — 
Benefit from deferred income taxes(76)(156)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
(Increase) decrease in trade receivables(154)68 
(Increase) decrease in inventories(222)147 
Increase (decrease) in trade payables36 (363)
Pension and other postretirement contributions (in excess of) less than expenses(39)(39)
Variable compensation payments (in excess of) less than expenses44 73 
Other items, net196 227 
Net cash provided by operating activities
747 922 
Investing activities
Additions to properties and equipment(420)(649)
Proceeds from sale of businesses— 38 
Acquisition, net of cash acquired— (74)
Additions to capitalized software(4)(4)
Other items, net22 9 
Net cash used in investing activities
(402)(680)
Financing activities
Net increase in commercial paper and other borrowings
— 73 
Proceeds from borrowings1,237 796 
Repayment of borrowings (1,039)(808)
Dividends paid to stockholders(285)(282)
Treasury stock purchases (200)(50)
Other items, net
14 (24)
Net cash used in financing activities
(273)(295)
Effect of exchange rate changes on cash and cash equivalents2 (1)
Net change in cash and cash equivalents74 (54)
Cash and cash equivalents at beginning of period548 493 
Cash and cash equivalents at end of period$622 $439 

The accompanying notes are an integral part of these consolidated financial statements.
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Page

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by Eastman Chemical Company ("Eastman" or the "Company") in accordance and consistent with the accounting policies stated in the Company's 2023 Annual Report on Form 10-K, and should be read in conjunction with the consolidated financial statements in Part II, Item 8 of that report, with the exception of recently adopted accounting standards noted below. The December 31, 2023 financial position data included herein was derived from the consolidated financial statements included in the 2023 Annual Report on Form 10-K but does not include all disclosures required by accounting principles generally accepted in the United States ("GAAP").

In the opinion of management, the unaudited consolidated financial statements include all normal recurring adjustments necessary for the fair presentation of the interim financial information in conformity with GAAP. These statements contain some amounts that are based upon management estimates and judgments. Future actual results could differ from such current estimates. The unaudited consolidated financial statements include assets, liabilities, revenues, and expenses of business ventures in which Eastman has a controlling interest. Eastman accounts for other joint ventures and investments where it exercises significant influence on the equity basis. Intercompany transactions and balances are eliminated in consolidation.

Recently Adopted Accounting Standards

Accounting Standards Update ("ASU") 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions: On January 1, 2024, Eastman adopted this update, which states that when measuring the fair value of an asset or a liability, a reporting entity should consider the characteristics of the asset or liability, including restrictions on the sale of the asset or liability, if a market participant also would take those characteristics into account. Key to that determination is the unit of account for the asset or liability being measured at fair value. The adoption did not have a significant impact on the Company's financial statements and related disclosures.

Accounting Standards Issued But Not Adopted as of September 30, 2024

ASU 2023-05 Business Combination - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement: The Financial Accounting Standards Board ("FASB") issued this update in August 2023, which states that a joint venture must initially measure all contributions received upon its formation at fair value, largely consistent with Topic 805, Business Combinations. The guidance is intended to reduce diversity in practice and provide users of joint venture financial statements with more decision-useful information. This ASU should be applied prospectively and is effective for all newly formed joint venture entities with a formation date on or after January 1, 2025. Early adoption is permitted, and joint ventures formed prior to the adoption date may elect to apply the new guidance retrospectively back to their original formation date. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements and disclosures.

ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures: The FASB issued this update in November 2023, which requires enhanced disclosures regarding significant segment expenses and other segment items for public entities on both an annual and interim basis. Specifically, the update requires that entities provide, during interim periods, all disclosures related to a reportable segment's profit or loss and assets that were previously required only on an annual basis. Additionally, this guidance necessitates the disclosure of the title and position of the Chief Operating Decision Maker. The new guidance does not modify how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years starting after December 15, 2024. This ASU must be applied retrospectively to all prior periods presented. Management is currently evaluating the impact on the Company's financial statements and related disclosures.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures: The FASB issued this update in December 2023, which modifies income tax disclosure requirements. The updated guidance requires entities to provide more detailed information including specific categories in the income tax rate reconciliation, and the breakdown of income or loss from continuing operations before income tax expense or benefit, for both domestic and foreign operations. Additionally, entities must disclose income tax expense or benefit from continuing operations, categorized by federal, state, and foreign taxes. The guidance further requires disclosure of income tax payments to various jurisdictions. This ASU is effective for fiscal periods beginning after December 15, 2024, and early adoption is permitted. This ASU should be applied on a prospective basis, although retrospective application is permitted. Management is currently evaluating the impact on the Company's financial statements and related disclosures.

Working Capital Management and Off Balance Sheet Arrangements

The Company has off balance sheet, uncommitted accounts receivable factoring programs under which entire invoices may be sold to third-party financial institutions. The vast majority of these programs are without recourse. Under these programs, the Company sells the invoices at face value, less a transaction fee, which substantially equals the carrying value and fair value with no gain or loss recognized, and no credit loss exposure is retained. Available capacity under these programs, which the Company uses as a routine source of working capital funding, is dependent on the level of accounts receivable eligible to be sold and the financial institutions' willingness to purchase such receivables. In addition, certain programs also require that the Company continue to service, administer, and collect the sold accounts receivable at market rates. The total amounts sold under the program in third quarter 2024 and 2023 were $703 million and $692 million, respectively, and $2.0 billion and $2.1 billion in first nine months 2024 and 2023, respectively.

The Company works with suppliers to optimize payment terms and conditions on accounts payable to enhance timing of working capital and cash flows. Under a supplier finance program, the Company's suppliers may voluntarily sell receivables due from Eastman to a participating financial institution. Eastman's responsibility is limited to making payments on the terms originally negotiated with suppliers, regardless of whether the suppliers sell their receivables to the financial institution. The range of payment terms Eastman negotiates with suppliers are consistent, regardless of whether a supplier participates in the program. No fees are paid by Eastman for the supplier finance platform or services fees. Eastman or the financial institution may terminate the program at any time with immediate effect upon 90 days' notice. Confirmed obligations in the supplier finance program of $64 million and $69 million at September 30, 2024 and December 31, 2023, respectively, are included in "Payables and other current liabilities" on the Unaudited Consolidated Statements of Financial Position.

2.INVENTORIES
 September 30,December 31,
(Dollars in millions)20242023
Finished goods$1,332 $1,193 
Work in process302 293 
Raw materials and supplies691 618 
Total inventories at FIFO or average cost2,325 2,104 
Less: LIFO reserve421 421 
Total inventories$1,904 $1,683 

Inventories valued on the last-in, first-out ("LIFO") method were approximately 50 percent of total inventories at both September 30, 2024 and December 31, 2023.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3.INCOME TAXES
 Third QuarterFirst Nine Months
(Dollars in millions)2024202320242023
$%$%$%$%
Provision for income taxes and tax rate
$99 35 %$20 10 %$204 26 %$77 12 %

Third quarter and first nine months 2024 provision for income taxes includes an increase of $37 million and $60 million, respectively, related to uncertain tax positions. First nine months 2023 provision for income taxes includes a $51 million decrease due to state tax law changes that were enacted in second quarter 2023 that extend the carryforward period to utilize certain existing state tax credits and a $23 million increase as a result of state guidance issued in first quarter 2023 interpreting certain provisions of the 2017 Tax Cuts and Jobs Act.

At September 30, 2024 and December 31, 2023, Eastman had $388 million and $320 million, respectively, in unrecognized tax benefits. At September 30, 2024, it is reasonably possible that, as a result of the resolution of federal, state, and foreign examinations and appeals, and the expiration of various statutes of limitation, the total amounts of unrecognized tax benefits could decrease by up to $180 million within the next 12 months.

4.BORROWINGS
 September 30,December 31,
(Dollars in millions)20242023
Borrowings consisted of:
7.25% debentures due January 2024
$— $198 
7.625% debentures due June 2024
— 43 
3.80% notes due March 2025
448 696 
1.875% notes due November 2026 (1)
558 550 
7.60% debentures due February 2027
196 196 
4.5% notes due December 2028
496 495 
5.0% notes due August 2029
495 — 
5.75% notes due March 2033 (2)
496 496 
5.625% notes due February 2034
743 — 
4.8% notes due September 2042
495 495 
4.65% notes due October 2044
878 878 
2024 Term Loan— 300 
2027 Term Loan249 499 
Total borrowings5,054 4,846 
Less: Borrowings due within one year448 541 
Long-term borrowings$4,606 $4,305 
(1)The carrying value of the euro-denominated 1.875% notes due November 2026 fluctuates with changes in the euro to U.S. dollar exchange rate. The carrying value of this euro-denominated borrowing has been designated as a non-derivative net investment hedge of a portion of the Company's net investments in euro functional-currency denominated subsidiaries to offset foreign currency fluctuations.
(2)Net proceeds from the bond issuance were used to finance or refinance eligible green investment initiatives, which contribute to Eastman's environmental sustainability strategy (a green bond).

In third quarter 2024, the Company issued $500 million aggregate principal amount of 5.0% notes due August 2029 (the "2029 Notes"). Proceeds from the sale of the 2029 Notes, net of original issue discount and issuance costs, were $495 million. The Company also redeemed $250 million aggregate principal amount of the 3.80% notes due March 2025 (the "2025 Notes") during third quarter 2024. Redemption of the 2025 Notes resulted in an immaterial gain on extinguishment of debt.

In second quarter 2024, the Company repaid the $43 million 7.625% debentures due June 2024. There were no debt extinguishment costs associated with the repayment.
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In first quarter 2024, the Company issued $750 million aggregate principal amount of 5.625% notes due February 2034 (the "2034 Notes"). Proceeds from the sale of the 2034 Notes, net of original issue discounts and issuance costs, were $742 million. The Company also repaid the $198 million 7.25% debentures due January 2024 during first quarter 2024. There were no debt extinguishment costs associated with the repayment.

All proceeds from the issued notes and the redemption of the debentures are reported under financing activities on the Unaudited Consolidated Statements of Cash Flows.

Credit Facility, Term Loans, and Commercial Paper Borrowings

The Company has access to a $1.50 billion revolving credit agreement (the "Credit Facility"). In February 2024, the Credit Facility was amended to extend the maturity to February 2029. All other material terms of the Credit Facility remain unchanged. Borrowings under the Credit Facility are subject to interest at varying spreads above quoted market rates and a commitment fee is paid on the total unused commitment. The Credit Facility includes sustainability-linked pricing terms, provides available liquidity for general corporate purposes, and supports commercial paper borrowings. Commercial paper borrowings are classified as short-term. At September 30, 2024 and December 31, 2023, the Company had no outstanding borrowings under the Credit Facility and no commercial paper borrowings.

