Eastman Chemical Company

02/13/2026 | Press release | Distributed by Public on 02/13/2026 10:59

Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Page
Critical Accounting Estimates
34
Non-GAAP Financial Measures
37
Overview
42
Results of Operations
42
Summary by Operating Segment
46
Sales by Customer Location
49
Liquidity and Other Financial Information
49
Inflation
52
Recently Issued Accounting Standards
52
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is based upon the consolidated financial statements of Eastman Chemical Company ("Eastman" or the "Company"), which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), and should be read in conjunction with the Company's consolidated financial statements and related notes, included in Part II, Item 8 of this Annual Report on Form 10-K (this "Annual Report"). All references to earnings per share ("EPS") contained in this report are to diluted EPS unless otherwise noted. EBIT is the GAAP measure earnings before interest and taxes. For a discussion of the year ended December 31, 2024, compared to the year ended December 31, 2023, please read "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of Eastman's Annual Report on Form 10-Kfor the year ended December 31, 2024.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CRITICAL ACCOUNTING ESTIMATES
In preparing the consolidated financial statements in conformity with GAAP, 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, fair value of disposal groups, and related disclosure of contingent assets and liabilities. On an ongoing basis, Eastman evaluates its estimates, including those related to impairment of long-lived assets, environmental costs, pension and other postretirement benefits, 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. Management believes the critical accounting estimates described below 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.
Impairment of Long-Lived Assets
Definite-lived Assets
Properties and equipment and definite-lived intangible assets to be held and used by Eastman are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of properties and equipment and the review of definite-lived intangible assets is performed at the asset group level, which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If the carrying amount is not considered to be recoverable, an analysis of potential impairment is triggered. An impairment is recognized for the excess of the carrying amount of the asset over the estimated fair value. The Company's assumptions to estimate cash flows in the evaluation of impairment related to long-lived assets are subject to change and impairments may be required in the future resulting in a charge to earnings.
Goodwill
Goodwill is an asset determined as the residual of the purchase price over the fair value of identified assets and liabilities
acquired in a business combination. Eastman conducts testing of goodwill for impairment annually in the fourth quarter or more frequently when events and circumstances indicate an impairment may have occurred. The testing of goodwill is performed at the "reporting unit" level which the Company has determined to be its "components". Components are defined as an operating segment or one level below an operating segment, and in order to be a reporting unit, the component must 1) be a "business" as defined by applicable accounting standards (an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to the investors or other owners, members, or participants); 2) have discrete financial information available; and 3) be reviewed regularly by Company operating segment management. The Company aggregates certain components into reporting units based on economic similarities.
An impairment is recognized when the reporting unit's estimated fair value is less than its carrying value. The Company elected to perform a qualitative impairment assessment of goodwill in 2025. The qualitative assessment identified three reporting units where a quantitative assessment was needed to confirm that goodwill was not impaired. For those reporting units, the Company used an income approach, specifically a discounted cash flow model, in testing the carrying value of goodwill for each reporting unit for impairment. Key assumptions and estimates used in the Company's 2025 goodwill impairment testing included projections of revenues and EBIT determined using the Company's annual multi-year strategic plan, the estimated weighted average cost of capital ("WACC"), and projected long-term growth rates. The Company believes these assumptions are consistent with those a hypothetical market participant would use given circumstances that were present at the time the estimates were made. However, actual results and amounts may be significantly different from the Company's estimates. In addition, the use of different estimates or assumptions could result in materially different estimated fair values of reporting units. The WACC is calculated incorporating weighted average returns on debt and equity from market participants. Therefore, changes in the market, which are beyond the control of the Company, may have an impact on future estimates of fair value.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company had $3.7 billion of goodwill as of December 31, 2025. As a result of the goodwill impairment testing performed during fourth quarter 2025, fair values were determined to significantly exceed the carrying values for each reporting unit tested with the exception of performance films (part of the Advanced Materials operating segment as described in Part I, Item 1, "Business", of this Annual Report). Two of the most critical assumptions used in the calculation of the fair value of the performance films reporting unit are the target market long-term growth rate and the WACC. The Company performed a sensitivity analysis of both of those assumptions, assuming a 50 basis point decrease in the expected long-term growth rate or a 50 basis point increase in the WACC, and both scenarios independently yielded an estimated fair value for the performance films reporting unit above the carrying value. As of December 31, 2025, goodwill allocated to the performance films reporting unit was $812 million. Declines in market conditions or forecasted revenue and EBIT could result in a future impairment of goodwill.
Indefinite-lived Intangible Assets
Indefinite-lived intangible assets, consisting primarily of tradenames, are tested for potential impairment by comparing the estimated fair value to the carrying amount. The Company elected to perform a quantitative impairment assessment of indefinite-lived intangible assets in fourth quarter 2025. The qualitative assessment did not identify indicators of impairment, and it was determined that it is more likely than not the fair value of indefinite-lived intangible assets was greater than their carrying value. When a quantitative impairment assessment is performed, the Company uses an income approach, specifically the relief from royalty method, to test indefinite-lived intangible assets for potential impairment. The estimated fair value of tradenames is determined based on projections of revenue and an assumed royalty rate savings, discounted by the calculated market participant WACC plus a risk premium. The Company had $351 million in indefinite-lived intangible assets at December 31, 2025. There were no impairments of the Company's indefinite-lived intangible assets as a result of the tests performed during fourth quarter 2025. Declines in market conditions or forecasted revenue could result in a future impairment of indefinite-lived intangible assets.
The Company will continue to monitor both goodwill and indefinite-lived intangible assets for any indication of events which might require additional testing before the next annual impairment test and could result in material impairment charges.
For additional information related to impairment of long-lived assets, see Note 1, "Significant Accounting Policies", Note 4, "Properties and Accumulated Depreciation", Note 5, "Goodwill and Other Intangible Assets", and Note 16, "Asset Impairments, Restructuring, and Other Charges, Net", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
Environmental Costs
Eastman recognizes environmental remediation costs when it is probable that the Company has incurred a liability at a contaminated site and the amount can be reasonably estimated. When a single amount cannot be reasonably estimated but the cost can be estimated within a range, the Company recognizes the minimum undiscounted amount. This undiscounted amount reflects liabilities expected to be paid within approximately 30 years and 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, and chemical control regulations and testing requirements could result in higher or lower costs. Estimated future environmental expenditures for undiscounted remediation costs ranged from $285 million to $509 million with a best estimate or minimum of $285 million at December 31, 2025. The best estimate or minimum estimated future environmental expenditures are considered to be probable and reasonably estimable and include the amounts recognized at December 31, 2025.
