(Mark
One)
|
|
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended September 30, 2006
|
|
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.)
|
|
200
South Wilcox Drive
|
||
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
by check mark whether the registrant is a large accelerated filer,
an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the
Exchange Act. (check one);
Large
accelerated filer [X] Accelerated filer [ ] Non-accelerated filer
[
]
|
Indicate
by check mark whether the registrant is a shell company (as defined
in
Rule 12b-2 of the Exchange Act) YES [ ] NO
[X]
|
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
|
||
Class
|
Number
of Shares Outstanding at September 30, 2006
|
|
Common
Stock, par value $0.01 per share
|
82,285,145
|
|
(including
rights to purchase shares of Common Stock or Participating Preferred
Stock)
|
ITEM
|
PAGE
|
1.
|
Financial
Statements
|
|
3
|
||
|
4
|
|
|
5
|
|
|
6
|
|
2.
|
|
27
|
3.
|
|
46
|
4.
|
|
47
|
1.
|
|
48
|
1A.
|
48
|
|
2.
|
|
49
|
6.
|
|
49
|
|
5001
|
Third
Quarter
|
First
Nine Months
|
|||||||
(Dollars
in millions, except per share amounts)
|
2006
|
2005
|
2006
|
2005
|
||||
Sales
|
$
|
1,966
|
$
|
1,816
|
$
|
5,698
|
$
|
5,330
|
Cost
of sales
|
1,650
|
1,464
|
4,701
|
4,205
|
||||
Gross
profit
|
316
|
352
|
997
|
1,125
|
||||
Selling,
general and administrative expenses
|
105
|
108
|
316
|
339
|
||||
Research
and development expenses
|
40
|
42
|
126
|
120
|
||||
Asset
impairments and restructuring charges, net
|
13
|
4
|
23
|
23
|
||||
Other
operating income
|
--
|
--
|
--
|
(2)
|
||||
Operating
earnings
|
158
|
198
|
532
|
645
|
||||
Interest
expense, net
|
21
|
23
|
62
|
77
|
||||
Income
from equity investment in Genencor
|
--
|
--
|
--
|
(173)
|
||||
Early
debt extinguishment costs
|
--
|
--
|
--
|
46
|
||||
Other
(income) charges, net
|
1
|
(2)
|
(2)
|
(3)
|
||||
Earnings
before income taxes
|
136
|
177
|
472
|
698
|
||||
Provision
for income taxes
|
41
|
54
|
158
|
207
|
||||
Net
earnings
|
$
|
95
|
$
|
123
|
$
|
314
|
$
|
491
|
Earnings
per share
|
||||||||
Basic
|
$
|
1.16
|
$
|
1.51
|
$
|
3.84
|
$
|
6.10
|
Diluted
|
$
|
1.15
|
$
|
1.50
|
$
|
3.79
|
$
|
6.01
|
Comprehensive
Income
|
||||||||
Net
earnings
|
$
|
95
|
$
|
123
|
$
|
314
|
$
|
491
|
Other
comprehensive income (loss)
|
||||||||
Change
in cumulative translation adjustment
|
(8)
|
(5)
|
32
|
(84)
|
||||
Change
in unrealized gains (losses) on investments, net of tax
|
--
|
5
|
(1)
|
18
|
||||
Change
in unrealized gains (losses) on derivative instruments, net of
tax
|
(6)
|
--
|
5
|
1
|
||||
Total
other comprehensive income (loss)
|
(14)
|
--
|
36
|
(65)
|
||||
Comprehensive
income
|
$
|
81
|
$
|
123
|
$
|
350
|
$
|
426
|
Retained
Earnings
|
||||||||
Retained
earnings at beginning of period
|
$
|
2,070
|
$
|
1,806
|
$
|
1,923
|
$
|
1,509
|
Net
earnings
|
95
|
123
|
314
|
491
|
||||
Cash
dividends declared
|
(36)
|
(36)
|
(108)
|
(107)
|
||||
Retained
earnings at end of period
|
$
|
2,129
|
$
|
1,893
|
$
|
2,129
|
$
|
1,893
|
September
30,
|
December
31,
|
|||
(Dollars
in millions, except per share amounts)
|
2006
|
2005
|
||
(Unaudited)
|
||||
Assets
|
|
|||
Current
assets
|
||||
Cash
and cash equivalents
|
$
|
430
|
$
|
524
|
Trade
receivables, net of allowance of $16 and $20
|
758
|
575
|
||
Miscellaneous
receivables
|
81
|
81
|
||
Inventories
|
702
|
671
|
||
Other
current assets
|
56
|
73
|
||
Current
assets held for sale
|
132
|
--
|
||
Total
current assets
|
2,159
|
1,924
|
||
Properties
|
||||
Properties
and equipment at cost
|
8,763
|
9,597
|
||
Less:
Accumulated depreciation
|
5,707
|
6,435
|
||
Net
properties
|
3,056
|
3,162
|
||
Goodwill
|
313
|
312
|
||
Other
noncurrent assets
|
358
|
375
|
||
Noncurrent
assets held for sale
|
180
|
--
|
||
Total
assets
|
$
|
6,066
|
$
|
5,773
|
Liabilities
