Eastman Chemical Company
07/31/2026 | Press release | Distributed by Public on 07/31/2026 09:11
Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Non-GAAP Financial Measures
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30
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Overview
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32
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Results of Operations
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33
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Summary by Operating Segment
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38
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Sales by Customer Location
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41
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Liquidity and Other Financial Information
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42
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Critical Accounting Estimates
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44
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Recently Issued Accounting Standards
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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 2025 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.
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, unusual, or non-recurring items include transactions, costs, and losses or gains relating to, among other things, cost reduction initiatives, 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, non-operational sites and product lines, and discontinued programs; mark-to-market losses or gains for pension and other postretirement benefit plans; the impact from significant tax law changes; and unusual or non-recurring income tax reserves or adjustments.
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.
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:
•Cost of sales impact from restructuring activities,
•Asset impairments, restructuring, and other charges, net, and
•Environmental and other costs from previously divested or non-operational sites and product lines, which included associated gains and losses.
The following unusual item is excluded by management in its evaluation of certain earnings results in this Quarterly Report:
•Income tax related item resulting from enactment of the One Big Beautiful Bill Act ("OBBBA").
As described above, the alternative non-GAAP measure of debt, "net debt", is also presented in this Quarterly Report.
Non-GAAP Financial Measures - Non-Core and Unusual Items Excluded from Earnings and Adjustments to Provision for Income Taxes
| Second Quarter | First Six Months | ||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Non-core items impacting earnings before interest and taxes: | |||||||||||||||||||||||
| Cost of sales impact from restructuring activities | $ | - | $ | - | $ | 3 | $ | - | |||||||||||||||
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Asset impairments, restructuring, and other charges, net
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1 | 13 | 10 | 22 | |||||||||||||||||||
| Environmental and other costs | 8 | 40 | 8 | 40 | |||||||||||||||||||
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Total non-core items impacting earnings before interest and taxes
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9 | 53 | 21 | 62 | |||||||||||||||||||
| Less: Items impacting provision for income taxes: | |||||||||||||||||||||||
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Tax effect of non-core items
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(1) | 14 | 3 | 15 | |||||||||||||||||||
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Income tax related item
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(8) | - | (13) | - | |||||||||||||||||||
| Interim adjustment to tax provision | (26) | (7) | (31) | (39) | |||||||||||||||||||
| Total items impacting provision for income taxes | (35) | 7 | (41) | (24) | |||||||||||||||||||
| Total items impacting net earnings attributable to Eastman | $ | 44 | $ | 46 | $ | 62 | $ | 86 | |||||||||||||||
This MD&A includes an analysis of the effect of the foregoing on the following GAAP financial measures:
•Gross profit;
•Other income (charges), net;
•Earnings before interest and taxes ("EBIT");
•Provision for income taxes;
•Net earnings attributable to Eastman;
•Diluted EPS; and
•Total borrowings.
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 extend the level of differentiation afforded by our world class technology platforms. Eastman began operating the world's largest polyester molecular recycling facility 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 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:
| Second Quarter | First Six Months | ||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Sales | $ | 2,513 | $ | 2,287 | $ | 4,690 | $ | 4,577 | |||||||||||||||
| Earnings before interest and taxes | 311 | 222 | 499 | 524 | |||||||||||||||||||
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Earnings before interest and taxes excluding non-core items
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320 | 275 | 520 | 586 | |||||||||||||||||||
Sales revenue increased in second quarter 2026 compared to second quarter 2025 primarily due to higher sales volume mix and higher selling prices. Higher sales volume mix in the AM and CI segments was partially offset by lower sales volume mix in the Fibers segment. Higher selling prices in the CI segment were primarily driven by tightening market conditions from the ongoing Middle East conflict. Higher selling prices in specialty businesses offset higher raw material and distribution costs.
Sales revenue increased in first six months 2026 compared to first six months 2025 primarily due to a favorable foreign currency exchange impact.
