8-K

EASTMAN CHEMICAL COMPANY - EMN October 28, 2004

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the Securities and Exchange Act of 1934

EASTMAN CHEMICAL COMPANY

(Exact name of registrant as specified in its charter)

Delaware	1-12626	62-1539359
(State or other jurisdiction of	(Commission	(I.R.S. employer
incorporation or organization)	File Number)	identification No.)

100 N. Eastman Road, Kingsport, TN	37660
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (423) 229-2000

EASTMAN CHEMICAL COMPANY - EMN October 28, 2004

Item 2.02 Results of Operations and Financial Condition

On October 28, 2004, the registrant publicly released its financial results for the third quarter 2004. The full text of the release is furnished as Exhibit 99.01 to this Form 8-K, and is incorporated herein by reference. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

This Form 8-K includes the following non-GAAP financial measures:

· Net earnings and diluted earnings per share excluding asset impairments and restructuring charges, other operating income, and a net deferred tax benefit.

· Operating earnings excluding asset impairments and restructuring charges.

· Eastman Chemical Company and Eastman Division sales revenue excluding restructured, divested, and consolidated product lines sales revenue from the coatings, adhesives, specialty polymers and inks (CASPI) segment.

Eastman’s management believes that the asset impairments and restructuring charges, other operating income, net deferred tax benefit, and corporate and Eastman Division sales revenue including restructured, divested, and consolidated product lines sales revenue from the CASPI segment do not reflect ongoing business results. However, management believes that these items are indicative of the performance of certain businesses and product lines, results of continuous efforts to reduce costs, and results of other actions to improve the profitability of the company. Management believes that investors can better evaluate and analyze historical and future business trends if they also consider the reported corporate, division and segment results, respectively, without the identified items. Management utilizes corporate earn ings and division and segment sales revenue and operating results excluding the identified items in the measures it uses to evaluate corporate, division and segment performance and in determining certain performance-based compensation. These measures are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as alternatives to the GAAP measures of performance. Table 8 in the accompanying third-quarter 2004 financial tables reconciles operating earnings, net earnings and earnings per share on a GAAP basis, as reflected in Eastman’s Consolidated Statements of Earnings to operating earnings, net earnings and earnings per share excluding asset impairments and restructuring charges, other operating income, and the net deferred tax benefit. Tables 4a and 4b in the accompanying third-quarter 2004 financial tables reconcile corporate and Eastman Division sales revenue on a GAAP basis to sales revenue excluding restructured, divested, and consolidated product l ines sales revenue from the CASPI segment.

In addition, the Company has chosen to present CASPI sales revenue, operating results, and asset impairments and restructuring charges attributable to restructured, divested, and consolidated product lines. Table 5 in the accompanying third-quarter 2004 financial tables provides this information on a GAAP basis.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

The following exhibit is furnished pursuant to Item 9.01:

99.01 Public release by the registrant on October 28, 2004 of third quarter 2004 financial results. SIGNATURES

EASTMAN CHEMICAL COMPANY - EMN October 28, 2004

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
	By:	/s/ Richard A. Lorraine
Name:		Richard A. Lorraine
Title:		Senior Vice President and Chief Financial Officer

Date: October 28, 2004

EASTMAN CHEMICAL COMPANY - EMN October 28, 2004

EXHIBIT INDEX

EXHIBIT NUMBER	DESCRIPTION
99.01	Public release by the registrant on October 28, 2004 of third quarter 2004 financial results.

EX-99.01

For Release Oct. 28, 2004	Contacts:
5:00 p.m. EDT	Media: Nancy Ledford
	423-229-5264 / nledford@eastman.com
	Investors: Greg Riddle
	423-229-8692 / griddle@eastman.com

Eastman Announces Third-Quarter 2004 Earnings

KINGSPORT, Tenn., Oct. 28, 2004 - Eastman Chemical Company (NYSE:EMN) today announced earnings of $0.49 per diluted share for third quarter 2004 versus a loss of $4.35 per diluted share for third quarter 2003. Excluding the items described below for both periods, third-quarter 2004 earnings per diluted share were $0.79 compared with third-quarter 2003 earnings per diluted share of $0.26. For reconciliation to reported earnings, see Table 8 in the accompanying third-quarter 2004 financial tables.