and Stockholders’ Equity
|
||||
Current
liabilities
|
||||
Payables
and other current liabilities
|
$
|
1,041
|
$
|
1,047
|
Borrowings
due within one year
|
3
|
4
|
||
Current
liabilities related to assets held for sale
|
15
|
--
|
||
Total
current liabilities
|
1,059
|
1,051
|
||
Long-term
borrowings
|
1,586
|
1,621
|
||
Deferred
income tax liabilities
|
264
|
317
|
||
Post-employment
obligations
|
1,058
|
1,017
|
||
Other
long-term liabilities
|
151
|
155
|
||
Long-term
liabilities related to assets held for sale
|
46
|
--
|
||
Total
liabilities
|
4,164
|
4,161
|
||
Stockholders’
equity
|
||||
Common
stock ($0.01 par value - 350,000,000 shares authorized;
shares
issued
- 90,214,704 and 89,566,115 for 2006 and 2005,
respectively)
|
1
|
1
|
||
Additional
paid-in capital
|
368
|
320
|
||
Retained
earnings
|
2,129
|
1,923
|
||
Accumulated
other comprehensive loss
|
(164)
|
(200)
|
||
2,334
|
2,044
|
|||
Less:
Treasury stock at cost (8,036,330 shares for 2006 and 8,034,901 shares
for
2005)
|
432
|
432
|
||
Total
stockholders’ equity
|
1,902
|
1,612
|
||
Total
liabilities and stockholders’ equity
|
$
|
6,066
|
$
|
5,773
|
First
Nine Months
|
||||
(Dollars
in millions)
|
2006
|
2005
|
||
Cash
flows from operating activities
|
||||
Net
earnings
|
$
|
314
|
$
|
491
|
|
||||
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
||||
Income
from equity investment in Genencor
|
--
|
(173)
|
||
Depreciation
and amortization
|
226
|
229
|
||
Gain
on sale of assets
|
(5)
|
--
|
||
Early
debt extinguishment costs
|
--
|
46
|
||
Asset
impairments
|
20
|
1
|
||
Provision
for deferred income taxes
|
49
|
130
|
||
Changes
in operating assets and liabilities:
|
||||
(Increase)
decrease in receivables
|
(189)
|
(35)
|
||
(Increase)
decrease in inventories
|
(134)
|
(141)
|
||
Increase
(decrease) in trade payables
|
50
|
(5)
|
||
Increase
(decrease) in liabilities for employee benefits and incentive
pay
|
(60)
|
(108)
|
||
Other
items, net
|
(38)
|
(58)
|
||
Net
cash provided by operating activities
|
233
|
377
|
||
Cash
flows from investing activities
|
||||
Proceeds
from sale of equity investment in Genencor, net
|
--
|
417
|
||
Additions
to properties and equipment
|
(279)
|
(224)
|
||
Proceeds
from sale of assets and investments
|
12
|
50
|
||
Additions
to capitalized software
|
(12)
|
(8)
|
||
Other
items, net
|
--
|
(5)
|
||
Net
cash provided by (used in) investing activities
|
(279)
|
230
|
||
Cash
flows from financing activities
|
||||
Net
increase (decrease) in commercial paper, credit facility and other
borrowings
|
33
|
(84)
|
||
Repayment
of borrowings
|
--
|
(544)
|
||
Dividends
paid to stockholders
|
(108)
|
(106)
|
||
Proceeds
from stock option exercises and other items
|
25
|
91
|
||
Net
cash provided by (used in) financing activities
|
(50)
|
(643)
|
||
Effect
of exchange rate changes on cash and cash equivalents
|
2
|
(3)
|
||
Net
change in cash and cash equivalents
|
(94)
|
(39)
|
||
Cash
and cash equivalents at beginning of period
|
524
|
325
|
||
Cash
and cash equivalents at end of period
|
$
|
430
|
$
|
286
|
ITEM
|
Page
|
7
|
|
7
|
|
7
|
|
8
|
|
8
|
|
9
|
|
9
|
|
10
|
|
11
|
|
11
|
|
12
|
|
14
|
|
14
|
|
15
|
|
16
|
|
16
|
|
17
|
|
21
|
|
23
|
|
24
|
|
26
|
2. |
September
30,
|
December
31,
|
|||
(Dollars
in millions)
|
2006
|
2005
|
||
At
FIFO or average cost (approximates current cost)
|
||||
Finished
goods
|
$
|
672
|
$
|
664
|
Work
in process
|
227
|
207
|
||
Raw
materials and supplies
|
378
|
247
|
||
Total
inventories
|
1,277
|
1,118
|
||
LIFO
Reserve
|
(466)
|
(447)
|
||
Inventories
before assets held for sale
|
811
|
671
|
||
Assets
held for sale (1)
|
(109)
|
--
|
||
Total
inventories
|
$
|
702
|
$
|
671
|
(1) |
For
more information regarding assets held for sale, see Note 5 to the
Company's unaudited consolidated financial statements.
