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

Posted on: Thursday, 27 October 2005, 18:01 CDT

Eastman Chemical Company (NYSE:EMN) today announced record sales revenue of $1.82 billion and earnings of $1.50 per diluted share for third quarter 2005 versus earnings of $0.49 per diluted share for third quarter 2004. Excluding the items described below for both periods, third-quarter 2005 earnings were $1.53 per diluted share, while third-quarter 2004 earnings were $0.79 per diluted share. For reconciliation to reported earnings, see Table 8 in the accompanying third-quarter 2005 financial tables.

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

"Our strong base continued to deliver solid earnings despite the margin compression that occurred toward the end of the quarter due to volatile raw material and energy costs," said Brian Ferguson, chairman and CEO. "Year-over-year, our third-quarter earnings per share excluding the items described above increased by over 90 percent, and we remain on track for one of the best years in our company's history." (In millions, except per share amounts) 3Q2005 3Q2004 Sales revenue $1,816 $1,649 Sales revenue excluding restructured, divested and consolidated CASPI product lines(1) $1,816 $1,575 Earnings per diluted share $ 1.50 $ 0.49 Earnings per diluted share excluding asset impairments and restructuring charges, and net deferred tax benefit(1) $ 1.53 $ 0.79 Net cash provided by operating activities $ 165 $ 119 (1) For reconciliation to reported sales revenue and earnings, see Tables 4a and 8 respectively in the accompanying third-quarter 2005 financial tables.

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

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

Eastman Division Results 3Q 2005 versus 3Q 2004

Coatings, Adhesives, Specialty Polymers and Inks - External sales

revenue decreased by 7 percent as a result of the restructured,

divested and consolidated product lines in third quarter 2004.

Sales revenue for continuing product lines in the segment

increased by 17 percent primarily due to higher selling prices for

cyclical commodity product lines. Operating earnings increased as

higher selling prices and continued cost reduction efforts more

than offset higher raw material and energy costs.

Performance Chemicals and Intermediates - External sales revenue

increased by 16 percent primarily due to higher selling prices.

Operating earnings increased substantially as a result of higher

selling prices and continued cost reduction efforts that more than

offset higher raw material and energy costs. Third-quarter

operating earnings included $10 million of operating earnings from

the achievement of certain milestones under an acetyls technology

licensing agreement.

Specialty Plastics - External sales revenue increased by 8 percent

as higher selling prices more than offset lower sales volume. The

lower sales volume was attributed mainly to the impact on demand

of higher selling prices that were largely the result of efforts

to offset increased raw material and energy costs. Lower acetate

sales volume for use in photographic film also contributed to the

segment's overall lower sales volume. Operating earnings declined

as higher sales revenue was more than offset by increased raw

material and energy costs and expenditures related to growth

efforts.

Voridian Division Results 3Q 2005 versus 3Q 2004

Polymers - External sales revenue increased by 19 percent

primarily due to higher selling prices and increased sales volume.

The higher selling prices were mainly the result of efforts to

offset volatile raw material and energy costs. Operating earnings

increased as higher selling prices and ongoing cost reduction

efforts more than offset the higher raw material and energy costs.

Fibers - External sales revenue increased by 24 percent as a

result of higher selling prices and increased sales volume. The

higher sales volume was attributed to stronger demand for acetate

tow and acetate yarn resulting from structural changes in their

respective markets. Operating earnings increased as higher selling

prices and increased sales volume more than offset higher raw

material and energy costs.

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

Cash Flow

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

Outlook

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

Eastman will host a conference call with industry analysts on Oct. 28 at 8:00 a.m. Eastern Time. To listen to the live webcast of the conference call, go to www.eastman.com, investors, event information, audio archives. To listen via telephone, the dial-in number is 913-981-5532, passcode number 290845. A telephone replay will be available continuously from 11:00 a.m. Eastern Time, Oct. 28, to 12:00 a.m. Eastern Time, Nov. 4, at 888-203-1112, passcode number 290845.