In third quarter 2024, the Company repaid $250 million of the $500 million five-year term loan (the "2027 Term Loan"). In first quarter 2024, the Company repaid the $300 million delayed draw two-year term loan (the "2024 Term Loan"). There were no extinguishment costs associated with repayments of either term loan. The outstanding balance on the 2027 Term Loan was $249 million at September 30, 2024 and $499 million at December 31, 2023, with variable interest rates of 6.07% and 6.58%, respectively. The 2027 Term Loan is subject to interest at varying spreads above quoted market rates.

The Credit Facility and the 2027 Term Loan contain customary covenants, including requirements to maintain certain financial ratios, that determine the events of default, amounts available, and terms of borrowings. The Company was in compliance with all applicable covenants at both September 30, 2024 and December 31, 2023.

Fair Value of Borrowings

Eastman has classified its total borrowings at September 30, 2024 and December 31, 2023 under the fair value hierarchy as defined in the accounting policies in Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K. The fair value for fixed-rate debt securities is based on quoted market prices for the same or similar debt instruments and is classified as Level 2. The fair value for the 2027 Term Loan equals the carrying value and is classified as Level 2. The Company's fair value of total borrowings was $5.1 billion and $4.7 billion at September 30, 2024 and December 31, 2023, respectively. The Company had no borrowings classified as Level 1 or Level 3 as of September 30, 2024 and December 31, 2023.

5.DERIVATIVE AND NON-DERIVATIVE FINANCIAL INSTRUMENTS

Overview of Hedging Programs

Eastman is exposed to market risks, such as changes in foreign currency exchange rates, raw material and energy prices, and interest rates. To mitigate these market risks and their effects on the cash flows of the underlying transactions and investments in foreign subsidiaries, the Company uses various derivative and non-derivative financial instruments, when appropriate, in accordance with the Company's hedging strategy and policies. Designation is performed on a specific exposure basis to support hedge accounting. The Company does not enter into derivative transactions for speculative purposes.

For further information on the Company's hedging programs, see Note 10, "Derivative and Non-Derivative Financial Instruments", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Cash Flow Hedges

Cash flow hedges are derivative instruments designated as and used to hedge the exposure to variability in expected future cash flows that are attributable to a particular risk. The derivative instruments that are designated and qualify as a cash flow hedge are reported on the balance sheet at fair value and the changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the anticipated cash flows of the underlying exposures being hedged. The change in the hedge instrument is reported as a component of "Accumulated other comprehensive income (loss)" ("AOCI") on the Unaudited Consolidated Statements of Financial Position and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Cash flows from cash flow hedges are classified as operating activities in the Unaudited Consolidated Statements of Cash Flows.

Fair Value Hedges

Fair value hedges are defined as derivative or non-derivative instruments designated as and used to hedge the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk. The derivative instruments that are designated and qualify as fair value hedges are reported as "Long-term borrowings" on the Unaudited Consolidated Statements of Financial Position at fair value and the changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the anticipated fair value of the underlying exposures being hedged. The net of the change in the hedge instrument and item being hedged for qualifying fair value hedges is recognized in earnings in the same period or periods during which the hedged transaction affects earnings. Cash flows from fair value hedges are classified as operating activities in the Unaudited Consolidated Statements of Cash Flows.

In third quarter 2024, the Company settled $75 million notional amount designated as an interest rate swap on the 3.80% notes due March 2025, resulting in an immaterial cash loss which is included as part of operating activities in the Unaudited Consolidated Statements of Cash Flows.

Net Investment Hedges

Net investment hedges are defined as derivative or non-derivative instruments designated as and used to hedge the foreign currency exposure of the net investments in certain foreign operations. The net of the change in the hedge instrument and item being hedged for qualifying net investment hedges is reported as a component of the "Cumulative Translation Adjustment" ("CTA") within AOCI on the Unaudited Consolidated Statements of Financial Position. Cash flows from the CTA component are classified as operating activities in the Unaudited Consolidated Statements of Cash Flows. Recognition in earnings of amounts previously recognized in CTA is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. In the event of a complete or substantially complete liquidation of the net investment, cash flows from net investment hedges are classified as investing activities in the Unaudited Consolidated Statements of Cash Flows.

For derivative cross-currency interest rate swap net investment hedges, gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in CTA within AOCI and recognized in earnings through the periodic swap interest accruals. The cross-currency interest rate swaps designated as net investment hedges are included as part of "Other long-term liabilities", "Other noncurrent assets", "Payables and other current liabilities", or "Other current assets" on the Unaudited Consolidated Statements of Financial Position. Cash flows from excluded components are classified as operating activities in the Unaudited Consolidated Statements of Cash Flows.

Eastman enters into fixed-to-fixed cross-currency swaps and designates these swaps to hedge a portion of its net investment in a non-U.S. dollar functional currency denominated subsidiary against foreign currency fluctuations. These contracts involve the exchange of fixed U.S. dollars with fixed foreign currency interest payments periodically over the life of the contracts and an exchange of the notional amounts at maturity.

In third quarter 2024, in conjunction with the partial repayment of the 3.80% notes due March 2025, the Company terminated a fixed-to-fixed cross-currency swap of $120 million (€104 million) maturing in March 2025. The termination of this cross-currency swap resulted in a $7 million gain recognized in CTA. In first quarter 2024, in conjunction with the repayment of the 7.25% debentures due January 2024, the Company terminated fixed-to-fixed cross-currency swaps of $190 million (€165 million) maturing January 2024. The termination of the cross-currency swap resulted in a $9 million gain recognized in CTA. The related cash flows were classified as investing activities in the Unaudited Consolidated Statements of Cash Flows.
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Additionally, in first quarter 2024, Eastman entered into fixed-to-fixed cross-currency swaps of $50 million (€46 million) maturing December 2028, $200 million (€184 million) maturing September 2029, and $250 million (€230 million) maturing February 2034.

Summary of Financial Position and Financial Performance of Hedging Instruments

The following table presents the notional amounts outstanding at September 30, 2024 and December 31, 2023 associated with Eastman's hedging programs.
Notional OutstandingSeptember 30, 2024December 31, 2023
Derivatives designated as cash flow hedges:
Foreign Exchange Forward and Option Contracts (in millions)
EUR/USD (in EUR)€432€405
Commodity Forward and Collar Contracts
Energy (in million british thermal units)15 11 
Derivatives designated as fair value hedges:
Fixed-for-floating interest rate swaps (in millions)— $75
Derivatives designated as net investment hedges:
Cross-currency interest rate swaps (in millions)
EUR/USD (in EUR)€1,543€1,354
JPY/USD (in JPY)¥7,385¥7,385
Non-derivatives designated as net investment hedges:
Foreign Currency Net Investment Hedges (in millions)
EUR/USD (in EUR)€498€498

Fair Value Measurements

All the Company's derivative assets and liabilities are currently classified as Level 2. Level 2 fair value is based on estimates using standard pricing models. These standard pricing models use inputs that are derived from or corroborated by observable market data such as interest rate yield curves and currency spot and forward rates. The fair value of commodity contracts is derived using forward curves supplied by an industry recognized and unrelated third party. In addition, on an ongoing basis, the Company compares a subset of its valuations against valuations received from counterparties to validate the accuracy of its standard pricing models. The Company had no derivatives classified as Level 3 as of September 30, 2024 and December 31, 2023. Counterparties to these derivative contracts are highly rated financial institutions which the Company believes carry minimal risk of nonperformance, and the Company diversifies its positions among such counterparties to reduce its exposure to counterparty risk and credit losses. The Company monitors the creditworthiness of its counterparties on an ongoing basis. The Company did not recognize a credit loss during third quarter and first nine months 2024 or 2023.

All the Company's derivative contracts are subject to master netting arrangements, or similar agreements, which provide for the option to settle contracts on a net basis when they settle on the same day and in the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event. The Company does not have any cash collateral due under such agreements.

The Company has elected to present derivative contracts on a gross basis on the Unaudited Consolidated Statements of Financial Position. The following table presents the financial assets and liabilities valued on a recurring and gross basis and includes where the financial assets and liabilities are presented on the Unaudited Consolidated Statements of Financial Position as of September 30, 2024 and December 31, 2023.
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Financial Position and Fair Value Measurements of Hedging Instruments on a Gross Basis
(Dollars in millions) 
Derivative TypeStatements of Financial
Position Classification		Level 2
September 30, 2024December 31, 2023
Derivatives designated as fair value hedges:
Fixed-for-floating interest rate swapOther current assets$— $1 
Derivatives designated as net investment hedges:
Cross-currency interest rate swapsOther current assets4 8 
Cross-currency interest rate swapsOther noncurrent assets18 18 
Total Derivative Assets$22 $27 
Derivatives designated as cash flow hedges:
Commodity contractsPayables and other current liabilities$5 $19 
Foreign exchange contractsPayables and other current liabilities7 8 
Foreign exchange contractsOther long-term liabilities2 2 
Derivatives designated as fair value hedges:
Fixed-for-floating interest rate swapLong-term borrowings— 3 
Derivatives designated as net investment hedges:
Cross-currency interest rate swaps
Payables and other current liabilities21 — 
Cross-currency interest rate swapsOther long-term liabilities63 61 
Total Derivative Liabilities$98 $93 
Total Net Derivative Assets (Liabilities) $(76)$(66)

In addition to the fair value associated with derivative instruments designated as cash flow hedges, fair value hedges, and net investment hedges, the Company had non-derivative instruments designated as foreign currency net investment hedges with a carrying value of $558 million at September 30, 2024 and $550 million at December 31, 2023. The designated foreign currency-denominated borrowings are included as part of "Borrowings due within one year" and "Long-term borrowings" on the Unaudited Consolidated Statements of Financial Position.

For additional fair value measurement information, see Note 1, "Significant Accounting Policies", and Note 10, "Derivative and Non-Derivative Financial Instruments", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2024 and December 31, 2023, the following amounts were included on the Unaudited Consolidated Statements of Financial Position related to cumulative basis adjustments for fair value hedges.
(Dollars in millions)Carrying amount of the hedged liabilitiesCumulative amount of fair value hedging loss adjustment included in the carrying amount of the hedged liability
Line item on the Unaudited Consolidated Statements of Financial Position in which the hedged item is includedSeptember 30, 2024December 31, 2023September 30, 2024December 31, 2023
Long-term borrowings— 72 — (3)

The following table presents the effect of the Company's hedging instruments on "Other comprehensive income (loss), net of tax" ("OCI") and financial performance for third quarter and first nine months 2024 and 2023.
Change in amount of after tax gain (loss) recognized in OCI on derivativesPre-tax amount of gain (loss) reclassified from AOCI into earnings
(Dollars in millions)Third QuarterFirst Nine MonthsThird QuarterFirst Nine Months
Hedging Relationships20242023202420232024202320242023
Derivatives in cash flow hedging relationships:
Commodity contracts$(3)$(5)$10 $(9)$— $— $(23)$(3)
Foreign exchange contracts(11)11 (3)1 — 3 5 10 
Forward starting interest rate and treasury lock swap contracts1 1 2 2 (1)— (2)(2)
Non-derivatives in net investment hedging relationships (pre-tax):
Net investment hedges (24)15 (7)(8)— — — — 
Derivatives in net investment hedging relationships (pre-tax):
Cross-currency interest rate swaps(73)51 (18)31 — — — — 
Cross-currency interest rate swaps excluded component 5 (16)7 (33)— — — — 

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the effect of fair value and cash flow hedge accounting in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings for third quarter and first nine months 2024 and 2023.

