(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, 2007
|
|
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 June
30, 2007
|
|
Common
Stock, par value $0.01 per share
|
84,045,690
|
|
ITEM
|
PAGE
|
1.
|
Financial
Statements
|
|
3
|
||
4
|
||
5
|
||
6
|
||
2.
|
21
|
|
3.
|
43
|
|
4.
|
43
|
1.
|
44
|
|
1A.
|
45
|
|
2.
|
45
|
|
4.
|
45
|
|
6.
|
46
|
47
|
Second
Quarter
|
First
Six Months
|
|||||||
(Dollars
in millions, except per share amounts)
|
2007
|
2006
|
2007
|
2006
|
||||
Sales
|
$
|
1,895
|
$
|
1,929
|
$
|
3,690
|
$
|
3,732
|
Cost
of sales
|
1,575
|
1,579
|
3,077
|
3,051
|
||||
Gross
profit
|
320
|
350
|
613
|
681
|
||||
Selling,
general and administrative expenses
|
113
|
113
|
214
|
211
|
||||
Research
and development expenses
|
37
|
44
|
73
|
86
|
||||
Asset
impairments and restructuring charges, net
|
2
|
3
|
23
|
10
|
||||
Operating
earnings
|
168
|
190
|
303
|
374
|
||||
Interest
expense, net
|
15
|
21
|
33
|
41
|
||||
Other
(income) charges, net
|
(3)
|
(2)
|
(6)
|
(3)
|
||||
Earnings
before income taxes
|
156
|
171
|
276
|
336
|
||||
Provision
for income taxes
|
51
|
57
|
94
|
117
|
||||
Net
earnings
|
$
|
105
|
$
|
114
|
$
|
182
|
$
|
219
|
Earnings
per share
|
||||||||
Basic
|
$
|
1.24
|
$
|
1.39
|
$
|
2.16
|
$
|
2.68
|
Diluted
|
$
|
1.22
|
$
|
1.37
|
$
|
2.13
|
$
|
2.64
|
Comprehensive
Income
|
||||||||
Net
earnings
|
$
|
105
|
$
|
114
|
$
|
182
|
$
|
219
|
Other
comprehensive income (loss)
|
||||||||
Change
in cumulative translation adjustment
|
13
|
23
|
9
|
40
|
||||
Change
in pension and other post employment benefits due to amortization,
net of
tax
|
(6)
|
--
|
(4)
|
--
|
||||
Change
in unrealized gains (losses) on investments, net of tax
|
2
|
8
|
1
|
11
|
||||
Change
in unrealized gains (losses) on derivative instruments, net of
tax
|
(4)
|
(1)
|
3
|
(1)
|
||||
Total
other comprehensive income
|
5
|
30
|
9
|
50
|
||||
Comprehensive
income
|
$
|
110
|
$
|
144
|
$
|
191
|
$
|
269
|
Retained
Earnings
|
||||||||
Retained
earnings at beginning of period
|
$
|
2,234
|
$
|
1,992
|
$
|
2,186
|
$
|
1,923
|
Net
earnings
|
105
|
114
|
182
|
219
|
||||
Adoption
of accounting standards
|
--
|
--
|
8
|
--
|
||||
Cash
dividends declared
|
(37)
|
(36)
|
(74)
|
(72)
|
||||
Retained
earnings at end of period
|
$
|
2,302
|
$
|
2,070
|
$
|
2,302
|
$
|
2,070
|
June
30,
|
December
31,
|
|||
(Dollars
in millions, except per share amounts)
|
2007
|
2006
|
||
(Unaudited)
|
||||
Assets
|
||||
Current
assets
|
||||
Cash
and cash equivalents
|
$
|
891
|
$
|
939
|
Trade
receivables, net of allowance of $12 and $16
|
747
|
682
|
||
Miscellaneous
receivables
|
74
|
72
|
||
Inventories
|
700
|
682
|
||
Other
current assets
|
89
|
47
|
||
Total
current assets
|
2,501
|
2,422
|
||
Properties
|
||||
Properties
and equipment at cost
|
8,714
|
8,844
|
||
Less: Accumulated
depreciation
|
5,674
|
5,775
|
||
Net
properties
|
3,040
|
3,069
|
||
Goodwill
|
315
|
314
|
||
Other
noncurrent assets
|
384
|
368
|
||
Total
assets
|
$
|
6,240
|
$
|
6,173
|
Liabilities
and Stockholders’ Equity
|
||||
Current
liabilities
|
||||
Payables
and other current liabilities
|
$
|
1,028
|
$
|
1,056