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

Forward-Looking Statements: This news release includes forward-looking statements concerning current expectations for future economic and business conditions; raw material and energy costs; company strategies, actions and efforts to control and reduce costs and to increase overall selling prices and continue to improve operating and financial performance; and overall operating and financial performance for the fourth quarter of 2005. Such expectations are based upon certain preliminary information, internal estimates, and management assumptions, expectations and plans, and are subject to a number of risks and uncertainties inherent in projecting future conditions, events, and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations prove to be inaccurate or are unrealized. Important factors that could cause actual results to differ materially from such expectations are and will be detailed in the company's filings with the Securities and Exchange Commission, including the Form 10-Q filed for second quarter 2005 and the Form 10-Q to be filed for third quarter 2005, available on the Eastman web site at www.eastman.com in the Investors, SEC filings section. TABLE 1 - STATEMENTS OF EARNINGS Third Quarter First Nine Months ------------------ ------------------ (Dollars in millions, except per share amounts) 2005 2004 2005 2004 -------- -------- -------- -------- Sales $ 1,816 $ 1,649 $ 5,330 $ 4,922 Cost of sales 1,464 1,392 4,205 4,160 -------- -------- -------- -------- Gross profit 352 257 1,125 762 Selling, general and administrative expenses 108 107 339 329 Research and development expenses 42 35 120 116 Asset impairments and restructuring charges, net 4 42 23 188 Other operating income -- -- (2) -- -------- -------- -------- -------- Operating earnings 198 73 645 129 Interest expense, net 23 29 77 88 Income from equity investment in Genencor -- (5) (173) (14) Early debt extinguishment costs -- -- 46 -- Other (income) charges, net (2) 1 (3) 10 -------- -------- -------- -------- Earnings (loss) before income taxes 177 48 698 45 Provision (benefit) for income taxes 54 10 207 (71) -------- -------- -------- -------- Net earnings $ 123 $ 38 $ 491 $ 116 ======== ======== ======== ======== Earnings per share Basic $ 1.51 $ 0.50 $ 6.10 $ 1.51 -------- -------- -------- -------- Diluted $ 1.50 $ 0.49 $ 6.01 $ 1.49 ======== ======== ======== ======== Shares (in millions) outstanding at end of period 81.5 77.9 81.5 77.9 Shares (in millions) used for earnings per share calculation Basic 81.3 77.6 80.5 77.4 Diluted 82.0 78.3 81.7 78.1 TABLE 2 - OTHER SALES INFORMATION Third Quarter, 2005 (Dollars in millions) Gross Interdivisional External Sales Sales Sales -------- --------------- -------- Sales by Division and Segment Eastman Division Coatings, Adhesives, Specialty Polymers, and Inks $ 333 $ -- $ 333 Performance Chemicals and Intermediates 599 171 428 Specialty Plastics 190 11 179 -------- --------------- -------- Total Eastman Division 1,122 182 940 -------- --------------- -------- Voridian Division Polymers 667 21 646 Fibers 251 23 228 -------- --------------- -------- Total Voridian Division 918 44 874 -------- --------------- -------- Developing Businesses Division Developing Businesses 2 -- 2 -------- --------------- -------- Total Developing Businesses Division 2 -- 2 -------- --------------- -------- Total Eastman Chemical Company $ 2,042 $ 226 $ 1,816 ======== =============== ======== Third Quarter, 2004 Gross Interdivisional External Sales Sales Sales -------- --------------- -------- Sales by Division and Segment Eastman Division Coatings, Adhesives, Specialty Polymers, and Inks $ 357 $ -- $ 357 Performance Chemicals and Intermediates 518 147 371 Specialty Plastics 179 15 164 -------- --------------- -------- Total Eastman Division 1,054 162 892 -------- --------------- -------- Voridian Division Polymers 559 17 542 Fibers 206 22 184 -------- --------------- -------- Total Voridian Division 765 39 726 -------- --------------- -------- Developing Businesses Division Developing Businesses 137 106 31 -------- --------------- -------- Total Developing Businesses Division 137 106 31 -------- --------------- -------- Total Eastman Chemical Company $ 1,956 $ 307 $ 1,649 ======== =============== ======== TABLE 2 - OTHER SALES INFORMATION (Continued) First Nine Months, 2005 (Dollars in millions) Gross Interdivisional External Sales Sales Sales -------- --------------- -------- Sales by Division and Segment Eastman Division Coatings, Adhesives, Specialty Polymers, and Inks $ 978 $ 1 $ 977 Performance Chemicals and Intermediates 1,711 497 1,214 Specialty Plastics 572 36 536 -------- --------------- -------- Total Eastman Division 3,261 534 2,727 -------- --------------- -------- Voridian Division Polymers 2,009 65 1,944 Fibers 704 71 633 -------- --------------- -------- Total Voridian Division 2,713 136 2,577 -------- --------------- -------- Developing Businesses Division Developing Businesses 87 61 26 -------- --------------- -------- Total Developing Businesses Division 87 61 26 -------- --------------- -------- Total Eastman Chemical Company $ 6,061 $ 731 $ 5,330 ======== =============== ======== First Nine Months, 2004 Gross Interdivisional External Sales Sales Sales -------- --------------- -------- Sales by Division and Segment Eastman Division Coatings, Adhesives, Specialty Polymers, and Inks $ 1,272 $ -- $ 1,272 Performance Chemicals and Intermediates 1,402 428 974 Specialty Plastics 515 40 475 -------- --------------- -------- Total Eastman Division 3,189 468 2,721 -------- --------------- -------- Voridian Division Polymers 1,622 50 1,572 Fibers 603 66 537 -------- --------------- -------- Total Voridian Division 2,225 116 2,109 -------- --------------- -------- Developing Businesses Division Developing Businesses 418 326 92 -------- --------------- -------- Total Developing Businesses Division 418 326 92 -------- --------------- -------- Total Eastman Chemical Company $ 5,832 $ 910 $ 4,922 ======== =============== ======== Third Quarter First Nine Months (Dollars in millions) 2005 2004 2005 2004 -------- -------- -------- -------- Sales by Region - External Sales United States and Canada $ 1,052 $ 969 $ 3,068 $ 2,784 Europe, Middle East, and Africa 332 333 1,051 1,137 Asia Pacific 235 192 685 562 Latin America 197 155 526 439 -------- -------- -------- -------- $ 1,816 $ 1,649 $ 5,330 $ 4,922 -------- -------- -------- -------- TABLE 3 - OPERATING EARNINGS (LOSS), ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES AND OTHER OPERATING INCOME Third Quarter First Nine Months (Dollars in millions) 2005 2004 2005 2004 -------- -------- -------- -------- Operating Earnings (Loss) by Segment and Certain Items Eastman Division Segments Coatings, Adhesives, Specialty Polymers, and Inks Operating earnings (loss) $ 64 $ 38 $ 195 $ 44 Asset impairments and restructuring charges 1 4 3 79 Other operating income -- -- (2) -- Performance Chemicals and Intermediates Operating earnings (loss) 47 (10) 149 10 Asset impairments and restructuring charges -- 30 4 37 Specialty Plastics Operating earnings (loss) 17 18 59 14 Asset impairments and restructuring charges -- 3 -- 53 -------- -------- -------- -------- Total operating earnings (loss) $ 128 $ 46 $ 403 $ 68 Total asset impairments and restructuring charges $ 1 $ 37 $ 7 $ 169 Total other operating income $ -- $ -- $ (2) $ -- Voridian Division Segments Polymers Operating earnings (loss) $ 27 $ 3 $ 146 $ 11 Asset impairments and restructuring charges -- 1 -- 13 Fibers Operating earnings (loss) 58 44 148 110 -------- -------- -------- -------- Total operating earnings (loss) $ 85 $ 47 $ 294 $ 121 Total asset impairments and restructuring charges $ -- $ 1 $ -- $ 13 Developing Businesses Division Segment Developing Businesses Operating earnings (loss) $ (14) $ (21) $ (57) $ (60) Asset impairments and restructuring charges 3 4 16 6 -------- -------- -------- -------- Total operating earnings (loss) $ (14) $ (21) $ (57) $ (60) Total asset impairments and restructuring charges $ 3 $ 4 $ 16 $ 6 Eliminations to operating earnings (loss) $ (1) $ 1 $ 5 $ -- -------- -------- -------- -------- Total Eastman Chemical Company Total operating earnings (loss) $ 198 $ 73 $ 645 $ 129 Total asset impairments and restructuring charges $ 4 $ 42 $ 23 $ 188 Total other operating income $ -- $ -- $ (2) $ -- TABLE 4a- EASTMAN CHEMICAL COMPANY DETAIL OF SALES REVENUE First Second Third Quarter Quarter Quarter (Dollars in millions) 2005 2005 2005 -------- -------- -------- Sales Revenue $ 1,762 $ 1,752 $ 1,816 Less: CASPI restructured, divested, and consolidated product lines (1) -- -- -- -------- -------- -------- Sales revenue - continuing product lines $ 1,762 $ 1,752 $ 1,816 First Second Third Fourth Twelve Quarter Quarter Quarter Quarter Months (Dollars in millions) 2004 2004 2004 2004 2004 -------- -------- -------- -------- ------- Sales Revenue $ 1,597 $ 1,676 $ 1,649 $ 1,658 $ 6,580 Less: CASPI restructured, divested, and consolidated product lines (1) 174 193 74 -- 441 -------- -------- -------- -------- ------- Sales revenue - continuing product lines $ 1,423 $ 1,483 $ 1,575 $ 1,658 $ 6,139 TABLE 4b- EASTMAN DIVISION DETAIL OF SALES REVENUE First Second Third Quarter Quarter Quarter (Dollars in millions) 2005 2005 2005 -------- -------- -------- Sales Revenue $ 885 $ 902 $ 940 Less: CASPI restructured, divested, and consolidated product lines (1) -- -- -- -------- -------- -------- Sales revenue - continuing product lines $ 885 $ 902 $ 940 First Second Third Fourth Twelve Quarter Quarter Quarter Quarter Months (Dollars in millions) 2004 2004 2004 2004 2004 -------- -------- -------- -------- ------- Sales Revenue $ 886 $ 943 $ 892 $ 824 $ 3,545 Less: CASPI restructured, divested, and consolidated product lines (1) 174 193 74 -- 441 -------- -------- -------- -------- ------- Sales revenue - continuing product lines $ 712 $ 750 $ 818 $ 824 $ 3,104 (1) These businesses and product lines include acrylate ester monomers, composites (unsaturated polyester resins), inks and graphic arts raw materials, liquid resins, powder resins and textile chemicals divested on July 31, 2004 as well as other restructuring, divestiture and consolidation activities that the Company has completed related to these businesses and product lines