For additional information, see Note 13, "Environmental Matters and Asset Retirement Obligations", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Pension and Other Postretirement Benefits
Eastman maintains defined benefit pension and other postretirement benefit plans that provide eligible employees with retirement benefits. The estimated amounts of the costs and obligations related to these benefits primarily reflect the Company's assumptions related to discount rates and expected return on plan assets. For the Company's U.S. and non-U.S. defined benefit pension plans, the Company assumed weighted average discount rates of 5.26 percent and 4.81 percent, respectively, and weighted average expected returns on plan assets of 7.50 percent and 5.13 percent, respectively, at December 31, 2025. The Company assumed a weighted average discount rate of 5.13 percent for its other postretirement benefit plans at December 31, 2025. The estimated cost of providing plan benefits also depends on demographic assumptions including retirements, mortality, turnover, and plan participation.
The projected benefit obligation as of December 31, 2025 and expense for 2026 are affected by year-end 2025 assumptions. The following table illustrates the sensitivity to changes in the Company's long-term assumptions in the assumed discount rate and expected return on plan assets for all pension and other postretirement benefit plans. The sensitivities below are specific to the time periods noted. They also may not be additive, so the impact of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities shown.
Change in
Assumption
Impact on
2026 Pre-tax
Benefits Expense
(Excludes mark-to-market impact)
for Pension Plans
Impact on December 31, 2025 Projected Benefit Obligation for Pension Plans
Impact on 2026 Pre-tax Benefits Expense (Excludes mark-to-market impact) for Other Postretirement Benefit Plans
Impact on December 31, 2025 Benefit Obligation for Other Postretirement Benefit Plans
U.S. Non-U.S.
25 basis point
decrease in discount
rate 		$-2 Million $+26 Million $+20 Million
<-$0.5 Million
$+4 Million
25 basis point
increase in discount
rate 		$+1 Million $-26 Million $-18 Million
<+$0.5 Million
$-4 Million
25 basis point
decrease in expected return on plan assets 		$+5 Million No Impact No Impact <+$0.5 Million No Impact
25 basis point
increase in expected
return on plan assets 		$-5 Million No Impact No Impact <-$0.5 Million No Impact
The assumed discount rate and expected return on plan assets used to calculate the Company's pension and other postretirement benefit obligations are established each December 31. The assumed discount rate is based upon a portfolio of high-grade corporate bonds, which are used to develop a yield curve. This yield curve is applied to the expected cash flows of the pension and other postretirement benefit obligations. Because future health care benefits under the U.S. benefit plan have been fixed at a certain contribution amount, changes in the health care cost trend assumptions do not have a material impact on results of operations. The expected return on plan assets is based upon prior performance and the long-term expected returns in the markets in which the plans invest their funds, primarily in U.S. and non-U.S. fixed income securities, U.S. and non-U.S. public equity securities, private equity, and real estate. Moreover, the expected return on plan assets is a long-term assumption and on average is expected to approximate the actual return on plan assets. Actual returns will be subject to year-to-year variances and could vary materially from assumptions.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company calculates service and interest cost components of net periodic benefit costs for its significant defined benefit pension and other postretirement benefit plans by applying the specific spot rates along the yield curve to the plans' projected cash flows. This cost approach does not affect the measurement of the total benefit obligation or the annual net periodic benefit cost or credit of the plans because the change in the service and interest costs will be offset in the mark-to-market ("MTM") actuarial gain or loss. The MTM gain or loss, as described in the next paragraph, is typically recognized in the fourth quarter of each year or in any other quarters in which an interim remeasurement is triggered.
The Company uses fair value accounting for plan assets. If actual experience differs from actuarial assumptions, primarily discount rates and long-term assumptions for asset returns which were used in determining the current year expense, the difference is recognized as part of the MTM net gain or loss in fourth quarter each year, and any other quarter in which an interim remeasurement is triggered. See the calculation of the MTM pension and other post-retirement benefits (gain) loss table below in "NON-GAAP FINANCIAL MEASURES - Non-GAAP Financial Measures - Non-Core and Unusual Items Excluded from Earnings".
While changes in obligations do not correspond directly to cash funding requirements, it is an indication of the amount the Company will be required to contribute to the plans in future years. The amount and timing of such cash contributions is dependent upon interest rates, actual returns on plan assets, retirements, attrition rates of employees, and other factors.
For further information regarding pension and other postretirement benefit obligations, see Note 11, "Retirement Plans", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
Income Taxes
Amounts of deferred tax assets and liabilities on Eastman's Consolidated Statements of Financial Position are based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. The ability to realize deferred tax assets is evaluated through the forecasting of taxable income, using historical and projected future operating results, the reversal of existing temporary differences, and the availability of tax planning opportunities. Valuation allowances are recognized to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. In the event that the actual outcome of future tax consequences differs from management estimates and assumptions, the resulting change to the provision for income taxes could have a material impact on the consolidated results of operations and statements of financial position. As of December 31, 2025, valuation allowances of $731 million have been provided against certain deferred tax assets.
The calculation of income tax liabilities involves uncertainties in the application of complex tax laws and regulations, which are subject to legal interpretation and management judgment. Eastman's income tax returns are regularly examined by federal, state and foreign tax authorities, and those audits may result in proposed adjustments which could result in additional income tax liabilities and income tax expense. Income tax expense could be materially impacted to the extent the Company prevails in a tax position, when the statute of limitations expires for a tax position for which there is an established liability for unrecognized tax benefits, or to the extent payments are required in excess of the established liability for unrecognized tax benefits.
For further information, see Note 8, "Income Taxes", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
NON-GAAP FINANCIAL MEASURES
Non-GAAP financial measures, and the accompanying reconciliations of the non-GAAP financial measures to the most comparable GAAP measures, are presented below in this section and in "Overview", "Results of Operations", "Summary by Operating Segment", and "Liquidity and Other Financial Information - Cash Flows" in this MD&A.