EBIT excluding non-core items increased in second quarter 2026 compared to second quarter 2025 primarily due to higher selling prices, net of slightly higher raw material and energy costs and the benefit of continued cost reduction initiatives. These impacts were partially offset by higher selling general and administration ("SG&A") and planned maintenance expenses.
EBIT excluding non-core items decreased in first six months 2026 compared to first six months 2025 primarily due to lower sales volume mix, lower selling prices, higher raw material and energy costs, and higher SG&A expenses. These impacts were partially offset by the impact of cost reduction initiatives and a favorable foreign currency exchange impact primarily in the AM and AFP segments.
Further discussion of sales revenue and EBIT changes is presented in "Results of Operations" and "Summary by Operating Segment" in this MD&A.
CONDITION AND RESULTS OF OPERATIONS
Net earnings and EPS and adjusted net earnings and EPS were as follows:
| Second Quarter | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (Dollars in millions, except EPS) | $ | EPS | $ | EPS | |||||||||||||||||||
| Net earnings attributable to Eastman | $ | 183 | $ | 1.59 | $ | 140 | $ | 1.20 | |||||||||||||||
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Total non-core and unusual items, net of tax
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18 | 0.16 | 39 | 0.34 | |||||||||||||||||||
| Interim adjustment to tax provision | 26 | 0.22 | 7 | 0.06 | |||||||||||||||||||
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Adjusted net earnings attributable to Eastman
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$ | 227 | $ | 1.97 | $ | 186 | $ | 1.60 | |||||||||||||||
| First Six Months | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (Dollars in millions, except EPS) |
$
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EPS |
$
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EPS | |||||||||||||||||||
| Net earnings attributable to Eastman | $ | 290 | $ | 2.51 | $ | 322 | $ | 2.77 | |||||||||||||||
| Total non-core and unusual items, net of tax | 31 | 0.27 | 47 | 0.40 | |||||||||||||||||||
| Interim adjustment to tax provision | 31 | 0.28 | 39 | 0.34 | |||||||||||||||||||
| Adjusted net earnings | $ | 352 | $ | 3.06 | $ | 408 | $ | 3.51 | |||||||||||||||
Cash provided by operating activities was $87 million in first six months 2026 compared to $66 million in first six months 2025.
RESULTS OF OPERATIONS
Sales
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||||||||||||||
| Change | Change | ||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | |||||||||||||||||||||||||||||||||||||||
| Sales | $ | 2,513 | $ | 2,287 | $ | 226 | 10 | % | $ | 4,690 | $ | 4,577 | $ | 113 | 2 | % | |||||||||||||||||||||||||||||||
| Volume / product mix effect | 111 | 5 | % | 27 | - | % | |||||||||||||||||||||||||||||||||||||||||
| Price effect | 87 | 4 | % | 5 | - | % | |||||||||||||||||||||||||||||||||||||||||
| Exchange rate effect | 28 | 1 | % | 81 | 2 | % | |||||||||||||||||||||||||||||||||||||||||
Sales revenue increased in second quarter and first six months 2026 compared to second quarter and first six months 2025 due to increases in all segments except the Fibers segment. Further discussion by operating segments is presented in "Summary by Operating Segment" in this MD&A.
Gross Profit
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | Change | 2026 | 2025 | Change | |||||||||||||||||||||||||||||
| Gross profit | $ | 560 | $ | 506 | 11 | % | $ | 991 | $ | 1,073 | (8) | % | |||||||||||||||||||||||
| Cost of sales impact from restructuring activities | - | - | 3 | - | |||||||||||||||||||||||||||||||
| Gross profit excluding non-core item | $ | 560 | $ | 506 | 11 | % | $ | 994 | $ | 1,073 | (7) | % | |||||||||||||||||||||||
Gross profit increased in second quarter 2026 compared to second quarter 2025 due to increases in the CI and AFP segments partially offset by decreases in the Fibers and AM segments. Gross profit in first six months 2026 included inventory adjustments related to the closure of a production line at a German performance films facility in the AM segment. Excluding this non-core item, gross profit decreased in first six months 2026 compared to first six months 2025 due to decreases in all segments except the CI segment. Further discussion of sales revenue and EBIT changes is presented in "Summary by Operating Segment" in this MD&A.
