# Dear fellow Eastman stockholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_EMN_2019/NYSE_EMN_2019.mmd` · pages 1-7_

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Dear fellow Eastman stockholders,

We faced a tough year as global trade conflicts and weakness in many key end markets created a very challenging environment. I'm proud of how Eastman employees around the world collectively managed the things within our control and created our own growth to the extent possible. Even in the difficult environment of 2019, we had a number of highlights that demonstrated our ability to create value.

• We continued to deliver impressive results in Advanced Materials, which outperformed underlying markets despite exposure to transportation and other consumer discretionary markets.

• We continued to make strong progress growing new business revenue from innovation and market development initiatives, delivering approximately $400 million.

• We generated greater than $1 billion in free cash flow for the third year in a row.

• We continued to put our cash to work in a disciplined way, including:

- Significant debt reduction, which will remain a priority for us in 2020

- Capital returns by share repurchases and an increased dividend for the 10th consecutive year

- Bolt-on, strategic acquisitions of Marlotherm and INACSA, which are two strategic businesses that are opening new markets for our technologies

While global trade tensions have eased somewhat, the global industrial economy continues to be sluggish. We are also closely monitoring the possible impacts of the new coronavirus on our markets and business. In all, business conditions, particularly for industrial companies, remain challenging.

We enter 2020 in a period of significant uncertainty related to macro factors that are beyond our control. We remain focused on what we can control, including growing new business revenue by leveraging our innovation-driven growth model, aggressive cost management, and disciplined capital allocation.

## Multiyear plan to enhance performance

We are not waiting for global conditions to improve; we are taking actions to enhance our performance as we manage through this environment. This broad, multiyear effort focuses on:

• Continuing to grow new business revenue from innovation, which we expect to approach $500 million in 2020

• Creating a new vector of growth for the company with investments in the circular economy, as outlined below

• Increasing capabilities and improving efficiencies across the company by continuing to build our commercial capability and reducing our cost structure by greater than $100 million over the next three years through site optimization, digital and other productivity investments, supply chain optimization, and licensing our advantaged technologies

• Utilizing our sites in various ways, including welcoming site tenants

We also remain fully committed to optimizing our portfolio to address the underperforming parts of Additives & Functional Products, which include certain adhesive resins, tire additives, and formic acid products. Most of the segment is performing well, and we expect to make substantial progress in AFP's innovation programs over the next few years.

Taken altogether, this robust, multiyear plan of action is a continuation of the work that we have already started. These actions will allow us to continue funding our innovation-driven growth strategy, remain competitive, and better manage through this industrial recession so that we can continue to build on Eastman's long history.

## Addressing the world's big problems

With our world-class scalable technology platforms, applications development capabilities, and manufacturing scale and integration, Eastman is well positioned to be a leader in how our industry can address climate change and enable the circular economy by removing waste from our environment. We have developed multiple solutions to enable the collection of plastic waste to be reused in new products, which also substantially reduces our greenhouse gas footprint compared with processes that use fossil fuels.

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Our Advanced Circular Recycling technologies, which find new uses for products or materials otherwise reaching "end of life" to advance the circular economy, align with our innovation-driven growth strategy and commitment to create value through sustainability.

Over the past year, we have made great progress on this front and reached a number of milestones. Those milestones include commercial operation of our carbon renewal technology (CRT) in 2019. We see Eastman Advanced Circular Recycling technologies as a game changer because they can provide an end-of-life solution for plastics that traditional mechanical recycling methods cannot process and are currently being landfilled and incinerated, including materials such as single-use packaging, textiles, and carpet.

With Advanced Circular Recycling technologies, waste plastics can be recycled an infinite number of times without degradation of performance and quality, which means recycled materials will have more possible end uses. We expect to use up to 50 million pounds of waste plastic in CRT operations in 2020. Also, in response to customer demand, we leveraged our expertise to accelerate the timeline for polyester renewal technology (PRT), which just began operation. There are two branches of this technology. Our ultimate and primary PRT branch will operate from methanolysis technology, and we expect to construct and operate a commercial-scale methanolysis facility within 24–36 months. In the short term, we are responding to overwhelming demand from customers who quickly need materials with recycled content, moving swiftly to bring a PRT facility online in early 2020 using glycolysis technology. All of Eastman's recycled materials are certified by International Sustainability and Carbon Certification (ISCC), an independent agency for tracking sustainable content in a variety of industries.

