innovation day 2018 - eastman chemical company

Innovation Day 2018

Mark Costa Board Chair and Chief Executive Officer

During these presentations, we make certain forward-looking statements concerning plans and expectations for Eastman Chemical Company. We caution you that actual events or

results may differ materially from our plans and expectations. Throughout these presentations, “F” is used to indicate projected, or “forecasted”, amounts. See Eastman’s most recent

Form 10-K and 10-Q filings with the Securities and Exchange Commission and these slides and the remarks in the presentations for risks and uncertainties which could cause actual

results to differ materially from current expectations.

Forward-looking statements

Non-GAAP financial measuresAll earnings measures in these presentations are non-GAAP and exclude certain non-core and unusual items. Full-year 2017 amounts are from our February 1 and 2 public

disclosures of our 2017 financial results but will be final when we file our 2017 Form 10-K with the SEC.

“Adjusted Net Income” is “Net Income” adjusted to exclude the same non-core and any unusual or non-recurring items as are excluded from the Company's other non-GAAP

earnings measures for the same periods.

“Debt to EBITDA” Ratio is defined as Total Debt divided by Adjusted EBITDA.

“Diversified Peers” are BASF, CE, HUN.

“EBITDA” is net earnings or net earnings per share before interest, taxes, depreciation and amortization adjusted to exclude the same non-core and any unusual or non-recurring

items as are excluded from the Company's other non-GAAP earnings measures for the same periods. “EBITDA Margin” is EBITDA divided by the GAAP measure sales revenue

in the Company’s income statement for the period presented. Information concerning use of the non-GAAP measures. Projections of future Adjusted EBITDA and EBITDA

Margin also exclude any non-core or non-recurring items.

“Free cash flow” is cash provided by operating activities less cash used for additions to properties and equipment, both the GAAP measures in the Company’s statements of

cash flows for the period presented. Information concerning use of the non-GAAP measure free cash flow is available in the Company’s Form 10-Q for third quarter 2017.

“Adjusted Free Cash Flow” is cash provided by operating activities excluding non-core or unusual items less cash used for additions to properties and equipment.

“Free cash flow conversion” is Adjusted Free Cash Flow divided by Adjusted Net Income.

“IRR” is the Internal Rate of Return calculated based on 10-year project cash flow assumptions.

“Return on Invested Capital” (or “ROIC”) is adjusted net income plus interest expense after tax divided by average total borrowings plus average stockholders’ equity for the

period presented, each derived from the GAAP measures in the Company’s financial statements for the periods presented.

“Specialty Peers” are ALB, ASH, FMC, IFF, PPG.

“Variable Margin” defined as GAAP measure sales revenue in the Company’s income statement for the period presented minus total raw material costs, total purchased energy

costs, and variable distribution costs divided by the GAAP measure sales revenue in the Company’s income statement for the period presented.

“Operating Margin” defined as operating earnings divided by the GAAP measure sales revenue in the Company’s income statement for the period presented.

Reconciliations to the most directly comparable GAAP financial measures and other associated disclosures, including a description of the excluded and adjusted items, are available

in the Appendix and in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Forms 10-K and 10-Q filed and Forms 8-K

furnished and filed with the SEC for the periods for which non-GAAP financial measures are presented. Projected future earnings exclude any non-core, unusual, or non-recurring

items, and projections of future earnings per share assume that the adjusted tax rate for the most recent completed period will be the actual tax rate for the projected periods. Unless

otherwise indicated, except for earnings per share, all dollar amounts are millions “($M)” or billions “($B)”.

Agenda

Mark CostaBoard Chair and Chief Executive Officer

8:15 – 8:55 a.m.

Eastman overview

Brad LichExecutive Vice President and Chief Commercial Officer

Lucian BoldeaSenior Vice President, Additives & Functional Products 9:00 – 11:25 a.m.

Concurrent breakout sessions

Steve CrawfordSenior Vice President and Chief Technology Officer

11:25 – 11:40 a.m. / Break

Curt EspelandExecutive Vice President and Chief Financial Officer

11:40 – 12:00 p.m.

Financial overview

12:00 – ~12:45 p.m.