CONDITION AND RESULTS OF OPERATIONS
Selling, General and Administrative Expenses
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | Change | 2026 | 2025 | Change | |||||||||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 185 | $ | 157 | 18 | % | $ | 363 | $ | 339 | 7 | % | |||||||||||||||||||||||
Selling, general and administrative expenses increased in second quarter and first six months 2026 compared to second quarter and first six months 2025 primarily due to higher variable compensation costs partially offset by cost reduction initiatives.
Research and Development Expenses
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | Change | 2026 | 2025 | Change | |||||||||||||||||||||||||||||
| Research and development expenses | $ | 65 | $ | 67 | (3) | % | $ | 125 | $ | 134 | (7) | % | |||||||||||||||||||||||
Research and development expenses decreased in second quarter and first six months 2026 compared to second quarter and first six months 2025 primarily due to targeted reductions in R&D projects.
Asset Impairments, Restructuring, and Other Charges, Net
| Second Quarter | First Six Months | ||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
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Severance charges
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$ | 1 | $ | 10 | $ | 7 | $ | 11 | |||||||||||||||
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Restructuring and other charges
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- | 3 | 3 | 11 | |||||||||||||||||||
| Total | $ | 1 | $ | 13 | $ | 10 | $ | 22 | |||||||||||||||
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
| Second Quarter | First Six Months | ||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Other components of post-employment (benefit) cost, net | $ | (16) | $ | (2) | $ | (33) | $ | (3) | |||||||||||||||
Other components of post-employment (benefit) cost, net were more favorable in second quarter and first six months 2026 compared to second quarter and first six months 2025 due to a prior service credit related to the Company's 2025 other postretirement benefit plan amendment. 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.
CONDITION AND RESULTS OF OPERATIONS
Other (Income) Charges, Net
| Second Quarter | First Six Months | ||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
|
Foreign exchange transaction losses, net
|
$ | - | $ | 4 | $ | 1 | $ | 4 | |||||||||||||||
| (Income) loss from equity investments and other investment (gains) losses, net | 1 | 1 | 1 | 2 | |||||||||||||||||||
| Environmental and other costs | 8 | 40 | 8 | 40 | |||||||||||||||||||
| Other, net | 5 | 4 | 17 | 11 | |||||||||||||||||||
| Other (income) charges, net | $ | 14 | $ | 49 | $ | 27 | $ | 57 | |||||||||||||||
| Environmental and other costs | (8) | (40) | (8) | (40) | |||||||||||||||||||
| Other (income) charges, net excluding non-core items | $ | 6 | $ | 9 | $ | 19 | $ | 17 | |||||||||||||||
Other (income) charges, net in second quarter and first six months 2026 and 2025 included environmental and other costs related to previously divested businesses or non-operational sites and product lines, and in second quarter and first six months 2026 also included associated gains and losses. Excluding these non-core items, Other (income) charges, net decreased in second quarter 2026 compared to second quarter 2025 primarily due to lower foreign exchange transaction losses, and increased in first six months 2026 compared to first six months 2025 primarily due to an increase of indirect taxes. 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
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | Change | 2026 | 2025 | Change | |||||||||||||||||||||||||||||
| Earnings before interest and taxes | $ | 311 | $ | 222 | 40 | % | $ | 499 | $ | 524 | (5) | % | |||||||||||||||||||||||
| Cost of sales impact from restructuring activities | - | - | 3 | - | |||||||||||||||||||||||||||||||
|
Asset impairments, restructuring, and other charges, net
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1 | 13 | 10 | 22 | |||||||||||||||||||||||||||||||
| Environmental and other costs | 8 | 40 | 8 | 40 | |||||||||||||||||||||||||||||||
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Earnings before interest and taxes excluding non-core items
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$ | 320 | $ | 275 | 16 | % | $ | 520 | $ | 586 | (11) | % | |||||||||||||||||||||||
Net Interest Expense
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | Change | 2026 | 2025 | Change | |||||||||||||||||||||||||||||
| Gross interest costs | $ | 60 | $ | 59 | 2 | % | $ | 117 | $ | 117 | - | % | |||||||||||||||||||||||
| Less: Capitalized interest | 3 | 3 | 6 | 8 | |||||||||||||||||||||||||||||||
| Interest expense | 57 | 56 | 111 | 109 | |||||||||||||||||||||||||||||||
| Less: Interest income | 2 | 3 | 4 | 7 | |||||||||||||||||||||||||||||||
| Net interest expense | $ | 55 | $ | 53 | 4 | % | $ | 107 | $ | 102 | 5 | % | |||||||||||||||||||||||
Net interest expense increased in second quarter and first six months 2026 compared to second quarter and first six months 2025 primarily due to lower interest income.
