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First Quarter 2025
(Dollars in millions)Advanced MaterialsAdditives & Functional ProductsChemical IntermediatesFibersTotal Operating Segments
Sales$719 $733 $545 $288 $2,285 
Cost of sales511 526 492 176 1,705 
Selling, general and administrative expenses69 51 28 19 167 
Other segment items (1)
23 15 6 5 49 
Adjusted EBIT
116 141 19 88 364 
Reconciliation of segment Adjusted EBIT to consolidated earnings before income taxes ("EBT"):
Other adjusted EBIT (2)
(53)
Non-core items impacting EBIT
Asset impairments, restructuring, and other charges, net (3)
(9)
Net interest expense(49)
Consolidated EBT$253 
First Quarter 2024
(Dollars in millions)Advanced MaterialsAdditives & Functional ProductsChemical IntermediatesFibersTotal Operating Segments
Sales$748 $704 $523 $331 $2,306 
Cost of sales546 527 470 190 1,733 
Selling, general and administrative expenses77 53 31 20 181 
Other segment items (1)
21 15 6 4 46 
Adjusted EBIT104 109 16 117 346 
Reconciliation of segment Adjusted EBIT to consolidated EBT:
Other adjusted EBIT (2)
(72)
Non-core items impacting EBIT
Asset impairments, restructuring, and other charges, net (3)
(11)
Net interest expense(49)
Consolidated EBT$214 
First Quarter 2025
Advanced MaterialsAdditives & Functional ProductsChemical IntermediatesFibers
Total Operating Segments
Other
Total Consolidated
Depreciation and amortization expense50 35 24 16 125 1 126 
Capital expenditures97 15 19 8 139 8 147 
(1)Other segment items for each reportable segment includes research and development expenses, other components of post-employment (benefit) cost, net and other (income) charges, net.
(2)Other is not considered an operating segment. Other includes the following which are not allocated to operating segments: 1) sales and costs from growth initiatives and businesses, 2) pension and other postretirement benefit plans income (expense), net, and 3) other income (charges), net.
(3)See Note 11, "Asset Impairments, Restructuring, and Other Charges, Net", for a description of included items.

First Quarter 2024
Advanced MaterialsAdditives & Functional ProductsChemical IntermediatesFibersTotal Operating SegmentsOtherTotal Consolidated
Depreciation and amortization expense49 36 25 16 126 1 127 
Capital expenditures150 11 11 6 178 7 185 
(1)Other segment items for each reportable segment includes research and development expenses, other components of post-employment (benefit) cost, net and other (income) charges, net.
(2)Other is not considered an operating segment. Other includes the following which are not allocated to operating segments: 1) sales and costs from growth initiatives and businesses, 2) pension and other postretirement benefit plans income (expense), net, and 3) other income (charges), net.
(3)See Note 11, "Asset Impairments, Restructuring, and Other Charges, Net", for a description of included items.
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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 endedMarch 31, 2025
 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 March 31, 2025
Common Stock, par value $0.01 per share115,460,148
--------------------------------------------------------------------------------------------------------------------------------
1
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TABLE OF CONTENTS
ITEM PAGE

PART I.  FINANCIAL INFORMATION
 
   
 
 
 
 
   
   
   

PART II.  OTHER INFORMATION
   

SIGNATURES
 

2
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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 and opportunities (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 costs and foreign currency exchange and interest rates; disruption or interruption of operations and of raw material or energy supply (including as a result of cyber-attacks or other breaches of the Company's information security systems); global and regional economic, political, and business conditions, including heightened inflation, capital market volatility, interest rate and currency fluctuations, and economic slowdown or recession; impacts from U.S. tariffs, reciprocal tariffs, and global trade disruption; competition; growth opportunities; supply and demand, volume, price, cost, margin and sales; pending and future legal proceedings; earnings, cash flow, dividends, stock repurchases and other expected 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.
3
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS,
COMPREHENSIVE INCOME AND RETAINED EARNINGS
 First Quarter
(Dollars in millions, except per share amounts)20252024
Sales$2,290 $2,310 
Cost of sales1,723 1,778 
Gross profit567 532 
Selling, general and administrative expenses182 191 
Research and development expenses67 59 
Asset impairments, restructuring, and other charges, net
9 11 
Other components of post-employment (benefit) cost, net(1)(5)
Other (income) charges, net8 13 
Earnings before interest and taxes302 263 
Net interest expense49 49 
Earnings before income taxes253 214 
Provision for income taxes
70 49 
Net earnings183 165 
Less: Net earnings attributable to noncontrolling interest1 — 
Net earnings attributable to Eastman$182 $165 
Basic earnings per share attributable to Eastman$1.58 $1.40 
Diluted earnings per share attributable to Eastman$1.57 $1.39 
Comprehensive Income
Net earnings including noncontrolling interest$183 $165 
Other comprehensive income (loss), net of tax:
Change in cumulative translation adjustment8 (10)
Defined benefit pension and other postretirement benefit plans:
Amortization of unrecognized prior service credits— (2)
Derivatives and hedging:
Unrealized gain (loss) during period(13)4 
Reclassification adjustment for (gains) losses included in net income, net(2)(1)
Total other comprehensive income (loss), net of tax(7)(9)
Comprehensive income including noncontrolling interest176 156 
Less: Comprehensive income attributable to noncontrolling interest1 — 
Comprehensive income attributable to Eastman$175 $156 
Retained Earnings  
Retained earnings at beginning of period$10,013 $9,490 
Net earnings attributable to Eastman182 165 
Cash dividends declared(96)(96)
Retained earnings at end of period$10,099 $9,559 

