Attached files
| file | filename |
|---|---|
| EX-99.4 - EX-99.4 - EASTMAN CHEMICAL CO | d290397dex994.htm |
| 8-K - FORM 8-K - EASTMAN CHEMICAL CO | d290397d8k.htm |
| EX-99.7 - EX-99.7 - EASTMAN CHEMICAL CO | d290397dex997.htm |
| EX-99.1 - EX-99.1 - EASTMAN CHEMICAL CO | d290397dex991.htm |
| EX-99.3 - EX-99.3 - EASTMAN CHEMICAL CO | d290397dex993.htm |
| EX-99.5 - EX-99.5 - EASTMAN CHEMICAL CO | d290397dex995.htm |
| EX-99.6 - EX-99.6 - EASTMAN CHEMICAL CO | d290397dex996.htm |
 Eastman’s Acquisition of Solutia:
Strengthening a Top-Tier Specialty
Chemical Company
January 27, 2012
Exhibit 99.2 |
 Forward-Looking Statements
This communication includes forward-looking statements subject to the safe
harbor provisions of the federal securities laws. Forward-looking
statements include, but are not limited to, statements regarding Eastman’s current expectations regarding
the timing of completion of the proposed acquisition, the expected benefits of the
proposed acquisition, integration plans and expected synergies therefrom,
and Eastman’s anticipated future financial and operating performance and results, including
estimates for general economic conditions and growth. 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 conditions, 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 (“SEC”),
including
the
Quarterly
Report
on
Form
10-Q
for
the
quarter
ended
September
30,
2011
that
has
been
filed
with
the
SEC,
as
well as the Annual Report on Form 10-K for the fiscal year ended December 31,
2011 and the proxy statement/prospectus that will be included in the
Registration Statement on Form S-4 that Eastman will file with the SEC in connection with the
proposed
acquisition.
Filings
made
by
Eastman
are
available
when
filed
with
the
SEC,
on
the
Eastman
web
site
at
www.eastman.com in the Investors, SEC Information section.
Additional Information and Where to Find it
Eastman will file with the SEC a registration statement on Form S-4 that will
include a proxy statement of Solutia and a prospectus of Eastman relating to
Eastman’s proposed acquisition of Solutia. WE URGE INVESTORS AND SECURITY
HOLDERS TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS AND ANY
OTHER RELEVANT
DOCUMENTS
WHEN
THEY
BECOME
AVAILABLE,
BECAUSE
THEY
WILL
CONTAIN
IMPORTANT
INFORMATION about Eastman, Solutia, and the proposed acquisition. Investors and
security holders will be able to obtain these materials (when they are
available) and other documents filed with the SEC free of charge at the SEC’s website,
www.sec.gov. In addition, copies of the registration statement and proxy
statement/prospectus (when they become available) may be obtained free of
charge by accessing Eastman’s website at www.eastman.com by clicking on the
“Investors”
link
and
then
clicking
on
the
“SEC
Information”
link
or
by
writing
Eastman
at
P.O.
Box
431,
Kingsport,
Tennessee
37662, Attention: Investor Relations. Security holders may also read and copy any
reports, statements and other information filed by Eastman with the SEC, at
the SEC public reference room at 100 F Street, N.E., Washington D.C. 20549. Please call
the SEC at 1-800-SEC-0330 or visit the SEC’s website for further
information on its public reference room. 2 |
 3
Non-GAAP Financial Measures
Certain Eastman financial measures referenced in this presentation are non-GAAP
financial measures (earnings per share, operating earnings, and
cash-flow from operating activities) that exclude asset impairments and
restructuring charges and early debt extinguishment costs. A reconciliation to the most
directly comparable
GAAP
financial
measures
and
other
associated
disclosures,
including
a
description
of
the
asset impairments and restructuring charges and early debt extinguishment costs are
available in our fourth- quarter and full-year financial results news
release and the tables accompanying the news release available at
www.investors.eastman.com.