|
September
30,
|
||
(Dollars
in millions)
|
2006
|
|
Current
assets
|
||
Trade
receivables, net
|
$
|
23
|
Inventories
|
109
|
|
Total
current assets
|
132
|
|
Non-current
assets
|
||
Properties
and Equipment, net
|
174
|
|
Other
non-current assets
|
6
|
|
Total
non-current assets
|
180
|
|
Total
assets
|
$
|
312
|
Current
liabilities
|
||
Payables
and other current liabilities, net
|
$
|
15
|
Total
current liabilities
|
15
|
|
Long-term
liabilities
|
||
Deferred
income tax liabilities
|
40
|
|
Other
long term liabilities
|
6
|
|
Total
long-term liabilities
|
46
|
|
Total
liabilities
|
$
|
61
|
September
30,
|
December
31,
|
|||
(Dollars
in millions)
|
2006
|
2005
|
||
Trade
creditors
|
$
|
590
|
$
|
534
|
Accrued
payrolls, vacation, and variable-incentive compensation
|
120
|
154
|
||
Accrued
taxes
|
--
|
49
|
||
Post-employment
obligations
|
65
|
134
|
||
Interest
payable
|
26
|
31
|
||
Bank
overdrafts
|
89
|
10
|
||
Other
|
166
|
135
|
||
Payables
and other current liabilities before assets held for sale
|
1,056
|
1,047
|
||
Assets
held for sale (1)
|
(15)
|
--
|
||
Total
payables and other current liabilities
|
$
|
1,041
|
$
|
1,047
|
Third
Quarter
|
First
Nine Months
|
|||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
||||||
Provision
for income
taxes
|
$
|
41
|
$
|
54
|
(24)%
|
$
|
158
|
$
|
207
|
(24)%
|
||
Effective
tax rate
|
30
%
|
31
%
|
34
%
|
30
%
|
8. |
September
30,
|
December
31,
|
|||
(Dollars
in millions)
|
2006
|
2005
|
||
Borrowings
consisted of:
|
||||
3
1/4% notes due 2008
|
$
|
72
|
$
|
72
|
7%
notes due 2012
|
141
|
142
|
||
6.30%
notes due 2018
|
182
|
185
|
||
7
1/4% debentures due 2024
|
497
|
497
|
||
7
5/8% debentures due 2024
|
200
|
200
|
||
7.60%
debentures due 2027
|
297
|
297
|
||
Credit
facility borrowings
|
182
|
214
|
||
Other
|
18
|
18
|
||
Total
borrowings
|
1,589
|
1,625
|
||
Borrowings
due within one year
|
(3)
|
(4)
|
||
Long-term
borrowings
|
$
|
1,586
|
$
|
1,621
|
(dollars
in millions)
|
Book
Value
|
|
3
1/4% notes due 2008
|
$
|
178
|
6.30%
notes due 2018
|
68
|
|
7%
notes due 2012
|
254
|
|
Total
|
$
|
500
|
(Dollars
in millions)
|
Balance
at
January
1, 2005
|
Provision/
Adjustments
|
Non-cash
Reductions
|
Cash
Reductions
|
Balance
at
December
31, 2005
|
|||||
Non-cash
charges
|
$
|
--
|
$
|
12
|
$
|
(12)
|
$
|
--
|
$
|
--
|
Severance
costs
|
26
|
3
|
--
|
(26)
|
3
|
|||||
Site
closure and other restructuring costs
|
9
|
18
|
(1)
|
(19)
|
7
|
|||||
Total
|
$
|
35
|
$
|
33
|
$
|
(13)
|
$
|
(45)
|
$
|
10
|
Balance
at
January
1, 2006
|
Provision/
Adjustments
|
Non-cash
Reductions
|
Cash
Reductions
|
Balance
at
September
30, 2006
|
||||||
Non-cash
charges
|
$
|
--
|
$
|
21
|
$
|
(21)
|
$
|
--
|
$
|
--
|
Severance
costs
|
3
|
--
|
--
|
(1)
|
2
|
|||||
Site
closure and other restructuring costs
|
7
|
2
|
--
|
--
|
9
|
|||||
Total
|
$
|
10
|
$
|
23
|
$
|
(21)
|
$
|
(1)
|
$
|
11
|
Summary
of Components of Net Periodic Benefit Costs
|
||||||||
Third
Quarter