|
Borrowings
due within one year
|
72
|
3
|
||
Total
current liabilities
|
1,100
|
1,059
|
||
Long-term
borrowings
|
1,507
|
1,589
|
||
Deferred
income tax liabilities
|
288
|
269
|
||
Post-employment
obligations
|
996
|
1,084
|
||
Other
long-term liabilities
|
179
|
143
|
||
Total
liabilities
|
4,070
|
4,144
|
||
Stockholders’
equity
|
||||
Common
stock ($0.01 par value – 350,000,000 shares authorized; shares issued –
93,362,017 and 91,579,294 for 2007 and 2006, respectively)
|
1
|
1
|
||
Additional
paid-in capital
|
549
|
448
|
||
Retained
earnings
|
2,302
|
2,186
|
||
Accumulated
other comprehensive loss
|
(165)
|
(174)
|
||
2,687
|
2,461
|
|||
Less:
Treasury stock at cost (9,399,001 shares for 2007 and 8,048,442 shares
for
2006)
|
517
|
432
|
||
Total
stockholders’ equity
|
2,170
|
2,029
|
||
Total
liabilities and stockholders’ equity
|
$
|
6,240
|
$
|
6,173
|
First
Six Months
|
||||
(Dollars
in millions)
|
2007
|
2006
|
||
Cash
flows from operating activities
|
||||
Net
earnings
|
$
|
182
|
$
|
219
|
Adjustments
to reconcile net earnings to net cash provided by (used in) operating
activities:
|
||||
Depreciation
and amortization
|
169
|
150
|
||
Asset
impairments
|
22
|
8
|
||
Provision
(benefit) for deferred income taxes
|
(18)
|
29
|
||
Changes
in operating assets and liabilities:
|
||||
(Increase)
decrease in receivables
|
(59)
|
(156)
|
||
(Increase)
decrease in inventories
|
(18)
|
(49)
|
||
Increase
(decrease) in trade payables
|
(63)
|
59
|
||
Increase
(decrease) in liabilities for employee benefits and incentive
pay
|
(121)
|
(74)
|
||
Other
items, net
|
5
|
(23)
|
||
Net
cash provided by operating activities
|
99
|
163
|
||
Cash
flows from investing activities
|
||||
Additions
to properties and equipment
|
(198)
|
(169)
|
||
Proceeds
from sale of assets and investments
|
43
|
11
|
||
Additions
to capitalized software
|
(5)
|
(8)
|
||
Other
items, net
|
14
|
(1)
|
||
Net
cash (used in) investing activities
|
(146)
|
(167)
|
||
Cash
flows from financing activities
|
||||
Net
increase (decrease) in commercial paper, credit facility and other
borrowings
|
75
|
23
|
||
Dividends
paid to stockholders
|
(75)
|
(72)
|
||
Treasury
stock purchases
|
(86)
|
--
|
||
Proceeds
from stock option exercises and other items
|
88
|
24
|
||
Net
cash provided by (used in) financing activities
|
2
|
(25)
|
||
Effect
of exchange rate changes on cash and cash equivalents
|
(3)
|
2
|
||
Net
change in cash and cash equivalents
|
(
48)
|
(27)
|
||
Cash
and cash equivalents at beginning of period
|
939
|
524
|
||
Cash
and cash equivalents at end of period
|
$
|
891
|
$
|
497
|
ITEM
|
Page
|
Note
1. Basis of
Presentation
|
7
|
Note
2. Inventories
|
7
|
7
|
|
Note
4. Provision for Income
Taxes
|
8
|
Note
5. Borrowings
|
8
|
9
|
|
11
|
|
Note
8. Environmental
Matters
|
12
|
Note
9. Commitments
|
12
|
13
|
|
Note
11. Stockholders' Equity
|
14
|
Note
12. Earnings and Dividends per
Share
|
15
|
Note
13. Share-Based Compensation
Awards
|
15
|
Note
14. Segment
Information
|
16
|
Note
15. Legal Matters
|
19
|
Note
16. Recently Issued Accounting
Standards
|
19
|
Note
17. Divestitures
|
20
|
2.