Management discloses non-GAAP financial measures, and the related reconciliations to the most comparable GAAP financial measures, because it believes investors use these metrics in evaluating longer term period-over-period performance, and to allow investors to better understand and evaluate the information used by management to assess the Company's and its operating segments' performances, make resource allocation decisions, and evaluate organizational and individual performances in determining certain performance-based compensation. Non-GAAP financial measures do not have definitions under GAAP, and may be defined differently by, and not be comparable to, similarly titled measures used by other companies. As a result, management cautions investors not to place undue reliance on any non-GAAP financial measure, but to consider such measures alongside the most directly comparable GAAP financial measure.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Company Use of Non-GAAP Financial Measures
Non-Core Items and any Unusual or Non-Recurring Items Excluded from Non-GAAP Earnings
In addition to evaluating Eastman's financial condition, results of operations, liquidity, and cash flows as reported in accordance with GAAP, management evaluates Company and operating segment performance, and makes resource allocation and performance evaluation decisions, excluding the effect of transactions, costs, and losses or gains that do not directly result from Eastman's normal, or "core", business and operations, or are otherwise of an unusual or non-recurring nature.
Non-core, unusual, or non-recurring items include transactions, costs, and losses or gains relating to, among other things, cost reductions, growth and profitability improvement initiatives, changes in businesses and assets, and other events outside of the Company's core business operations, and have included asset impairments, restructuring, and other charges and gains; costs of and related to acquisitions; gains and losses from and costs related to dispositions, closures, or shutdowns of businesses or assets; financing transaction costs; environmental and other costs related to previously divested businesses, non-operational sites and product lines, and discontinued programs; mark-to-market losses or gains for pension and other postretirement benefit plans; the impact from significant tax law changes; and unusual or non-recurring income tax reserves or adjustments.
Because non-core, unusual, or non-recurring transactions, costs, and losses or gains may materially affect the Company's, or any particular operating segment's, financial condition or results in a specific period in which they are recognized, management believes it is appropriate to evaluate the financial measures prepared and calculated in accordance with both GAAP and the related non-GAAP financial measures excluding the effect on the Company's results of these non-core, unusual, or non-recurring items. In addition to using such measures to evaluate results in a specific period, management evaluates such non-GAAP measures, and believes that investors may also evaluate such measures, because such measures may provide more complete and consistent comparisons of the Company's, and its segments', operational performance on a period-over-period historical basis and, as a result, provide a better indication of expected future trends.
Non-GAAP Debt Measure
Eastman from time to time evaluates and discloses to investors and securities and credit analysts the non-GAAP debt measure "net debt", which management defines as total borrowings less cash and cash equivalents. Management believes this metric is useful to investors and securities and credit analysts to provide them with information similar to that used by management in evaluating the Company's overall financial position, liquidity, and leverage and because management believes investors, securities analysts, credit analysts and rating agencies, and lenders often use a similar measure to assess and compare companies' relative financial position and liquidity.
Non-GAAP Measures in this Annual Report
The following non-core items are excluded by management in its evaluation of certain earnings results in this Annual Report:
•Asset impairments, restructuring, and other charges, net;
•Cost of sales impact from restructuring activities;
•Mark-to-market pension and other postretirement benefit plans gains and losses resulting from the changes in discount rates and other actuarial assumptions and the difference between actual and expected returns on plan assets during the period; and
•Environmental and other costs from previously divested businesses, non-operational sites and product lines, and discontinued programs.
The following unusual items are excluded by management in its evaluation of certain earnings results in this Annual Report:
•Income tax related items.
As described above, the alternative non-GAAP measure of debt, "net debt", is also presented in this Annual Report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Non-GAAP Financial Measures - Non-Core and Unusual Items Excluded from Earnings
(Dollars in millions) 2025 2024
Non-core items impacting EBIT:
Cost of sales impact from restructuring activities $ 2 $ 7
Asset impairments, restructuring, and other charges, net
96 51
Mark-to-market pension and other postretirement benefits (gain) loss, net
(6) (54)
Environmental and other costs 62 16
Total non-core items impacting EBIT 154 20
Less: Items impacting provision for income taxes:
Tax effect for non-core items 34 1
Income tax related items
(33) (7)
Total items impacting provision for income taxes 1 (6)
Total items impacting net earnings attributable to Eastman $ 153 $ 26
Below is the calculation of the "Other components of post-employment (benefit) cost, net" that are not included in the above non-core item "mark-to-market pension and other postretirement benefits loss (gain), net" and that are included in the non-GAAP results.
(Dollars in millions) 2025 2024
Other components of post-employment (benefit) cost, net $ (25) $ (72)
Service cost 26 30
Net periodic benefit (credit) cost 1 (42)
Less: Mark-to-market pension and other postretirement benefits (gain) loss, net
(6) (54)
Components of post-employment (benefit) cost, net included in non-GAAP earnings measures $ 7 $ 12
Below is the calculation of the MTM pension and other post-retirement benefits (gain) loss disclosed above.
(Dollars in millions) 2025 2024
Actual return and percentage of return on assets $ 166 8 % $ 81 4 %
Less: expected return on assets 125 6 % 128 6 %
Mark-to-market gain (loss) on assets
41 (47)
Actuarial (loss) gain (1)
(35) 101
Total mark-to-market (loss) gain $ 6 $ 54
Global weighted-average assumed discount rate for year ended December 31: 5.12 % 5.33 %
(1)Actuarial (loss) gain resulted primarily from the change in discount rates from the prior year and changes in other actuarial assumptions.
For more detail about MTM pension and other postretirement benefit plans net gains and losses, including actual and expected return on plan assets and the components of the net gain or loss, see "Critical Accounting Estimates - Pension and Other Postretirement Benefits" above, and Note 11, "Retirement Plans", "Summary of Changes - Actuarial (gain) loss, Actual return on plan assets, and Reserve for third party contributions", and "Summary of Benefit Costs and Other Amounts Recognized in Other Comprehensive Income - Mark-to-market pension and other postretirement benefits (gain) loss, net" to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This MD&A includes the effect of the foregoing on the following GAAP financial measures:
•Gross profit,
•Other components of post-employment (benefit) cost, net,
•Other (income) charges, net,
•EBIT,
•Provision for income taxes,
•Net earnings attributable to Eastman,
•Diluted EPS, and
•Total borrowings.
