-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JdfoO7UOwFR6VKof1FRHqyTcMc+kt7Y73kGTFFedICg/UNxYtN2Hi6mjQMtnhi7h PGKLDe34wTANJtWRuf0vVA== 0000915389-09-000070.txt : 20091023 0000915389-09-000070.hdr.sgml : 20091023 20091023165248 ACCESSION NUMBER: 0000915389-09-000070 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 42 CONFORMED PERIOD OF REPORT: 20090930 FILED AS OF DATE: 20091023 DATE AS OF CHANGE: 20091023 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EASTMAN CHEMICAL CO CENTRAL INDEX KEY: 0000915389 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 621539359 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12626 FILM NUMBER: 091134990 BUSINESS ADDRESS: STREET 1: PO BOX 511 STREET 2: 200 SOUTH WILCOX DRIVE CITY: KINGSPORT STATE: TN ZIP: 37660 BUSINESS PHONE: 4232292000 MAIL ADDRESS: STREET 1: P O BOX BOX 511 B-54D CITY: KINGSPORT STATE: TN ZIP: 37662 10-Q 1 emn2009q3_10q.htm EASTMAN 2009 THIRD QUARTER 10-Q emn2009q3_10q.htm
 
 
 

UNITED STATES
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 September 30, 2009
 
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
 
37662
(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES [X]  NO  [  ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
                                                                                                          Large accelerated filer [X]                             Accelerated filer [  ]
                                                                                                          Non-accelerated filer [  ]                                Smaller reporting company [  ]
                                                                                                                (Do not check if a smaller reporting company)
 
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, 2009
Common Stock, par value $0.01 per share
 
72,707,237
     

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EXHIBIT INDEX ON PAGE 49

 
1

 





TABLE OF CONTENTS

ITEM
 
PAGE

PART I.  FINANCIAL INFORMATION


PART II.  OTHER INFORMATION


SIGNATURES

 
48


 
2

 

COMPREHENSIVE INCOME AND RETAINED EARNINGS

   
Third Quarter
 
First Nine Months
(Dollars in millions, except per share amounts)
 
2009
 
2008
 
2009
 
2008
                 
$
1,337
$
1,819
$
3,719
$
5,380
Cost of sales
 
1,009
 
1,497
 
2,952
 
4,400
Gross profit
 
 328
 
 322
 
767
 
 980
                 
Selling, general and administrative expenses
 
104
 
107
 
296
 
324
Research and development expenses
 
33
 
39
 
101
 
120
Asset impairments and restructuring charges, net
 
--
 
2
 
23
 
22
Operating earnings
 
191
 
 174
 
347
 
 514
                 
Net interest expense
 
19
 
19
 
58
 
53
Other charges (income), net
 
2
 
7
 
11
 
7
Earnings from continuing operations before income taxes
 
 170
 
 148
 
278
 
 454
Provision for income taxes from continuing operations
 
69
 
48
 
110
 
124
Earnings from continuing operations
 
 101
 
 100
 
168
 
 330
                 
Earnings from disposal of discontinued operations, net of tax
 
--
 
--
 
--
 
18
Net earnings
$
 101
$
 100
$
 168
$
 348
                 
Basic earnings per share
               
Earnings from continuing operations
$
1.40
$
1.35
$
2.31
$
4.34
Earnings from discontinued operations
 
--
 
--
 
--
 
0.23
Basic earnings per share
$
   1.40
$
   1.35
$
   2.31
$
   4.57
                 
Diluted earnings per share
               
Earnings from continuing operations
$
1.38
$
1.33
$
2.29
$
4.27
Earnings from discontinued operations
 
--
 
--
 
--
 
0.23
Diluted earnings per share
$
  1.38
$
   1.33
$
   2.29
$
   4.50
                 
Comprehensive Income
               
Net earnings
$
 101
$
 100
$
 168
$
 348
Other comprehensive income (loss)
               
Change in cumulative translation adjustment, net of tax
 
2
 
(27)
 
17
 
(68)
Change in pension plans, net of tax
 
--
 
(1)
 
(2)
 
7
Change in unrealized gains (losses) on derivative instruments, net of tax
 
(7)
 
(6)
 
(6)
 
(3)
Total other comprehensive income (loss)
 
(5)
 
(34)
 
9
 
(64)
Comprehensive income
$
96
$
  66
$
177
$
 284
                 
Retained Earnings
               
Retained earnings at beginning of period
$
2,566
$
2,529
$
2,563
$
2,349
Net earnings
 
 101
 
 100
 
 168
 
 348
Cash dividends declared
 
(32)
 
(31)
 
(96)
 
(99)
Retained earnings at end of period
$
2,635
$
2,598
$
2,635
$
2,598

The accompanying notes are an integral part of these consolidated financial statements.

3

 


   
September 30,
 
December 31,
(Dollars in millions, except per share amounts)
 
2009
 
2008
   
(Unaudited)
   
Assets
     
 
Current assets
       
Cash and cash equivalents
$
668
$
387
Trade receivables, net
 
316
 
275
Miscellaneous receivables
 
68
 
79
Inventories
 
495
 
637
Other current assets
 
33
 
45
Total current assets
 
1,580
 
1,423
         
Properties and equipment
       
Properties and equipment at cost
 
8,636
 
8,527
Less:  Accumulated depreciation
 
5,363
 
5,329
Net properties and equipment
 
3,273
 
3,198
         
Goodwill
 
326
 
325
Other noncurrent assets
 
375
 
335
Total assets
$
5,554
$
5,281
         
Liabilities and Stockholders' Equity
       
Current liabilities
       
Payables and other current liabilities
$
827
$
819
Borrowings due within one year
 
1
 
13
Total current liabilities
 
828
 
 832
         
Long-term borrowings
 
1,440
 
1,442
Deferred income tax liabilities
 
274
 
106
Post-employment obligations
 
1,250
 
1,246
Other long-term liabilities
 
117
 
102
Total liabilities
 
3,909
 
3,728
         
Stockholders' equity
       
Common stock ($0.01 par value – 350,000,000 shares authorized; shares issued – 94,659,859 and 94,495,860 for 2009 and 2008, respectively)
 
1
 
1
Additional paid-in capital
 
649
 
638
Retained earnings
 
2,635
 
2,563
Accumulated other comprehensive loss
 
(326)
 
(335)
   
2,959
 
2,867
Less: Treasury stock at cost (22,035,296 shares for 2009 and 22,031,357 shares for 2008)
 
1,314
 
1,314
         
Total stockholders' equity
 
1,645
 
1,553
         
Total liabilities and stockholders' equity
$
5,554
$
5,281
         
The accompanying notes are an integral part of these consolidated financial statements.
 

4

 


   
First Nine Months
(Dollars in millions)
 
2009
 
2008
         
Cash flows from operating activities
       
Net earnings
$
168
$
348
 
       
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
       
Depreciation and amortization
 
203
 
199
Asset impairments charges
 
--
 
1
Gains on sale of assets
 
--
 
(13)
Provision (benefit) for deferred income taxes
 
165
 
(56)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
       
(Increase) decrease in trade receivables
 
(35)
 
(16)
(Increase) decrease in inventories
 
141
 
(170)
Increase (decrease) in trade payables
 
(8)
 
(49)
Increase (decrease) in liabilities for employee benefits and incentive pay
 
(14)
 
(6)
Other items, net
 
48
 
55
         
Net cash provided by operating activities
 
 668
 
 293
         
Cash flows from investing activities
       
Additions to properties and equipment
 
(268)
 
(430)
Proceeds from sale of assets
 
25
 
333
Acquisitions of and investments in joint ventures
 
--
 
(38)
Additions to capitalized software
 
(6)
 
(8)
Other items, net
 
(64)
 
(2)
         
Net cash used in investing activities
 
(313)
 
(145)
         
Cash flows from financing activities
       
Net increase in commercial paper, credit facility and other borrowings
 
23
 
42
Repayment of borrowings
 
(16)
 
(175)
Dividends paid to stockholders
 
(96)
 
(103)
Treasury stock purchases
 
--
 
(501)
Proceeds from stock option exercises and other items
 
15
 
38
         
Net cash used in financing activities
 
(74)
 
(699)
         
Effect of exchange rate changes on cash and cash equivalents
 
--
 
--
         
Net change in cash and cash equivalents
 
 281
 
(551)
         
Cash and cash equivalents at beginning of period
 
387
 
888
         
Cash and cash equivalents at end of period
$
 668
$
 337

The accompanying notes are an integral part of these consolidated financial statements.


 
5

 


Page
   
Note 1.    Basis of Presentation
7
7
Note 3.    Inventories
8
8
8
Note 6.    Borrowings
9
9
Note 8.    Retirement Plans
10
Note 9.    Environmental Matters
11
Note 10.  Commitments
12
13
15
16
16
17
Note 16.  Legal Matters
18
19

 
6

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


The accompanying unaudited consolidated financial statements have been prepared by Eastman Chemical Company (the "Company" or "Eastman") in accordance and consistent with the accounting policies stated in the Company's 2008 Annual Report on Form 10-K and should be read in conjunction with the consolidated financial statements in Part II, Item 8 of the Company's 2008 Annual Report on Form 10-K.  The unaudited consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States ("GAAP") and, of necessity, include some amounts that are based upon management estimates and judgments.  Future actual results could differ from such current estimates.  The unaudited consolidated financial statements include assets, liabilities, revenues, and expenses of all majority-owned subsidiaries and joint ventures.  Eastman accounts for other joint ventures and investments in minority-owned companies where it exercises significant influence, but does not have control, on the equity basis.  Intercompany transactions and balances are eliminated in consolidation.  Certain prior period data has been reclassified in the Consolidated Financial Statements and accompanying footnotes to conform to current period presentation.

The Company has evaluated the period from September 30, 2009, the date of the financial statements, through October 23, 2009, the date of the issuance and filing of the financial statements and has determined that no material subsequent events have occurred that would affect the information presented in these financial statements or require additional disclosure.


In first quarter 2008, the Company sold its polyethylene terephthalate ("PET") polymers and purified terephthalic acid ("PTA") production facilities in the Netherlands and its PET production facility in the United Kingdom and related businesses for approximately $329 million.  The Company recognized a gain of $18 million, net of tax, related to the sale of these businesses which included the recognition of deferred currency translation adjustments of approximately $40 million, net of tax.  In addition, the Company indemnified the buyer against certain liabilities primarily related to taxes, legal matters, environmental matters, and other representations and warranties.

The sale of the manufacturing facilities in the Netherlands and United Kingdom, and related businesses completed the Company's exit from the European PET business and qualified as a component of an entity under GAAP for the impairment or disposal of long-lived assets, and accordingly their results are presented as discontinued operations and are not included in the results from continuing operations for the effected period presented in the Company's unaudited consolidated financial statements.

In fourth quarter 2007, the Company sold its PET polymers production facilities in Mexico and Argentina and the related businesses.  The results related to the Mexico and Argentina facilities were not presented as discontinued operations due to continuing involvement of the Company's Performance Polymers segment in the region including contract polymer intermediates sales under a transition supply agreement to the divested sites through 2008.

Operating results of the discontinued operations which were formerly included in the Performance Polymers segment are summarized below:
 
 
   
First Nine Months
(Dollars in millions)
 
2008
     
Sales
$
169
Earnings before income taxes
 
2
Gain on disposal, net of tax
 
18

 

 
7

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


3.  
 
 
September 30,
 
December 31,
(Dollars in millions)
2009
 
2008
       
At FIFO or average cost (approximates current cost)
     
Finished goods
$
535
$
634
Work in process
161
 
200
Raw materials and supplies
259
 
328
Total inventories
955
 
1,162
LIFO Reserve
(460)
 
(525)
Total inventories
$
495
$
637

Inventories valued on the LIFO method were approximately 70 percent as of September 30, 2009 and 75 percent as of December 31, 2008 of total inventories.

 
   
September 30,
 
December 31,
(Dollars in millions)
 
2009
 
2008
         
Trade creditors
$
403
$
390
Accrued payrolls, vacation, and variable-incentive compensation
 
110
 
129
Accrued taxes
 
60
 
41
Post-employment obligations
 
62
 
60
Interest payable
 
25
 
30
Bank overdrafts
 
25
 
4
Other
 
142
 
165
Total payables and other current liabilities
$
827
$
819

The current portion of post-employment obligations is an estimate of current year payments in excess of plan assets.
 

 
Third Quarter
 
First Nine Months
(Dollars in millions)
2009
 
2008
 
2009
 
2008
               
Provision for income taxes
$
69
$
48
$
110
$
124
Effective tax rate
 
40 %
 
33 %
 
39 %
 
27 %

Third quarter 2009 effective tax rate reflects a $12 million tax charge associated with the recapture of gasification investment tax credits.  Third quarter 2008 effective tax rate reflected an $8 million benefit from the reversal of a U.S. capital loss valuation allowance associated with the sale of businesses, and a $6 million benefit from the settlement of a non-U.S. income tax audit.  
 
First nine months 2009 effective tax rate reflects a $12 million tax charge associated with the recapture of gasification investment tax credits and a $7 million tax charge associated with a change in accounting method for tax purposes to accelerate timing of deductions for manufacturing repairs expense.  First nine months 2008 effective tax rate reflected the estimated benefit resulting from the gasification investment tax credit, an $8 million benefit from the reversal of a U.S. capital loss valuation allowance associated with the sale of businesses, and a $6 million benefit from the settlement of a non-U.S. income tax audit.  Including the above items, first nine months 2009 and 2008 effective tax rates reflect the Company's expected full year tax rate on reported earnings from continuing operations before income tax, of approximately 38 and 28 percent, respectively.

 
8

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


The Company or one of its subsidiaries files tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions.  With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2004, or non-U.S. income tax examinations by tax authorities for years before 2003.

6.  

   
September 30,
 
December 31,
(Dollars in millions)
 
2009
 
2008
         
Borrowings consisted of:
       
7% notes due 2012
$
152
$
154
6.30% notes due 2018
 
206
 
207
7 1/4% debentures due 2024
 
497
 
497
7 5/8% debentures due 2024
 
200
 
200
7.60% debentures due 2027
 
298
 
298
Credit facilities borrowings
 
85
 
84
Other
 
3
 
15
Total borrowings
 
1,441
 
1,455
Borrowings due within one year
 
(1)
 
(13)
Long-term borrowings
$
1,440
$
1,442

At September 30, 2009, the Company had credit facilities with various U.S. and foreign banks totaling approximately $800 million.  These credit facilities consist of a $700 million revolving credit facility (the "Credit Facility"), as well as a 58 million euro credit facility ("Euro Facility").  The Credit Facility has two tranches, with $125 million expiring in 2012 and $575 million expiring in 2013.  The Euro Facility expires in 2012.  Borrowings under these credit facilities are subject to interest at varying spreads above quoted market rates.  The Credit Facility requires a facility fee on the total commitment.  In addition, these credit facilities contain a number of customary covenants and events of default, including the maintenance of certain financial ratios.  The Company was in compliance with all such covenants for all periods presented.  At September 30, 2009, the Company's credit facility borrowings totaled $85 million at an effective interest rate of 0.79 percent.  At December 31, 2008, the Company's credit facility borrowings totaled $84 million at an effective interest rate of 3.74 percent.

The Credit Facility provides liquidity support for commercial paper borrowings and general corporate purposes.  Accordingly, any outstanding commercial paper borrowings reduce borrowings available under the Credit Facility.  Given the expiration dates of the Credit Facility, any commercial paper borrowings supported by the Credit Facility are classified as long-term borrowings because the Company has the ability and intent to refinance such borrowings on a long-term basis.


In first nine months 2009, restructuring charges were $23 million, net.  The charges, primarily for severance, resulted from a reduction in force.

In third quarter and first nine months 2008, asset impairments and restructuring charges, net totaled $2 million and $22 million, respectively, primarily for severance, pension charges, and site closure costs in the Performance Chemicals and Intermediates ("PCI") segment resulting from the decision to close a previously impaired site in the United Kingdom, and in the Performance Polymers segment for restructuring at the South Carolina facility and the divestiture of the PET manufacturing facilities in Mexico and Argentina.


 
9

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Changes in Reserves for Asset Impairments, Restructuring Charges, and Severance Charges

The following table summarizes the beginning reserves, charges to and changes in estimates to the reserves as described above, and the cash and non-cash reductions to the reserves attributable to asset impairments and the cash payments for severance and site closure costs for full year 2008 and first nine months 2009:
 
 
(Dollars in millions)
 
Balance at
January 1, 2008
 
Provision/ Adjustments
 
Non-cash Reductions
 
Cash Reductions
 
Balance at
December 31, 2008
                     
Non-cash charges
$
--
$
2
$
(2)
$
--
$
--
Severance costs
 
7
 
10
 
--
 
(12)
 
5
Site closure and other  restructuring costs
 
11
 
34
 
--
 
(20)
 
25
Total
$
18
$
  46
$
(2)
$
(32)
$
30
                     
   
Balance at
January 1, 2009
 
Provision/ Adjustments
 
Non-cash Reductions
 
Cash Reductions
 
Balance at
September 30, 2009
                     
Non-cash charges
$
--
$
--
$
--
$
--
$
--
Severance costs
 
5
 
24
 
--
 
(18)
 
11
Site closure and other  restructuring costs
 
25
 
(1)
 
--
 
--
 
24
Total
$
30
$
  23
$
--
$
(18)
$
35

A majority of the remaining severance and site closure costs is expected to be applied to the reserves within one year.
 

DEFINED BENEFIT PENSION PLANS

Eastman maintains defined benefit pension plans that provide eligible employees with retirement benefits.  Costs recognized for these benefits are recorded using estimated amounts, which may change as actual costs derived for the year are determined.
 
Below is a summary of the components of net periodic benefit cost recognized for Eastman's significant defined benefit pension plans:
 
Summary of Components of Net Periodic Benefit Costs
       
   
Third Quarter
 
First Nine Months
(Dollars in millions)
 
2009
 
2008
 
2009
 
2008
                 
Service cost
$
10
$
11
$
31
$
34
Interest cost
 
22
 
22
 
65
 
66
Expected return on assets
 
(25)
 
(26)
 
(74)
 
(79)
Curtailment charge
 
--
 
--
 
--
 
9
Amortization of:
               
Prior service credit
 
(4)
 
(5)
 
(12)
 
(12)
Actuarial loss
 
8
 
7
 
25
 
21
Net periodic benefit cost
$
  11
$
   9
$
  35
$
  39

The Company contributed $30 million to its U.S. defined benefit pension plan in third quarter 2009.

The curtailment charge in 2008 was primarily related to the decision to close a previously impaired site in the United Kingdom.

 
10

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


POSTRETIREMENT WELFARE PLANS

Eastman provides a subsidy toward life insurance, health care, and dental benefits for eligible retirees hired prior to January 1, 2007, and a subsidy toward health care benefits for retirees' eligible survivors.  In general, Eastman provides those benefits to retirees eligible under the Company's U.S. plans.  Similar benefits are also made available to retirees of Holston Defense Corporation, a wholly-owned subsidiary of the Company that, prior to January 1, 1999, operated a government-owned ammunitions plant.

Eligible employees hired on or after January 1, 2007 have access to postretirement health care benefits, but Eastman does not provide a subsidy toward the premium cost of postretirement health care benefits for those employees.

A few of the Company's non-U.S. operations have supplemental health benefit plans for certain retirees, the cost of which is not significant to the Company.

Costs recognized for benefits for eligible retirees hired prior to January 1, 2007 are recorded using estimated amounts, which may change as actual costs derived for the year are determined.  Below is a summary of the components of net periodic benefit cost recognized for the Company's U.S. plans:

Summary of Components of Net Periodic Benefit Costs
       
   
Third Quarter
 
First Nine Months
(Dollars in millions)
 
2009
 
2008
 
2009
 
2008
                 
Service cost
$
2
$
2
$
6
$
5
Interest cost
 
12
 
11
 
34
 
33
Expected return on assets
 
(1)
 
(1)
 
(2)
 
(3)
Amortization of:
               
Prior service credit
 
(5)
 
(6)
 
(17)
 
(17)
Actuarial loss
 
4
 
2
 
10
 
7
Net periodic benefit cost
$
  12
$
   8
$
  31
$
  25


Certain Eastman manufacturing sites generate hazardous and nonhazardous wastes, the treatment, storage, transportation, and disposal of which are regulated by various governmental agencies.  In connection with the cleanup of various hazardous waste sites, the Company, along with many other entities, has been designated a potentially responsible party ("PRP") by the U.S. Environmental Protection Agency under the Comprehensive Environmental Response, Compensation and Liability Act, which potentially subjects PRPs to joint and several liability for such cleanup costs.  In addition, the Company could be required to incur costs for environmental remediation and closure and postclosure under the federal Resource Conservation and Recovery Act.  Reserves for environmental contingencies have been established in accordance with Eastman's policies described in Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2008 Annual Report on Form 10-K.  Because of expected sharing of costs, the availability of legal defenses, and the Company's preliminary assessment of actions that may be required, management does not believe that the Company's liability for these environmental matters, individually or in the aggregate, will be material to the Company's consolidated financial position, results of operations or cash flows.  The Company's reserve for environmental contingencies was $42 million and $41 million at September 30, 2009 and December 31, 2008, respectively, representing the minimum or best estimate for remediation costs and the best estimate accrued to date over the facilities' estimated useful lives for asset retirement obligation costs.  Estimated future environmental expenditures for remediation costs range from the minimum or best estimate of $10 million to the maximum of $21 million at September 30, 2009, and $11 million to the maximum of $21 million at December 31, 2008.


 
11

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


10.  

Purchasing Obligations and Lease Commitments

At September 30, 2009, the Company had various purchase obligations totaling approximately $1.3 billion over a period of approximately 15 years for materials, supplies, and energy incident to the ordinary conduct of business.  The Company also had various lease commitments for property and equipment under cancelable, noncancelable, and month-to-month operating leases totaling $103 million over a period of several years.  Of the total lease commitments, approximately 17 percent relate to machinery and equipment, including computer and communications equipment and production equipment; approximately 41 percent relate to real property, including office space, storage facilities and land; and approximately 42 percent relate to vehicles, primarily railcars.

Accounts Receivable Securitization Program

In 1999, the Company entered into an agreement that allows the Company to sell certain trade receivables on a non-recourse basis to a consolidated special purpose entity which in turn may sell interests in those receivables to a third party purchaser which generally funds its purchases via the issuance of commercial paper backed by the receivables interests.  The annually renewable agreement permits the sale of undivided interests in domestic trade accounts receivable.  The assets of the special purpose entity are not available to satisfy the Company's general obligations.  Receivables sold to the third party totaled $200 million at September 30, 2009 and December 31, 2008.  Undivided interests in designated receivable pools were sold to the purchaser with recourse limited to the purchased interest in the receivable pools.  Average monthly proceeds from collections reinvested in the continuous sale program were approximately $245 million and $370 million in third quarter 2009 and 2008, respectively, and $225 million and $345 million in first nine months 2009 and 2008, respectively.  The securitization program was fully drawn at September 30, 2009 and renewed in July 2009.
 
Guarantees

The Company has operating leases with terms that require the Company to guarantee a portion of the residual value of the leased assets upon termination of the lease.  These residual value guarantees at September 30, 2009 totaled $159 million and consisted of leases for railcars and aircraft.  Leases with guarantee amounts totaling $11 million, $138 million, and $10 million will expire in 2011, 2012, and 2014 and beyond, respectively.  The Company believes, based on current facts and circumstances, that the likelihood of a material payment pursuant to such guarantees is remote.

Variable Interest Entities

The Company has evaluated its material contractual relationships and has concluded that the entities involved in these relationships are not Variable Interest Entities ("VIEs") or, in the case of Primester, a joint venture that manufactures cellulose acetate at the Company's Kingsport, Tennessee plant, the Company is not the primary beneficiary of the VIE.  As such, in accordance with consolidations rules included in GAAP, the Company is not required to consolidate these entities.  In addition, the Company has evaluated long-term purchase obligations with an entity that may be a VIE at September 30, 2009.  This potential VIE is a joint venture from which the Company has purchased raw materials and utilities for several years.  The Company purchased approximately $50 million of raw materials and utilities during 2008 and expects to purchase approximately $35 million during 2009.  The Company has no equity interest in this entity and has confirmed that one party to this joint venture does consolidate the potential VIE.  However, due to competitive and other reasons, the Company has not been able to obtain the necessary financial information to determine whether the entity is a VIE, and whether or not the Company is the primary beneficiary.

 
 
12

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



Fair Value of Borrowings

GAAP requires public companies to disclose the fair value of financial assets and liabilities whenever summarizing financial information for interim reporting periods.  The fair value for fixed-rate borrowings is based on current interest rates for comparable securities.  The Company's floating-rate borrowings approximate fair value.

(Dollars in millions)
 
September 30, 2009
 
December 31, 2008
   
Recorded Amount
 
Fair Value
 
Recorded Amount
 
Fair Value
                 
Long-term borrowings
$
1,440
$
1,484
   $
1,442
$
1,369

Fair Value Measurements

On January 1, 2008, the Company began recording financial assets and liabilities subject to recurring fair value measurement at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  On January 1, 2009 the Company began recording non-recurring financial as well as all non-financial assets and liabilities subject to fair value measurement under the same principles.  These fair value principles prioritize valuation inputs across three broad levels.  Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.  Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.  Level 3 inputs are unobservable inputs based on the Company's assumptions used to measure assets and liabilities at fair value.  An asset or liability's classification within the various levels is determined based on the lowest level input that is significant to the fair value measurement.

The following chart shows the financial assets and liabilities valued on a recurring basis.