|
First
Nine Months
|
|||||||
(Dollars
in millions)
|
2006
|
2005
|
2006
|
2005
|
||||
Service
cost
|
$
|
11
|
$
|
11
|
$
|
33
|
$
|
32
|
Interest
cost
|
21
|
20
|
61
|
59
|
||||
Expected
return on assets
|
(21)
|
(21)
|
(65)
|
(59)
|
||||
Amortization
of:
|
||||||||
Prior
service credit
|
(3)
|
(2)
|
(7)
|
(8)
|
||||
Actuarial
loss
|
9
|
9
|
28
|
27
|
||||
Net
periodic benefit cost
|
$
|
17
|
$
|
17
|
$
|
50
|
$
|
51
|
Summary
of Components of Net Periodic Benefit Costs
|
||||||||
Third
Quarter
|
First
Nine Months
|
|||||||
(Dollars
in millions)
|
2006
|
2005
|
2006
|
2005
|
||||
Service
cost
|
$
|
2
|
$
|
2
|
$
|
6
|
$
|
6
|
Interest
cost
|
10
|
11
|
31
|
32
|
||||
Amortization
of:
|
||||||||
Prior
service credit
|
(5)
|
(6)
|
(17)
|
(17)
|
||||
Actuarial
loss
|
3
|
5
|
11
|
15
|
||||
Net
periodic benefit cost
|
$
|
10
|
$
|
12
|
$
|
31
|
$
|
36
|
13. |
(Dollars
in millions)
|
Common
Stock at Par Value
$
|
Paid-in
Capital
$
|
Retained
Earnings
$
|
Accumulated
Other Comprehensive Income (Loss)
$
|
Treasury
Stock at Cost
$
|
Total
Stockholders' Equity
$
|
Balance
at December 31, 2005
|
1
|
320
|
1,923
|
(200)
|
(432)
|
1,612
|
Net
Earnings
|
--
|
--
|
314
|
--
|
--
|
314
|
Cash
Dividends Declared
|
--
|
--
|
(108)
|
--
|
--
|
(108)
|
Other
Comprehensive Income
|
--
|
--
|
--
|
36
|
--
|
36
|
Stock
Option Exercises and Other Items (1)
|
--
|
48
|
--
|
--
|
--
|
48
|
Balance
at September 30, 2006
|
1
|
368
|
2,129
|
(164)
|
(432)
|
1,902
|
(Dollars
in millions)
|
Cumulative
Translation Adjustment
|
Unfunded
Minimum Pension Liability
|
Unrealized
Gains (Losses) on Derivative Instruments
|
Unrealized
Gains (Losses) on Investments
|
Accumulated
Other Comprehensive Income (Loss)
|
|||||
Balance
at December 31, 2004
|
$
|
155
|
$
|
(248)
|
$
|
(8)
|
$
|
(2)
|
$
|
(103)
|
Period
change
|
(94)
|
(7)
|
3
|
1
|
(97)
|
|||||
Balance
at December 31, 2005
|
61
|
(255)
|
(5)
|
(1)
|
(200)
|
|||||
Period
change
|
32
|
--
|
5
|
(1)
|
36
|
|||||
Balance
at September 30, 2006
|
$
|
93
|
$
|
(255)
|
$
|
--
|
$
|
(2)
|
$
|
(164)
|
Third
Quarter
|
First
Nine Months
|
||||||
2006
|
2005
|
2006
|
2005
|
||||
Shares
used for earnings per share calculation:
|
|||||||
Basic
|
82.1
|
81.3
|
81.8
|
80.5
|
|||
Diluted
|
83.1
|
82.0
|
82.8
|
81.7
|
Third
Quarter
|
First
Nine Months
|
||||||||
(Dollars
and shares in millions, except per share amounts)
|
2006
|
Proforma
2005
|
2006
|
Proforma
2005
|
|||||
Net
earnings, as reported
|
$
|
95
|
$
|
123
|
$
|
314
|
$
|
491
|
|
Add:
Stock-based employee compensation expense
|
|||||||||
included
in net earnings, as reported
|
2
|
--
|
9
|
7
|
|||||
Deduct:
Total additional stock-based employee compensation cost, net of tax,
that
would have been included in net earnings under fair value
method
|
2
|
1
|
9
|
10
|
|||||
Pro
forma net earnings
|
$
|
95
|
$
|
122
|
$
|
314
|
$
|
488
|
|
Basic
earnings per share
|
As
reported
|
$
|
1.16
|
$
|
1.51
|
$
|
3.84
|
$
|
6.10
|
Pro
forma
|
$
|
N.A.