The accompanying notes are an integral part of these consolidated financial statements.
4
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UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
March 31,December 31,
(Dollars in millions, except per share amounts)20252024
Assets
Current assets
Cash and cash equivalents$418 $837 
Trade receivables, net of allowance for credit losses894 791 
Miscellaneous receivables365 381 
Inventories2,116 1,988 
Other current assets108 104 
Total current assets3,901 4,101 
Properties
Properties and equipment at cost14,130 13,985 
Less: Accumulated depreciation8,491 8,370 
Net properties5,639 5,615 
Goodwill3,642 3,632 
Intangible assets, net of accumulated amortization1,021 1,032 
Other noncurrent assets768 833 
Total assets$14,971 $15,213 
Liabilities and Stockholders' Equity
Current liabilities
Payables and other current liabilities$1,984 $2,258 
Borrowings due within one year285 450 
Total current liabilities2,269 2,708 
Long-term borrowings4,736 4,567 
Deferred income tax liabilities512 533 
Post-employment obligations624 630 
Other long-term liabilities886 923 
Total liabilities9,027 9,361 
Stockholders' equity
Common stock ($0.01 par value – 350,000,000 shares authorized; shares issued – 223,880,113 and 223,588,347 as of March 31, 2025 and December 31, 2024, respectively)
2 2 
Additional paid-in capital2,476 2,463 
Retained earnings10,099 10,013 
Accumulated other comprehensive income (loss)(321)(314)
12,256 12,164 
Less: Treasury stock at cost (108,470,763 shares as of both March 31, 2025 and December 31, 2024)
6,385 6,385 
Total Eastman stockholders' equity5,871 5,779 
Noncontrolling interest73 73 
Total equity5,944 5,852 
Total liabilities and stockholders' equity$14,971 $15,213 

The accompanying notes are an integral part of these consolidated financial statements.
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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
First Three Months
(Dollars in millions)20252024
Operating activities
Net earnings$183 $165 
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization126 127 
Benefit from deferred income taxes(3)(17)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
(Increase) decrease in trade receivables(92)(105)
(Increase) decrease in inventories(120)(100)
Increase (decrease) in trade payables(72)49 
Pension and other postretirement contributions (in excess of) less than expenses(14)(19)
Variable compensation payments (in excess of) less than expenses(109)(78)
Other items, net(66)(38)
Net cash used in operating activities
(167)(16)
Investing activities
Additions to properties and equipment(147)(185)
Government incentives
11 — 
Other items, net5 6 
Net cash used in investing activities
(131)(179)
Financing activities
Net increase in commercial paper and other borrowings
285 — 
Proceeds from borrowings246 742 
Repayment of borrowings (550)(498)
Dividends paid to stockholders(96)(95)
Other items, net
(9)(1)
Net cash (used in) provided by financing activities
(124)148 
Effect of exchange rate changes on cash and cash equivalents3 (2)
Net change in cash and cash equivalents(419)(49)
Cash and cash equivalents at beginning of period837 548 
Cash and cash equivalents at end of period$418 $499 

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 2024 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, 2024 financial position data included herein was derived from the consolidated financial statements included in the 2024 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") 2023-05 Business Combination - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement: On January 1, 2025, Eastman adopted this update, which requires 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 is applied prospectively for all newly formed joint venture entities with a formation date on or after January 1, 2025. The adoption did not have a significant impact on the Company's financial statements and related disclosures.

ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures: On January 1, 2025, Eastman adopted this update on a prospective basis, which modifies annual income tax disclosure requirements. The updated guidance mandates 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. 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. 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 March 31, 2025

ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses: The Financial Accounting Standards Board issued this update in November 2024, which requires public companies to provide additional disclosure of certain income statement expense line items. This guidance is intended to improve transparency around the nature of expenses and their impact on financial performance. The ASU is effective for fiscal periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted. Management is currently evaluating the impact of the changes required by the new standard on the Company's financial statements and related disclosures.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Working Capital Management and Off Balance Sheet Arrangements

The Company engages in off-balance sheet, uncommitted accounts receivable factoring programs as a routine part of its ordinary business operations. Through these programs, entire invoices may be sold to third-party financial institutions, the vast majority of which are without recourse. Under these agreements, 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 first quarter 2025 and 2024 were $676 million and $698 million, 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 program or services fees. Eastman or the financial institution may terminate the program at any time upon 90 days' notice. Confirmed obligations in the supplier finance program of $67 million and $56 million at March 31, 2025 and December 31, 2024, respectively, are included in "Payables and other current liabilities" on the Unaudited Consolidated Statements of Financial Position.

2.INVENTORIES
 March 31,December 31,
(Dollars in millions)20252024
Finished goods$1,412 $1,321 
Work in process347 305 
Raw materials and supplies712 737 
Total inventories at FIFO or average cost2,471 2,363 
Less: LIFO reserve355 375 
Total inventories$2,116 $1,988 

Inventories valued on the last-in, first-out ("LIFO") method were approximately 50 percent of total inventories at both March 31, 2025 and December 31, 2024.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3.INCOME TAXES
 First Quarter
(Dollars in millions)20252024
$%$%
Provision for income taxes and tax rate
$70 28 %$49 23 %

First quarter 2025 provision for income taxes includes an increase related to the foreign rate variance due to the Company's mix of earnings and an increase related to adjustments of certain prior year income tax returns. First quarter 2024 provision for income taxes included a decrease related to the foreign rate variance due to the Company's mix of earnings, partially offset by an increase related to uncertain tax positions.

At March 31, 2025 and December 31, 2024, Eastman had $331 million and $321 million, respectively, in unrecognized tax benefits.

4.BORROWINGS
 March 31,December 31,
(Dollars in millions)20252024
Borrowings consisted of:
3.80% notes due March 2025
$— $450 
1.875% notes due November 2026 (1)
539 518 
7.60% debentures due February 2027
196 196 
4.5% notes due December 2028
497 496 
5.0% notes due August 2029
742 495 
5.75% notes due March 2033
496 496 
5.625% notes due February 2034
743 743 
4.8% notes due September 2042
495 495 
4.65% notes due October 2044
878 878 
2027 Term Loan150 250 
Commercial paper and short-term borrowings285 — 
Total borrowings5,021 5,017 
Less: Borrowings due within one year285 450 
Long-term borrowings$4,736 $4,567 
(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.

