<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
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)
Delaware 62-1539359
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 N. Eastman Road
Kingsport, Tennessee 37660
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 229-2000
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 X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding at
Class June 30, 1996
Common Stock, par value $0.01 per share 78,267,447
-----------------------------------------------------
PAGE 1 OF 35 TOTAL SEQUENTIALLY NUMBERED PAGES
EXHIBIT INDEX ON PAGE 18
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------------
ITEM PAGE
- - - --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
<S> <C>
1. Financial Statements................................................ 3-7
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 8-13
<CAPTION>
PART II. OTHER INFORMATION
1. Legal Proceedings................................................... 14
4. Submission of Matters to a Vote of Security Holders................. 14
6. Exhibits and Reports on Form 8-K.................................... 16
<CAPTION>
SIGNATURES
Signatures.......................................................... 17
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1.FINANCIAL STATEMENTS
<S> <C>
Item Page
Consolidated statements of earnings and retained earnings 4
Consolidated statements of financial position 5
Consolidated statements of cash flows 6
Notes to consolidated financial statements 7
</TABLE>
3
<PAGE> 4
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Second Quarter First Six Months
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $1,241 $1,321 $2,502 $2,553
Cost of sales 922 927 1,862 1,809
------ ------ ------ ------
Gross profit 319 394 640 744
Selling and general administrative expenses 85 89 169 169
Research and development costs 44 40 90 82
------ ------ ------ ------
Operating earnings 190 265 381 493
Interest expense 20 20 35 39
Other (income) charges, net (7) (10) (9) (14)
------ ------ ------ ------
Earnings before income taxes 177 255 355 468
Provision for income taxes 65 97 131 178
------ ------ ------ ------
Net earnings $ 112 $ 158 $ 224 $ 290
====== ====== ====== ======
Net earnings per share $ 1.41 $ 1.90 $ 2.80 $ 3.48
====== ====== ====== ======
Retained earnings at beginning of period $1,763 $1,357 $1,684 $1,258
Net earnings 112 158 224 290
Cash dividends declared (33) (33) (66) (66)
------ ------ ------ ------
Retained earnings at end of period $1,842 $1,482 $1,842 $1,482
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in Millions)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 59 $ 100
Receivables 852 802
Inventories 454 467
Other current assets 125 100
------ ------
Total current assets 1,490 1,469
------ ------
Properties
Properties and equipment at cost 7,069 6,791
Less: Accumulated depreciation 3,873 3,742
------ ------
Net properties 3,196 3,049
------ ------
Other noncurrent assets 329 336
------ ------
Total assets $5,015 $4,854
------ ------
Liabilities and Shareowners' equity
Current liabilities
Payables $ 642 $ 771
Other current liabilities 82 102
------ ------
Total current liabilities 724 873
Long-term borrowings 1,425 1,217
Deferred income tax credits 342 330
Postemployment obligations 734 690
Other long-term liabilities 223 216
------ ------
Total liabilities 3,448 3,326
------ ------
Shareowners' equity
Common stock ($0.01 par - 350,000,000 shares authorized;
shares issued - 83,381,675 and 83,250,683) 1 1
Paid in capital 37 30
Retained earnings 1,842 1,684
Cumulative translation adjustment 10 13
------ ------
1,890 1,728
Less: Treasury stock at cost (5,114,228 and 3,308,200 shares) 323 200
------ ------
Total shareowners' equity 1,567 1,528
------ ------
Total liabilities and shareowners' equity $5,015 $4,854
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
<TABLE>
<CAPTION>
First Six Months
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 224 $ 290
----- -----
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation 152 152
Benefit for deferred income taxes (9) (16)
Increase in receivables (50) (153)
(Increase) decrease in inventories 11 (13)
Increase (decrease) in incentive pay and employee benefit liabilities (102) 39
Increase (decrease) in liabilities excluding borrowings,
incentive pay, and employee benefit liabilities (3) 12
Other items, net 9 3
----- -----
Total adjustments 8 24
----- -----
Net cash provided by operating activities 232 314
----- -----
Cash flows from investing activities
Additions to properties and equipment (310) (164)
Acquisitions and investments in joint ventures -- (30)
Proceeds from sale of assets 39 7
Capital advances to suppliers (29) (31)
Other items 2 (4)
----- -----
Net cash used in investing activities (298) (222)
----- -----
Cash flows from financing activities
Net increase in commercial paper borrowings 208 95
Dividends to shareowners (67) (66)
Treasury stock purchases (125) (106)
Other items 9 1
----- -----
Net cash provided by (used in) financing activities 25 (76)
----- -----
Net change in cash and cash equivalents (41) 16
Cash and cash equivalents at beginning of period 100 90
----- -----
Cash and cash equivalents at end of period $ 59 $ 106
===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited interim consolidated financial statements have
been prepared by the Company in accordance and consistent with the
accounting policies stated in the Company's 1995 Annual Report and should
be read in conjunction with the consolidated financial statements appearing
therein. In the opinion of the Company, all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation have
been included in the interim consolidated financial statements. The
interim consolidated financial statements are based in part on
approximations and have not been audited by independent accountants.
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
2. Inventories
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
(Dollars in millions)
At FIFO or average cost (approximates current cost):
Finished goods $ 431 $ 461
Work in process 145 127
Raw materials and supplies 210 199
----- -----
Total inventories at FIFO or average cost 786 787
Reduction to LIFO value (332) (320)
----- -----
Total inventories at LIFO value $ 454 $ 467
===== =====
</TABLE>
Inventories valued on the LIFO method are approximately 80% of total
inventories in each of the periods.
3. Dividends Second Quarter First Six Months
1996 1995 1996 1995
Cash dividends declared per share $.42 $.40 $.84 $.80
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Company's Consolidated
Financial Statements and Management's Discussion and Analysis contained in the
1995 Annual Report and the unaudited interim consolidated financial statements
included elsewhere in this report.
RESULTS OF OPERATIONS
During 1995, Eastman reported record sales and earnings reflecting accelerated
business conditions that began in the last half of 1994 and continued through
much of 1995. The results for second quarter 1996 show declines when compared
with the exceptionally strong second quarter 1995 results, although overall
sales volumes were essentially level with the record-setting second quarter of
1995.
Earnings
<TABLE>
<CAPTION>
(Dollars in millions, except Second Quarter First Six Months
per share amounts) 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Operating earnings $190 $ 265 (28)% $ 381 $ 493 (23)%
Net earnings 112 158 (29) 224 290 (23)
Net earnings per share 1.41 1.90 (26) 2.80 3.48 (20)
<CAPTION>
Second Quarter First Six Months
Changes in Earnings per Share 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Net earnings per share $1.41 $1.90 $(.49) $2.80 $3.48 $(.68)
===== =====
Operations
Selling price $(.54) $(.41)
Volume and mix (.03) .02
Raw materials, supplies, and energy .08 (.32)
Variable-incentive pay .10 .20
Pre-production costs (.07) (.14)
Other (.10) (.18)
----- -----
Change from operations (.56) (.83)
Other
Interest expense - .03
Other income/charges (.02) (.04)
Effective tax rate change .02 .04
Lower average shares outstanding .06 .11
Rounding .01 .01
----- -----
Total change $(.49) $(.68)
===== =====
</TABLE>
Compared with second quarter 1995, earnings declined significantly due to lower
selling prices, especially in the Container Plastics, Flexible Plastics, and
Industrial Intermediates businesses. This decline in selling prices was
partially offset by lower purchased raw material costs. Production
interruptions at the South Carolina plant, preproduction costs at the PET
plants in Mexico and Spain, and start-up difficulties at the Mexico plant
contributed to decreased earnings. Positive impacts on overall earnings per
share were lower variable-incentive compensation, lower shares outstanding, and
a gain on the divestiture of the Company's food emulsifier business. In the
Fibers business, earnings increased as a result of price increases combined
with lower costs resulting from efficiencies of near capacity operations.
8
<PAGE> 9
Outlook Looking forward, the Company expects the second half of 1996 earnings
per share to be better than the first half, but does not expect the earnings
per share for the year 1996 to meet the record earnings of 1995. The Company's
earnings expectations for 1996 are based on the following assumptions:
relatively stable business conditions in the United States and worldwide,
supporting continued good overall demand for the Company's products; increased
PET volume over the first half of 1996 as a result of additional manufacturing
capability; lower raw material costs; lower selling prices for polyester
plastics; overall stable margins, relative to the first half of 1996; and
continued progress on the current share repurchase program. Actual results
could vary from current expectations if one or more of these assumptions prove
to be inaccurate or are unrealized.