Other Non-GAAP Financial Measures
Adjusted Tax Rate and Provision for Income Taxes
In interim periods, Eastman discloses non-GAAP earnings with an adjusted effective tax rate and a resulting adjusted provision for income taxes using the Company's forecasted tax rate for the full year as of the end of the interim period. The adjusted effective tax rate and resulting adjusted provision for income taxes are equal to the Company's projected full year effective tax rate and provision for income taxes on earnings excluding non-core, unusual, or non-recurring items for completed periods. The adjusted effective tax rate and resulting adjusted provision for income taxes may fluctuate during the year for changes in events and circumstances that change the Company's forecasted annual effective tax rate and resulting provision for income taxes excluding non-core, unusual, or non-recurring items. Management discloses this adjusted effective tax rate, and the related reconciliation to the GAAP effective tax rate, to provide investors more complete and consistent comparisons of the Company's operational performance on a period-over-period interim basis and on the same basis as management evaluates quarterly financial results to provide a better indication of expected full year results.
Alternative Non-GAAP Cash Flow Measures
In addition to the non-GAAP measures presented in this Annual Report and other periodic reports, management may occasionally evaluate and disclose to investors and securities analysts the non-GAAP measure cash provided by or used in operating activities excluding certain non-core, unusual, or non-recurring sources or uses of cash or including cash from or used by activities that are managed as part of core business operations ("adjusted cash provided by or used in operating activities") when analyzing, among other things, business performance, liquidity and financial position, and performance-based compensation. Management has used this non-GAAP measure in conjunction with the GAAP measure cash provided by or used in operating activities because it believes it is an appropriate metric to evaluate the cash flows from Eastman's core operations that are available for organic and inorganic growth initiatives and because it allows for a more consistent period-over-period presentation of such amounts. In its evaluation, management generally excludes the impact of certain non-core and unusual activities and decisions of management that it does not consider core, ongoing components of operations and the decisions to undertake or not to undertake such activities may be made irrespective of the cash generated from operations, and generally includes cash from or used in activities that are managed as operating activities and in business operating decisions. Management has disclosed this non-GAAP measure and the related reconciliation to investors, securities analysts, credit analysts and rating agencies, and lenders to allow them to better understand and evaluate the information used by management in its decision-making processes and because management believes investors and securities analysts use similar measures to assess Company performance, liquidity, and financial position over multiple periods and to compare these with other companies.
From time to time, Eastman may evaluate and disclose to investors and securities analysts an alternative non-GAAP measure of "free cash flow", which management defines as net cash provided by or used in operating activities less the amount of net capital expenditures (typically the GAAP measure additions to properties and equipment, net of government incentives). In addition, Eastman may disclose to investors and securities analysts an alternative non-GAAP measure of "free cash flow yield", which management defines as annual free cash flow divided by the Company's market capitalization, and "free cash flow conversion", which management defines as annual free cash flow divided by adjusted net income. Management believes these metrics can be useful to investors and securities analysts in comparing cash flow generation with that of peer and other companies.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Alternative Non-GAAP Earnings Measures
From time to time, Eastman may also disclose to investors and securities analysts the non-GAAP earnings measures "Adjusted EBIT Margin", "Adjusted EBITDA", "Adjusted EBITDA Margin", "Return on Invested Capital" (or "ROIC"), and "Adjusted ROIC". Management defines Adjusted EBIT Margin as the GAAP measure EBIT adjusted to exclude the same non-core, unusual, or non-recurring items as are excluded from the Company's other non-GAAP earnings measures for the same periods divided by the GAAP measure sales revenue in the Company's Consolidated Statement of Earnings, Comprehensive Income and Retained Earnings for the same periods. Adjusted EBITDA is EBITDA (net earnings before interest, taxes, depreciation and amortization) adjusted to exclude the same non-core, unusual, or non-recurring items as are excluded from the Company's other non-GAAP earnings measures for the same periods. Adjusted EBITDA Margin is Adjusted EBITDA divided by the GAAP measure sales revenue in the Company's Consolidated Statement of Earnings, Comprehensive Income and Retained Earnings for the same periods. Management defines ROIC as net earnings plus interest expense after tax divided by average total borrowings plus average stockholders' equity for the periods presented, each derived from the GAAP measures in the Company's financial statements for the periods presented. Adjusted ROIC is ROIC adjusted to exclude from net earnings the same non-core, unusual, or non-recurring items as are excluded from the Company's other non-GAAP earnings measures for the same periods. Management believes that Adjusted EBIT Margin, Adjusted EBITDA, Adjusted EBITDA Margin, ROIC, and Adjusted ROIC are useful as supplemental measures in evaluating the performance of and returns from Eastman's operating businesses, and from time to time uses such measures in internal performance calculations. Further, management understands that investors and securities analysts often use similar measures of Adjusted EBIT Margin, Adjusted EBITDA, Adjusted EBITDA Margin, ROIC, and Adjusted ROIC to compare the results, returns, and value of the Company with those of peer and other companies.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Eastman's products and operations are managed and reported in four operating segments: Advanced Materials ("AM"), Additives & Functional Products ("AFP"), Chemical Intermediates ("CI"), and Fibers. Eastman uses an innovation-driven growth model which consists of leveraging world class scalable technology platforms, delivering differentiated application development capabilities, and relentlessly engaging the market. The Company's world class technology platforms, scale advantage, and sustainability macrotrends form the foundation of the Company's research and development ("R&D") and innovation initiatives. Molecular recycling technologies continue to be an area of investment focus for the Company and extends the level of differentiation afforded by our world class technology platforms. Eastman began operating the world's largest polyester molecular recycling facility in 2024. Differentiated application development converts market complexity into opportunities for growth and accelerates innovation by enabling a deeper understanding of the value of Eastman's products and how they perform within customers' and end-user products. Key areas of application development include thermoplastic conversion, functional films, coatings formulations, textiles, and personal and home care formulations. The Company engages the market by working directly with customers and downstream users, targeting attractive markets, and leveraging disruptive macro trends. Management believes that these elements of the Company's innovation-driven growth model, combined with disciplined portfolio management and balanced capital deployment, will result in consistent, sustainable earnings growth and strong cash flow from operations.
