eastman8k

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934


Date of Report (Date of earliest event reported)    July 31, 2004



EASTMAN CHEMICAL COMPANY
(Exact name of registrant as specified in its charter)


Delaware
(State or other jurisdiction of
incorporation or organization)
1-12626
(Commission
File Number)
62-1539359
(I.R.S. employer
identification No.)


100 N. Eastman Road, Kingsport, TN
37660
(Address of principal executive offices)
(Zip Code)



Registrant’s telephone number, including area code: (423) 229-2000

1

 
     
 
Item 2. Acquisition or Disposition of Assets
 
               On July 31, 2004 Eastman Chemical Company (the "Company") completed the sale of certain businesses and product lines and related assets in the Coatings, Adhesives, Specialty Polymers and Inks ("CASPI") segment to Resolution Specialty Materials, Inc. ("RSM"), an affiliate of Apollo Management, L.P., for approximately $175 million including cash and the receipt of a $50 million note receivable (the "Sale"). The Company retained approximately $40 million of accounts receivable related to these businesses and product lines. These businesses and product lines include acrylate ester monomers, composites (unsaturated polyester resins), inks and graphics arts raw materials, liquid resins, powder resins and textile chemicals. The final purchase price is subject to adjustment based upon meeting working capital and other targets established in the agreement. In accordance with the terms of the sales agreement, the Company will continue to produce certain products for the buyer under ongoing supply agreements with terms in excess of one year. In addition, the Company indemnified the buyer against certain liabilities primarily related to taxes, legal matters, environmental matters, and other representations and warranties.

              
Item 7. Financial Statements and Exhibits
 
(b) Pro Forma Financial Information
 
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
 
The accompanying unaudited pro forma consolidated income statements for the six months ended June 30, 2004 and fiscal year ended December 31, 2003 gives effect of the Sale as well as other restructuring, divestiture and consolidation activities that the Company has completed related to these businesses and product lines as if the actions were completed on January 1, 2003.
 
The accompanying unaudited pro forma consolidated balance sheet as of June 30, 2004 gives effect to the Sale as if the transaction had occurred as of that date.
 
The unaudited pro forma consolidated financial statements presented herein are shown for illustrative purposes only and are not necessarily indicative of the future financial position or future results of operations of the Company, or of the financial position or results of operations of the Company that would have actually occurred had the actions described above taken place as of the date or for the periods presented. The unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements and related notes of the Company’s 2003 Annual Report on Form 10-K and 2004 Quarterly Reports on Form 10-Q.
 
     
 
Financial Statements and Exhibits:
(1)
Eastman Chemical Company and Subsidiaries Pro Forma Consolidated Income Statement (unaudited) for the six months ended June 30, 2004
(2)
Eastman Chemical Company and Subsidiaries Pro Forma Consolidated Income Statement (unaudited) for the fiscal year ended December 31, 2003
(3)
Eastman Chemical Company and Subsidiaries Pro Forma Consolidated Balance Sheet (unaudited) as of June 30, 2004.
(4)
Notes to the unaudited Eastman Chemical Company and Subsidiaries Pro Forma Consolidated Financial Statements.

 
     
 
EXHIBIT 1  
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Six months ended June 30, 2004

 
 
Eastman
 
(A)
 
 
 
 
(Dollars in millions, except per share amounts)
 
Chemical
 
Divested
 
Other
 
Pro
 
 
Company
 
Businesses
 
Adjustments
 
Forma
 
 
 
 
 
 
 
 
 
Sales
$
3,273
$
368
$
19 (B)
$
2,924
Cost of sales
 
2,768
 
338
 
16 (B)
 
2,446
   
   		  
  		  
  		  
  
Gross profit
 
505
 
30
 
3
 
478
 
 
 
 
 
 
 
 
 
Selling and general administrative expenses
 
222
 
22
 
--
 
200
Research and development expenses
 
81
 
8
 
--
 
73
Asset impairments and restructuring charges, net
 
146
 
67
 
--
 
79
   
  		  
  		  
  		  
  
Pro forma operating earnings (loss)
 
56
 
(67)
 
3
 
126
 
 
 
 
 
 
 
 
 
Interest expense (income), net
 
59
 
--
 
(3) (C)
 
56
   
  		  
  		  
  		  
  
Pro forma earnings (loss) before income taxes and cumulative effect of changes in accounting principles
 
(3)
 
(67)
 
6
 
70
Provision (benefit) for income taxes
 
(81)
 
(12)
 
1 (D)
 