Summary by Industry Segment
Performance Segment
<TABLE>
<CAPTION>
(Dollars in millions) Second Quarter First Six Months
1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Sales $938 $986 (5)% $1,901 $1,902 --%
Operating earnings 137 178 (23) 291 339 (14)
</TABLE>
The Performance segment sales decrease was primarily attributable to Container
Plastics selling price declines and, to a lesser extent, volume declines,
partially offset by higher selling prices in the Fibers business. Fibers
volumes decreased because of timing of shipments. The decline in the operating
earnings resulted primarily from lower selling prices in the Container Plastics
business, start-up and preproduction costs at new PET plants, and production
interruptions at the South Carolina plant, partially offset by lower raw
material costs. Looking forward, substantial PET capacity is being constructed
within the industry worldwide which may lead to further margin suppression in
PET markets.
Industrial Segment
<TABLE>
<CAPTION>
Second Quarter First Six Months
(Dollars in millions) 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Sales $303 $335 (10)% $601 $651 (8)%
Operating earnings 53 87 (39) 90 154 (42)
</TABLE>
The decrease in the Industrial segment sales was due to decreases in selling
prices, primarily the result of lower polyethylene prices in the Flexible
Plastics business, partially offset by volume increases in the Industrial
Intermediates business. Decreased Industrial segment operating earnings were
primarily the result of the lower selling prices.
(For supplemental analysis of Performance and Industrial segment business
organization results, see Exhibit 99.01 to this Form 10-Q.)
9
<PAGE> 10
Summary by Customer Location
<TABLE>
<CAPTION>
Sales by Region Second Quarter First Six Months
(Dollars in millions) 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
United States and Canada $832 $876 (5)% $1,671 $1,721 (3)%
Europe, Middle East, and Africa 199 220 (10) 407 423 (4)
Asia Pacific 138 164 (16) 272 282 (4)
Latin America 72 61 18 152 127 20
</TABLE>
Sales in the United States for second quarter 1996 were $779 million compared
with 1995 second quarter sales of $817 million. For the first six months of
1996, sales in the United States were $1.563 billion compared with $1.604
billion in 1995. Second quarter 1996 sales outside the United States were down
8% compared with 1995 second quarter and were 37% of total sales, compared with
38% for second quarter 1995. The increase in Latin America sales was primarily
due to increased volume in the Container Plastics and Fibers businesses. The
Asia Pacific sales decrease resulted from generally lower sales volumes. Lower
selling prices and foreign currency fluctuations adversely impacted the Europe,
Middle East, and Africa region sales.
Summary of Consolidated Results
<TABLE>
<CAPTION>
Second Quarter First Six Months
(Dollars in millions) 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Sales $1,241 $1,321 (6)% $2,502 $2,553 (2)%
</TABLE>
The sales decline was almost entirely due to lower selling prices, as volumes
and foreign currency fluctuations were essentially flat with second quarter
1995.
<TABLE>
<CAPTION>
Second Quarter First Six Months
(Dollars in millions) 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Gross profit $ 319 $ 394 (19)% $ 640 $ 744 (14)%
As a percentage of sales 25.7% 29.8% 25.6% 29.1%
</TABLE>
The second quarter 1996 gross profit declined when compared with the
exceptionally strong second quarter 1995. The change was principally
attributable to lower selling prices which were partially offset by lower
purchased raw material costs and lower variable-incentive compensation. Also,
start-up difficulties at the new Mexico PET plant and production interruptions
at the South Carolina plant contributed to lower gross profit.
<TABLE>
<CAPTION>
Second Quarter First Six Months
(Dollars in millions) 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Selling and general
administrative expenses $ 85 $ 89 (4)% $169 $169 --%
As a percentage of sales 6.8% 6.7% 6.8% 6.6%
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
Second Quarter First Six Months
(Dollars in millions) 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Research and
development costs $ 44 $ 40 10% $ 90 $ 82 10%
As a percentage of sales 3.5% 3.0% 3.6% 3.2%
<CAPTION>
Second Quarter First Six Months
(Dollars in millions) 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Interest expense $ 20 $ 20 --% $ 35 $ 39 (10)%
<CAPTION>
Second Quarter First Six Months
(Dollars in millions) 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Other (income) charges, net $ 7 $ 10 (30)% $ 9 $ 14 (36)%
</TABLE>
The second quarter 1996 includes a $13 million pre-tax gain from the sale of
the Company's food emulsifier business, which was partially offset by increased
equity investment losses and unfavorable foreign currency effects. In the
second quarter 1995, the Company recognized a $6 million pre-tax gain from the
sale of property, but did not have significant off-setting charges. Both years
include royalty and interest income.
<TABLE>
<CAPTION>
Second Quarter First Six Months
(Dollars in millions) 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Provision for income taxes $65 $97 (33)% $131 $178 (26)%
Effective tax rate 37% 38% 37% 38%
</TABLE>
11
<PAGE> 12
LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA
<TABLE>
<CAPTION>
Financial Indicators 1996 1995
<S> <C> <C>
For the first six months
Ratio of earnings to fixed charges 7.4x 9.5x
At the period ended June 30 and December 31
Current ratio 2.1x 1.7x
Percent of long-term borrowings to total capital 48% 44%
Percent of floating-rate borrowings to total borrowings 16% 2%
</TABLE>
<TABLE>
<CAPTION>
Cash Flow First Six Months
(Dollars in millions) 1996 1995
<S> <C> <C>
Net cash provided by (used in)
Operating activities $ 232 $ 314
Investing activities (298) (222)
Financing activities 25 (76)
----- -----
Net change in cash and cash equivalents $ (41) $ 16
===== =====
Cash and cash equivalents at end of period $ 59 $ 106
===== =====
</TABLE>
Cash provided by operations for the first six months of 1996 decreased when
compared with the first six months of 1995, primarily because of lower
earnings. The increase in cash used in investing activities of $76 million in
the first six months of 1996 is consistent with the Company's global expansion
activities and primarily reflects capital expenditure increases. The cash
provided by financing activities for the first six months of 1996 reflects
higher levels of commercial paper borrowings, primarily to meet cash demands
for payment of variable-incentive compensation, capital expenditures, and $125
million for repurchase of shares.
Capital Expenditures
Eastman anticipates that total capital expenditures in 1996 will be
approximately $700 million, primarily due to previously announced expansions in
worldwide manufacturing capacity. During 1996, the Company announced plans to
construct an isophthalic acid (IPA) plant in Kingsport, Tennessee; it is
expected to be on-line by mid-1998. The Company announced a planned increase in
polyethylene naphthalate (PEN) homopolymer capacity expected on-line during the
second half of 1996. The Company signed a letter of intent to join with three
other companies to build a worldscale olefins plant near Houston, Texas with a
target start-up date of mid-year 2000. In addition to expanding its Longview,
Texas oxo aldehydes and derivatives plants, the Company announced plans for
construction of new plant facilities in Singapore to produce oxo aldehydes and
derivatives; production operations for Singapore are expected to begin in 1998.
The Company announced plans to construct a polyethylene terephthalate (PET)
plant and a purified terephthalic acid (PTA) plant at their South Carolina
location; production is expected in early 1999. An additional PTA plant is
planned to be built in Kingsport, Tennessee by late 1997. In July, the Company
announced plans to double production capacity for general-purpose fine
chemicals at the Peboc Division of Eastman Chemical (UK) Ltd. in Llangefni,
Wales. These projects will not impact depreciation expense until after
production begins. Therefore, depreciation overall is expected to be only
slightly higher in 1997 and 1998 compared to 1996.
12
<PAGE> 13
Liquidity
Eastman has access to an $800 million revolving credit facility ("Credit
Facility") expiring in December 2000. Amounts outstanding under the Credit
Facility are subject to interest at varying spreads above quoted market rates,
principally LIBOR. The Credit Facility also requires a facility fee on the
total commitment that varies based on Eastman's credit rating. The annual rate
for such fee was 0.075% as of June 30, 1996. The Credit Agreement contains a
number of covenants and events of default, including the maintenance of certain
financial ratios. Eastman was in compliance with all such covenants for all
periods.
Eastman utilizes commercial paper, generally with maturities of 90 days or
less, to meet its liquidity needs. The Company's commercial paper, supported by
the Credit Facility, is classified as long-term borrowings because the Company
has the ability and intent to refinance such borrowings long-term. At June 30,
1996, a total of $230 million of commercial paper was outstanding, at a 5.49%
average annual interest rate. The remaining balance of long-term borrowings is
unchanged from December 31, 1995.
In 1995, the Company repurchased $200 million of Eastman common stock. In
February 1996, the Company announced plans to repurchase up to $400 million of
additional Eastman common shares. Repurchased shares may be used to meet
common stock requirements for benefit plans and other corporate purposes.
Repurchase of common shares is not expected to have an adverse impact on the
liquidity of the Company. At June 30, 1996, the Company had acquired an
additional 1,834,000 shares at a cost of $125 million, pursuant to its current
repurchase program.
Existing sources of capital, together with cash flows from operations, are
expected to be sufficient to meet the Company's foreseeable cash flow
requirements. Eastman has on file with the Securities and Exchange Commission
a shelf registration to issue up to an additional $300 million of debt
securities.