Participants in the Solicitation
Eastman, Solutia, and certain of their respective directors, executive officers and
other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed acquisition. Information regarding
Eastman’s directors and executive officers is available in Eastman’s proxy statement filed with
the SEC on March 24, 2011 in connection with its 2011 annual meeting of
stockholders, and information regarding Solutia’s directors and
executive officers is available in Solutia’s proxy statement filed with the
SEC on March 4, 2011 in connection with its 2011 annual meeting of stockholders.
Other information regarding persons who may be deemed participants in the
proxy solicitation and a description of their direct and indirect interests,
by security holdings or otherwise, will be contained in the registration statement and
proxy statement/prospectus and other relevant materials to be filed with the SEC
when they become available.
Non-Solicitation
This communication does not constitute an offer to sell or the solicitation of an
offer to buy any securities, nor
shall
there
be
any
sale
of
securities
in
any
jurisdiction
in
which
such
offer,
solicitation,
or
sale
would be
unlawful prior to registration or qualification under the securities laws of any
such jurisdiction. |
 Agenda
Review of 4Q / FY 2011 Eastman results
Transaction overview
Strategic rationale
Solutia overview and strategic fit
Financial summary and EPS forecast update
Summary
4 |
 4Q11
financial results – Corporate
($ in millions, except EPS)
4Q11
4Q10
Change
Sales revenue
$1,723
$1,463
18 %
Volume effect
5 %
Price effect
11 %
Product mix effect
2 %
Exchange rate effect
--
%
Operating earnings
$163
$187
EPS from continuing operations
$0.71
$0.70
Sales revenue increased due to:
•
Selling prices
11%
•
Sales volume
5%
Operating earnings declined primarily in the Specialty Plastics and PCI
segments 5
5
in response to higher raw material and energy costs
primarily in PCI |
 Full-year 2011 financial results –
Corporate
6
($ in millions, except EPS)
FY11
FY10
Change
Sales revenue
$7,178
$5,842
23 %
Volume effect
7 %
Price effect
14 %
Product mix effect
2 %
Exchange rate effect
--
%
Operating earnings
$1,013
$891
EPS from continuing operations
$4.56
$3.48
Sales revenue increased due to:
•
Selling prices
14%
•
Sales volume
7%
of a previously idled olefins cracking unit, and strengthened end-use demand
primarily for CASPI segment products
in response to higher raw material and energy costs
primarily due to growth in PCI plasticizer product lines, the restart
Operating earnings increased primarily due to higher selling prices more than
offsetting higher raw material and energy costs and higher sales
volume |
 Eastman to acquire Solutia
Transaction overview
7
Purchase
price and
transaction
value
Each Solutia share exchanged for $22.00 in cash and 0.12 share of Eastman
stock ~80% cash and ~20% stock consideration
$4.7 billion Total Enterprise Value
•
Includes
$3.4
billion
equity
value
plus
net
assumed
Solutia
debt
of
$1.3 billion
Value of $27.65 for each Solutia share
•
42% premium to the January 26, 2012 closing price of Solutia’s common
stock 9.0
times
2011
EBITDA
(1)
Financial
impact
Expected to be immediately accretive to Eastman earnings, excluding
acquisition-related costs and charges
Cost synergies of approximately $100 million identified and expected to be
achieved by year-end 2013
Significant tax benefit from utilization of Solutia NOLs
Eastman
free
cash
flow
(2)
over
next
2
years
expected
to
be
~$1
billion
Attractive return on capital
Closing
conditions
Solutia stockholder approval
Receipt of regulatory approvals
Other customary closing conditions
Timing
Closing expected in mid-2012
(1)
Solutia EBITDA defined as net income attributable to Solutia plus loss from
discontinued operations, income tax expense, interest expense, loss on debt extinguishment
or modification, depreciation and amortization, events affecting comparability,
non-cash share-based compensation expense and Primary Accelerators and Nylon
cost overhang all as reported by Solutia.