Sales, EBIT, and EBIT excluding non-core items were as follows:
(Dollars in millions) 2025 2024
Sales $ 8,752 $ 9,382
Earnings before interest and taxes 776 1,278
Earnings before interest and taxes excluding non-core items
930 1,298
Sales revenue decreased in 2025 compared to 2024 due to lower sales volume primarily driven by acetate tow customer inventory destocking and industry capacity share adjustments as well as end-market weakness in most consumer discretionary end markets. EBIT excluding non-core items decreased in 2025 compared to 2024 primarily due to lower sales volume, lower selling prices and higher raw material and energy costs, and lower asset utilization. These factors were partially offset by cost reduction initiatives, lower manufacturing costs, and lower variable compensation costs.
Further discussion of sales revenue and EBIT changes is presented in "Results of Operations" and "Summary by Operating Segment" in this MD&A.
Net earnings and EPS and adjusted net earnings and EPS were as follows:
2025 2024
(Dollars in millions, except diluted EPS)
$
EPS
$
EPS
Net earnings attributable to Eastman $ 474 $ 4.10 $ 905 $ 7.67
Total non-core and unusual items, net of tax 153 1.32 26 0.22
Net earnings attributable to Eastman excluding non-core and unusual items $ 627 $ 5.42 $ 931 $ 7.89
The Company generated $970 million and $1.3 billion of cash from operating activities in 2025 and 2024, respectively.
RESULTS OF OPERATIONS
Eastman's results of operations as presented in the Company's consolidated financial statements in Part II, Item 8 of this Annual Report are summarized and analyzed below.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales
(Dollars in millions) 2025 2024 Change
Sales $ 8,752 $ 9,382 (7) %
Volume / product mix effect (6) %
Price effect (1) %
Exchange rate effect - %
Sales revenue decreased in 2025 compared to 2024 due to decreases across all operating segments except the AFP segment. Further discussion by operating segments is presented in "Summary of Operating Segment" in this MD&A.
Gross Profit
(Dollars in millions) 2025 2024 Change
Gross profit $ 1,844 $ 2,290 (19) %
Costs of sales impact from restructuring activities
2 7
Gross profit excluding non-core items $ 1,846 $ 2,297 (20) %
Gross profit in 2025 included inventory adjustments related to the decommissioning of certain assets at performance films facilities in North America. Gross profit in 2024 included inventory adjustments related to the closure of a solvent-based resins production line at an advanced interlayers facility in North America.
Excluding these non-core items, gross profit decreased in 2025 compared to 2024 due to lower sales volume and higher raw material and energy costs and lower selling prices. Further discussion of sales revenue and EBIT changes is presented in "Summary by Operating Segment" in this MD&A.
Selling, General and Administrative Expenses
(Dollars in millions) 2025 2024 Change
Selling, general and administrative expenses $ 658 $ 736 (11) %
Selling, general and administrative ("SG&A") expense decreased in 2025 compared to 2024 primarily as a result of cost reduction initiatives and lower variable compensation costs.
Research and Development Expenses
(Dollars in millions) 2025 2024 Change
Research and development expenses $ 255 $ 250 2 %
R&D expenses slightly increased in 2025 compared to 2024 primarily due to strategic investment in innovation.
Asset Impairments, Restructuring, and Other Charges, Net
(Dollars in millions) 2025 2024
Asset impairments
$ 33 $ 5
Severance charges
39 25
Restructuring and other charges
24 21
Total $ 96 $ 51
For detailed information regarding asset impairments, restructuring, and other charges, net see Note 16, "Asset Impairments, Restructuring, and Other Charges, Net", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other Components of Post-employment (Benefit) Cost, Net
(Dollars in millions) 2025 2024 Change
Other components of post-employment (benefit) cost, net $ (25) $ (72) (65) %
Mark-to-market pension and other postretirement benefit gain (loss), net
6 54
Other components of post-employment (benefit) cost, net excluding non-core item $ (19) $ (18) 6 %
For more information regarding "Other components of post-employment (benefit) cost, net" see Note 1, "Significant Accounting Policies", and Note 11, "Retirement Plans", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
Other (Income) Charges, Net
(Dollars in millions) 2025 2024
Foreign exchange transaction losses (gains), net $ 9 $ 11
(Income) loss from equity investments and other investment (gains) losses, net 1 -
Environmental and other costs
62 16
Other, net 12 20
Other (income) charges, net $ 84 $ 47
Environmental and other costs (62) (16)
Other (income) charges, net excluding non-core items $ 22 $ 31
Other (income) charges, net in 2025 and 2024 included environmental and other costs related to previously divested businesses, non-operational sites and product lines, and discontinued programs. Excluding these non-core items, Other (income) charges, net decreased in 2025 compared to 2024 primarily due to lower factoring fees and foreign exchange transaction losses. For more information regarding components of foreign exchange transaction losses, see Note 10, "Derivative and Non-Derivative Financial Instruments", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
Earnings Before Interest and Taxes
(Dollars in millions) 2025 2024 Change
EBIT $ 776 $ 1,278 (39) %
Cost of sales impact from restructuring activities
2 7
Asset impairments, restructuring, and other charges, net
96 51
Mark-to-market pension and other postretirement benefit (gain) loss, net
(6) (54)
Environmental and other costs 62 16
EBIT excluding non-core items $ 930 $ 1,298 (28) %
For more information regarding items that impact EBIT, see "Overview", and items described above in "Results of Operations".
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Interest Expense
(Dollars in millions) 2025 2024 Change
Gross interest expense $ 234 $ 233 - %
Less: Capitalized interest 15 17
Interest Expense 219 216
Less: Interest income 11 16
Net interest expense $ 208 $ 200 4 %
Net interest expense increased in 2025compared to 2024primarily as a result of lower interest income and lower capital expenditures.
Provision for Income Taxes
(Dollars in millions) 2025 2024
$ % $ %
Provision for income taxes and effective tax rate $ 93 16 % $ 170 16 %
Tax provision for non-core items (1)
34 1
Income tax related items (2)
(33) (7)
Adjusted provision for income taxes and effective tax rate $ 94 13 % $ 164 15 %
(1)Provision for income taxes for non-core items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
(2)Full year 2025 includes a benefit from releasing reserves related to prior tax law changes and charges related to the enactment of the One Big Beautiful Bill Act (the "Act") and unusual macroeconomic conditions impacting certain deferred tax assets in the U.S. Full year 2024 includes tax expense associated with a previously divested business.