Included in third-quarter 2004 earnings were asset impairments and restructuring charges of $42 million and a net deferred tax benefit of $8 million. Third-quarter 2003 results included asset impairments and restructuring charges of $496 million. For additional information, see “Asset Impairments and Restructuring Charges and Net Deferred Tax Benefit” below.

“Despite continued increases in raw material and energy costs, our earnings in the third quarter and first nine months of 2004 confirm the improvements we have made in the company that have strengthened our profitability,” said Brian Ferguson, chairman and CEO. “We are on track for full-year 2004 earnings to be our best since the year 2000.”

(In millions, except per share amounts)	3Q2004		3Q2003
Sales revenue	$	1,649	$	1,444
Sales revenue excluding restructured, divested and consolidated CASPI product lines*	$	1,575	$	1,259
Earnings (Loss) per diluted share	$	0.49		($4.35	)
Earnings per diluted share excluding asset impairments and restructuring charges and a net deferred tax benefit*	$	0.79	$	0.26
Net cash provided by operating activities	$	119	$	141

*For reconciliation to reported sales revenue and earnings per diluted share, see Tables 4a and 8 respectively in the accompanying third-quarter 2004 financial tables. Also see “Asset Impairments and Restructuring Charges and Net Deferred Tax Benefit” for additional information.

Operating earnings in third quarter 2004 were $73 million compared with an operating loss of $440 million in third quarter 2003. Excluding asset impairments and restructuring charges for both periods, operating earnings were $115 million in third quarter 2004 compared with $56 million in third quarter 2003. The year-over-year improvement was attributed to higher sales volume, an ongoing focus on more profitable businesses and product lines, and cost reduction efforts. The company also said that increased selling prices were more than offset by historically high raw material and energy costs, which increased year-over-year by over $150 million for key raw materials.

Sales revenue for third quarter 2004 was $1.65 billion, a 14 percent increase over third quarter 2003. The increase in sales revenue was primarily due to higher selling prices and higher sales volume. Third-quarter 2004 and third-quarter 2003 results included sales revenue from restructured, divested and consolidated product lines in the coatings, adhesives, specialty polymers and inks (CASPI) segment. Excluding sales from those product lines for both periods, sales revenue increased by 25 percent and sales volume increased by 13 percent. For reconciliation to reported sales revenue, see Table 4a in the accompanying third-quarter 2004 financial tables.

Division and Segment Results 3Q 2004 versus 3Q 2003

Eastman Division’s third-quarter 2004 external sales revenue increased by 9 percent compared with third quarter 2003 primarily due to higher selling prices and increased sales volume. Third-quarter 2004 and third-quarter 2003 results included sales revenue from restructured, divested and consolidated product lines in the CASPI segment. Excluding sales from those product lines for both periods, Eastman Division’s sales revenue increased by 30 percent and sales volume increased by 20 percent. For reconciliation to reported sales revenue, see Table 4b in the accompanying third-quarter 2004 financial tables.

Third-quarter 2004 operating earnings for Eastman Division were $46 million compared with an operating loss of $466 million in third quarter 2003. Third-quarter 2004 operating earnings included asset impairments and restructuring charges of $37 million. Third-quarter 2003 operating earnings included asset impairments and restructuring charges of $495 million. Excluding those items for both periods, operating earnings increased year-over-year due to an ongoing focus on more profitable businesses and product lines, increased sales volume, higher selling prices and cost reduction efforts that more than offset higher raw material and energy costs.

Coatings, Adhesives, Specialty Polymers and Inks - External sales revenue declined by 15 percent primarily due to the divestiture of certain businesses and product lines on July 31, 2004. Sales revenue for continuing product lines in the segment increased by 20 percent primarily due to an increase in sales volume of 17 percent and higher selling prices. The increase in sales volume for the continuing product lines was attributed to improved end-market demand resulting from strong economic growth, especially in North America.

Third-quarter 2004 operating earnings for the CASPI segment included asset impairments and restructuring charges of $4 million. Third-quarter 2003 operating earnings included asset impairments and restructuring charges of $452 million. Excluding those items in both periods, operating earnings increased substantially year-over-year as a result of the company’s ongoing focus on more profitable businesses and product lines, higher sales volume and selling prices in the continuing product lines, and cost reduction efforts that more than offset higher raw material and energy costs.

