Eastman Details Strong Free Cash Flow, Solid Balance Sheet and Significant Sources of Liquidity

The company highlighted the strength of Eastman's cash flow, balance sheet, and sources of liquidity.

"We remain confident that Eastman is well positioned financially thanks to the resilience of our cash flow, our solid balance sheet, and our significant sources of liquidity," said Board Chair and Chief Executive Officer Mark Costa. "While we continue to assess the impact of COVID-19, we are focusing on cash generation by taking aggressive actions on what we can control in working capital and cost management. In this environment, we remain committed to maintaining our disciplined approach to capital allocation with a focus on funding our dividend and meaningful debt reduction."

With a strong start to the year in January and resilience in February and early March, first-quarter 2020 earnings per share is expected to be above the prior year period, higher than previous expectations. Additionally, free cash flow (cash from operations less net capital expenditures) is expected to be approximately break-even in the first quarter, which is well above typical first-quarter free cash flow in prior years.

The company is also taking additional actions to further support free cash flow in 2020, including reducing capital expenditures to between $325 and $375 million from the previous expectation of between $450 and $475 million. In addition, working capital is expected to be a source of more than $250 million of cash flow beyond previous expectations for full-year 2020, assuming raw material prices remain similar to current levels and that COVID-19 negatively impacts demand. Also, we are aggressively managing all of our costs in this environment.

Eastman's balance sheet remains solid with no long-term debt maturities in 2020 and a manageable amount of debt due in 2021. Eastman expects to reduce debt by greater than $400 million in 2020, reducing net debt (total borrowing less cash and cash equivalents) by retiring certain existing borrowings.

Significant and multiple liquidity sources are an important part of Eastman's financial strength, including a $1.5 billion revolving credit facility. In the current environment, in an abundance of caution, the company plans to access $400 million of available borrowings under the revolving credit facility and is exploring additional liquidity sources as needed. At the beginning of the second quarter, the company expects to have greater than $600 million of cash and cash equivalents and remains committed to maintaining a solid investment-grade credit rating.

"I want to thank the Eastman team for their many extraordinary efforts to keep our company moving forward in this difficult time," continued Costa. "Eastman materials are essential to a variety of markets such as healthcare, consumables and feeding the world, and I'm grateful to the men and women of Eastman for their commitment to our customers and to the millions of people who depend upon our products."