(Dollars in millions)
 
Fair Value Measurements at September 30, 2009
Description
 
September 30, 2009
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
Derivative Assets
$
12
$
--
$
12
$
--
Derivative Liabilities
 
(6)
 
--
 
(6)
 
--
 
$
   6
$
   --
$
6
$
   --


(Dollars in millions)
 
Fair Value Measurements at December 31, 2008
Description
 
December 31, 2008
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
Derivative Assets
$
16
$
--
$
16
$
--
Derivative Liabilities
 
(14)
 
--
 
(14)
 
--
 
$
2
$
--
$
2
$
--
                 
Hedging Programs

The Company is exposed to market risk, such as changes in currency exchange rates, raw material and energy costs, and interest rates.  The Company uses various derivative financial instruments pursuant to the Company's hedging policies to mitigate these market risk factors and their effect on the cash flows of the underlying transactions.  Designation is performed on a specific exposure basis to support hedge accounting.  The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the cash flows of the underlying exposures being hedged.  The Company does not hold or issue derivative financial instruments for trading purposes.  For further information, see Note 10, "Fair Value of Financial Instruments", to the consolidated financial statements in Part II, Item 8 of the Company's 2008 Annual Report on Form 10-K.
 
 
13

 
 
 
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
Fair Value Hedges
Fair value hedges are defined by GAAP as derivative or non-derivative instruments designated as and used to hedge the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk.  For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.

As of September 30, 2009, the Company had no active fair value hedges.

Cash Flow Hedges
Cash flow hedges are defined by GAAP as derivative instruments designated as and used to hedge the exposure to variability in expected future cash flows that is attributable to a particular risk.  For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income, net of income taxes and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.  Gains and losses on the derivatives representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

As of September 30, 2009, the total amount of the Company's foreign exchange forward and option contracts was a $5 million asset.  As of September 30, 2009, the total amount of the Company's feedstock/energy forward and option contracts was a $1 million asset.

Fair Value of Derivatives Designated as Cash Flow Hedging Instruments

 (Dollars in millions)
 
September 30, 2009
Asset Derivatives
 
Balance Sheet Location
 
Fair Value
Commodity contract
 
Other current assets
  $
2
Foreign exchange contracts
 
Other current assets
 
6
     
$
8
 
 
(Dollars in millions)
 
September 30, 2009
Liability Derivatives
 
Balance Sheet Location
 
Fair Value
Commodity  contract
 
Payables and other current liabilities
$
1
Foreign exchange contacts
 
Other noncurrent liabilities
 
1
     
$
2


 
14

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



Derivatives' Cash Flow Hedging Relationships

(Dollars in millions)
 
Third Quarter 2009
 
Derivatives Cash Flow Hedging Relationships
 
Amount after tax of gain/ (loss) recognized in Other Comprehensive Income on derivatives (effective portion)
 
Location of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)
 
Pre-tax amount of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)
 
September 30, 2009
   
September 30, 2009
Commodity  contract
$
1
 
Cost of sales
$
--
Foreign exchange contracts
 
(8)
 
Sales
 
5
 
$
(7)
   
$
5

(Dollars in millions)
 
First Nine Months 2009
 
Derivatives Cash Flow Hedging Relationships
 
Amount after tax of gain/ (loss) recognized in Other Comprehensive Income on derivatives (effective portion)
 
Location of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)
 
Pre-tax amount of gain/(loss) reclassified from Accumulated Other Comprehensive Income into income (effective portion)
 
September 30, 2009
   
September 30, 2009
Commodity  contract
$
6
 
Cost of sales
$
(9)
Foreign exchange contracts
 
(12)
 
Sales
 
19
 
$
(6)
   
$
10

For third quarter and nine months ended September 30, 2009, there was no material ineffectiveness with regard to the Company's cash flow hedges.

Nondesignated / Nonqualifying Derivative Instruments
The gains or losses on nonqualifying derivatives or derivatives that are not designated as hedges are marked to market in the line item "Other charges (income), net" of the Statements of Earnings.  The Company recognized approximately $4 million net loss on nonqualifying derivatives during the quarter ended September 30, 2009.  The Company recognized less than $3 million net loss on nonqualifying derivatives during the nine months ended September 30, 2009.


A reconciliation of the changes in stockholders' equity in first nine months 2009 is provided below:

(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, 2008
1
638
2,563
(335)
(1,314)
1,553
             
Net Earnings
 --
 --
168
 --
 --
168
Cash Dividends Declared (1)
 --
 --
(96)
 --
 --
(96)
Other Comprehensive Income
 --
 --
 --
9
 --
9
Stock-Based Compensation Expense (2)
 --
13
 --
 --
 --
13
Other (3)
--
(2)
--
--
--
(2)
Balance at September 30, 2009
 1
649
2,635
(326)
 (1,314)
 1,645

  (1)
Includes cash dividends declared, but unpaid.
  (2)
The fair value of equity share-based awards recognized under GAAP for share-based payments.
  (3)
The tax benefits relating to the difference between the amounts deductible for federal income taxes over the amounts charged to income for book value purposes have been credited to paid-in capital.

 
15

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

 
 
 
 
(Dollars in millions)
 
Cumulative Translation Adjustment
$
 Unrecognized Loss and Prior Service Cost
$
Unrealized Gains (Losses) on Derivative Instruments
$
 
Unrealized Losses on Investments
$
Accumulated Other Comprehensive Income (Loss)
$
Balance at December 31, 2007
157
(182)
(3)
--
(28)
Period change
(97)
(232)
23
(1)
(307)
Balance at December 31, 2008
60
(414)
20
(1)
(335)
Period change
17
(2)
(6)
--
9
Balance at September 30, 2009
77
(416)
14
(1)
(326)

Amounts of other comprehensive income (loss) are presented net of applicable taxes.  The Company records deferred income taxes on the cumulative translation adjustment related to branch operations and other entities included in the Company's consolidated U.S. tax return.  No deferred income taxes are provided on the cumulative translation adjustment of subsidiaries outside the United States, as such cumulative translation adjustment is considered to be a component of permanently invested, unremitted earnings of these foreign subsidiaries.


 
Third Quarter
 
First Nine Months
 
2009
 
2008
 
2009
 
2008
               
Shares used for earnings per share calculation (in millions):
             
Basic
72.6
 
74.2
 
72.5
 
76.1
Diluted
73.5
 
75.1
 
73.3
 
77.2

In third quarter and first nine months 2009, common shares underlying options to purchase 3,037,007 shares of common stock and 3,720,448 shares of common stock, respectively, were excluded from the computation of diluted earnings per share because the total market value of option exercises for these awards was less than the total proceeds that would be received for these awards.  There were no share repurchases in first nine months 2009.
 
In third quarter and first nine months 2008, common shares underlying options to purchase 655,884 shares of common stock and 596,784 shares of common stock, respectively, were excluded from the computation of diluted earnings per share because the total market value of option exercises for these awards was less than the total proceeds that would be received for these awards.  Third quarter and first nine months 2008 reflect the impact of share repurchases of 3.9 million and 8.1 million shares, respectively.
 
The Company declared cash dividends of $0.44 per share in third quarter 2009 and 2008 and $1.32 per share in first nine months 2009 and 2008.
 

The Company utilizes share-based awards under employee and non-employee director compensation programs.  These share-based awards may include restricted and unrestricted stock, restricted stock units, stock options, and performance shares.  In third quarter 2009 and 2008, approximately $4 million and $6 million of compensation expense before tax were recognized in selling, general and administrative expense in the earnings statement for all share-based awards.  The impact on third quarter 2009 and 2008 net earnings of $3 million and $4 million, respectively, is net of deferred tax expense related to share-based award compensation.

In first nine months 2009 and 2008, $13 million and $19 million, respectively, of compensation expense before tax were recognized in selling, general and administrative expense in the earnings statement for all share-based awards.  The impact on first nine months 2009 and 2008 net earnings of $8 million and $12 million, respectively, is net of deferred tax expense related to share-based award compensation.

 
16

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 
Additional information regarding share-based compensation plans and awards may be found in Note 16, "Share-Based Compensation Plans and Awards", to the consolidated financial statements in Part II, Item 8 of the Company's 2008 Annual Report on Form 10-K.


The Company's products and operations are managed and reported in five reportable operating segments, consisting of the Coatings, Adhesives, Specialty Polymers, and Inks ("CASPI") segment, the Fibers segment, the PCI segment, the Performance Polymers segment, and the Specialty Plastics ("SP") segment.  For additional information concerning the Company's segments' businesses and products, see Note 23, "Segment Information", to the consolidated financial statements in Part II, Item 8 of the Company's 2008 Annual Report on Form 10-K.

Research and development and other expenses not identifiable to an operating segment are not included in segment operating results for either of the periods presented and are shown in the tables below as "other" operating losses.

   
Third Quarter
(Dollars in millions)
 
2009
 
2008
Sales by Segment
       
CASPI
$
338
$
410
Fibers
 
257
 
269
PCI
 
355
 
594
Performance Polymers
 
187
 
293
SP
 
200
 
253
Total Sales
$
1,337
$
1,819

   
First Nine Months
(Dollars in millions)
 
2009
 
2008
Sales by Segment
       
CASPI
$
890
$
1,213
Fibers
 
779
 
783
PCI
 
943
 
1,768
Performance Polymers
 
563
 
886
SP
 
544
 
730
Total Sales
$
3,719
$
5,380

   
Third Quarter
(Dollars in millions)
 
2009
 
2008
Operating Earnings (Loss)
       
CASPI
$
84
$
55
Fibers
 
79
 
65
PCI (1)
 
33
 
62
Performance Polymers (2)
 
(10)
 
(1)
SP
 
13
 
6
Total Operating Earnings by Segment
 
 199
 
 187
Other
 
(8)
 
(13)
         
Total Operating Earnings
$
 191
$
 174

(1)  
Third quarter 2008 includes $1 million of asset impairments and restructuring charges, net primarily related to severance and pension costs from the decision to close a previously impaired site in the United Kingdom and $2 million in accelerated depreciation costs resulting from the previously reported shutdown of cracking units at the Company's Longview, Texas facility.
(2)  
Third quarter 2008 includes $1 million of asset impairments and restructuring charges, net related to previously divested manufacturing facilities in Mexico and Argentina and restructuring at the South Carolina facility using IntegRexTM technology, partially offset by a resolution of a contingency from the sale of the Company's polyethylene ("PE") and EpoleneTM polymer businesses divested in fourth quarter 2006, and $1 million of accelerated depreciation costs resulting from restructuring actions associated with certain assets in Columbia, South Carolina.
 

 
17

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



   
First Nine Months
(Dollars in millions)
 
2009
 
2008
Operating Earnings (Loss)
       
CASPI (1)(2)
$
148
$
167
Fibers (1)
 
222
 
195
PCI (1)(3)
 
35
 
160
Performance Polymers (1)(4)
 
(32)
 
(5)
SP (1)
 
3
 
36
Total Operating Earnings by Segment
 
 376
 
 553
Other
 
(29)
 
(39)
         
Total Operating Earnings
$
 347
$
 514

(1)  
First nine months 2009 includes a restructuring charge primarily for a severance program of $5 million, $4 million, $6 million, $4 million, and $4 million in the CASPI, Fibers, PCI, Performance Polymers, and SP segments, respectively.
(2)  
First nine months 2008 includes $2 million in gains for an adjustment to a reserve for asset impairments and restructuring charges, net for the first quarter 2008 divestiture of certain product lines.
(3)  
First nine months 2008 includes $20 million of asset impairments and restructuring charges, net primarily related to severance and pension costs from the decision to close a previously impaired site in the United Kingdom and $4 million of accelerated depreciation costs resulting from the previously reported shutdown of cracking units at the Company's Longview, Texas facility.
(4)  
First nine months 2008 includes $4 million of asset impairments and restructuring charges, net related to previously divested manufacturing facilities in Mexico and Argentina and restructuring at the South Carolina facility using IntegRexTM technology, partially offset by a resolution of a contingency from the sale of the Company's PE and EpoleneTM polymer businesses divested in fourth quarter 2006 and $4 million of accelerated depreciation costs resulting from restructuring actions associated with certain assets in Columbia, South Carolina.

   
September 30,
 
December 31,
(Dollars in millions)
 
2009
 
2008
Assets by Segment (1)
       
CASPI
$
1,132
$
1,150
Fibers
 
724
 
750
PCI
 
790
 
834
Performance Polymers
 
658
 
728
SP
 
903
 
818
Total Assets by Segment
 
4,207
 
4,280
Corporate Assets (2)
 
1,347
 
1,001
         
Total Assets
$
                   5,554
$
                   5,281

(1)  
Assets managed by segment are accounts receivable, inventory, fixed assets, and goodwill.
(2)  
Corporate assets includes approximately $230 million and $200 million at September 30, 2009 and December 31, 2008, respectively, for the Beaumont, Texas gasification project, which consists of land, capitalized front-end engineering and design, methanol and ammonia assets, intangible assets, and goodwill.

16.  

From time to time, the Company and its operations are parties to, or targets of, lawsuits, claims, investigations and proceedings, including product liability, personal injury, asbestos, patent and intellectual property, commercial, contract, environmental, antitrust, health and safety, and employment matters, which are being handled and defended in the ordinary course of business.  While the Company is unable to predict the outcome of these matters, it does not believe, based upon currently available facts, that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations or cash flows.  However, adverse developments could negatively impact earnings or cash flows in a particular future period.


 
18

 
 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 
In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 166, "Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140" ("SFAS No. 166").  This statement addresses the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets.  This statement is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter.  The Company is currently evaluating the effect SFAS No. 166 will have on its consolidated financial position, liquidity, or results of operations.

In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)" ("SFAS No. 167").  This statement amends certain requirements of FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities", to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements.  This statement is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter.  The Company is currently evaluating the effect SFAS No. 167 will have on its consolidated financial position, liquidity, or results of operations.

 

 
19

 
 

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 Eastman Chemical Company's (the "Company" or "Eastman") audited consolidated financial statements, including related notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's 2008 Annual Report on Form 10-K, and the Company's unaudited consolidated financial statements, including related notes, included elsewhere in this report.  All references to earnings per share contained in this report are diluted earnings per share unless otherwise noted.

As described below in "Presentation of Non-GAAP Financial Measures", the Company sold its polyethylene terephthalate ("PET") manufacturing facility in Spain in the second quarter 2007 and sold its PET polymers and purified terephthalic acid ("PTA") manufacturing facilities in the Netherlands and its PET manufacturing facility in the United Kingdom and the related businesses in first quarter 2008.  Because the Company has exited the PET business in the European region, results from sales of PET products manufactured at the Spain, the Netherlands, and the United Kingdom sites, including impairments and restructuring charges of those operations, and gains and losses from disposal of those assets and businesses, are presented as discontinued operations for all periods presented and are therefore not included in results from continuing operations under accounting principles generally accepted in the United States ("GAAP").  For additional information, see Note 2, "Discontinued Operations", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.



 
20

 
 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


In preparing the consolidated financial statements in conformity with GAAP, the Company's management must make decisions which impact the reported amounts and the related disclosures.  Such decisions include the selection of the appropriate accounting principles to be applied and assumptions on which to base estimates and judgments that affect the reported amounts of assets, liabilities, sales revenue and expenses, and related disclosure of contingent assets and liabilities.  On an ongoing basis, the Company evaluates its estimates, including those related to allowances for doubtful accounts, impairment of long-lived assets, environmental costs, pension and other post-employment benefits, litigation and contingent liabilities, and income taxes.  The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.  The Company's management believes the critical accounting estimates listed and described in Part II, Item 7 of the Company's 2008 Annual Report on Form 10-K are the most important to the fair presentation of the Company's financial condition and results.  These estimates require management's most significant judgments in the preparation of the Company's consolidated financial statements.


During 2009, the Company recognized $23 million in restructuring charges, primarily for severance, resulting from a reduction in force.

During 2007 and 2008, the Company took strategic actions in its Performance Polymers segment to address its underperforming PET manufacturing facilities outside the United States.  In second quarter 2007, the Company completed the sale of its PET manufacturing facility in Spain and in first quarter 2008, the Company completed the sale of its PET polymers and PTA manufacturing facilities in the Netherlands and the PET manufacturing facility in the United Kingdom and related businesses.  Results from, charges related to, and gains and losses from disposal of the Spain, the Netherlands, and the United Kingdom assets and businesses are presented as discontinued operations.  In fourth quarter 2007, the Company completed the sale of its Mexico and Argentina manufacturing facilities.  As part of this divestiture, the Company entered into transition supply agreements for polymer intermediates from which sales revenue and operating results are included in the Performance Polymers segment results in 2008.

In fourth quarter 2006, the Company sold its polyethylene ("PE") and EpoleneTM polymer businesses and related assets of the Performance Polymers and the Coatings, Adhesives, Specialty Polymers, and Inks ("CASPI") segments.  As part of the PE divestiture, the Company entered into a transition supply agreement for contract ethylene sales, from which sales revenue and operating results are included in the Performance Chemicals and Intermediates ("PCI") segment results in 2009 and 2008.

Also in fourth quarter 2006, the Company made strategic decisions relating to the scheduled shutdown of cracking units in Longview, Texas and a planned shutdown of higher cost PET assets in Columbia, South Carolina.  Accelerated depreciation costs resulting from these decisions were $3 million and $8 million in third quarter and first nine months 2008, respectively.  For more information on accelerated depreciation costs, see "Gross Profit" in the "Results of Operations" section of this Management's Discussion and Analysis.

This Management's Discussion and Analysis includes the following non-GAAP financial measures and accompanying reconciliations to the most directly comparable GAAP financial measures.  The non-GAAP financial measures used by the Company may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance or liquidity prepared in accordance with GAAP.
·  
Company and segment sales excluding contract ethylene sales under a transition agreement related to the divestiture of the PE product lines;
·  
Company and segment sales excluding contract polymer intermediates sales under a transition supply agreement related to the divestiture of the PET manufacturing facilities and related businesses in Mexico and Argentina;

 
21

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


·  
Company and segment gross profit, operating earnings, and earnings from continuing operations excluding accelerated depreciation costs and asset impairments and restructuring charges; and
 ·  
Company earnings from continuing operations excluding net deferred tax benefits related to the previous divestiture of businesses.

Eastman's management believes that contract ethylene sales under the transition agreement related to the divestiture of the PE product lines and the contract polymer intermediates sales under the transition supply agreement related to the divestiture of the PET manufacturing facilities and related businesses in Mexico and Argentina do not reflect the continuing and expected future business of the PCI and Performance Polymers segments or of the Company.  In addition, for evaluation and analysis of ongoing business results and of the impact on the Company and segments of strategic decisions and actions to reduce costs and to improve the profitability of the Company, management believes that Company and segment earnings from continuing operations should be considered both with and without accelerated depreciation costs, asset impairments and restructuring charges, and deferred tax benefits related to the previous divestiture of businesses.  Management believes that investors can better evaluate and analyze historical and future business trends if they also consider the reported Company and segment results, respectively, without the identified items.  Management utilizes Company and segment results including and excluding the identified items in the measures it uses to evaluate business performance and in determining certain performance-based compensation.  These measures, excluding the identified items, are not recognized in accordance with GAAP and should not be viewed as alternatives to the GAAP measures of performance.


The Company generated sales revenue of $1.3 billion and $1.8 billion in third quarter 2009 and 2008, respectively.  Excluding the results of contract ethylene sales and contract polymer intermediates sales from third quarter 2008, sales revenue decreased by 21 percent.  The Company generated sales revenue of $3.7 billion in first nine months 2009 compared to $5.4 billion in first nine months 2008.  Excluding the results of contract ethylene sales and contract polymer intermediates sales from both periods, sales revenue decreased by 26 percent.  Sales revenue decreases for both third quarter and first nine months 2009 compared to the same periods in 2008 were due to lower selling prices in response to lower raw material and energy costs and lower sales volume primarily attributed to the global recession.

Operating earnings were $191 million in third quarter 2009 compared with $174 million in third quarter 2008.  Excluding accelerated depreciation costs and asset impairments and restructuring charges, operating earnings were $179 million in third quarter 2008.  The increase in third quarter 2009 was due to lower raw material and energy costs and cost reduction actions more than offsetting lower selling prices and lower sales volume.  The increased operating margin was attributed to a favorable shift in company product mix due to a higher percentage of overall sales revenue from the Fibers, CASPI, and Specialty Plastics ("SP") segments compared to the PCI and Performance Polymers segments.

Operating earnings were $347 million in first nine months 2009 compared with $514 million in first nine months 2008.  Excluding asset impairments and restructuring charges in first nine months 2009 and 2008 and accelerated depreciation costs in first nine months 2008, operating earnings were $370 million in first nine months 2009 compared with $544 million in first nine months 2008.  Eastman's reduced earnings reflect continued weakness in demand for the Company's products that caused lower sales volume and continued low capacity utilization which resulted in higher unit costs.  This weakness in demand, which is attributed to the global recession, has been moderating throughout 2009 resulting in sequential sales volume and operating earnings increases each quarter.  First nine months 2009 operating earnings also included approximately $20 million in costs related to the reconfiguration of the Longview, Texas facility.  Operating earnings benefited from cost reduction actions which will positively impact results throughout the year.

Earnings from continuing operations were $101 million in third quarter 2009 compared to $100 million in third quarter 2008.  Excluding accelerated depreciation costs, asset impairments and restructuring charges, and net deferred tax benefits, earnings from continuing operations were $102 million in third quarter 2008.  Earnings from continuing operations were $168 million in first nine months 2009 compared to $330 million in first nine months 2008.  Excluding accelerated depreciation costs, asset impairments and restructuring charges, and net deferred tax benefits, earnings from continuing operations were $182 million and $338 million in first nine months 2009 and 2008, respectively.

 
22

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


The Company generated $668 million in cash from operating activities during first nine months 2009 compared to $293 million in first nine months 2008.  The improvement was primarily due to a decrease in working capital in 2009 compared to an increase in working capital in 2008, as well as a change in tax accounting method reflected as a provision for deferred income taxes.  The Company expects to generate positive free cash flow (operating cash flow less capital expenditures and dividends) in excess of $300 million in 2009, assuming continued difficult economic conditions and raw material and energy costs similar to current levels.
 
During third quarter 2009, the Company completed front-end engineering and design for its industrial gasification project in Beaumont, Texas, which resulted in a higher than anticipated capital cost estimate and a later estimated project completion date.  The Company continues to believe that the long-term business fundamentals of the project are favorable, and is evaluating alternatives to lower the overall project cost.  The Company is also pursuing government financing and incentives, and evaluating the possible impact of pending and proposed environmental legislation.  Given the uncertainty of the timing of the project, obtaining government financing and incentives, and possible environmental legislation, the Company has reduced spending for this project.

RESULTS OF OPERATIONS

 
Third Quarter
 
Volume Effect
 
Price Effect
 
Product
Mix Effect
 
Exchange
Rate
Effect
(Dollars in millions)
2009
 
2008
 
Change
 
                           
Sales
$
1,337
$
1,819
 
(27) %
 
(10) %
 
(17) %
 
-- %
 
-- %
                             
Sales - contract polymer intermediates sales (1)
 
--
 
35
                   
Sales - contract ethylene sales (2)
 
--
 
89
                   
Sales – excluding listed items
 
1,337
 
1,695
 
(21) %
 
(4) %
 
(18) %
 
1 %
 
-- %
                             

 
First Nine Months
 
Volume Effect
 
Price Effect
 
Product
Mix Effect
 
Exchange
Rate
Effect
(Dollars in millions)
2009
 
2008
 
Change
 
                           
Sales
$
3,719
$
5,380
 
(31) %
 
(18) %
 
(13) %
 
-- %
 
-- %
                             
Sales - contract polymer intermediates sales (1)
 
--
 
117
                   
Sales - contract ethylene sales (2)
 
18
 
283
                   
Sales – excluding listed items
 
3,701
 
4,980
 
(26) %
 
(12) %
 
(13) %
 
(1) %
 
-- %
                             
  (1) 
Included in 2008 sales revenue are contract polymer intermediates sales under the transition supply agreement related to the divestiture of the PET manufacturing facilities and related businesses in Mexico and Argentina in fourth quarter 2007.
(2) 
 Included in 2009 and 2008 sales revenue are contract ethylene sales under the transition supply agreement related to the divestiture of the PE businesses.

Sales revenue in third quarter 2009 compared to third quarter 2008 decreased $482 million.  Excluding revenue from the contract ethylene and polymer intermediates sales, sales revenue decreased $358 million in third quarter 2009 compared to third quarter 2008.  The decrease was primarily due to lower selling prices in response to lower raw material and energy costs, particularly in the PCI and Performance Polymers segments, and lower sales volume primarily attributed to weakened demand due to the global recession.

 
23

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


Sales revenue in first nine months 2009 compared to first nine months 2008 decreased $1.7 billion.  Excluding revenue from the contract ethylene and polymer intermediates sales, sales revenue decreased $1.3 billion in first nine months 2009 compared to first nine months 2008.  The decrease was due to lower selling prices in response to lower raw material and energy costs, particularly in the PCI and Performance Polymers segments, and lower sales volume primarily attributed to weakened demand due to the global recession.

 
Third Quarter
 
First Nine Months
(Dollars in millions)
2009
 
2008
 
Change
 
2009
 
2008
 
Change
                       
Gross Profit
$
328
$
322
 
2 %
$
767
$
980
 
(22) %
As a percentage of sales
 
25 %
 
18 %
     
21 %
 
18 %
   
                         
Accelerated depreciation costs included in cost of goods sold
 
--
 
3
     
--
 
8
   
                         
Gross profit excluding accelerated depreciation costs
 
328
 
325
 
1 %
 
767
 
988
 
(22) %
As a percentage of sales
 
25 %
 
18 %
     
21 %
 
18 %
   

Gross profit in third quarter 2009 increased slightly compared to third quarter 2008 with increases in the CASPI, Fibers, and SP segments offset by decreases in the PCI and Performance Polymers segments.  Gross profit as a percentage of sales in third quarter 2009 increased compared to third quarter 2008 due to lower raw material and energy costs and cost reduction actions more than offsetting lower selling prices and lower sales volume.  The increase was attributed to a favorable shift in company product mix due to a higher percentage of overall sales revenue from the Fibers, CASPI, and SP segments compared to the PCI and Performance Polymers segments.  Third quarter 2008 included accelerated depreciation costs of $3 million resulting from the previously reported shutdown of the cracking units in Longview, Texas and of higher cost PET polymer assets in Columbia, South Carolina.  The Company's third quarter raw material and energy costs decreased by approximately $350 million compared with third quarter 2008.