Location and Amount of Gain or (Loss) Recognized in Earnings from Fair Value and Cash Flow Hedging Relationships
Third Quarter
20242023
(Dollars in millions)SalesCost of SalesNet Interest ExpenseSalesCost of SalesNet Interest Expense
Total amounts of income and expense line items presented in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in which the effects of fair value or cash flow hedges are recognized$2,464 $1,859 $49 $2,267 $1,783 $57 
The effects of fair value and cash flow hedging:
Gain or (loss) on fair value hedging relationships:
Interest contracts (fixed-for-floating interest rate swaps):
Hedged items— — 
Derivatives designated as hedging instruments— — 
Gain or (loss) on cash flow hedging relationships:
Interest contracts (forward starting interest rate and treasury lock swap contracts):
Amount reclassified from AOCI into earnings(1)— 
Commodity Contracts:
Amount reclassified from AOCI into earnings— — 
Foreign Exchange Contracts:
Amount reclassified from AOCI into earnings— 3 
Location and Amount of Gain or (Loss) Recognized in Earnings from Fair Value and Cash Flow Hedging Relationships
First Nine Months
20242023
(Dollars in millions)SalesCost of SalesNet Interest ExpenseSalesCost of SalesNet Interest Expense
Total amounts of income and expense line items presented in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in which the effects of fair value or cash flow hedges are recognized$7,137 $5,401 $148 $7,003 $5,406 $163 
The effects of fair value and cash flow hedging:
Gain or (loss) on fair value hedging relationships:
Interest contracts (fixed-for-floating interest rate swaps):
Hedged items2 2 
Derivatives designated as hedging instruments(2)(2)
Gain or (loss) on cash flow hedging relationships:
Interest contracts (forward starting interest rate and treasury lock swap contracts):
Amount reclassified from AOCI into earnings(2)(2)
Commodity Contracts:
Amount reclassified from AOCI into earnings(23)(3)
Foreign Exchange Contracts:
Amount reclassified from AOCI into earnings5 10 
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company enters into foreign exchange derivatives denominated in multiple currencies which are transacted and settled in the same quarter. These derivatives are not designated as hedges due to the short-term nature and the gains or losses on these derivatives are marked-to-market in line item "Other (income) charges, net" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings. As a result of these derivatives, the Company recognized a net gain of $7 million and $4 million during third quarter and first nine months 2024, respectively, and recognized a net loss of $1 million and $7 million during third quarter and first nine months 2023, respectively.

Pre-tax monetized positions and mark-to-market gains and losses from raw materials and energy, currency, and certain interest rate hedges that were included in AOCI resulted in a net loss of $10 million and $4 million at September 30, 2024 and December 31, 2023, respectively. Losses in AOCI increased between December 31, 2023 and September 30, 2024 primarily as a result of a decrease in euro to U.S. dollar exchange rates. If recognized, approximately $13 million in pre-tax losses as of September 30, 2024, would be reclassified into earnings during the next 12 months, including foreign exchange contracts prospectively dedesignated and monetized in fourth quarter 2022.

6.RETIREMENT PLANS

Defined Benefit Pension Plans and Other Postretirement Benefit Plans

Eastman maintains defined benefit pension plans that provide eligible employees with retirement benefits. In addition, Eastman provides life insurance for eligible retirees hired prior to January 1, 2007. Company funding is provided for eligible Medicare retirees hired prior to January 1, 2007 with a health reimbursement arrangement. Costs recognized for these benefits are estimated amounts, which may change as actual costs for the year are determined.

For additional information regarding retirement plans, see Note 11, "Retirement Plans", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Components of net periodic benefit (credit) cost were as follows:
Third Quarter
 Pension PlansOther Postretirement Benefit Plans
2024202320242023
(Dollars in millions)U.S.Non-U.S.U.S.Non-U.S.
Service cost$5 $2 $6 $2 $— $— 
Interest cost17 6 19 8 6 7 
Expected return on assets(24)(7)(22)(6)(1)(1)
Amortization of:
Prior service credit, net— — — — (2)(7)
Net periodic benefit (credit) cost$(2)$1 $3 $4 $3 $(1)
First Nine Months
Pension PlansOther Postretirement Benefit Plans
2024202320242023
(Dollars in millions)U.S.Non-U.S.U.S.Non-U.S.
Service cost$16 $6 $17 $6 $— $— 
Interest cost54 18 58 22 18 20 
Expected return on assets(72)(21)(66)(19)(4)(3)
Amortization of:
Prior service credit, net— — — — (7)(20)
Net periodic benefit (credit) cost$(2)$3 $9 $9 $7 $(3)

7.OTHER COMMITMENTS

Eastman has commitments consisting of debt securities, credit facilities, term loans, interest payable, purchase obligations, operating leases, and other liabilities.

In first quarter 2024, purchase obligations in the 2029 and beyond period decreased by approximately $1.5 billion as a result of exiting an agreement with a supplier after contract negotiations. Eastman had remaining debt and other commitments at September 30, 2024 totaling approximately $10.7 billion over a period of approximately 30 years.

Other than the purchase obligations discussed above, there have been no material changes to the Company's commitments from those disclosed in Note 12, "Leases and Other Commitments", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
8.ENVIRONMENTAL MATTERS AND ASSET RETIREMENT OBLIGATIONS

Certain Eastman manufacturing facilities generate hazardous and nonhazardous wastes, of which the treatment, storage, transportation, and disposal are regulated by various governmental agencies. In connection with the cleanup of various hazardous waste sites, the Company, along with many other entities, has been designated a potentially responsible party ("PRP") by the U.S. Environmental Protection Agency under the Comprehensive Environmental Response, Compensation and Liability Act, which potentially subjects PRPs to joint and several liability for certain cleanup costs. In addition, the Company will incur costs for environmental remediation and closure and post-closure under the federal Resource Conservation and Recovery Act. Reserves for environmental contingencies have been established in accordance with Eastman's policies described in Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K. The resolution of uncertainties related to environmental matters may have a material adverse effect on the Company's consolidated results of operations in the period recognized. However, because of the availability of legal defenses, the Company's preliminary assessment of actions that may be required, and the extended period of time that the obligations are expected to be satisfied, management does not believe that the Company's liability for these environmental matters, individually or in the aggregate, will have a material adverse effect on the Company's future overall financial position, results of operations, or cash flows.

Environmental Remediation and Environmental Asset Retirement Obligations

The Company's net environmental reserve for environmental contingencies, including remediation costs and asset retirement obligations, is included as part of "Other noncurrent assets", "Payables and other current liabilities", and "Other long-term liabilities" on the Unaudited Consolidated Statements of Financial Position as follows:
(Dollars in millions)September 30, 2024December 31, 2023
Environmental contingencies, current$15 $10 
Environmental contingencies, long-term272 274 
Total$287 $284 

Environmental Remediation

Estimated future environmental expenditures for undiscounted remediation costs ranged from the best estimate or minimum of $255 million to the maximum of $499 million and from the best estimate or minimum of $252 million to the maximum of $497 million at September 30, 2024 and December 31, 2023, respectively. The best estimate or minimum estimated future environmental expenditures are considered to be probable and reasonably estimable.

Reserves for environmental remediation include liabilities expected to be paid within approximately 30 years. The amounts charged to pre-tax earnings for environmental remediation and related charges are recognized in "Cost of sales" and "Other (income) charges, net" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings.

Changes in the reserves for environmental remediation liabilities during first nine months 2024 and full year 2023 are summarized below:
(Dollars in millions)Environmental Remediation Liabilities
Balance at December 31, 2022
$245 
Changes in estimates recognized in earnings and other19 
Cash reductions(12)
Balance at December 31, 2023
252 
Changes in estimates recognized in earnings and other12 
Cash reductions(9)
Balance at September 30, 2024$255 

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Environmental Asset Retirement Obligations

An asset retirement obligation is an obligation for the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development, or normal operation of that long-lived asset. Environmental asset retirement obligations primarily consist of closure and post-closure costs. For sites that have environmental asset retirement obligations, the best estimate recognized to date for these environmental asset retirement obligation costs were $32 million at both September 30, 2024 and December 31, 2023.

Non-Environmental Asset Retirement Obligations

The Company has contractual asset retirement obligations not associated with environmental liabilities. Eastman's non-environmental asset retirement obligations are primarily associated with the future closure of leased manufacturing assets in Pace, Florida and Oulu, Finland. These non-environmental asset retirement obligations were $53 million and $51 million at September 30, 2024 and December 31, 2023, respectively, and are included in "Other long-term liabilities" on the Unaudited Consolidated Statements of Financial Position.

