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Eastman Chemical Company Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 3, 2011 02:19PM
Eastman Chemical Company (EMN) filed Quarterly Report for the period ended 2011-03-31.
Highlight of Business Operations:
In first quarter 2010, the Company adopted amended accounting guidance for transfers of financial assets which impacts the financial statement presentation for activity under the Company's $200 million accounts receivable securitization program. For periods beginning after December 31, 2009, transfers of receivables interests that were previously treated as sold and removed from the balance sheet will be included in trade receivables, net and reflected as secured borrowings on the balance sheet. The Company's Statement of Financial Position at December 31, 2010 reflects an increase in trade receivable of $200 million, the amount transferred at December 31, 2009 under the securitization program, which reduced cash flows from operating activities by that amount for first quarter 2010.
The Company generated sales revenue of $1.8 billion and $1.4 billion in first quarter 2011 and 2010, respectively, due to higher sales volume and higher selling prices. The higher sales volume was attributed to strengthened end-use demand primarily in the packaging, transportation, and other markets, the positive impact of growth initiatives, and the restart of a previously idled cracking unit at the Longview, Texas facility. The growth initiatives included increased utilization of the Korean acetate tow manufacturing facility and the Eastman TritanTM copolyester resin manufacturing facility, and the acquisition of the Genovique Specialties Corporation ("Genovique") plasticizer product lines. The higher selling prices were in response to higher raw material and energy costs and were also attributed to strengthened demand, particularly in the U.S., and tight industry supply.
Operating earnings were $284 million in first quarter 2011 compared with $189 million in first quarter 2010. The increase was due to higher selling prices and higher sales volume more than offsetting higher raw material and energy costs. In first quarter 2010, operating earnings included $12 million from acetyl license revenue and a negative impact of approximately $20 million from the outage at the Longview, Texas manufacturing facility, primarily reflected in the Performance Chemicals and Intermediates ("PCI") and Coatings, Adhesives, Specialty Polymers, and Inks ("CASPI") segments.
The Company used $146 million in cash from operating activities during first three months 2011, including a $100 million contribution to the U.S. defined benefit pension plan. Working capital increased by $270 million due to increased sales revenue. The Company used $225 million in cash from operating activities during the first three months of 2010 including a $200 million increase in working capital resulting from the adoption of amended accounting guidance for transfers of financial assets which impacted the financial statement presentation for activity under the Company s accounts receivable securitization program.
On January 31, 2011, the Company completed the sale of the PET business, related assets at the Columbia, South Carolina site, and technology of its Performance Polymers segment for $615 million, subject to post-closing adjustments for working capital, and recognized a gain of approximately $30 million, net of tax. The Company contracted with the buyer for transition services to supply certain raw materials and services for a period of less than one year. The PET business, assets, and technology sold were substantially all of the Performance Polymers segment and therefore the segment operating results are presented as discontinued operations for all periods presented and are not included in results from continuing operations. The assets and liabilities of this business were reclassified as assets held for sale as of December 31, 2010. The sale is not expected to impact product lines in the Specialty Plastics segment.
Gross profit in first quarter 2011 increased compared to first quarter 2010 in all segments. The increase was due to higher selling prices and higher sales volume more than offsetting higher raw material and energy costs. First quarter 2010 gross profit included $12 million from acetyl license revenue and a negative impact of approximately $20 million from the outage at the Texas manufacturing facility, primarily reflected in the PCI and CASPI segments.
Stocks Discussed: EMN,