Gross profit in first nine months 2009 decreased compared to first nine months 2008 in all segments except the Fibers segment due to continued weakness in demand for the Company's products attributed to the global recession.  This weak demand caused lower sales volume and lower capacity utilization which resulted in higher unit costs.  In addition, first nine months 2009 included approximately $20 million in costs related to the reconfiguration of the Longview, Texas facility.  The reconfiguration costs impacted the PCI and CASPI segments.  First nine months 2009 also benefited from cost reduction actions.  First nine months 2008 included accelerated depreciation costs of $8 million resulting from the previously reported shutdown of the cracking units in Longview, Texas and of higher cost PET polymer assets in Columbia, South Carolina.  The Company's first nine months 2009 raw material and energy costs decreased by approximately $725 million compared with first nine months 2008.

 
Third Quarter
 
First Nine Months
(Dollars in millions)
2009
 
2008
 
Change
 
2009
 
2008
 
Change
                       
Selling, General and Administrative Expenses
$
104
$
107
 
(3) %
$
296
$
324
 
(9) %
Research and Development Expenses
 
33
 
39
 
(15) %
 
101
 
120
 
(16) %
 
$
137
$
146
 
(6) %
$
397
$
444
 
(11) %
As a percentage of sales
 
10 %
 
8 %
     
11 %
 
8 %
   

Selling, general and administrative expenses decreased in third quarter and first nine months 2009 compared to third quarter and first nine months 2008 primarily due to lower discretionary spending and compensation expense resulting from cost reduction actions partially offset by increased compensation expense linked to the Company's stock price.

 
24

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


Research and development ("R&D") expenses decreased $6 million and $19 million in third quarter 2009 compared to third quarter 2008 and first nine months 2009 compared to first nine months 2008, respectively.  The decrease is primarily due to lower R&D expenses for corporate growth initiatives and lower discretionary spending resulting from cost reduction actions.

Asset Impairments and Restructuring Charges, Net

In first nine months 2009, restructuring charges were $23 million, net.  The charges, primarily for severance, resulted from a reduction in force.

In third quarter and first nine months 2008, asset impairments and restructuring charges, net totaled $2 million and $22 million, respectively, primarily for severance, pension charges, and site closure costs in the PCI segment resulting from the decision to close a previously impaired site in the United Kingdom.

For more information regarding asset impairments and restructuring charges, net see the segment discussions and Note 7, "Asset Impairments and Restructuring Charges, Net", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
 
Operating Earnings
 
     
 
Third Quarter
 
First Nine Months
(Dollars in millions)
2009
 
2008
 
Change
 
2009
 
2008
 
Change
                         
Operating earnings
$
191
$
174
 
10 %
$
347
$
514
 
(32) %
Accelerated depreciation costs included in cost of goods sold
 
--
 
3
     
--
 
8
   
Asset impairments and restructuring charges, net
 
--
 
2
     
23
 
22
   
Operating earnings excluding accelerated depreciation costs and asset impairments and restructuring charges, net
$
 191
$
 179
 
7 %
$
 370
$
 544
 
(32) %
 
Operating earnings increased in third quarter 2009 compared to third quarter 2008 despite lower sales revenue as a result of a favorable shift in company product mix and cost reduction actions.  Operating earnings decreased in first nine months 2009 compared to first nine months 2008 reflecting continued weakness in demand for the Company's products.  This weakness in demand, which is attributed to the global recession, has been moderating throughout 2009 resulting in sequential sales volume and operating earnings increases each quarter.

Net Interest Expense

 
Third Quarter
 
First Nine Months
(Dollars in millions)
2009
 
2008
 
Change
 
2009
 
2008
 
Change
                       
Gross interest costs
$
23
$
26
   
$
73
$
80
   
Less:  Capitalized interest
 
3
 
3
     
10
 
7
   
Interest expense
 
20
 
23
 
(13) %
 
63
 
73
 
(14) %
Interest income
 
1
 
4
     
5
 
20
   
Net interest expense
$
19
$
19
 
-- %
$
58
$
53
 
9 %
                       
Net interest expense was unchanged in third quarter 2009 compared to third quarter 2008 as lower gross interest costs were offset by lower interest income due to lower average interest rates.

 
25

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

 
Net interest expense increased $5 million in first nine months 2009 compared to first nine months 2008.  Gross interest costs in first nine months 2009 were lower compared to first nine months 2008 due to lower average borrowings and lower average interest rates.  Interest income in first nine months 2009 was lower compared to first nine months 2008 due to lower average interest rates and lower average cash balances.

For 2009, the Company expects net interest expense to increase compared with 2008 primarily due to lower interest income, driven by lower average interest rates and lower average cash balances.

Other Charges (Income), Net

   
Third Quarter
 
First Nine Months
(Dollars in millions)
 
2009
 
2008
 
2009
 
2008
                 
Foreign exchange transaction losses
$
--
$
6
$
2
$
8
Investment losses (gains)
 
(1)
 
1
 
4
 
2
Other, net
 
3
 
--
 
5
 
(3)
Other charges (income), net
$
 2
$
 7
$
  11
$
   7

Included in net other charges (income) are gains or losses on foreign exchange transactions, results from equity investments, gains or losses on business venture investments, other non-operating income or charges related to Holston Defense Corporation, gains from the sale of non-operating assets, royalty income, certain litigation costs, fees on securitized receivables, other non-operating income, and other miscellaneous items.

Provision for Income Taxes

 
Third Quarter
 
First Nine Months
(Dollars in millions)
2009
 
2008
 
2009
 
2008
               
Provision for income taxes
$
69
$
48
$
110
$
124
Effective tax rate
 
40 %
 
33 %
 
39 %
 
27 %

Third quarter 2009 effective tax rate reflects a $12 million tax charge associated with the recapture of gasification investment tax credits as the Company no longer anticipates meeting the timeline agreed to with the Internal Revenue Service.  Third quarter 2008 effective tax rate reflected an $8 million benefit from the reversal of a U.S. capital loss valuation allowance associated with the sale of businesses, and a $6 million benefit from the settlement of a non-U.S. income tax audit.

First nine months 2009 effective tax rate reflects a $12 million tax charge associated with the recapture of gasification investment tax credits and a $7 million tax charge associated with a change in accounting method for tax purposes to accelerate timing of deductions for manufacturing repairs expense.  First nine months 2008 effective tax rate reflected the estimated benefit resulting from the gasification investment tax credit, an $8 million benefit from the reversal of a U.S. capital loss valuation allowance associated with the sale of businesses, and a $6 million benefit from the settlement of a non-U.S. income tax audit.  Including the above items, first nine months 2009 and 2008 effective tax rates reflect the Company's expected full year tax rate on reported earnings from continuing operations before income tax, of approximately 38 and 28 percent, respectively.

 
26

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS



Earnings from Continuing Operations
           
   
Third Quarter
 
First Nine Months
(Dollars in millions)
 
2009
 
2008
 
2009
 
2008
                 
Earnings from continuing operations
$
101
$
100
$
168
$
330
Accelerated depreciation costs included in cost of goods sold, net of tax
 
--
 
2
 
--
 
5
Asset impairments and restructuring charges, net of tax
 
--
 
3
 
14
 
17
Net deferred tax benefits related to the previous divestiture of  businesses
 
--
 
(3)
 
--
 
(14)
Earnings from continuing operations excluding accelerated depreciation costs, net of tax, asset impairments and restructuring charges, net of tax, and net deferred tax benefits related to the previous divestiture of businesses
$
 101
$
 102
$
 182
$
 338

Net Earnings
           
   
Third Quarter
 
First Nine Months
(Dollars in millions)
 
2009
 
2008
 
2009
 
2008
                 
Earnings from continuing operations
$
101
$
100
$
168
$
330
Earnings from disposal of discontinued operations, net of tax
 
--
 
--
 
--
 
18
Net earnings
$
 101
$
 100
$
 168
$
 348

The earnings on disposal of discontinued operations, net of tax of $18 million in first nine months 2008 was from the sale of the Company's PET polymers and PTA production facilities in the Netherlands and its PET production facility in the United Kingdom and related businesses for approximately $329 million in first quarter 2008.  For additional information, see Note 2, "Discontinued Operations", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.



R&D and other expenses not identifiable to an operating segment, including industrial gasification project expenses, are not included in segment operating results for either of the periods presented and are shown in Note 15, "Segment Information", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, as "other" operating losses.  As discussed in Note 15, these "other" operating losses are $8 million and $29 million in third quarter and first nine months 2009, respectively, and $13 million and $39 million in third quarter and first nine months 2008, respectively.  The total corporate assets of $1.3 billion include approximately $230 million and $200 million at September 30, 2009 and December 31, 2008, respectively, related to the Beaumont, Texas gasification project.

 
27

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

 

CASPI Segment
 
Third Quarter
 
First Nine Months
         
Change
         
Change
(Dollars in millions)
2009
 
2008
 
$
 
%
 
2009
 
2008
 
$
 
%
                               
Sales
$
338
$
410
$
(72)
 
(18) %
$
890
$
1,213
$
(323)
 
(27) %
 
Volume effect
       
(27)
 
(7) %
         
(227)
 
(19) %
 
Price effect
       
(44)
 
(11) %
         
(64)
 
(5) %
 
Product mix effect
       
(1)
 
-- %
         
(29)
 
(3) %
 
Exchange rate effect
       
--
 
-- %
         
(3)
 
-- %
                               
                               
Operating earnings
84
 
55
 
29
 
53 %
 
148
 
167
 
(19)
 
(11) %
                               
Asset impairments and restructuring charges, net
--
 
--
 
--
     
5
 
(2)
 
7
   
                               
Operating earnings excluding asset impairments and restructuring charges, net
84
 
55
 
29
 
53 %
 
153
 
165
 
(12)
 
(7) %

Sales revenue decreased $72 million in third quarter 2009 compared to third quarter 2008 primarily due to lower selling prices and lower sales volume.  The lower selling prices were due to lower raw material and energy costs.  The lower sales volume was due to weak customer demand, attributed to the global recession, particularly for products sold into the automotive, building and construction, and packaging markets.

Sales revenue decreased $323 million in first nine months 2009 compared to first nine months 2008 primarily due to lower sales volume and lower selling prices.  The lower sales volume was due to weak customer demand, in all regions except Asia Pacific, attributed to the global recession, particularly for products sold into the automotive, building and construction, and packaging markets.  The lower selling prices were due to lower raw material and energy costs.

Excluding asset impairments and restructuring charges, net, operating earnings increased $29 million in third quarter 2009 compared to third quarter 2008 due primarily to lower raw material and energy costs and cost reduction actions, which more than offset lower selling prices and lower sales volume.

Excluding asset impairments and restructuring charges, net, operating earnings decreased $12 million in first nine months 2009 compared to first nine months 2008 due primarily to lower sales volume, partially offset by lower raw material and energy costs and cost reduction actions.  The asset impairments and restructuring charges, net for 2009 reflect the segment's portion of the severance charge for a reduction in force in first quarter 2009 and 2008 reflects an adjustment to a reserve for first quarter 2008 divestiture of certain product lines.

 
28

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS



Fibers Segment
 
Third Quarter
 
First Nine Months
         
Change
         
Change
(Dollars in millions)
2009
 
2008
 
$
 
%
 
2009
 
2008
 
$
 
%
                               
Sales
$
257
$
269
$
(12)
 
(5) %
$
779
$
783
$
(4)
 
-- %
 
Volume effect
       
(33)
 
(12) %
         
(79)
 
(10) %
 
Price effect
       
20
 
7 %
         
69
 
9 %
 
Product mix effect
       
--
 
-- %
         
5
 
1 %
 
Exchange rate effect
       
1
 
-- %
         
1
 
-- %
                               
                               
Operating earnings
79
 
65
 
14
 
22 %
 
222
 
195
 
27
 
14 %
                               
Asset impairments and restructuring charges, net
--
 
--
 
--
     
4
 
--
 
4
   
                               
Operating earnings excluding asset impairments and restructuring charges, net
79
 
65
 
14
 
22 %
 
226
 
195
 
31
 
16 %

Sales revenue decreased $12 million in third quarter 2009 compared to third quarter 2008 and $4 million in first nine months 2009 compared to first nine months 2008 primarily due to lower sales volume partially offset by higher selling prices.  The lower sales volume was primarily for the acetyl chemical products.  The higher selling prices were in response to higher raw material costs, particularly for wood pulp.

Operating earnings increased $14 million in third quarter 2009 compared to third quarter 2008 primarily due to higher selling prices and cost reduction actions partially offset by lower sales volume.

Excluding the segment's portion of the severance charge for a reduction in force in first quarter 2009, operating earnings increased $31 million in first nine months 2009 compared to first nine months 2008 primarily due to higher selling prices, cost reduction actions, and a favorable shift in product mix, partially offset by lower sales volume and higher raw material and energy costs.

In December 2008, the Company announced an alliance with SK Chemicals Company Ltd. ("SK") to form a company to acquire and operate a cellulose acetate tow manufacturing facility and related business, with the facility to be constructed by SK in Korea.  Eastman will have majority ownership in the company.  Construction began in first quarter 2009 and the facility is expected to be operational in second quarter 2010.

 
29

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS



PCI Segment
 
Third Quarter
 
First Nine Months
         
Change
         
Change
(Dollars in millions)
2009
 
2008
 
$
 
%
 
2009
 
2008
 
$
 
%
                               
Sales
$
355
$
594
$
(239)
 
(40) %
$
943
$
1,768
$
(825)
 
(47) %
Volume effect
         
(61)
 
(10) %
         
(432)
 
(25) %
Price effect
         
(188)
 
(32) %
         
(409)
 
(23) %
Product mix effect
         
9
 
2 %
         
16
 
1 %
Exchange rate effect
         
1
 
-- %
         
--
 
-- %
                                 
Sales – contract ethylene sales
--
 
89
 
(89)
     
18
 
283
 
(265)
   
                               
Sales – excluding contract ethylene sales
355
 
505
 
(150)
 
(30) %
 
925
 
1,485
 
(560)
 
(38) %
Volume effect
       
28
 
    5 %
         
(144)
 
(10) %
Price effect
       
(188)
 
(37) %
         
(415)
 
(28) %
Product mix effect
       
9
 
2 %
         
(1)
 
-- %
Exchange rate effect
       
1
 
-- %
         
--
 
-- %
                               
                               
Operating earnings
33
 
62
 
(29)
 
(47) %
 
35
 
160
 
(125)
 
(78) %
                               
Accelerated depreciation costs included in cost of goods sold
--
 
2
 
(2)
     
--
 
4
 
(4)
   
                               
Asset impairments and restructuring charges, net
--
 
1
 
(1)
     
6
 
20
 
(14)
   
                               
Operating earnings excluding accelerated depreciation costs and asset impairments and restructuring charges, net
33
 
65
 
(32)
 
(49) %
 
41
 
184
 
(143)
 
(78) %
                               


 
30

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


Sales revenue decreased $239 million in third quarter 2009 compared to third quarter 2008.  Excluding contract ethylene sales under the transition agreement resulting from the divestiture of the Performance Polymers segment's PE business in the fourth quarter 2006, sales revenue decreased $150 million in third quarter 2009 compared to third quarter 2008 due to lower selling prices more than offsetting higher sales volume.  The lower selling prices were primarily due to lower raw material and energy costs.

Sales revenue decreased $825 million in first nine months 2009 compared to first nine months 2008.  Excluding contract ethylene sales, sales revenue decreased $560 million in first nine months 2009 compared to first nine months 2008 due to lower selling prices and lower sales volume.  The lower selling prices were primarily due to lower raw material and energy costs.  The lower sales volume was primarily in olefin-based derivatives and was attributed to the global recession.

Excluding accelerated depreciation costs and asset impairments and restructuring charges, net in third quarter 2008, operating earnings decreased $32 million in third quarter 2009 compared to third quarter 2008 primarily due to lower selling prices partially offset by lower raw material and energy costs and cost reduction actions. 

Excluding asset impairments and restructuring charges, net in first nine months 2009 and 2008 and accelerated depreciation costs in first nine months 2008, operating earnings decreased $143 million in first nine months 2009 compared to first nine months 2008 primarily due to lower selling prices, lower sales volume, lower capacity utilization resulting in higher unit costs including approximately $15 million in costs related to the reconfiguration of the Longview, Texas facility, partially offset by lower raw material and energy costs and cost reduction actions.  A restructuring charge in first quarter 2009 consisted of the segment's portion of the severance charge for a reduction in force.  Asset impairments and restructuring charges in first nine months 2008 consisted primarily of severance and pension costs from the decision to close a previously impaired site in the United Kingdom.  The accelerated depreciation costs for 2008 are related to the continuation of the previously reported planned staged phase-out of older cracking units in 2007 at the Company's Longview, Texas facility.


 
31

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


Performance Polymers Segment

As a result of the Company's strategic actions in the Performance Polymers segment, the discussion below is of results from continuing operations in all periods presented.  For additional information, see Note 2, "Discontinued Operations", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

 
Third Quarter
 
First Nine Months
         
Change
         
Change
(Dollars in millions)
2009
 
2008
 
$
 
%
 
2009
 
2008
 
$
 
%
                               
Sales
$
187
$
293
$
(106)
 
(36) %
$
563
$
886
$
(323)
 
(36) %
 
Volume effect
       
(34)
 
(11) %
         
(117)
 
(13) %
 
Price effect
       
(81)
 
(28) %
         
(221)
 
(25) %
 
Product mix effect
       
9
 
3 %
         
15
 
2 %
 
Exchange rate effect
       
--
 
-- %
         
--
 
-- %
                               
Sales – contract polymer intermediates sales (1)
--
 
35
 
(35)
     
--
 
117
 
(117)
   
                               
Sales – excluding contract polymer intermediates sales
187
 
258
 
(71)
 
(27) %
 
563
 
769
 
(206)
 
(27) %
Volume effect
       
1
 
-- %
         
--
 
-- %
Price effect
       
(81)
 
(31) %
         
(221)
 
(29) %
Product mix effect
       
9
 
4 %
         
15
 
2 %
Exchange rate effect
       
--
 
-- %
         
--
 
-- %
                               

Operating loss (2)
 
(10)
 
(1)
 
(9)
 
>(100) %
 
(32)
 
(5)
 
(27)
 
>(100) %
                               
Accelerated depreciation costs included in cost of goods sold
--
 
1
 
(1)
     
--
 
4
 
(4)
   
                               
Asset impairments and restructuring charges, net
--
 
1
 
(1)
     
4
 
4
 
--
   
                               
Operating earnings (loss) excluding accelerated depreciation costs and asset impairments and restructuring charges, net
(10)
 
1
 
(11)
 
>(100) %
 
(28)
 
3
 
(31)
 
>(100) %

  (1)
Sales revenue for 2008 includes contract polymer intermediates sales under the transition supply agreement related to the divestiture of the PET manufacturing facilities and related businesses in Mexico and Argentina in fourth quarter 2007.
  (2)
Includes allocated costs in 2008 not included in discontinued operations, some of which may remain and could be reallocated to the remainder of the segment and other segments.

Excluding contract polymer intermediates sales to the buyer of the divested Mexico and Argentina facilities, sales revenue decreased $71 million and $206 million in third quarter and first nine months 2009 compared to third quarter and first nine months 2008 due to lower selling prices.  The lower selling prices were attributed to a decline in raw material and energy costs, primarily for paraxylene.  Sales volume excluding contract polymer intermediates sales was unchanged as higher volume from the Company's IntegRex™ technology based PET facility was offset by lower volume from the Company's conventional PET manufacturing assets which were significantly rationalized in first quarter 2008.

 
32

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


Excluding asset impairments and restructuring charges and accelerated depreciation costs, net in third quarter 2008, operating results in third quarter 2009 declined $11 million compared to third quarter 2008.  Operating results declined due to lower selling prices and the impact on sales revenue and manufacturing costs of previously disclosed continuing operational challenges with the IntegRexTM-based PET manufacturing facility, partially offset by lower raw material and energy costs and cost reduction actions.  

Excluding asset impairments and restructuring charges, net in first nine months 2009 and 2008, and accelerated depreciation costs in first nine months 2008, operating results in first nine months 2009 declined $31 million compared to first nine months 2008.  Operating results declined due to lower selling prices and higher unit costs resulting from lower polyester stream utilization, partially offset by lower raw material and energy costs and cost reduction actions.  In addition, results were negatively impacted by the slower than expected start-up of the debottleneck of the IntegRexTM-based PET manufacturing facility and previously disclosed continuing operational challenges with the facility.  A restructuring charge in first quarter 2009 consisted of the segment's portion of the severance charge for a reduction in force.  Accelerated depreciation costs of $4 million in first nine months 2008 resulted from restructuring actions associated with higher cost PET polymer assets in Columbia, South Carolina.  Asset impairments and restructuring charges of $4 million in first nine months 2008 related to restructuring at the South Carolina facility using IntegRexTM technology.

Because of seasonality of demand, additional market capacity, volatility of paraxylene, and additional costs to address continuing operational challenges with the IntegRexTM-based PET manufacturing facility, the Company expects the Performance Polymers segment to have greater operating losses in fourth quarter 2009 compared to third quarter 2009.  In response to the continuing operational challenges, the Company will have a planned shutdown in the fourth quarter to make additional improvements to the facility.

SP Segment
 
Third Quarter
 
First Nine Months
         
Change
         
Change
(Dollars in millions)
2009
 
2008
 
$
 
%
 
2009
 
2008
 
$
 
%
                               
Sales
$
200
$
253
$
(53)
 
(21) %
$
544
$
730
$
(186)
 
(25) %
 
Volume effect
       
(32)
 
(13) %
         
(127)
 
(17) %
 
Price effect
       
(18)
 
(7) %
         
(41)
 
(5) %
 
Product mix effect
       
(5)
 
(2) %
         
(20)
 
(3) %
 
Exchange rate effect
       
2
 
1 %
         
2
 
-- %
                                 
                               
                               
Operating earnings
13
 
6
 
7
 
>100 %
 
3
 
36
 
(33)
 
 (92) %
                               
Asset impairments and restructuring charges, net
--
 
--
 
--
     
4
 
--
 
4
   
                               
Operating earnings excluding asset impairments and restructuring charges, net
13
 
6
 
7
 
>100 %
 
7
 
36
 
(29)
 
 (81) %

Sales revenue decreased $53 million in third quarter 2009 compared to third quarter 2008 due to lower sales volume and lower selling prices.  The decline in sales volume was attributed to the global recession which has weakened demand for plastic resins, including copolyester products sold into the consumer and durable goods markets and for cellulosic plastics sold into various markets.  The lower selling prices were a result of lower raw material and energy costs.

 
33

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


Sales revenue decreased $186 million in first nine months 2009 compared to first nine months 2008 due to lower sales volume and lower selling prices.  The decline in sales volume was attributed to the global recession which has weakened demand for plastic resins, including copolyester products sold into the packaging, consumer and durable goods markets, and for cellulosic plastics sold into various markets.  The lower selling prices were a result of lower raw material and energy costs.

Operating results increased $7 million in third quarter 2009 compared to third quarter 2008 due to lower raw material and energy costs and cost reduction actions, partially offset by lower sales volume, lower capacity utilization resulting in higher unit costs, and an unfavorable shift in product mix with less cellulosic plastics sold into various markets.
 
Excluding the segment's portion of a severance charge for a reduction in force in first quarter 2009, operating results decreased $29 million in first nine months 2009 compared to first nine months 2008 due to lower sales volume, lower capacity utilization causing higher unit costs, and an unfavorable shift in product mix with less cellulosic plastics sold into various markets, partially offset by lower raw material and energy costs and cost reduction actions.

The SP segment is progressing with the introduction of its new copolyester, Eastman TritanTM copolyester, including a new 30,000 metric ton TritanTM manufacturing facility expected to be online by early 2010.


   Sales Revenue

 
Third Quarter
               
(Dollars in millions)
 
2009
 
2008
 
Change
 
Volume Effect
 
Price Effect
 
Product
Mix Effect
 
Exchange
Rate
Effect
                             
United States and Canada
$
737
$
1,124
 
(34) %
 
(13) %
 
(22) %
 
1 %
 
-- %
Asia Pacific
 
282
 
309
 
(9) %
 
1 %
 
(9) %
 
(1) %
 
-- %
Europe, Middle East, and Africa
 
222
 
248
 
(10) %
 
(8) %
 
(2) %
 
(2) %
 
2 %
Latin America
 
96
 
138
 
 (31) %
 
(14) %
 
(22) %
 
6 %
 
(1) %
 
$
1,337
$
1,819
 
(27) %
 
(10) %
 
(17) %
 
-- %
 
-- %

Sales revenue in the United States and Canada decreased in third quarter 2009 compared to third quarter 2008 primarily due to lower selling prices and lower sales volume particularly in the PCI segment partially due to contract ethylene sales.  Excluding contract ethylene sales, sales revenue decreased 29 percent primarily due to lower selling prices particularly in the PCI and Performance Polymers segments and lower sales volume particularly in the CASPI segment.

Sales revenue in Asia Pacific decreased in third quarter 2009 compared to third quarter 2008 primarily due to lower selling prices in the PCI, CASPI, and SP segments partially offset by higher selling prices in the Fibers segment.   Sales volume in the region increased in third quarter 2009 compared to third quarter 2008 as higher sales volume in the PCI and CASPI segments were partially offset by lower sales volume in the SP and Fibers segments.  The higher sales volume was partially due to a plant shutdown in third quarter 2008 in the PCI segment.

Sales revenue in Europe, Middle East and Africa decreased in third quarter 2009 compared to third quarter 2008, primarily due to lower sales volume in all segments.  The region had minimal price effect change compared to significant declines in other regions due to the higher selling prices in the Fibers segment offsetting declines in each of the other segments in third quarter 2009 compared to third quarter 2008.
 