(2) Free cash flow defined as expected cash from operations minus expected
capital expenditures and dividends. |
 Eastman’s strategic focus
Solutia acquisition consistent with all criteria
8
Growing core businesses
Bias toward emerging markets
Focus on sustainable businesses
Use JVA to execute our strategy
•
Complementary and adjacent key end markets (auto, architectural,
etc.)
•
Combination of technology and business capabilities drive significant
opportunities
•
~25% of Eastman pro forma 2011 revenue was in Asia Pacific (>$2 billion)
•
Leverages trend of growing middle class buying premium products
•
Building more manufacturing capacity in Asia Pacific to meet growth
•
Focus includes renewable resources and product safety
•
Expands
portfolio
of
sustainable
products
(energy
efficiency
and
safety) |
 Solutia: Global leader in Specialty
Chemicals and Performance Materials
9
Headquartered in St. Louis, MO
3,400 employees
24 manufacturing
facilities,
>30 technical centers and sales
offices worldwide
Operates three business
segments:
•
Advanced Interlayers
Market leader in Saflex™
•
Performance Films
Market leader in Llumar™
•
Technical Specialties
Market leader in Crystex™
NYSE: SOA
2011 revenue of $2.1 billion and
EBITDA of $0.5 billion
Attractive 2011 EBITDA margin of
~25%
(1) Source: Solutia public filings and December 2011 Investor Day presentation
|
 10
Solutia
Eastman
Exited Commodity and
Non-Core Businesses
Key Investments in
High Margin, Specialty
Focused Businesses
2001
2012
Beaumont, TX
Gasification
Project
CASPI Under-
performing
Lines
Polyethylene
PET
Nylon
Acrylic Fibers
Feed
Ingredients
Pharma
Dequest
UK & Korea
Filter Tow
Expansion
Hercules
Adhesives
Sterling
Chemicals
Genovique
Specialties
Southwall
Flexsys
EVA / Solar
Saflex
Expansion
Suzhou &
Kuantan
Investments
Strategic Improvement
Tritan™
Copolyester
Expansion
Strategic
actions
improved
portfolios
Market-
leading,
competitive
positions in
key products
Focus on
superior
financial
performance
Combining two strong companies |
 Solutia acquisition accelerates
Eastman’s growth investment in
Asia Pacific
11
Source: Eastman and Solutia
Growing Presence in Asia-Pacific
% of Total Revenue
Eastman Asia Pacific revenue expected to grow from ~$1.7 billion
in 2011 to
>$3 billion in 2015 and higher than corporate EBITDA margins
Eastman Site
Solutia Site
19%
23%
28%
2008
2011
2015E post acquisition |
 Eastman pro forma 2011
revenue by geography
Geographic diversity remains a source of strength
12
Solutia
Eastman pro forma
Eastman
Solutia 2011 revenue:
$2 billion
Eastman 2011 revenue:
$7 billion
Eastman pro forma 2011
revenue: $9 billion
2011 revenue by geography
Source: Eastman public filings and Solutia’s December 2011
Investor Day presentation |
 Eastman pro forma 2011 revenue
by end-market
End-market diversity remains a source of strength
13
Solutia
Eastman pro forma
Eastman
Solutia 2011 revenue:
$2 billion
Eastman 2011 revenue:
$7 billion
Eastman pro forma 2011 revenue:
$9 billion
2011 revenue by end-market
Source: Eastman public filings and Solutia’s December 2011
Investor Day presentation |
 $6,000
$7,000
$8,000
$9,000
EBITDA
2011E EBITDA Margin
Top-tier Specialty Chemical Company
14
Source: IBES consensus estimates, for all other than Eastman, Solutia, and
Pro Forma; Eastman and Solutia from public filings Mean
peer
Margin
17.1%
2011 EBITDA and EBITDA Margins