9.LEGAL MATTERS

From time to time, Eastman and its operations are parties to, or targets of, lawsuits, claims, investigations and proceedings, including product liability, personal injury, asbestos, patent and intellectual property, commercial, contract, environmental, antitrust, health and safety, and employment matters, which are primarily handled and defended in the ordinary course of business. While the Company is unable to predict the outcome of these matters, it does not believe, based upon currently available facts, that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial position, results of operations, or cash flows.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10.STOCKHOLDERS' EQUITY

Reconciliations of the changes in stockholders' equity for third quarter and first nine months 2024 and 2023 are provided below:
(Dollars in millions, except per share amount)Common Stock at Par ValueAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury Stock at CostTotal Eastman Stockholders' EquityNoncontrolling InterestTotal Equity
Balance at June 30, 2024$2 $2,417 $9,694 $(302)$(6,184)$5,627 $72 $5,699 
Net Earnings— — 180 — — 180 1 181 
Cash Dividends Declared (1)
($0.81 per share)
— — (94)— — (94)— (94)
Other Comprehensive Income (Loss)— — — 24 — 24 — 24 
Share-Based Compensation Expense (2)
— 14 — — — 14 — 14 
Stock Option Exercises— 4 — — — 4 — 4 
Other
— — — — (1)(1)1 — 
Share Repurchases— — — — (100)(100)— (100)
Balance at September 30, 2024$2 $2,435 $9,780 $(278)$(6,285)$5,654 $74 $5,728 
(Dollars in millions, except per share amount)Common Stock at Par ValueAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury Stock at CostTotal Eastman Stockholders' EquityNoncontrolling InterestTotal Equity
Balance at June 30, 2023$2 $2,342 $9,190 $(271)$(5,982)$5,281 $71 $5,352 
Net Earnings— — 178 — — 178 1 179 
Cash Dividends Declared (1)
($0.79 per share)
— — (94)— — (94)— (94)
Other Comprehensive Income (Loss)— — — (23)— (23)— (23)
Share-Based Compensation Expense (2)
— 10 — — — 10 — 10 
Balance at September 30, 2023$2 $2,352 $9,274 $(294)$(5,982)$5,352 $72 $5,424 
(1)Cash dividends declared consists of cash dividends paid and dividends declared but unpaid.
(2)Share-based compensation expense is based on the fair value of share-based awards.
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amount)Common Stock at Par ValueAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury Stock at CostTotal Eastman Stockholders' EquityNoncontrolling InterestTotal Equity
Balance at December 31, 2023$2 $2,368 $9,490 $(319)$(6,083)$5,458 $72 $5,530 
Net Earnings— — 575 — — 575 2 577 
Cash Dividends Declared (1)
($2.43 per share)
— — (285)— — (285)— (285)
Other Comprehensive Income (Loss)— — — 41 — 41 — 41 
Share-Based Compensation Expense (2)
— 49 — — — 49 — 49 
Stock Option Exercises— 26 — — — 26 — 26 
Other (3)
— (8)— — (2)(10)1 (9)
Share Repurchases— — — — (200)(200)— (200)
Distributions to Noncontrolling Interest— — — — — — (1)(1)
Balance at September 30, 2024$2 $2,435 $9,780 $(278)$(6,285)$5,654 $74 $5,728 
(Dollars in millions, except per share amount)Common Stock at Par ValueAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury Stock at CostTotal Eastman Stockholders' EquityNoncontrolling InterestTotal Equity
Balance at December 31, 2022$2 $2,315 $8,973 $(205)$(5,932)$5,153 $83 $5,236 
Net Earnings— — 584 — — 584 1 585 
Cash Dividends Declared (1)
($2.37 per share)
— — (283)— — (283)— (283)
Other Comprehensive Income (Loss)— — — (89)— (89)— (89)
Share-Based Compensation Expense (2)
— 49 — — — 49 — 49 
Stock Option Exercises— 2 — — — 2 — 2 
Other (3)
— (14)— — — (14)2 (12)
Share Repurchases
— — — — (50)(50)— (50)
Distributions to Noncontrolling Interest— — — — — — (14)(14)
Balance at September 30, 2023$2 $2,352 $9,274 $(294)$(5,982)$5,352 $72 $5,424 
(1)Cash dividends declared consists of cash dividends paid and dividends declared but unpaid.
(2)Share-based compensation expense is based on the fair value of share-based awards.
(3)Additional paid-in capital includes the value of shares withheld for employees' taxes on vesting of share-based compensation awards.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Accumulated Other Comprehensive Income (Loss), Net of Tax
(Dollars in millions)Cumulative Translation AdjustmentBenefit Plans Unrecognized Prior Service CreditsUnrealized Gains (Losses) on Derivative InstrumentsUnrealized Losses on InvestmentsAccumulated Other Comprehensive Income (Loss)
Balance at December 31, 2022
$(230)$32 $(6)$(1)$(205)
Period change(67)(21)(26)— (114)
Balance at December 31, 2023
(297)11 (32)(1)(319)
Period change38 (6)9 — 41 
Balance at September 30, 2024$(259)$5 $(23)$(1)$(278)
Amounts of other comprehensive income (loss) are presented net of applicable taxes. Eastman recognizes deferred income taxes on the CTA related to branch operations and income from other entities included in the Company's consolidated U.S. tax return. No deferred income taxes are recognized on the CTA of other subsidiaries outside the United States because the CTA is considered to be a component of indefinitely invested, unremitted earnings of these foreign subsidiaries.

Components of OCI recognized in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings are presented below, before tax and net of tax effects:
Third Quarter
20242023
(Dollars in millions)Before TaxNet of TaxBefore TaxNet of Tax
Other comprehensive income (loss)
Change in cumulative translation adjustment$26 $39 $4 $(24)
Defined benefit pension and other postretirement benefit plans:
Amortization of unrecognized prior service credits(2)(2)(7)(6)
Derivatives and hedging:
Unrealized gain (loss) during period(17)(13)12 9 
Reclassification adjustment for (gains) losses included in net income, net— — (3)(2)
Total other comprehensive income (loss)$7 $24 $6 $(23)
First Nine Months
20242023
(Dollars in millions)Before TaxNet of TaxBefore TaxNet of Tax
Other comprehensive income (loss)
Change in cumulative translation adjustment$37 $38 $(39)$(67)
Defined benefit pension and other postretirement benefit plans:
Amortization of unrecognized prior service credits(7)(6)(20)(16)
Derivatives and hedging:
Unrealized gain (loss) during period(8)(6)(4)(3)
Reclassification adjustment for (gains) losses included in net income, net19 15 (5)(3)
Total other comprehensive income (loss)$41 $41 $(68)$(89)

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
11.EARNINGS AND DIVIDENDS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share ("EPS") which are calculated using the treasury stock method:
 Third QuarterFirst Nine Months
(In millions, except per share amounts)2024202320242023
Numerator
Earnings attributable to Eastman, net of tax $180 $178 $575 $584 
Denominator
Weighted average shares used for basic EPS116.4118.5117.0118.7
Dilutive effect of stock options and other awards1.40.51.30.8
Weighted average shares used for diluted EPS117.8119.0118.3119.5
(Calculated using whole dollars and shares)
EPS
Basic$1.55 $1.50 $4.91 $4.92 
Diluted$1.53 $1.49 $4.86 $4.89 

Shares underlying stock options of 1,315,375 and 1,873,472 for third quarter 2024 and 2023, respectively, and 1,234,513 and 1,873,472 for first nine months 2024 and 2023, respectively, were excluded from the calculations of diluted EPS because the grant date exercise price of these options was greater than the average market price of the Company's common stock and the effect of including them in the calculations of diluted EPS would have been antidilutive. The Company repurchased 1,018,269 shares and 2,018,274 shares in third quarter and first nine months 2024, respectively, and repurchased 621,711 shares in first nine months 2023. No shares were repurchased in third quarter 2023.

The Company declared cash dividends of $0.81 and $0.79 per share for third quarter 2024 and 2023, respectively. The Company declared cash dividends of $2.43 and $2.37 per share for first nine months 2024 and 2023, respectively.
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
12.ASSET IMPAIRMENTS, RESTRUCTURING, AND OTHER CHARGES, NET
(Dollars in millions)Third QuarterFirst Nine Months
2024202320242023
Asset impairments (1)
$5 $— $5 $— 
Severance charges (1)(2)
10 — 21 16 
Site closure and other charges (1)(3)(4)
15 — 15 6 
Total$30 $— $41 $22 

(1)Third quarter and first nine months 2024 includes asset impairment charges of $5 million, severance charges of $4 million, and site closure costs of $9 million related to the planned closure of a solvent-based resins production line at an advanced interlayers facility in North America. In addition, inventory adjustments of $4 million and $3 million in the Advanced Materials ("AM") segment and Additives & Functional Products ("AFP") segment, respectively, were recognized in "Cost of sales" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in third quarter and first nine months 2024 related to this closure.
(2)Third quarter and first nine months 2024 includes severance charges of $6 million and $17 million, respectively, as part of cost reduction initiatives which are reported in "Other". First nine months 2023 includes severance charges as part of fourth quarter 2022 cost reduction initiatives reported in "Other".
(3)Third quarter and first nine months 2024 includes other charges of $6 million related to growth and profitability improvement initiatives.
(4)First nine months 2023 includes site closure costs of $6 million related to the closure of an acetate yarn manufacturing facility in Europe in the Fibers segment. In addition, accelerated depreciation of $23 million was recognized in "Cost of sales" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in first nine months 2023 related to the closure of this facility.

Changes in Reserves

The following table summarizes the changes in asset impairments and restructuring reserves in first nine months 2024 and full year 2023:

(Dollars in millions)Balance at January 1, 2024Provision/ AdjustmentsNon-cash Reductions/
Additions		Cash ReductionsBalance at September 30, 2024
Non-cash charges$— $5 $(5)$— $— 
Severance costs$26 $21 $— $(22)$25 
Other restructuring costs— 15 — (6)9 
Total$26 $41 $(5)$(28)$34 

(Dollars in millions)		Balance at January 1, 2023Provision/ AdjustmentsNon-cash Reductions/
Additions		Cash ReductionsBalance at December 31, 2023
Severance costs$34 $31 $— $(39)$26 
Other restructuring costs1 6 — (7)— 
Total$35 $37 $— $(46)$26 

Substantially all severance costs remaining as of September 30, 2024 are expected to be paid within one year.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
13.SHARE-BASED COMPENSATION AWARDS

The Company utilizes share-based awards under employee and non-employee director compensation programs. These share-based awards have included restricted and unrestricted stock, restricted stock units, stock options, and performance shares. In third quarter 2024 and 2023, $14 million and $10 million, respectively, of compensation expense before tax were recognized in "Selling, general and administrative expenses" ("SG&A") in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings, for all share-based awards. The impact on third quarter 2024 and 2023 net earnings of $11 million and $7 million, respectively, is net of deferred tax expense related to share-based award compensation for each period.

In both first nine months 2024 and 2023, $49 million of compensation expense before tax was recognized in SG&A in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings for all share-based awards. The impact on first nine months 2024 and 2023 net earnings of $37 million and $36 million, respectively, is net of deferred tax expense related to share-based award compensation for each period.

For additional information regarding share-based compensation plans and awards, see Note 18, "Share-Based Compensation Plans and Awards", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K.

14.SEGMENT INFORMATION

Eastman's products and operations are managed and reported in four operating segments: Advanced Materials ("AM"), Additives & Functional Products ("AFP"), Chemical Intermediates ("CI"), and Fibers. The economic factors that impact the nature, amount, timing, and uncertainty of revenue and cash flows vary among the Company's operating segments and the geographical regions in which they operate. For disaggregation of revenue by major product lines and regions for each operating segment, see Note 20, "Segment and Regional Sales Information", to the consolidated financial statements in Part II, Item 8 of the Company's 2023 Annual Report on Form 10-K. For additional financial and product information for each operating segment, see Part I, Item 1, "Business - Business Segments", in the Company's 2023 Annual Report on Form 10-K.