 

 
34

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


Sales revenue in Latin America decreased in third quarter 2009 compared to third quarter 2008 primarily due to lower selling prices and sales volume.  Excluding contract polymer intermediates sales, sales revenue decreased 8 percent due to lower selling prices in all segments except the Fibers segment partially offset by increased sales volume in the PCI and CASPI segments.   The increased sales volume were a result of a plant shutdown in third quarter 2008 in the PCI segment.  Sales revenue also benefited from a favorable shift in product mix, particularly for the Performance Polymers segment resulting from the completion of contract polymer intermediates sales under the transition supply agreement related to the divestiture of the PET manufacturing facilities and related businesses in Mexico and Argentina in fourth quarter 2007.

    Sales Revenue
 
 
 
First Nine Months
               
(Dollars in millions)
 
2009
 
2008
 
Change
 
Volume Effect
 
Price Effect
 
Product
Mix Effect
 
Exchange
Rate
Effect
                             
United States and Canada
$
2,096
$
3,287
 
(36) %
 
(21) %
 
(16) %
 
1 %
 
-- %
Asia Pacific
 
769
 
921
 
(17) %
 
(8) %
 
(6) %
 
(3) %
 
-- %
Europe, Middle East, and Africa
 
607
 
774
 
(20) %
 
(12) %
 
-- %
 
(8) %
 
-- %
Latin America
 
247
 
398
 
(40) %
 
(31) %
 
(17) %
 
8 %
 
-- %
 
$
3,719
$
5,380
 
(31) %
 
(18) %
 
(13) %
 
-- %
 
-- %

Sales revenue in the United States and Canada decreased in first nine months 2009 compared to first nine months 2008 primarily due to lower sales volume and lower selling prices particularly in the PCI segment partially due to contract ethylene sales in the PCI segment.  Excluding contract ethylene sales, sales revenue decreased 31 percent primarily due to lower selling prices particularly in the PCI and Performance Polymers segments and lower sales volume particularly in the CASPI and PCI segments.

Sales revenue in Asia Pacific decreased in first nine months 2009 compared to first nine months 2008 primarily due to lower sales volume particularly in the SP and Fibers segments and lower selling prices in the PCI, SP, and CASPI segments partially offset by higher selling prices in the Fibers segment.
 
Sales revenue in Europe, Middle East and Africa decreased in first nine months 2009 compared to first nine months 2008 primarily due to lower sales volume and an unfavorable shift in product mix in all segments.  The region had minimal price effect change compared to significant declines in other regions due to the higher selling prices in the Fibers segment offsetting declines in each of the other segments in first nine months 2009 compared to first nine months 2008.
 
Sales revenue in Latin America decreased in first nine months 2009 compared to first nine months 2008 primarily due to lower sales volume and lower selling prices partially offset by a favorable shift in product mix.  Excluding contract polymer intermediates sales, sales revenue decreased 12 percent due to lower selling prices primarily in the Performance Polymers and PCI segments partially offset by a favorable shift in product mix primarily in the Performance Polymers segment.

With a substantial portion of sales to customers outside the United States, Eastman is subject to the risks associated with operating in international markets.  To mitigate its exchange rate risks, the Company frequently seeks to negotiate payment terms in U.S. dollars.  In addition, where it deems such actions advisable, the Company engages in foreign currency hedging transactions and requires letters of credit and prepayment for shipments where its assessment of individual customer and country risks indicates their use is appropriate.  For additional information, see Note 10 to the consolidated financial statements in Part II, Item 8 and Part II, Item 7A of the Company's 2008 Annual Report on Form 10-K and Forward-Looking Statements and Risk Factors of this Quarterly Report on Form 10-Q.

 
35

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


Cash Flows

   
First  Nine Months
(Dollars in millions)
 
2009
 
2008
         
Net cash provided by (used in)
       
Operating activities
$
668
$
293
Investing activities
 
(313)
 
(145)
Financing activities
 
(74)
 
(699)
Net change in cash and cash equivalents
 
 281
 
(551)
 
       
Cash and cash equivalents at beginning of period
 
387
 
888
         
Cash and cash equivalents at end of period
$
668
$
337

Cash provided by operating activities was $668 million in first nine months 2009 compared to $293 million in first nine months 2008.  The improvement was primarily due to a decrease in working capital in 2009, particularly inventories, compared to an increase in working capital in 2008, as well as a change in tax accounting method reflected as a provision for deferred income taxes.  The Company generated a more than $100 million positive operating cash flow impact from a change in tax accounting method in the first nine months of 2009, which for tax purposes, accelerated the timing of deductions for manufacturing repairs expense resulting in lower estimated tax payments and a refund of previously paid taxes.

Cash used in investing activities was $313 million in first nine months 2009 compared to $145 million used in investing activities in first nine months 2008.  The first nine months 2009 included the first three scheduled payments for an investment in the Company's alliance with SK which are reflected in the line item "Cash flows from investing activities -- Other items, net" of the Statements of Cash Flows.  Proceeds of $333 million were received in the first nine months 2008 primarily related to the sale of the Company's PET polymers and PTA manufacturing facilities in the Netherlands and the PET manufacturing facility in the United Kingdom.  Capital spending of $268 million in first nine months 2009 decreased compared to $430 million in first nine months 2008 due primarily to actions taken to respond to the current global recession.

Cash used in financing activities totaled $74 million in first nine months 2009 compared to $699 million used in financing activities in first nine months 2008.  Share repurchases in first nine months 2008 were $501 million.

The payment of dividends is also reflected in financing activities in all periods.

The Company expects to generate positive free cash flow (operating cash flow less capital expenditures and dividends) in excess of $300 million in 2009, including approximately $100 million in cash from working capital and approximately $100 million from a combination of a refund of previously paid taxes and lower estimated tax payments, assuming continued difficult economic conditions and raw material and energy costs similar to current levels.  The priorities for uses of available cash are expected to be payment of the quarterly cash dividend, investing in growth initiatives, funding defined benefit pension plans, and repurchasing shares.


 
36

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


Liquidity

At September 30, 2009, the Company had credit facilities with various U.S. and foreign banks totaling approximately $800 million.  These credit facilities consist of a $700 million revolving credit facility (the "Credit Facility") and a 58 million euro credit facility ("Euro Facility").  The Credit Facility has two tranches, with $125 million expiring in 2012 and $575 million expiring in 2013.  The Euro Facility expires in 2012.  Borrowings under these credit facilities are subject to interest at varying spreads above quoted market rates.  The Credit Facility requires a facility fee on the total commitment that is based on Eastman's credit rating.  In addition, these credit facilities contain a number of customary covenants and events of default, including the maintenance of certain financial ratios.  The Company was in compliance with all such covenants for all periods presented.  At September 30, 2009, the Company's credit facility borrowings totaled $85 million, primarily from the Euro Facility, at an effective interest rate of 0.79 percent.  At December 31, 2008, borrowings on these credit facilities were $84 million, primarily from the Euro Facility, at an effective interest rate of 3.74 percent.

The Credit Facility provides liquidity support for commercial paper borrowings and general corporate purposes.  Accordingly, any outstanding commercial paper borrowings reduce borrowings available under the Credit Facility.  Given the expiration dates of the Credit Facility, any commercial paper borrowings supported by the Credit Facility are classified as long-term borrowings because the Company has the ability to refinance such borrowings on a long-term basis.

Additionally, the Company maintains a $200 million annually renewable accounts receivable securitization program that is available to provide liquidity through the sale of receivables.  The securitization program was fully drawn at September 30, 2009 and renewed in July 2009.  For more information, see "Off-Balance Sheet and Other Financing Arrangements" below and Note 10, "Commitments", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For more information regarding interest rates, refer to Note 6, "Borrowings", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In third quarter 2009, the Company completed a planned $30 million contribution to its U.S. defined benefit pension plan.  In 2008, the Company made no contribution to its U.S. defined benefit pension plan.

Cash flows from operations and the other sources of liquidity described above are expected to be available and sufficient to meet foreseeable cash flow requirements.  However, the Company's cash flows from operations can be affected by numerous factors including risks associated with global operations, raw material availability and cost, demand for and pricing of Eastman's products, capacity utilization, and other factors described under "Forward-Looking Statements and Risk Factors" below.  The Company believes maintaining a financial profile consistent with an investment grade company is important to its long term strategic and financial flexibility.

Capital Expenditures

Capital expenditures were $268 million and $430 million in first nine months 2009 and 2008, respectively.  The decrease of $162 million in 2009 compared with 2008 was primarily due to the Company's reduced capital spending in response to the current global recession.  The Company expects that 2009 capital spending will be between $300 million and $325 million, which is sufficient to fund required maintenance and certain strategic growth initiatives including the increased capacity for Eastman TritanTM copolyester and the front-end engineering and design for the industrial gasification project.

Other Commitments

At September 30, 2009, the Company's obligations related to notes and debentures totaled approximately $1.4 billion to be paid over a period of up to 20 years.  Other borrowings, related primarily to credit facility borrowings, totaled approximately $90 million.


 
37

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


The Company had various purchase obligations at September 30, 2009 totaling approximately $1.3 billion over a period of approximately 15 years for materials, supplies, and energy incident to the ordinary conduct of business.  For information regarding the Company's lease commitments, refer to Note 10, "Commitments", to the Company’s unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In addition, the Company had other liabilities at September 30, 2009 totaling approximately $1.4 billion primarily related to pension, retiree medical, and other post-employment obligations.

The Company expects to make scheduled payments of approximately $55 million towards the investment in the Company’s alliance with SK in 2009.
 
The items described above are summarized in the following table:

(Dollars in millions)
 
Payments Due for
 
Period
 
 
 
Notes and Debentures
 
 
 
Credit Facility Borrowings and Other
 
Interest Payable
 
 
 
Purchase Obligations
 
 
Operating Leases
 
Other Liabilities (a)
 
 
Total
                             
2009
$
--
$
1
$
13
$
79
$
7
$
122
$
 222
2010
 
--
 
--
 
97
 
355
 
26
 
80
 
558
2011
 
2
 
--
 
97
 
245
 
25
 
61
 
430
2012
 
152
 
85
 
93
 
241
 
16
 
53
 
640
2013
 
--
 
--
 
86
 
227
 
11
 
54
 
378
2014 and beyond
 
1,201
 
--
 
906
 
113
 
18
 
1,060
 
3,298
Total
$
1,355
$
 86
$
1,292
$
1,260
$
103
$
1,430
$
5,526

(a) Amounts represent the current estimated cash payments to be made by the Company primarily for pension and other post-employment benefits and taxes payable in the periods indicated.  The amount and timing of such payments is dependent upon interest rates, health care trends, actual returns on plan assets, retirement and attrition rates of employees, continuation or modification of the benefit plans, and other factors.  Such factors can significantly impact the amount and timing of any future contributions by the Company.


If certain operating leases are terminated by the Company, it guarantees a portion of the residual value loss, if any, incurred by the lessors in disposing of the related assets.  For information on the Company's residual value guarantees, refer to Note 10, "Commitments", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Eastman entered into an agreement in 1999 that allows it to generate cash by reducing its working capital through the sale of undivided interests in certain domestic trade accounts receivable under a planned continuous sale program to a third party.  For information on the Company's annually renewable accounts receivable securitization program, refer to Note 10, "Commitments", to the Company’s unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The Company did not have any other material relationships with unconsolidated entities or financial partnerships, including special purpose entities, for the purpose of facilitating off-balance sheet arrangements with contractually narrow or limited purposes.  Thus, Eastman is not materially exposed to any financing, liquidity, market, or credit risk related to the above or any other such relationships.


 
38

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


The Company has evaluated its material contractual relationships and has concluded that the entities involved in these relationships are not Variable Interest Entities ("VIEs") or, in the case of Primester, a joint venture that manufactures cellulose acetate at the Company's Kingsport, Tennessee plant, the Company is not the primary beneficiary of the VIE.   As such, in accordance with GAAP for consolidations, the Company is not required to consolidate these entities.  In addition, the Company has evaluated long-term purchase obligations with an entity that may be a VIE at September 30, 2009.  This potential VIE is a joint venture from which the Company has purchased raw materials and utilities for several years.   The Company purchased approximately $50 million of raw materials and utilities during 2008 and expects to purchase approximately $35 million during 2009.  The Company has no equity interest in this entity and has confirmed that one party to this joint venture does consolidate the potential VIE.  However, due to competitive and other reasons, the Company has not been able to obtain the necessary financial information to determine whether the entity is a VIE, and whether or not the Company is the primary beneficiary.

Guarantees and claims also arise during the ordinary course of business from relationships with suppliers, customers, and non-consolidated affiliates when the Company undertakes an obligation to guarantee the performance of others if specified triggering events occur.  Non-performance under a contract could trigger an obligation of the Company. These potential claims include actions based upon alleged exposures to products, intellectual property and environmental matters, and other indemnifications.  The ultimate effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists as to the final outcome of these claims.  However, while the ultimate liabilities resulting from such claims may be significant to results of operations in the period recognized, management does not anticipate they will have a material adverse effect on the Company's consolidated financial position or liquidity.

Treasury Stock

In October 2007, the Company's Board of Directors authorized the repurchase of up to $700 million of the Company's outstanding common stock at such times, in such amounts, and on such terms, as determined to be in the best interests of the Company.  As of September 30, 2009, a total of 9.4 million shares had been repurchased under this authorization for a total amount of $583 million.  No share repurchases were made in first nine months 2009.

Dividends

The Company declared cash dividends of $0.44 per share in third quarter 2009 and 2008 and $1.32 per share in first nine months 2009 and 2008.


In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 166, "Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140" ("SFAS No. 166").  This statement addresses the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets.  This statement is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter.  The Company is currently evaluating the effect SFAS No. 166 will have on its consolidated financial position, liquidity, or results of operations.

In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)" ("SFAS No. 167").  This statement amends certain requirements of FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities", to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements.  This statement is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter.  The Company is currently evaluating the effect SFAS No. 167 will have on its consolidated financial position, liquidity, or results of operations.

 
39

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS



For 2009, the Company expects:

·  
declines in volume attributed to the global recession;

·  
the volatility of market prices for raw material and energy to continue and that the Company will continue to use pricing strategies and ongoing cost control initiatives in an attempt to offset the effects on gross profit;

·  
some segments to be challenged to meet their typical operating margins with the current uncertainty of the global recession;

·  
sales volume for acetate tow in the Fibers segment to be down slightly compared to 2008, and to make scheduled payments of approximately $55 million in the alliance with SK to form a company to acquire and operate a cellulose acetate tow manufacturing facility and related business in Korea;

·  
to complete an additional 30 percent expansion of its CASPI segment's hydrogenated hydrocarbon resins manufacturing capacity in Middelburg, the Netherlands during fourth quarter;

·  
ethylene volume to decline in the PCI segment due to the staged phase-out of older cracking units at the Company's Longview, Texas facility;

·  
to complete maintenance and capital projects for its largest cracking unit as the last step in the reconfiguration of its Longview, Texas facility during second quarter (which was completed in second quarter 2009), with costs related to these actions impacting the PCI and CASPI segments;

·  
the SP segment will continue to progress with the introduction of its new copolyester, Eastman TritanTM copolyester, including a new 30,000 metric ton TritanTM manufacturing facility expected to be online in 2010;

·  
the Performance Polymers segment to have a greater operating loss in fourth quarter 2009 compared to third quarter 2009 because of seasonality of demand, additional market capacity, volatility of paraxylene, and additional costs to address operational challenges with the IntegRexTM-based PET manufacturing facility;
 
·  
to continue to pursue options to create additional value from its IntegRexTM technology, primarily by actively pursuing licensing opportunities;
 
·  
following completion of front-end engineering and design for the industrial gasification project, to evaluate alternatives to lower the overall project cost, pursue government financing and incentives, and evaluate the possible impact of pending and proposed environmental legislation;
 
·  
depreciation and amortization to be slightly higher than 2008;

·  
pension expense to be similar to 2008, and to fund defined benefit pension plans in an amount between $25 million and $50 million (approximately $35 million of which has been funded through third quarter) and is evaluating additional funding in the fourth quarter such that funding in 2009 would exceed $50 million;

·  
net interest expense to increase compared with 2008 primarily due to lower interest income, driven by lower average interest rates and lower average cash balances;

·  
the effective tax rate, including the recapture of gasification investment tax credits taken and a charge associated with a change in accounting method for tax purposes, to be approximately 38%;

 
40

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


·  
capital spending to be between $300 million and $325 million as it selectively funds targeted growth efforts, while prioritizing capital spending, including the increased capacity for Eastman TritanTM copolyester and the front-end engineering and design for the industrial gasification project;

·  
to generate positive free cash flow in excess of $300 million, including approximately $100 million in cash from working capital, assuming continued difficult economic conditions and raw material and energy costs similar to current levels, and $100 million positive operating cash flow impact of a change in tax accounting method; and
 
·  
priorities for uses of available cash to be payment of the quarterly cash dividend, fund targeted growth initiatives and defined benefit pension plans, and repurchase shares.
 
Based upon the foregoing, the Company expects fourth quarter 2009 earnings per share to decline compared to third quarter 2009, but to be slightly above $0.85 per share.

In addition to the above, the Company expects to significantly improve earnings over the long-term through strategic efforts and growth initiatives in existing businesses, and expects:

·  
the SP segment to improve earnings by continued focus on copolyesters growth, increasing sales revenue from cellulose esters used in liquid crystal displays screens and other various markets, and continued progress with the introduction of its high performance copolyesters;

·  
to pursue licensing opportunities for the PCI segment's acetyl and oxo technologies and for the Performance Polymers segment's IntegRexTM technology;

·  
to pursue additional growth opportunities in Asia for acetate tow in the Fibers segment; and

·  
to continue exploring options with industrial gasification.

See "Forward-Looking Statements and Risk Factors" below.

 
The expectations under "Outlook" and certain other statements in this Quarterly Report on Form 10-Q may be forward-looking in nature as defined in the Private Securities Litigation Reform Act of 1995.  These statements and other written and oral forward-looking statements made by the Company from time to time may relate to, among other things, such matters as planned and expected capacity increases and utilization; anticipated capital spending; expected depreciation and amortization; environmental matters; legal proceedings; exposure to, and effects of hedging of, raw material and energy costs, foreign currencies and interest rates; global and regional economic, political, and business conditions; competition; growth opportunities; supply and demand, volume, price, cost, margin, and sales; earnings, cash flow, dividends and other expected financial results and conditions; expectations, strategies, and plans for individual assets and products, businesses and segments as well as for the whole of Eastman Chemical Company; cash requirements and uses of available cash; financing plans; pension expenses and funding; credit ratings; anticipated restructuring, divestiture, and consolidation activities; cost reduction and control efforts and targets; integration of acquired businesses; strategic initiatives and development, production, commercialization, and acceptance of new products, services and technologies and related costs; asset, business and product portfolio changes; and expected tax rates and net interest costs.

These plans and expectations are based upon certain underlying assumptions, including those mentioned with the specific statements.  Such assumptions are in turn based upon internal estimates and analyses of current market conditions and trends, management plans and strategies, economic conditions and other factors.  These plans and expectations and the assumptions underlying them are necessarily subject to risks and uncertainties inherent in projecting future conditions and results.  Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions and expectations proves to be inaccurate or is unrealized.  In addition to the factors described elsewhere in this report, the following are some of the important risk factors that could cause the Company's actual results to differ materially from those in any such forward-looking statements:

 
41

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


·  
Conditions in the global economy and global capital markets may adversely affect the Company's results of operations, financial condition, and cash flows.  The Company's business and operating results have been and will continue to be affected by the global recession, including the credit market crisis, declining consumer and business confidence, fluctuating commodity prices, volatile exchange rates, and other challenges currently affecting the global economy.  The Company's customers have experienced and may continue to experience deterioration of their businesses, cash flow shortages, and difficulty obtaining financing.  As a result, existing or potential customers may continue to delay or cancel plans to purchase products and may not be able to fulfill their obligations in a timely fashion.  Further, suppliers may be experiencing similar conditions, which could impact their ability to fulfill their obligations to the Company.  If the global recession continues for significant future periods or deteriorates significantly, the Company's results of operations, financial condition and cash flows could continue to be materially adversely affected.

·  
The Company is reliant on certain strategic raw material and energy commodities for its operations and utilizes risk management tools, including hedging, as appropriate, to mitigate short-term market fluctuations in raw material and energy costs.  There can be no assurance, however, that such measures will result in cost savings or that all market fluctuation exposure will be eliminated.  In addition, natural disasters, changes in laws or regulations, war or other outbreak of hostilities or terrorism or other political factors in any of the countries or regions in which the Company operates or does business or in countries or regions that are key suppliers of strategic raw material and energy commodities, or breakdown or degradation of transportation infrastructure used for delivery of strategic raw material and energy commodities, could affect availability and costs of raw material and energy commodities.

·  
While temporary shortages of raw material and energy may occasionally occur, these items have historically been sufficiently available to cover current and projected requirements.  However, their continuous availability and price are impacted by natural disasters, plant interruptions occurring during periods of high demand, domestic and world market and political conditions, changes in government regulation, war or other outbreak of hostilities or terrorism, and breakdown or degradation of transportation infrastructure.  Eastman's operations or products may, at times, be adversely affected by these factors.

·  
The Company's competitive position in the markets in which it participates is, in part, subject to external factors in addition to those that the Company can impact.  Natural disasters, pandemic illnesses, changes in laws or regulations (including environmental laws and regulations), war or other outbreak of hostilities or terrorism, or other political factors in any of the countries or regions in which the Company operates or does business or in countries or regions that are key suppliers of strategic raw materials, and breakdown or degradation of transportation infrastructure used for delivery of  raw material and energy supplies to the Company and for delivery of the Company's products to customers, could negatively impact the Company's competitive position and its ability to maintain market share.  For example, supply and demand for certain of the Company's products is driven by end-use markets and worldwide capacities which, in turn, impact demand for and pricing of the Company's products.

·  
Limitation of the Company's available manufacturing capacity due to significant disruption in its manufacturing operations, including natural disasters, pandemic illnesses, changes in laws or regulations, war or other outbreak of hostilities or terrorism, or other political factors in any of the countries or regions in which the Company operates or does business, or breakdown or degradation of transportation infrastructure used for delivery of  raw material and energy supplies to the Company and for delivery of the Company's products to customers, could have a material adverse affect on sales revenue, costs and results of operations and financial condition.

·  
The Company has an extensive customer base; however, loss of, or material financial weakness of, certain of the largest customers could adversely affect the Company's financial condition and results of operations until such business is replaced and no assurances can be made that the Company would be able to regain or replace any lost customers.

 
42

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


·  
The Company has efforts underway to exploit growth opportunities in certain core businesses by developing new products and technologies, licensing technologies, expanding into new markets, and tailoring product offerings to customer needs.  Current examples include IntegRexTM technology and new PET polymers products and TritanTM and other copolyester product innovations.  There can be no assurance that such efforts will result in financially successful commercialization of such products or acceptance by existing or new customers or new markets or that large capital projects for such growth efforts can be completed within the time or at the costs projected due, among other things, to demand for and availability of construction materials and labor.

·  
The Company has made, and intends to continue making, strategic investments, including in industrial gasification, and has entered, and expects to continue to enter, into strategic alliances in technology, services businesses, and other ventures in order to build, diversify, and strengthen certain Eastman capabilities, improve Eastman's raw material and energy cost and supply position, and maintain high utilization of manufacturing assets.  There can be no assurance that such investments and alliances will achieve their underlying strategic business objectives or that they will be beneficial to the Company's results of operations or that large capital projects for such growth efforts can be completed within the time or at the costs projected due, among other things, to demand for and availability of construction materials and labor and obtaining regulatory approvals and operating permits and reaching agreement on terms of key agreements and arrangements with potential suppliers and customers.  Such delays or cost overruns or the inability to obtain such approvals or to reach such agreements on acceptable terms could negatively affect the returns from these strategic investments and projects.

·  
The Company is trying to obtain non-recourse project financing for its industrial gasification project.  There is risk that such financing cannot be obtained or, if obtained, may be on terms different than those assumed in the Company's projections for financial performance of the project, due to any circumstance, change, or condition in the loan syndication, financial, capital markets, or government loan guarantee programs, that could reasonably be expected to materially affect availability, terms, and syndication of such financing.  The ability to enter into financially acceptable project commercial agreements for such elements as engineering, procurement, and construction, off-take agreements, commodity and/or interest hedges, utilities, administrative services, and others, as well as obtaining all necessary regulatory approvals and operating permits, may impact the available financing for the project or the terms of such financing, if available, including the nature and terms of any recourse back to the Company.

·  
In addition to productivity and cost reduction initiatives, the Company is striving to improve margins on its products through price increases where warranted and accepted by the market; however, the Company's earnings could be negatively impacted should such increases be unrealized, not be sufficient to cover increased raw material and energy costs, or have a negative impact on demand and volume.  There can be no assurances that price increases will be realized or will be realized within the Company's anticipated timeframe.

·  
The Company has undertaken and expects to continue to undertake productivity and cost reduction initiatives and organizational restructurings to improve performance and generate cost savings.  There can be no assurance that these will be completed as planned or beneficial or that estimated cost savings from such activities will be realized.

·  
The Company's facilities and businesses are subject to complex health, safety and environmental laws and regulations, which require and will continue to require significant expenditures to remain in compliance with such laws and regulations currently and in the future.  The Company's accruals for such costs and associated liabilities are subject to changes in estimates on which the accruals are based.  The amount accrued reflects the Company's assumptions about remediation requirements at the contaminated site, the nature of the remedy, the outcome of discussions with regulatory agencies and other potentially responsible parties at multi-party sites, and the number and financial viability of other potentially responsible parties.  Changes in the estimates on which the accruals are based, unanticipated government enforcement action, or changes in health, safety, environmental, chemical control regulations, and testing requirements could result in higher or lower costs.  Pending and proposed U.S. Federal legislation and regulation increase the likelihood that the Company’s manufacturing sites will in the future be impacted by regulation or taxation of greenhouse gas emissions, which legislation and regulation, if enacted, may result in capital expenditures, increases in costs for raw materials and energy, limitations on raw material and energy source and supply choices, and other direct compliance costs.