In first quarter 2025, the Company issued an additional $250 million aggregate principal amount of the 5.0% notes due August 2029 in a registered public offering (the "2029 Notes"), which was originally issued in August 2024, resulting in an aggregate principal amount of $750 million. The net proceeds from first quarter 2025 issuance were $246 million. The Company also repaid the $450 million 3.80% notes due March 2025. There were no debt extinguishment costs associated with the repayment of this debt. All proceeds from the issued notes and the redemption of the 3.8% notes are reported under financing activities on the Unaudited Consolidated Statements of Cash Flows.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Credit Facility, Term Loans, and Commercial Paper Borrowings

The Company has access to a $1.50 billion revolving credit agreement (the "Credit Facility") that matures in February 2029. 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 March 31, 2025 and December 31, 2024, the Company had no outstanding borrowings under the Credit Facility. At March 31, 2025, the Company's commercial paper borrowings were $285 million with a weighted interest rate of 4.61%. At December 31, 2024, the Company had no commercial paper borrowings.

In first quarter 2025, the Company repaid $100 million of the remaining $250 million five-year term loan (the "2027 Term Loan"). There were no extinguishment costs associated with the partial repayment of the loan. The outstanding balance on the 2027 Term Loan was $150 million at March 31, 2025 and $250 million at December 31, 2024, with variable interest rates of 5.55% and 5.58%, respectively. The 2027 Term Loan is subject to interest at a spread 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 March 31, 2025 and December 31, 2024.

Fair Value of Borrowings

Eastman has classified its total borrowings at March 31, 2025 and December 31, 2024 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 2024 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 of the Company's other borrowings, including the 2027 Term Loan and commercial paper, equals the carrying value and is classified as Level 2. The Company's fair value of total borrowings was $4.9 billion at both March 31, 2025 and December 31, 2024. The Company had no borrowings classified as Level 1 or Level 3 as of March 31, 2025 and December 31, 2024.

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 2024 Annual Report on Form 10-K.

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.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 "Short-term borrowings" or "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.

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 first quarter 2025, the Company entered into fixed-to-fixed cross-currency swaps of $50 million (¥7.9 billion) maturing December 2028, $50 million (€48 million) maturing December 2028, $100 million (€97 million) maturing August 2029, and $100 million (€97 million) maturing February 2034.

Additionally, Eastman voluntarily terminated and reentered into fixed-to-fixed cross-currency swaps of $245 million (€229 million terminated; €236 million reentered) maturing December 2028, and $300 million (€282 million terminated; €290 million reentered) maturing March 2033. The Company also voluntarily terminated fixed-to-fixed cross-currency swaps of $50 million (¥7.4 billion) maturing March 2025, and $375 million (€351 million) maturing March 2025. The termination of cross-currency swaps in first quarter 2025 resulted in a $2 million loss 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
Summary of Financial Position and Financial Performance of Hedging Instruments

The following table presents the notional amounts outstanding at March 31, 2025 and December 31, 2024 associated with Eastman's hedging programs.
Notional OutstandingMarch 31, 2025December 31, 2024
Derivatives designated as cash flow hedges:
Foreign Exchange Forward and Option Contracts (in millions)
EUR/USD (in EUR)€447€428
Commodity Forward and Collar Contracts
Energy (in million british thermal units)3 10 
Derivatives designated as net investment hedges:
Cross-currency interest rate swaps (in millions)
EUR/USD (in EUR)€1,449€1,543
JPY/USD (in JPY)¥7,885¥7,385
Non-derivatives designated as net investment hedges:
Foreign Currency Net Investment Hedges (in millions)
EUR/USD (in EUR)€499€499

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 the counterparties to validate the accuracy of its standard pricing models. The Company had no derivatives classified as Level 1 or Level 3 as of March 31, 2025 and December 31, 2024. 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 realize a credit loss related to these counterparties during first quarter 2025 or 2024.

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 within 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 located within the Unaudited Consolidated Statements of Financial Position as of March 31, 2025 and December 31, 2024.

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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
March 31, 2025December 31, 2024
Derivatives designated as cash flow hedges:   
Commodity contractsOther current assets$1 $— 
Foreign exchange contractsOther current assets— 6 
Foreign exchange contractsOther noncurrent assets— 3 
Derivatives designated as net investment hedges:
Cross-currency interest rate swapsOther current assets— 19 
Cross-currency interest rate swapsOther noncurrent assets18 69 
Total Derivative Assets$19 $97 
Derivatives designated as cash flow hedges:
Commodity contractsPayables and other current liabilities$— $4 
Foreign exchange contractsPayables and other current liabilities7 — 
Foreign exchange contractsOther long-term liabilities3 — 
Derivatives designated as net investment hedges:
Cross-currency interest rate swaps
Payables and other current liabilities— 4 
Cross-currency interest rate swapsOther long-term liabilities24 54 
Total Derivative Liabilities$34 $62 
Total Net Derivative Assets (Liabilities) $(15)$35 

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 a carrying value of $539 million at March 31, 2025 and $518 million at December 31, 2024 associated with non-derivative instruments designated as foreign currency net investment hedges. 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 2024 Annual Report on Form 10-K.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 first quarter 2025 and 2024.
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)First QuarterFirst Quarter
Hedging Relationships2025202420252024
Derivatives in cash flow hedging relationships:
Commodity contracts$1 $(4)$— $— 
Foreign exchange contracts(17)7 4 2 
Forward starting interest rate and treasury lock swap contracts1 — (1)(1)
Non-derivatives in net investment hedging relationships (pre-tax):
Net investment hedges (21)12 — — 
Derivatives in net investment hedging relationships (pre-tax):
Cross-currency interest rate swaps(103)39 — — 
Cross-currency interest rate swaps excluded component 66 (10)— — 

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 first quarter 2025 and 2024.

Location and Amount of Gain or (Loss) Recognized in Earnings from Fair Value and Cash Flow Hedging Relationships
First Quarter
20252024
(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$2,290 $1,723 $49 $2,310 $1,778 $49 
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— 1 
Derivatives designated as hedging instruments— (1)
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)(1)
Commodity Contracts:
Amount reclassified from AOCI into earnings— — 
Foreign Exchange Contracts:
Amount reclassified from AOCI into earnings4 2 
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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 $3 million during first quarter 2025, and recognized a net loss of $5 million during first quarter 2024.

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 unrealized gain of $75 million and a net unrealized gain of $154 million at March 31, 2025 and December 31, 2024, respectively. Unrealized gains in AOCI decreased between December 31, 2024 and March 31, 2025 primarily as a result of an increase in euro to U.S. dollar exchange rates. If realized, approximately $6 million in pre-tax losses as of March 31, 2025, would be reclassified into earnings during the next 12 months, including foreign exchange contracts prospectively dedesignated and monetized in 2024.