<TABLE>
<CAPTION>
Dividends Second Quarter First Six Months
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash dividends declared per share $.42 $.40 $.84 $.80
</TABLE>
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Legal Proceedings
The Company's operations are parties to or targets of lawsuits,
claims, investigations, and proceedings, including product liability,
patent, commercial, environmental, and health and safety matters,
which are being handled and defended in the ordinary course of
business. No such pending matters are expected to have a material
adverse effect on the Company's financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1996 Annual Meeting of Shareowners was held on May
2, 1996. Six items of business were acted upon at the meeting: (i)
the election of four directors to serve until the 1999 Annual Meeting
of Shareowners and until their successors are duly elected and
qualified; (ii) the proposed Second Amended and Restated Eastman
Directors' Deferred Compensation Plan (The "Directors' Deferred
Compensation Plan"); (iii) the proposed Eastman Chemical Company 1996
Non-Employee Director Stock Option Plan (The "Director Stock Option
Plan"); (iv) the ratification of the appointment of Price Waterhouse
LLP as independent accountants for the Company until the Annual
Meeting of Shareowners in 1997; (v) a shareowner proposal to
discontinue use of "options, rights, SARs, etc." as management and
director compensation; and (vi) a shareowner proposal to divest the
Company's cellulose acetate tow product line.
The results of the voting for the election of directors were as
follows:
<TABLE>
<CAPTION>
Votes Broker
-------- --------
Nominee Votes For Withheld Abstentions Nonvotes
------- --------- -------- ----------- --------
<S> <C> <C> <C> <C>
Calvin A. Campbell, Jr. 70,488,074 517,683 0 0
---------- -------- ----------- --------
Dr. Michael von Clemm 70,490,698 515,059 0 0
---------- -------- ----------- --------
Earnest W. Deavenport, Jr. 70,492,116 513,641 0 0
---------- -------- ----------- --------
Lee Liu 70,483,663 522,094 0 0
========== ======== =========== ========
</TABLE>
Accordingly, each of the four nominees received a plurality of the votes
cast and was elected.
The results of the voting on the proposed Directors' Deferred
Compensation Plan were as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions Broker Nonvotes
- - - ---------- ------------- ----------- ---------------
<S> <C> <C> <C>
68,816,952 1,599,838 588,967 0
========== ============= =========== ===============
</TABLE>
Accordingly, the number of affirmative votes cast on the proposal constituted a
majority of the shares represented at the meeting and entitled to vote on the
proposal, and the Directors' Deferred Compensation Plan was approved.
14
<PAGE> 15
The results of the voting on the proposed Director Stock Option Plan were as
follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions Broker Nonvotes
- - - ---------- ------------- ----------- ---------------
<S> <C> <C> <C>
65,137,705 5,267,150 600,902 0
========== ============= =========== ===============
</TABLE>
Accordingly, the number of affirmative votes cast on the proposal
constituted a majority of the shares represented at the meeting and entitled to
vote on the proposal, and the Director Stock Option Plan was approved.
The results of the voting on the ratification of the appointment of
Price Waterhouse LLP as independent accountants were as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions Broker Nonvotes
- - - --------- ------------- ----------- ---------------
<S> <C> <C> <C>
67,454,438 3,362,979 188,340 0
========== ============= =========== ===============
</TABLE>
Accordingly, the number of affirmative votes cast on the proposal constituted
a majority of the votes cast on the proposal at the meeting, and the
appointment of Price Waterhouse LLP as independent accountants was ratified.
The results of the voting on the shareowner proposal to discontinue use of
"options, rights, SARs, etc." as management and director compensation were as
follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions Broker Nonvotes
- - - --------- ------------- ----------- ---------------
<S> <C> <C> <C>
2,523,907 55,669,858 925,330 11,886,662
========= ============= =========== ===============
</TABLE>
Accordingly, the number of affirmative votes cast on the proposal
constituted less than a majority of the votes cast on the proposal at the
meeting, and the proposal was not adopted.
The results of the voting on the shareowner proposal to divest the
cellulose acetate tow product line were as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions Broker Nonvotes
- - - --------- ------------- ----------- ---------------
<S> <C> <C> <C>
1,585,992 55,321,232 2,211,871 11,886,662
========= ============= =========== ===============
</TABLE>
Accordingly, the number of affirmative votes cast on the proposal
constituted less than a majority of the votes cast on the proposal at the
meeting, and the proposal was not adopted.
15
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed as part of this report are listed in the Exhibit
Index appearing on page 18.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended June 30, 1996.
16
<PAGE> 17
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: July 26, 1996 By: /s/ H. Virgil Stephens
-------------------------
H. Virgil Stephens
Senior Vice President and
Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial Officer)
17
<PAGE> 18
EXHIBIT INDEX
Description
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Number
<S> <C> <C>
3.01 Amended and Restated Certificate of Incorporation of
Eastman Chemical Company (incorporated herein by reference
to Exhibit 3.01 to Eastman Chemical Company's Registration
Statement on Form S-1, File No. 33-72364, as amended)
3.02 Amended and Restated By-laws of Eastman Chemical Company,
as amended October 1, 1994 (incorporated by reference to
Exhibit 3.02 to Eastman Chemical Company's Annual Report
on Form 10-K for the year ended December 31, 1994)
4.01 Form of Eastman Chemical Company Common Stock certificate
(incorporated herein by reference to Exhibit 3.02 to
Eastman Chemical Company's Annual Report on Form 10-K for
the year ended December 31, 1993)
4.02 Stockholder Protection Rights Agreement dated as of
December 13, 1993, between Eastman Chemical Company and
First Chicago Trust Company of New York, as Rights Agent
(incorporated herein by reference to Exhibit 4.4 to
Eastman Chemical Company's Registration Statement on Form
S-8 relating to the Eastman Investment Plan, File No.
33-73810)
4.03 Indenture, dated as of January 10, 1994, between Eastman
Chemical Company and The Bank of New York, as Trustee
(incorporated herein by reference to Exhibit 4(a) to
Eastman Chemical Company's current report on Form 8-K
dated January 10, 1994 (the "8-K"))
4.04 Form of 6 3/8% Notes due January 15, 2004 (incorporated herein
by reference to Exhibit 4(c) to the 8-K)
4.05 Form of 7 1/4% Debentures due January 15, 2024 (incorporated
herein by reference to Exhibit 4(d) to the 8-K)
4.06 Officers' Certificate pursuant to Sections 201 and 301 of
the Indenture (incorporated herein by reference to Exhibit
4(a) to Eastman Chemical Company's Current Report on Form
8-K dated June 8, 1994 (the "June 8-K"))
4.07 Form of 7 5/8% Debentures due June 15, 2024 (incorporated
herein by reference to Exhibit 4(b) to the June 8-K)
4.08 Credit Agreement, dated as of December 19, 1995 (the
"Credit Agreement") among Eastman Chemical Company, the
Lenders named therein, and The Chase Manhattan Bank, as
Agent (incorporated herein by reference to Exhibit 4.08 to
Eastman Chemical Company's Annual Report on Form 10-K for
the year ended December 31, 1995)
</TABLE>
18
<PAGE> 19
EXHIBIT INDEX
Description
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Number
<S> <C> <C>
*10.01 Second Amended and Restated Eastman Directors' Deferred 20
Compensation Plan.
*10.02 Eastman Chemical Company 1996 Non-Employee Director Stock 27
Option Plan
11.01 Statement re Computation of Earnings Per Common Share 33
12.01 Statement re Computation of Ratios of Earnings to Fixed 34
Charges
27.01 Financial Data Schedule (for SEC use only)
99.01 Supplemental Business Organization Information 35
</TABLE>
- - - ---------------------
* Management contract or compensatory plan or arrangement filed pursuant to
Item 601(b)(10)(iii) of Regulation S-K.
19
<PAGE> 1
EXHIBIT 10.01
SECOND AMENDED AND RESTATED
EASTMAN DIRECTORS' DEFERRED COMPENSATION PLAN
Preamble. The Second Amended and Restated Eastman Directors' Deferred
- - - ---------
Compensation Plan is an unfunded, non-qualified deferred compensation
arrangement for non-employee members of the Board of Directors of Eastman
Chemical Company (the "Company"). Under the Plan, each Eligible Director is
semi-annually given an opportunity to elect to defer payment of part of his or
her compensation for serving as a Director. This Plan originally was adopted
effective January 1, 1994, was amended and restated effective as of December 1,
1994, and is further amended and restated effective as of May 2, 1996.
Section 1. Definitions.
- - - ---------- ------------
Section 1.1. "Account" means the Interest Account or the Stock Account.
------------
Section 1.2. "Board" means the Board of Directors of the Company.
