KINGSPORT, Tenn., April 26, 2012 - Eastman Chemical Company (NYSE:EMN) today announced earnings from continuing operations of $1.13 per diluted share for first quarter 2012 versus $1.39 per diluted share for first quarter 2011. Excluding $14 million of transaction and financing costs in first quarter 2012 related to the pending acquisition of Solutia and a $15 million other postretirement benefit (OPEB) plan gain in first quarter 2011 (described below), earnings from continuing operations were $1.22 per diluted share in first quarter 2012 and $1.32 per diluted share in first quarter 2011. For reconciliation to reported company and segment earnings, see Tables 3 and 4 in the accompanying first-quarter 2012 financial tables.

"We delivered solid first quarter results despite persistent global economic uncertainty, and we remain well positioned for full year earnings growth," said Jim Rogers, chairman and CEO. "In addition, we are on track to complete the Solutia acquisition by mid-2012, which we expect will significantly enhance our earnings growth in the future."

(In millions, except per share amounts)	1Q2012	1Q2011
Sales revenue	$1,821	$1,758
Earnings per diluted share       from continuing operations	$1.13	$1.39
Earnings per diluted share       from continuing operations excluding       Solutia acquisition transaction and        financing costs and OPEB plan gain*	$1.22	$1.32
Net cash provided by (used in)       operating activities	$19	($146)
*For reconciliations to reported company and segment earnings, see Tables 3 and 4 in the accompanying first-quarter 2012 financial tables.

Sales revenue for first quarter 2012 was $1.8 billion, a 4 percent increase compared with first quarter 2011 due primarily to higher selling prices. The higher selling prices were in response to higher raw material and energy costs. 

Operating earnings in first quarter 2012 were $264 million compared to $314 million in first quarter 2011. Excluding $9 million of transaction costs in first quarter 2012 related to the pending acquisition of Solutia and the $15 million OPEB plan gain (described below) in first quarter 2011, operating earnings were $273 million and $299 million, respectively.

Coatings, Adhesives, Specialty Polymers and Inks - Sales revenue increased slightly in first quarter 2012 compared with first quarter 2011. First-quarter 2012 operating earnings were $98 million compared to $104 million in first quarter 2011, with the decline primarily due to an unfavorable shift in product mix resulting from lower sales volume in the polymers product line.

Fibers - Sales revenue increased by 11 percent primarily due to higher selling prices and a favorable shift in product mix. The higher selling prices were in response to higher raw material and energy costs, particularly for wood pulp. The favorable shift in product mix was primarily due to higher acetate tow volume in Asia Pacific attributed to customer buying patterns. Operating earnings in first quarter 2012 increased to $101 million compared with $86 million in first quarter 2011 due to higher selling prices and the favorable shift in product mix partially offset by higher raw material and energy costs.     

Performance Chemicals and Intermediates - Sales revenue increased by 6 percent primarily due to higher sales volume in the U.S., mainly in acetyl product lines. Operating earnings in first quarter 2012 were $77 million compared to $94 million in first quarter 2011, with the decline primarily in Asia Pacific due to lower selling prices attributed to weakened market demand primarily for olefin derivatives and higher raw material and energy costs. In addition, operating earnings increased in the U.S. primarily due to the benefit of producing versus purchasing olefins, while lower operating earnings in Europe were attributed to weakened market demand and higher raw material and energy costs.

Specialty Plastics - Sales revenue decreased by 5 percent in first quarter 2012 compared to first quarter 2011 primarily due to lower sales volume partially offset by higher selling prices. The decrease in sales volume, mainly in Asia Pacific, was attributed to weakened demand primarily in the LCD and consumer and durable goods markets. Selling prices increased in response to higher raw material and energy costs, particularly for paraxylene. First-quarter 2012 operating earnings were $30 million compared to $35 million in first quarter 2011. The decline was primarily due to lower sales volume and resulting lower capacity utilization, and higher raw material and energy costs. These were partially offset by higher selling prices.

Cash Flow
Eastman generated $19 million in cash from operating activities during first quarter 2012. Working capital increased by $109 million as receivables increased due to higher sales revenue. The company contributed $25 million to the U.S. defined benefit pension plans during the quarter, and expects to contribute approximately $100 million in full year 2012.

Outlook

Commenting on the outlook for full year 2012, Rogers said: "Although there is continued uncertainty, we anticipate slow global economic growth but with particular strength in the U.S. In addition, we anticipate reduced volatility in raw material and energy costs, and we expect that producing versus buying olefins will be a tailwind for 2012. We also expect continued benefit from incremental capacity additions as well as recent acquisitions, including the expected mid-year close of the Solutia acquisition. As a result, we expect full-year 2012 earnings per share to be approximately $5.30, which would be an increase of approximately 10 percent compared with full year 2011 earnings per share." Acquisition-related costs and charges, asset impairments and restructuring charges, and mark-to-market pension and OPEB adjustments are excluded from earnings per share for both periods.

Accounting Methodology Change for Pension and OPEB Plans; Description of First-Quarter 2011 OPEB Plan Gain

As previously disclosed, Eastman has elected to change its method of accounting for actuarial gains and losses for its pension and OPEB plans. The new method recognizes actuarial gains and losses in operating results in the year incurred rather than amortizing them over future periods. Under the new method of accounting, these gains and losses are now measured annually at December 31 and recorded as a mark-to-market ("MTM") adjustment during the fourth quarter of each year, and any quarters in which an interim remeasurement is triggered. The new method has been retrospectively applied to the financial results for all periods. In first quarter 2011, the Company recognized a $15 million gain under the new accounting method due to the interim remeasurement of the OPEB plan obligation. The exit of employees associated with the sale of the PET business triggered the interim MTM remeasurement.

Eastman will host a conference call with industry analysts on April 27 at 8:00 a.m. EDT. To listen to the live webcast of the conference call and view the accompanying slides, go to www.investors.eastman.com, Events & Presentations. To listen via telephone, the dial-in number is 913-312-1298, passcode number 8471527. A web replay, a replay in downloadable MP3 format, and the accompanying slides will be available at www.investors.eastman.com, Events & Presentations beginning at 9:00 a.m. EDT, April 30. A telephone replay will be available continuously from 9:00 a.m. EDT, April 30, at (888) 203-1112or (719) 457-0820, passcode 8471527.

Forward Looking Statements: This news release includes forward-looking statements concerning current expectations for global economic conditions; the timing and expected benefits of the completion of the Solutia acquisition and other acquisitions and capacity additions; raw material and energy costs, including for propane and propylene; and earnings per share for 2012. 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, including the Form 10-K filed for 2011 available, and the Form 10-Q to be filed for first quarter 2012 and to be available, on the SEC web site at www.sec.gov and the Eastman web site at www.eastman.com in the Investors, SEC filings section.

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