Closing comments and Q&A

Immediately following

Lunch / Executive availability

Damon C. Warmack Senior Vice President Corporate

Development and Chemical

Intermediates

Perry Stuckey III Senior Vice President and

Chief Human Resources Officer

Brad A. LichExecutive Vice President and

Chief Commercial Officer

David A. Golden Senior Vice President,

Chief Legal and Sustainability

Officer, and Corporate Secretary

Curt E. EspelandExecutive Vice President and

Chief Financial Officer

Mark J. CostaBoard Chair and

Chief Executive Officer

Lucian BoldeaSenior Vice President, Additives

& Functional Products

Michael H.K. Chung Senior Vice President and

Chief International Ventures Officer

Mark K. Cox Senior Vice President,

Chief Manufacturing, Supply

Chain and Engineering Officer

Stephen G. Crawford Senior Vice President and

Chief Technology Officer

Eastman Executive Team

Why invest in EMN?

A compelling, innovation-based

organic growth model

Aggressive portfolio management,

improving structural quality of

earnings and FCF

Disciplined and balanced

capital deployment05010015020025030035040045050055060065070075080085090095010001050110011501200125013001350

0

1

2

3

4

5

6

7

8

9

2010 2011 2012 2013 2014 2015 2016 2017 2018F

Free cash flow Earnings per share

8%

–1

2%

E

PS

G

ro

wth

Strong value creation expected going forward

Core sales

revenue

growth in

line with end

markets

Specialty

products growing

>2x underlying

markets

23%

CORPORATE

EBITDA

MARGIN

and increasing

with improved

product mix

>$1

billionANNUAL

FREE CASH

FLOW

and growing

10%–15%

RETURN ON

INVESTED

CAPITAL

(ROIC)

creating value

above cost of

capital and

growing over

time

8%–12%

EPS CAGR2018–2020

Advanced Materials: Transformation through innovation-driven growth

and portfolio management

PET

Tritan

Spectar

Aspira

Performance

Films

2017

Volume

(kg)

EBITDA

($M)

EBITDA

margin

$660

26%

>5x EBITDA GROWTH

TRANSFORMATION IN ADVANCED MATERIALS

Volume

(kg)

EBITDA

($M)

EBITDA

margin

$1206%

Interlayers

2007

Note: 2007 represents the combination of specialty plastics and PET. For reference, see the Company’s Form 10-K for 2008.

Success of Tritan in consumer durables enabled by our

innovation-driven growth model

Tritan 2017 sales revenue ~$300M with above AM segment average operating margin

World-Class

Technology

Platforms

Relentlessly

Engage

the Market

Differentiated

Application

Development

SAN (Styrene acrylonitrile)

Deforms after 125

dishwasher cycles

Polycarbonate

Cracks after 250

dishwasher cycles

After 1,000 dishwasher cycles

NO cracking hazing, crazing,

or distortion

Tritan launched in 2007 July 16, 2008

$-

$0.50

$1.00

$1.50

$2.00

$2.50

-

500

1,000

1,500

2,000

2,500

3,000

3,500

Premium revenue

Core revenue

PET revenue

AM unit variable margin

Advanced Materials transformation accelerated earnings growth by

leveraging assets, upgrading mix and strategic portfolio management

PET Core Premium

Va

ria

ble

ma

rgin

($/k

g)

Structural changes result in variable margin that is ~5x higher than 2007

SELLING PRICES

($/kg)1

REVENUE GROWTH2

Reve

nu

e (

$M

)

(1) Weighted average selling price 2007–2020F

(2) Performance Polymers segment PET business included for 2007 to 2011 for visibility of

portfolio change

Advanced Materials: Organic growth is 2/3 of the 21% EBITDA

growth CAGR from 2010–2017

(1) ‘Acquisitions’ are acquired Solutia and Commonwealth Laminating & Coating, Inc. businesses at first full year of ownership assuming first full year of realized synergies.

(2) FX includes foreign currency translation and competitive impact on operating earnings.