------------
Section 1.3. "Change In Control" means a change in control of the
------------
Company of a nature that would be required to be reported (assuming such
event has not been "previously reported") in response to Item 1(a) of a
Current Report on Form 8-K, as in effect on August 1, 1993, pursuant to
Section 13 or 15(d) of the Exchange Act; provided that, without limitation,
a Change In Control shall be deemed to have occurred at such time as (i)
any "person" within the meaning of Section 14(d) of the Exchange Act, other
than the Company, a subsidiary of the Company, or any employee benefit
plan(s) sponsored by the Company or any subsidiary of the Company, is or
has become the "beneficial owner," as defined in Rule 13d-3 under the
Exchange Act, directly or indirectly, of 25% or more of the combined voting
power of the outstanding securities of the Company ordinarily having the
right to vote at the election of directors; provided, however, that the
following will not constitute a Change In Control: any acquisition by any
corporation if, immediately following such acquisition, more than 75% of
the outstanding securities of the acquiring corporation ordinarily having
the right to vote in the election of directors is beneficially owned by all
or substantially all of those persons who, immediately prior to such
acquisition, were the beneficial owners of the outstanding securities of
the Company ordinarily having the right to vote in the election of
directors; or (ii) individuals who constitute the Board on January 1, 1994
(the "Incumbent Board") have ceased for any reason to constitute at least
a majority thereof, provided that: any person becoming a director
subsequent to January 1, 1994 whose election, or nomination for election by
the Company's shareowners, was approved by a vote of at least
three-quarters (3/4) of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director without
objection to such nomination) shall be, for purposes of the Plan,
considered as though such person were a member of the Incumbent Board; or
(iii) upon approval by the Company's shareowners of a reorganization,
merger or consolidation, other than one with respect to which all or
substantially all of those persons who were the beneficial owners,
immediately prior to such reorganization, merger or consolidation, of
outstanding securities of the Company ordinarily having the right to vote
in the election of directors own, immediately after such transaction, more
than 75% of the outstanding securities of the resulting corporation
ordinarily having the right to vote in the election of directors; or (iv)
upon approval by the Company's stockholders of a complete liquidation and
dissolution of the Company or the sale or other disposition of all or
substantially all of the assets of the Company other than to a subsidiary
of the Company. Notwithstanding the occurrence of any of the foregoing,
the Board of Directors may determine, if it deems it to be in the best
interest of the Company, that an event or events otherwise constituting a
Change in Control shall not be so considered. Such determination shall be
effective only if it is made by the Board of Directors prior to the
occurrence of an event that otherwise would be or probably will lead to a
Change In Control or after such event if made by the Board of Directors a
20
<PAGE> 2
majority of which is composed of directors who were members of the Board
immediately prior to the event that otherwise would be or probably will
lead to a Change In Control.
Section 1.4. "Committee on Directors" means the Committee on Directors of
------------
the Board.
Section 1.5. "Common Stock" means the $.01 par value common stock of the
------------
Company.
Section 1.6. "Company" means Eastman Chemical Company.
------------
Section 1.7. "Deferrable Amount" means an amount equal to the sum of the
------------
Eligible Director's cash compensation, including retainer, meeting fees,
and any other compensation otherwise payable in cash.
Section 1.8. "Eligible Director" means a member of the Board of Directors
------------
of the Company who is not an employee of the Company or any subsidiary of
the Company.
Section 1.9. "Enrollment Periods" means the periods designated by the
------------
Committee on Directors each year; provided however, that such period with
respect to the Deferrable Amount attributable to services rendered from
January 1 through June 30 (the "First Enrollment Period") shall end on or
before June 30 of the preceding year, and such period with respect to the
Deferrable Amount attributable to services rendered from July 1 through
December 31 (the "Second Enrollment Period") shall end on or before
December 31 of the preceding year.
Section 1.10. "Exchange Act" means the Securities Exchange Act of 1934, as
-------------
amended.
Section 1.11. "Interest Account" means the account established by the
-------------
Company for each Participant for compensation deferred pursuant to this
Plan and which shall bear interest as described in Section 4.1 below. The
maintenance of individual Interest Accounts is for bookkeeping purposes
only.
Section 1.12. "Interest Rate" means the monthly average of bank prime
-------------
lending rates to most favored customers as published in The Wall Street
Journal, such average to be determined as of the last day of each month.
Section 1.13. "Market Value" means the closing price of the shares of
-------------
Common Stock on the New York Stock Exchange on the day on which such value
is to be determined or, if no such shares were traded on such day, said
closing price on the next business day on which such shares are traded;
provided, however, that if at any relevant time the shares of Common Stock
are not traded on the New York Stock Exchange, then "Market Value" shall be
determined by reference to the closing price of the shares of Common Stock
on another national securities exchange, if applicable, or if the shares
are not traded on an exchange but are traded in the over-the-counter
market, by reference to the last sale price or the closing "asked" price of
the shares in the over-the-counter market as reported by the National
Association of Securities Dealers Automated Quotation System (NASDAQ) or
other national quotation service.
Section 1.14. "Plan" means this Second Amended and Restated Eastman
-------------
Directors' Deferred Compensation Plan.
Section 1.15. "Participant" means an Eligible Director who elects for one
-------------
or more six-month periods to defer compensation pursuant to this Plan.
21
<PAGE> 3
Section 1.16. "Stock Account" means the account established by the
-------------
Company for each Participant, the performance of which shall
be measured by reference to the Market Value of Common Stock. The
maintenance of individual Stock Accounts is for bookkeeping purposes only.
Section 1.17. "Valuation Date" means each business day.
-------------
Section 2. Deferral of Compensation. An Eligible Director may elect to defer
- - - ---------- -------------------------
receipt of all or any portion of his or her Deferrable Amount to his or her
Interest Account and/or Stock Account. No deferral shall be made of any
compensation payable after termination of the Eligible Director's service on
the Board.
Section 3. Time of Election of Deferral. An Eligible Director who wishes to
- - - ---------- -----------------------------
defer compensation must irrevocably elect to do so during the applicable
Enrollment Period. The First Enrollment Period shall end on or before June 30
of the calendar year immediately preceding the year in which the Eligible
Director's retainer and/or meeting fees for the period January 1 through June
30 will be earned. The Second Enrollment Period shall end on or before
December 31 of the calendar year immediately preceding the year in which the
Eligible Director's retainer and/or meeting fees for the period July 1 through
December 31 will be earned.
Section 4. Hypothetical Investments.
- - - ---------- -------------------------
Section 4.1. Interest Account. Amounts in a Participant's Interest
------------ -----------------
Account are hypothetically invested in an interest bearing account which
bears interest computed at the Interest Rate, compounded monthly.
Section 4.2. Stock Account. Amounts in a Participant's Stock
------------ --------------
Account are hypothetically invested in units of Common Stock. Amounts
deferred into a Stock Account are recorded as units of Common Stock, and
fractions thereof, with one unit equating to a single share of Common
Stock. Thus, the value of one unit shall be the Market Value of a single
share of Common Stock. The use of units is merely a bookkeeping
convenience; the units are not actual shares of Common Stock. The Company
will not reserve or otherwise set aside any Common Stock for or to any
Stock Account. The maximum number of Common Stock units that may be
hypothetically purchased by deferral of compensation to Stock Accounts
under this Plan is 80,000.
Section 5. Deferrals and Crediting Amounts to Accounts.
- - - ---------- --------------------------------------------
Section 5.1. Manner of Electing Deferral. An Eligible Director may
------------ ----------------------------
elect to defer compensation by executing and returning to the Committee
on Directors a deferred compensation form provided by the Company. The
form shall indicate: (1) the amount of Deferrable Amount to be deferred;
and (2) the portion of the deferral to be credited to the Participant's
Interest Account and Stock Account, respectively.
Section 5.2. Crediting of Amounts to Accounts. Amounts to be
------------ ---------------------------------
deferred shall be credited to the Participant's Interest Account and/or
Stock Account, as applicable, as of the date such amounts are otherwise
payable.
Section 6. Deferral Period. Subject to Sections 9, 10 and 17 hereof, the
- - - ---------- ----------------
compensation which a Participant elects to defer under this Plan shall be
deferred until the Participant ceases to serve as a member of the Board. Any
such election shall be made during the applicable Enrollment Period on the
deferred compensation form referenced in Section 5 above. The payment of a
Participant's account shall be governed by Sections 8, 9, 10 and 17, as
applicable.
22
<PAGE> 4
Section 7. Investment in the Stock Account and Transfers Between Accounts.
- - - ---------- ---------------------------------------------------------------
Section 7.1. Election Into the Stock Account. If a Participant elects to
------------ --------------------------------
defer compensation into his or her Stock Account, his or her Stock Account
shall be credited, as of the date described in Section 5.2, with that
number of units of Common Stock, and fractions thereof, obtained by
dividing the dollar amount to be deferred into the Stock Account by the
Market Value of the Common Stock as of such date.