 
43

 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

·  
The Company and its operations from time to time are parties to, or targets of, lawsuits, claims, investigations, and proceedings, including product liability, personal injury, asbestos, patent and intellectual property, commercial, contract, environmental, antitrust, health and safety, and employment matters, which are handled and defended in the ordinary course of business.  The Company believes amounts reserved are adequate for such pending matters; however, results of operations could be affected by significant litigation adverse to the Company.

·  
The Company has deferred tax assets related to capital and operating losses.  The Company establishes valuation allowances to reduce these deferred tax assets to an amount that is more likely than not to be realized.  The Company's ability to utilize these deferred tax assets depends on projected future operating results, the reversal of existing temporary differences, and the availability of tax planning strategies.  Realization of these assets is expected to occur over an extended period of time.  As a result, changes in tax laws, assumptions with respect to future taxable income, and tax planning strategies could result in adjustments to these assets.

·  
Due to the Company's global sales, earnings, and asset profile, it is exposed to volatility in foreign currency exchange rates and interest rates.  The Company may use derivative financial instruments, including swaps, options and forwards, to mitigate the impact of changes in exchange rates and interest rates on its financial results.  However, there can be no assurance that these efforts will be successful and operating results could be affected by significant adverse changes in currency exchange rates or interest rates.

·  
The Company's sources of liquidity have been and are expected to be cash from operating activities, available cash balances, the revolving $700 million credit facility, sales of domestic receivables under the $200 million annually renewable accounts receivable securitization program, the commercial paper market, and the capital markets.  Additionally, the Company relies upon third parties to provide it with trade credit for purchases of various products and services.  While the Company maintains business relationships with a diverse group of financial institutions, their continued viability is not certain and could lead them not to honor their contractual credit commitments or to renew their extensions of credit or provide new sources of credit.  Furthermore, trade creditors may be unable to obtain credit and reduce their trade credit extension.  Recently, the capital and credit markets have become increasingly volatile as a result of adverse conditions that have caused the failure or near failure of a number of large financial services companies.  If the capital and credit markets continue to experience volatility and the availability of funds remains limited, the Company may incur increased costs associated with borrowings.  In addition, it is possible that the Company's ability to access the capital and credit markets may be limited by these or other factors at a time when it would like, or need, to do so, which could have an impact on the Company's ability to finance its business or react to changing economic and business conditions.  While the Company believes that recent governmental and regulatory actions reduce the risk of a further deterioration or systemic contraction of capital and credit markets, there can be no certainty that the Company's liquidity will not be negatively impacted.  Company borrowings are subject to a number of customary covenants and events of default, including the maintenance of certain financial ratios.  While the Company expects to remain in compliance with such covenants, there is no certainty that events and circumstances will not result in covenant violations which could limit access to credit facilities or cause events of default with outstanding borrowings. In addition, the Company's cash flows from operations may be adversely affected by unfavorable consequences to the Company's customers and the markets in which the Company competes as a result of the current financial, economic, and capital and credit market conditions and uncertainty.

The foregoing list of important factors does not include all such factors nor necessarily present them in order of importance.  This disclosure, including that under "Outlook" and "Forward-Looking Statements and Risk Factors," and other forward-looking statements and related disclosures made by the Company in this Quarterly Report on Form 10-Q and elsewhere from time to time, represents management's best judgment as of the date the information is given.  The Company does not undertake responsibility for updating any of such information, whether as a result of new information, future events, or otherwise, except as required by law.  Investors are advised, however, to consult any further public Company disclosures (such as in filings with the Securities and Exchange Commission or in Company press releases) on related subjects.


 
44

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There are no material changes to the Company's market risks from those disclosed in Part II, Item 7A of the Company's 2008 Annual Report on Form 10-K.

 
Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company's management, including its principal executive and principal financial officers as appropriate to allow timely decisions regarding required disclosure.  An evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the Company's disclosure controls and procedures.  Based on that evaluation, the CEO and CFO have concluded that as of September 30, 2009, the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed was accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company's internal control over financial reporting that occurred during first nine months of 2009 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
 
 

 
45

 

PART II.  OTHER INFORMATION
 

General

From time to time, the Company and its operations are parties to, or targets of, lawsuits, claims, investigations and proceedings, including product liability, personal injury, asbestos, patent and intellectual property, commercial, contract, environmental, antitrust, health and safety, and employment matters, which are being handled and defended in the ordinary course of business.  While the Company is unable to predict the outcome of these matters, it does not believe, based upon currently available facts, that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations, or cash flows.  However, adverse developments could negatively impact earnings or cash flows in a particular future period.

Jefferson (Pennsylvania) Environmental Proceeding

In December 2005, Eastman Chemical Resins, Inc., a wholly-owned subsidiary of the Company (the "ECR Subsidiary"), received a Notice of Violation ("NOV") from the United States Environmental Protection Agency's Region III Office ("EPA") alleging that the ECR Subsidiary's West Elizabeth, Jefferson Borough, Allegheny County, Pennsylvania manufacturing operation violated certain federally enforceable local air quality regulations and certain provisions in a number of air quality-related permits.  In October 2006, EPA referred the matter to the United States Department of Justice's Environmental Enforcement Section ("DOJ").  Company representatives have met with EPA and DOJ on a number of occasions since the NOV’s issuance and have determined that it is not reasonably likely that any civil penalty assessed by the EPA and DOJ will be less than $100,000.  While the Company intends to vigorously defend against these allegations, this disclosure is made pursuant to SEC Regulation S-K, Item 103, Instruction 5.C., which requires disclosure of administrative proceedings commenced under environmental laws that involve governmental authorities as parties and potential monetary sanctions in excess of $100,000.  The Company believes that the ultimate resolution of this proceeding will not have a material impact on the Company's financial condition, results of operations, or cash flows.

ITEM 1A.  RISK FACTORS

For identification and discussion of the most significant risks applicable to the Company and its business, see "Part I – Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements and Risk Factors" of this Quarterly Report on Form 10-Q.


 
46

 



(c)  Purchases of Equity Securities by the Issuer

Period
Total Number
of Shares
Purchased
(1)
 
Average Price Paid Per Share
(2)
 
Total Number of Shares Purchased as Part of Publicly Announced Plans
or Programs
(3)
 
Approximate Dollar
Value (in millions) that May Yet Be Purchased Under the Plans or Programs
(3)
July 1-31, 2009
0
$
--
 
0
$
117
August 1-31, 2009
212
$
55.02
 
0
$
117
September 1-30, 2009
93
$
51.50
 
0
$
117
Total
305
$
53.95
 
0
   

(1)  
Shares surrendered to the Company by employees to satisfy individual tax withholding obligations upon vesting of previously issued shares of restricted common stock.  These share surrenders were not part of any Company repurchase plan.
(2)  
Average price paid per share reflects the closing price of Eastman common stock on the business day the shares were surrendered by the employee stockholder to satisfy individual tax withholding obligations.
(3)  
In October 2007, the Board of Directors authorized $700 million for repurchase of the Company's outstanding common shares at such times, in such amounts, and on such terms, as determined to be in the best interests of the Company.  As of September 30, 2009, a total of 9.4 million shares have been repurchased under this authorization for a total amount of $583 million. For additional information, see Note 12, "Stockholders' Equity", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

ITEM 6.  EXHIBITS

Exhibits filed as part of this report are listed in the Exhibit Index appearing on page 49.

 

 
47

 

 
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:  October 23, 2009
 
By:
 /s/Curtis E. Espeland 
     
Curtis E. Espeland
     
Senior Vice President and Chief Financial Officer

 

 

 
48

 


     
Sequential
Exhibit
     
Page
Number
 
Description
 
Number
         
3.01
 
Amended and Restated Certificate of Incorporation of Eastman Chemical Company, as amended (incorporated herein by reference to Exhibit 3.01 to Eastman Chemical Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001)
   
         
3.02
 
Amended and Restated Bylaws of Eastman Chemical Company, as amended  November 9, 2007 (incorporated herein by referenced to Exhibit 3.02 to Eastman Chemical Company's  Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 (the "September 30, 2007 10-Q")
   
         
4.01
 
Form of Eastman Chemical Company common stock certificate as amended February 1, 2001 (incorporated herein by reference to Exhibit 4.01 to Eastman Chemical Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)
   
         
4.02
 
Indenture, dated as of January 10, 1994, between Eastman Chemical Company and The Bank of New York, as Trustee (the "Indenture") (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"))
   
         
4.03
 
Form of 7 1/4% Debentures due January 15, 2024 (incorporated herein by reference to Exhibit 4(d) to the 8-K)
   
         
4.04
 
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"))
   
         
4.05
 
Form of 7 5/8% Debentures due June 15, 2024 (incorporated herein by reference to Exhibit 4(b) to the June 8-K)
   
         
4.06
 
Form of 7.60% Debentures due February 1, 2027 (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, 1996 (the "1996 10-K"))
   
         
4.07
 
Form of 7% Notes due April 15, 2012 (incorporated herein by reference to Exhibit 4.09 to Eastman Chemical Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002)
   
         
4.08
 
Officer's Certificate pursuant to Sections 201 and 301 of the Indenture related to 7.60% Debentures due February 1, 2027 (incorporated herein by reference to Exhibit 4.09 to the 1996 10-K)
   
         
4.09
 
$200,000,000 Accounts Receivable Securitization agreement dated July 9, 2008 (amended February 18, 2009, and July 8, 2009), between the Company and The Bank of Tokyo-Mitsubishi UFJ, Ltd. and SunTrust Robinson Humphrey, Inc., as agents (incorporated herein by reference to Exhibit 4.09 to Eastman Chemical Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009)
   
         
4.10
 
Amended and Restated Credit Agreement, dated as of April 3, 2006 (the "Credit Agreement") among Eastman Chemical Company, the Lenders named therein, and Citigroup Global Markets , Inc. and J. P. Morgan Securities Inc., as  joint lead arrangers (incorporated herein by reference to Exhibit 4.11 to Eastman Chemical Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006)
   


 
49

 


   
EXHIBIT INDEX
 
Sequential
Exhibit
     
Page
Number
 
Description
 
Number
         
4.11
 
Letter Amendments dated November 16, 2007 and March 10, 2008, to the Credit Agreement (incorporated herein by reference to Exhibit 4.10 to Eastman Chemical Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008)
   
         
4.12
 
Form of 6.30% Notes due November  15, 2018 (incorporated herein by reference to Exhibit 4.14 to Eastman Chemical Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003)
   
         
10.01
   
51-63
         
10.02
   
64-76
         
12.01
   
77
         
31.01
   
78
         
31.02
   
79
         
32.01
   
80
         
32.02
   
81
         
101.INS
 
XBRL Instance Document (furnished, not filed)
   
         
101.SCH
 
XBRL Taxonomy Extension Schema (furnished, not filed)
   
         
101.CAL
 
XBRL Taxonomy Calculation Linkbase (furnished, not filed)
   
         
101.LAB
 
XBRL Taxonomy Label Linkbase (furnished, not filed)
   
         
101.PRE
 
XBRL Definition Linkbase Document (furnished, not filed)
   
         
         


 
  50

 

GRAPHIC 2 eastmanlogo.jpg begin 644 eastmanlogo.jpg M_]C_X``02D9)1@`!`0$`8`!@``#_VP!#``@&!@<&!0@'!P<)"0@*#!0-#`L+ M#!D2$P\4'1H?'AT:'!P@)"XG("(L(QP<*#7J#A(6&AXB)BI*3E)66EYB9FJ*CI*6FIZBIJK*SM+6VM[BYNL+#Q,7& MQ\C)RM+3U-76U]C9VN'BX^3EYN?HZ>KQ\O/T]?;W^/GZ_\0`'P$``P$!`0$! M`0$!`0````````$"`P0%!@<("0H+_\0`M1$``@$"!`0#!`<%!`0``0)W``$" M`Q$$!2$Q!A)!40=A<1,B,H$(%$*1H;'!"2,S4O`58G+1"A8D-.$E\1<8&1HF M)R@I*C4V-S@Y.D-$149'2$E*4U155E=865IC9&5F9VAI:G-T=79W>'EZ@H.$ MA8:'B(F*DI.4E9:7F)F:HJ.DI::GJ*FJLK.TM;:WN+FZPL/$Q<;'R,G*TM/4 MU=;7V-G:XN/DY>;GZ.GJ\O/T]?;W^/GZ_]H`#`,!``(1`Q$`/P#JOB9XWUWP MUXDM[/3+F.*![196#1*WS%W'4CT45FP^*O&DT$#I24(N36ND6_Q:/8/&7B:;PSX+%Z)$ M.H2JD41P"#(1DG'0@`$^G2O-I_'WCFQTC3M8GN[5K.]9Q$/)3+;&PP(`XYI? MB1<:OX@OM/M;72;\6MM;(=JPNP\QU!89QS@87Z@UN^+?`US#\,-+M+=7FO-+ M^=XXP6+^8= M7XD\:+I7@B+Q#8PK.;@1^2KYV@L,_-CGCGCCFO.-+\:>-/$#R/;^(])L"IP( M;@Q1EO\`=#*2?SJYX9U/4K/X?7VE7_ANZU`6\RE+::!P'B8Y;'!QM89SVW5R MFLVMIJ$:QZ1X-U.PNR_S`2R2K]`I7/ZBIJU92M)/IMJ:X'`T*3G2E!-\VDGR MM6TMHW^2.\N[WXIHEM]FBAGS%EY(5A96.YL8/^[MKE[+XC>.M1U%-/M+B.6Z MD8JL8@C!)'7J,=C7H_PNT35=#\,/#JBO$TLYDB@;3;R.%;B0F1X&"@;6[D4YJ:Y&F]2PD\#(ZBJ_A3XD>(;GQ/I5MK%S$]E>MM`$*J3D MLBG(']\8KHOC%97=]X>L$M+6:X=;O)6*,N0-C<\5PVK^&=2'@/POJ%O978O8 M#-#(B1-YB?O7=#C&1_%^8HJ.I";LVTAX2.#Q&%BZD(QE-M:)::.UON)]7^*? MB4:K?MI]S&MA'<,D7[A&PN3MR2.X4FO1?!_BJXN_`$VO:S,KM"96=E4+E5Z` M`=Z\N;PKJ%O\,O/_`+.NC>76JH3$(6+B-(Y`"1C(^9F_2K5P=8M_A=9:'!IE M]YMS=223JMN^512,`\=S@_\``:FG4J1;E)O8TQ6"P=>G&E145::3>E[):DT' MC[QS?:1J.L07=JMG9,@E'DIE=[84`$<\UZ%X9\6S:[\/;G52Z_VA:PRK*0HP M)%4D''N,'\ZYOPEX&N9OAAJMK+?B5K=I)I$NE7,<4- MWIL=Q(IB5L2%G#JX_"L7PMX6O[WPQXHMKC3[J*;R(I8!)"REG0LV%R.21 MQ^- EX-10.01 3 exhibit10_01.htm FORM OF PERFORMANCE SHARE AWARD TO EXECUTIVE OFFICERS exhibit10_01.htm
Exhibit 10.01
 
 

 
PERFORMANCE SHARE AWARD SUBPLAN
OF THE 2007 OMNIBUS LONG-TERM COMPENSATION PLAN
2010-2012 PERFORMANCE PERIOD
 

 

 
 
 
EASTMAN CHEMICAL COMPANY
 
 
 
 
 

 
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EASTMAN CHEMICAL COMPANY
PERFORMANCE SHARE AWARD SUBPLAN
OF THE 2007 OMNIBUS LONG-TERM COMPENSATION PLAN
2010-2012 PERFORMANCE PERIOD
 
Section 1. Background.  Under Article 4 of the Eastman Chemical Company 2007 Omnibus Long-Term Compensation Plan (the “Plan”), the “Committee” (as defined in the Plan), may, among other things, award shares of the $.01 par value common stock (“Common Stock”) of Eastman Chemical Company (the “Company”) to “Participants” (as defined in the Plan), and such awards may take the form of “Performance Awards” (as defined in the Plan) or “Qualified Performance-Based Awards” (as defined in the Plan) which are contingent upon the attainment of certain performance objectives during a specified period, and subject to such other terms, conditions, and restrictions as the Committee deems appropriate.  The purpose of this Performance Share Award Subplan (this “Subplan”) is to set forth the terms of the award of  performance shares for the 2010-2012 Performance Period specified herein, effective as of January 1, 2010 (the “Effective Date”).
 
Section 2. Definitions.
 
(a) The following definitions shall apply to this Subplan:
 
(i) “Actual Grant Amount” means the number of shares of Common Stock to which a participant is entitled under this Subplan, calculated in accordance with Section 6 of this Subplan.
 
(ii) “Award Amount” means the performance shares awarded to the Participant under this Subplan at the beginning of the Performance Period.
 
(iii) “Award Payment Date” means the date the Committee approves the payout of Common Stock covered by an award under this Subplan to a Participant.
 
(iv) “Comparison Group” is the group of companies within the S&P 1500 “Materials Sector” that are classified by Standard & Poor’s as Chemical companies.  The S&P “Materials Sector” index is an index of industrial companies selected from the S&P “Super Composite 1500” Index, identified as Global Industry Classification Standard (“GICS”) 15.
 
(v) “Cost of Capital” reflects the Company’s cost of debt and the cost of equity, expressed as a percentage, reflecting the percentage of interest charged on debt and the percentage of expected return on equity.
 
(vi) “Earnings from Continuing Operations” shall be defined as the total sales of the Company minus the costs of all operations of any nature used to produce such sales, including taxes, plus after-tax interest associated with the Company’s capital debt.
 

 
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(vii) “Maximum Deductible Amount” means the maximum amount deductible by the Company under Section 162(a), taking into consideration the limitations under Section 162(m), of the Internal Revenue Code of 1986, as amended, or any similar or successor provisions thereto.
 
(viii) “Participation Date” means October 27, 2009.
 
(ix) “Performance Period” means January 1, 2010 through December 31, 2012.
 
(x) “Performance Year” means one of the three calendar years in the Performance Period.
 
(xi) “Return on Capital” shall mean the return produced by funds invested in the Company and shall be determined as Earnings from Continuing Operations, as defined in Section 2.a.(vi), divided by the Average Capital Employed.  Average Capital Employed shall be derived by adding the Company’s capital debt plus equity at the close of the last day of the year preceding the Performance Year, to the Company’s capital debt plus equity at the close of the last day of the present Performance Year, with the resulting sum being divided by two.  Capital debt is defined as the sum of borrowing by the Company due within one year and long-term borrowing, as designated on the Company’s balance sheet.  The resulting ratio shall be multiplied by One Hundred (100) in order to convert such to a percentage.  Such percentage shall be calculated to the third place after the decimal point (i.e., xx.xxx%), and then rounded to the second place after the decimal point (i.e., xx.xx%).
 
(xii) “Target Award Range” means, with respect to any eligible Participant, the number of performance shares within the range specified on Exhibit A hereto for the Salary Grade applicable to such Participant.
 
(xiii) “TSR” means total stockholder return, as reflected by the sum of (A) change in stock price (measured as the difference between (I) the average of the closing prices of a company’s common stock on the New York Stock Exchange, or of the last sale prices or closing prices of such stock on another national trading exchange, as applicable, in the period beginning on the tenth trading day preceding the beginning of the Performance Period and ending on the tenth trading day of the Performance Period and (II) the average of such closing or last sale prices for such stock in the period beginning on the tenth trading day preceding the end of the Performance Period and ending on the tenth trading day following the end of the Performance Period) plus (B) dividends declared, assuming reinvestment of dividends, and expressed as a percentage return on a stockholder’s hypothetical investment.
 
(b) Any capitalized terms used but not otherwise defined in this Subplan shall have the respective meanings set forth in the Plan.
 

 
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Section 3. Administration.  This Subplan shall be administered by the Compensation and Management Development Committee of the Board of Directors.  The Committee shall have authority to interpret this Subplan, to prescribe rules and regulations relating to this Subplan, and to take any other actions it deems necessary or advisable for the administration of this Subplan, and shall retain all general authority granted to it under Article 4 of the Plan.  At the end of the Performance Period, the Committee shall approve Actual Grant Amounts awarded to participants under this Subplan.
 
Section 4. Eligibility; Types of Awards.  The Participants who are eligible to participate in this Subplan are those employees who, as of the Participation Date, are at Salary Grade 49 and 105 and above.  Employees who are promoted during the Performance Period to a position that would meet the above criteria, but who do not hold such position as of the Participation Date, are not eligible to participate in this Subplan.  The Covered Employees identified on Schedule A shall receive Qualified Performance-Based Awards.  The remainder of the Participants shall receive Performance Awards.
 
Section 5. Form of Payout of Awards.  Subject to the terms and conditions of the Plan and this Subplan, earned Awards under this Subplan shall be paid out in the form of unrestricted shares of Common Stock, except for conversions to cash and deferrals under Section 9 of this Subplan, and except that if a participant is entitled to any fraction of a share of Common Stock, as a result of Section 10 of this Subplan or otherwise, then in lieu of receiving such fraction of a share, the participant shall be paid a cash amount representing the market value of such fraction of a share at the time of payment.
 
Section 6. Size of Awards.
 
(a) Target Award Range.  Exhibit A hereto shows by Salary Grade the Target Award Range. The Salary Grade to be used in determining the size of any Award Amount to a Participant under this Subplan shall be the Salary Grade applicable to the position held by the participant on the Participation Date.  The actual size of the Award Amount to the Participant shall be determined based on an assessment by his or her senior management (and, in the case of executive officers, by the Committee) of the Participant’s past performance and potential for contributions to the Company’s future long term success.  Based on this assessment, the Participant may receive no award, the target award amount, or any amount within the Target Award Range in increments of 10 performance shares.  Each member of senior management will have a performance share budget, based on the cumulative award targets for their Participants, which must be balanced for their organizations.
 
(b) Actual Grant Amount.  Subject to the Committee’s authority to adjust the Actual Grant Amount described in Section 12, the Actual Grant Amount awarded to the Participant at the end of the Performance Period is determined by applying a multiplier to the Participant’s Award Amount.  The multiplier shall be determined by comparing Company performance relative to two measures:
 

 
54

 


 
(i) The Company’s TSR during the Performance Period relative to the TSRs of the companies in the Comparison Group during the Performance Period.  The Company and each company in the Comparison Group shall be ranked by TSR, in descending order, with the company having the highest TSR during the Performance Period being ranked number one.  The Comparison Group shall further be separated into quintiles (first 20%, second 20%, etc.) and the Company’s position, in relation to the Comparison Group, shall be expressed as a position in the applicable quintile ranking; and
 
(ii) The arithmetic average, for each of the Performance Years during the Performance Period, of the Company’s average Return on Capital minus a Return on Capital target. The Return on Capital target will be determined by the Committee.  In the case of Qualified Performance-Based Awards, the Return on Capital target for each year included in the Performance Period shall be established within 90 days after commencement of the Performance Period in a manner that complies with Code Section 162(m).  Moreover, in the case of Qualified Performance-Based Awards, Return on Capital will be measured in a manner that complies with Code Section 162(m), including the requirement that the performance goals be objectively measured.
 
An award multiplier table is shown in Exhibit B.  The award multiplier is based on the Company’s performance relative to its quintile ranking relative to the Comparison Group, and its average Return on Capital relative to a target during the Performance Period.  The award multipliers range from 3.0 (i.e., 300%), if the Company’s TSR is in the top performing quintile (top 20%) of companies in the Comparison Group and the average Return on Capital minus the target Return on Capital is greater than 10 percentage points, to 0.0 (with no shares of Common Stock earned by Participants under this Subplan) if the Company does not meet the specified levels of performance relative to the two measures.
 
Section 7. Composition of Comparison Group.
 
(a) Qualified Performance-Based Awards.  In the case of Qualified Performance-Based Awards, there shall be no adjustment in the Comparison Group during the Performance Period that would cause the Qualified Performance-Based Awards not to qualify for the Section 162(m) Exemption.
 
(b) Performance Awards.  In the case of Performance Awards, the Committee retains the discretion to make the following adjustments in the Comparison Group during the Performance Period.  A company in the Comparison Group may be dropped from the Comparison Group if a company’s common stock ceases to be publicly traded on a national stock exchange or market; or a company is a party to a significant merger, acquisition, or other reorganization.  Under these, or similar, circumstances, the company or companies may be removed from the Comparison Group, and may be replaced with another company or companies by Standard & Poor’s, consistent with their established criteria for selection of companies for the Comparison Group.  In any case where the Comparison Group ceases to exist, or is otherwise determined to no longer be appropriate as the basis for a measure under this Subplan, the Committee may designate a replacement Comparison Group.  In any such case, the Committee shall have authority to determine the appropriate method of calculating the TSR of such former and/or replacement Comparison Group, whether by complete substitution of the replacement Comparison Group (and disregard of the former Comparison Group) over the entire Performance Period or by pro rata calculations for each Comparison Group or otherwise.
 

 
55

 

 
 
Section 8. Preconditions to Payout Under Award.
 
(a) Continuous Employment.  Except as specified in paragraph (b) below, to remain eligible for payout under an Award under this Subplan, a Participant must remain continuously employed with the Company or a Subsidiary at all times from the Effective Date through the Award Payment Date.
 
(b) Death, Disability, Retirement, or Termination for an Approved Reason Before the Award Payment Date.  If a Participant’s employment is terminated due to death, disability, retirement, or any approved reason as determined by the Committee (in the case of an executive officer) or the executive officer responsible for Human Resources (in the case of non-executive officers)  (including reduction in force, divestiture, special separation, or termination by mutual consent) prior to the Award Payment Date, the Participant shall receive, subject to the terms and conditions of the Plan and this Subplan, a payout representing a prorated portion of the Actual Grant Amount to which such participant otherwise would be entitled, with the precise amount of such payout to be determined by multiplying the Actual Grant Amount by a fraction, the numerator of which is the number of full calendar months employed in the Performance Period from the Effective Date through and including the effective date of such termination, and the denominator of which is 36 (the total number of months in the Performance Period).
 