|
June
30,
|
December
31,
|
|||
(Dollars
in millions)
|
2007
|
2006
|
||
At
FIFO or average cost (approximates current cost)
|
||||
Finished
goods
|
$
|
635
|
$
|
660
|
Work
in process
|
203
|
206
|
||
Raw
materials and supplies
|
326
|
280
|
||
Total
inventories
|
1,164
|
1,146
|
||
LIFO
Reserve
|
(464)
|
(464)
|
||
Total
inventories
|
$
|
700
|
$
|
682
|
June
30,
|
December
31,
|
|||
(Dollars
in millions)
|
2007
|
2006
|
||
Trade
creditors
|
$
|
530
|
$
|
581
|
Accrued
payrolls, vacation, and variable-incentive compensation
|
97
|
126
|
||
Accrued
taxes
|
58
|
59
|
||
Post-employment
obligations
|
59
|
63
|
||
Interest
payable
|
31
|
31
|
||
Bank
overdrafts
|
93
|
11
|
||
Other
|
160
|
185
|
||
Total
payables and other current liabilities
|
$
|
1,028
|
$
|
1,056
|
Second
Quarter
|
First
Six Months
|
|||||||
(Dollars
in millions)
|
2007
|
2006
|
2007
|
2006
|
||||
|
||||||||
Provision
for income
taxes
|
$
|
51
|
$
|
57
|
$
|
94
|
$
|
117
|
Effective
tax rate
|
32.7
%
|
33.5
%
|
34.0
%
|
34.9
%
|
5.
|
June
30,
|
December
31,
|
|||
(Dollars
in millions)
|
2007
|
2006
|
||
Borrowings
consisted of:
|
||||
3
1/4% notes due 2008
|
$
|
72
|
$
|
72
|
7%
notes due 2012
|
139
|
141
|
||
6.30%
notes due 2018
|
176
|
182
|
||
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
|
183
|
185
|
||
Other
|
15
|
18
|
||
Total
borrowings
|
1,579
|
1,592
|
||
Borrowings
due within one year
|
(72)
|
(3)
|
||
Long-term
borrowings
|
$
|
1,507
|
$
|
1,589
|
(Dollars
in millions)
|
Balance
at
January
1, 2006
|
Provision/
Adjustments
|
Non-cash
Reductions
|
Cash
Reductions
|
Balance
at
December
31, 2006
|
|||||
Non-cash
charges
|
$
|
--
|
$
|
62
|
$
|
(62)
|
$
|
--
|
$
|
--
|
Severance
costs
|
3
|
32
|
--
|
(1)
|
34
|
|||||
Site
closure and other restructuring costs
|
7
|
7
|
--
|
--
|
14
|
|||||
Total
|
$
|
10
|
$
|
101
|
$
|
(62)
|
$
|
(1)
|
$
|
48
|
Balance
at
January
1, 2007
|
Provision/
Adjustments
|
Non-cash
Reductions
|
Cash
Reductions
|
Balance
at
June
30, 2007
|
||||||
Non-cash
charges
|
$
|
--
|
$
|
22
|
$
|
(22)
|
$
|
--
|
$
|
--
|
Severance
costs
|
34
|
(5)
|
--
|
(8)
|
21
|
|||||
Site
closure and other restructuring costs
|
14
|
6
|
--
|
(5)
|
15
|
|||||
Total
|
$
|
48
|
$
|
23
|
$
|
(22)
|
$
|
(13)
|
$
|
36
|
7.