CONDITION AND RESULTS OF OPERATIONS
Provision for Income Taxes
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||||
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Provision for income taxes and effective tax rate
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$ | 72 | 28 | % | $ | 29 | 17 | % | $ | 101 | 26 | % | $ | 99 | 23 | % | |||||||||||||||||||||||||||||||
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Tax provision for non-core items (1)
|
(1) | 14 | 3 | 15 | |||||||||||||||||||||||||||||||||||||||||||
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Income tax related item (2)
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(8) | - | (13) | - | |||||||||||||||||||||||||||||||||||||||||||
|
Interim adjustment to tax provision (3)
|
(26) | (7) | (31) | (39) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted provision for income taxes and effective tax rate | $ | 37 | 15 | % | $ | 36 | 16 | % | $ | 60 | 15 | % | $ | 75 | 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)Resulting from the enactment of OBBBA.
(3)Second quarter 2026 provision for income taxes was adjusted to reflect the current forecasted full year effective tax rate. Second quarter 2025 provision for income taxes was adjusted to reflect the then current forecasted full year effective tax rate.
|
First Six Months (1)
|
|||||||||||
| 2026 | 2025 | ||||||||||
| Effective tax rate | 26 | % | 23 | % | |||||||
|
Discrete tax items (2)
|
(1) | % | (1) | % | |||||||
|
Tax impact of current year non-core items (3)
|
(2) | % | 4 | % | |||||||
| Changes in tax contingencies and valuation allowances | - | % | (2) | % | |||||||
|
Forecasted full year impact of expected tax events (4)
|
(8) | % | (8) | % | |||||||
| Forecasted full year adjusted effective tax rate | 15 | % | 16 | % | |||||||
(1)Effective tax rate percentages are rounded to the nearest whole percent. The forecasted full year effective tax rates are 14.5 percent and 15.5 percent for first six months 2026 and 2025.
(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 six months 2026 and 2025 are related to share based compensation expense and adjustments to certain prior year tax returns.
(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.
CONDITION AND RESULTS OF OPERATIONS
Net Earnings Attributable to Eastman and Diluted Earnings per Share
| Second Quarter | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (Dollars in millions, except EPS) | $ | EPS | $ | EPS | |||||||||||||||||||
| Net earnings and diluted earnings per share attributable to Eastman | $ | 183 | $ | 1.59 | $ | 140 | $ | 1.20 | |||||||||||||||
|
Non-core items, net of tax: (1)
|
|||||||||||||||||||||||
|
Asset impairments, restructuring, and other charges, net
|
1 | 0.01 | 8 | 0.08 | |||||||||||||||||||
| Environmental and other costs | 9 | 0.08 | 31 | 0.26 | |||||||||||||||||||
| Unusual item: | |||||||||||||||||||||||
| Income tax related item | 8 | 0.07 | - | - | |||||||||||||||||||
| Interim adjustment to tax provision | 26 | 0.22 | 7 | 0.06 | |||||||||||||||||||
| Adjusted net earnings and diluted earnings per share attributable to Eastman | $ | 227 | $ | 1.97 | $ | 186 | $ | 1.60 | |||||||||||||||
| First Six Months | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (Dollars in millions, except EPS) | $ | EPS | $ | EPS | |||||||||||||||||||
| Net earnings and diluted earnings per share attributable to Eastman | $ | 290 | $ | 2.51 | $ | 322 | $ | 2.77 | |||||||||||||||
|
Non-core items, net of tax: (1)
|
|||||||||||||||||||||||
| Cost of sales impact from restructuring activities | 2 | 0.02 | - | - | |||||||||||||||||||
|
Asset impairments, restructuring, and other charges, net
|
7 | 0.06 | 16 | 0.14 | |||||||||||||||||||
| Environmental and other costs | 9 | 0.08 | 31 | 0.26 | |||||||||||||||||||
| Unusual item: | |||||||||||||||||||||||
| Income tax related item | 13 | 0.11 | - | - | |||||||||||||||||||
| Interim adjustment to tax provision | 31 | 0.28 | 39 | 0.34 | |||||||||||||||||||
| Adjusted net earnings and diluted earnings per share attributable to Eastman | $ | 352 | $ | 3.06 | $ | 408 | $ | 3.51 | |||||||||||||||
(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.