Provision for income taxes and effective tax rate in 2025and 2024 included the tax effect of non-core items and other income tax related items. Excluding these items, adjusted provision for income taxes decreased in 2025compared to 2024primarily as a result of changes in unrecognized tax benefits and the tax effect of decreased adjusted earnings, partially offset by foreign tax effects due to the Company's mix of earnings and effects of cross border tax laws, net of credits.
For more information, see Note 8, "Income Taxes", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
Net Earnings Attributable to Eastman and Diluted Earnings per Share
2025 2024
(Dollars in millions, except per share amounts)
$
EPS
$
EPS
Net earnings and diluted earnings per share attributable to Eastman $ 474 $ 4.10 $ 905 $ 7.67
Non-core items, net of tax: (1)
Cost of sales impact from restructuring activities
1 0.01 5 0.04
Asset impairments, restructuring, and other charges, net
75 0.65 41 0.36
Mark-to-market pension and other postretirement benefit (gain) loss, net
(3) (0.03) (40) (0.34)
Environmental and other costs 47 0.41 13 0.10
Unusual items:
Income tax related items
33 0.28 7 0.06
Adjusted net earnings and diluted earnings per share attributable to Eastman $ 627 $ 5.42 $ 931 $ 7.89
(1)The provision for income taxes for non-core items is calculated using the tax rate for the jurisdiction where the gains are taxable and the expenses are deductible.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY BY OPERATING SEGMENT
Eastman's products and operations are managed and reported in four operating segments: Advanced Materials ("AM"), Additives & Functional Products ("AFP"), Chemical Intermediates ("CI"), and Fibers. For additional financial and product information for each operating segment, see "Business - Business Segments" in Part I, Item 1 of this Annual Report and Note 20, "Segment and Regional Sales Information", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
Advanced Materials Segment
Change
(Dollars in millions) 2025 2024 $ %
Sales $ 2,880 $ 3,050 $ (170) (6) %
Volume / product mix effect (137) (4) %
Price effect (36) (2) %
Exchange rate effect 3 - %
Earnings before interest and taxes
$ 319 $ 442 $ (123) (28) %
Cost of sales impact from restructuring activities
2 4 (2)
Asset impairments, restructuring, and other charges, net 28 18 10
Earnings before interest and taxes excluding non-core items
349 464 (115) (25) %
Sales revenue decreased in 2025 compared to 2024 primarily due to lower sales volume in the advanced interlayers and performance films product lines. Lower sales volume in the advanced interlayers product line was driven by weakness in the building and construction end market. Lower sales volume in the performance films product line was driven by weak consumer discretionary spending in the automotive end-market. Sales volume in the specialty plastics product line was relatively flat as growth from innovation offset a weak consumer durables end-market and impacts from tariff uncertainty.
EBIT in 2025 included inventory adjustments and asset impairments, restructuring, and other charges, net related to the decommissioning of certain assets at performance films facilities in North America and certain terminated capital projects within the performance films product line. EBIT in 2024 included inventory adjustments, and asset impairments, restructuring, and other charges, net related to the closure of a solvent-based resins production line. For more information regarding asset impairments, restructuring, and other charges, net, see Note 16, "Asset Impairments, Restructuring, and Other Charges, Net", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
Excluding these non-core items, EBIT decreased in 2025 compared to 2024 due to $116 million lower sales volume and $9 million higher raw material and energy costs and lower selling prices. This was partially offset by cost reduction initiatives and lower SG&A expenses.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Additives & Functional Products Segment
Change
(Dollars in millions) 2025 2024 $ %
Sales $ 2,880 $ 2,862 $ 18 1 %
Volume / product mix effect (82) (3) %
Price effect 82 3 %
Exchange rate effect 18 1 %
Earnings before interest and taxes
$ 512 $ 487 $ 25 5 %
Cost of sales impact from restructuring activities - 3 (3)
Asset impairments, restructuring, and other charges, net 4 - 4
Earnings before interest and taxes excluding non-core items
516 490 26 5 %
Sales revenue remained relatively unchanged in 2025 compared to 2024 primarily due to higher selling prices offset by lower sales volume. Higher selling prices were driven by cost-pass-through contracts. Lower sales volume in the building and construction and automotive end-markets were partially offset by growth in the water treatment, medical and pharma, and electronics end-markets.
EBIT in 2025 included asset impairments, restructuring, and other charges, net related to the closure of a heat-transfer fluids production line at a specialty fluids and energy facility in North America. EBIT in 2024 included inventory adjustments related to the closure of a solvent-based resins production line. For more information see Note 16, "Asset Impairments, Restructuring, and Other Charges, Net", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
Excluding these non-core items, EBIT increased in 2025 compared to 2024 due to lower SG&A expenses and lower operating costs, partially offset by $19 million lower sales volume.
Chemical Intermediates Segment
Change
(Dollars in millions) 2025 2024 $ %
Sales $ 1,925 $ 2,134 $ (209) (10) %
Volume / product mix effect (110) (5) %
Price effect (103) (5) %
Exchange rate effect 4 - %
Earnings (loss) before interest and taxes
$ (60) $ 101 $ (161) (159) %
Asset impairments and restructuring, and other charges, net
9 - 9
Environmental and other costs
13 - 13
Earnings (loss) before interest and taxes excluding non-core items
(38) 101 (139) (138) %
Sales revenue decreased in 2025 compared to 2024 due to lower sales volume, primarily in the building and construction and durables end markets, and lower selling prices primarily due to competitive pressure in Asia.
EBIT in 2025 included asset impairments, restructuring, and other charges, net related to the termination of certain capital projects and other costs related to the discontinuation of licensing programs in the Asia Pacific region. For more information see Note 16, "Asset Impairments, Restructuring, and Other Charges, Net", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
Excluding these non-core items, EBIT decreased in 2025 compared to 2024 primarily due to $121 million lower selling prices and higher raw material and energy costs and $27 million lower sales volume, partially offset by lower SG&A expenses.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fibers Segment
(Dollars in millions) Change
2025 2024 $ %
Sales $ 1,050 $ 1,318 $ (268) (20) %
Volume / product mix effect (256) (19) %
Price effect (10) (1) %
Exchange rate effect (2) - %
Earnings before interest and taxes $ 283 $ 454 $ (171) (38) %
Asset impairments, restructuring, and other charges, net
2 - 2
Earnings before interest and taxes excluding non-core item 285 454 (169) (37) %
Sales revenue decreased in 2025 compared to 2024 primarily due to lower sales volume in the acetate tow product line attributed to customer inventory destocking and industry capacity share adjustments, and lower textiles sales volume into Europe and Asia due to impacts of tariffs on demand.