|
PENSION
AND OTHER POST-EMPLOYMENT
BENEFITS
|
Summary
of Components of Net Periodic Benefit Costs
|
||||||||
Second
Quarter
|
First
Six Months
|
|||||||
(Dollars
in millions)
|
2007
|
2006
|
2007
|
2006
|
||||
Service
cost
|
$
|
13
|
$
|
11
|
$
|
24
|
$
|
22
|
Interest
cost
|
24
|
20
|
45
|
40
|
||||
Expected
return on assets
|
(27)
|
(23)
|
(52)
|
(44)
|
||||
Amortization
of:
|
||||||||
Prior
service credit
|
(2)
|
(2)
|
(4)
|
(4)
|
||||
Actuarial
loss
|
8
|
10
|
17
|
19
|
||||
Net
periodic benefit cost
|
$
|
16
|
$
|
16
|
$
|
30
|
$
|
33
|
Summary
of Components of Net Periodic Benefit Costs
|
||||||||
Second
Quarter
|
First
Six Months
|
|||||||
(Dollars
in millions)
|
2007
|
2006
|
2007
|
2006
|
||||
Service
cost
|
$
|
2
|
$
|
2
|
$
|
4
|
$
|
4
|
Interest
cost
|
10
|
10
|
21
|
21
|
||||
Expected
return on assets
|
--
|
(1)
|
||||||
Amortization
of:
|
||||||||
Prior
service credit
|
(5)
|
(6)
|
(11)
|
(12)
|
||||
Actuarial
loss
|
3
|
4
|
6
|
8
|
||||
Net
periodic benefit cost
|
$
|
10
|
$
|
10
|
$
|
19
|
$
|
21
|
9.
|
(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, 2006
|
1
|
448
|
2,186
|
(174)
|
(432)
|
2,029
|
Net
Earnings
|
--
|
--
|
182
|
--
|
--
|
182
|
Effect
of FIN 48 Adoption
|
--
|
--
|
8
|
--
|
--
|
8
|
Cash
Dividends Declared (1)
|
--
|
--
|
(74)
|
--
|
--
|
(74)
|
Other
Comprehensive Income
|
--
|
--
|
--
|
9
|
--
|
9
|
Stock
Option Exercises and Other Items (2)(3)
|
--
|
101
|
--
|
--
|
1
|
102
|
Stock
Repurchases
|
--
|
--
|
--
|
--
|
(86)
|
(86)
|
Balance
at June 30, 2007
|
1
|
549
|
2,302
|
(165)
|
(517)
|
2,170
|
|
(1) Includes
cash dividends paid and dividends declared but
unpaid.
|
|
(2) The
tax benefits relating to the difference between the amounts deductible
for
federal income taxes over the amounts charged to income for financial
reporting purposes have been credited to paid-in
capital.
|
|
(3)
Includes the fair value of equity share-based awards
recognized under SFAS No. 123 Revised December 2004 ("SFAS No. 123(R)"),
"Share-Based Payment".
|
(Dollars
in millions)
|
Cumulative
Translation Adjustment
|
Unfunded
Additional
Minimum
Pension Liability
|
Unrecognized
Loss and Prior Service Cost, net of taxes
|
Unrealized
Gains (Losses) on Cash Flow Hedges
|
Unrealized
Losses on Investments
|
Accumulated
Other Comprehensive Income (Loss)
|
Balance
at December 31, 2005
|
61
|
(255)
|
--
|
(5)
|
(1)
|
(200)
|
Period
change
|
60
|
48
|
--
|
(1)
|
--
|
107
|
Pre-SFAS
No. 158 (1)
balance at
December 31, 2006
|
121
|
(207)
|
--
|
(6)
|
(1)
|
(93)
|
Adjustments
to apply SFAS No. 158
|
--
|
207
|
(288)
|
--
|
--
|
(81)
|
Balance
at December 31, 2006
|
121
|
--
|
(288)
|
(6)
|
(1)
|
(174)
|
Period
change
|
9
|
--
|
(4)
|
3
|
1
|
9
|
Balance
at June 30, 2007
|
130
|
--
|
(292)
|
(3)
|
--
|
(165)
|
|
(1) SFAS
No. 158, "Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans" ("SFAS No.
158").