Performance Chemicals and Intermediates - External sales revenue increased by 42 percent due to increased sales volume and higher selling prices. The increased sales volume was attributed to improved end-market demand due to strong economic growth and the initiation of long-term supply arrangements with key customers. Third-quarter 2004 and third-quarter 2003 operating earnings included asset impairments and restructuring charges of $30 million and $42 million respectively. Excluding those charges for both periods, operating earnings increased substantially due primarily to higher sales volume, higher selling prices and cost reduction efforts that more than offset higher raw material and energy costs.

Specialty Plastics - External sales revenue increased by 22 percent due primarily to higher sales volume. The higher sales volume was attributed mainly to strong demand for products in new applications, including packaging, eyewear and housewares. Operating earnings increased as a result of higher sales volume and cost reduction efforts that more than offset higher raw material and energy costs.

Voridian Division’s third-quarter 2004 external sales revenue increased by 20 percent year-over-year due primarily to higher selling prices and increased sales volume. Operating earnings increased due to higher sales volume and cost reduction efforts that more than offset higher raw material and energy costs.

Polymers - External sales revenue increased by 23 percent due to higher selling prices and increased sales volume. The increased sales volume was mainly the result of continued strong end-market demand for PET polymers, particularly in North America, driven in part by increased substitution of PET polymers for other materials. Operating earnings increased slightly as higher selling prices and higher sales volume offset particularly high raw material costs, especially for paraxylene and ethylene glycol.

Fibers - External sales revenue increased by 13 percent primarily due to higher sales volume, particularly for acetate tow in Asia and acetyl chemicals. Operating earnings increased as higher sales volume more than offset higher raw material and energy costs.

Developing Businesses Division’s third-quarter 2004 sales revenue was $31 million compared with $21 million for third quarter 2003. Operating results for the division declined due primarily to increased spending for growth initiatives and higher costs associated with the restructuring of Cendian Corporation. The company also recently announced the pending divestiture of Ariel Research Corporation. These actions support the division’s strategy of narrowing its focus to align more closely with the company’s core capabilities.

Asset Impairments and Restructuring Charges and Net Deferred Tax Benefit

During third quarter 2004, Eastman recognized pretax asset impairments and restructuring charges of $42 million. Included in these charges were non-cash asset impairments of $28 million and restructuring charges of $14 million. The non-cash asset impairments primarily related to certain fixed assets in the performance chemicals product lines in the performance chemicals and intermediates segment that are being rationalized due to increased foreign competition. In addition, the company recognized restructuring charges of $14 million primarily related to previously announced employee separation programs and ongoing cost reduction efforts.

The company also recorded a net deferred tax benefit of $8 million to recognize the expected utilization of capital loss carryforwards.

Cash Flow

Eastman generated $119 million in cash from operating activities during the third quarter of 2004, a decrease of $22 million compared with third quarter 2003. In the third quarters of 2004 and 2003, the company made $3 million and $98 million respectively in contributions to its U.S. defined benefit pension plans. The decline in cash from operating activities was primarily due to an increase in accounts receivables resulting from continued strong sales revenue and a decline in accounts payables due to the timing of purchases.

Outlook

Commenting on outlook for the fourth quarter, Ferguson said: “Although fourth quarter is typically our lowest earnings quarter due primarily to seasonality and planned maintenance, we continue to benefit from our actions to improve profitability and strong economic conditions. However, we expect that historically high raw material and energy costs will increase in the fourth quarter from third-quarter levels. Pricing will, therefore, continue to be a key determinant of our profitability. As a result, we expect fourth-quarter 2004 earnings per share excluding any asset impairments and restructuring charges to be within the current First Call analysts’ fourth-quarter 2004 range of estimates, which is $0.42 to $0.63 per share.”

Eastman will host a conference call with industry analysts on Oct.29, 2004, at 8:00 a.m. EDT. To listen to the live webcast of the conference call, go to www.eastman.com , Investors, Event Information, Audio Archives for the link to the live webcast. To listen via telephone, the dial-in number is 913-981-5507, passcode number 555269. A telephone replay will be available continuously from 11:00 a.m. EDT, Oct. 29, to 12:00 a.m. EST, Nov. 5, 2004, at 888-289-0579, passcode number 555269.

Headquartered in Kingsport, Tenn., Eastman manufactures and markets chemicals, fibers and plastics worldwide. The company had 2003 sales of $5.8 billion. To learn more about Eastman and its products, visit  www.eastman.com.      