. TABLE 5 - CASPI SEGMENT DETAIL OF SALES REVENUE, OPERATING EARNINGS (LOSS), ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES, AND OTHER OPERATING INCOME First Second Third Quarter Quarter Quarter (Dollars in millions) 2005 2005 2005 -------- -------- -------- Sales Revenue CASPI restructured, divested, and consolidated product lines (1) $ -- $ -- $ -- Continuing product lines 319 325 333 -------- -------- -------- Total sales revenue $ 319 $ 325 $ 333 Operating earnings (loss) CASPI restructured, divested, and consolidated product lines (1) (2) $ -- $ -- $ -- Continuing product lines 67 64 64 -------- -------- -------- Total operating earnings (loss) $ 67 $ 64 $ 64 Asset impairments and restructuring charges CASPI restructured, divested, and consolidated product lines (1) $ 1 $ 1 $ 1 Continuing product lines -- -- -- -------- -------- -------- Total asset impairments and restructuring charges $ 1 $ 1 $ 1 Other Operating income CASPI restructured, divested, and consolidated product lines (1) $ (2) $ -- $ -- Continuing product lines -- -- -- -------- -------- -------- Total other operating income $ (2) $ -- $ -- First Second Third Fourth Twelve Quarter Quarter Quarter Quarter Months (Dollars in millions) 2004 2004 2004 2004 2004 -------- -------- -------- -------- ------- Sales Revenue CASPI restructured, divested, and consolidated product lines (1) $ 174 $ 193 $ 74 $ -- $ 441 Continuing product lines 265 283 283 282 1,113 -------- -------- -------- -------- ------- Total sales revenue $ 439 $ 476 $ 357 $ 282 $ 1,554 Operating earnings (loss) CASPI restructured, divested, and consolidated product lines (1) (2) $ (11) $ (72) $ (2) $ -- $ (85) Continuing product lines 41 48 40 23 152 -------- -------- -------- -------- ------- Total operating earnings (loss) $ 30 $ (24) $ 38 $ 23 $ 67 Asset Impairments and Restructuring Charges CASPI restructured, divested, and consolidated product lines (1) $ 5 $ 66 $ 1 $ -- $ 72 Continuing product lines 1 3 3 2 9 -------- -------- -------- -------- ------- Total asset impairments and restructuring charges $ 6 $ 69 $ 4 $ 2 $ 81 -------- -------- -------- -------- ------- (1) See note (1) to Table 4a and 4b (2) Includes allocated costs consistent with the Company's historical practices, some of which may remain and could be reallocated to the remainder of the segment and other segments. TABLE 6 - SALES REVENUE CHANGE - EXTERNAL SALES Third Quarter, 2005 Compared to Third Quarter, 2004 -------------------------------------------- Change in External Sales Revenue Due To ----------------------------------- Product Exchange Revenue Volume Price Mix Rate Change Effect Effect Effect Effect ------- ------- ------- ------- -------- Eastman Division Coatings, Adhesives, Specialty Polymers, and Inks (7)% (19)% 13 % (1)% -- % Performance Chemicals and Intermediates 16 % (1)% 17 % -- % -- % Specialty Plastics 8 % (3)% 12 % (1)% -- % ------- ------- ------- ------- -------- Total Eastman Division 5 % (8)% 14 % (1)% -- % ======= ======= ======= ======= ======== Voridian Division Polymers 19 % 4 % 14 % -- % 1 % Fibers 24 % 11 % 13 % -- % -- % ------- ------- ------- ------- -------- Total Voridian Division 20 % 6 % 14 % -- % -- % ======= ======= ======= ======= ======== Developing Businesses Division Developing Businesses (95)% -- % -- % (95)% -- % ------- ------- ------- ------- -------- Total Developing Businesses Division (95)% -- % -- % (95)% -- % ======= ======= ======= ======= ======== Total Eastman Chemical Company 10 % (2)% 14 % (2)% -- % ======= ======= ======= ======= ======== First