|
Second
Quarter
|
First
Six Months
|
||||||
2007
|
2006
|
2007
|
2006
|
||||
Shares
used for earnings per share calculation:
|
|||||||
Basic
|
84.2
|
81.9
|
84.1
|
81.7
|
|||
Diluted
|
85.5
|
83.0
|
85.3
|
82.7
|
Second
Quarter
|
||||
(Dollars
in millions)
|
2007
|
2006
|
||
Sales
by Segment
|
||||
CASPI
|
$
|
376
|
$
|
362
|
Fibers
|
239
|
238
|
||
PCI
|
552
|
431
|
||
Performance
Polymers
|
513
|
696
|
||
SP
|
215
|
202
|
||
Total
Sales by Segment
|
1,895
|
1,929
|
||
Other
|
--
|
--
|
||
Total
Sales
|
$
|
1,895
|
$
|
1,929
|
First
Six Months
|
||||
(Dollars
in millions)
|
2007
|
2006
|
||
Sales
by Segment
|
||||
CASPI
|
$
|
721
|
$
|
711
|
Fibers
|
473
|
468
|
||
PCI
|
1,050
|
823
|
||
Performance
Polymers
|
1,019
|
1,341
|
||
SP
|
427
|
389
|
||
Total
Sales by Segment
|
3,690
|
3,732
|
||
Other
|
--
|
--
|
||
Total
Sales
|
$
|
3,690
|
$
|
3,732
|
Second
quarter
|
||||
(Dollars
in millions)
|
2007
|
2006
|
||
Operating
Earnings (Loss)
|
||||
CASPI
(1)
|
$
|
66
|
$
|
68
|
Fibers
|
51
|
61
|
||
PCI
(1)
|
57
|
45
|
||
Performance
Polymers (1)
|
(13)
|
14
|
||
SP(1)
|
18
|
14
|
||
Total
Operating Earnings (Loss) by Segment
|
179
|
202
|
||
Other
|
(11)
|
(12)
|
||
Total
Operating Earnings (Loss)
|
$
|
168
|
$
|
190
|
(1)
|
Operating
earnings (loss) for the following segments include asset impairments
and
restructuring charges: CASPI includes $1 million in second
quarter 2006 relating primarily to the divestiture of previously
closed
manufacturing facilities; Performance Polymers includes $1 million
in the
second quarter of 2007 relating primarily to the impairment of the
San
Roque, Spain PET facility; and SP includes $1 million in second quarter
2007 relating primarily to the San Roque, Spain CHDM
facility. Operating earnings (loss) for the second quarter 2007
in the PCI, Performance Polymers and SP segments also include $7
million,
$6 million and $1 million, respectively, in accelerated depreciation
costs
related to cracking units at the Company's Longview, Texas facility
and
polymer assets in Columbia, South
Carolina.
|
First
Six Months
|
||||
(Dollars
in millions)
|
2007
|
2006
|
||
Operating
Earnings (Loss)
|
||||
CASPI
(1)
|
$
|
131
|
$
|
123
|
Fibers
|
110
|
127
|
||
PCI
(1)
|
111
|
86
|
||
Performance
Polymers (1)
|
(64)
|
31
|
||
SP(1)
|
36
|
32
|
||
Total
Operating Earnings (Loss) by Segment
|
324
|
399
|
||
Other
|
(21)
|
(25)
|
||
Total
Operating Earnings (Loss)
|
$
|
303
|
$
|
374
|
(1)
|
Operating
earnings (loss) for the following segments include asset impairments
and
restructuring charges: CASPI includes $8 million in first six
months 2006 relating primarily to the divestiture of previously closed
manufacturing facilities; Performance Polymers includes $22 million
in the
first six months 2007 relating primarily to the impairment of the
San
Roque, Spain PET facility; and SP includes $1 million in first six
months
2007 relating primarily to the San Roque, Spain CHDM
facility. Operating earnings (loss) for the first six months
2007 in the PCI, Performance Polymers and SP segments also include
$14
million, $13 million and $1 million, respectively, in accelerated
depreciation costs related to cracking units at the Company's Longview,
Texas facility and polymer assets in Columbia, South
Carolina.
|
June
30,
|
December
31,
|
|||
(Dollars
in millions)
|
2007
|
2006
|
||
Assets
by Segment (1)
|
||||
CASPI
|
$
|
1,110
|
$
|
1,078
|
Fibers
|
660
|
651
|
||
PCI
|
1,103
|
926
|
||
Performance
Polymers
|
1,319
|
1,480
|
||
SP
|
600
|
599
|
||
Total
Assets by Segment
|
4,792
|
4,734
|
||
Other
|
9
|
13
|
||
Corporate
Assets
|
1,439
|
1,426
|
||
Total
Assets
|
$
|
6,240
|
$
|
6,173
|
(1)
|
Assets
managed by segments include accounts receivable,
inventory, fixed assets and goodwill.
|
15. | LEGAL MATTERS |
17.