##

Forward-looking Statements: This news release includes forward-looking statements concerning current expectations for future economic and business conditions; raw material and energy costs; company strategies, actions and efforts to control and reduce costs and to increase overall selling prices and improve financial performance; and overall selling prices, sales volume, raw material and energy costs, and earnings for fourth quarter and full-year 2004. Such expectations are based upon certain preliminary information, internal estimates, and management assumptions, expectations and plans, and are subject to a number of risks and uncertainties inherent in projecting future condi tions, events, and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations prove to be inaccurate or are unrealized. Important factors that could cause actual results to differ materially from such expectations are and will be detailed in the company’s filings with the Securities and Exchange Commission, including the Form 10-Q filed for second quarter 2004 and the Form 10-Q to be filed for third quarter 2004, available on the Eastman web site at www.eastman.com in the Investors, SEC filings section.

EASTMAN CHEMICAL COMPANY - EMN	October 28, 2004
	5:30 PM EDT

FINANCIAL INFORMATION

October 28, 2004

For use in the Eastman Chemical Company Conference Call

at 8:00 AM (EDT), October 29, 2004.

Table of Contents

Item		Page
TABLE 1	Statements of Earnings	1
TABLE 2	Other Sales Information	2-3
TABLE 3	Operating Earnings (Loss), Asset Impairments and Restructuring Charges and Other Operating Income	4
TABLE 4	Eastman Chemical Company and Eastman Division Pro-Forma Sales Revenue Excluding CASPI Restructured, Divested and Consolidated Product Lines	5
TABLE 5	CASPI Segment Detail of Sales Revenue, Operating Earnings (Loss) and Asset Impairments and Restructuring Charges	6
TABLE 6	Sales Revenue Change - External Sales	7
TABLE 7	Percentage Growth in Sales Volume	8-9
TABLE 8	Operating Earnings, Net Earnings, and Earnings Per Share Reconciliation	10
TABLE 9	Statements of Cash Flows	11
TABLE 10	Selected Balance Sheet Items	12

EASTMAN CHEMICAL COMPANY - EMN	October 28, 2004
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	Page 1

TABLE 1 - STATEMENTS OF EARNINGS

	Third Quarter						First Nine Months
(Dollars in millions, except per share amounts)	2004			2003			2004			2003
Sales	$	1,649		$	1,444		$	4,922		$	4,366
Cost of sales		1,392			1,244			4,160			3,741
Gross profit		257			200			762			625
Selling and general administrative expenses		107			100			329			308
Research and development expenses		35			44			116			129
Asset impairments and restructuring charges, net		42			462			188			480
Goodwill impairment		--			34			--			34
Other operating income		--			--			--			(20	)
Operating earnings (loss)		73			(440	)		129			(306	)
Interest expense, net		29			30			88			92
Other (income) charges, net		(4	)		1			(4	)		(5	)
Earnings (loss) before income taxes and cumulative effect of changes in accounting principle		48			(471	)		45			(393	)
Provision (benefit) for income taxes		10			(135	)		(71	)		(110	)
Earnings before cumulative effect of changes in accounting principle		38			(336	)		116			(283	)
Cumulative effect of changes in accounting principle, net		--			--			--			3
Net earnings (loss)	$	38		$	(336	)	$	116		$	(280	)
Earnings (loss) per share
Basic
Before cumulative effect of changes in accounting principle	$	0.50		$	(4.35	)	$	1.51		$	(3.66	)
Cumulative effect of changes in accounting principle, net		--			--			--			0.04
Net earnings (loss) per share	$	0.50		$	(4.35	)	$	1.51		$	(3.62	)
Diluted
Before cumulative effect of changes in accounting principle	$	0.49		$	(4.35	)	$	1.49		$	(3.66	)
Cumulative effect of changes in accounting principle, net		--			--			--			0.04
Net earnings (loss) per share	$	0.49		$	(4.35	)	$	1.49		$	(3.62	)
Shares (in millions) outstanding at end of period		77.9			77.4			77.9			77.4
Shares (in millions) used for earnings per share calculation
Basic		77.6			77.2			77.4			77.1
Diluted		78.3			77.2			78.1			77.1

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	Page 2

TABLE 2 - OTHER SALES INFORMATION

	Third Quarter, 2004
(Dollars in millions)	External Sales		Interdivisional Sales		Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$	357	$	--	$	357
Performance Chemicals and Intermediates		371		147		518
Specialty Plastics		164		15		179
Total Eastman Division		892		162		1,054
Voridian Division
Polymers		542		17		559
Fibers		184		22		206
Total Voridian Division		726		39		765
Developing Businesses Division
Developing Businesses		31		106		137
Total Developing Businesses Division		31		106		137
Total Eastman Chemical Company	$	1,649	$	307	$	1,956

