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Eastman reports $2 million loss in 4th quarter

Sharon Hayes • Jan 29, 2009 at 12:00 AM

KINGSPORT — The economic downturn cut sharply into Eastman Chemical Co.’s bottom line during the fourth quarter of 2008, but the company posted an increase in profit for the full year.

Eastman on Thursday evening reported a loss of $2 million or a loss of 3 cents per diluted share for the fourth quarter vs. earnings from continuing operations of $101 million or $1.25 per share in the same period of 2007.

“The current global recession has resulted in an unprecedented decline in demand and negatively impacted our fourth quarter results,” said Eastman Chairman and CEO Brian Ferguson.

However, he said the actions the company has taken in the past five years along with its recent cost-cutting measures have positioned Eastman to “weather the current storm and rebound decisively when demand recovers.”

The fourth quarter 2008 results include $24 million in asset impairments and restructuring charges from completion of restructuring work at Eastman’s South Carolina facility, as well as charges related to a corporate severance program, other operating income of $16 million from the sale of mineral rights at one of its manufacturing sites, and $1 million in accelerated depreciation costs.

Fourth quarter 2007 results included $12 million in accelerated depreciation costs.

Excluding one-time items, fourth quarter 2008 earnings were 5 cents per diluted share, and fourth quarter 2007 earnings from continuing operations were $1.27 per share.

Sales revenue fell 23 percent to $1.3 billion in the fourth quarter 2008 vs. the same period in 2007.

Meanwhile, operating earnings for the fourth quarter 2008 were $5 million vs. $144 million in the same period of 2007.

Excluding one-time items, operating earnings in the 2008 fourth quarter were $14 million vs. $152 million in the 2007 fourth quarter.

In addition to the recession, the company was hit with higher raw material and energy costs. In the fourth quarter, those costs increased by $25 million vs. the same period of 2007.

For the full year 2008, Eastman posted earnings from continuing operations of $328 million or $4.31 per diluted share vs. $321 million or $3.84 per share in 2007.

Excluding one-time items in both years, the company reported earnings from continuing operations of $4.50 per diluted share in 2008, down from $5.06 per share in 2007.

Sales revenue for full year 2008 totaled $6.7 billion, down 1 percent from 2007.

Meanwhile operating earnings for 2008 were $519 million vs. $504 million in 2007.

Eastman’s raw material and energy costs increased by $600 million in 2008 vs. 2007.

In 2008, the company generated $653 million in cash from operating activities vs. $732 million the year before. Eastman repurchased $501 million in shares during 2008, while net debt totaled $1.1 billion at the end of the year.

Looking forward, Ferguson said Eastman expects weak demand to continue in the first quarter of 2009. But he said the company’s capacity utilization “likely reached its lowest point in December.”

He said Eastman expects its capacity utilization to improve through the first quarter due to a modest increase in demand.

“As a result, we expect our first quarter earnings per share to be slightly higher than fourth quarter earnings per share excluding gains and charges,” Ferguson said.

Eastman’s stock, traded on the New York Stock Exchange under the symbol “EMN,” closed Thursday at $27.34, down $1.40 for the day.

The Kingsport-based company manufactures and markets chemicals, fibers and plastics, and employs 10,500 people worldwide, including about 7,000 in Kingsport.

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