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 2024 Annual Report on Form 10-K.

Components of net periodic benefit (credit) cost were as follows:
First Quarter
 Pension PlansOther Postretirement Benefit Plans
2025202420252024
(Dollars in millions)U.S.Non-U.S.U.S.Non-U.S.
Service cost$4 $2 $5 $2 $— $— 
Interest cost18 6 18 6 5 6 
Expected return on assets(22)(7)(24)(7)(1)(1)
Amortization of:
Prior service credit, net— — — — — (3)
Net periodic benefit (credit) cost$— $1 $(1)$1 $4 $2 

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
7.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 2024 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 financial statements and related disclosures 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)March 31, 2025December 31, 2024
Environmental contingencies, current$20 $15 
Environmental contingencies, long-term262 269 
Total$282 $284 

Environmental Remediation

Estimated future environmental expenditures for undiscounted remediation costs ranged from $250 million to $503 million and from $252 million to $495 million at March 31, 2025 and December 31, 2024, 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 three months 2025 and full year 2024 are summarized below:
(Dollars in millions)Environmental Remediation Liabilities
Balance at December 31, 2023
$252 
Changes in estimates recognized in earnings and other13 
Cash reductions(13)
Balance at December 31, 2024
252 
Changes in estimates recognized in earnings and other1 
Cash reductions(3)
Balance at March 31, 2025$250 

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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 was $32 million at both March 31, 2025 and December 31, 2024.

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 $54 million and $53 million at March 31, 2025 and December 31, 2024, respectively, and are included in "Other long-term liabilities" on the Unaudited Consolidated Statements of Financial Position.

8.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
9.STOCKHOLDERS' EQUITY

Reconciliations of the changes in stockholders' equity for first quarter 2025 and 2024 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 December 31, 2024$2 $2,463 $10,013 $(314)$(6,385)$5,779 $73 $5,852 
Net Earnings— — 182 — — 182 1 183 
Cash Dividends Declared (1)
($0.83 per share)
— — (96)— — (96)— (96)
Other Comprehensive Income (Loss)— — — (7)— (7)— (7)
Share-Based Compensation Expense (2)
— 23 — — — 23 — 23 
Stock Option Exercises— 2 — — — 2 — 2 
Other (3)
— (12)— — — (12)— (12)
Distributions to noncontrolling interest— — — — — — (1)(1)
Balance at March 31, 2025$2 $2,476 $10,099 $(321)$(6,385)$5,871 $73 $5,944 
(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— — 165 — — 165 — 165 
Cash Dividends Declared (1)
($0.81 per share)
— — (96)— — (96)— (96)
Other Comprehensive Income (Loss)— — — (9)— (9)— (9)
Share-Based Compensation Expense (2)
— 21 — — — 21 — 21 
Stock Option Exercises— 7 — — — 7 — 7 
Other (3)
— (8)— — — (8)(1)(9)
Distributions to Noncontrolling Interest— — — — — — (1)(1)
Balance at March 31, 2024$2 $2,388 $9,559 $(328)$(6,083)$5,538 $70 $5,608 
(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, 2023
$(297)$11 $(32)$(1)$(319)
Period change(20)(8)33 — 5 
Balance at December 31, 2024
(317)3 1 (1)(314)
Period change8 — (15)— (7)
Balance at March 31, 2025$(309)$3 $(14)$(1)$(321)
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:
First Quarter
20252024
(Dollars in millions)Before TaxNet of TaxBefore TaxNet of Tax
Other comprehensive income (loss)
Change in cumulative translation adjustment$(1)$8 $(4)$(10)
Defined benefit pension and other postretirement benefit plans:
Amortization of unrecognized prior service credits— — (3)(2)
Derivatives and hedging:
Unrealized gain (loss) during period(17)(13)5 4 
Reclassification adjustment for (gains) losses included in net income, net(3)(2)(1)(1)
Total other comprehensive income (loss)$(21)$(7)$(3)$(9)

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10.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:
 First Quarter
(In millions, except per share amounts)20252024
Numerator
Earnings attributable to Eastman, net of tax $182 $165 
Denominator
Weighted average shares used for basic EPS115.2117.4
Dilutive effect of stock options and other awards1.30.8
Weighted average shares used for diluted EPS116.5118.2
(Calculated using whole dollars and shares)
EPS
Basic$1.58 $1.40 
Diluted$1.57 $1.39 

Shares underlying stock options of 1,716,564 and 1,583,247 for first quarter 2025 and 2024, 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. No shares were repurchased in first quarter 2025 or 2024.

The Company declared cash dividends of $0.83 and $0.81 per share for first quarter 2025 and 2024, respectively.
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
11.ASSET IMPAIRMENTS, RESTRUCTURING, AND OTHER CHARGES, NET

(Dollars in millions)First Quarter
20252024
Severance charges (1)(2)
$1 $11 
Restructuring and other charges (1)(3)
8 — 
Total$9 $11 

(1)Severance charges of $1 million and restructuring charges of $3 million in first quarter 2025 related to the closure of a heat-transfer fluids production line at a North America specialty fluids and energy facility in the Additives & Functional Products segment.
(2)Severance charges in first quarter 2024 related to corporate cost reductions actions which are reported in "Other".
(3)Charges of $5 million related to profitability improvement initiatives which are reported in "Other".