	Third Quarter, 2003*
	External Sales		Interdivisional Sales		Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$	421	$	--	$	421
Performance Chemicals and Intermediates		262		120		382
Specialty Plastics		135		14		149
Total Eastman Division		818		134		952
Voridian Division
Polymers		442		14		456
Fibers		163		20		183
Total Voridian Division		605		34		639
Developing Businesses Division
Developing Businesses		21		104		125
Total Developing Businesses Division		21		104		125
Total Eastman Chemical Company	$	1,444	$	272	$	1,716

* Sales revenues for 2003 have been realigned to reflect certain product movements between the CASPI and PCI segments effective in the first quarter 2004.

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	Page 3

TABLE 2 - OTHER SALES INFORMATION (Continued)

	First Nine Months, 2004
(Dollars in millions)	External Sales		Interdivisional Sales		Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$	1,272	$	--	$	1,272
Performance Chemicals and Intermediates		974		428		1,402
Specialty Plastics		475		40		515
Total Eastman Division		2,721		468		3,189
Voridian Division
Polymers		1,572		50		1,622
Fibers		537		66		603
Total Voridian Division		2,109		116		2,225
Developing Businesses Division
Developing Businesses		92		326		418
Total Developing Businesses Division		92		326		418
Total Eastman Chemical Company	$	4,922	$	910	$	5,832

	First Nine Months, 2003*
	External Sales		Interdivisional Sales		Total Sales
Sales by Division and Segment
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks	$	1,274	$	--	$	1,274
Performance Chemicals and Intermediates		844		360		1,204
Specialty Plastics		417		40		457
Total Eastman Division		2,535		400		2,935
Voridian Division
Polymers		1,306		54		1,360
Fibers		475		60		535
Total Voridian Division		1,781		114		1,895
Developing Businesses Division
Developing Businesses		50		296		346
Total Developing Businesses Division		50		296		346
Total Eastman Chemical Company	$	4,366	$	810	$	5,176

* Sales revenues for 2003 have been realigned to reflect certain product movements between the CASPI and PCI segments effective in the first quarter 2004.

	Third Quarter				First Nine Months
(Dollars in millions)	2004		2003		2004		2003
Sales by Region - External Sales
United States and Canada	$	969	$	832	$	2,784	$	2,505
Europe, Middle East, and Africa		333		336		1,137		1,033
Asia Pacific		192		157		562		478
Latin America		155		119		439		350
	$	1,649	$	1,444	$	4,922	$	4,366

EASTMAN CHEMICAL COMPANY - EMN	October 28, 2004
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	Page 4

TABLE 3 - OPERATING EARNINGS (LOSS), ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES AND OTHER OPERATING INCOME

	Third Quarter						First Nine Months
(Dollars in millions)	2004			2003**			2004			2003**
Operating Earnings (Loss) by Segment and Certain Items
Eastman Division Segments
Coatings, Adhesives, Specialty Polymers, and Inks
Operating earnings (loss)	$	38		$	(435	)	$	44		$	(419	)
Asset impairments and restructuring charges		4			452			79			455
Performance Chemicals and Intermediates
Operating earnings (loss)		(10	)		(43	)		10			(34	)
Asset impairments and restructuring charges		30			42			37			57
Specialty Plastics
Operating earnings		18			12			14			53
Asset impairments and restructuring charges		3			1			53			1
Other operating income		--			--			--			(20	)
Total operating earnings (loss)	$	46		$	(466	)	$	68		$	(400	)
Total asset impairments and restructuring charges	$	37		$	495		$	169		$	513
Total other operating income	$	--		$	--		$	--		$	(20	)
Voridian Division Segments
Polymers
Operating earnings	$	3		$	2		$	11		$	56
Asset impairments and restructuring charges		1			1			13			1
Fibers
Operating earnings		44			34			110			95
Total operating earnings	$	47		$	36		$	121		$	151
Total asset impairments and restructuring charges	$	1		$	1		$	13		$	1
Developing Business Division Segment
Developing Businesses
Operating loss	$	(21	)	$	(13	)	$	(60	)	$	(52	)
Asset impairments and restructuring charges		4			--			6			--
Total operating loss	$	(21	)	$	(13	)	$	(60	)	$	(52	)
Total asset impairments and restructuring charges	$	4		$	--		$	6		$	--
Eliminations to operating earnings	$	1		$	3		$	--		$	(5	)
Total Eastman Chemical Company
Total operating earnings (loss)	$	73		$	(440	)	$	129		$	(306	)
Total asset impairments and restructuring charges	$	42		$	496		$	188		$	514
Total other operating income	$	--		$	--		$	--		$	(20	)