(Dollars in millions)Third QuarterFirst Nine Months
Sales by Segment2024202320242023
Advanced Materials$787 $746 $2,330 $2,227 
Additives & Functional Products744 670 2,166 2,194 
Chemical Intermediates593 527 1,631 1,630 
Fibers336 323 997 949 
Total Sales by Operating Segment2,460 2,266 7,124 7,000 
Other4 1 13 3 
Total Sales$2,464 $2,267 $7,137 $7,003 


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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions)Third QuarterFirst Nine Months
Earnings (Loss) Before Interest and Taxes by Segment2024202320242023
Advanced Materials$100 $93 $335 $278 
Additives & Functional Products 127 105 359 369 
Chemical Intermediates43 6 81 87 
Fibers 112 109 351 280 
Total Earnings Before Interest and Taxes by Operating Segment382 313 1,126 1,014 
Other   
Growth initiatives and businesses not allocated to operating segments(43)(49)(155)(145)
Pension and other postretirement benefits income (expense), net not allocated to operating segments2 (4)6 (12)
Asset impairments, restructuring, and other charges, net(12)— (23)(16)
Steam line incident (costs) insurance proceeds, net— — — 8 
Other income (charges), net not allocated to operating segments— (4)(25)(24)
Total Earnings Before Interest and Taxes$329 $256 $929 $825 

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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Page
  
  
  
  
  
  

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is based upon the unaudited consolidated financial statements of Eastman Chemical Company ("Eastman" or the "Company"), which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), and should be read in conjunction with the Company's audited consolidated financial statements, including related notes, and MD&A contained in the Company's 2023 Annual Report on Form 10-K, and the unaudited consolidated financial statements, including related notes, included in Part I, Item 1, in this Quarterly Report. All references to earnings per share ("EPS") contained in this report are diluted EPS unless otherwise noted.
 
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures, and the accompanying reconciliations of the non-GAAP financial measures to the most comparable GAAP measures, are presented below in this section and in "Overview", "Results of Operations", "Summary by Operating Segment", and "Liquidity and Other Financial Information - Cash Flows" in this MD&A.

Management discloses non-GAAP financial measures, and the related reconciliations to the most comparable GAAP financial measures, because it believes investors use these metrics in evaluating longer term period-over-period performance, and to allow investors to better understand and evaluate the information used by management to assess the Company's and its operating segments' performances, make resource allocation decisions, and evaluate organizational and individual performances in determining certain performance-based compensation. Non-GAAP financial measures do not have definitions under GAAP, and may be defined differently by, and not be comparable to, similarly titled measures used by other companies. As a result, management cautions investors not to place undue reliance on any non-GAAP financial measure, but to consider such measures alongside the most directly comparable GAAP financial measure.

Company Use of Non-GAAP Financial Measures

Non-Core Items and any Unusual or Non-Recurring Items Excluded from Non-GAAP Earnings

In addition to evaluating Eastman's financial condition, results of operations, liquidity, and cash flows as reported in accordance with GAAP, management evaluates Company and operating segment performance, and makes resource allocation and performance evaluation decisions, excluding the effect of transactions, costs, and losses or gains that do not directly result from Eastman's normal, or "core", business and operations, or are otherwise of an unusual or non-recurring nature.

•Non-core transactions, costs, and losses or gains relate to, among other things, cost reductions, growth and profitability improvement initiatives, changes in businesses and assets, and other events outside of the Company's core business operations, and have included asset impairments, restructuring, and other charges and gains, costs of and related to acquisitions, gains and losses from and costs related to dispositions, closures, or shutdowns of businesses or assets, financing transaction costs, environmental and other costs related to previously divested businesses or non-operational sites and product lines, and mark-to-market losses or gains for pension and other postretirement benefit plans.

•In first nine months 2023, the Company recognized unusual insurance proceeds, net of costs from the previously reported January 31, 2022 operational incident at its Kingsport site as a result of a steam line failure (the "steam line incident"). Management considered the steam line incident unusual because of the Company's operational and safety history and the magnitude of the unplanned disruption.

Because non-core, unusual, or non-recurring transactions, costs, and losses or gains may materially affect the Company's, or any particular operating segment's, financial condition or results in a specific period in which they are recognized, management believes it is appropriate to evaluate the financial measures prepared and calculated in accordance with both GAAP and the related non-GAAP financial measures excluding the effect on the Company's results of these non-core, unusual, or non-recurring items. In addition to using such measures to evaluate results in a specific period, management evaluates such non-GAAP measures, and believes that investors may also evaluate such measures, because such measures may provide more complete and consistent comparisons of the Company's, and its segments', operational performance on a period-over-period historical basis and, as a result, provide a better indication of expected future trends.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Adjusted Tax Rate and Provision for Income Taxes

In interim periods, Eastman discloses non-GAAP earnings with an adjusted effective tax rate and a resulting adjusted provision for income taxes using the Company's forecasted tax rate for the full year as of the end of the interim period. The adjusted effective tax rate and resulting adjusted provision for income taxes are equal to the Company's projected full year effective tax rate and provision for income taxes on earnings excluding non-core, unusual, or non-recurring items for completed periods. The adjusted effective tax rate and resulting adjusted provision for income taxes may fluctuate during the year for changes in events and circumstances that change the Company's forecasted annual effective tax rate and resulting provision for income taxes excluding non-core, unusual, or non-recurring items. Management discloses this adjusted effective tax rate, and the related reconciliation to the GAAP effective tax rate, to provide investors more complete and consistent comparisons of the Company's operational performance on a period-over-period interim basis and on the same basis as management evaluates quarterly financial results to provide a better indication of expected full year results.

Non-GAAP Debt Measure

Eastman from time to time evaluates and discloses to investors and securities and credit analysts the non-GAAP debt measure "net debt", which management defines as total borrowings less cash and cash equivalents. Management believes this metric is useful to investors and securities and credit analysts to provide them with information similar to that used by management in evaluating the Company's overall financial position, liquidity, and leverage and because management believes investors, securities analysts, credit analysts and rating agencies, and lenders often use a similar measure to assess and compare companies' relative financial position and liquidity.

Non-GAAP Measures in this Quarterly Report

The following non-core items are excluded by management in its evaluation of certain earnings results in this Quarterly Report:
•Asset impairments, restructuring, and other charges, net;
•Cost of sales impact from restructuring activities; and
•Environmental and other costs from previously divested or non-operational sites and product lines.

The following unusual items are excluded by management in its evaluation of certain earnings results in this Quarterly Report:
•Steam line incident costs (insurance proceeds), net.

As described above, the alternative non-GAAP measure of debt, "net debt", is also presented in this Quarterly Report.

Non-GAAP Financial Measures - Non-Core and Unusual Items Excluded from Earnings and Adjustments to Provision for Income Taxes
 Third QuarterFirst Nine Months
(Dollars in millions)2024202320242023
Non-core items impacting earnings before interest and taxes:
Asset impairments, restructuring, and other charges, net
$30 $— $41 $22 
Cost of sales impact from restructuring activities
7 — 7 23 
Environmental and other costs— — 16 13 
Unusual item impacting earnings before interest and taxes:
Steam line incident costs (insurance proceeds), net— — — (8)
Total non-core and unusual items impacting earnings before interest and taxes37 — 64 50 
Less: Items impacting provision for income taxes:
Tax effect of non-core and unusual items10 — 16 9 
Interim adjustment to tax provision(59)3 (89)17 
Total items impacting provision for income taxes(49)3 (73)26 
Total items impacting net earnings attributable to Eastman$86 $(3)$137 $24 

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

This MD&A includes an analysis of the effect of the foregoing on the following GAAP financial measures:

•Gross profit;
•Other (income) charges, net;
•Earnings before interest and taxes ("EBIT");
•Provision for income taxes;
•Net earnings attributable to Eastman;
•Diluted EPS; and
•Total borrowings.

OVERVIEW

Eastman's products and operations are managed and reported in four operating segments: Advanced Materials ("AM"), Additives & Functional Products ("AFP"), Chemical Intermediates ("CI"), and Fibers. Eastman uses an innovation-driven growth model which consists of leveraging world class scalable technology platforms, delivering differentiated application development capabilities, and relentlessly engaging the market. The Company's world class technology platforms form the foundation of sustainable growth by differentiated products through significant scale advantages in research and development ("R&D") and advantaged global market access. Molecular recycling technologies continue to be an area of investment focus for the Company and extends the level of differentiation afforded by our world class technology platforms. Differentiated application development converts market complexity into opportunities for growth and accelerates innovation by enabling a deeper understanding of the value of Eastman's products and how they perform within customers' and end-user products. Key areas of application development include thermoplastic conversion, functional films, coatings formulations, textiles and nonwovens, and personal and home care formulations. The Company engages the market by working directly with customers and downstream users, targeting attractive niche markets, and leveraging disruptive macro trends. Management believes that these elements of the Company's innovation-driven growth model, combined with disciplined portfolio management and balanced capital deployment, will result in consistent, sustainable earnings growth and strong cash flow from operations.

Sales, EBIT, and EBIT excluding non-core and unusual items were as follows:
 Third QuarterFirst Nine Months
(Dollars in millions)2024202320242023
Sales$2,464 $2,267 $7,137 $7,003 
Earnings before interest and taxes329 256 929 825 
Earnings before interest and taxes excluding non-core and unusual items366 256 993 875 

Sales revenue increased in third quarter 2024 compared to third quarter 2023 primarily due to higher sales volume. Sales revenue increased in first nine months 2024 compared to first nine months 2023 primarily due to higher sales volume, partially offset by lower selling prices. Higher sales volume was primarily attributed to the end of customer inventory destocking across most end-markets. Lower selling prices were primarily due to lower raw material and energy prices and lower distribution prices.

EBIT excluding non-core and unusual items increased in third quarter 2024 compared to third quarter 2023 primarily due to higher sales volume, higher selling prices, and lower raw material and energy costs. These impacts were partially offset by higher SG&A expenses. EBIT excluding non-core and unusual items increased in first nine months 2024 compared to first nine months 2023 primarily due to higher sales volume and lower raw material and energy costs, net of lower selling prices. These impacts were partially offset by higher SG&A expenses.

Further discussion of sales revenue and EBIT changes is presented in "Results of Operations" and "Summary by Operating Segment" in this MD&A.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Net earnings and EPS and adjusted net earnings and EPS were as follows:
Third Quarter
20242023
(Dollars in millions, except EPS)$EPS$EPS
Net earnings attributable to Eastman$180 $1.53 $178 $1.49 
Total non-core and unusual items, net of tax27 0.23 — — 
Interim adjustment to tax provision59 0.50 (3)(0.02)
Adjusted net earnings$266 $2.26 $175 $1.47 
First Nine Months
20242023
(Dollars in millions, except EPS)
 $
EPS
 $
EPS
Net earnings attributable to Eastman$575 $4.86 $584 $4.89 
Total non-core and unusual items, net of tax48 0.41 41 0.34 
Interim adjustment to tax provision89 0.75 (17)(0.14)
Adjusted net earnings$712 $6.02 $608 $5.09 
Cash provided by operating activities was $747 million in first nine months 2024 and $922 million in first nine months 2023.