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 2025 Annual Report on Form 10-K.
Advanced Materials Segment
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||||||||||||||
| Change | Change | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Sales | $ | 817 | $ | 777 | $ | 40 | 5 | % | $ | 1,532 | $ | 1,496 | $ | 36 | 2 | % | |||||||||||||||||||||||||||||||
| Volume / product mix effect | 28 | 4 | % | 27 | 2 | % | |||||||||||||||||||||||||||||||||||||||||
| Price effect | (1) | - | % | (23) | (2) | % | |||||||||||||||||||||||||||||||||||||||||
| Exchange rate effect | 13 | 1 | % | 32 | 2 | % | |||||||||||||||||||||||||||||||||||||||||
| Earnings before interest and taxes | $ | 109 | $ | 121 | $ | (12) | (10) | % | $ | 169 | $ | 237 | $ | (68) | (29) | % | |||||||||||||||||||||||||||||||
|
Cost of sales impact from restructuring activities
|
- | - | - | 3 | - | 3 | |||||||||||||||||||||||||||||||||||||||||
| Asset impairments, restructuring, and other charges, net | - | - | - | 6 | - | 6 | |||||||||||||||||||||||||||||||||||||||||
|
Earnings before interest and taxes excluding non-core items
|
109 | 121 | (12) | (10) | % | 178 | 237 | (59) | (25) | % | |||||||||||||||||||||||||||||||||||||
Sales revenue increased in second quarter 2026 compared to second quarter 2025 due to higher sales volume mix and a favorable foreign currency exchange impact. Higher sales volume mix was driven by growth across the segment.
Sales revenue increased in first six months 2026 compared to first six months 2025 due to a favorable foreign currency exchange impact and higher sales volume mix partially offset by lower selling prices.
EBIT decreased in second quarter 2026 compared to second quarter 2025 primarily due to $7 million higher sales volume mix and a favorable foreign currency exchange impact being more than offset by higher manufacturing costs, as a result of lower asset utilization, and higher SG&A expenses.
EBIT in first six months 2026 included inventory adjustments and asset impairments, restructuring, and other charges, net related to the closure of a production line at a German performance films facility. 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.
Excluding these non-core items, EBIT decreased in first six months 2026 compared to first six months 2025 due to lower selling prices and higher manufacturing costs, as a result of lower asset utilization, partially offset by a favorable foreign currency exchange impact.
CONDITION AND RESULTS OF OPERATIONS
Additives & Functional Products Segment
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||||||||||||||
| Change | Change | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Sales | $ | 807 | $ | 769 | $ | 38 | 5 | % | $ | 1,546 | $ | 1,502 | $ | 44 | 3 | % | |||||||||||||||||||||||||||||||
| Volume / product mix effect | (1) | - | % | (10) | - | % | |||||||||||||||||||||||||||||||||||||||||
| Price effect | 28 | 4 | % | 18 | 1 | % | |||||||||||||||||||||||||||||||||||||||||
| Exchange rate effect | 11 | 1 | % | 36 | 2 | % | |||||||||||||||||||||||||||||||||||||||||
| Earnings before interest and taxes | $ | 151 | $ | 153 | $ | (2) | (1) | % | $ | 293 | $ | 290 | $ | 3 | 1 | % | |||||||||||||||||||||||||||||||
| Asset impairments, restructuring, and other charges, net | - | - | - | - | 4 | (4) | |||||||||||||||||||||||||||||||||||||||||
| Earnings before interest and taxes excluding non-core item | 151 | 153 | (2) | (1) | % | 293 | 294 | (1) | - | % | |||||||||||||||||||||||||||||||||||||
Sales revenue increased in second quarter 2026 compared to second quarter 2025 primarily due to higher selling prices driven by cost-pass-through contracts.