Nine Months, 2005 Compared to First Nine Months, 2004 -------------------------------------------- Change in External Sales Revenue Due To ----------------------------------- Product Exchange Revenue Volume Price Mix Rate Change Effect Effect Effect Effect ------- ------- ------- ------- -------- Eastman Division Coatings, Adhesives, Specialty Polymers, and Inks (23)% (35)% 11 % -- % 1 % Performance Chemicals and Intermediates 25 % 8 % 19 % (3)% 1 % Specialty Plastics 13 % 2 % 10 % -- % 1 % ------- ------- ------- ------- -------- Total Eastman Division -- % (13)% 14 % (1)% -- % ======= ======= ======= ======= ======== Voridian Division Polymers 24 % -- % 23 % -- % 1 % Fibers 18 % 7 % 9 % 2 % -- % ------- ------- ------- ------- -------- Total Voridian Division 22 % 2 % 19 % -- % 1 % ======= ======= ======= ======= ======== Developing Businesses Division Developing Businesses (72)% -- % -- % (72)% -- % ------- ------- ------- ------- -------- Total Developing Businesses Division (72)% -- % -- % (72)% -- % ======= ======= ======= ======= ======== Total Eastman Chemical Company 8 % (7) % 16 % (2) % 1 % ======= ======= ======= ======= ======== TABLE 7 - PERCENTAGE GROWTH IN SALES VOLUME Third Quarter, 2005 Compared to Third Quarter, 2004 ----------------------------------------------- Total External Interdivisional Including Volume Volume Interdivisional ------------- --------------- --------------- Eastman Division Coatings, Adhesives, Specialty Polymers, and Inks (19)% (53)% (19)% Performance Chemicals and Intermediates -- % 5 % 2 % Specialty Plastics (3)% (33)% (8)% ------------- --------------- --------------- Total Eastman Division (7)% 2 % (5)% ============= =============== =============== Voridian Division Polymers 4 % 7 % 5 % Fibers 11 % 4 % 7 % ------------- --------------- --------------- Total Voridian Division 6 % 4 % 5 % ============= =============== =============== Developing Businesses Division Developing Businesses greater than greater than 100% -- % 100% ------------- --------------- --------------- Total Developing Businesses greater than greater than Division 100% -- % 100% ============= =============== =============== Total Eastman Chemical Company (1)% ============= Regional sales volume growth United States and Canada (1)% Europe, Middle East, and Africa (11)% Asia Pacific 9 % Latin America 6 % TABLE 7 - PERCENTAGE GROWTH IN SALES VOLUME (Continued) First Nine Months, 2005 Compared to First Nine Months, 2004 ----------------------------------------------- Total External Interdivisional Including Volume Volume Interdivisional ------------- --------------- --------------- Eastman Division Coatings, Adhesives, Specialty Polymers, greater than and Inks (34)% 100% (34)% Performance Chemicals and Intermediates 9 % 3 % 7 % Specialty Plastics 2 % (27)% (3)% ------------- --------------- --------------- Total Eastman Division (10)% 1 % (8)% ============= =============== =============== Voridian Division Polymers -- % 10 % -- % Fibers 7 % 1 % 4 % ------------- --------------- --------------- Total Voridian Division 1 % 3 % 1 % ============= =============== =============== Developing Businesses Division Developing Businesses greater than greater than 100% -- % 100% ------------- --------------- --------------- Total Developing Businesses greater than greater than Division 100% -- % 100% ============= =============== =============== Total Eastman Chemical Company (5)% ============= Regional sales volume growth United States and Canada (2)% Europe, Middle East, and Africa (19)% Asia