$170M

$660M

0

100

200

300

400

500

600

700

800

2010 Acquisitions Organic growth FX 2017

ADVANCED MATERIALS EBITDA1,2

(2010–2017)

Unique innovation-driven growth model delivers

consistent, sustainable value

World-Class

Technology

Platforms

Relentlessly

Engage

the Market

Differentiated

Application

Development

Significant integration and scale enable innovation, reliability and cost advantage

Advantaged growth and execution capability and culture

Aggressive and disciplined portfolio management

$0.7B

11%

$0.2B

$2.2B

23%

$1.0B

$2.0B

22%

$0.8B

Divestitures Integration/shift

to innovation

2004

2014

2017

2020F

$EBITDA

EBITDA margin

Free cash flow

Strong track record of value-creating portfolio management

2011 Acquisitions Accelerated

innovation

$1.4B

19%

$0.3B

Innovation-led organic growth and portfolio management result in

>90% increase in EBITDA 2010–2017, despite macro headwinds

$1,160M

$2,220M

0

500

1000

1500

2000

2500

3000

2010 Acquisitions Organic growth Oil FX Fibers 2017

EASTMAN EBITDA1,2,3

(2010–2017)

(1) ‘Acquisitions’ are acquired Solutia and Commonwealth Laminating & Coating, Inc. businesses at first full year of ownership assuming first full year of realized synergies. All other acquisitions and divestitures

included in ‘Organic Growth.’

(2) ‘FX’ includes foreign currency translation and competitive impact on operating earnings.

(3) ‘Oil’ is defined as the drop in the price of Brent over the period indicated which resulted in lower selling prices for products that have oil derivatives as a key input, narrowed the cost advantage of products produced

with natural gas liquids in the U.S. compared with those produced globally.

Driving market activation across the value chain

Relentlessly engaging the market to create our own growth

Leveraging disruptive macro trends for growth

Relentlessly Engage

the Market

Sophisticated targeting in attractive niche markets

Transportation (20%) Consumables (16%) Building & Construction (13%)

~2/3 of sales revenue from product lines in leading market

positions combined with precision marketing within nichesRelentlessly Engage

the Market

Consumer / Medical Durable / Electronics

(10%)

Animal Nutrition / Crop Protection (7%)

Metam sodium(soil fumigant)

Propionic acid(animal feed)

Eastman Tritan™

copolyester(consumer durables)

Eastman

Enhanz™(animal nutrition)

Eastman

Visualize™ material(films in electronics)

Tenite™

cellulosics(eyewear)

Eastman CrystexTM

insoluble sulfur(performance

additive for tires)

Saflex® Acoustic

interlayers & V-KOOL®

(performance

films for vehicles)

Eastman cellulose

acetate butyrate (CAB)(car coatings)

Eastman Texanol™

ester alcohol(coalescents for

latex paints)

Alkylamines(liquid laundry

detergent)

Eastman 168™

non-phthalate

plasticizers (flooring)

Aerafin™ polyolefin

polymers(adhesives for

hygiene products)

Acetate yarn(performance clothing)

Vanceva®

(color interlayers)

% revenue by end market – 2017

Leveraging disruptive macro trends to

enhance the quality of life in a material way

Favorable macro trends applicable to ~80% of Eastman growth

Relentlessly Engage

the Market

Feeding a growing

population

Emerging

middle class

Health &

wellness

Natural

resource

efficiency

World-class scalable technology platforms provide the

foundation of competitive advantage and sustainable growthWorld-Class Scalable

Technology Platforms

Multigenerational product development for

every specialty product

R&D scale enables faster, more differentiated

product development

Creating value through integration of

multiple technology platforms

0

0.2

0.4

0.6

0.8

1

1.2

Crystex multigenerational technology

plan extends our competitive advantage

2012

World-Class Scalable


Pro

duct

perf

orm

ance

BE

ST

Competitors

Crystex™

2014 2018 2020

Comptitor

ACrystex™

Competitors

2016

Crystex™

Crystex™

Cure

Crystex™

Cure Pro

Competitors

Crystexbreakthrough

Integration across multiple technology platforms

delivers sustainable high margins

Technology

platform #1

Technology

platform #2

Technology

platform #3

Single-technologyplatform

Multi-technologyplatforms

2017 VARIABLE MARGIN ($/kg)

Multi-technology

platforms

Tritan™

Tetrashield™

Cellulose acetate

butyrate (CAB)

Cellulose acetate

propionate (CAP)