2011 Eastman pro forma EBITDA $1.8 billion with ~20% EBITDA margin
$0
$500
$1,000
$1,500
$2,000
$2,500
5%
10%
15%
20%
25%
30%
EBITDA
EBITDA Margin |
 Attractive capital structure
Benefits from low cost interest environment
15
Expect new debt financing will be composed of low-interest term loan and public
debt Bridge facility financing commitments in place from Citi and
Barclays Eastman pro forma Debt / EBITDA ratio expected at closing of
~2.8 Eastman pro forma expected to generate ~$1 billion of free cash flow
over next two years •
Expected cash flows and synergies to allow Eastman to delever quickly
Revolving facility of $750 million to remain undrawn at closing
Committed to maintaining current annual dividend rate of $1.04 per share
Eastman is committed to maintaining an investment grade credit rating
Cash from Solutia and Eastman
$ 600
New debt financing
$3,500
Eastman equity issued to Solutia stockholders
$ 700
$ in millions |
 16
Achievable cost and tax synergies as
well as potential revenue opportunities
Track record from previous acquisitions and divestitures
gives us confidence in ability to realize synergies
~$100 million identified
•
Reduction of corporate
costs
•
Raw material and
procurement savings
•
Improved manufacturing
and supply chain
processes
Leveraging
technology from
both companies
Leveraging
complementary
business
capabilities
Leveraging key end-
market overlap
Cost synergies
Tax synergies
Revenue synergies
~$1.5 billion of NOL benefits
Eastman expects to utilize
over next 15 years, half in
next 3 years
~$150 million Foreign Tax
Credits that Eastman expects
to utilize over next 10 years
Geographic profile and entity
structure expected to enable
Eastman to reduce effective
tax rate |
 Clear
path to completion Solutia stockholder approval
Receipt of necessary regulatory approvals
Completion of standard and customary closing
conditions
•
No financing contingency
•
Termination fee of $102 million
17
Expected to close by mid-2012 |
 Acquisition expected to result in
strong 2013 EPS growth
Note: earnings per share estimates exclude acquisition related costs and
charges 2011
$/share
$4.56
~$5.00
>$6.00
2011
18
2012E
2013E |
 Eastman + Solutia = A compelling value
Complementary and adjacent key end-markets
Combination of technology and business capabilities
drive significant opportunities
Expands presence in emerging markets, particularly
Asia Pacific
Clearly defined, executable cost and tax synergies
Committed to investment grade credit rating
Attractive return on capital
Expect significant EPS accretion
19 |
 Appendix |
 4
th
-Quarter
and
Full-Year
2011 Financial Results |
 2011
accomplishments 22
Second consecutive year of increased earnings per share and
operating earnings for Eastman and for each of the four businesses
Sales revenue increased 23%
Continued progress on growth initiatives
•
Acquired Sterling Chemicals, Scandiflex, and Dynaloy
•
Completed
capacity
expansions
for
Regalite
TM
adhesives
and
first
phase of CHDM monomer for copolyesters
•
Broke ground on acetate tow joint venture with China National Tobacco
Corporation
Free cash flow $142 million
Returned cash to stockholders with dividend increases and share
repurchases
Note: Free cash flow is defined as cash from operations less capital
expenditures and dividends, excluding the tax payment for the gain on the
sale of the PET business completed first quarter 2011.