|
$
|
1.50
|
$
|
N.A.
|
$
|
6.06
|
|
Diluted
earnings per share
|
As
reported
|
$
|
1.15
|
$
|
1.50
|
$
|
3.79
|
$
|
6.01
|
Pro
forma
|
$
|
N.A.
|
$
|
1.49
|
$
|
N.A.
|
$
|
5.99
|
Assumptions
|
Third
Quarter 2006
|
Third
Quarter 2005
|
First
Nine Months 2006
|
First
Nine Months 2005
|
|||
Exercise
Price
|
$52.18
|
--
|
$56.25
|
$56.52
|
|||
Expected
term years
|
5.00
|
--
|
4.41
|
6.00
|
|||
Expected
volatility rate
|
22.58%
|
--
|
22.51%
|
27.90%
|
|||
Expected
dividend yield
|
3.37%
|
--
|
3.13%
|
3.70%
|
|||
Average
risk-free interest rate
|
4.99%
|
--
|
5.02%
|
3.50%
|
|||
Expected
forfeiture rate
|
0.75%
|
--
|
0.75%
|
Actual
|
Stock
Options
|
Number
of Shares
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Life (years)
|
Aggregate
Intrinsic Value(1)
|
||
Outstanding
at 12/31/2005
|
6,616,803
|
$
|
48.26
|
|||
Grants
|
110,838
|
$
|
56.25
|
|||
Exercises
|
(542,506)
|
$
|
44.82
|
$
|
5,938,424
|
|
Cancelled/Forfeited/Expired
|
(228,226)
|
$
|
55.65
|
|||
Outstanding
at 9/30/2006
|
5,956,909
|
$
|
48.44
|
5.6
|
$
|
37,167,411
|
Exercisable
at 9/30/2006
|
4,173,751
|
$
|
47.12
|
4.3
|
$
|
32,447,135
|
Outstanding
at 12/31/2004
|
8,155,148
|
$
|
46.86
|
|||
Grants
|
64,788
|
$
|
56.52
|
|||
Exercises
|
(2,159,797)
|
$
|
43.27
|
$
|
32,982,186
|
|
Cancelled/Forfeited/Expired
|
(469,135)
|
$
|
63.65
|
|||
Outstanding
at 9/30/2005
|
5,591,004
|
$
|
46.93
|
5.4
|
$
|
15,808,530
|
Exercisable
at 9/30/2005
|
4,628,774
|
$
|
47.24
|
4.8
|
$
|
13,758,499
|
Third
Quarter
|
||||
(Dollars
in millions)
|
2006
|
2005
|
||
Sales
by Segment
|
||||
CASPI
|
$
|
367
|
$
|
333
|
Fibers
|
228
|
228
|
||
PCI
|
457
|
428
|
||
Performance
Polymers
|
707
|
646
|
||
SP
|
207
|
179
|
||
Total
Sales by Segment
|
1,966
|
1,814
|
||
Other
|
--
|
2
|
||
Total
Sales
|
$
|
1,966
|
$
|
1,816
|
First
Nine Months
|
||||
(Dollars
in millions)
|
2006
|
2005
|
||
Sales
by Segment
|
||||
CASPI
|
$
|
1,078
|
$
|
977
|
Fibers
|
696
|
633
|
||
PCI
|
1,321
|
1,214
|
||
Performance
Polymers
|
2,007
|
1,944
|
||
SP
|
596
|
536
|
||
Total
Sales by Segment
|
5,698
|
5,304
|
||
Other
|
--
|
26
|
||
Total
Sales
|
$
|
5,698
|
$
|
5,330
|
Third
Quarter
|
||||
(Dollars
in millions)
|
2006
|
2005
|
||
Operating
Earnings (Loss) (1)
|
||||
CASPI
(1)
|
$
|
53
|
$
|
63
|
Fibers
|
55
|
60
|
||
PCI
(1)
|
25
|
40
|
||
Performance
Polymers
|
17
|
32
|
||
SP
|
18
|
17
|
||
Total
Operating Earnings by Segment
|
168
|
212
|
||
Other
(1)
|
(10)
|
(14)
|
||
Total
Operating Earnings
|
$
|
158
|
$
|
198
|
(1) |
Operating
earnings (loss) for the following segments include asset impairments
and
restructuring charges: CASPI includes $1 million in third quarter
2005 for
previously closed manufacturing facilities; PCI includes $11 million
in
third quarter 2006 for the expected divestiture of the Arkansas facility
and Other includes $4 million for Cendian's shutdown of its business
activities.