The world needs a circular economy, and the Eastman team knows we cannot solve it alone. We are committed to innovating with customers and brands and working across the value chain with feedstock suppliers, product manufacturers, and nongovernmental organizations such as the Ellen MacArthur Foundation to deliver large-scale, circular solutions for materials to give them infinite life.

I am proud of our work in this area and the global impact that it can have. I have long said that Eastman is a company of problem solvers, and our people have the capabilities to tackle the world's biggest problems, which we have demonstrated time and again. Closing the loop of waste is a complex problem that can only be solved with innovative solutions. With the right people, world-class technologies, and our unique vertical integration, Eastman is uniquely positioned to scale up this solution quickly. With Eastman Advanced Circular Recycling, we will revolutionize recycling at the molecular level.

We have the power to impact global society for the better by directing more of our focus than ever toward climate change.

The Eastman team reached our 2020 goal for reducing our greenhouse gas emissions by 20 percent two years early, and we are close to identifying new goals for 2030. These new goals for emissions reduction will be the most aggressive in the history of the company. Eastman meets the world's material needs through the power of innovation, and innovation will power our commitment to dramatically reduce our carbon footprint.

## Enhancing our culture: Commitment to a zero-incident mindset

As always, we remain fully committed to driving a zero-incident mindset (ZIM) in all that we do — from safety to global business conduct to upholding our core values of health and wellness, sustainability, and inclusion and diversity. In 2019, we appointed a ZIM Steering Team that is tasked with ensuring that ZIM principles are applied across functions and businesses globally, providing education and training to increase awareness, and engaging with employees to assess understanding and acceptance.

Creating a zero-incident mindset across the enterprise is an area where we can always improve, but I am pleased with the strong record that we already have in this area. For example, for the seventh consecutive year, Eastman was recognized by Ethisphere Institute in 2020 as one of the World's Most Ethical Companies \( ^{®} \)  for our efforts to continually raise the bar on ethical leadership and corporate behavior. We were also named this year to Newsweek magazine's inaugural list of America's Most Responsible Companies.

Another area we work to continually improve is our culture of inclusivity and diversity. I am proud that this year we were recognized as part of Forbes magazine's annual list of Best Employers for Diversity for 2020. Our success depends on our ability to grow a powerfully diverse workforce with increasingly diverse talents, perspectives, and experiences that bring the best ideas to the table.

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Awards like these speak to the strong culture at Eastman and the values that we share around the globe. They are also a testament to the team of 14,500 who show up each day committed to doing the right thing.

## Innovation. Then. Now. Next.

As I close this year's letter, I will end at the beginning — Eastman's beginning.

One hundred years ago, George Eastman set out on a nationwide search. After having his raw materials supply disrupted during World War I, he was looking for a site that could reliably supply raw materials to his photographic company, Eastman Kodak. After discovering abundant natural resources and an industrious workforce, his search came to an end in 1920 when he founded Tennessee Eastman Corporation (TEC) in Kingsport, Tennessee.

George Eastman's expectations for the small company were modest, and though he was undoubtedly one of this world's greatest visionaries, it is unlikely that even he knew what the future would hold for TEC. Today, George Eastman's fledgling company, born out of a single need in the hills of East Tennessee, is a multinational, Fortune 500 company that provides materials that offer a better way of life for people all around the world. We are celebrating this incredible milestone through the centennial theme of "Innovation. Then. Now. Next." Generations of Eastman women and men have been our driving force for 100 years with their ingenuity, forward-thinking ability, and adaptability to changing environments.

Those same qualities will usher in our next century of fostering innovation, providing jobs, and driving economic growth.

Our fundamental centennial message to each of our stakeholders is one of legacy, longevity, and leaving an even stronger company and improved society for the next generation. For our collective, continued success, we remain committed to serving all of our stakeholders by generating long-term value for our owners, delivering consistent value to our customers, continually investing in our employees, dealing fairly and ethically with our suppliers, and supporting the communities in which we work.

Thank you for choosing to be a part of Eastman during this very special and momentous year. We are grateful for your support and your belief in the future that we are creating.

Sincerely,

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Mark J. Costa
Board Chair and Chief Executive Officer
March 20, 2020