Specialty ketones

Interlayers

Performance films



Differentiated application development embraces and

converts market complexity into sustainable valueDifferentiated

Application Development

Accelerates innovation by enabling deep understanding

of how our products perform within the customer’s product

Improves understanding of our products’ value capture

Creates demand downstream by demonstrating

value of our innovation with prototypes

Global application development capability is

critical component of innovation-led growth

Thermoplastic conversion

Functional films

Akron, OH

Textiles

Functional films

Coatings formulation

Adhesives formulation

Rubber formulation

Kingsport, TN

Martinsville, VA Thermoplastic conversion

Rubber formulation



Shanghai, China


Guangzhou, China


Animal nutrition


Middelburg,

The Netherlands

Ghent, Belgium


Dresden, Germany

Functional films

Differentiated


Canoga Park, CA

Palo Alto, CA

Functional films

Functional films

Springfield, MA

Functional films

Eastman innovation-driven growth model:

Embracing and converting market complexity into sustainable value

Thermoplastic

Conversion

Rubber

FormulationTextiles/

Nonwovens

Adhesives

FormulationCoatings

FormulationFunctional

Films

Animal

Nutrition

Differentiated


Relentlessly Engage

the Market

Transportation Consumables/

Textiles

Consumer/

Medical Durables

Animal

Nutrition/Crop

Protection

Building &

Construction

Modified

Polyesters

Cellulose

Esters/

AcetylsPVB

Hydrocarbon

Resins

Oxo

DerivativesAlkylamines

Insoluble

Sulfur



Integration as a source of value creation on multiple dimensions

Enables innovation

Security of supply highly valued by customers

Flexibility across product chain to optimize value and drive asset efficiency

Advantaged cost position to fund growth

Stabilizes earnings volatility

Delivers superior margins

Additives & Functional Products

Advanced Materials

Chemical Intermediates

Fibers




Advanced Materials


Fibers


Advanced Materials


Polyester stream

Coal/wood

pulp/olefins

Paraxylene/

olefins/

acetyls

Cellulose and

acetyl stream

Alkylamines

stream

Propane/

ethane Olefins stream

Methanol/

ammonia

Building world-class growth capabilities and culture

Significant resource mix shift in technology towards application development

Large investment in commercial and marketing capabilities

salesforce.com Customer Relationship Management platform

World-class product development and market activation process

Industry leaders in operational reliability

Capabilities

Culture

2012–20172014–2016 20172012–20172016–2017

Innovation-driven growth model has delivered impressive

growth at above corporate average margins

$0

$100

$200

$300

$400

2014 2015 2016 2017

NEW BUSINESS REVENUE

$M

0

10

20

30

Tritan Acoustic/HUD

interlayers

Paintprotective

films

Tire resins Plantgrowth

regulators

HIGH-GROWTH/HIGH-MARGIN

INNOVATION-DRIVEN GROWTH

(2012–2017 CAGR)

% V

olu

me

gro

wth

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

-

2,000

4,000

6,000

8,000

10,000

12,000 AM revenue

AFP revenue

CI revenue

Fibers revenue

EMN unit variable margin

-

1.00

2.00

3.00

4.00

5.00

CI AFP Fibers AM

Un

it v

ari

ab

le (

$/k

g)

Structural changes result in variable margin that is ~50% higher than 2010

Reve

nu

e

2017 SELLING PRICE

($/kg)MIX IMPROVEMENT

Accelerated earnings driven by mix upgrade through

innovation-driven organic growth and portfolio upgrade

Actively driving portfolio to be ~80% specialty through

innovation-driven organic growth and portfolio upgrade

2010 2017 Future state

AM AFP Fibers CI

~40%~70%

~80%

OPERATING EARNINGS BY SEGMENT

Strong value creation expected going forward

Core sales

revenue

growth in

line with end

markets

Specialty

products growing

>2x underlying

markets

23%

CORPORATE

EBITDA

MARGIN

and increasing

with improved

product mix

>$1

billionANNUAL

FREE CASH

FLOW

and growing

10%–15%

RETURN ON

INVESTED

CAPITAL

(ROIC)

creating value

above cost of

capital and

growing over

time

8%–12%

EPS CAGR2018–2020

innovation day 2018 - eastman chemical company

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