Pacific 5 % Latin America (8)% TABLE 8 - OPERATING EARNINGS, NET EARNINGS, AND EARNINGS PER SHARE RECONCILIATION OPERATING EARNINGS, NET EARNINGS, AND NET EARNINGS PER DILUTED SHARE Third Quarter 2005 ---------------------------------------------- Earnings Net Earnings Operating Before Net Per Diluted (Dollars in millions) Earnings Tax Earnings Share --------- --------- --------- ------------ As reported $ 198 $ 177 $ 123 $ 1.50 Certain Items: Asset impairments and restructuring charges 4 4 3 0.03 --------- --------- --------- ------------ Excluding certain items $ 202 $ 181 $ 126 $ 1.53 ========= ========= ========= ============ Third Quarter 2004 ---------------------------------------------- Earnings Net Earnings Operating Before Net Per Diluted (Dollars in millions) Earnings Tax Earnings Share --------- --------- --------- ------------ As reported $ 73 $ 48 $ 38 $ 0.49 Certain Items: Asset impairments and restructuring charges 42 42 31 0.40 Net deferred tax benefit related to assets held for sale in the CASPI segment -- -- (8) (0.10) --------- --------- --------- ------------ Excluding certain items $ 115 $ 90 $ 61 $ 0.79 ========= ========= ========= ============ TABLE 9 - STATEMENTS OF CASH FLOWS First Nine Months ------------------ (Dollars in millions) 2005 2004 -------- -------- Cash flows from operating activities Net earnings $ 491 $ 116 -------- -------- Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 229 243 Asset impairments 1 131 Income from equity investment in Genencor (173) (14) Early debt extinguishment costs 46 -- Provision (benefit) for deferred income taxes 130 (82) Changes in operating assets and liabilities: (Increase) decrease in receivables (35) (151) (Increase) decrease in inventories (141) 9 Increase (decrease) in trade payables (5) 10 Increase (decrease) in liabilities for employee benefits and incentive pay (108) 35 Other items, net (61) 4 -------- -------- Net cash provided by operating activities 374 301 -------- -------- Cash flows from investing activities Additions to properties and equipment (224) (171) Proceeds from sale of assets 50 115 Proceeds from sale of equity investment in Genencor 417 -- Additions to capitalized software (8) (11) Other items, net (5) (10) -------- -------- Net cash provided by (used in) investing activities 230 (77) -------- -------- Cash flows from financing activities Net increase (decrease) in commercial paper, credit facility and other short-term borrowings (84) (15) Repayment of borrowings (544) (500) Dividends paid to stockholders (106) (102) Proceeds from stock option exercises and other items 91 14 -------- -------- Net cash used in financing activities (643) (603) -------- -------- Net change in cash and cash equivalents (39) (379) Cash and cash equivalents at beginning of period 325 558 -------- -------- Cash and cash equivalents at end of period $ 286 $ 179 ======== ======== TABLE 10 - SELECTED BALANCE SHEET ITEMS September 30, December 31, (Dollars in millions) 2005 2004 -------------- -------------- Current Assets $ 1,844 $ 1,768 Net Properties 3,134 3,192 Other Assets 630 879 -------------- -------------- Total Assets $ 5,608 $ 5,839 ============== ============== Payables and Other Current Liabilities $ 1,021 $ 1,098 Short-term Borrowings 4 1 Long-term Borrowings 1,436 2,061 Other Liabilities 1,552 1,495 Stockholders' Equity 1,595 1,184 -------------- -------------- Total Liabilities and Stockholders' Equity $ 5,608 $ 5,839 ============== ==============

Source: Business Wire

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