** Operating earnings for 2003 have been realigned to reflect certain product movements between the CASPI and PCI segments effective in the first quarter 2004.

EASTMAN CHEMICAL COMPANY - EMN	October 28, 2004
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TABLE 4a- EASTMAN CHEMICAL COMPANY DETAIL OF SALES REVENUE

	First Quarter		Second Quarter		Third Quarter		First Nine Months
(Dollars in millions)	2004		2004		2004		2004
Sales Revenue	$	1,597	$	1,676	$	1,649	$	4,922
Less: CASPI restructured, divested, and consolidated product lines(1)		174		193		74		441
Sales revenue - continuing product lines	$	1,423	$	1,483		1,575	$	4,481

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Twelve Months
(Dollars in millions)	2003		2003		2003		2003		2003
Sales Revenue	$	1,441	$	1,481	$	1,444	$	1,434	$	5,800
Less: CASPI restructured, divested, and consolidated product lines(1)		174		190		185		170		719
Sales revenue - continuing product lines	$	1,267	$	1,291	$	1,259	$	1,264	$	5,081

TABLE 4b- EASTMAN DIVISION DETAIL OF SALES REVENUE

	First Quarter		Second Quarter		Third Quarter		First Nine Months
(Dollars in millions)	2004		2004		2004		2004
Sales Revenue	$	886	$	943	$	892	$	2,721
Less: CASPI divested/consolidated product lines(1)		174		193		74		441
Sales revenue - continuing product lines	$	712	$	750	$	818	$	2,280

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Twelve Months
(Dollars in millions)	2003		2003		2003		2003		2003
Sales Revenue	$	852	$	865	$	818	$	805	$	3,340
Less: CASPI divested/consolidated product lines(1)		174		190		185		170		719
Sales revenue - continuing product lines	$	678	$	675	$	633		635	$	2,621

⁽¹⁾ These businesses and product lines include acrylate ester monomers, composites (unsaturated polyester resins), inks and graphic arts raw materials, liquid resins, powder resins and textile chemicals divested on July 31, 2004 as well as other restructuring, divestiture and consolidation activities that the Company has completed related to these businesses and product lines.

EASTMAN CHEMICAL COMPANY - EMN	October 28, 2004
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TABLE 5 - CASPI SEGMENT DETAIL OF SALES REVENUE, OPERATING EARNINGS (LOSS) AND ASSET IMPAIRMENTS AND RESTRUCTURING CHARGES

(Dollars in millions)	First Quarter 2004			Second Quarter 2004			Third Quarter 2004			First Nine Months 2004
Sales Revenue
Sales revenue - CASPI restructured, divested, and consolidated product lines (1)	$	174		$	193		$	74		$	441
Sales revenue - continuing product lines		265			283			283			831
Total sales revenue	$	439		$	476		$	357		$	1,272
Operating Earnings (Loss) and Asset Impairments and Restructuring Charges
Operating loss - CASPI restructured, divested, and consolidated product lines (1) (2)	$	(11	)	$	(72	)	$	(2	)	$	(85	)
Operating earnings - continuing product lines		41			48			40			129
Total Operating earnings (loss)	$	30		$	(24	)	$	38		$	44
Asset impairments and restructuring charges - CASPI restructured, divested, and consolidated product lines (1)		5			66			1			72
Asset impairments and restructuring charges - continuing product lines		1			3			3			7
Total asset impairments and restructuring charges	$	6		$	69		$	4		$	79