Changes in Reserves

The following table summarizes the changes in asset impairments and restructuring reserves in first three months 2025 and full year 2024:

(Dollars in millions)Balance at January 1, 2025Provision/ AdjustmentsNon-cash Reductions/
Additions		Cash ReductionsBalance at March 31, 2025
Severance charges$23 $1 $— $(6)$18 
Restructuring and other charges3 8 — (6)5 
Total$26 $9 $— $(12)$23 

(Dollars in millions)		Balance at January 1, 2024Provision/ AdjustmentsNon-cash Reductions/
Additions		Cash ReductionsBalance at December 31, 2024
Non-cash charges$— $5 $(5)$— $— 
Severance charges26 25 — (28)23 
Restructuring and other charges— 21 — (18)3 
Total$26 $51 $(5)$(46)$26 

Substantially all severance charges remaining as of March 31, 2025 are expected to be paid within one year.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
12.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 first quarter 2025 and 2024, $23 million and $21 million, respectively, of compensation expense before tax was recognized in "Selling, general and administrative expense" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings for all share-based awards, of which $9 million and $7 million, respectively, was for stock options. Compensation expense is recognized over the substantive vesting period, which may be a shorter time period than the stated vesting period for qualifying termination eligible employees as defined in the award notices. For first quarter 2025 and 2024, $8 million and $6 million, respectively, of stock option compensation expense was recognized due to qualifying termination eligibility preceding the requisite service period. The impact on net earnings for first quarter 2025 and 2024 was $17 million and $15 million, respectively, net of deferred tax expense related to share-based award compensation for each period.

Stock Option Grants

In first quarter 2025 and 2024, approximately 408 thousand and 389 thousand stock options, respectively, were granted under the 2021 Omnibus Stock Compensation Plan. Options have an exercise price equal to the closing price of the Company's stock on the date of grant and a term of ten years, with vesting periods that vary up to three years. Vesting generally occurs ratably over the vesting period or, in some cases, at the end of the vesting period. The Company utilizes the Black-Scholes-Merton option valuation model, which relies on certain assumptions to estimate an option's fair value.

The assumptions used in the determination of fair value for stock options granted in first quarter 2025 and 2024 are provided in the table below:
First Quarter
Assumptions20252024
Expected volatility rate30.61%30.21%
Expected dividend yield3.32%3.82%
Average risk-free interest rate4.42%4.34%
Expected term years6.86.7

The grant date exercise price and fair value of options granted during first quarter 2025 were $100.56 and $26.99, respectively, and first quarter 2024 were $86.15 and $21.16, respectively.

For options unvested at March 31, 2025, $3 million in compensation expense will be recognized over the next three years.

Other Share-Based Compensation Awards

In addition to stock option grants, the Company may award long-term performance shares, restricted stock and restricted stock units, and stock appreciation rights. Long-term performance share awards are based upon actual return on capital compared to a target return on capital and total stockholder return compared to a peer group ranking by total stockholder return over a three year performance period and pay out in unrestricted shares of common stock. Performance share awards vest and are paid out at the end of the three year performance period, contingent upon the achievement of specified performance conditions. The awards are valued using a Monte Carlo Simulation model and are recognized as compensation expense ratably over the service period. In first quarter 2025, approximately 332 thousand long-term performance share target awards were granted for the 2025–2027 performance period, and in first quarter 2024, approximately 339 thousand were granted for the 2024–2026 performance period. The target shares awarded are initially assumed to be 100 percent. At the end of the three-year performance period, the actual number of shares awarded can range from zero to 250 percent of the target shares based on the award notice. The number of restricted stock unit awards, which pay out in unrestricted shares of common stock at the end of the vesting and performance (if any) period, during first quarter 2025 and 2024 were approximately 176 thousand and 181 thousand, respectively. The fair value of a restricted stock unit award is equal to the closing stock price of the Company's stock on the award date and normally vests over a period of three years. Compensation expense before tax of $14 million was recognized in both first quarter 2025 and 2024 for these other share-based awards, and this amount was included in the total compensation expense noted above for all share-based awards. The unrecognized compensation expense before tax for these same type awards at March 31, 2025, was approximately $117 million and will be recognized primarily over a period of three years.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 2024 Annual Report on Form 10-K.

13.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. This operating segment structure is used by the Chief Operating Decision Maker ("CODM"), who has been determined to be the Chief Executive Officer, to make key operating decisions and assess performance of the Company. The CODM evaluates segment operating performance, and makes resource allocation and performance evaluation decisions, based on Adjusted EBIT, defined as the GAAP measure earnings before interest and taxes ("EBIT"), adjusted for non-core, unusual, or non-recurring items. These adjustments allow the CODM to evaluate segment operating performance 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. 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 2024 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 2024 Annual Report on Form 10-K.
First Quarter 2025
(Dollars in millions)Advanced MaterialsAdditives & Functional ProductsChemical IntermediatesFibersTotal Operating Segments
Sales$719 $733 $545 $288 $2,285 
Cost of sales511 526 492 176 1,705 
Selling, general and administrative expenses69 51 28 19 167 
Other segment items (1)
23 15 6 5 49 
Adjusted EBIT
116 141 19 88 364 
Reconciliation of segment Adjusted EBIT to consolidated earnings before income taxes ("EBT"):
Other adjusted EBIT (2)
(53)
Non-core items impacting EBIT
Asset impairments, restructuring, and other charges, net (3)
(9)
Net interest expense(49)
Consolidated EBT$253 
First Quarter 2025
Advanced MaterialsAdditives & Functional ProductsChemical IntermediatesFibers
Total Operating Segments
Other
Total Consolidated
Depreciation and amortization expense$50 $35 $24 $16 $125 $1 $126 
Capital expenditures97 15 19 8 139 8 147 
(1)Other segment items for each reportable segment includes research and development expenses, other components of post-employment (benefit) cost, net and other (income) charges, net.
(2)Other is not considered an operating segment. Other includes the following which are not allocated to operating segments: 1) sales and costs from growth initiatives and businesses, 2) pension and other postretirement benefit plans income (expense), net, and 3) other income (charges), net.
(3)See Note 11, "Asset Impairments, Restructuring, and Other Charges, Net", for a description of included items.
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
First Quarter 2024
(Dollars in millions)Advanced MaterialsAdditives & Functional ProductsChemical IntermediatesFibersTotal Operating Segments
Sales$748 $704 $523 $331 $2,306 
Cost of sales546 527 470 190 1,733 
Selling, general and administrative expenses77 53 31 20 181 
Other segment items (1)
21 15 6 4 46 
Adjusted EBIT104 109 16 117 346 
Reconciliation of segment Adjusted EBIT to consolidated EBT:
Other adjusted EBIT (2)
(72)
Non-core items impacting EBIT
Asset impairments, restructuring, and other charges, net (3)
(11)
Net interest expense(49)
Consolidated EBT$214 
First Quarter 2024
Advanced MaterialsAdditives & Functional ProductsChemical IntermediatesFibersTotal Operating SegmentsOtherTotal Consolidated
Depreciation and amortization expense$49 $36 $25 $16 $126 $1 $127 
Capital expenditures150 11 11 6 178 7 185 
(1)Other segment items for each reportable segment includes research and development expenses, other components of post-employment (benefit) cost, net and other (income) charges, net.
(2)Other is not considered an operating segment. Other includes the following which are not allocated to operating segments: 1) sales and costs from growth initiatives and businesses, 2) pension and other postretirement benefit plans income (expense), net, and 3) other income (charges), net.
(3)See Note 11, "Asset Impairments, Restructuring, and Other Charges, Net", for a description of included items.