|
ITEM
|
Page
|
21
|
|
22
|
|
22
|
|
24
|
|
27
|
|
34
|
|
35
|
|
38
|
|
39
|
|
40
|
|
·
|
Company
and segment sales excluding contract ethylene sales under a transition
agreement related to the polyethylene ("PE") product lines divested
in
fourth quarter 2006;
|
·
|
Company
gross profit, operating earnings and net earnings excluding accelerated
depreciation costs and asset impairments and restructuring charges;
and
|
·
|
Segment
operating earnings excluding accelerated depreciation costs and asset
impairments and restructuring
charges.
|
Second
Quarter
|
Volume
Effect
|
Price
Effect
|
Product
Mix
Effect
|
Exchange
Rate
Effect
|
||||||||||
(Dollars
in millions)
|
2007
|
2006
|
Change
|
|||||||||||
Sales
|
$
|
1,895
|
$
|
1,929
|
(2)
%
|
(5)
%
|
2
%
|
--
%
|
1
%
|
|||||
Sales
- contract ethylene sales
|
74
|
--
|
||||||||||||
Sales
- divested product lines
|
--
|
214
|
||||||||||||
Sales
– excluding listed items
|
1,821
|
1,715
|
6
%
|
--
%
|
4
%
|
1
%
|
1
%
|
|||||||
First
Six Months
|
Volume
Effect
|
Price
Effect
|
Product
Mix
Effect
|
Exchange
Rate
Effect
|
||||||||||
(Dollars
in millions)
|
2007
|
2006
|
Change
|
|||||||||||
Sales
|
$
|
3,690
|
$
|
3,732
|
(1)
%
|
(4)
%
|
1
%
|
1
%
|
1
%
|
|||||
Sales
- contract ethylene sales
|
144
|
--
|
||||||||||||
Sales
- divested product lines
|
--
|
442
|
||||||||||||
Sales
– excluding listed items
|
3,546
|
3,290
|
8
%
|
3
%
|
3
%
|
--
%
|
1
%
|
|||||||
Second
Quarter
|
First
Six Months
|
|||||||||||
(Dollars
in millions)
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
||||||
Gross
Profit
|
$
|
320
|
$
|
350
|
(8)
%
|
$
|
613
|
$
|
681
|
(10)
%
|
||
As
a percentage of sales
|
17
%
|
18
%
|
17
%
|
18
%
|
||||||||
Accelerated
depreciation included in cost of goods sold
|
14
|
--
|
28
|
--
|
||||||||
Gross
Profit excluding accelerated depreciation
|
334
|
350
|
(4)
%
|
641
|
681
|
(5)
%
|
||||||
As
a percentage of sales
|
18
%
|
18
%
|
17
%
|
18
%
|
Second
Quarter
|
First
Six Months
|
|||||||||||
(Dollars
in millions)
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
||||||
Selling,
General and
|
||||||||||||
Administrative
Expenses
|
$
|
113
|
$
|
113
|
--
%
|
$
|
214
|
$
|
211
|
1
%
|
||
Research
and Development
|
||||||||||||
Expenses
|
37
|
44
|
(16)
%
|
73
|
86
|
(15)
%
|
||||||
$
|
150
|
$
|
157
|
(4)
%
|
$
|
287
|
$
|
297
|
(3)
%
|
|||
As
a percentage of sales
|
8
%
|
8
%
|
8
%
|
8
%
|
Operating
Earnings
|
Second
Quarter
|
First
Six Months
|
||||||||||
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||
(Dollars
in millions, except per share amounts)
|
||||||||||||
Operating
earnings
|
$
|
168
|
$
|
190
|
(12)
%
|
$
|
303
|
$
|
374
|
(19)%
|
||
Accelerated
depreciation included in cost of goods sold
|
14
|
--
|
28
|
--
|
||||||||
Asset
impairments and restructuring charges
|
2
|
3
|
23
|
10
|
||||||||
Operating
earnings excluding accelerated depreciation and asset impairment
and
restructuring charges
|
$