Sales revenue increased in first six months 2026 compared to first six months 2025 due to a favorable foreign currency exchange impact and higher selling prices. Higher selling prices were driven by cost-pass-through contracts.
EBIT in first six months 2025 included asset impairments, restructuring, and other charges, net 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.
Excluding this non-core item, EBIT was relatively unchanged in second quarter and first six months 2026 compared to second quarter and first six months 2025 as higher manufacturing costs were mostly offset by higher sales volume mix and a favorable foreign currency exchange impact.
CONDITION AND RESULTS OF OPERATIONS
Chemical Intermediates Segment
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||||||||||||||
| Change | Change | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Sales | $ | 643 | $ | 463 | $ | 180 | 39 | % | $ | 1,138 | $ | 1,008 | $ | 130 | 13 | % | |||||||||||||||||||||||||||||||
| Volume / product mix effect | 112 | 24 | % | 97 | 10 | % | |||||||||||||||||||||||||||||||||||||||||
| Price effect | 65 | 14 | % | 22 | 2 | % | |||||||||||||||||||||||||||||||||||||||||
| Exchange rate effect | 3 | 1 | % | 11 | 1 | % | |||||||||||||||||||||||||||||||||||||||||
|
Earnings (loss) before interest and taxes
|
$ | 58 | $ | (30) | $ | 88 | 293 | % | $ | 40 | $ | (11) | $ | 51 | 464 | % | |||||||||||||||||||||||||||||||
Sales revenue increased in second quarter and first six months 2026 compared to second quarter and first six months 2025 due to higher sales volume mix and higher selling prices, particularly for olefin and derivative products. These increases were driven by additional product availability compared to the prior year period and supply disruptions.
EBIT increased in second quarter 2026 compared to second quarter 2025 primarily due to $83 million of higher selling prices and lower raw material and energy costs.
EBIT increased in first six months 2026 compared to first six months 2025 primarily due to $24 million higher selling prices and lower raw material and energy costs and higher sales volume mix.
Fibers Segment
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||||||||||||||
| Change | Change | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Sales | $ | 243 | $ | 274 | $ | (31) | (11) | % | $ | 468 | $ | 562 | $ | (94) | (17) | % | |||||||||||||||||||||||||||||||
| Volume / product mix effect | (27) | (10) | % | (81) | (14) | % | |||||||||||||||||||||||||||||||||||||||||
| Price effect | (6) | (2) | % | (15) | (3) | % | |||||||||||||||||||||||||||||||||||||||||
| Exchange rate effect | 2 | 1 | % | 2 | - | % | |||||||||||||||||||||||||||||||||||||||||
| Earnings before interest and taxes | $ | 36 | $ | 81 | $ | (45) | (56) | % | $ | 81 | $ | 169 | $ | (88) | (52) | % | |||||||||||||||||||||||||||||||
Sales revenue decreased in second quarter and first six months 2026 compared to second quarter and first six months 2025 due to lower sales volume mix driven by continued customer buying patterns to continue with inventory destocking in the acetate tow product line and continued weakness in the textiles end market relative to tariff-driven volume strength last year.
EBIT decreased in second quarter 2026 compared to second quarter 2025 primarily due to $36 million lower sales volume mix and lower selling prices and higher raw material and energy costs.
EBIT decreased in first six months 2026 compared to first six months 2025 primarily due to $68 million lower sales volume mix and unfavorable asset utilization and lower selling prices and higher raw material and energy costs.