|
First
Nine Months
|
||||
(Dollars
in millions)
|
2006
|
2005
|
||
Operating
Earnings (Loss) (1)
|
||||
CASPI
(2)
|
$
|
176
|
$
|
194
|
Fibers
|
182
|
155
|
||
PCI
(2)
|
113
|
128
|
||
Performance
Polymers
|
46
|
166
|
||
SP
|
50
|
59
|
||
Total
Operating Earnings by Segment
|
567
|
702
|
||
Other
(2)
|
(35)
|
(57)
|
||
Total
Operating Earnings
|
$
|
532
|
$
|
645
|
(2) |
Operating
earnings (loss) for the following segments include asset impairments
and
restructuring charges: CASPI includes $8 million and $3 million in
the
first nine months 2006 and 2005, respectively, for previously closed
manufacturing facilities; PCI includes $11 million and $4 million
in the
first nine months 2006 and 2005, respectively, for the expected
divestiture of the Arkansas facility and Other includes $4 million
and $16
million for the first nine months 2006 and 2005, respectively for
Cendian's shutdown of its business activities.
|
September
30,
|
December
31,
|
|||
(Dollars
in millions)
|
2006
|
2005
|
||
Assets
by Segment
|
||||
CASPI
|
$
|
1,509
|
$
|
1,393
|
Fibers
|
612
|
675
|
||
PCI
|
1,541
|
1,589
|
||
Performance
Polymers
|
1,318
|
1,416
|
||
SP
|
772
|
689
|
||
Total
Assets by Segment Before Assets Held for Sale
|
5,752
|
5,762
|
||
Other
|
2
|
11
|
||
Assets
Held for Sale (3)
|
312
|
--
|
||
Total
Assets
|
$
|
6,066
|
$
|
5,773
|
(3) |
For
more information regarding assets held for sale, see Note 5 to the
Company's unaudited consolidated financial statements.
|
19. |
ITEM
|
Page
|
27
|
|
28
|
|
29
|
|
32
|
|
37
|
|
38
|
|
41
|
|
43
|
|
44
|
|
Third
Quarter
|
Volume
Effect
|
Price
Effect
|
Product
Mix
Effect
|
Exchange
Rate
Effect
|
||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
|||||||||||
Sales
|
$
|
1,966
|
$
|
1,816
|
8
%
|
--
%
|
9
%
|
(1)
%
|
--
%
|
First
Nine Months
|
Volume
Effect
|
Price
Effect
|
Product
Mix
Effect
|
Exchange
Rate
Effect
|
||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
|||||||||||
Sales
|
$
|
5,698
|
$
|
5,330
|
7
%
|
1
%
|
7
%
|
(1)
%
|
--
%
|
Third
Quarter
|
First
Nine Months
|
|||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
||||||
Gross
Profit
|
$
|
316
|
$
|
352
|
(10)
%
|
$
|
997
|
$
|
1,125
|
(11)
%
|
||
As
a percentage of sales
|
16%
|
19
%
|
17
%
|
21
%
|
Third
Quarter
|
First
Nine Months
|
|||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
||||||
Selling,
General and
|
||||||||||||
Administrative
Expenses
|
$
|
105
|
$
|
108
|
(3)
%
|
$
|
316
|
$
|
339
|
(7)
%
|
||
Research
and Development
|
||||||||||||
Expenses
|
40
|
42
|
(5)
%
|
126
|
120
|
5
%
|
||||||
$
|
145
|
$
|
150
|
(3)
%
|
$
|
442
|
$
|
459
|
(4)
%
|
|||
As
a percentage of sales
|
7
%
|
8
%
|
8
%
|
9
%
|
Third
Quarter
|
First
Nine Months