(Dollars in millions)First Quarter
Sales by Segment20252024
Advanced Materials$719 $748 
Additives & Functional Products733 704 
Chemical Intermediates545 523 
Fibers288 331 
Total Sales by Operating Segment2,285 2,306 
Other5 4 
Total Sales$2,290 $2,310 

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31,December 31, 2024
(Dollars in millions)2025
Assets by Segment (1)
Advanced Materials$5,875 $5,735 
Additives & Functional Products
4,660 4,608 
Chemical Intermediates
1,625 1,586 
Fibers1,076 1,075 
Total Assets by Operating Segment13,236 13,004 
Corporate Assets1,735 2,209 
Total Assets$14,971 $15,213 
(1)Segment assets include accounts receivable, inventory, fixed assets, goodwill, and intangible assets.


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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 2024 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.

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.

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


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.

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 Items Excluded from Earnings and Adjustments to Provision for Income Taxes
 First Quarter
(Dollars in millions)20252024
Non-core items impacting earnings before interest and taxes:
Asset impairments, restructuring, and other charges, net
$9 $11 
Total non-core items impacting earnings before interest and taxes
9 11 
Less: Items impacting provision for income taxes:
Tax effect of non-core items
1 3 
Interim adjustment to tax provision(32)(17)
Total items impacting provision for income taxes(31)(14)
Total items impacting net earnings attributable to Eastman$40 $25 

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

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

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

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, scale advantage, and sustainability macrotrends form the foundation of the Company's research and development ("R&D") and innovation initiatives. 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. Eastman began operating one of the world's largest molecular recycling facilities in 2024. 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 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 items were as follows:
 First Quarter
(Dollars in millions)20252024
Sales$2,290 $2,310 
Earnings before interest and taxes302 263 
Earnings before interest and taxes excluding non-core items
311 274 

Sales revenue decreased in first quarter 2025 compared to first quarter 2024 as lower sales volume and an unfavorable shift in foreign currency exchange rates were partially offset by higher selling prices.

EBIT excluding non-core items increased in first quarter 2025 compared to first quarter 2024 primarily due to the absence of start-up costs at the Kingsport methanolysis facility, as well as higher selling prices and lower distribution costs, net of higher raw material and energy costs. These net positive impacts were partially offset by lower sales volume in the Fibers segment and an unfavorable shift in foreign currency exchange rates.

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

Net earnings and EPS and adjusted net earnings and EPS were as follows:
First Quarter
20252024
(Dollars in millions, except EPS)$EPS$EPS
Net earnings attributable to Eastman$182 $1.57 $165 $1.39 
Total non-core items, net of tax
8 0.06 8 0.07 
Interim adjustment to tax provision32 0.28 17 0.15 
Adjusted net earnings$222 $1.91 $190 $1.61 
Cash used in operating activities was $167 million in first three months 2025 and $16 million in first three months 2024.

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

RESULTS OF OPERATIONS

Sales
First Quarter
Change
(Dollars in millions)20252024 $%
Sales$2,290 $2,310 $(20)(1)%
Volume / product mix effect(23)(1)%
Price effect27 1 %
Exchange rate effect(24)(1)%

Sales revenue decreased in first quarter 2025 compared to first quarter 2024 primarily as a result of decreases in the Fibers and AM segments partially offset by increases in the AFP and CI segments. Further discussion by operating segment is presented in "Summary by Operating Segment" in this MD&A.

Gross Profit
 First Quarter
(Dollars in millions)20252024Change
Gross profit$567 $532 7 %

Gross profit increased in first quarter 2025 compared to first quarter 2024 due to increases in all segments except Fibers. Further discussion of sales revenue and EBIT changes is presented in "Summary by Operating Segment" in this MD&A.

Selling, General and Administrative Expenses
 First Quarter
(Dollars in millions)20252024Change
Selling, general and administrative expenses$182 $191 (5)%

Selling, general and administrative ("SG&A") expenses decreased in first quarter 2025 compared to first quarter 2024 primarily due to lower deferred compensation expenses.

Research and Development Expenses
 First Quarter
(Dollars in millions)20252024Change
Research and development expenses$67 $59 14 %

R&D expenses increased in first quarter 2025 compared to first quarter 2024 primarily due to strategic investment in innovation.

Asset Impairments, Restructuring, and Other Charges, Net

(Dollars in millions)First Quarter
20252024
Severance charges
$1 $11 
Restructuring and other charges
8 — 
Total$9 $11 

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

For detailed information regarding asset impairments, restructuring, and other charges, net see Note 11, "Asset Impairments, Restructuring, and Other Charges, Net", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

Other Components of Post-employment (Benefit) Cost, Net
 First Quarter
(Dollars in millions)20252024
Other components of post-employment (benefit) cost, net$(1)$(5)

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
 First Quarter
(Dollars in millions)20252024
Foreign exchange transaction losses, net
$— $5 
(Income) loss from equity investments and other investment (gains) losses, net1 — 
Other, net7 8 
Other (income) charges, net$8 $13 

Other (income) charges, net decreased in first quarter 2025 compared to first quarter 2024 primarily due to the absence of losses on foreign exchange transactions in first quarter 2025. 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
 First Quarter
(Dollars in millions)20252024Change
Earnings before interest and taxes$302 $263 15 %
Asset impairments, restructuring, and other charges, net
9 11 
Earnings before interest and taxes excluding non-core items
$311 $274 14 %

Net Interest Expense
 First Quarter
(Dollars in millions)20252024Change
Gross interest costs$58 $58 — %
Less: Capitalized interest5 5 
Interest expense53 53 
Less: Interest income4 4  
Net interest expense$49 $49 — %

Net interest expense remained unchanged in first quarter 2025 compared to first quarter 2024.