Section 9. Manner and Timing of Award Payments.
 
(a) Timing of Award Payment.  Except for deferrals under Section 9(c), if any Awards are payable under this Subplan, the payment of such Awards to Participants shall be made as soon as is administratively practicable after the end of the Performance Period and final approval by the Committee.
 
(b) Tax Withholding.  The Company may withhold or require the grantee to remit a cash amount sufficient to satisfy federal, state, and local taxes (including the participant’s FICA obligation) required by law to be withheld.  Further, either the Company or the grantee may elect to satisfy the withholding requirement by having the Company withhold shares of Common Stock having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction.
 
(c) Deferral of Award in Excess of the Maximum Deductible Amount.  If payment of the Award would, or could in the reasonable estimation of the Committee, result in the participant’s receiving compensation in excess of the Maximum Deductible Amount in a given year, then such portion (or all, as applicable) of the Award as would, or could in the reasonable estimation of the Committee, cause such participant to receive compensation from the Company in excess of the Maximum Deductible Amount may, at the sole discretion of the Committee, be converted into the right to receive a cash payment, which shall be deferred until after the participant retires or otherwise terminates employment with the Company and its Subsidiaries, provided that such deferral is compliant with the requirements of Internal Revenue Code Section 409A and Treasury Regulations and guidance thereunder.
 

 
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(d) Award Deferral to the EDCP.  In the event that all or any portion of an Award is converted into a right to receive a cash payment pursuant to Section 9(c) (except as otherwise provided in this Section with respect to Participants who are subject to Section 16(a) of the 1934 Act), an amount representing the Fair Market Value, as of the date the shares of Common Stock covered by the Award otherwise would be issued to the participant, of the Actual Grant Amount (or the deferred portion thereof) will be credited to the Stock Account of the Executive Deferred Compensation Plan (the “EDCP”), and hypothetically invested in units of Common Stock.  Notwithstanding the foregoing, for each Participant who is subject to Section 16(a) of the 1934 Act. the deferrable amount, when initially credited to the participant’s EDCP Account, shall be held in a participant’s Interest Account until the next date that dividends are paid on Common Stock, and on such date the deferrable amount that would have been initially credited to the participant’s Stock Account but for this sentence shall be transferred, together with allocable interest thereon, to the participant’s Stock Account, subject to provisions set forth in the EDCP.  Thereafter, such amount shall be treated in the same manner as other investments in the EDCP and shall be subject to the terms and conditions thereof.
 
Section 10. No Rights as Stockholder.  No certificates for shares of Common Stock shall be issued under this Subplan, nor shall any participant have any rights as a stockholder as a result of participation in this Subplan, until the Actual Grant Amount has been determined and such participant has otherwise become entitled to an Award under the terms of the Plan and this Subplan.  In particular, no participant shall have any right to vote or to receive dividends on any shares of Common Stock under this Subplan until certificates for such shares have been issued as described above.
 
Section 11. Application of Plan.  The provisions of the Plan shall apply to this Subplan, except to the extent that any such provisions are inconsistent with specific provisions of this Subplan.
 
Section 12. Adjustment of Actual Grant Amount.  The Committee may, in its sole discretion, adjust the Actual Grant Amount to reflect overall Company performance and business and financial conditions, except in the case of a Qualified Performance-Based Award where such actions would cause the Qualified Performance-Based Award to cease to qualify for the Section 162(m) Exemption.  In the case of a Qualified Performance-Based Award, the Committee shall retain the discretion to adjust such Award downward, either on a formula or discretionary basis or any combination, as the Committee determined.
 
Section 13. Amendments.  The Committee may, from time to time, amend this Subplan in any manner.
 

 
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EXHIBIT A
 
Eastman Chemical Company
Performance Share Award Grant Table
2010-2012 Cycle
 

 

 
ON FILE IN GLOBAL COMPENSATION
 

 
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EXHIBIT B
 
Award Multiplier Table
 
Differential from Target Return on Capital
Eastman TSR Relative to Comparison Companies
<-7%
-7% to -5%
-4.99 to -3%
-2.99 to -1%
-0.99 to 0%
.01 to +1%
+1.01 to +3%
+3.01 to +5%
+5.01 to +7%
+7.01 to +10%
>10%
5th quintile
0
0
0
0
.4
.5
.6
.7
.8
1.1
1.5
4th quintile
0
0
0
.4
.5
.7
.8
.9
1.1
1.5
2
3rd quintile
0
0
.4
.5
.8
1
1.2
1.5
1.8
2.1
2.4
2nd quintile
0
.4
.6
.8
1
1.3
1.6
1.9
2.2
2.5
2.8
1st quintile
0
.6
.8
1
1.3
1.6
1.9
2.2
2.5
2.8
3

 

 

 
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AWARD NOTICE
 

NOTICE OF PERFORMANCE SHARES
AWARDED PURSUANT TO THE
EASTMAN CHEMICAL COMPANY
2007 OMNIBUS LONG-TERM COMPENSATION PLAN
 
 
Recipient:
Performance Period: 2010 - 2012
 
Target Award:
 

1.         Award of Performance Shares.  This Award Notice serves to notify you that the Compensation and Management Development Committee of the Board of Directors (the “Committee”) of Eastman Chemical Company ("Company") has awarded to you, under the 2010-2012 Performance Share Award Subplan ("Subplan") of the 2007 Omnibus Long-Term Compensation Plan ("Plan"), on the terms and conditions set forth in the Subplan and the Plan, the number of performance shares (the "Performance Shares") of its $.01 par value Common Stock ("Common Stock") specified above.  The Performance Shares are rights to receive Awards in the form of shares of Common Stock, subject to the attainment of specified performance conditions by the Company.  Subject to satisfaction of the minimum performance conditions and the other terms of the Subplan, Awards under the Subplan will ultimately be paid in the form of unrestricted shares of Common Stock.

This Award Notice provides a summary of the terms and conditions of your performance shares, all of which terms and conditions are contained in the Subplan and the Plan.  Capitalized terms not defined herein have the respective meanings set forth in the Subplan and the Plan, as applicable.

2.         Performance Conditions.  The performance conditions for the Subplan involve: 1)  a comparison of the total stockholder return (referred to in the Subplan as "TSR," and reflecting both the change in stock price and the amount of dividends declared) of the Company during the period from January 1, 2010 through December 31, 2012 (the "Performance Period"), to the TSRs of the companies in the Comparison Group (the group of companies within the Standard and Poor’s “Materials Sector” that are classified as Chemical companies.  The S&P “Materials Sector” index, identified as Global Industry Classification Standard (“GICS”) 15, is an index of industrial companies selected from the S&P “Super Composite 1500” index); and 2) the arithmetic average for each of the Performance Years during the Performance Period, of the Company’s average Return on Capital minus a Return on Capital target.   The specific terms of the performance conditions are summarized in Section 3 of this Award Notice and are detailed in Section 6 of the Subplan.

3.         Number of Performance Shares Awarded.  The number of Performance Shares that you have been awarded is shown above (the "Target Award").  However, the actual number of shares of Common Stock to which you will be entitled under the Subplan (the "Actual Grant Amount") may be more or less than the Target Award, depending upon the quintile ranking of the Company's TSR when ranked among the TSRs of the Comparison Group, and the Company’s average Return on Capital relative to a Return on Capital target for each of the Performance Years during the Performance Period.  The Company’s performance relative to these measures shall determine a multiplier to be applied to the Target Grant Amount.  Multipliers range from 3.0 (i.e., 300%), if the Company’s TSR is ranked in the top performing quintile (top 20%) of companies in the Comparison Group, and the average Return on Capital minus the target Return on Capital is greater than 10 percentage points, to 0.0 (with no shares of Common Stock being delivered to participants), if the Company does not meet certain levels of performance relative to the two measures.  The award multiplier table is shown in Exhibit A.  Subject to the Committee’s authority to adjust the Actual Grant Amount described in Section 12 of this Award Notice, your Actual Grant Amount is determined by applying the multiplier corresponding to the Company’s performance (Exhibit A) to your Target Award.
 
 
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4.         Payment of Award.  If you are entitled to payment of an Award under the Subplan, such payment will be made as soon as administratively practicable after the end of the Performance Period and final approval by the Committee; provided, however, that if payment of the Award could, in the reasonable estimation of the Committee, result in your receiving compensation, in the year of scheduled payment, in excess of the amount deductible by the Company under Section 162(m) of the Internal Revenue Code, then such portion (or all, as applicable) of the Award as could, in the reasonable estimation of the Committee,  create such excess compensation, may, at the sole discretion of the Committee, be converted into the right to receive a cash payment, which will be deferred until after you terminate employment with the Company and its Subsidiaries, provided that such deferral is compliant with the requirements of Internal Revenue Code Section 409A and Treasury Regulations and guidance thereunder, as specified in Section 9 of the Subplan.

If any portion of an Award is converted into a right to receive a cash payment as described above, an amount representing the Fair Market Value of the deferred portion of the Actual Grant Amount will be credited to the Stock Account of the Executive Deferred Compensation Plan (the “EDCP”) and hypothetically invested in units of Common Stock.  Thereafter, such amount will be treated in the same manner as other investments in the EDCP, all as specified in Section 9 of the Subplan.

The Company may withhold or require you to remit a cash amount sufficient to satisfy federal, state, and local taxes (including your FICA obligation) required by law to be withheld.  Further, either the Company or you may elect to satisfy the withholding requirement by having the Company withhold shares of common stock having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction.

5.         Nontransferability.  Unless and until unrestricted shares of Common Stock are delivered or, if applicable, an amount is credited under the EDCP to you in payment of an earned Award of the Performance Shares, the Performance Shares are not transferable except by will or by the laws of descent and distribution, and may not be sold, assigned, pledged or encumbered in any way, whether by operation of law or otherwise.

6.         Limitation of Rights.  You will not have any rights as a stockholder with respect to the Performance Shares unless and until certificates for shares of Common Stock have been issued to you.  No such certificates will be issued under the Subplan until the Actual Grant Amount has been determined and you have otherwise become entitled to payment of an Award under the terms of the Plan and the Subplan.    Neither the Plan, the Subplan, the granting of these Performance Shares nor this Award Notice gives you any right to remain employed by the Company.

7.         Termination.  Upon termination of your employment with the Company and its Subsidiaries by reason of death, disability or retirement, or for another approved reason as determined by the Committee (in the case of executive officers) or the executive officer responsible for Human Resources (in the case of non-executive employees), you will receive, subject to the terms and conditions of the Plan and the Subplan, an Award representing a prorated portion of the Actual Grant Amount to which you otherwise would be entitled, based on the number of full calendar months from January 1, 2010 through the effective date of such termination.  Upon termination of your employment with the Company and its Subsidiaries for a reason other than death, disability, retirement or another approved reason prior to the date the shares of Common Stock covered by the Award are delivered to you, you will not be eligible or entitled to receive any Award under the Subplan.

8.         Noncompetition; Confidentiality.  You will not, without the written consent of the Company, either during your employment by the Company or thereafter, disclose to anyone or make use of any confidential information which you have acquired during your employment relating to any of the business of the Company, except as such disclosure or use may be required in connection with your work as an employee of the Company.  During your employment by the Company, and for a period of two years after the termination of such employment, you will not, either as principal, agent, consultant, employee or otherwise, engage in any work or other activity in competition with the Company in the field or fields in which you have worked for the Company.  The agreement in this Section 8 applies separately in the United States and in other countries but only to the extent that its application shall be reasonably necessary for the protection of the Company.  You will forfeit all rights under this Award Notice to or related to the Performance Shares if,. in the determination of the Committee (in the case of executive officers) or of the executive officer responsible for Human Resources (in the case of non-executive employees), you have violated any of the provisions of this Section 8, and in that event any issuance of shares, payment or other action with respect to the Performance Shares shall be made or taken, if at all, in the sole discretion of the Committee or the executive officer responsible for Human Resources
 
 
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9.         Restrictions on Issuance of Shares.  If at any time the Company determines that listing, registration or qualification of the shares covered by an Award upon any securities exchange or under any state or federal law, or the approval of any governmental agency, is necessary or advisable prior to the delivery of any certificate for shares of Common Stock subject to the Award, no such certificate may be delivered unless and until such listing, registration, qualification or approval shall have been effected or obtained free of any conditions not acceptable to the Company.

10.         Change in Ownership; Change in Control.  Article 14 of the Plan contains certain special provisions that will apply in the event of a Change in Ownership or Change in Control, respectively.

11.         Adjustment of Terms.  The adjustment provisions Article 15 of the Plan will control in the event of a nonreciprocal transaction between the company and its stockholders that causes the per-share value of the Common Stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend) or upon the occurrence of in anticipation of any other corporate event or transaction involving the Company (including, without limitation, any merger, combination, or exchange of shares).

12.         Adjustment of Actual Grant Amount.  .  The Committee may, in its sole discretion, adjust the Actual Grant Amount to reflect overall Company performance and business and financial conditions, except in the case of a Qualified Performance-Based Award where such actions would cause the Qualified Performance-Based Award to cease to qualify for the Section 162(m) Exemption.  In the case of a Qualified Performance-Based Award, the Committee shall retain the discretion to adjust such Award downward, either on a formula or discretionary basis or any combination, as the Committee determined.

13.         Plan and Subplan Control.  In the event of any conflict between the provisions of the Plan or the Subplan and the provisions of this Award Notice, the provisions of the Plan or the Subplan, as applicable, will be controlling and determinative.

 
62

 


EXHIBIT A

Award Multiplier Table

 
Differential from Target Return on Capital
Eastman TSR Relative to Comparison Companies
<-7%
-7% to -5%
-4.99 to -3%
-2.99 to -1%
-0.99 to 0%
.01 to +1%
+1.01 to +3%
+3.01 to +5%
+5.01 to +7%
+7.01 to +10%
>10%
5th quintile
0
0
0
0
.4
.5
.6
.7
.8
1.1
1.5
4th quintile
0
0
0
.4
.5
.7
.8
.9
1.1
1.5
2
3rd quintile
0
0
.4
.5
.8
1
1.2
1.5
1.8
2.1
2.4
2nd quintile
0
.4
.6
.8
1
1.3
1.6
1.9
2.2
2.5
2.8
1st quintile
0
.6
.8
1
1.3
1.6
1.9
2.2
2.5
2.8
3



 
63

 
 

EX-10.02 4 exhibit10_02.htm FORM OF PERFORMANCE SHARE AWARD TO MARK J COSTA exhibit10_02.htm

Exhibit 10.02


PERFORMANCE SHARE AWARD SUBPLAN
OF THE 2007 OMNIBUS LONG-TERM COMPENSATION PLAN
2010-2012 PERFORMANCE PERIOD
Mark J. Costa




 



EASTMAN CHEMICAL COMPANY









  64

 



EASTMAN CHEMICAL COMPANY
PERFORMANCE SHARE AWARD SUBPLAN
OF THE 2007 OMNIBUS LONG-TERM COMPENSATION PLAN
2010-2012 PERFORMANCE PERIOD
Mark J. Costa


Section 1. Background.  Under Article 4 of the Eastman Chemical Company 2007 Omnibus Long-Term Compensation Plan (the “Plan”), the “Committee” (as defined in the Plan), may, among other things, award shares of the $.01 par value common stock (“Common Stock”) of Eastman Chemical Company (the “Company”) to “Participants” (as defined in the Plan), and such awards may take the form of “Performance Awards” (as defined in the Plan) or “Qualified Performance-Based Awards” (as defined in the Plan) which are contingent upon the attainment of certain performance objectives during a specified period, and subject to such other terms, conditions, and restrictions as the Committee deems appropriate.  The purpose of this Performance Share Award Subplan (this “Subplan”) is to set forth the terms of the award of  performance shares for the 2010-2012 Performance Period specified herein, effective as of January 1, 2010 (the “Effective Date”).
 
Section 2. Definitions.
 
(a) The following definitions shall apply to this Subplan:
 
(i) “Actual Grant Amount” means the number of shares of Common Stock to which a participant is entitled under this Subplan, calculated in accordance with Section 6 of this Subplan.
 
(ii) “Award Amount” means the performance shares awarded to the Participant under this Subplan at the beginning of the Performance Period.
 
(iii) “Award Payment Date” means the date the Committee approves the payout of Common Stock covered by an award under this Subplan to a Participant.
 
(iv) “Comparison Group” is the group of companies within the S&P 1500 “Materials Sector” that are classified by Standard & Poor’s as Chemical companies.  The S&P “Materials Sector” index is an index of industrial companies selected from the S&P “Super Composite 1500” Index, identified as Global Industry Classification Standard (“GICS”) 15.
 
(v) “Cost of Capital” reflects the Company’s cost of debt and the cost of equity, expressed as a percentage, reflecting the percentage of interest charged on debt and the percentage of expected return on equity.
 
(vi) “Earnings from Continuing Operations” shall be defined as the total sales of the Company minus the costs of all operations of any nature used to produce such sales, including taxes, plus after-tax interest associated with the Company’s capital debt.
 

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(vii) “Maximum Deductible Amount” means the maximum amount deductible by the Company under Section 162(a), taking into consideration the limitations under Section 162(m), of the Internal Revenue Code of 1986, as amended, or any similar or successor provisions thereto.
 
(viii) “Participation Date” means October 27, 2009.
 
(ix) “Performance Period” means January 1, 2010 through December 31, 2012.
 
(x) “Performance Year” means one of the three calendar years in the Performance Period.
 
(xi) “Return on Capital” shall mean the return produced by funds invested in the Company and shall be determined as Earnings from Continuing Operations, as defined in Section 2.a.(vi), divided by the Average Capital Employed.  Average Capital Employed shall be derived by adding the Company’s capital debt plus equity at the close of the last day of the year preceding the Performance Year, to the Company’s capital debt plus equity at the close of the last day of the present Performance Year, with the resulting sum being divided by two.  Capital debt is defined as the sum of borrowing by the Company due within one year and long-term borrowing, as designated on the Company’s balance sheet.  The resulting ratio shall be multiplied by One Hundred (100) in order to convert such to a percentage.  Such percentage shall be calculated to the third place after the decimal point (i.e., xx.xxx%), and then rounded to the second place after the decimal point (i.e., xx.xx%).
 
(xii) “Target Award Range” means, with respect to any eligible Participant, the number of performance shares within the range specified on Exhibit A hereto for the Salary Grade applicable to such Participant.
 
(xiii) “TSR” means total stockholder return, as reflected by the sum of (A) change in stock price (measured as the difference between (I) the average of the closing prices of a company’s common stock on the New York Stock Exchange, or of the last sale prices or closing prices of such stock on another national trading exchange, as applicable, in the period beginning on the tenth trading day preceding the beginning of the Performance Period and ending on the tenth trading day of the Performance Period and (II) the average of such closing or last sale prices for such stock in the period beginning on the tenth trading day preceding the end of the Performance Period and ending on the tenth trading day following the end of the Performance Period) plus (B) dividends declared, assuming reinvestment of dividends, and expressed as a percentage return on a stockholder’s hypothetical investment.
 
(b) Any capitalized terms used but not otherwise defined in this Subplan shall have the respective meanings set forth in the Plan.
 

 66

 


 
Section 3. Administration.  This Subplan shall be administered by the Compensation and Management Development Committee of the Board of Directors.  The Committee shall have authority to interpret this Subplan, to prescribe rules and regulations relating to this Subplan, and to take any other actions it deems necessary or advisable for the administration of this Subplan, and shall retain all general authority granted to it under Article 4 of the Plan.  At the end of the Performance Period, the Committee shall approve Actual Grant Amounts awarded to participants under this Subplan.
 
Section 4. Eligibility; Types of Awards.  The Participants who are eligible to participate in this Subplan are those employees who, as of the Participation Date, are at Salary Grade 49 and 105 and above.  Employees who are promoted during the Performance Period to a position that would meet the above criteria, but who do not hold such position as of the Participation Date, are not eligible to participate in this Subplan.  The Covered Employees identified on Schedule A shall receive Qualified Performance-Based Awards.  The remainder of the Participants shall receive Performance Awards.
 
Section 5. Form of Payout of Awards.  Subject to the terms and conditions of the Plan and this Subplan, earned Awards under this Subplan shall be paid out in the form of unrestricted shares of Common Stock, except for conversions to cash and deferrals under Section 9 of this Subplan, and except that if a participant is entitled to any fraction of a share of Common Stock, as a result of Section 10 of this Subplan or otherwise, then in lieu of receiving such fraction of a share, the participant shall be paid a cash amount representing the market value of such fraction of a share at the time of payment.
 
Section 6. Size of Awards.
 
(a) Target Award Range.  Exhibit A hereto shows by Salary Grade the Target Award Range. The Salary Grade to be used in determining the size of any Award Amount to a Participant under this Subplan shall be the Salary Grade applicable to the position held by the participant on the Participation Date.  The actual size of the Award Amount to the Participant shall be determined based on an assessment by his or her senior management (and, in the case of executive officers, by the Committee) of the Participant’s past performance and potential for contributions to the Company’s future long term success.  Based on this assessment, the Participant may receive no award, the target award amount, or any amount within the Target Award Range in increments of 10 performance shares.  Each member of senior management will have a performance share budget, based on the cumulative award targets for their Participants, which must be balanced for their organizations.
 
(b) Actual Grant Amount.  Subject to the Committee’s authority to adjust the Actual Grant Amount described in Section 12, the Actual Grant Amount awarded to the Participant at the end of the Performance Period is determined by applying a multiplier to the Participant’s Award Amount.  The multiplier shall be determined by comparing Company performance relative to two measures:
 

  67

 


 
(i) The Company’s TSR during the Performance Period relative to the TSRs of the companies in the Comparison Group during the Performance Period.  The Company and each company in the Comparison Group shall be ranked by TSR, in descending order, with the company having the highest TSR during the Performance Period being ranked number one.  The Comparison Group shall further be separated into quintiles (first 20%, second 20%, etc.) and the Company’s position, in relation to the Comparison Group, shall be expressed as a position in the applicable quintile ranking; and
 
(ii) The arithmetic average, for each of the Performance Years during the Performance Period, of the Company’s average Return on Capital minus a Return on Capital target. The Return on Capital target will be determined by the Committee.  In the case of Qualified Performance-Based Awards, the Return on Capital target for each year included in the Performance Period shall be established within 90 days after commencement of the Performance Period in a manner that complies with Code Section 162(m).  Moreover, in the case of Qualified Performance-Based Awards, Return on Capital will be measured in a manner that complies with Code Section 162(m), including the requirement that the performance goals be objectively measured.
 
An award multiplier table is shown in Exhibit B.  The award multiplier is based on the Company’s performance relative to its quintile ranking relative to the Comparison Group, and its average Return on Capital relative to a target during the Performance Period.  The award multipliers range from 3.0 (i.e., 300%), if the Company’s TSR is in the top performing quintile (top 20%) of companies in the Comparison Group and the average Return on Capital minus the target Return on Capital is greater than 10 percentage points, to 0.0 (with no shares of Common Stock earned by Participants under this Subplan) if the Company does not meet the specified levels of performance relative to the two measures.
 
Section 7. Composition of Comparison Group.
 
(a) Qualified Performance-Based Awards.  In the case of Qualified Performance-Based Awards, there shall be no adjustment in the Comparison Group during the Performance Period that would cause the Qualified Performance-Based Awards not to qualify for the Section 162(m) Exemption.
 
(b) Performance Awards.  In the case of Performance Awards, the Committee retains the discretion to make the following adjustments in the Comparison Group during the Performance Period.  A company in the Comparison Group may be dropped from the Comparison Group if a company’s common stock ceases to be publicly traded on a national stock exchange or market; or a company is a party to a significant merger, acquisition, or other reorganization.  Under these, or similar, circumstances, the company or companies may be removed from the Comparison Group, and may be replaced with another company or companies by Standard & Poor’s, consistent with their established criteria for selection of companies for the Comparison Group.  In any case where the Comparison Group ceases to exist, or is otherwise determined to no longer be appropriate as the basis for a measure under this Subplan, the Committee may designate a replacement Comparison Group.  In any such case, the Committee shall have authority to determine the appropriate method of calculating the TSR of such former and/or replacement Comparison Group, whether by complete substitution of the replacement Comparison Group (and disregard of the former Comparison Group) over the entire Performance Period or by pro rata calculations for each Comparison Group or otherwise.
 

  68

 

 
 

Section 8. Preconditions to Payout Under Award.
 
(a) Continuous Employment.  Except as specified in paragraphs (b) and (c) below, to remain eligible for an Award under this Subplan, an eligible Employee must remain continuously employed with the Company or a Subsidiary at all times from the Effective Date through the Award Payment Date.

(b) Death, Disability, Retirement, or Termination for an Approved Reason Before the Award Payment Date.  If a participant's employment with the Company or a Subsidiary is terminated due to death, disability, retirement, or any approved reason as determined by the Committee prior to the Award Payment Date, the participant shall receive, subject to the terms and conditions of the Plan and this Subplan, an Award representing a prorated portion of the Actual Grant Amount to which such participant otherwise would be entitled, with the precise amount of such Award to be determined by multiplying the Actual Grant Amount by a fraction, the numerator of which is the number of full calendar months employed in the Performance Period from the Effective Date through and including the effective date of such termination, and the denominator of which is 36 (the total number of months in the Performance Period).

(c) Termination Without Cause or for Good Reason Before the Award Payment Date.  If a participant's employment with the Company or a Subsidiary is terminated without "Cause" or for "Good Reason" (as such terms are defined in the participants' Employment Agreement dated May 4, 2006) prior to the Award Payment Date, the participant shall receive, subject to the terms and conditions of the Plan and this Subplan, within 30 days of termination (or such other date as may be required under Internal Revenue Code Section 409A), shares of Common Stock underlying outstanding performance shares (as if all performance objectives with respect thereto had been met at a level of 100%) on a pro rata basis based upon the number of full calendar months employed in the Performance Period from the Effective Date through and including the effective date of such termination.