|
 Update on 2011 outlook statements
23
4Q11 EPS expected to be higher than 4Q10 EPS of $0.70
Full-year 2011 EPS expected to be approximately $4.62
Expect
2011
free
cash
flow
to
be
between
$175
-
$200
million
Expect to make 2-3 acquisitions in 2011
Allocation of capital will continue to be disciplined
23 |
 Financial results –
CASPI
($ in millions)
4Q11
4Q10
Change
FY11
FY10
Change
Sales revenue
$425
$379
12 %
$1,844
$1,574
17 %
Volume effect
3 %
5 %
Price effect
10 %
13 %
Product mix effect
--
%
(1 %)
Exchange rate effect
(1 %)
--
%
Operating earnings
$52
$53
$331
$299
4Q11 operating earnings relatively flat
FY11 operating earnings increased primarily due to higher selling prices, higher
sales volume, and the benefits from cracking propane, which more than
offset higher raw material and energy costs
Expect
2012
operating
earnings
to
be
approximately
$350
million
1
1
Does not include projected results from Solutia businesses
24 |
 Financial results –
Fibers
($ in millions)
4Q11
4Q10
Change
FY11
FY10
Change
Sales revenue
$324
$300
8 %
$1,279
$1,142
12 %
Volume effect
1 %
3 %
Price effect
5 %
4 %
Product mix effect
2 %
5 %
Exchange rate effect
--
%
--
%
Operating earnings
$80
$78
$346
$326
4Q11 operating earnings increased primarily due to higher acetate tow sales
volume FY11 operating earnings increased primarily due to higher acetate tow
sales volume and higher selling prices more than offsetting higher raw
material and energy costs Expect
2012
operating
earnings
to
be
slightly
higher
than
2011
1
1
Does not include projected results from Solutia businesses
25 |
 Financial results –
PCI
26
($ in millions)
4Q11
4Q10
Change
FY11
FY10
Change
Sales revenue
$697
$526
33 %
$2,860
$2,083
37 %
Volume effect
15 %
14 %
Price effect
14 %
19 %
Product mix effect
4 %
4 %
Exchange rate effect
--
%
--
%
Operating earnings
$42
$51
$296
$231
4Q11 operating earnings declined as higher selling prices were more than offset by
higher raw material and energy costs, particularly in Asia Pacific and
Europe FY11 operating earnings increased, particularly in North America,
primarily due to higher selling prices, higher sales volume, and the
increased benefits from cracking propane to produce low-cost propylene,
which more than offset higher raw material and energy costs Expect
2012
operating
earnings
to
be
approximately
$320
million
1
1
Does not include projected results from Solutia businesses
|
 Financial results –
Specialty Plastics
27
($ in millions)
4Q11
4Q10
Change
FY11
FY10
Change
Sales revenue
$277
$258
7 %
$1,195
$1,043
15 %
Volume effect
(9 %)
(2 %)
Price effect
14 %
16 %
Product mix effect
2 %
1 %
Exchange rate effect
--
%
--
%
Operating earnings
$9
$24
$105
$93
4Q11 operating earnings declined due to lower sales volume and lower capacity
utilization due to weakened demand for copolyester product lines and
inventory management during and after planned maintenance shutdowns
FY11 operating earnings increased primarily due to higher selling prices more than
offsetting
higher
raw
material
and
energy
costs
and
the
positive
impact
of
Tritan™
copolyester growth initiative
Expect
2012
operating
earnings
to
be
approximately
$120
million
1
1
Does not include projected results from Solutia businesses
|
 4
th
-Quarter and Full-Year
2011 Financial Results
Curt Espeland, Sr. VP and CFO |
 Full-year 2011 financial highlights
29
Cash from operations of $625 million
•
$735 excluding impact of tax payment on the sale of the
PET business
•
Working capital increased by $280 million
Capital expenditures $457 million
Generated $142 million of free cash flow
Note: Free cash flow is defined as cash from operations less capital
expenditures and dividends, excluding the tax payment for the gain on the
sale of the PET business completed first quarter 2011.
|
 Balanced capital allocation in 2011
30
Supporting earnings growth and returning cash to stockholders
Sterling Chemicals
Scandiflex
Dynaloy
Capital expenditures
Tritan™
copolyester
expansion
CHDM monomer expansion
CTA expansion
Regalite™
expansion
2-EH expansion
Share repurchases
U.S. pension contributions
$457 m
$316 m
$102 m
$136 m
$156 m |
 4
th
-Quarter
and
Full-
Year 2011 Financial
Results
Jim Rogers, President and CEO
Curt Espeland, Senior Vice President and CFO
January 27, 2012 |