EBIT in 2025 included asset impairments, restructuring, and other charges, net due to a loss on sale related to the 2022 closure of an acetate yarn manufacturing facility in Europe. For more information see Note 16, "Asset Impairments, Restructuring, and Other Charges, Net", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
Excluding this non-core item, EBIT decreased in 2025 compared to 2024 primarily due to $129 million lower sales volume and $51 million higher raw material and energy costs and lower selling prices. These higher costs were partially offset by lower SG&A expenses.
Other
(Dollars in millions) 2025 2024
Sales $ 17 $ 18
Loss before interest and taxes
Growth initiatives and businesses not allocated to operating segments $ (178) $ (208)
Asset impairments, restructuring, and other charges, net
(53) (33)
Pension and other postretirement benefit plans income (expense), net not allocated to operating segments 14 62
Other income (charges), net not allocated to operating segments (61) (27)
Loss before interest and taxes $ (278) $ (206)
Asset impairments, restructuring, and other charges, net
53 33
Mark-to-market pension and other postretirement benefits (gain) loss, net
(6) (54)
Environmental and other costs 49 16
Loss before interest and taxes excluding non-core items (182) (211)
Sales and costs related to growth initiatives, including the cellulosic biopolymer and circular economy platforms, R&D costs, certain components of pension and other postretirement benefits, and other expenses and income not identifiable to an operating segment are included in "Other".
Loss before interest and taxes in 2025 and 2024 included severance charges related to corporate cost reduction initiatives; environmental and other costs related to previously divested businesses, non-operational sites and product lines, discontinued programs, and profitability improvement initiatives. For more information regarding Non-GAAP items, see "Non-GAAP Financial Measures" in this MD&A. For more information regarding asset impairments, restructuring, and other charges, net, see Note 16, "Asset Impairments, Restructuring, and Other Charges, Net", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SALES BY CUSTOMER LOCATION
Sales Revenue
Change
(Dollars in millions) 2025 2024 $ %
United States and Canada $ 3,818 $ 3,937 $ (119) (3) %
Europe, Middle East, and Africa 2,304 2,571 (267) (10) %
Asia Pacific 2,137 2,363 (226) (10) %
Latin America 493 511 (18) (4) %
Total $ 8,752 $ 9,382 $ (630) (7) %
Sales revenue decreased 7 percent in 2025 compared to 2024. Lower sales revenue was due to lower sales volume and unfavorable product mix across all regions and operating segments, as well as lower selling prices in the Asia Pacific region.
See Note 20, "Segment and Regional Sales Information", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report for segment sales revenues by customer location.
LIQUIDITY AND OTHER FINANCIAL INFORMATION
Cash Flows
The Company had cash and cash equivalents as follows:
(Dollars in millions) December 31,
2025 2024
Cash and cash equivalents $ 566 $ 837
Cash flows from operations, cash and cash equivalents, and other sources of liquidity are expected to be available and sufficient to meet known short and long-term cash 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 "Risk Factors" in Part I, Item 1A of this Annual Report. Management believes maintaining a financial profile that supports a solid investment grade credit rating is important to its long-term strategy and financial flexibility.
For years ended December 31,
(Dollars in millions) 2025 2024
Net cash provided by (used in):
Operating activities $ 970 $ 1,287
Investing activities (462) (534)
Financing activities (797) (454)
Effect of exchange rate changes on cash and cash equivalents 18 (10)
Net change in cash and cash equivalents (271) 289
Cash and cash equivalents at beginning of period 837 548
Cash and cash equivalents at end of period $ 566 $ 837
Cash provided by operating activities decreased $317 million primarily due to lower net earnings and higher variable compensation payout partially offset by lower working capital driven by inventory consumption in 2025 compared to build in 2024.
Cash used in investing activities decreased $72 million due to lower capital expenditure primarily for methanolysis plastic-to-plastic molecular recycling manufacturing facilities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cash used in financing activities increased $343 million primarily due to lower proceeds from borrowings partially offset by lower repayment of borrowings and lower stock repurchases. For additional information, see "Liquidity and Other Financial Information - Debt and Other Commitments" in this MD&A.
Working Capital Management
Eastman applies a proactive and disciplined approach to working capital management to optimize cash flow and to enable a full range of capital allocation options in support of the Company's strategy. Eastman expects to continue utilizing the programs described below to support operating cash flow consistent with the Company's past practices.
The Company engages in off-balance sheet, uncommitted accounts receivable factoring programs as a routine part of its ordinary business operations. Through these programs, entire invoices may be sold to third-party financial institutions, the vast majority of which are without recourse. Under these agreements, the Company sells the invoices at face value, less a transaction fee, which substantially equals the carrying value and fair value with no gain or loss recognized, and no credit loss exposure is retained. Available capacity under these programs, which the Company uses as a routine source of working capital funding, is dependent on the level of accounts receivable eligible to be sold and the financial institutions' willingness to purchase such receivables. The total amounts sold in both 2025 and 2024 were $2.7 billion. Based on the original terms of receivables sold for certain programs and actual outstanding balance of receivables under servicing agreements, the Company estimates that $346 million and $385 million of these receivables would have been outstanding as of December 31, 2025 and 2024, respectively, had they not been sold under these factoring programs.
Eastman works with suppliers to optimize payment terms and conditions on accounts payable to enhance timing of working
capital and cash flows. The Company has a voluntary supplier finance program to provide suppliers with the opportunity to sell receivables due from Eastman to a participating financial institution. The Company also maintains a structured payables program that utilizes a payables processing arrangement with a financial institution to support the processing and settlement of freight and logistics invoices. See Note 1, "Significant Accounting Policies", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report for additional information regarding both programs.