RESULTS OF OPERATIONS

Sales
Third QuarterFirst Nine Months
ChangeChange
(Dollars in millions)20242023 $%20242023 $%
Sales$2,464 $2,267 $197 9 %$7,137 $7,003 $134 2 %
Volume / product mix effect186 8 %404 6 %
Price effect15 1 %(256)(4)%
Exchange rate effect(4)— %(14)— %

Sales revenue increased in third quarter 2024 compared to third quarter 2023 primarily as a result of increases across all segments. Sales revenue increased in first nine months 2024 compared to first nine months 2023 as a result of increases in the AM and Fibers segments, partially offset by a decrease in the AFP segment. Further discussion by operating segment is presented in "Summary by Operating Segment" in this MD&A.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Gross Profit
 Third QuarterFirst Nine Months
(Dollars in millions)20242023Change20242023Change
Gross profit$605 $484 25 %$1,736 $1,597 9 %
Cost of sales impact of restructuring activities
7 — 7 23 
Steam line incident costs (insurance proceeds), net— — — (8)
Gross profit excluding non-core and unusual items$612 $484 26 %$1,743 $1,612 8 %

Gross profit in third quarter and first nine months 2024 included inventory adjustments related to the planned closure of a solvent-based resins production line at an advanced interlayers facility in North America. Gross profit in first nine months 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 increased in third quarter 2024 compared to third quarter 2023 in all segments. Gross profit increased in first nine months 2024 compared to first nine months 2023 primarily as a result of increases in the AM and Fibers segments, partially offset by a decrease in the CI segment. Further discussion of sales revenue and EBIT changes is presented in "Summary by Operating Segment" in this MD&A.

Selling, General and Administrative Expenses
 Third QuarterFirst Nine Months
(Dollars in millions)20242023Change20242023Change
Selling, general and administrative expenses$183 $160 14 %$554 $536 3 %

SG&A expenses increased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily due to higher variable compensation costs partially offset by cost reduction initiatives.

Research and Development Expenses
 Third QuarterFirst Nine Months
(Dollars in millions)20242023Change20242023Change
Research and development expenses$65 $60 8 %$184 $182 1 %

R&D expenses increased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily due to strategic investment in innovation.

Asset Impairments, Restructuring, and Other Charges, Net

(Dollars in millions)Third QuarterFirst Nine Months
2024202320242023
Asset impairments
$5 $— $5 $— 
Severance charges
10 — 21 16 
Site closure and other charges
15 — 15 6 
Total$30 $— $41 $22 

For detailed information regarding asset impairments, restructuring, and other charges, net see Note 12, "Asset Impairments, Restructuring, and Other Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Other Components of Post-employment (Benefit) Cost, Net
 Third QuarterFirst Nine Months
(Dollars in millions)2024202320242023
Other components of post-employment (benefit) cost, net$(5)$(2)$(14)$(8)

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
 Third QuarterFirst Nine Months
(Dollars in millions)2024202320242023
Foreign exchange transaction losses, net
$3 $3 $12 $8 
(Income) loss from equity investments and other investment (gains) losses, net(3)— (4)5 
Other, net3 7 34 $27 
Other (income) charges, net$3 $10 $42 $40 
Environmental and other costs— — (16)(13)
Other (income) charges, net excluding non-core item$3 $10 $26 $27 

Other (income) charges, net in first nine months 2024 and 2023 included environmental and other costs related to previously divested businesses or non-operational sites and product lines. Excluding these non-core items, Other (income) charges, net decreased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily due to income from equity investments partially offset by increases in foreign exchange transaction losses. 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
 Third QuarterFirst Nine Months
(Dollars in millions)20242023Change20242023Change
Earnings before interest and taxes$329 $256 29 %$929 $825 13 %
Asset impairments, restructuring, and other charges, net
30 — 41 22 
Cost of sales impact of restructuring activities7 — 7 23 
Steam line incident costs (insurance proceeds), net— — — (8)
Environmental and other costs— — 16 13 
Earnings before interest and taxes excluding non-core and unusual items$366 $256 43 %$993 $875 13 %

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Net Interest Expense
 Third QuarterFirst Nine Months
(Dollars in millions)20242023Change20242023Change
Gross interest costs$58 $64 (9)%$174 $183 (5)%
Less: Capitalized interest5 5 14 12 
Interest expense53 59 160 171 
Less: Interest income4 2  12 8  
Net interest expense$49 $57 (14)%$148 $163 (9)%

Net interest expense decreased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily as a result of lower total borrowings and higher interest income.

Provision for Income Taxes
Third QuarterFirst Nine Months
2024202320242023
(Dollars in millions)$%$%$%$%
Provision for income taxes and effective tax rate
$99 35 %$20 10 %$204 26 %$77 12 %
Tax provision for non-core and unusual items (1)
10 — 16 9 
Interim adjustment to tax provision (2)
(59)3 (89)17 
Adjusted provision for income taxes and effective tax rate$50 16 %$23 12 %$131 16 %$103 15 %
(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)Third quarter 2024 provision for income taxes was adjusted to reflect the current forecasted full year effective tax rate. Third quarter 2023 provision for income taxes was adjusted to reflect the then current forecasted full year effective tax rate.

First Nine Months (1)
20242023
Effective tax rate26 %12 %
Tax impact of current year non-core and unusual items (2)
2 %1 %
Changes in tax contingencies and valuation allowances(1)%1 %
Forecasted full year impact of expected tax events (3)
(11)%1 %
Forecasted full year adjusted effective tax rate16 %15 %
(1)Effective tax rate percentages are rounded to the nearest whole percent. The forecasted full year effective tax rates are 15.5 percent and 14.5 percent in first nine months 2024 and 2023, respectively.
(2)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.
(3)Expected future tax events may include finalization of tax returns; federal, state, and foreign examinations or the expiration of statutes of limitation; and corporate restructurings.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Net Earnings Attributable to Eastman and Diluted Earnings per Share
Third Quarter
20242023
(Dollars in millions, except EPS)$EPS$EPS
Net earnings and diluted earnings per share attributable to Eastman$180 $1.53 $178 $1.49 
Non-core items, net of tax: (1)
Asset impairments, restructuring, and other charges, net
22 0.19 — — 
Cost of sales impact of restructuring activities5 0.04 — — 
Interim adjustment to tax provision59 0.50 (3)(0.02)
Adjusted net earnings and diluted earnings per share attributable to Eastman$266 $2.26 $175 $1.47 
First Nine Months
20242023
(Dollars in millions, except EPS)$EPS$EPS
Net earnings and diluted earnings per share attributable to Eastman$575 $4.86 $584 $4.89 
Non-core items, net of tax: (1)
Asset impairments, restructuring, and other charges, net
30 0.27 18 0.14 
Cost of sales impact of restructuring activities5 0.04 20 0.17 
Environmental and other costs13 0.10 9 0.08 
Unusual items, net of tax: (1)
Steam line incident costs (insurance proceeds), net— — (6)(0.05)
Interim adjustment to tax provision89 0.75 (17)(0.14)
Adjusted net earnings and diluted earnings per share attributable to Eastman$712 $6.02 $608 $5.09 
(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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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

SUMMARY BY OPERATING SEGMENT

Eastman's products and operations are managed and reported in four operating segments: Advanced Materials ("AM"), Additives & Functional Products ("AFP"), Chemical Intermediates ("CI"), and Fibers. For additional financial and product information for each operating segment, see Part I, Item 1, "Business - Business Segments" and Part II, Item 8, Note 20, "Segment and Regional Sales Information", in the Company's 2023 Annual Report on Form 10-K.
Advanced Materials Segment
Third QuarterFirst Nine Months
Change  Change
20242023 $%20242023 $%
(Dollars in millions)
Sales$787 $746 $41 5 %$2,330 $2,227 $103 5 %
Volume / product mix effect65 8 %  210 9 %
Price effect(22)(3)%  (97)(4)%
Exchange rate effect(2)— %  (10)— %
Earnings before interest and taxes$100 $93 $7 8 %$335 $278 $57 21 %
Asset impairments, restructuring, and other charges, net18 — 18 18 — 18 
Cost of sales impact of restructuring activities
4 — 4 4 — 4 
Earnings before interest and taxes excluding non-core item122 93 29 31 %357 278 79 28 %
Sales revenue increased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily due to higher sales volume, partially offset by lower selling prices. Higher sales volume was primarily attributed to the end of customer inventory destocking in consumer durables, and product growth of premium interlayers products.

EBIT in third quarter 2024 and first nine months 2024 includes asset impairments, restructuring, and other charges, net, and inventory adjustments, related to the planned closure of a solvent-based resins production line. For more information regarding asset impairments, restructuring, and other charges see Note 12, "Asset Impairments, Restructuring, and Other Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.
EBIT excluding non-core items increased third quarter 2024 compared to third quarter 2023 primarily due to $37 million higher sales volume and improved asset utilization, net of higher manufacturing costs associated with Kingsport methanolysis. These impacts were partially offset by $4 million higher SG&A expenses.

EBIT excluding non-core items increased in first nine months 2024 compared to first nine months 2023 primarily due to $88 million higher sales volume. This impact was partially offset by a $10 million unfavorable shift in foreign currency exchange rates.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Additives & Functional Products Segment
Third QuarterFirst Nine Months
Change  Change
20242023 $%20242023 $%
(Dollars in millions)
Sales$744 $670 $74 11 %$2,166 $2,194 $(28)(1)%
Volume / product mix effect77 11 %  80 4 %
Price effect(2)— %  (107)(5)%
Exchange rate effect(1)— %  (1)— %
Earnings before interest and taxes$127 $105 $22 21 %$359 $369 $(10)(3)%
Cost of sales impact of restructuring activities3 — 3 3 — 3 
Earnings before interest and taxes excluding non-core item130 105 25 24 %362 369 (7)(2)%

Sales revenue increased in third quarter 2024 compared to third quarter 2023 primarily due to higher sales volume and favorable mix in the functional amines and coatings additives product lines and the timing of heat transfer fluid projects.

Sales revenue decreased in first nine months 2024 compared to first nine months 2023 primarily due to lower selling prices, partially offset by higher sales volume and favorable mix. Lower selling prices were primarily attributed to lower raw material costs, including cost pass-through contracts. Higher sales volume and favorable mix was primarily attributable to the coatings additives and care additives product lines, partially offset by the reduction of heat transfer fluid projects.