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Twelve Months
(Dollars in millions)	2003			2003			2003			2003			2003
Sales Revenue
Sales revenue - CASPI restructured, divested, and consolidated product lines (1)	$	174		$	190		$	185		$	170		$	719
Sales revenue - continuing product lines		237			251			236			240			964
Total sales revenue	$	411		$	441		$	421		$	410		$	1,683
Operating Earnings (Loss) and Asset Impairments and Restructuring Charges
Operating loss - CASPI restructured, divested, and consolidated product lines (1) (2)	$	(31	)	$	(28	)	$	(464	)	$	(15	)	$	(538	)
Operating earnings - continuing product lines		28			47			29			32			136
Total Operating earnings (loss)	$	(3	)	$	19		$	(435	)	$	17		$	(402	)
Other Operating income	$	--		$	--		$	--		$	(12	)	$	(12	)
Asset impairments and restructuring charges - CASPI restructured, divested, and consolidated product lines (1)		1			1			449			6			457
Asset impairments and restructuring charges - continuing product lines		1			--			3			1			5
Total asset impairments and restructuring charges	$	2		$	1		$	452		$	7		$	462

⁽¹⁾ See note (1) to table 4a and 4b

⁽²⁾ Includes allocated costs consistent with the Company’s historical practices, some of which may remain and could be reallocated to the remainder of the segment and other segments.

EASTMAN CHEMICAL COMPANY - EMN	October 28, 2004
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	Page 7

TABLE 6 - SALES REVENUE CHANGE - EXTERNAL SALES

	Third Quarter, 2004 Compared to Third Quarter, 2003
				Change in External Sales Revenue Due To
	Revenue % Change			Volume Effect			Price Effect			Product Mix Effect			Exchange Rate Effect
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks		(15)	%		(19)	%		3	%		(1)	%		2	%
Performance Chemicals and Intermediates		42	%		24	%		18	%		(1)	%		1	%
Specialty Plastics		22	%		18	%		(1)	%		3	%		2	%
Total Eastman Division		9	%		1	%		7	%		--			1	%
Voridian Division
Polymers		23	%		5	%		15	%		1	%		2	%
Fibers		13	%		12	%		(2)	%		2	%		1	%
Total Voridian Division		20	%		7	%		10	%		1	%		2	%
Developing Businesses Division
Developing Businesses		52	%		--	%		--	%		52	%		--	%
Total Developing Businesses Division		52	%		--	%		--	%		52	%		--	%
Total Eastman Chemical Company		14	%		3	%		8	%		1	%		2	%

	First Nine Months, 2004 Compared to First Nine Months, 2003
				Change in External Sales Revenue Due To
	Revenue % Change			Volume Effect			Price Effect			Product Mix Effect			Exchange Rate Effect
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks		--	%		(4)	%		1	%		--	%		3	%
Performance Chemicals and Intermediates		15	%		7	%		9	%		(2)	%		1	%
Specialty Plastics		14	%		10	%		1	%		--	%		3	%
Total Eastman Division		7	%		2	%		4	%		(1)	%		2	%
Voridian Division
Polymers		20	%		11	%		6	%		--	%		3	%
Fibers		13	%		14	%		(3)	%		1	%		1	%
Total Voridian Division		18	%		12	%		4	%		(1)	%		3	%
Developing Businesses Division
Developing Businesses		84	%		--	%		--	%		84	%		--	%
Total Developing Businesses Division		84	%		--	%		--	%		84	%		--	%
Total Eastman Chemical Company		13	%		6	%		4	%		1	%		2	%

EASTMAN CHEMICAL COMPANY - EMN	October 28, 2004
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	Page 8

TABLE 7 - PERCENTAGE GROWTH IN SALES VOLUME

	Third Quarter, 2004 Compared to
	Third Quarter, 2003
							Total
	External			Interdivisional			Including
	Volume			Volume			Interdivisional
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks		(17)	%		--	%		(17)	%
Performance Chemicals and Intermediates		23	%		2	%		15	%
Specialty Plastics		19	%		(1)	%		15	%
Total Eastman Division		4	%		2	%		4	%
Voridian Division
Polymers		5	%		14	%		5	%
Fibers		12	%		9	%		10	%
Total Voridian Division		6	%		10	%		7	%
Developing Businesses Division
Developing Businesses		--	%		--	%		--	%
Total Developing Businesses Division		--	%		--	%		--	%
Total Eastman Chemical Company		5	%
Regional sales volume growth
United States and Canada		9	%
Europe, Middle East, and Africa		(12)	%
Asia Pacific		6	%
Latin America		15	%

EASTMAN CHEMICAL COMPANY - EMN	October 28, 2004
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	Page 9

TABLE 7 - PERCENTAGE GROWTH IN SALES VOLUME (Continued)