|
184
|
$
|
193
|
(5)
%
|
$
|
354
|
$
|
384
|
(8)
%
|
Second
Quarter
|
First
Six Months
|
|||||||||||
(Dollars
in millions)
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
||||||
Gross
interest costs
|
$
|
29
|
$
|
28
|
$
|
58
|
$
|
56
|
||||
Less: Capitalized
interest
|
4
|
2
|
5
|
3
|
||||||||
Interest
expense
|
25
|
26
|
(4)%
|
53
|
53
|
--%
|
||||||
Interest
income
|
10
|
5
|
20
|
12
|
||||||||
Interest
expense, net
|
$
|
15
|
$
|
21
|
(29)%
|
$
|
33
|
$
|
41
|
(20)%
|
||
Second
Quarter
|
First
Six Months
|
|||||||||||
(Dollars
in millions)
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
||||||
Other
(income)
|
$
|
(4)
|
$
|
(4)
|
$
|
--
%
|
$
|
(11)
|
$
|
(7)
|
$
|
57
%
|
Other
charges
|
1
|
2
|
(50)
%
|
5
|
4
|
25
%
|
||||||
Other
(income) charges, net
|
$
|
(3)
|
$
|
(2)
|
$
|
50
%
|
$
|
(6)
|
$
|
(3)
|
$
|
100
%
|
Second
Quarter
|
First
Six Months
|
|||||||
(Dollars
in millions)
|
2007
|
2006
|
2007
|
2006
|
||||
Provision
for
income
taxes
|
$
|
51
|
$
|
57
|
$
|
94
|
$
|
117
|
Effective
tax rate
|
32.7%
|
33.5%
|
34.0%
|
34.9%
|
Net
Earnings
|
||||||||
Second
Quarter
|
First
Six Months
|
|||||||
(Dollars
in millions, except per share amounts)
|
2007
|
2006
|
2007
|
2006
|
||||
Net
earnings
|
$
|
105
|
$
|
114
|
$
|
182
|
$
|
219
|
Accelerated
depreciation included in cost of goods sold, net of tax
|
8
|
--
|
18
|
--
|
||||
Asset
impairments and restructuring charges, net of tax
|
1
|
2
|
16
|
9
|
||||
Net
earnings excluding accelerated depreciation and asset impairment
and
restructuring charges, net of tax
|
$
|
114
|
$
|
116
|
$
|
216
|
$
|
228
|
CASPI
Segment
|
||||||||||||||||
Second
Quarter
|
First
Six Months
|
|||||||||||||||
Change
|
Change
|
|||||||||||||||
(Dollars
in millions)
|
2007
|
2006
|
$
|
%
|
2007
|
2006
|
$
|
%
|
||||||||
Sales
|
$
|
376
|
$
|
362
|
$
|
14
|
4
%
|
$
|
721
|
$
|
711
|
$
|
10
|
1
%
|
||
Volume
effect
|
(14)
|
(4)%
|
(41)
|
(6)%
|
||||||||||||
Price
effect
|
14
|
4
%
|
30
|
4
%
|
||||||||||||
Product
mix effect
|
9
|
2
%
|
8
|
1
%
|
||||||||||||
Exchange
rate effect
|
5
|
2
%
|
13
|
2
%
|
||||||||||||
Operating
earnings
|
66
|
68
|
(2)
|
(3)
%
|
131
|
123
|
8
|
7
%
|
||||||||
Asset
impairments and
|
||||||||||||||||
restructuring
charges, net
|
--
|
1
|
(1)
|
--
|
8
|
(8)
|
||||||||||
Operating
earnings excluding asset impairments and restructuring charges,
net
|
66
|
69
|
(3)
|
(4)
%
|
131
|
131
|
--
|
--
%
|
Fibers
Segment
|
||||||||||||||||
Second
Quarter
|
First
Six Months
|
|||||||||||||||
Change
|
Change
|
|||||||||||||||
(Dollars
in millions)
|
2007
|
2006
|
$
|
%
|
2007
|
2006
|
$
|
%
|
||||||||
Sales
|
$
|
239
|
$
|
238
|
$
|
1
|
--
%
|
$
|
473
|
$
|
468
|
$
|
5
|
1
%
|
||
Volume
effect
|
(10)
|
(4)%
|
(20)
|
(4)%
|
||||||||||||
Price
effect
|
10
|
4
%
|
18
|
4
%
|
||||||||||||
Product
mix effect
|
--
|
--
%
|
5
|
1
%
|
||||||||||||
Exchange
rate effect
|
1
|
--
%
|
2
|
--
%
|
||||||||||||
Operating