Section 7.2. Transfers Between Accounts. A Participant may direct that
------------ ---------------------------
all or any portion, designated as a whole dollar amount, of the existing
balance of one of his or her Accounts be transferred to his or her other
Account, effective as of (i) the date such election is made, if and only if
such election is made prior to the close of trading on the New York Stock
Exchange on a day on which the Common Stock is traded on the New York Stock
Exchange, or (ii) if such election is made after the close of trading on
the New York Stock Exchange on a given day or at any time on a day on which
no sales of Common Stock are made on the New York Stock Exchange, then on
the next business day on which the Common Stock is traded on the New York
Stock Exchange (the date described in (i) or (ii), as applicable, is
referred to hereinafter as the election's "Effective Date"); provided,
however, that a Participant may not effect transfers between his or her
Accounts more often than once in any six-month period. Such election shall
be made by filing a written election with the Company during the period
that begins on the third business day following the public release of the
Company's quarterly earnings report and that ends on the twelfth business
day following the release of the Company's quarterly earnings report.
Section 7.3. Transfer Into the Stock Account. If a Participant elects
------------ --------------------------------
pursuant to Section 7.2 to transfer an amount from his or her Interest
Account to his or her Stock Account, effective as of the election's
Effective Date, (i) his or her Stock Account shall be credited with that
number of units of Common Stock, and fractions thereof, obtained by
dividing the dollar amount elected to be transferred by the Market Value of
the Common Stock on the Valuation Date immediately preceding the election's
Effective Date; and (ii) his or her Interest Account shall be reduced by
the amount elected to be transferred.
Section 7.4. Transfer Out of the Stock Account. If a Participant elects
------------ ----------------------------------
pursuant to Section 7.2 to transfer an amount from his or her Stock Account
to his or her Interest Account, effective as of the election's Effective
Date, (i) his or her Interest Account shall be credited with a dollar
amount equal to the amount obtained by multiplying the number of units to
be transferred by the Market Value of the Common Stock on the Valuation
Date immediately preceding the election's Effective Date; and (ii) his or
her Stock Account shall be reduced by the number of units elected to be
transferred.
Section 7.5. Dividend Equivalents. Effective as of the payment date for
------------ ---------------------
each cash dividend on the Common Stock, the Stock Account of each
Participant who had a balance in his or her Stock Account on the record
date for such dividend shall be credited with a number of units of Common
Stock, and fractions thereof, obtained by dividing (i) the aggregate dollar
amount of such cash dividend payable in respect of such Participant's Stock
Account (determined by multiplying the dollar value of the dividend paid
upon a single share of Common Stock by the number of units of Common Stock
held in the Participant's Stock Account on the record date for such
dividend); by (ii) the Market Value of the Common Stock on the Valuation
Date immediately preceding the payment date for such cash dividend.
Section 7.6. Stock Dividends. Effective as of the payment date for each
------------ ----------------
stock dividend on the Common Stock, additional units of Common Stock shall
be credited to the Stock Account of each Participant who had a balance in
his or her Stock Account on the record date for such dividend. The number
of units that shall be credited to the Stock Account of such a Participant
shall equal the number of shares of Common Stock, and fractions thereof,
which the Participant would have received as stock dividends had he or she
been the owner on the record date for such stock dividend of the number of
23
<PAGE> 5
shares of Common Stock equal to the number of units credited to his or her
Stock Account on such record date.
Section 7.7. Recapitalization. If, as a result of a recapitalization of
------------ -----------------
the Company, the outstanding shares of Common Stock shall be changed into a
greater number or smaller number of shares, the number of units credited to
a Participant's Stock Account shall be appropriately adjusted on the same
basis.
Section 7.8. Distributions. Amounts in respect of units of Common Stock
------------ --------------
may only be distributed out of the Stock Account by transfer to the
Interest Account (pursuant to Sections 7.2 and 7.4 or 7.10) or withdrawal
from the Stock Account (pursuant to Section 8, 9, 10, or 17), and shall be
distributed in cash. The number of units to be distributed from a
Participant's Stock Account shall be valued by multiplying the number of
such units by the Market Value of the Common Stock as of the Valuation Date
immediately preceding the date such distribution is to occur.
Section 7.9. Responsibility for Investment Choices. Each Participant is
------------ --------------------------------------
solely responsible for any decision to defer compensation into his or her
Stock Account and accepts all investment risks entailed by such decision,
including the risk of loss and a decrease in the value of the amounts he or
she elects to defer into his or her Stock Account.
Section 7.10. Liquidation of Stock Account. Upon the date that a
------------- -----------------------------
Participant ceases to serve on the Board, the entire balance, if any, of
the Participant's Stock Account shall automatically be transferred to his
or her Interest Account. For purposes of valuing the units of Common Stock
subject to such a transfer, the approach described in Section 7.8 shall be
used.
Section 7.11. Non-Transferability of Stock Account. The Stock Account of
------------- -------------------------------------
a Participant is not transferable by him or her to any other person or
entity other than by will or the laws of descent and distribution. The
designation of a beneficiary by a Participant does not constitute a
transfer for this purpose.
Section 8. Payment of Deferred Compensation.
- - - ---------- ---------------------------------
Section 8.1. Background. No withdrawal may be made from a Participant's
------------ -----------
Account except as provided in this Section 8 and Sections 9, 10 and 17.
Section 8.2. Manner of Payment. Payment of a Participant's Account shall
------------ ------------------
be made in a single lump sum or annual installments, in the sole discretion
of the Committee on Directors. The maximum number of annual installments
is ten. All payments from the Plan shall be made in cash.
Section 8.3. Timing of Payments. Payments shall be made by the fifth
------------ -------------------
business day in March and shall commence in any year designated in the sole
discretion of the Committee on Directors, up through the tenth year
following the year in which the Participant ceases to be a member of the
Board for any reason, but in no event shall payment commence later than the
year the Participant reaches age 71.
Section 8.4. Valuation. The amount of each payment shall be equal to the
------------ ----------
value, as of the preceding Valuation Date, of the Participant's Account,
divided by the number of installments remaining to be paid.
Section 9. Payment of Deferred Compensation After Death. If a Participant dies
- - - ---------- ---------------------------------------------
prior to complete payment of his or her Accounts, the balance of such Accounts,
valued as of the Valuation Date immediately preceding the date payment is made,
shall be paid in a single, lump-sum payment to: (i) the beneficiary or
contingent beneficiary designated by the Participant on forms supplied by the
Committee on Directors; or, in
24
<PAGE> 6
the absence of a valid designation of a beneficiary or contingent beneficiary,
(ii) the Participant's estate within 30 days after appointment of a legal
representative of the deceased Participant.
Section 10. Acceleration of Payment for Hardship. Upon written approval from
- - - ----------- -------------------------------------
the Committee on Directors, a Participant, whether or not he or she is still
serving as a member of the Board, may be permitted to receive all or part of his
or her Accounts if the Committee on Directors determines that an emergency
event beyond the Participant's control exists which would cause such Participant
severe financial hardship if the payment of his or her Accounts were not
approved. Any such distribution for hardship shall be limited to the amount
needed to meet such emergency.
Section 11. Participant's Rights Unsecured. The benefits payable under this
- - - ----------- -------------------------------
Plan shall be paid by the Company each year out of its general assets. To the
extent a Participant acquires the right to receive a payment under this Plan,
such right shall be no greater than that of an unsecured general creditor of the
Company. No amount payable under this Plan may be assigned, transferred,
encumbered or subject to any legal process for the payment of any claim against
a Participant. No Participant shall have the right to exercise any of the
rights or privileges of a shareowner with respect to units credited to his or
her Stock Account.
Section 12. No Right to Continued Service. Participation in the Plan shall not
- - - ----------- ------------------------------
give any Participant any right to remain a member of the Board.
Section 13. Statement of Account. Statements will be sent no less frequently
- - - ----------- ---------------------
than annually to each Participant or his or her estate showing the value of the
Participant's Accounts.
Section 14. Deductions. The Company will withhold to the extent required by law
- - - ----------- -----------
all applicable income and other taxes from amounts deferred or paid under the
Plan.
Section 15. Administration.
- - - ----------- ---------------
Section 15.1. Responsibility. Except as expressly provided otherwise
------------- ---------------
herein, the Committee on Directors shall have total and exclusive
responsibility to control, operate, manage and administer the Plan in
accordance with its terms.
Section 15.2. Authority of the Committee on Directors. The Committee on
------------- ----------------------------------------
Directors shall have all the authority that may be necessary or helpful to
enable it to discharge its responsibilities with respect to the Plan.
Without limiting the generality of the preceding sentence, the Committee on
Directors shall have the exclusive right: to interpret the Plan, to
determine eligibility for participation in the Plan, to decide all
questions concerning eligibility for and the amount of benefits payable
under the Plan, to construe any ambiguous provision of the Plan, to correct
any default, to supply any omission, to reconcile any inconsistency, and to
decide any and all questions arising in the administration, interpretation,
and application of the Plan.