Section 9. Manner and Timing of Award Payments.
 
(a) Timing of Award Payment.  Except for deferrals under Section 9(c), if any Awards are payable under this Subplan, the payment of such Awards to Participants shall be made as soon as is administratively practicable after the end of the Performance Period and final approval by the Committee.
 
(b) Tax Withholding.  The Company may withhold or require the grantee to remit a cash amount sufficient to satisfy federal, state, and local taxes (including the participant’s FICA obligation) required by law to be withheld.  Further, either the Company or the grantee may elect to satisfy the withholding requirement by having the Company withhold shares of Common Stock having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction.
 

69

 


 
(c) Deferral of Award in Excess of the Maximum Deductible Amount.  If payment of the Award would, or could in the reasonable estimation of the Committee, result in the participant’s receiving compensation in excess of the Maximum Deductible Amount in a given year, then such portion (or all, as applicable) of the Award as would, or could in the reasonable estimation of the Committee, cause such participant to receive compensation from the Company in excess of the Maximum Deductible Amount may, at the sole discretion of the Committee, be converted into the right to receive a cash payment, which shall be deferred until after the participant retires or otherwise terminates employment with the Company and its Subsidiaries, provided that such deferral is compliant with the requirements of Internal Revenue Code Section 409A and Treasury Regulations and guidance thereunder.
 
(d) Award Deferral to the EDCP.  In the event that all or any portion of an Award is converted into a right to receive a cash payment pursuant to Section 9(c) (except as otherwise provided in this Section with respect to Participants who are subject to Section 16(a) of the 1934 Act),  an amount representing the Fair Market Value, as of the date the shares of Common Stock covered by the Award otherwise would be issued to the participant, of the Actual Grant Amount (or the deferred portion thereof) will be credited to the Stock Account of the Executive Deferred Compensation Plan (the "EDCP"), and hypothetically invested in units of Common Stock. Notwithstanding the foregoing, for each Participant who is subject to Section 16(a) of the 1934 Act. the deferrable amount, when initially credited to the participant’s EDCP Account, shall be held in a participant’s Interest Account until the next date that dividends are paid on Common Stock, and on such date the deferrable amount that would have been initially credited to the participant’s Stock Account but for this sentence shall be transferred, together with allocable interest thereon, to the participant’s Stock Account, subject to provisions set forth in the EDCP. Thereafter, such amount shall be treated in the same manner as other investments in the EDCP and shall be subject to the terms and conditions thereof.
 
Section 10. No Rights as Stockholder.  No certificates for shares of Common Stock shall be issued under this Subplan, nor shall any participant have any rights as a stockholder as a result of participation in this Subplan, until the Actual Grant Amount has been determined and such participant has otherwise become entitled to an Award under the terms of the Plan and this Subplan.  In particular, no participant shall have any right to vote or to receive dividends on any shares of Common Stock under this Subplan until certificates for such shares have been issued as described above.
 
Section 11. Application of Plan.  The provisions of the Plan shall apply to this Subplan, except to the extent that any such provisions are inconsistent with specific provisions of this Subplan.
 
Section 12. Adjustment of Actual Grant Amount.  The Committee may, in its sole discretion, adjust the Actual Grant Amount to reflect overall Company performance and business and financial conditions, except in the case of a Qualified Performance-Based Award where such actions would cause the Qualified Performance-Based Award to cease to qualify for the Section 162(m) Exemption.  In the case of a Qualified Performance-Based Award, the Committee shall retain the discretion to adjust such Award downward, either on a formula or discretionary basis or any combination, as the Committee determined.
 
Section 13. Amendments.  The Committee may, from time to time, amend this Subplan in any manner.
 

70

 

EXHIBIT A
 
Eastman Chemical Company
Performance Share Award Grant Table
2010-2012 Cycle
 

 

 
ON FILE IN GLOBAL COMPENSATION
 

 

71

 

EXHIBIT B
 
Award Multiplier Table
 
Differential from Target Return on Capital
Eastman TSR Relative to Comparison Companies
<-7%
-7% to -5%
-4.99 to -3%
-2.99 to -1%
-0.99 to 0%
.01 to +1%
+1.01 to +3%
+3.01 to +5%
+5.01 to +7%
+7.01 to +10%
>10%
5th quintile
0
0
0
0
.4
.5
.6
.7
.8
1.1
1.5
4th quintile
0
0
0
.4
.5
.7
.8
.9
1.1
1.5
2
3rd quintile
0
0
.4
.5
.8
1
1.2
1.5
1.8
2.1
2.4
2nd quintile
0
.4
.6
.8
1
1.3
1.6
1.9
2.2
2.5
2.8
1st quintile
0
.6
.8
1
1.3
1.6
1.9
2.2
2.5
2.8
3

 

 

 

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AWARD NOTICE
 

NOTICE OF PERFORMANCE SHARES
AWARDED PURSUANT TO THE
EASTMAN CHEMICAL COMPANY
2007 OMNIBUS LONG-TERM COMPENSATION PLAN

Recipient:   Mark J. Costa

Performance Period: 2010 – 2012

Target Award:

1.         Award of Performance Shares.  This Award Notice serves to notify you that the Compensation and Management Development Committee of the Board of Directors (the “Committee”) of Eastman Chemical Company ("Company") has awarded to you, under the 2010-2012 Performance Share Award Subplan ("Subplan") of the 2007 Omnibus Long-Term Compensation Plan ("Plan"), on the terms and conditions set forth in the Subplan and the Plan, the number of performance shares (the "Performance Shares") of its $.01 par value Common Stock ("Common Stock") specified above.  The Performance Shares are rights to receive Awards in the form of shares of Common Stock, subject to the attainment of specified performance conditions by the Company.  Subject to satisfaction of the minimum performance conditions and the other terms of the Subplan, Awards under the Subplan will ultimately be paid in the form of unrestricted shares of Common Stock.

This Award Notice provides a summary of the terms and conditions of your performance shares, all of which terms and conditions are contained in the Subplan and the Plan.  Capitalized terms not defined herein have the respective meanings set forth in the Subplan and the Plan, as applicable.

2.         Performance Conditions.  The performance conditions for the Subplan involve: 1)  a comparison of the total stockholder return (referred to in the Subplan as "TSR," and reflecting both the change in stock price and the amount of dividends declared) of the Company during the period from January 1, 2010 through December 31, 2012 (the "Performance Period"), to the TSRs of the companies in the Comparison Group (the group of companies within the Standard and Poor’s "Materials Sector" that are classified as Chemical companies.  The S&P "Materials Sector" index, identified as Global Industry Classification Standard ("GICS") 15, is an index of industrial companies selected from the S&P “Super Composite 1500” index); and 2) the arithmetic average for each of the Performance Years during the Performance Period, of the Company’s average Return on Capital minus a Return on Capital target.   The specific terms of the performance conditions are summarized in Section 3 of this Award Notice and are detailed in Section 6 of the Subplan.

3.         Number of Performance Shares Awarded.  The number of Performance Shares that you have been awarded is shown above (the "Target Award").  However, the actual number of shares of Common Stock to which you will be entitled under the Subplan (the "Actual Grant Amount") may be more or less than the Target Award, depending upon the quintile ranking of the Company's TSR when ranked among the TSRs of the Comparison Group, and the Company’s average Return on Capital relative to a Return on Capital target for each of the Performance Years during the Performance Period.  The Company’s performance relative to these measures shall determine a multiplier to be applied to the Target Grant Amount.  Multipliers range from 3.0 (i.e., 300%), if the Company’s TSR is ranked in the top performing quintile (top 20%) of companies in the Comparison Group, and the average Return on Capital minus the target Return on Capital is greater than 10 percentage points, to 0.0 (with no shares of Common Stock being delivered to participants), if the Company does not meet certain levels of performance relative to the two measures.  The award multiplier table is shown in Exhibit A.  Subject to the Committee’s authority to adjust the Actual Grant Amount described in Section 12 of this Award Notice, your Actual Grant Amount is determined by applying the multiplier corresponding to the Company’s performance (Exhibit A) to your Target Award.

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4.         Payment of Award.  If you are entitled to payment of an Award under the Subplan, such payment will be made as soon as administratively practicable after the end of the Performance Period and final approval by the Committee; provided, however, that if payment of the Award could, in the reasonable estimation of the Committee, result in your receiving compensation, in the year of scheduled payment, in excess of the amount deductible by the Company under Section 162(m) of the Internal Revenue Code, then such portion (or all, as applicable) of the Award as could, in the reasonable estimation of the Committee,  create such excess compensation, may, at the sole discretion of the Committee, be converted into the right to receive a cash payment, which will be deferred until after you terminate employment with the Company and its Subsidiaries, provided that such deferral is compliant with the requirements of Internal Revenue Code Section 409A and Treasury Regulations and guidance thereunder, as specified in Section 9 of the Subplan.

If any portion of an Award is converted into a right to receive a cash payment as described above, an amount representing the Fair Market Value of the deferred portion of the Actual Grant Amount will be credited to the Stock Account of the Executive Deferred Compensation Plan (the "EDCP") and hypothetically invested in units of Common Stock.  Thereafter, such amount will be treated in the same manner as other investments in the EDCP, all as specified in Section 9 of the Subplan.

The Company may withhold or require you to remit a cash amount sufficient to satisfy federal, state, and local taxes (including your FICA obligation) required by law to be withheld.  Further, either the Company or you may elect to satisfy the withholding requirement by having the Company withhold shares of common stock having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction.

5.         Nontransferability.  Unless and until unrestricted shares of Common Stock are delivered or, if applicable, an amount is credited under the EDCP to you in payment of an earned Award of the Performance Shares, the Performance Shares are not transferable except by will or by the laws of descent and distribution, and may not be sold, assigned, pledged or encumbered in any way, whether by operation of law or otherwise.

6.         Limitation of Rights.  You will not have any rights as a stockholder with respect to the Performance Shares unless and until certificates for shares of Common Stock have been issued to you.  No such certificates will be issued under the Subplan until the Actual Grant Amount has been determined and you have otherwise become entitled to payment of an Award under the terms of the Plan and the Subplan.    Neither the Plan, the Subplan, the granting of these Performance Shares nor this Award Notice gives you any right to remain employed by the Company.

7.         Termination.  Upon termination of your employment with the Company and its Subsidiaries ("termination")  by reason of death, disability or retirement, or for another approved reason as determine by the Committee, you will receive, subject to the terms and conditions of the Plan and the Subplan, an Award representing a prorated portion of the Actual Grant Amount to which you otherwise would be entitled, based on the number of full calendar months employed from January 1, 2010 through the effective date of such termination.  Upon termination without "Cause" or for "Good Reason" (as such terms are defined in your Employment Agreement dated May 4, 2006) Eastman will issue to you, within 30 days of your termination (or such other date as may be required under Internal Revenue Code Section 409A), shares of Common Stock underlying outstanding performance shares (as if all performance objectives with respect thereto had been met at a level of 100%) on a pro rata basis based upon the number of full calendar months employed during the performance period.  Upon termination for a reason other than death, disability, retirement or another reason described above prior to the date the shares of Common Stock covered by the Award are delivered to you, you will not be eligible or entitled to receive any Award under the Subplan.

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8.         Noncompetition; Confidentiality.  You will not, without the written consent of the Company, either during your employment by the Company or thereafter, disclose to anyone or make use of any confidential information which you have acquired during your employment relating to any of the business of the Company, except as such disclosure or use may be required in connection with your work as an employee of the Company.  During your employment by the Company, and for a period of two years after the termination of such employment, you will not, either as principal, agent, consultant, employee or otherwise, engage in any work or other activity in competition with the Company in the field or fields in which you have worked for the Company.  The agreement in this Section 8 applies separately in the United States and in other countries but only to the extent that its application shall be reasonably necessary for the protection of the Company.  You will forfeit all rights under this Award Notice to or related to the Performance Shares if,. in the determination of the Committee (in the case of executive officers) or of the executive officer responsible for Human Resources (in the case of non-executive employees), you have violated any of the provisions of this Section 8, and in that event any issuance of shares, payment or other action with respect to the Performance Shares shall be made or taken, if at all, in the sole discretion of the Committee or the executive officer responsible for Human Resources

9.         Restrictions on Issuance of Shares.  If at any time the Company determines that listing, registration or qualification of the shares covered by an Award upon any securities exchange or under any state or federal law, or the approval of any governmental agency, is necessary or advisable prior to the delivery of any certificate for shares of Common Stock subject to the Award, no such certificate may be delivered unless and until such listing, registration, qualification or approval shall have been effected or obtained free of any conditions not acceptable to the Company.

10.         Change in Ownership; Change in Control.  Article 14 of the Plan contains certain special provisions that will apply in the event of a Change in Ownership or Change in Control, respectively.

11.         Adjustment of Terms.  The adjustment provisions Article 15 of the Plan will control in the event of a nonreciprocal transaction between the company and its stockholders that causes the per-share value of the Common Stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend) or upon the occurrence of in anticipation of any other corporate event or transaction involving the Company (including, without limitation, any merger, combination, or exchange of shares).

12.         Adjustment of Actual Grant Amount.  .  The Committee may, in its sole discretion, adjust the Actual Grant Amount to reflect overall Company performance and business and financial conditions, except in the case of a Qualified Performance-Based Award where such actions would cause the Qualified Performance-Based Award to cease to qualify for the Section 162(m) Exemption.  In the case of a Qualified Performance-Based Award, the Committee shall retain the discretion to adjust such Award downward, either on a formula or discretionary basis or any combination, as the Committee determined.

13.         Plan and Subplan Control.  In the event of any conflict between the provisions of the Plan or the Subplan and the provisions of this Award Notice, the provisions of the Plan or the Subplan, as applicable, will be controlling and determinative.



75

 



EXHIBIT A

Award Multiplier Table

 
Differential from Target Return on Capital
Eastman TSR Relative to Comparison Companies
<-7%
-7% to -5%
-4.99 to   -3%
-2.99 to   -1%
-0.99 to 0%
.01 to +1%
+1.01 to +3%
+3.01 to +5%
+5.01 to +7%
+7.01 to +10%
>10%
5th quintile
0
0
0
0
.4
.5
.6
.7
.8
1.1
1.5
4th quintile
0
0
0
.4
.5
.7
.8
.9
1.1
1.5
2
3rd quintile
0
0
.4
.5
.8
1
1.2
1.5
1.8
2.1
2.4
2nd quintile
0
.4
.6
.8
1
1.3
1.6
1.9
2.2
2.5
2.8
1st quintile
0
.6
.8
1
1.3
1.6
1.9
2.2
2.5
2.8
3



 

  76

 

EX-12.01 5 exhibit12_01.htm STATEMENT RE: COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES exhibit12_01.htm


EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
 
Computation of Ratios of Earnings to Fixed Charges
 
   
 
Third Quarter
First Nine Months
(Dollars in millions)
 
2009
 
2008
 
2009
 
2008
                 
Earnings from continuing operations before income taxes (1)
$
170
$
148
$
278
$
454
Add:
               
Interest expense
 
20
 
23
 
63
 
74
Appropriate portion of rental expense (2)
 
4
 
5
 
11
 
14
Amortization of capitalized interest
 
2
 
1
 
6
 
5
Earnings as adjusted
$
196
$
 177
$
358
$
 547
                 
Fixed charges:
               
Interest expense
$
20
$
23
$
63
$
74
Appropriate portion of rental expense (2)
 
4
 
5
 
11
 
14
Capitalized interest
 
--
 
1
 
14
 
10
Total fixed charges
$
  24
$
  29
$
88
$
  98
                 
Ratio of earnings to fixed charges
 
8.2x
 
6.1x
 
4.1x
 
5.6x
                 
(1)  
Because the Company has exited the PET business in the European region, results related to sales of PET products manufactured at the Spain, the Netherlands, and United Kingdom sites are presented as discontinued operations for 2008.  For additional information, see Note 2, "Discontinued Operations", to the Company's unaudited consolidated financial statements in Part I, Item 1 of this quarterly report on Form 10-Q.
 
(2)  
For all periods presented, the interest component of rental expense is estimated to equal one-third of such expense.
 

 
77

 

EX-31.01 6 exhibit31_01.htm RULE 13A - 14(A) CEO CERTIFICATION exhibit31_01.htm

Exhibit 31.01
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
 
Rule 13a – 14(a)/15d – 14(a) Certifications
 
I, James P. Rogers, certify that:
 
      1.  I have reviewed this quarterly report on Form 10-Q of Eastman Chemical Company;
 
 
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
 
4.  The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
 
5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
 
(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
 
(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date: October 23, 2009
 
/s/James P. Rogers                                              
James P. Rogers
President and Chief Executive Officer

 
78

 

EX-31.02 7 exhibit31_02.htm RULE 13A - 14(A) CFO CERTIFICATION exhibit31_02.htm

Exhibit 31.02
EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES
 
Rule 13a – 14(a)/15d – 14(a) Certifications
 
I, Curtis E. Espeland, certify that:
 
      1.  I have reviewed this quarterly report on Form 10-Q of Eastman Chemical Company;
 
 
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
 
4.  The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
 
5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
 
(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
 
(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date: October 23, 2009
 
 
 /s/Curtis E. Espeland                                                             
Curtis E. Espeland
Senior Vice President and Chief Financial Officer

 
79

 

EX-32.01 8 exhibit32_01.htm SECTION 1350 CEO CERTIFICATION exhibit32_01.htm

Exhibit 32.01


EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES

Section 1350 Certifications


In connection with the Quarterly Report of Eastman Chemical Company (the "Company") on Form 10-Q for the period ending September 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge:

1.  
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
2.  
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
 
A signed original of this written statement required by Section 906 has been provided to Eastman Chemical Company and will be retained by Eastman Chemical Company and furnished to the Securities and Exchange Commission or its staff upon request.
 

 
Date: October 23, 2009

/s/James P. Rogers                                 
James P. Rogers
President and Chief Executive Officer

 
The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.
 

 
80

 

EX-32.02 9 exhibit32_02.htm SECTION 1350 CFO CERTIFICATION exhibit32_02.htm

Exhibit 32.02

EASTMAN CHEMICAL COMPANY AND SUBSIDIARIES

Section 1350 Certifications


In connection with the Quarterly Report of Eastman Chemical Company (the "Company") on Form 10-Q for the period ending September 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge:

1.
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
 
A signed original of this written statement required by Section 906 has been provided to Eastman Chemical Company and will be retained by Eastman Chemical Company and furnished to the Securities and Exchange Commission or its staff upon request.
 

 
Date: October 23, 2009

/s/Curtis E. Espeland                                                 
Curtis E. Espeland
Senior Vice President and Chief Financial Officer

 
The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.
 


 
81

 