earnings
|
51
|
61
|
(10)
|
(16)
%
|
110
|
127
|
(17)
|
(13)
%
|
PCI
Segment
|
||||||||||||||||
Second
Quarter
|
First
Six Months
|
|||||||||||||||
Change
|
Change
|
|||||||||||||||
(Dollars
in millions)
|
2007
|
2006
|
$
|
%
|
2007
|
2006
|
$
|
%
|
||||||||
Sales
|
$
|
552
|
$
|
431
|
$
|
121
|
28
%
|
$
|
1,050
|
$
|
823
|
$
|
227
|
28
%
|
||
Volume
effect
|
135
|
31
%
|
269
|
33
%
|
||||||||||||
Price
effect
|
(1)
|
--
%
|
(49)
|
(6)
%
|
||||||||||||
Product
mix effect
|
(15)
|
(3)
%
|
2
|
--
%
|
||||||||||||
Exchange
rate effect
|
2
|
--
%
|
5
|
1
%
|
||||||||||||
Sales
– contract ethylene sales
|
74
|
--
|
74
|
144
|
--
|
144
|
||||||||||
Sales
– divested product lines
|
--
|
29
|
(29)
|
--
|
59
|
(59)
|
||||||||||
Sales
– excluding listed items
|
478
|
402
|
76
|
19
%
|
906
|
764
|
142
|
19
%
|
||||||||
Volume
effect
|
53
|
13
%
|
103
|
14
%
|
||||||||||||
Price
effect
|
28
|
7
%
|
35
|
5
%
|
||||||||||||
Product
mix effect
|
(7)
|
(2)
%
|
(1)
|
--
%
|
||||||||||||
Exchange
rate effect
|
2
|
1
%
|
5
|
1
%
|
||||||||||||
Operating
earnings
|
57
|
45
|
12
|
27
%
|
111
|
86
|
25
|
29
%
|
||||||||
Operating
earnings – divested product lines (1)
|
--
|
1
|
(1)
|
(100)%
|
--
|
3
|
(3)
|
(100)%
|
||||||||
Operating
earnings – excluding listed items
|
57
|
44
|
13
|
30
%
|
111
|
83
|
28
|
34
%
|
||||||||
Accelerated
depreciation included in cost of goods sold
|
7
|
--
|
7
|
14
|
--
|
14
|
||||||||||
Operating
earnings excluding accelerated depreciation
|
64
|
45
|
19
|
42
%
|
125
|
86
|
39
|
45
%
|
||||||||
Operating
earnings excluding accelerated depreciation – divested product lines (1)
|
--
|
1
|
(1)
|
(100)%
|
--
|
3
|
(3)
|
(100)%
|
||||||||
Operating
earnings excluding accelerated depreciation– excluding listed
items
|
64
|
44
|
20
|
45
%
|
125
|
83
|
42
|
51
%
|
||||||||
|
(1)
Includes
allocated costs consistent with the Company’s historical practices, some
of which may remain and could be reallocated to the remainder of
the
segment and other segments.
|
Performance
Polymers Segment
|
||||||||||||||||
Second
Quarter
|
First
Six Months
|
|||||||||||||||
Change
|
Change
|
|||||||||||||||
(Dollars
in millions)
|
2007
|
2006
|
$
|
%
|
2007
|
2006
|
$
|
%
|
||||||||
Sales
|
$
|
513
|
$
|
696
|
$
|
(183)
|
(26)
%
|
$
|
1,019
|
$
|
1,341
|
$
|
(322)
|
(24)
%
|
||
Volume
effect
|
(209)
|
(30)
%
|
(357)
|
(27)
%
|
||||||||||||
Price
effect
|
12
|
2
%
|
10
|
1
%
|
||||||||||||
Product
mix effect
|
4
|
1
%
|
1
|
--
%
|
||||||||||||
Exchange
rate effect
|
10
|
1
%
|
24
|
2
%
|
||||||||||||
Sales
– divested product lines (1)
|
--
|
168
|
(168)
|
(100)%
|
--
|
348
|
(348)
|
(100)%
|
||||||||
Sales
– continuing product lines
|
513
|
528
|
(15)
|
(3)
%
|
1,019
|
993
|
26
|
2
%
|
||||||||
Volume
effect
|
(41)
|
(8)
%
|
(9)
|
(1)
%
|
||||||||||||
Price
effect
|
12
|
2
%
|
10
|
1
%
|
||||||||||||
Product
mix effect
|
4
|
1
%
|
1
|
--
%
|
||||||||||||
Exchange
rate effect
|
10
|
2
%
|