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

Provision for Income Taxes
First Quarter
20252024
(Dollars in millions)$%$%
Provision for income taxes and effective tax rate
$70 28 %$49 23 %
Tax provision for non-core items (1)
1 3 
Interim adjustment to tax provision (2)
(32)(17)
Adjusted provision for income taxes and effective tax rate$39 16 %$35 16 %
(1)Provision for income taxes for non-core items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
(2)First quarter 2025 provision for income taxes was adjusted to reflect the current forecasted full year effective tax rate. First quarter 2024 provision for income taxes was adjusted to reflect the then current forecasted full year effective tax rate.

First Three Months (1)
20252024
Effective tax rate28 %23 %
Discrete tax items (2)
(2)%(1)%
Tax impact of current year non-core items (3)
1 %1 %
Changes in tax contingencies and valuation allowances(2)%(1)%
Forecasted full year impact of expected tax events (4)
(9)%(6)%
Forecasted full year adjusted effective tax rate16 %16 %
(1)Effective tax rate percentages are rounded to the nearest whole percent. The forecasted full year effective tax rates are 15.5 percent in both first three months 2025 and 2024, respectively.
(2)"Discrete tax items" are items that are excluded from the Company's estimated annual effective tax rate and recognized entirely in the quarter in which the item occurs. Discrete tax items for first three months 2025 are related to share based compensation expense and adjustments to certain prior year tax returns and first three months 2024 are related to share based compensation expense.
(3)Provision for income taxes for non-core items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
(4)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.

Net Earnings Attributable to Eastman and Diluted Earnings per Share
First Quarter
20252024
(Dollars in millions, except EPS)$EPS$EPS
Net earnings and diluted earnings per share attributable to Eastman$182 $1.57 $165 $1.39 
Non-core items, net of tax: (1)
Asset impairments, restructuring, and other charges, net
8 0.06 8 0.07 
Interim adjustment to tax provision32 0.28 17 0.15 
Adjusted net earnings and diluted earnings per share attributable to Eastman$222 $1.91 $190 $1.61 
(1)Provision for income taxes for non-core 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 2024 Annual Report on Form 10-K.
Advanced Materials Segment
First Quarter
Change
20252024 $%
(Dollars in millions)
Sales$719 $748 $(29)(4)%
Volume / product mix effect(7)(1)%
Price effect(13)(2)%
Exchange rate effect(9)(1)%
Earnings before interest and taxes$116 $104 $12 12 %
Sales revenue decreased in first quarter 2025 compared to first quarter 2024 primarily due to lower selling prices across the segment. Lower sales volume was driven by weakened demand in the automotive and building and construction end-markets, partially offset by growth in the specialty plastics product line.

EBIT increased in first quarter 2025 compared to first quarter 2024 primarily due to $7 million favorable sales volume mix and $8 million lower SG&A expenses, partially offset by a $5 million unfavorable shift in foreign currency rates.
Additives & Functional Products Segment
First Quarter
Change
20252024 $%
(Dollars in millions)
Sales$733 $704 $29 4 %
Volume / product mix effect15 2 %
Price effect24 3 %
Exchange rate effect(10)(1)%
Earnings before interest and taxes$137 $109 $28 26 %
Asset impairments, restructuring, and other charges, net4 — 4 
Earnings before interest and taxes excluding non-core item141 109 32 29 %

Sales revenue increased in first quarter 2025 compared to first quarter 2024 primarily due to higher selling prices, driven by cost pass-through contracts, and higher sales volume, primarily in the coatings additives and specialty fluids product lines.

EBIT in first quarter 2025 included asset impairments, restructuring, and other charges, net of $4 million related to the closure of a heat-transfer fluids production line at a specialty fluids and energy facility in North America. For more information see Note 11, "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

Excluding this non-core item, EBIT increased in first quarter 2025 compared to first quarter 2024 primarily due to $13 million higher selling prices, net of higher raw material and energy costs, $11 million higher sales volume, and $5 million improved asset utilization.
Chemical Intermediates Segment
First Quarter
Change
20252024 $%
(Dollars in millions)
Sales$545 $523 $22 4 %
Volume / product mix effect8 2 %
Price effect18 3 %
Exchange rate effect(4)(1)%
Earnings before interest and taxes$19 $16 $3 19 %
Sales revenue increased in first quarter 2025 compared to first quarter 2024 due to higher selling prices and higher sales volume, partially offset by an unfavorable shift in foreign currency rates. Higher selling prices and higher sales volume were primarily due to more favorable market conditions in some olefins-based products.

EBIT increased in first quarter 2025 compared to first quarter 2024 primarily due to $15 million higher selling prices and lower distribution costs, net of higher raw material and energy costs, partially offset by $8 million unfavorable product mix and $3 million higher manufacturing costs.

Fibers Segment
First Quarter
Change
20252024 $%
(Dollars in millions)
Sales$288 $331 $(43)(13)%
Volume / product mix effect(40)(12)%
Price effect(2)(1)%
Exchange rate effect(1)— %
Earnings before interest and taxes$88 $117 $(29)(25)%
Sales revenue decreased in first quarter 2025 compared to first quarter 2024 primarily due to lower sales volume attributed to continued customer inventory destocking in the acetate tow product line and the impact of a discontinued product.

EBIT decreased in first quarter 2025 compared to first quarter 2024 primarily due to $25 million lower sales volume.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Other
First Quarter
20252024
(Dollars in millions)
Sales$5 $4 
Loss before interest and taxes
Growth initiatives and businesses not allocated to operating segments$(51)$(68)
Pension and other postretirement benefits income (expense), net not allocated to operating segments1 2 
Asset impairments, restructuring, and other charges, net(5)(11)
Other income (charges), net not allocated to operating segments(3)(6)
Loss before interest and taxes$(58)$(83)
Asset impairments, restructuring, and other charges, net5 11 
Loss before interest and taxes excluding non-core items
(53)(72)
Sales and costs related to growth initiatives, including the cellulosics biopolymer and circular economy platforms, 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 included pre-production costs for the Kingsport methanolysis facility.