Section 15.3. Discretionary Authority. The Committee on Directors shall
------------- ------------------------
have full discretionary authority in all matters related to the discharge
of its responsibilities and the exercise of its authority under the Plan
including, without limitation, its construction of the terms of the Plan
and its determination of eligibility for participation and benefits under
the Plan. It is the intent that the decisions of the Committee on Directors
and its action with respect to the Plan shall be final and binding upon all
persons having or claiming to have any right or interest in or under the
Plan and that no such decision or action shall be modified upon judicial
review unless such decision or action is proven to be arbitrary or
capricious.
Section 15.4. Delegation of Authority. The Committee on Directors may
------------- ------------------------
delegate some or all of its authority under the Plan to any person or
persons provided that any such delegation be in writing.
25
<PAGE> 7
Section 15.5. Restriction on Authority of the Committee on Directors.
------------- -------------------------------------------------------
Under any circumstances where the Committee on Directors is authorized to
make a discretionary decision concerning a payment of any type under this
Plan to a member of such Committee, the member of the Committee who is to
receive such payment shall take no part in the deliberations or have any
voting or other power with respect to such decision.
Section 16. Amendment. The Board may suspend or terminate the Plan at any
- - - ----------- ----------
time. In addition, the Board may, from time to time, amend the Plan in any
manner but may not, without shareowner approval, adopt any amendment that would
require shareowner approval in order for the Plan or transactions thereunder to
qualify for the exemptions provided by Rule 16b-3 under the Exchange Act, as the
same may be amended from time to time. No amendment, modification, or
termination shall, without the consent of a Participant, adversely affect such
Participant's accruals in his or her Accounts as of the date of such amendment,
modification, or termination.
Section 17. Change in Control.
- - - ----------- ------------------
Section 17.1. Background. The terms of this Section 17 shall immediately
------------- -----------
become operative, without further action or consent by any person or
entity, upon a Change in Control, and once operative shall supersede and
control over any other provisions of this Plan.
Section 17.2. Acceleration of Payment Upon Change in Control. Upon the
------------- -----------------------------------------------
occurrence of a Change in Control, each Participant, whether or not he or
she is still a Director, shall be paid in a single, lump-sum cash payment
the balance of his or her Accounts as of the Valuation Date immediately
preceding the date payment is made. Such payment shall be made as soon as
practicable, but in no event later than 90 days after the date of the
Change in Control.
Section 17.3. Amendment On or After Change in Control. On or after a
------------- ----------------------------------------
Change in Control, no action, including, but not by way of limitation, the
amendment, suspension or termination of the Plan, shall be taken which
would affect the rights of any Participant or the operation of this Plan
with respect to the balance in the Participant's Accounts.
Section 18. Governing Law. The Plan shall be construed, governed and enforced
- - - ----------- --------------
in accordance with the law of Tennessee, except as such laws are preempted by
applicable federal law.
Section 19. Successors and Assigns. This Plan shall be binding upon the
- - - ----------- -----------------------
successors and assigns of the parties hereto.
Section 20. Compliance with SEC Regulations. It is the Company's intent that
- - - ----------- --------------------------------
the Plan comply in all respects with Rule 16b-3 of the Exchange Act, and any
regulations promulgated thereunder. If any provision of the Plan is found not
to be in compliance with such rule, the provision shall be deemed null and void.
All transactions under the Plan, including, but not by way of limitation, a
Participant's election to defer compensation or transfer Account balances under
Section 7, shall be executed in accordance with the requirements of Section 16
of the Exchange Act, as amended and any regulations promulgated thereunder. To
the extent that any of the provisions contained herein do not conform with Rule
16b-3 of the Exchange Act or any amendments thereto or any successor regulation,
then the Committee may make such modifications so as to conform the Plan to the
Rule's requirements.
26
<PAGE> 1
EXHIBIT 10.02
EASTMAN CHEMICAL COMPANY
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
ARTICLE 1 - Purpose of the Plan
Section 1.1. Purpose. The purpose of the Eastman Chemical Company 1996
------------ --------
Non-Employee Director Stock Option Plan is to promote the long-term growth of
Eastman Chemical Company by providing a vehicle for Non-Employee Directors to
increase their proprietary interest in Eastman Chemical Company and to attract
and retain highly qualified and capable Non-Employee Directors.
ARTICLE 2 - Definitions
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
Section 2.1. "Annual Retainer" means the annual cash retainer fee
------------
(specifically, not including meeting fees) payable by the Company to a
Non-Employee Director for services as a director (and, if applicable, as the
chairman of a committee of the Board) of the Company, as such amount may be
changed from time to time. The Annual Retainer is payable one-half in January
and one-half in July of each year, with each half being referred to hereinafter
as a "Semi-Annual Retainer."
Section 2.2. "Acquisition" has the meaning assigned such term in Section
------------
11.3 hereof.
Section 2.3. "Acquisition Consideration" has the meaning assigned such
------------
term in Section 11.3 hereof.
Section 2.4. "Board" means the Board of Directors of the Company.
------------
Section 2.5. "Change in Control" means a change in control of the Company
------------
of a nature that would be required to be reported (assuming such event has not
been "previously reported") in response to Item 1(a) of a Current Report on
Form 8-K, as in effect on February 1, 1996, pursuant to Section 13 or 15(d) of
the Exchange Act; provided that, without limitation, a Change in Control shall
be deemed to have occurred at such time as (i) any "person" within the meaning
of Section 14(d) of the Exchange Act, other than the Company, a subsidiary of
the Company, or any employee benefit plan(s) sponsored by the Company or any
subsidiary of the Company, is or has become the "beneficial owner," as defined
in Rule 13d-3 under the Exchange Act, directly or indirectly, of 25% or more of
the combined voting power of the outstanding securities of the Company
ordinarily having the right to vote at the election of directors; provided,
however, that the following will not constitute a Change in Control: any
acquisition by any corporation if, immediately following such acquisition, more
than 75% of the outstanding securities of the acquiring corporation ordinarily
having the right to vote in the election of directors is beneficially owned by
all or substantially all of those persons who, immediately prior to such
acquisition, were the beneficial owners of the outstanding securities of the
Company ordinarily having the right to vote in the election of directors; or
(ii) individuals who constituted the Board on January 1, 1994 (the "Incumbent
Board") have ceased for any reason to constitute at least a majority thereof,
provided that: any person becoming a director subsequent to January 1, 1994
whose election, or nomination for election by the Company's shareowners, was
approved by a vote of at least three-quarters (3/4) of the directors comprising
the Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is or was named as a nominee for
director without objection to such nomination) shall be, for purposes of the
Plan, considered as though such person were a member of the Incumbent Board; or
(iii) upon approval by the Company's shareowners of a reorganization, merger or
consolidation, other than one with respect to which all or substantially all of
those persons who were the beneficial owners, immediately prior to such
reorganization, merger or consolidation, of outstanding securities of the
Company ordinarily having the
27
<PAGE> 2
right to vote in the election of directors own, immediately after such
transaction, more than 75% of the outstanding securities of the resulting
corporation ordinarily having the right to vote in the election of directors;
or (iv) upon approval by the Company's shareowners of a complete liquidation
and dissolution of the Company or the sale or other disposition of all or
substantially all of the assets of the Company other than to a subsidiary of
the Company. Notwithstanding the occurrence of any of the foregoing, the Board
may determine, if it deems it to be in the best interest of the Company, that
an event or events otherwise constituting a Change in Control shall not be so
considered. Such determination shall be effective only if it is made by the
Board prior to the occurrence of an event that otherwise would be or probably
will lead to a Change in Control or after such event if made by the Board a
majority of which is composed of directors who were members of the Board
immediately prior to the event that otherwise would be or probably will lead to
a Change in Control.
Section 2.6. "Committee" means the Committee on Directors of the Board.
------------
Section 2.7. "Company" means Eastman Chemical Company.
------------
Section 2.8. "Election Periods" means the periods designated by the
------------
Committee on Directors each year during which Non-Employee Directors may elect
to receive Options in lieu of some or all of their Annual Retainer, provided
however, that such period with respect to the Semi-Annual Retainer payable in
January (the "First Election Period") shall end on or before June 30 of each
year, and such period with respect to the Semi-Annual Retainer payable in July
(the "Second Election Period") shall end on or before December 31 of each year.
Section 2.9. "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
Section 2.10. "Fair Market Value" means the closing price of the shares of
-------------
Common Stock on the New York Stock Exchange on the day on which such value is
to be determined or, if no such shares were traded on such day, on the next
preceding day on which such shares were traded; provided, however, that if at
any relevant time the shares of Common Stock are not traded on the New York
Stock Exchange, then "Fair Market Value" shall be determined by reference to
the closing price of the shares of Common Stock on another national securities
exchange, if applicable, or if the shares are not traded on an exchange but are
traded in the over-the-counter market, by reference to the last sale price or
the closing "asked" price of the shares in the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotation
System (NASDAQ) or other national quotation service.