	First Nine Months, 2004 Compared to
	First Nine Months, 2003
							Total
	External			Interdivisional			Including
	Volume			Volume			Interdivisional
Eastman Division
Coatings, Adhesives, Specialty Polymers, and Inks		(2)	%		--	%		(2)	%
Performance Chemicals and Intermediates		7	%		7	%		7	%
Specialty Plastics		11	%		(4)	%		8	%
Total Eastman Division		4	%		7	%		4	%
Voridian Division
Polymers		10	%		(18)	%		9	%
Fibers		14	%		9	%		12	%
Total Voridian Division		11	%		4	%		10	%
Developing Businesses Division
Developing Businesses		--	%		--	%		--	%
Total Developing Businesses Division		--	%		--	%		--	%
Total Eastman Chemical Company		7	%
Regional sales volume growth
United States and Canada		7	%
Europe, Middle East, and Africa		1	%
Asia Pacific		6	%
Latin America		20	%

EASTMAN CHEMICAL COMPANY - EMN	October 28, 2004
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	Page 10

TABLE 8 - OPERATING EARNINGS, NET EARNINGS, AND EARNINGS PER SHARE RECONCILIATION

OPERATING EARNINGS, NET EARNINGS, AND NET EARNINGS PER DILUTED SHARE

	Third Quarter 2004
(Dollars in millions)	Operating Earnings		Net Earnings			Net earnings per diluted share
As reported	$	73	$	38		$	0.49
Certain Items:
Asset impairments, restructuring charges, and other operating income		42		31			0.40
Net deferred tax benefit		--		(8	)		(0.10	)
Excluding certain items	$	115	$	61		$	0.79

	Third Quarter 2003
(Dollars in millions)	Operating Earnings			Net Earnings			Net earnings per diluted share
As reported	$	(440	)	$	(336	)	$	(4.35	)
Certain Items:
Asset impairments and restructuring charges		496			356			4.61
Excluding certain items	$	56		$	20		$	0.26

EASTMAN CHEMICAL COMPANY - EMN	October 28, 2004
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	Page 11

TABLE 9 - STATEMENTS OF CASH FLOWS

	First Nine Months
(Dollars in millions)	2004			2003
Cash flows from operating activities
Net earnings (loss)	$	116		$	(280	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization		243			280
Cumulative effect of changes in accounting principles, net		--			(3	)
Asset impairments		131			497
Gain on sales of assets		--			(20	)
Provision (benefit) for deferred income taxes		(82	)		(159	)
Changes in operating assets and liabilities:
Increase in receivables		(151	)		(48	)
Decrease in inventories		9			21
Increase (decrease) in trade payables		10			(52	)
Increase (decrease) in liabilities for employee benefits and incentive pay		35			(217	)
Other items, net		(10	)		27
Net cash provided by operating activities		301			46
Cash flows from investing activities
Additions to properties and equipment		(171	)		(159	)
Proceeds from sale of assets, net of cash acquired		115			28
Additions to capitalized software		(11	)		(11	)
Acquisitions, net of cash acquired		(4	)		--
Other items, net		(6	)		16
Net cash used in investing activities		(77	)		(126	)
Cash flows from financing activities
Net (decrease) in commercial paper, credit facility and other short-term borrowings		(5	)		(88	)
Proceeds from long-term borrowings		--			248
Repayment of borrowings		(510	)		(5	)
Dividends paid to stockholders		(102	)		(102	)
Other items		14			3
Net cash provided by (used in) financing activities		(603	)		56
Net change in cash and cash equivalents		(379	)		(24	)
Cash and cash equivalents at beginning of period		558			77
Cash and cash equivalents at end of period	$	179		$	53

EASTMAN CHEMICAL COMPANY - EMN	October 28, 2004
	5:30 PM EDT
	Page 12

TABLE 10 - SELECTED BALANCE SHEET ITEMS

(Dollars in millions)	September 30, 2004		December 31, 2003
Current Assets	$	1,553	$	2,010
Net Properties		3,165		3,419
Other Assets		893		801
Total Assets	$	5,611	$	6,230
Payables and Other Current Liabilities	$	948	$	973
Short-term Borrowings		1		504
Long-term Borrowings		2,066		2,089
Other Liabilities		1,557		1,621
Stockholders’ Equity		1,039		1,043
Total Liabilities and Stockholders’ Equity	$	5,611	$	6,230