EBIT in third quarter 2024 and first nine months 2024 includes inventory adjustments related to the planned closure of a solvent-based resins production line. For more information see Note 12, "Asset Impairments, Restructuring, and Other Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.
EBIT excluding non-core items increased in third quarter 2024 compared to third quarter 2023 primarily due to $37 million higher sales volume, partially offset by $9 million SG&A expenses.
EBIT excluding non-core items decreased in first nine months 2024 compared to first nine months 2023 primarily due to $8 million higher SG&A expenses. Lower raw material and energy costs and distribution costs, net of lower selling prices were offset primarily by lower sales volume and higher manufacturing costs.
Chemical Intermediates Segment
Third QuarterFirst Nine Months
Change  Change
20242023 $%20242023 $%
(Dollars in millions)
Sales$593 $527 $66 13 %$1,631 $1,630 $1 — %
Volume / product mix effect35 7 %  79 5 %
Price effect32 6 %  (77)(5)%
Exchange rate effect(1)— %  (1)— %
Earnings before interest and taxes$43 $6 $37 >100%$81 $87 $(6)(7)%
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Sales revenue increased in third quarter 2024 compared to third quarter 2023 primarily due to higher sales volume and higher selling prices. Sales revenue in first nine months 2024 was relatively unchanged compared to first nine months 2023 due to higher sales volume being offset by lower selling prices. Higher sales volume was primarily attributed to the end of customer inventory destocking and improved market conditions in 2024. Fluctuations in selling prices were driven by changes in raw material and energy prices.

EBIT increased in third quarter 2024 compared to third quarter 2023 primarily due to $28 million higher selling prices, net of higher raw material and energy costs and $10 million lower manufacturing costs, including higher capacity utilization, partially offset by $5 million higher SG&A expenses.

EBIT decreased in first nine months 2024 compared to first nine months 2023 due to $33 million lower selling prices, net of lower raw material and energy costs. These impacts were partially offset by $28 million lower manufacturing costs, including higher capacity utilization.

Fibers Segment
Third QuarterFirst Nine Months
Change  Change
20242023 $%20242023 $%
(Dollars in millions)
Sales$336 $323 $13 4 %$997 $949 $48 5 %
Volume / product mix effect6 2 %  25 3 %
Price effect7 2 %  25 3 %
Exchange rate effect— — %  (2)(1)%
Earnings before interest and taxes$112 $109 $3 3 %$351 $280 $71 25 %
Asset impairments, restructuring, and other charges, net— — — — 6 (6)
Cost of sales impact of restructuring activities— — — — 23 (23)
Earnings before interest and taxes excluding non-core items112 109 3 3 %351 309 42 14 %
Sales revenue increased in third quarter and first nine months 2024 compared to third quarter and first nine months 2023 primarily due to higher selling prices in acetate tow and higher sales volume in textiles.

EBIT in first nine months 2023 included asset impairments, restructuring, and other charges, net, and accelerated depreciation from a previously announced manufacturing facility closure. For more information regarding asset impairments, restructuring, and other charges, net see Note 12, "Asset Impairments, Restructuring, and Other Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

EBIT increased in third quarter 2024 compared to third quarter 2023 primarily due to $7 million higher selling prices, partially offset by $5 million higher SG&A expenses.
EBIT excluding non-core items increased in first nine months 2024 compared to first nine months 2023 primarily due to $32 million higher selling prices and lower raw material and energy costs, and $11 million higher sales volume. These impacts were partially offset by $4 million higher SG&A expenses.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Other
Third QuarterFirst Nine Months
2024202320242023
(Dollars in millions)
Sales$4 $1 $13 $3 
Loss before interest and taxes
Growth initiatives and businesses not allocated to operating segments$(43)$(49)$(155)$(145)
Pension and other postretirement benefits income (expense), net not allocated to operating segments2 (4)6 (12)
Asset impairments, restructuring, and other charges, net(12)— (23)(16)
Steam line incident (costs) insurance proceeds, net— — — 8 
Other income (charges), net not allocated to operating segments— (4)(25)(24)
Loss before interest and taxes$(53)$(57)$(197)$(189)
Asset impairments, restructuring, and other charges, net12 — 23 16 
Steam line incident costs (insurance proceeds), net— — — (8)
Environmental and other costs— — 16 13 
Loss before interest and taxes excluding non-core and unusual items(41)(57)(158)(168)
Sales and costs related to growth initiatives, including the cellulosics biopolymer platform and circular economy, R&D costs, certain components of pension and other postretirement benefits, and other expenses and income not identifiable to an operating segment are included in "Other". First quarter 2024 also includes pre-production costs for the Kingsport methanolysis facility.

EBIT in third quarter and first nine months 2024 and first nine months 2023 included severance primarily in accordance with foreign regulatory requirements as a result of cost reduction initiatives in fourth quarter 2023 and 2022, respectively. EBIT in third quarter and first nine months 2024 also includes growth and profitability improvement initiatives. Third quarter and first nine months 2024 and 2023 EBIT included environmental and other costs from previously divested or non-operational sites. In addition, first nine months 2023 included insurance proceeds from the steam line incident. For more information, see "Non-GAAP Financial Measures" in this MD&A. For more information regarding asset impairments, restructuring, and other charges, net, see Note 12, "Asset Impairments, Restructuring, and Other Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

SALES BY CUSTOMER LOCATION
Sales Revenue
 Third QuarterFirst Nine Months
ChangeChange
(Dollars in millions)20242023$%20242023 $%
United States and Canada$1,032 $966 $66 7 %$2,995 $3,031 $(36)(1)%
Europe, Middle East, and Africa640 602 38 6 %1,949 1,946 3 — %
Asia Pacific653 576 77 13 %1,807 1,654 153 9 %
Latin America139 123 16 13 %386 372 14 4 %
Total Eastman
$2,464 $2,267 $197 9 %$7,137 $7,003 $134 2 %

Sales revenue increased 9 percent in third quarter 2024 compared to third quarter 2023 primarily due to 8 percent higher sales volume across all regions, partially offset by lower selling prices in the Asia Pacific and Europe, Middle East, and Africa regions. Sales revenue increased 2 percent in first nine months 2024 compared to first nine months 2023 primarily due to 6 percent higher sales volume across all regions, partially offset by 4 percent lower selling prices across all regions.
Further discussion by operating segment is presented in "Summary by Operating Segment" in this MD&A.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND OTHER FINANCIAL INFORMATION

Cash Flows

Cash flows from operations, cash and cash equivalents, and other sources of liquidity are expected to be available and sufficient to meet known short and long-term cash requirements. However, the Company's cash flows from operations can be affected by numerous factors including risks associated with global operations, raw material availability and cost, demand for and pricing of Eastman's products, capacity utilization, and other factors described under "Risk Factors" in Part II, Item 1A of this Quarterly Report. Management believes maintaining a financial profile that supports an investment grade credit rating is important to its long-term strategy and financial flexibility.
First Nine Months
(Dollars in millions)20242023
Net cash provided by (used in)
Operating activities$747 $922 
Investing activities(402)(680)
Financing activities(273)(295)
Effect of exchange rate changes on cash and cash equivalents2 (1)
Net change in cash and cash equivalents74 (54)
Cash and cash equivalents at beginning of period548 493 
Cash and cash equivalents at end of period$622 $439 
 
Cash provided by operating activities decreased $175 million in first nine months 2024 compared to first nine months 2023 primarily due to higher working capital.

Cash used in investing activities decreased $278 million in first nine months 2024 compared to first nine months 2023 primarily due to lower capital expenditures primarily for the AM segment methanolysis plastic-to-plastic molecular recycling manufacturing facilities.

Cash used in financing activities decreased $22 million in first nine months 2024 compared to first nine months 2023, primarily due to higher net borrowings partially offset by higher treasury stock purchases. For additional information, see "Liquidity and Other Financial Information - Debt and Other Commitments" in this MD&A.

Working Capital Management and Off Balance Sheet Arrangements

Eastman applies a proactive and disciplined approach to working capital management to optimize cash flow and to enable a full range of capital allocation options in support of the Company's strategy. Eastman expects to continue utilizing the programs described below to support operating cash flow consistent with past practices.

The Company has off balance sheet, uncommitted accounts receivable factoring programs under which entire invoices may be sold to third-party financial institutions. The vast majority of these programs are without recourse. Available capacity under these programs, which the Company uses as a routine source of working capital funding, is dependent on the level of accounts receivable eligible to be sold and the financial institutions' willingness to purchase such receivables. The total amounts sold in third quarter 2024 and 2023 were $703 million and $692 million, respectively, and $2.0 billion and $2.1 billion in first nine months 2024 and 2023, respectively. Based on the original terms of receivables sold for certain programs and actual outstanding balance of receivables under servicing agreements, the Company estimates that $412 million and $397 million of these receivables would have been outstanding as of September 30, 2024 and December 31, 2023, respectively, had they not been sold under these factoring programs.

The Company works with suppliers to optimize payment terms and conditions on accounts payable to enhance timing of working capital and cash flows. Under a supplier finance program, the Company's suppliers may voluntarily sell receivables due from Eastman to a participating financial institution. The supplier invoices that have been confirmed as valid under the program require payment in full on the invoice due date. For additional information, see Note 1, "Significant Accounting Policies", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Debt and Other Commitments

At September 30, 2024, the Company's borrowings totaled $5.1 billion with various maturities. The Company expects to use a combination of available cash and debt proceeds to repay the $450 million principal of 3.80% notes due March 2025.

In third quarter 2024, the Company issued $500 million aggregate principal amount 5.0% notes due August 2029 in a registered public offering (the "2029 Notes"). Proceeds from the sale of the 2029 Notes, net of original issue discounts and issuance costs, were $495 million. The Company also redeemed $250 million aggregate principal amount of the 3.80% notes due March 2025 (the "2025 Notes") during third quarter 2024. Redemption of the 2025 Notes resulted in immaterial gain on extinguishment of debt.

In second quarter 2024, the Company repaid the $43 million 7.625% debentures due June 2024 using available cash and debt proceeds. There were no debt extinguishment costs associated with the repayment of this debt.

In first quarter 2024, the Company repaid the $198 million 7.25% debentures due January 2024 using available cash. There were no extinguishment costs associated with the repayment. In first quarter 2024, the Company also issued $750 million aggregate principal amount of 5.625% notes due February 2034 in a registered public offering (the "2034 Notes"). Proceeds from the sale of the 2034 Notes, net of original issue discounts and issuance costs, were $742 million.

See Note 4, "Borrowings", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information.

In first quarter 2024, purchase obligations in the 2029 and beyond period decreased by approximately $1.5 billion as a result of exiting an agreement with a supplier after contract negotiations. Eastman had remaining debt and other commitments at September 30, 2024 totaling approximately $10.7 billion over a period of approximately 30 years. 

Other than the item discussed above, there have been no material changes to the Company's commitments from those disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Other Financial Information - Debt and Other Commitments" in Part II, Item 7 of the Company's 2023 Annual Report on Form 10-K.