EBIT in first quarter 2025 included profitability improvement initiatives. First quarter 2024 included severance primarily in accordance with foreign regulatory requirements as a result of cost reduction initiatives in fourth quarter 2023. 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 11, "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
 First Quarter
Change
(Dollars in millions)20252024$%
United States and Canada$1,020 $969 $51 5 %
Europe, Middle East, and Africa610 659 (49)(7)%
Asia Pacific539 564 (25)(4)%
Latin America121 118 3 3 %
Total Eastman
$2,290 $2,310 $(20)(1)%

Sales revenue decreased 1 percent in first quarter 2025 compared to first quarter 2024. Lower sales revenue in Europe, Middle East, and Africa was across all segments except the AFP segment, and lower sales revenue in Asia Pacific was primarily in the Fibers segment. Higher sales revenue in United States and Canada was primarily in the CI 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

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 Three Months
(Dollars in millions)20252024
Net cash provided by (used in)
Operating activities$(167)$(16)
Investing activities(131)(179)
Financing activities(124)148 
Effect of exchange rate changes on cash and cash equivalents3 (2)
Net change in cash and cash equivalents(419)(49)
Cash and cash equivalents at beginning of period837 548 
Cash and cash equivalents at end of period$418 $499 
 
Cash used in operating activities increased $151 million in first three months 2025 compared to first three months 2024 primarily due to higher working capital and higher variable compensation payout.

Cash used in investing activities decreased $48 million in first three months 2025 compared to first three months 2024 primarily due to lower capital expenditures and higher government incentives, both primarily for the AM segment methanolysis plastic-to-plastic molecular recycling manufacturing facilities.

Cash used in financing activities was $124 million in first three months 2025 compared to cash provided by financing activities of $148 million first three months 2024 primarily due to lower net borrowings. 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 engages in off-balance sheet, uncommitted accounts receivable factoring programs as a routine part of its ordinary business operations. Through these programs, entire invoices may be sold to third-party financial institutions, the vast majority of which are without recourse. Under these agreements, 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. The total amounts sold in first quarter 2025 and 2024 were $676 million and $698 million, 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 $401 million and $385 million of these receivables would have been outstanding as of March 31, 2025 and December 31, 2024, respectively, had they not been sold under these factoring programs.

Eastman works with suppliers to optimize payment terms and conditions on accounts payable to enhance timing of working
capital and cash flows. The Company has a voluntary supplier finance program to provide suppliers with the opportunity to sell receivables due from Eastman to a participating financial institution. 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 March 31, 2025, the Company's borrowings totaled $5.0 billion with various maturities. In first quarter 2025, the Company issued an additional $250 million aggregate principal amount of the 5.0% notes due August 2029 in a registered public offering (the "2029 Notes"), which was originally issued in August 2024, resulting in an aggregate principal amount of $750 million. The net proceeds from first quarter 2025 issuance was $246 million. The Company also repaid the $450 million 3.80% notes due March 2025. There were no debt extinguishment costs associated with the repayment of this debt.

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

See "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 2024 Annual Report on Form 10-K for information on other commitments.

Credit Facility, Term Loans, and Commercial Paper Borrowings

The Company has access to a $1.50 billion revolving credit agreement (the "Credit Facility") that matures in February 2029. 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 March 31, 2025 and December 31, 2024, the Company had no outstanding borrowings under the Credit Facility. The Company's commercial paper borrowings were $285 million at March 31, 2025 with a weighted interest rate of 4.61%. The Company had no commercial paper borrowings at December 31, 2024.

In first quarter 2025, the Company repaid $100 million of the remaining $250 million five-year term loan (the "2027 Term Loan"). There were no extinguishment costs associated with the partial repayment of the loan. The outstanding balance on the 2027 Term Loan was $150 million at March 31, 2025 and $250 million at December 31, 2024, with variable interest rates of 5.55% and 5.58%, respectively. The 2027 Term Loan is subject to interest at a spread 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 March 31, 2025 and December 31, 2024. The total amount of available borrowings under the Credit Facility was $1.5 billion as of March 31, 2025.

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

Net Debt
 March 31,December 31,
(Dollars in millions)20252024
Total borrowings$5,021 $5,017 
Less: Cash and cash equivalents418 837 
Net debt (1)
$4,603 $4,180 
(1)Includes non-cash increase of $21 million in 2025 and non-cash decrease of $32 million in 2024 resulting from foreign currency exchange rates.

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

Capital Expenditures

Capital expenditures were $147 million and $185 million in first three months 2025 and 2024, respectively. Capital expenditures in first three months 2025 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 2025 capital expenditures will be approximately $550 million, primarily for targeted growth initiatives, including the AM segment methanolysis plastic-to-plastic molecular recycling manufacturing facilities, and site modernization projects.

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"). No shares of common stock were repurchased during first quarter 2025. As of March 31, 2025, a total of 11,612,158 shares have been repurchased under the 2021 authorization for $1.1 billion. 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 2024 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 2024 Annual Report on Form 10-K.

There have been no material changes to the Company's market risks from those disclosed in Part II, Item 7A of the Company's 2024 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 March 31, 2025, 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 first quarter 2025 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 2024 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 March 31, 2025, a total of 11,612,158 shares have been repurchased under the 2021 authorization for $1.1 billion. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders. No shares of common stock were repurchased during first quarter 2025. For additional information, see Note 9, "Stockholders' Equity", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

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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.

No Rule 10b5-1 trading arrangements or "non-Rule 10b5-1 trading arrangements" (as defined by Regulation S-K Item 408(c)) were entered into, modified, or terminated by the Company's directors or officers during the quarterly period covered by this Report.

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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
10.01 *
10.02 *
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.
**     Management contract or compensatory plan or arrangement filed pursuant to Item 601(b) (10) (iii) of Regulation S-K.

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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:April 25, 2025By:/s/ William T. McLain, Jr.
William T. McLain, Jr.
Executive Vice President and Chief Financial Officer

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