CONDITION AND RESULTS OF OPERATIONS
Other
| Second Quarter | First Six Months | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Sales | $ | 3 | $ | 4 | $ | 6 | $ | 9 | |||||||||||||||
| Loss before interest and taxes | |||||||||||||||||||||||
| Growth initiatives and businesses not allocated to operating segments | $ | (41) | $ | (47) | $ | (78) | $ | (98) | |||||||||||||||
| Pension and other postretirement benefits income (expense), net not allocated to operating segments | 7 | 1 | 14 | 2 | |||||||||||||||||||
| Asset impairments, restructuring, and other charges, net | (1) | (13) | (4) | (18) | |||||||||||||||||||
| Other income (charges), net not allocated to operating segments | (8) | (44) | (16) | (47) | |||||||||||||||||||
| Loss before interest and taxes | $ | (43) | $ | (103) | $ | (84) | $ | (161) | |||||||||||||||
| Asset impairments, restructuring, and other charges, net | 1 | 13 | 4 | 18 | |||||||||||||||||||
| Environmental and other costs | 8 | 40 | 8 | 40 | |||||||||||||||||||
|
Loss before interest and taxes excluding non-core items
|
(34) | (50) | (72) | (103) | |||||||||||||||||||
Sales and costs related to growth initiatives, including the cellulosic 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".
Loss before interest and taxes in second quarter and first six months 2026 and second quarter and first six months 2025 included environmental and other costs from previously divested or non-operational sites and product lines, and severance charges related to corporate cost reduction initiatives, and in second quarter and first six months 2026 also included associated gains and losses. For more information regarding non-GAAP items, 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 | ||||||||||||||||||||||||||||||||||||||||||||
| Second Quarter | First Six Months | |||||||||||||||||||||||||||||||||||||||||||
| Change | Change | |||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||
| United States and Canada | $ | 1,158 | $ | 963 | $ | 195 | 20 | % | $ | 2,137 | $ | 1,983 | $ | 154 | 8 | % | ||||||||||||||||||||||||||||
| Europe, Middle East, and Africa | 628 | 610 | 18 | 3 | % | 1,202 | 1,220 | (18) | (1) | % | ||||||||||||||||||||||||||||||||||
| Asia Pacific | 578 | 583 | (5) | (1) | % | 1,078 | 1,122 | (44) | (4) | % | ||||||||||||||||||||||||||||||||||
| Latin America | 149 | 131 | 18 | 14 | % | 273 | 252 | 21 | 8 | % | ||||||||||||||||||||||||||||||||||
|
Total Eastman
|
$ | 2,513 | $ | 2,287 | $ | 226 | 10 | % | $ | 4,690 | $ | 4,577 | $ | 113 | 2 | % | ||||||||||||||||||||||||||||
Sales revenue increased 10 percent in second quarter 2026 compared to second quarter 2025. Higher sales revenue was due to higher sales volume across all regions except the Europe, Middle East, and Africa region ("EMEA") and higher selling prices across all regions except the Asia Pacific region.
Sales revenue increased 2 percent in first six months 2026 compared to first six months 2025. Higher sales revenue was primarily due to higher sales volume and higher selling prices in the United States and Canada and Latin America regions, as well as a favorable foreign currency exchange impact in the EMEA and Asia Pacific regions. These increases were partially offset by lower sales volume and lower selling prices in the EMEA and Asia Pacific regions.
Further discussion by operating segment is presented in "Summary by Operating Segment" in this MD&A.
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 Six Months | |||||||||||
| (Dollars in millions) | 2026 | 2025 | |||||||||
| Net cash provided by (used in) | |||||||||||
| Operating activities | $ | 87 | $ | 66 | |||||||
| Investing activities | (203) | (278) | |||||||||
| Financing activities | 241 | (214) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | - | 12 | |||||||||
| Net change in cash and cash equivalents | 125 | (414) | |||||||||
| Cash and cash equivalents at beginning of period | 566 | 837 | |||||||||
| Cash and cash equivalents at end of period | $ | 691 | $ | 423 | |||||||
Cash provided by operating activities increased $21 million in first six months 2026 compared to first six months 2025 primarily due to lower variable compensation payout and reduced working capital cash outflows partially offset by unfavorable Other items, net, including higher cash tax payments.