|
|||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
||||||
Gross
interest costs
|
$
|
28
|
$
|
27
|
$
|
84
|
$
|
91
|
||||
Less:
Capitalized interest
|
2
|
1
|
5
|
3
|
||||||||
Interest
expense
|
26
|
26
|
--
%
|
79
|
88
|
(10)
%
|
||||||
Interest
income
|
5
|
3
|
17
|
11
|
||||||||
Interest
expense, net
|
$
|
21
|
$
|
23
|
(9)
%
|
$
|
62
|
$
|
77
|
(19)
%
|
||
Third
Quarter
|
First
Nine Months
|
|||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
||||||
Other
(income)
|
$
|
(3)
|
$
|
(2)
|
$
|
(1)
|
$
|
(10)
|
$
|
(8)
|
$
|
(2)
|
Other
charges
|
4
|
--
|
4
|
8
|
5
|
3
|
||||||
Other
(income) charges, net
|
$
|
1
|
$
|
(2)
|
$
|
3
|
$
|
(2)
|
$
|
(3)
|
$
|
1
|
Third
Quarter
|
First
Nine Months
|
|||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
||||||
Provision
for income taxes
|
$
|
41
|
$
|
54
|
(24)%
|
$
|
158
|
$
|
207
|
(24)%
|
||
Effective
tax rate
|
30%
|
31%
|
34%
|
30%
|
CASPI
Segment
|
|||||||||||||||||
Third
Quarter
|
First
Nine Months
|
||||||||||||||||
Change
|
Change
|
||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
$
|
%
|
2006
|
2005
|
$
|
%
|
|||||||||
Sales
|
$
|
367
|
$
|
333
|
$
|
34
|
10
%
|
$
|
1,078
|
$
|
977
|
$
|
101
|
10
%
|
|||
Volume
effect
|
(2)
|
(1)%
|
5
|
--
%
|
|||||||||||||
Price
effect
|
34
|
10
%
|
96
|
10
%
|
|||||||||||||
Product
mix effect
|
--
|
--
%
|
6
|
1
%
|
|||||||||||||
Exchange
rate effect
|
2
|
1
%
|
(6)
|
(1)%
|
|||||||||||||
Operating
earnings
|
53
|
63
|
(10)
|
(16)%
|
176
|
194
|
(18)
|
(9)%
|
|||||||||
Asset
impairments and
|
|||||||||||||||||
restructuring
charges, net
|
--
|
1
|
(1)
|
8
|
3
|
5
|
|||||||||||
Other
operating income
|
--
|
--
|
--
|
--
|
(2)
|
2
|
Fibers
Segment
|
|||||||||||||||||
Third
Quarter
|
First
Nine Months
|
||||||||||||||||
Change
|
Change
|
||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
$
|
%
|
2006
|
2005
|
$
|
%
|
|||||||||
Sales
|
$
|
228
|
$
|
228
|
$
|
--
|
--
%
|
$
|
696
|
$
|
633
|
$
|
63
|
10
%
|
|||
Volume
effect
|
(6)
|
(3)
%
|
37
|
6
%
|
|||||||||||||
Price
effect
|
12
|
6
%
|
51
|
8
%
|
|||||||||||||
Product
mix effect
|
(6)
|
(3)
%
|
(24)
|
(4)
%
|
|||||||||||||
Exchange
rate effect
|
--
|
--
%
|
(1)
|
--
%
|
|||||||||||||
Operating
earnings
|
55
|
60
|
(5)
|
(8)
%
|
182
|
155
|
27
|
17
%
|
PCI
Segment
|
|||||||||||||||||
Third
Quarter
|
First
Nine Months
|
||||||||||||||||
Change
|
Change
|
||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
$
|
%
|
2006
|
2005
|
$
|
%
|
|||||||||
Sales
|
$
|
457
|
$
|
428
|
$
|
29
|
7
%
|
$
|
1,321
|
$
|
1,214
|
$
|
107
|
9
%
|
|||
Volume
effect
|
(1)
|
--
%
|
(5)
|
--
%
|
|||||||||||||
Price
effect
|
32
|
8
%
|
113
|
9
%
|
|||||||||||||
Product
mix effect
|
(3)
|
(1)%
|
1
|
--
%
|
|||||||||||||