Credit Facility, Term Loans, and Commercial Paper Borrowings

The Company has access to a $1.50 billion revolving credit agreement (the "Credit Facility"). In February 2024, the Credit Facility was amended to extend the maturity to February 2029. All other material terms of the Credit Facility remain unchanged. Borrowings under the Credit Facility are subject to interest at varying spreads above quoted market rates and a commitment fee is paid on the total unused commitment. The Credit Facility includes sustainability-linked pricing terms, provides available liquidity for general corporate purposes, and supports commercial paper borrowings. At September 30, 2024 and December 31, 2023, the Company had no outstanding borrowings under the Credit Facility and no commercial paper borrowings.

In third quarter 2024, the Company repaid $250 million of the $500 million five-year term loan (the "2027 Term Loan"). In first quarter 2024, the Company repaid the $300 million two-year term loan (the "2024 Term Loan"). There were no extinguishment costs associated with the repayments of either loan. The outstanding balance on the 2027 Term Loan was $249 million at September 30, 2024 and $499 million at December 31, 2023, with variable interest rates of 6.07% and 6.58%, respectively. The 2027 Term Loan is subject to interest at varying spreads above quoted market rates.

The Credit Facility and the 2027 Term Loan contain customary covenants, including requirements to maintain certain financial ratios, that determine the events of default, amounts available, and terms of borrowings. The Company was in compliance with all applicable covenants at both September 30, 2024 and December 31, 2023. The total amount of available borrowings under the Credit Facility was $1.5 billion as of September 30, 2024.

See Note 4, "Borrowings", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Net Debt
 September 30,December 31,
(Dollars in millions)20242023
Total borrowings$5,054 $4,846 
Less: Cash and cash equivalents622 548 
Net debt (1)
$4,432 $4,298 
(1)Includes non-cash increase of $8 million and $20 million in 2024 and 2023, respectively, resulting from foreign currency exchange rates.

Capital Expenditures

Capital expenditures were $420 million and $649 million in first nine months 2024 and 2023, respectively. Capital expenditures in first nine months 2024 were primarily for the AM segment methanolysis plastic-to-plastic molecular recycling manufacturing facilities, other targeted growth initiatives, and site modernization projects. The Company expects that 2024 capital expenditures will be approximately $625 million.

Stock Repurchases

In December 2021, the Company's Board of Directors authorized the repurchase of up to $2.5 billion of the Company's outstanding common stock at such times, in such amounts, and on such terms, as determined by management to be in the best interest of the Company and its stockholders (the "2021 authorization"). During third quarter and first nine months 2024, the Company repurchased 1,018,269 and 2,018,274 shares of common stock, respectively, for $100 million and $200 million, respectively. As of September 30, 2024, a total of 10,629,023 shares have been repurchased under the 2021 authorization for $985 million. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders.

CRITICAL ACCOUNTING ESTIMATES

In preparing the consolidated financial statements in conformity with GAAP, management must make decisions which impact the reported amounts and the related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and assumptions on which to base estimates and judgments that affect the reported amounts of assets, liabilities, sales revenue and expenses, fair value of disposal groups, and related disclosure of contingent assets and liabilities. On an ongoing basis, Eastman evaluates its estimates, including those related to impairment of long-lived assets, environmental costs, pension and other postretirement benefits, litigation and contingent liabilities, and income taxes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the critical accounting estimates described in Part II, Item 7 of the Company's 2023 Annual Report on Form 10-K are the most important to the fair presentation of the Company's financial condition and results. These estimates require management's most significant judgments in the preparation of the Company's consolidated financial statements.

RECENTLY ISSUED ACCOUNTING STANDARDS

For information regarding the impact of recently issued accounting standards, see Note 1, "Significant Accounting Policies", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Eastman has exposure to various market risks principally due to changes in foreign currency exchange rates, the pricing of various commodities, and interest rates. In an effort to manage these risks, the Company employs various strategies, including pricing, inventory management, and hedging. The Company enters into derivative contracts which are governed by policies, procedures, and internal processes set forth by its Board of Directors.

The Company determines its exposures to market risk by utilizing sensitivity analyses, which measure the potential losses in fair value resulting from one or more selected hypothetical changes in foreign currency exchange rates, commodity prices, or interest rates. For more information regarding exposures, refer to Part II, Item 7A of the Company's 2023 Annual Report on Form 10-K.

At September 30, 2024, a 10 percent fluctuation in the euro currency rate would have had a $228 million impact on the designated net investment values in the foreign subsidiaries. As a result of the designation of the euro-denominated borrowings and designated cross-currency interest rate swaps as hedges of the net investments, foreign currency translation gains and losses on the borrowings and designated cross-currency interest rate swaps are recorded as a component of the "Change in cumulative translation adjustment" within "Other comprehensive income (loss), net of tax" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in Part I, Item 1 of this Quarterly Report. Therefore, a foreign currency change in the designated investment values of the foreign subsidiaries will generally be offset by a foreign currency change in the carrying value of the euro-denominated borrowings or the foreign currency change in the designated cross-currency interest rate swaps.

Other than the foreign currency risk discussed above, there have been no material changes to the Company's market risks from those disclosed in Part II, Item 7A of the Company's 2023 Annual Report on Form 10-K.

ITEM 4.CONTROLS AND PROCEDURES
 
Disclosure Controls and Procedures

Eastman maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. An evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that as of September 30, 2024, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed was accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company's internal control over financial reporting that occurred during the third quarter of 2024 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

General

From time to time, Eastman and its operations are parties to, or targets of, lawsuits, claims, investigations and proceedings, including product liability, personal injury, asbestos, patent and intellectual property, commercial, contract, environmental, antitrust, health and safety, and employment matters, which are handled and defended in the ordinary course of business. While the Company is unable to predict the outcome of these matters, it does not believe, based upon currently available facts, that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations, or cash flows. Consistent with the requirements of Regulation S-K, Item 103, the Company's threshold for disclosing any environmental legal proceeding involving a governmental authority is potential monetary sanctions that management believes will meet or exceed $1 million.

Solutia Legacy Torts Claims Litigation

Pursuant to an Amended and Restated Settlement Agreement effective February 28, 2008 between Solutia, Inc. ("Solutia") and Monsanto Company ("Monsanto") in connection with Solutia's emergence from Chapter 11 bankruptcy proceedings (the "Monsanto Settlement Agreement"), Monsanto is responsible for the defense and indemnification of Solutia against any Legacy Tort Claims (as defined in the Monsanto Settlement Agreement) and Solutia has agreed to retain responsibility for certain tort claims, if any, that may arise from Solutia's conduct after its spinoff from Pharmacia Corporation (f/k/a Monsanto), which occurred on September 1, 1997. Solutia, which became a wholly-owned subsidiary of Eastman upon Eastman's acquisition of Solutia in July 2012, has been named as a defendant in several such proceedings, and has submitted the matters to Monsanto, which was acquired by Bayer AG in June 2018, as Legacy Tort Claims. To the extent these matters are not within the meaning of Legacy Tort Claims, Solutia could potentially be liable thereunder. In connection with the completion of its acquisition of Solutia, Eastman guaranteed the obligations of Solutia and Eastman was added as an indemnified party under the Monsanto Settlement Agreement.

ITEM 1A.RISK FACTORS

For information regarding the Company's material known risk factors which could materially adversely affect the Company, its business, financial condition, or results of operations, see "Risk Factors" in Part I, Item 1A of the Company's 2023 Annual Report on Form 10-K.
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ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Purchases of Equity Securities by the Issuer

In December 2021, the Company's Board of Directors authorized the repurchase of up to $2.5 billion of the Company's outstanding common stock at such times, in such amounts, and on such terms, as determined by management to be in the best interest of the Company and its stockholders (the "2021 authorization"). As of September 30, 2024, a total of 10,629,023 shares have been repurchased under the 2021 authorization for $985 million. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders. During third quarter and first nine months 2024, the Company repurchased 1,018,269 and 2,018,274 shares of common stock, respectively, for $100 million and $200 million, respectively. For additional information, see Note 10, "Stockholders' Equity", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.
PeriodTotal Number
of Shares
Purchased
Average Price Paid Per Share (1)
Total Number of Shares Purchased as Part of Publicly Announced Plan
or Program 		Approximate Dollar
Value that May Yet Be Purchased Under the Plan or Program
July 1-31, 2024
30,000 $102.71 30,000 $1.612  billion
August 1-31, 2024
485,455 $96.65 485,455 $1.565  billion
September 1-30, 2024
502,814 $99.44 502,814 $1.515  billion
Total1,018,269 $98.21 1,018,269 
(1)Average price paid per share reflects the weighted average purchase price paid for shares.

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ITEM 5.    OTHER INFORMATION

(c) Director and Officer Trading Arrangements

A portion of our directors’ and officers’ compensation is in the form of equity awards and, from time to time, they may engage in open-market transactions involving Company securities for diversification or other personal reasons. All such transactions in Company securities by directors and officers must comply with the Company’s Insider Trading Policy, which requires that transactions be in accordance with applicable U.S. federal securities laws that prohibit trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables directors and officers to prearrange transactions in the Company’s securities in a manner that avoids concerns about initiating transactions while in possession of material nonpublic information. The Company’s Insider Trading Policy permits our directors and executive officers to enter into trading plans designed to comply with Rule 10b5-1.

The following table describes the contracts, instructions or written plans for the purchase or sale of securities adopted by our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) during the three months ended September 30, 2024, that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). No other Rule 10b5-1 trading arrangements or "non-Rule 10b5-1 trading arrangements" (as defined by Regulation S-K Item 408(c)) were entered into or terminated by our directors or officers during such period.
Name and Title
Date of Adoption of Rule 10b5-1 Trading Plan
Expiration Date of Rule 10b5-1 Trading Plan (1)
Aggregate Number of Securities to be Purchased or Sold
Adrian Holt
Senior Vice President and Chief
Human Resources Officer
8/5/20248/1/2025
Sale of up to 4,869 shares of common stock
Christopher M. Killian
Senior Vice President and Chief
Technology Officer
8/6/20247/31/2025
Sale of up to 5,310 shares of common stock
(1)The plan duration is until the date listed in this column or such earlier date upon the completion of all trades under the plan (or the expiration of the orders relating to such trades without execution) or the occurrence of such other termination events as specified in the plan.
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ITEM 6.EXHIBITS

Exhibits filed as part of this report are listed in the Exhibit Index.

EXHIBIT INDEX
Exhibit NumberDescription
  
3.01
3.02
4.01
31.01 *
31.02 *
32.01 *
32.02 *
101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH *Inline XBRL Taxonomy Extension Schema Document
101.CAL *Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF *Inline XBRL Definition Linkbase Document
101.LAB *Inline XBRL Taxonomy Label Linkbase Document
101.PRE *Inline XBRL Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* Denotes exhibit filed or furnished herewith.

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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 thereunto duly authorized.
Eastman Chemical Company
Date:November 1, 2024By:/s/ William T. McLain, Jr.
William T. McLain, Jr.
Executive Vice President and Chief Financial Officer

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