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FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="14%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">298</font></div> </td> </tr><tr bgcolor="white"> <td valign="top" width="46%"> <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Credit facilities borrowings</font></div> </td> <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="14%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">85</font></div> </td> <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="14%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">84</font></div> </td> </tr><tr bgcolor="#cceeff"> <td valign="top" width="46%"> <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roma n">Other</font></div> </td> <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="14%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3</font></div> </td> <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="14%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; F ONT-FAMILY: times new roman">15</font></div> </td> </tr><tr bgcolor="white"> <td valign="top" width="46%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Total borrowings</font></div> </td> <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="14%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,441</font></div> </td> <td valign="bottom" width="2%"><font style="DISPLAY: inline; 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FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="10%" style="BORD ER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(20)</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bo ttom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">25</font></div> </td> </tr><tr bgcolor="white"> <td valign="top" width="17%"> <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Total</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="b ottom" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">18</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;46</font></div> </td> < td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(2)</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" wi dth="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(32)</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">30</font></div> </td> </tr><tr bgcolor="white" > <td valign="top" width="17%"><font style="DISPLAY: inline; 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</font></td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td& gt; <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> </tr><tr bgcolor="#cceeff"> <td valign="top" width="17%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Non-cash charges</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align ="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> </tr><tr bgcolor="white"> <td valign="top" width="17%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Severance costs</font></div> </td> <td valign="bot tom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; 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MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">11</font></div> </td> </tr><tr bgcolor="#cceeff"> <td valign="top" width="17%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Site closure and other&#160;&#160;restructuring costs</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: blac k 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">25</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(1)</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="10% " style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">24</font></div> </td> </tr><tr bgcolor="white"> <td valign="top" width="17%"> <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Total</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right " valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; 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MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign=" bottom" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(18)</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; 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FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Quoted Prices in Active Markets for Identical Assets (Level 1)</font></div> </td> <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Significant Other Observable Inputs (Level 2)</font></div> </td> <td valign="to p" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; 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MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="12%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"> <font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td align="right" valign="bottom" width="2%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="12%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">12</font></div> </td> <td align="right" valign="bottom" width="2%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new ro man">$</font></div> </td> <td align="right" valign="bottom" width="12%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="14%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Derivative Liabilities</font></div> </td> <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px soli d"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; 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</font></td> <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> </tr><tr bgcolor="#cceeff"> <td valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></ td> <td align="right" valign="bottom" width="2%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;6</font></div> </td> <td align="right" valign="bottom" width="2%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;--</font></div> </td> <td align="right" valign="bottom" width="2%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">6</font>&l t;/div> </td> <td align="right" valign="bottom" width="2%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;--</font></div> </td> </tr></table> </div> <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br /></div> <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br /></div> <div align="left"> <table cellpadding="0" cellspacing="0" width="85%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td align="left" valign="bottom" width="15%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(Dollars in millions)</font></div> </td> <td colspan="2" valign="top" width="14%"><font style="DISPLAY: inline; 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TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">December 31, 2008</font></div> </td> <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Quoted Prices in Active Markets for Identical Assets (Level 1)</font></div> </td> <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inlin e; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Significant Other Observable Inputs (Level 2)</font></div> </td> <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Significant Unobservable Inputs (Level 3)</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="15%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMIL Y: times new roman">Derivative Assets</font></div> </td> <td align="right" valign="bottom" width="2%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="12%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">16</font></div> </td> <td align="right" valign="bottom" width="2%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="12%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td align="right" valign="bottom" width="2%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="12%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">16</font></div> </td> <td align="right" valign="bottom" width="2%" > <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="12%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="15%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Derivative Liabilities</font></div> </td> <td valign="bottom" width="2%"><font style="DISP LAY: inline; FONT-SIZE: 10pt; 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FONT-FAMILY: times new roman"> <tr valign="top"> <td align="right" style="WIDTH: 18pt"> <div><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt">15.</font>&#160;&#160;</font></div> </td> <td> <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="note_15">SEGMENT INFORMATION</a></font></div> </td> </tr></table> </div> <di v style="DISPLAY: block; TEXT-INDENT: 0pt"><br /></div> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company's products and operations are managed and reported in five reportable operating segments, consisting of the Coatings, Adhesives, Specialty Polymers, and Inks ("CASPI") segment, the Fibers segment, the PCI segment, the Performance Polymers segment, and the Specialty Plastics ("SP") segment.&#160;&#160;For additional information concerning the Company's segments' businesses and products, see Note 23, "Segment Information", to the consolidated financial statements in Part II, Item 8 of the Company's 2008 Annual Report on Form 10-K.</font></div> <div style="DISPLAY: block; 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MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Third Quarter</font></div> </td> </tr><tr> <td align="left" valign="middle" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(Dollars in millions)</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0p t; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2009</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; 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MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">CASPI</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">338</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41<font style="DISPLAY: inline; FONT-FAMILY: times new roman">0</font></font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Fibers</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> & lt;div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">257</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">269</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new rom an">PCI</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">355</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">594</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Performance Polymers</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">187</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td&g t; <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">293</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">SP</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">200</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">253</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Total Sales</ font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,337</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td&g t; <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,819</font></div> </td> </tr></table> </div> <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br /></div> <div align="left"> <table cellpadding="0" cellspacing="0" width="85%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td valign="top" width="48%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </fon t></td> <td colspan="3" valign="top" width="23%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">First Nine Months</font></div> </td> </tr><tr> <td align="left" valign="middle" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(Dollars in millions)</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2009</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div> </td> </tr><tr> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font styl e="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Sales by Segment</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-R IGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">CASPI</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">890</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FON T-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,213</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Fibers</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DIS PLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">779</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">783</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">PCI</fo nt></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">943</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,768</font></div> </td> </t r><tr bgcolor="white"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Performance Polymers</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">563</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">886</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">SP</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RI GHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">544</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">730</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Total Sales</font></di v> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3,719</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5,380</font></div> </td> </tr></table> </div> <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br /></div> <div align="left"> <table cellpadding="0" cellspacing="0" width="85%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td valign="bottom" width="48%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font>< /td> <td colspan="3" valign="bottom" width="23%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Third Quarter</font></div> </td> </tr><tr> <td align="left" valign="bottom" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(Dollars in millions)</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2009</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div> </td> </tr><tr> <td valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPL AY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Operating Earnings (Loss)</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN- RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">CASPI</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">84</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(Dollars in millions)</font></div> </td> <td valign="bottom" width="10%" style="BORDER-BOTTO M: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Common Stock at Par Value</font></div> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Paid-in Capital</font></div> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" alig n="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Retained Earnings</font></div> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY : inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Accumulated Other Comprehensive Income (Loss)</font></div> <div style="DISPLAY: block; 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Basis of Accounting [Text Block] Environmental Matters [Text Block] Description of reserve for environmental contingencies. Total reserve is comprised of Asset Retirement Obligation (ARO) pertaining to environmental requirements and estimated future environmental expenditures for remediation. An ARO is a legal obligation associated with the disposal or retirement from service of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset. Remediation pertains to environmental loss contingencies, such as presence of hazardous waste, relevant information from reports issued by regulators, and estimated costs to achieve compliance with regulatory requirements. Environmental Matters Description of New Accounting Pronouncements Not yet Adopted [Text Block] For a new accounting pronouncement that has been issued but not yet adopted, an entity's disclosure should (1) describe the new pronouncement, the date that adoption is required and the date that the entity plans to adopt, if earlier; (2) discuss the methods of adoption allowed by the pronouncement and the method expected to be utilized by the entity, if determined; (3) discuss the impact that adoption of the pronouncement is expected to have on the financial statements of the entity, unless such impact is not known or reasonably estimable (in which case, a statement to that effect should be made) and; (4) disclose the potential impact of other significant matt ers that the entity believes might result from the adoption of the pronouncement (for example, technical violations of debt covenant agreements and planned or intended changes in business practices.) 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</font></td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%"><fo nt style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> </tr><tr bgcolor="#cceeff"> <td valign="top" width="17%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Non-cash charges</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="bottom" width="10%"> <div style="DISPLAY: block; 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</font></td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(1)</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; 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MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" vali gn="top" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,819</font></div> </td> </tr></table> </div> <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br /></div> <div align="left"> <table cellpadding="0" cellspacing="0" width="85%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td valign="top" width="48%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td cols pan="3" valign="top" width="23%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">First Nine Months</font></div> </td> </tr><tr> <td align="left" valign="middle" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(Dollars in millions)</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: bl ock; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2009</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div> </td> </tr><tr> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; F ONT-SIZE: 10pt; FONT-FAMILY: times new roman">Sales by Segment</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font styl e="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">CASPI</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">890</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font ></div> </td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,213</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Fibers</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDE NT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">779</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">783</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">PCI</font></div> </td&g t; <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">943</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,768</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Performance Polymers</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">563</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width= "10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">886</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">SP</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font styl e="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">544</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">730</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Total Sales</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3,719</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width= "10%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5,380</font></div> </td> </tr></table> </div> <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br /></div> <div align="left"> <table cellpadding="0" cellspacing="0" width="85%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> <tr> <td valign="bottom" width="48%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td colspan="3" v align="bottom" width="23%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; 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</font></td> <td valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div> </td> </tr><tr> <td valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE : 10pt; FONT-FAMILY: times new roman">Operating Earnings (Loss)</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font sty le="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">CASPI</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">84</font></div> </td> <td align="right" valign="top" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font ></div> </td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">55</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Fibers</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">79</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">65</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">PCI <font style="DISPLAY: inline; FONT-SIZE: 70%; VE RTICAL-ALIGN: text-top">(1)</font></font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">33</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">62</font></di v> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Performance Polymers <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: text-top">(2)</font></font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(10)</font></div> </td> <td valign="top" widt h="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" width="10%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(1)</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="48%"> <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">SP</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="top" wid th="10%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">13</font></div> </td> <td valign="top" width="3%"><font style="DISPLAY: inline; 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No authoritative reference available. false 27 2 us-gaap_PaymentsOfDividends us-gaap true credit duration monetary No definition available. false false false false false false false false false 1 false true -96000000 -96 false false 2 false true -103000000 -103 false false No definition available. No authoritative reference available. false 28 2 us-gaap_PaymentsForRepurchaseOfOtherEquity us-gaap true credit duration monetary No definition available. false false false false false false false false false 1 false true 0 0 false false 2 false true -501000000 -501 false false No definition available. No authoritative reference available. false 29 2 us-gaap_ProceedsFromIssuanceOrSaleOfEquity us-gaap true debit duration monetary No definition available. false false false false false false false false false 1 false true 15000000 15 false false 2 false true 38000000 38 false false No definition available. 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MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="middle" width="24%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1</font></div> </td> <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font& gt;</td> <td valign="top" width="21%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Cost of sales</font></div> </td> <td align="right" valign="bottom" width="3%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td align="right" valign="middle" width="22%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> </tr><tr bgcolor="white"> < ;td align="left" valign="top" width="20%" style="PADDING-BOTTOM: 2px"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Foreign exchange contracts</font></div> </td> <td valign="top" width="5%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td> <td align="right" valign="middle" width="24%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(8)</font></div> </td> <td valign="top" width="5%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; 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No authoritative reference available. false 14 1 us-gaap_IncomeLossFromContinuingOperations us-gaap true credit duration monetary No definition available. false false false false false false false false false 1 false true 101000000 101 false false 2 false true 100000000 100 false false 3 false true 168000000 168 false false 4 false true 330000000 330 false false No definition available. No authoritative reference available. false 15 1 us-gaap_DiscontinuedOperationIncomeLossFromDiscontinuedOperationDuringPhaseOutPeriodNetOfTax us-gaap true credit duration monetary No definition available. false false false false false false false false false 1 false true 0 0 false false 2 false true 0 0 false false 3 false true 0 0 false false 4 false true 18000000 18 false false No definition available. No authoritative reference available. false 16 1 us-gaap_NetIncomeLoss us-gaap true credit duration monetary No definition available. false false false false false false false false false 1 false true 101000000 101 false false 2 false true 100000000 100 false false 3 false true 168000000 168 false false 4 false true 348000000 348 false false No definition available. No authoritative reference available. true 17 1 us-gaap_EarningsPerShareBasicAbstract us-gaap true na duration string No definition available. false false false false false true false false false 1 false false 0 0 false false 2 false false 0 0 false false 3 false false 0 0 false false 4 false false 0 0 false false No definition available. false 18 2 us-gaap_IncomeLossFromContinuingOperationsPerBasicShare us-gaap true na duration decimal No definition available. false false false false false false false false false 1 false true 1.40 1.40 false false 2 false true 1.35 1.35 false false 3 false true 2.31 2.31 false false 4 false true 4.34 4.34 false false No definition available. No authoritative reference available. false 19 2 us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTaxPerBasicShare us-gaap true na duration decimal No definition available. false false false false false false false false false 1 false true 0 0 false false 2 false true 0 0 false false 3 false true 0 0 false false 4 false true 0.23 0.23 false false No definition available. No authoritative reference available. false 20 2 us-gaap_EarningsPerShareBasic us-gaap true na duration decimal No definition available. false false false false false false false false false 1 false true 1.40 1.40 false false 2 false true 1.35 1.35 false false 3 false true 2.31 2.31 false false 4 false true 4.57 4.57 false false No definition available. No authoritative reference available. true 21 1 us-gaap_EarningsPerShareDilutedAbstract us-gaap true na duration string No definition available. false false false false false true false false false 1 false false 0 0 false false 2 false false 0 0 false false 3 false false 0 0 false false 4 false false 0 0 false false No definition available. false 22 2 us-gaap_IncomeLossFromContinuingOperationsPerDilutedShare us-gaap true na duration decimal No definition available. false false false false false false false false false 1 false true 1.38 1.38 false false 2 false true 1.33 1.33 false false 3 false true 2.29 2.29 false false 4 false true 4.27 4.27 false false No definition available. No authoritative reference available. false 23 2 us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTaxPerDilutedShare us-gaap true na duration decimal No definition available. false false false false false false false false false 1 false true 0 0 false false 2 false true 0 0 false false 3 false true 0 0 false false 4 false true 0.23 0.23 false false No definition available. No authoritative reference available. false 24 2 us-gaap_EarningsPerShareDiluted us-gaap true na duration decimal No definition available. false false false false false false false false false 1 false true 1.38 1.38 false false 2 false true 1.33 1.33 false false 3 false true 2.29 2.29 false false 4 false true 4.50 4.50 false false No definition available. No authoritative reference available. true 25 1 us-gaap_ComprehensiveIncomeNetOfTaxAbstract us-gaap true na duration string No definition available. false false false false false true false false false 1 false false 0 0 false false 2 false false 0 0 false false 3 false false 0 0 false false 4 false false 0 0 false false No definition available. false 26 2 us-gaap_NetIncomeLoss us-gaap true credit duration monetary No definition available. false false false false false false false false false 1 false true 101000000 101 false false 2 false true 100000000 100 false false 3 false true 168000000 168 false false 4 false true 348000000 348 false false No definition available. No authoritative reference available. false 27 2 us-gaap_OtherComprehensiveIncomeLossNetOfTaxPeriodIncreaseDecreaseAbstract us-gaap true na duration string No definition available. false false false false false true false false false 1 false false 0 0 false false 2 false false 0 0 false false 3 false false 0 0 false false 4 false false 0 0 false false No definition available. false 28 3 us-gaap_OtherComprehensiveIncomeForeignCurrencyTransactionAndTranslationAdjustmentNetOfTaxPeriodIncreaseDecrease us-gaap true na duration monetary No definition available. false false false false false false false false false 1 false true 2000000 2 false false 2 false true -27000000 -27 false false 3 false true 17000000 17 false false 4 false true -68000000 -68 false false No definition available. No authoritative reference available. false 29 3 us-gaap_OtherComprehensiveIncomeMinimumPensionLiabilityNetAdjustmentNetOfTax us-gaap true debit duration monetary No definition available. false false false false false false false false false 1 false true 0 0 false false 2 false true -1000000 -1 false false 3 false true -2000000 -2 false false 4 false true 7000000 7 false false No definition available. No authoritative reference available. false 30 3 us-gaap_OtherComprehensiveIncomeUnrealizedGainLossOnDerivativesArisingDuringPeriodNetOfTax us-gaap true credit duration monetary No definition available. false false false false false false false false false 1 false true -7000000 -7 false false 2 false true -6000000 -6 false false 3 false true -6000000 -6 false false 4 false true -3000000 -3 false false No definition available. No authoritative reference available. false 31 3 us-gaap_OtherComprehensiveIncomeLossNetOfTaxPeriodIncreaseDecrease us-gaap true na duration monetary No definition available. false false false false false false false false false 1 false true -5000000 -5 false false 2 false true -34000000 -34 false false 3 false true 9000000 9 false false 4 false true -64000000 -64 false false No definition available. No authoritative reference available. true 32 2 us-gaap_ComprehensiveIncomeNetOfTax us-gaap true credit duration monetary No definition available. false false false false false false false false false 1 false true 96000000 96 false false 2 false true 66000000 66 false false 3 false true 177000000 177 false false 4 false true 284000000 284 false false No definition available. No authoritative reference available. true 33 1 us-gaap_RetainedEarningsAccumulatedDeficitAbstract us-gaap true na duration string No definition available. false false false false false true false false false 1 false false 0 0 false false 2 false false 0 0 false false 3 false false 0 0 false false 4 false false 0 0 false false No definition available. false 34 2 us-gaap_RetainedEarningsAccumulatedDeficit us-gaap true credit instant monetary No definition available. false false false false false false true false false 1 false true 2566000000 2566 false false 2 false true 2529000000 2529 false false 3 false true 2563000000 2563 false false 4 false true 2349000000 2349 false false No definition available. No authoritative reference available. false 35 2 us-gaap_NetIncomeLoss us-gaap true credit duration monetary No definition available. false false false false false false false false false 1 false true 101000000 101 false false 2 false true 100000000 100 false false 3 false true 168000000 168 false false 4 false true 348000000 348 false false No definition available. No authoritative reference available. false 36 2 us-gaap_DividendsCommonStockCash us-gaap true debit duration monetary No definition available. false false false false false false false false false 1 false true -32000000 -32 false false 2 false true -31000000 -31 false false 3 false true -96000000 -96 false false 4 false true -99000000 -99 false false No definition available. No authoritative reference available. false 37 2 us-gaap_RetainedEarningsAccumulatedDeficit us-gaap true credit instant monetary No definition available. false false false false false false false true false 1 true true 2635000000 2635 false false 2 true true 2598000000 2598 false false 3 true true 2635000000 2635 false false 4 true true 2598000000 2598 false false No definition available. No authoritative reference available. false false 4 36 false Millions UnKnown UnKnown false true XML 38 R2.xml IDEA: CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 1.0.0.3 false CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (USD $) In Millions false 1 $ false false u000 Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 u001 Standard http://www.xbrl.org/2003/instance shares xbrli 0 false 2 $ false false u000 Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 u001 Standard http://www.xbrl.org/2003/instance shares xbrli 0 4 2 us-gaap_AssetsCurrentAbstract us-gaap true na duration string No definition available. false false false false false true false false false 1 false false 0 0 false false 2 false false 0 0 false false No definition available. false 5 3 us-gaap_CashAndCashEquivalentsAtCarryingValue us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 true true 668000000 668 false false 2 true true 387000000 387 false false No definition available. No authoritative reference available. false 6 3 us-gaap_AccountsReceivableNetCurrent us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 false true 316000000 316 false false 2 false true 275000000 275 false false No definition available. No authoritative reference available. false 7 3 us-gaap_OtherReceivables us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 false true 68000000 68 false false 2 false true 79000000 79 false false No definition available. No authoritative reference available. false 8 3 us-gaap_InventoryNet us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 false true 495000000 495 false false 2 false true 637000000 637 false false No definition available. No authoritative reference available. false 9 3 us-gaap_OtherAssetsCurrent us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 false true 33000000 33 false false 2 false true 45000000 45 false false No definition available. No authoritative reference available. false 10 3 us-gaap_AssetsCurrent us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 false true 1580000000 1580 false false 2 false true 1423000000 1423 false false No definition available. No authoritative reference available. true 11 2 us-gaap_PropertyPlantAndEquipmentNetAbstract us-gaap true na duration string No definition available. false false false false false true false false false 1 false false 0 0 false false 2 false false 0 0 false false No definition available. false 12 3 us-gaap_PropertyPlantAndEquipmentGross us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 false true 8636000000 8636 false false 2 false true 8527000000 8527 false false No definition available. No authoritative reference available. false 13 3 us-gaap_AccumulatedDepreciationDepletionAndAmortizationPropertyPlantAndEquipment us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 5363000000 5363 false false 2 false true 5329000000 5329 false false No definition available. No authoritative reference available. false 14 3 us-gaap_PropertyPlantAndEquipmentNet us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 false true 3273000000 3273 false false 2 false true 3198000000 3198 false false No definition available. No authoritative reference available. true 15 2 us-gaap_Goodwill us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 false true 326000000 326 false false 2 false true 325000000 325 false false No definition available. No authoritative reference available. false 16 2 us-gaap_OtherAssetsNoncurrent us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 false true 375000000 375 false false 2 false true 335000000 335 false false No definition available. No authoritative reference available. false 17 2 us-gaap_Assets us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 false true 5554000000 5554 false false 2 false true 5281000000 5281 false false No definition available. No authoritative reference available. true 19 2 us-gaap_LiabilitiesCurrentAbstract us-gaap true na duration string No definition available. false false false false false true false false false 1 false false 0 0 false false 2 false false 0 0 false false No definition available. false 20 3 us-gaap_AccountsPayableAndAccruedLiabilities us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 827000000 827 false false 2 false true 819000000 819 false false No definition available. No authoritative reference available. false 21 3 us-gaap_ShortTermBorrowings us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 1000000 1 false false 2 false true 13000000 13 false false No definition available. No authoritative reference available. false 22 3 us-gaap_LiabilitiesCurrent us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 828000000 828 false false 2 false true 832000000 832 false false No definition available. No authoritative reference available. true 23 2 us-gaap_LongTermDebtNoncurrent us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 1440000000 1440 false false 2 false true 1442000000 1442 false false No definition available. No authoritative reference available. false 24 2 us-gaap_DeferredTaxLiabilitiesNoncurrent us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 274000000 274 false false 2 false true 106000000 106 false false No definition available. No authoritative reference available. false 25 2 us-gaap_PostemploymentBenefitsLiabilityNoncurrent us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 1250000000 1250 false false 2 false true 1246000000 1246 false false No definition available. No authoritative reference available. false 26 2 us-gaap_OtherLiabilitiesNoncurrent us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 117000000 117 false false 2 false true 102000000 102 false false No definition available. No authoritative reference available. false 27 2 us-gaap_Liabilities us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 3909000000 3909 false false 2 false true 3728000000 3728 false false No definition available. No authoritative reference available. true 28 2 us-gaap_StockholdersEquityAbstract us-gaap true na duration string No definition available. false false false false false true false false false 1 false false 0 0 false false 2 false false 0 0 false false No definition available. false 29 3 us-gaap_CommonStockValue us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 1000000 1 false false 2 false true 1000000 1 false false No definition available. No authoritative reference available. false 30 3 us-gaap_AdditionalPaidInCapital us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 649000000 649 false false 2 false true 638000000 638 false false No definition available. No authoritative reference available. false 31 3 us-gaap_RetainedEarningsAccumulatedDeficit us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 2635000000 2635 false false 2 false true 2563000000 2563 false false No definition available. No authoritative reference available. false 32 3 us-gaap_AccumulatedOtherComprehensiveIncomeLossNetOfTax us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true -326000000 -326 false false 2 false true -335000000 -335 false false No definition available. No authoritative reference available. false 33 3 us-gaap_TreasuryStockValue us-gaap true debit instant monetary No definition available. false false false false false false false false false 1 false true 1314000000 1314 false false 2 false true 1314000000 1314 false false No definition available. No authoritative reference available. false 34 3 us-gaap_StockholdersEquity us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 false true 1645000000 1645 false false 2 false true 1553000000 1553 false false No definition available. No authoritative reference available. true 35 2 us-gaap_LiabilitiesAndStockholdersEquity us-gaap true credit instant monetary No definition available. false false false false false false false false false 1 true true 5554000000 5554 false false 2 true true 5281000000 5281 false false No definition available. No authoritative reference available. true false 2 31 false Millions UnKnown UnKnown false true XML 39 FilingSummary.xml IDEA: XBRL DOCUMENT 1.0.0.3 true Sheet 1000 - Statement - UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS, COMPREHENSIVE INCOME AND RETAINED EARNINGS UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS, COMPREHENSIVE INCOME AND RETAINED EARNINGS R1.xml false Sheet 2000 - Statement - CONSOLIDATED STATEMENTS OF FINANCIAL POSITION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION R2.xml false Sheet 2050 - Statement - Paranthetical Data To The Consolidated Statements Of Financial Position Paranthetical Data To The Consolidated Statements Of Financial Position R3.xml false Sheet 3000 - Statement - UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS R4.xml false Sheet 4000 - Statement - STATEMENTOFSTOCKHOLDERSEQUITY STATEMENTOFSTOCKHOLDERSEQUITY R5.xml false Sheet 6000 - Disclosure - BASIS OF PRESENTATION BASIS OF PRESENTATION R6.xml false Sheet 6010 - Disclosure - DISCONTINUED OPERATIONS DISCONTINUED OPERATIONS R7.xml false Sheet 6020 - Disclosure - INVENTORIES INVENTORIES R8.xml false Sheet 6030 - Disclosure - PAYABLES AND OTHER CURRENT LIABILITIES PAYABLES AND OTHER CURRENT LIABILITIES R9.xml false Sheet 6040 - Disclosure - PROVISION FOR INCOME TAXES PROVISION FOR INCOME TAXES R10.xml false Sheet 6050 - Disclosure - BORROWINGS BORROWINGS R11.xml false Sheet 6060 - Disclosure - ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES, NET ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES, NET R12.xml false Sheet 6070 - Disclosure - RETIREMENT PLANS RETIREMENT PLANS R13.xml false Sheet 6080 - Disclosure - ENVIRONMENTAL MATTERS ENVIRONMENTAL MATTERS R14.xml false Sheet 6090 - Disclosure - COMMITMENTS DISCLOSURE COMMITMENTS DISCLOSURE R15.xml false Sheet 6100 - Disclosure - FAIR VALUE OF FINANCIAL INSTRUMENTS FAIR VALUE OF FINANCIAL INSTRUMENTS R16.xml false Sheet 6110 - Disclosure - STOCKHOLDERS' EQUITY STOCKHOLDERS' EQUITY R17.xml false Sheet 6120 - Disclosure - EARNINGS AND DIVIDENDS PER SHARE EARNINGS AND DIVIDENDS PER SHARE R18.xml false Sheet 6130 - Disclosure - SHARE-BASED COMPENSATION AWARDS SHARE-BASED COMPENSATION AWARDS R19.xml false Sheet 6140 - Disclosure - SEGMENT INFORMATION SEGMENT INFORMATION R20.xml false Sheet 6150 - Disclosure - LEGAL MATTERS LEGAL MATTERS R21.xml false Sheet 6160 - Disclosure - RECENTLY ISSUED ACCOUNTING STANDARDS RECENTLY ISSUED ACCOUNTING STANDARDS R22.xml false Sheet 995200 - Document - Document Information Document Information R23.xml false Sheet 995400 - Document - Entity Information Entity Information R24.xml false Book All Reports All Reports 1 25 5 0 2 111 true false c00013 1 c00005 5 c00015 1 c00009 5 c00004 78 c00014 1 c00022 2 c00024 26 c00019 1 c00000 1 c00012 1 c00018 1 c00008 5 c00003 49 c00010 31 c00001 2 c00011 1 c00023 26 c00006 5 c00020 1 c00017 1 c00016 32 c00002 2 c00021 1 c00007 5 true true EXCEL 40 Financial_Report.xls IDEA: XBRL DOCUMENT begin 644 Financial_Report.xls MT,\1X*&Q&N$`````````````````````/@`#`/[_"0`&```````````````" M`````0``````````$```T`````$```#^____```````````"````________ M____________________________________________________________ M____________________________________________________________ M____________________________________________________________ M____________________________________________________________ M____________________________________________________________ M____________________________________________________________ M____________________________________________________________ M____________________________________________________________ M____________________________________________________________ M_______________________]_____O____W___\$````!0````8````'```` M"`````D````*````"P````P````-````#@````\````0````$0```!(````3 M````%````!4````6````%P```!@````9````&@```!L````<````'0```!X` M```?````(````"$````B````(P```"0````E````)@```"<````H````*0`` M`"H````K````+````"T````N````+P```#`````Q````,@```#,````T```` M-0```#8````W````.````#D````Z````.P```#P````]````/@```#\```!` M````00```$(```!#````1````$4```!&````1P```$@```!)````2@```$L` M``!,````30```$X```!/````4````%$```!2````4P```%0```!5````5@`` M`%<```!8````60```%H```!;````7````%T```!>````7P```&````!A```` M8@```&,```!D````90```&8```!G````:````&D```!J````:P```&P```!M M````;@```&\```!P````<0```'(```!S````=````'4```!V````=P```'@` M``!Y````>@```'L```!\````?0```'X```!_````@````%(`;P!O`'0`(`!% M`&X`=`!R`'D````````````````````````````````````````````````` M```````````6``4`__________\"```````````````````````````````` M`````````'#+C?TB5,H!T0```$`!````````5P!O`'(`:P!B`&\`;P!K```` M```````````````````````````````````````````````````````````` M`!(``@#_______________\````````````````````````````````````` M```````````#````VY@!```````%`%,`=0!M`&T`80!R`'D`20!N`&8`;P!R M`&T`80!T`&D`;P!N````````````````````````````````````*``"`0$` M```#````_____P`````````````````````````````````````````````` M``````"```````````4`1`!O`&,`=0!M`&4`;@!T`%,`=0!M`&T`80!R`'D` M20!N`&8`;P!R`&T`80!T`&D`;P!N```````````````X``(`____________ M____`````````````````````````````````````````````````@```*`` M````````@0```((```"#````A````(4```"&````AP```(@```")````B@`` M`(L```",````C0```(X```"/````D````)$```"2````DP```)0```"5```` ME@```)<```"8````F0```)H```";````G````)T```">````GP```*````"A M````H@```*,```"D````I0```*8```"G````J````*D```"J````JP```*P` M``"M````K@```*\```"P````L0```+(```"S````M````+4```"V````MP`` M`+@```"Y````N@```+L```"\````O0```+X```"_````P````,$```#"```` MPP```,0```#%````Q@```,<```#(````R0```,H```#+````S````,T```#. 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MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;Unrecognized Loss and Prior Service Cost</font></div> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10p t; FONT-FAMILY: times new roman">$</font></div> </td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Unrealized Gains (Losses) on Derivative Instruments</font></div> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt " align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Unrealized Losses on Investments</font></div> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></div> </td> <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Accumulated Other Comprehensive Income (Loss)</font></div> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FO NT-FAMILY: times new roman">$</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="28%"> <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Balance at December 31, 2007</font></div> </td> <td align="right" valign="bottom" width="11%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">157</font></div> </td> <td align="right" valign="bottom" width="11%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; F ONT-FAMILY: times new roman">(182)</font></div> </td> <td align="right" valign="bottom" width="11%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(3)</font></div> </td> <td align="right" valign="bottom" width="11%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td align="right" valign="bottom" width="11%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(28)</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="28%"> <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Period change</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(97)</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FON T-FAMILY: times new roman">(232)</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">23</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(1)</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">< font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(307)</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="28%"> <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Balance at December 31, 2008</font></div> </td> <td align="right" valign="bottom" width="11%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">60</font></div> </td> <td align="right" valign="bottom" width="11%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"> <font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(414)</font></div> </td> <td align="right" valign="bottom" width="11%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">20</font></div> </td> <td align="right" valign="bottom" width="11%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(1)</font></div> </td> <td align="right" valign="bottom" width="11%"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(335)</font></div> </td> </tr><tr bgcolor="white"> <td align="left" valign="top" width="28%"> <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Period change</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">17</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">< ;font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(2)</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(6)</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">--</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDEN T: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">9</font></div> </td> </tr><tr bgcolor="#cceeff"> <td align="left" valign="top" width="28%"> <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Balance at September 30, 2009</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">77</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px doub le"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(416)</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">14</font></div> </td> <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(1)</font></div> </td> <td align="right" valign="bott om" width="11%" style="BORDER-BOTTOM: black 4px double"> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(326)</font></div> </td> </tr></table> </div> <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br /></div> <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Amounts of other comprehensive income (loss) are presented net of applicable taxes.&#160;&#160;The Company records deferred income taxes on the cumulative translation adjustment related to branch operations and other entities included in the Company's consolidated U.S. tax return.&#160;&#160;No deferred income taxes are provided on the cumulative translati on adjustment of subsidiaries outside the United States, as such cumulative translation adjustment is considered to be a component of permanently invested, unremitted earnings of these foreign subsidiaries.</font></div> </div> 12.&#160;&#160; STOCKHOLDERS' EQUITY A reconciliation of the changes in false false No definition available. No authoritative reference available. false false 1 2 false UnKnown UnKnown UnKnown false true
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