Exchange
rate effect
|
1
|
--
%
|
(2)
|
--
%
|
|||||||||||||
Operating
earnings
|
25
|
40
|
(15)
|
(38)%
|
113
|
128
|
(15)
|
(12)%
|
|||||||||
Asset
impairments and
|
|||||||||||||||||
restructuring
charges, net
|
11
|
--
|
11
|
11
|
4
|
7
|
Performance
Polymers Segment
|
|||||||||
Third
Quarter
|
|||||||||
Change
|
|||||||||
(Dollars
in millions)
|
2006
|
2005
|
$
|
%
|
|||||
Total
sales
|
$
|
707
|
$
|
646
|
$
|
61
|
10
%
|
||
Sales
- assets held for sale
|
169
|
164
|
5
|
3
%
|
|||||
Sales
- continuing product lines
|
538
|
482
|
56
|
12
%
|
|||||
Volume
effect
|
(22)
|
(3)
%
|
|||||||
Price
effect
|
77
|
12
%
|
|||||||
Product
mix effect
|
(2)
|
--
%
|
|||||||
Exchange
rate effect
|
8
|
1
%
|
|||||||
Total
operating earnings
|
17
|
32
|
(15)
|
(47)
%
|
|||||
Operating
earnings - assets held for sale (1)
|
15
|
11
|
4
|
36
%
|
|||||
Operating
earnings - continuing product lines
|
2
|
21
|
(19)
|
(90)
%
|
|||||
First
Nine Months
|
|||||||||
Change
|
|||||||||
(Dollars
in millions)
|
2006
|
2005
|
$
|
%
|
|||||
Total
sales
|
$
|
2,007
|
$
|
1,944
|
$
|
63
|
3
%
|
||
Sales
- assets held for sale
|
517
|
442
|
75
|
17
%
|
|||||
Sales
- continuing product lines
|
1,490
|
1,502
|
(12)
|
(1)
%
|
|||||
Volume
effect
|
--
|
--
%
|
|||||||
Price
effect
|
58
|
3
%
|
|||||||
Product
mix effect
|
11
|
--
%
|
|||||||
Exchange
rate effect
|
(6)
|
--
%
|
|||||||
Total
operating earnings
|
46
|
166
|
(120)
|
(72)
%
|
|||||
Operating
earnings - assets held for sale (1)
|
52
|
56
|
(4)
|
(7)
%
|
|||||
Operating
earnings - continuing product lines
|
(6)
|
110
|
(116)
|
>(100)
%
|
|||||
SP
Segment
|
|||||||||||||||||
Third
Quarter
|
First
Nine Months
|
||||||||||||||||
Change
|
Change
|
||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
$
|
%
|
2006
|
2005
|
$
|
%
|
|||||||||
Sales
|
$
|
207
|
$
|
179
|
$
|
28
|
16
%
|
$
|
596
|
$
|
536
|
$
|
60
|
11
%
|
|||
Volume
effect
|
26
|
15
%
|
47
|
9
%
|
|||||||||||||
Price
effect
|
7
|
4
%
|
27
|
5
%
|
|||||||||||||
Product
mix effect
|
(5)
|
(3)
%
|
(9)
|
(2)
%
|
|||||||||||||
Exchange
rate effect
|
--
|
--
%
|
(5)
|
(1)
%
|
|||||||||||||
Operating
earnings
|
18
|
17
|
1
|
6
%
|
50
|
59
|
(9)
|
(15)%
|
Third
Quarter
|
||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
Volume
Effect
|
Price
Effect
|
Product
Mix
Effect
|
Exchange
Rate
Effect
|
|||||||
United
States and Canada
|
$
|
1,111
|
$
|
1,052
|
6
%
|
(3)
%
|
9
%
|
--
%
|
--
%
|
|||||
Europe,
Middle East, and Africa
|
371
|
332
|
12
%
|
2
%
|
9
%
|
(3)
%
|
4
%
|
|||||||
Asia
Pacific
|
243
|
235
|
3
%
|
(3)
%
|
9
%
|
(3)
%
|
--
%
|
|||||||
Latin
America
|
241
|
197
|
22
%
|
14
%
|
6
%
|
2
%
|
--
%
|
|||||||
$
|
1,966
|
$
|
1,816
|
8
%
|
--
%
|
9
%
|
(1)
%
|
--
%
|