Section 2.11. "Option" means an option to purchase Shares awarded under
-------------
Article 8 which does not meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended, or any successor law.
Section 2.12. "Option Grant Date" means the date upon which an Option is
-------------
granted to a Non-Employee Director.
Section 2.13. "Optionee" means a Non-Employee Director of the Company to
-------------
whom an Option has been granted or, in the event of such Non-Employee
Director's death prior to the expiration of an Option, such Non-Employee
Director's executor, administrator, beneficiary or similar person.
Section 2.14. "Non-Employee Director" means a director of the Company who
-------------
is not an employee of the Company or any subsidiary of the Company.
Section 2.15. "Plan" means the Eastman Chemical Company 1996 Non-Employee
-------------
Director Stock Option Plan.
Section 2.16. "Shares" means shares of the Common Stock, par value $0.01
-------------
per share, of the Company.
28
<PAGE> 3
Section 2.17. "Stock Option Award Notice" means a written award notice to
-------------
a Non-Employee Director from the Company evidencing an Option.
ARTICLE 3 - Administration of the Plan
Section 3.1. Administrator of the Plan. The Plan shall be administered by
------------ --------------------------
the Committee.
Section 3.2. Authority of Committee. The Committee shall have full power
------------ -----------------------
and authority to: (i) interpret and construe the Plan and adopt such rules and
regulations as it shall deem necessary and advisable to implement and
administer the Plan, and (ii) designate persons other than members of the
Committee or the Board to carry out its responsibilities, subject to such
limitations, restrictions and conditions as it may prescribe, such
determinations to be made in accordance with the Committee's best business
judgment as to the best interests of the Company and its shareowners and in
accordance with the purposes of the Plan. The Committee may delegate
administrative duties under the Plan to one or more agents as it shall deem
necessary or advisable.
Section 3.3. Effect of Committee Determinations. No member of the
------------ -----------------------------------
Committee or the Board shall be personally liable for any action or
determination made in good faith with respect to the Plan or any Option or to
any settlement of any dispute between a Non-Employee Director and the Company.
Any decision or action taken by the Committee or the Board with respect to an
Option or the administration or interpretation of the Plan shall be conclusive
and binding upon all persons.
ARTICLE 4 - Awards Under the Plan
Section 4.1. Stock Option Award Notice. Options may be granted to
------------ --------------------------
Non-Employee Directors in accordance with Article 8. Each Option granted under
the Plan shall be evidenced by a Stock Option Award Notice which shall be
executed by an authorized officer of the Company. Such Award Notice shall
contain provisions regarding (a) the number of Shares that may be issued upon
exercise of the Option, (b) the purchase price of the Shares and the means of
payment therefor, (c) the term of the Option, and (d) such other terms and
conditions not inconsistent with the Plan as may be determined from time to
time by the Committee.
ARTICLE 5 - Eligibility
Section 5.1. Eligibility. Non-Employee Directors of the Company shall be
------------ ------------
eligible to participate in the Plan in accordance with Article 8.
ARTICLE 6 - Shares Subject to the Plan
Section 6.1. Shares Subject to the Plan. Subject to adjustment as
------------ ---------------------------
provided in Article 11, the aggregate number of Shares which may be issued upon
the exercise of Options shall not exceed 150,000 Shares, and there are hereby
reserved for issuance under the Plan 150,000 Shares. To the extent that Shares
subject to an outstanding Option are not issued or delivered by reason of the
expiration, termination, cancellation or forfeiture of such Option or by reason
of the delivery of Shares (either actually or by attestation) to pay all or a
portion of the exercise price of such Option, then such Shares shall again be
available under the Plan.
ARTICLE 7 - Non-Transferability of Options
Section 7.1. Options Not Transferable. All Options granted under the Plan
------------ -------------------------
shall not be transferable by a Non-Employee Director during his or her lifetime
and may not be assigned, exchanged, pledged, transferred or otherwise
encumbered or disposed of except by court order, will or by the laws of
29
<PAGE> 4
descent and distribution. Options shall be exercisable during the
Optionee's lifetime only by the Optionee or by the Optionee's guardian, legal
representative or similar person.
ARTICLE 8 - Elective Options
Each Non-Employee Director shall be granted Options subject to the
following terms and conditions:
Section 8.1. Time of Grant.
------------ --------------
(a) On the first business day of January of each year, Options shall be
granted to each Non-Employee Director who, during the applicable First Election
Period, filed with the Committee or its designee a written irrevocable election
to receive Options in lieu of all or a portion of such Non-Employee Director's
Semi-Annual Retainer payable in January of such year. The First Election
Period shall end on or before June 30 of the calendar year immediately
preceding the year in which the Non-Employee Director's Annual Retainer will be
earned.
(b) On the first business day of July of each year, Options shall be
granted to each Non-Employee Director who, during the applicable Second
Election Period, filed with the Committee or its designee a written irrevocable
election to receive Options in lieu of all or a portion of such Non-Employee
Director's Semi-Annual Retainer payable in July of such year. The Second
Election Period shall end on or before December 31 of the calendar year
immediately preceding the year in which the Non-Employee Director's Annual
Retainer will be earned.
Section 8.2. Number and Terms of Options. The number of Shares subject to
------------ ----------------------------
an Option granted pursuant to this Article 8 shall be the number of whole
Shares equal to (i) the product of three and one-third, times the portion of
the Annual Retainer which the Non-Employee Director has elected pursuant to
Section 8.1 shall be payable in Options, divided by (ii) the Fair Market Value
per Share on the Option Grant Date. In determining the number of Shares
subject to an Option, any fraction of a Share shall be rounded up to the next
whole number of Shares. The purchase price per Share under each Option granted
pursuant to this Article 8 shall be 100% of the Fair Market Value per Share on
the Option Grant Date.
Section 8.3. Exercise of Options. Each Option shall be fully exercisable
------------ --------------------
on and after that date which is six months after the Option Grant Date and,
subject to Article 9, shall not be exercisable prior to such date. An
optionee's death, disability, retirement or other termination of directorship
or failure to be reelected as a director shall not shorten the term of any
outstanding option. In no event shall the period of time over which the Option
may be exercised exceed ten years from the Option Grant Date. An Option, or
portion thereof, may be exercised in whole or in part only with respect to
whole Shares.
Shares shall be issued to the Optionee pursuant to the exercise of an
Option only upon receipt by the Company from the Optionee of payment in full
either in cash or by surrendering (or attesting to the ownership of) Shares
together with proof acceptable to the Committee that such Shares, if acquired
by the Optionee pursuant to a previous option exercise, have been owned by the
Optionee for at least six months prior to the date of exercise of the Option,
or a combination of cash and Shares, in an amount or having a combined value
equal to the aggregate purchase price for the Shares subject to the Option or
portion thereof being exercised. The value of owned Shares submitted (directly
or by attestation) in full or partial payment for the Shares purchased upon
exercise of an Option shall be equal to the aggregate Fair Market Value of such
owned Shares on the date of the exercise of such Option.
ARTICLE 9 - Change in Control
Section 9.1. Change in Control. Upon the occurrence of a Change in
------------ ------------------
Control, any and all outstanding Options shall become immediately exercisable.
30
<PAGE> 5
ARTICLE 10 - Amendment and Termination
Section 10.1. Amendment, Suspension or Early Termination. The Board may
------------- -------------------------------------------
suspend or terminate the Plan at any time. In addition, the Board may, from
time to time, amend the Plan in any manner but may not, without shareowner
approval, adopt any amendment that would require shareowner approval under
applicable rules of the New York Stock Exchange or in order for the Plan or
transactions thereunder to qualify for the exemptions provided by Rule 16b-3
under the Exchange Act, as the same may be amended from time to time. No
action authorized by this Article shall adversely change the terms and
conditions of an outstanding Option without the Optionee's consent.
Section 10.2. Expiration. Unless earlier terminated by the Board, the
------------- -----------
Plan shall expire on the tenth anniversary of its effective date. No Options
may be granted under the Plan thereafter, but Options granted prior thereto
shall continue to be exercisable and may be exercised according to their terms.
ARTICLE 11 - Adjustment Provisions
Section 11.1. Change in Corporate Structure Affecting Shares. If the
------------- -----------------------------------------------
Company shall at any time change the number of issued Shares without new
consideration to the Company (such as by stock dividend, stock split,
recapitalization, reorganization, exchange of shares, liquidation, combination
or other change in corporate structure affecting the Shares) or make a
distribution of cash or property which has a substantial impact on the value of
issued Shares, the total number of Shares reserved for issuance under the Plan
shall be appropriately adjusted and the number of Shares covered by each
outstanding Option and the purchase price per Share under each outstanding
Option and the number of shares underlying Options to be issued annually
pursuant to Section 8.1 shall be adjusted so that the aggregate consideration
payable to the Company and the value of each such Option shall not be changed.