(68)
Pro forma earnings (loss) before cumulative effect of changes in accounting principles
$
78
$
(55)
$
5
$
138
 
 
 
 
 
 
 
 
 
Pro forma earnings (loss) per share
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
Before cumulative effect of changes in accounting
 
 
 
 
 
 
 
 
principles
$
1.01
 
 
 
 
$
1.78
 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
 
77,299,417
 
 
 
 
 
77,299,417
 
 
 
 
 
 
 
 
 
Diluted
 
 
 
 
 
 
 
 
Before cumulative effect of changes in accounting
 
 
 
 
 
 
 
 
principles
$
1.00
 
 
 
 
$
1.77
 
 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding
 
77,989,198
 
 
 
 
 
77,989,198
 
See Notes to the Unaudited Pro Forma Consolidated Financial Statements.
 
     
 
EXHIBIT 2  
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Year ended December 31, 2003

 
 
Eastman
 
(A)
 
 
 
 
(Dollars in millions, except per share amounts)
 
Chemical
 
Divested
 
Other
 
Pro
 
 
Company
 
Businesses
 
Adjustments
 
Forma
 
 
 
 
 
 
 
 
 
Sales
$
5,800
$
719
$
39 (B)
$
5,120
Cost of sales
 
4,990
 
704
 
33 (B)
 
4,319
   
  		  
  		  
  		  
  
Gross profit
 
810
 
15
 
6
 
801
 
 
 
 
 
 
 
 
 
Selling and general administrative expenses
 
414
 
34
 
--
 
380
Research and development expenses
 
173
 
25
 
--
 
148
Asset impairments and restructuring charges, net
 
489
 
424
 
--
 
65
Goodwill impairments
 
34
 
34
 
--
 
--
Other operating income
 
(33)
 
(13)
 
--
 
(20)
   
  		  
  		  
  		  
  
Pro forma operating earnings (loss)
 
(267)
 
(489)
 
6
 
228
 
 
 
 
 
 
 
 
 
Interest (income) expense, net
 
124
 
--
 
(5) (C)
 
119
Other (income) charges, net
 
(10)
 
(4)
 
--
 
(6)
   
  		  
  		  
  		  
  
Pro forma earnings (loss) before income taxes and cumulative effect of changes in accounting principles
 
(381)
 
(485)
 
11
 
115
Provision (benefit) for income taxes
 
(108)
 
(143)
 
2 (D)
 
37
Pro forma earnings (loss) before cumulative effect of changes in accounting principles
 
(273)
 
(342)
 
9
 
78
 
 
 
 
 
 
 
 
 
Pro forma earnings (loss) per share
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
Before cumulative effect of changes in accounting
 
 
 
 
 
 
 
 
principles
$
(3.54)
 
 
 
 
$
1.01
 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
 
77,145,897
 
 
 
 
 
77,145,897
 
 
 
 
 
 
 
 
 
Diluted
 
 
 
 
 
 
 
 
Before cumulative effect of changes in accounting
 
 
 
 
 
 
 
 
principles
$
(3.54)
 
 
 
 
$
1.01
 
 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding
 
77,145,897
 
 
 
 
 
77,391,137
 
See Notes to the Unaudited Pro Forma Consolidated Financial Statements.





 
     
 
EXHIBIT 3  
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
(dollars in millions)

As of June 30, 2004
 
 
 
Eastman
 
(E)
 
 
 
 
 
 
Chemical
 
Divested
 
Other
 
Pro
(Dollars in millions, except per share amounts)
 
Company
 
Businesses
 
Adjustments
 
Forma
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
145
$
--
$
--
$
145
Trade receivables, net of allowance of $21 and $28
 
670
 
--
 
--
 
670
Miscellaneous receivables
 
69
 
--
 
--
 
69
Inventories
 
589
 
--
 
--
 
589
Other current assets
 
52
 
--
 
--
 
52
Current assets held for sale
 
192
 
192
 
--
 
--
Total current assets
 
1,717
 
192
 
--
 
1,525
 
 
 
 
 
 
 
 
 
Properties
 
 
 
 
 
 
 
 
Properties and equipment at cost
 
9,434
 
--
 
--
 
9,434
Less: Accumulated depreciation
 
6,228
 
--
 
--
 
6,228
Net properties
 
3,206
 
--
 
--
 
3,206
 
 
 
 
 
 
 
 
 
Goodwill
 
315
 
--
 
--
 
315
Other intangibles, net of accumulated amortization of $4 and $218
 
21
 
--
 
--
 
21
Other noncurrent assets
 
481
 
--
 
50 (F)
 