Debt and Other Commitments
Eastman has debt and other commitments for debt securities, credit facilities, interest payable, purchase obligations, operating leases, and other liabilities. A summary of the Company's debt and other commitment obligations as of December 31, 2025 for each of the next five years and beyond is included in Note 12, "Leases and Other Commitments", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
At December 31, 2025, Eastman's borrowings totaled $4.8 billion with various maturities. Estimated future payments of debt securities assumes the repayment of principal upon stated maturity, and actual amounts and the timing of such payments may differ materially due to repayment or other changes in the terms of such debt prior to maturity. See Note 9, "Borrowings", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report, for more information regarding total borrowings and related activity.
Amounts in other liabilities represent the current estimated cash payments required to be made by the Company primarily for pension and other postretirement benefits, accrued compensation benefits, environmental loss contingency estimates, uncertain tax liabilities, and commodity and foreign exchange hedging in the periods indicated. Due to uncertainties in the timing of the effective settlement of tax positions with taxing authorities, management is unable to determine the timing of payments related to uncertain tax liabilities and these amounts are included in the "2031 and beyond" line item.
The amount and timing of pension and other postretirement benefit payments included in other liabilities is dependent upon interest rates, health care cost 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. Excess contributions are periodically made by management in order to keep the plans' funded status above 80 percent under the funding provisions of the Pension Protection Act to avoid partial benefit restrictions on accelerated forms of payment. The Company's U.S. defined benefit pension plans are not currently under any benefit restrictions. See Note 11, "Retirement Plans", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report, for more information regarding pension and other postretirement benefit obligations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The resolution of uncertainties related to environmental matters included in other liabilities may have a material adverse effect on the Company's consolidated results of operations in the period recognized, however, because of the availability of legal defenses, the Company's preliminary assessment of actions that may be required, and, if applicable, the expected sharing of costs, 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. See "Environmental Costs" in Note 1, "Significant Accounting Policies", and Note 13, "Environmental Matters and Asset Retirement Obligations", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report for more information regarding outstanding environmental matters and asset retirement obligations.
Credit Facility, Term Loans, and Commercial Paper Borrowings
The Company has access to a $1.50 billion revolving credit agreement (the "Credit Facility") in which borrowings under the Credit Facility are subject to interest at varying spreads above quoted market rates and a commitment fee is paid on the total unused commitment. In December 2025, the Credit Facility was amended to remove the sustainability-linked pricing terms from the agreement. In February 2026, the Credit Facility was amended and restated to extend the maturity to February 2031 and to temporarily adjust the maximum leverage ratio covenant through the fiscal quarter ending June 30, 2027 in the event of further macroeconomic uncertainty impacting operating results. All other material terms of the Credit Facility remains unchanged.The Credit Facility provides available liquidity for general corporate purposes, and supports commercial paper borrowings. At December 31, 2025, the Company had no outstanding borrowings under the Credit Facility and no commercial paper borrowings.
In 2025, the Company repaid $100 million of the remaining $250 million five-year term loan (the "2027 Term Loan"). There were no extinguishment costs associated with the partial repayment of the 2027 Term Loan. The outstanding balance on the 2027 Term Loan was $150 million at December 31, 2025 and $250 million at December 31, 2024, with variable interest rates of 5.14% and 5.58%, respectively. The 2027 Term Loan is subject to interest at a spread above quoted market rates.
The Credit Facility and the 2027 Term Loan contain customary covenants, including requirements to maintain certain financial ratios, that determine the events of default, amounts available, and terms of borrowings. The Company was in compliance with all applicable covenants at December 31, 2025. The total amount of available borrowings under the Credit Facility was $1.50 billion as of December 31, 2025. For additional information regarding financial covenants under the Credit Facility, see Section 5.03 of the Credit Facility filed as Exhibit 10.01 to the Company's 2025 Annual Report on Form 10-K.
See Note 9, "Borrowings", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
Net Debt
December 31, December 31,
(Dollars in millions) 2025 2024
Total borrowings $ 4,787 $ 5,017
Less: Cash and cash equivalents 566 837
Net debt(1)
$ 4,221 $ 4,180
(1)Includes non-cash increase of $68 million in 2025 and non-cash decrease of $32 million in 2024 resulting from foreign currency exchange rates.
Capital Expenditures
Capital expenditures were $546 million and $599 million in 2025 and 2024, respectively. Capital expenditures in 2025 were primarily for the methanolysis plastic-to-plastic molecular recycling manufacturing facilities, other targeted growth initiatives, and site modernization projects.
The Company expects that 2026 capital spending will be approximately $400 million, primarily for maintenance capital and limited growth capital for projects already in progress.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company had capital expenditures related to environmental protection and improvement of approximately $80 million and $70 million in 2025 and 2024, respectively. The Company does not currently expect near term environmental capital expenditures arising from requirements of environmental laws and regulations to materially impact the Company's planned level of annual capital expenditures for environmental control facilities.
Dividends and Stock Repurchases
In December 2021, the Company's Board of Directors authorized the repurchase of up to $2.5 billion of the Company's outstanding common stock at such times, in such amounts, and on such terms, as determined by management to be in the best interest of the Company and its stockholders (the "2021 authorization"). As of December 31, 2025, a total of 13,032,926 shares have been repurchased under the 2021 authorization for $1.2 billion.
During 2025, the Company repurchased 1,420,768 shares of common stock for $100 million. During 2024, the Company repurchased 3,001,409 shares of common stock for $300 million.
The Board of Directors has declared a cash dividend of $0.84 per share during the first quarter of 2026, payable on April 8, 2026 to stockholders of record on March 13, 2026. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders.
INFLATION
In recent years, Eastman has experienced significant volatility attributed to inflation, deflation, and other factors. The cost of raw materials is generally based on market prices, although derivative instruments are utilized, as appropriate, to mitigate short-term market price fluctuations. Management expects the volatility of raw material and energy prices and costs to continue and the Company will continue to pursue pricing and hedging strategies and ongoing cost control initiatives to offset the effects. For additional information, see "Risk Factors" in Part I, Item 1A, "Summary by Operating Segments" in this MD&A, and Note 10, "Derivative and Non-Derivative Financial Instruments", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
RECENTLY ISSUED ACCOUNTING STANDARDS
For information regarding the impact of recently issued accounting standards, see Note 1, "Significant Accounting Policies", to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report.
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