Section 11.2. Certain Reorganizations. Notwithstanding any other
------------- ------------------------
provision of the Plan, and without affecting the number of Shares reserved or
available hereunder, the Committee shall authorize the issuance, continuation
or assumption of outstanding Options or provide for other equitable adjustments
after changes in the Shares resulting from any merger, consolidation, sale of
assets, acquisition of property or stock, recapitalization, reorganization or
similar occurrence in which the Company is the continuing or surviving
corporation, upon such terms and conditions as it may deem necessary to
preserve Optionees' rights under the Plan.
Section 11.3. Acquisitions. In the case of any sale of assets, merger,
------------- -------------
consolidation or combination of the Company with or into another corporation
other than a transaction in which the Company is the continuing or surviving
corporation and which does not result in the outstanding Shares being converted
into or exchanged for different securities, cash or other property, or any
combination thereof (an "Acquisition"), any Optionee who holds an outstanding
Option shall have the right (subject to the provisions of the Plan and any
limitation applicable to the Option) thereafter and during the term of the
Option, to receive upon exercise thereof the Acquisition Consideration (as
defined below) receivable upon the Acquisition by a holder of the number of
Shares which would have been obtained upon exercise of the Option or portion
thereof, as the case may be, immediately prior to the Acquisition. The term
"Acquisition Consideration" shall mean the kind and amount of shares of the
surviving or new corporation, cash, securities, evidence of indebtedness, other
property or any combination thereof receivable in respect of one Share of the
Company upon consummation of an Acquisition.
ARTICLE 12 - Effective Date
Section 12.3. Effective Date. The Plan shall be submitted to the
------------- ---------------
shareowners of the Company for approval and, if approved by the affirmative
vote of the holders of a majority of the Shares represented and entitled to
vote at the 1996 annual meeting of shareowners, shall become effective as of
the date of approval by
31
<PAGE> 6
the shareowners. If shareowner approval is not obtained at the 1996 annual
meeting of shareowners, the Plan shall be null and void.
ARTICLE 13 - Miscellaneous
Section 13.1. Compliance with SEC Regulations. It is the Company's intent
------------- --------------------------------
that the Plan comply in all respects with Rule 16b-3 of the Exchange Act, and
any regulations promulgated thereunder. If any provision of the Plan is found
not to be in compliance with such rule, the provision shall be deemed null and
void. All grants and exercises of Options under the Plan shall be executed in
accordance with the requirements of Section 16 of the Exchange Act, as amended
and any regulations promulgated thereunder. To the extent that any of the
provisions contained herein do not conform with Rule 16b-3 of the Exchange Act
or any amendments thereto or any successor regulation, then the Committee may
make such modifications so as to conform the Plan and any Options granted
thereunder to the Rule's requirements.
Section 13.2. Right to Service. Except as provided in the Plan, no
------------- -----------------
Non-Employee Director shall have any claim or right to be granted an Option
under the Plan. Neither the Plan nor any action pursuant thereto shall be
construed as giving any Non-Employee Director a right to be retained in the
service of the Company. The adoption of this Plan shall not affect any other
compensation, retirement or other benefit plan or program in effect for the
Company.
Section 13.3. Validity. In the event that any provision of the Plan or
------------- ---------
any related Stock Option Award Notice is held to be invalid, void or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of the Plan or any related Stock Option Award
Notice.
Section 13.4. Inurement of Rights and Obligations. The rights and
------------- ------------------------------------
obligations under the Plan and any related agreements shall inure to the
benefit of, and shall be binding upon the Company, its successors and assigns,
and the Non-Employee Directors and their beneficiaries.
Section 13.5. Titles. Titles are provided herein for convenience only and
------------- -------
are not to serve as a basis for interpretation or construction of the Plan.
Section 13.6. Governing Law. The Plan shall be construed, governed and
------------- --------------
enforced in accordance with the law of Tennessee, except as such laws are
preempted by applicable federal law.
32
<PAGE> 1
EXHIBIT 11.01
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
Computation of Earnings Per Common Share
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Second Quarter First Six Months
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net earnings $ 112 $ 158 $ 224 $ 290
===== ===== ===== =====
Primary earnings per share
Average number of common shares outstanding 78.7 82.5 79.2 82.8
Common share equivalents(1) 0.9 0.7 0.9 0.6
----- ----- ----- -----
Average number of common shares and
share equivalents 79.6 83.2 80.1 83.4
===== ===== ===== =====
Primary earnings per share $1.41 $1.90 $2.80 $3.48
===== ===== ===== =====
Fully diluted earnings per share
Average number of common shares outstanding 78.8 82.5 79.2 82.8
Common share equivalents(1) 0.8 0.7 0.9 0.8
----- ----- ----- -----
Average number of common shares and
share equivalents 79.6 83.2 80.1 83.6
===== ===== ===== =====
Fully diluted earnings per share $1.41 $1.90 $2.80 $3.47
===== ===== ===== =====
</TABLE>
- - - -----------
(1) Common share equivalents of the Company represent the effect of dilutive
stock options outstanding during the period.
33
<PAGE> 1
EXHIBIT 12.01
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
Computation of Ratios of Earnings to Fixed Charges
(Dollars in millions)
<TABLE>
<CAPTION>
Second Quarter First Six Months
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Earnings before provision for income taxes $177 $255 $355 $468
Add:
Interest expense 20 20 35 39
Rental expense (1) 5 8 10 11
Amortization of capitalized interest 3 3 7 6
---- ---- ---- ----
Earnings as adjusted $205 $286 $407 $524
==== ==== ==== ====
Fixed charges:
Interest expense $ 20 $ 20 $ 35 $ 39
Rental expense (1) 5 8 10 11
Capitalized interest 4 2 10 5
---- ---- ---- ----
Total fixed charges $ 29 $ 30 $ 55 $ 55
==== ==== ==== ====
Ratio of earnings to fixed charges 7.1x 9.5x 7.4x 9.5x
==== ==== ==== ====
</TABLE>
- - - -------------
(1) For all periods presented, interest component of rental expense is
estimated to equal one-third of such expense.
34
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF EASTMAN CHEMICAL COMPANY FOR THE SIX MONTHS ENDED JUNE
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 59
<SECURITIES> 0
<RECEIVABLES> 852 <F1>
<ALLOWANCES> 0
<INVENTORY> 454
<CURRENT-ASSETS> 1,490
<PP&E> 7,069
<DEPRECIATION> 3,873
<TOTAL-ASSETS> 5,015
<CURRENT-LIABILITIES> 724
<BONDS> 1,425
0
0
<COMMON> 1
<OTHER-SE> 1,566
<TOTAL-LIABILITY-AND-EQUITY> 5,015
<SALES> 2,502
<TOTAL-REVENUES> 2,502
<CGS> 1,862
<TOTAL-COSTS> 1,862
<OTHER-EXPENSES> 259
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 355
<INCOME-TAX> 131
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224
<EPS-PRIMARY> 2.80
<EPS-DILUTED> 2.80
<FN>
<F1>ASSET VALUES REPRESENT NET AMOUNTS.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.01
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
Supplemental Business Organization Information
1996 Change From 1995
<TABLE>
<CAPTION>
Second Quarter First Six Months
% Change Operating % Change Operating
Sales Volume Earnings* Sales Volume Earnings*
<S> <C> <C> <C> <C> <C> <C>
Performance Segment
Container Plastics (16)% (4)% -- (2)% 1 % --
Fibers 4 % (4)% ++ 10 % 3 % ++
Coatings, Inks & Resins 5 % 7 % - (1)% - % --
Fine Chemicals 2 % 4 % ++ 1 % 1 % Sm
Performance Chemicals 2 % (1)% ++ (2)% (6)% ++
Specialty Packaging Plastics (2)% 4 % -- 2 % 1 % --
Performance Plastics (5)% (8)% ++ (4)% (7)% -
Total Segment (5)% (2)% (23)% - % (1)% (14)%
----- ----- ----- ----- ----- -----
Industrial Segment
Industrial Intermediates (6)% 6 % -- (3)% 5 % --
Flexible Plastics (19)% (3)% -- (17)% 1 % --
Total Segment (10)% 4 % (39)% (8)% 4 % (42)%
----- ----- ----- ----- ----- -----
Total Eastman (6)% (1)% (28)% (2)% - % (23)%
----- ----- ----- ----- ----- -----
</TABLE>
- - - --------------
* 0 = Change of approximately 0 - 2% (+ or -)
+ = Increase of approximately 2 - 10%
++ = Increase of greater than 10%
- = Decrease of approximately (2) - (10)%
-- = Decrease of greater than (10)%
Sm = Negligible change in dollar amount
Nm = Not meaningful
35