Cash used in investing activities decreased $75 million in first six months 2026 compared to first six months 2025 primarily due to lower capital spend.
Cash provided by financing activities was $241 million in first six months 2026 compared to $214 million cash used in financing activities in first six months 2025. This increase was primarily due to lower repayment of borrowings. For additional information, see "Liquidity and Other Financial Information - Debt and Other Commitments" in this MD&A.
Priorities for uses of available cash include payment of the quarterly dividend, capital expenditures, and share repurchases while maintaining our solid investment-grade balance sheet.
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 were $657 million and $674 million in second quarter 2026 and 2025, and $1.3 billion and $1.4 billion in first six months 2026 and 2025. Based on the original terms of receivables sold for certain programs and actual outstanding balance of receivables under servicing agreements, the Company estimates that $406 million and $346 million of these receivables would have been outstanding as of June 30, 2026 and December 31, 2025 had they not been sold under these factoring programs.
CONDITION AND RESULTS OF OPERATIONS
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. The Company also maintains a structured payables program that utilizes a payables processing arrangement with a financial institution to support the processing and settlement of freight and logistics invoices. See Note 1, "Significant Accounting Policies", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information regarding both programs.
Debt and Other Commitments
At June 30, 2026, the Company's borrowings totaled $5.2 billion with various maturities. In first quarter 2026, the Company issued $600 million aggregate principal amount of 4.5% notes due February 2031 in a registered public offering (the "2026 Notes"). Proceeds from the sale of the 2026 Notes, net of original issue discounts and issuance costs, were $594 million.
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 2025 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 2031. 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 provides available liquidity for general corporate purposes and supports commercial paper borrowings. Commercial paper borrowings are classified as short-term. In February 2026, the Credit Facility was amended to extend the maturity to February 2031 and to temporarily adjust the maximum leverage ratio covenant through fiscal quarter ending June 30, 2027 in the event of further macroeconomic uncertainty impacting operating results. All other material terms of the Credit Facility remain unchanged. At June 30, 2026 and December 31, 2025, the Company had no outstanding borrowings under the Credit Facility and no commercial paper borrowings.
In first quarter 2026, the remaining $150 million of the five-year term loan (the "2027 Term Loan") was repaid using available cash. There were no extinguishment costs associated with the repayment of the 2027 Term Loan. The outstanding balance on the 2027 Term Loan was $150 million at December 31, 2025 with a variable interest rate of 5.14%.
The Credit Facility contains 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 June 30, 2026 and December 31, 2025. The total amount of available borrowings under the Credit Facility was $1.50 billion as of June 30, 2026.
See Note 4, "Borrowings", to the unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information.
Net Debt
| June 30, | December 31, | |||||||||||||
| (Dollars in millions) | 2026 | 2025 | ||||||||||||
| Total borrowings | $ | 5,217 | $ | 4,787 | ||||||||||
| Less: Cash and cash equivalents | 691 | 566 | ||||||||||||
|
Net debt (1)
|
$ | 4,526 | $ | 4,221 | ||||||||||
(1)Included a non-cash decrease of $17 million in 2026 and a non-cash increase of $68 million in 2025 resulting from foreign currency exchange rates.
CONDITION AND RESULTS OF OPERATIONS
Capital Expenditures
Capital expenditures were $203 million and $297 million in first six months 2026 and 2025. Capital expenditures in first six months 2026 were primarily for maintenance capital and limited growth capital for projects already in progress. The Company expects that 2026 capital expenditures will be approximately $400 million, primarily for maintenance capital and limited growth capital for strategic 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"). As of June 30, 2026, a total of 13,032,926 shares have been repurchased under the 2021 authorization for $1.2 billion. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders. The Company did not repurchase shares of common stock in first six months 2026.
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 2025 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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