531
Noncurrent assets held for sale
 
68
 
68
 
--
 
--
Total assets
$
5,808
$
260
$
50
$
5,598
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
Payables and other current liabilities
$
942
$
--
$
12 (G)
$
954
Borrowings due within one year
 
1
 
--
 
--
 
1
Current liabilities related to assets held for sale
 
66
 
66
 
--
 
--
Total current liabilities
 
1,009
 
66
 
12
 
955
 
 
 
 
 
 
 
 
 
Long-term borrowings
 
2,153
 
--
 
(125) (F)
 
2,028
Deferred income tax liabilities
 
240
 
--
 
--
 
240
Postemployment obligations
 
1,157
 
--
 
--
 
1,157
Other long-term liabilities
 
197
 
--
 
--
 
197
Long-term liabilities related to assets held for sale
 
7
 
7
 
--
 
--
Total liabilities
 
4,763
 
73
 
(113)
 
4,577
 
 
 
 
 
 
 
 
 
Stockholders’ equity
 
 
 
 
 
 
 
 
Common stock ($0.01 par value – 350,000,000 shares authorized; shares issued – 85,638,077 and 85,177,467)
 
1
 
--
 
--
 
1
Additional paid-in capital
 
135
 
--
 
--
 
135
Retained earnings
 
1,486
 
163
 
163
 
1,486
Accumulated other comprehensive loss
 
(142)
 
24
 
--
 
(166)
 
 
1,480
 
187
 
163
 
1,456
Less: Treasury stock at cost (7,933,646 shares for 2004 and 2003)
 
435
 
--
 
--
 
435
 
 
 
 
 
 
 
 
 
Total stockholders’ equity
 
1,045
 
187
 
163
 
1,021
 
 
 
 
 
 
 
 
 
Total liabilities and stockholders’ equity
$
5,808
$
260
$
50
$
5,598
 
See Notes to the Unaudited Pro Forma Consolidated Financial Statements.
 
     
 
 

EXHIBIT 4  
Notes to the Unaudited Eastman Chemical Company and Subsidiaries Pro Forma Consolidated Financial Statements

(A)
The "Divested Businesses" column in the Unaudited Eastman Chemical Company and Subsidiaries Pro Forma Income Statement represents the results of the businesses and product lines divested as part of the Sale as well as those restructured, divested and consolidated during the periods presented. Provision for income taxes reflects a mix of income and losses between tax jurisdictions with different statutory tax rates.
(B)
The "Other Adjustments" in the Unaudited Eastman Chemical Company and Subsidiaries Pro Forma Consolidated Income Statement include adjustments for sales (and related cost of goods sold) made by the Company to the businesses sold to RSM under supply agreements that previously were eliminated in the Company's consolidated financial results.
(C)
The "Other Adjustments" in the Unaudited Eastman Chemical Company and Subsidiaries Pro Forma Consolidated Income Statements include adjustments for the impact on interest expense of the assumed use of cash to reduce commercial paper and credit facility borrowings and interest income on a $50 million note receivable.  
(D)
The "Other Adjustments" in the Unaudited Eastman Chemical Company and Subsidiaries Pro Forma Consolidated Income Statements include the tax effects at the applicable statutory rates for adjustment (B).
(E)
The "Divested Businesses" column in the Unaudited Eastman Chemical Company and Subsidiaries Pro Forma Consolidated Balance Sheet reflects the elimination of the assets, liabilities and components of equity included in the Sale to RSM as determined as of June 30, 2004. Details of these assets and liabilities can be found in Note 3 to the unaudited Eastman Chemical Company and Subsidiaries Consolidated Financial Statements for June 30, 2004 as reported in the Company’s Form 10-Q.
(F)
The "Other Adjustments" in the Unaudited Eastman Chemical Company and Subsidiaries Pro Forma Consolidated Balance Sheet include adjustments to reflect the assumed use of cash to reduce commercial paper and credit facility borrowings and the receipt of a $50 million note receivable from RSM.
(G)
The "Other Adjustments" in the Unaudited Eastman Chemical Company and Subsidiaries Pro Forma Consolidated Balance Sheet includes an adjustment to reflect the estimated transaction costs and other liabilities associated with the Sale.





 
     
 
SIGNATURE

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EASTMAN CHEMICAL COMPANY
(Registrant)
_/s/ Curtis E. Espeland__________________
 
                                                                                                                                                                                                       Curtis E. Espeland
                                                                                                                                                                                                                          Vice President and Controller

August 16, 2004