# DEAR FELLOW EASTMAN STOCKHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_EMN_2020/NYSE_EMN_2020.mmd` · pages 1-7_

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DEAR FELLOW EASTMAN STOCKHOLDERS,

During our 2020 centennial year, the dedication and resolve of the Eastman team was again on full display. We began the year with uncertainty, but no one could have predicted the wide-scale disruption that we are experiencing due to COVID-19. In addition to the grave threat this virus presents, it has upended our personal and work lives and profoundly impacted the global economy. I am grateful to the women and men of Eastman who continue to navigate through this uneasy and unsettling time, adapting to an ever-changing environment and coming together as never before to keep each other safe, keep our operations running, and enable our company to weather this staggering storm.

I am enormously proud of how the Eastman team has responded to this historic crisis. In the first quarter of 2020, we quickly and decisively adjusted our operations and introduced multiple layers of protection to keep our employees safe and preserve our operational integrity.

Given the uncertainty, we also took swift action to shift our financial focus to prioritize cash and liquidity, including aggressive inventory management. As a result of these actions, we generated greater than $1 billion of free cash flow for the fourth consecutive year, demonstrating our ability to deliver strong free cash flow in just about any environment.

Despite unprecedented challenges related to COVID-19, our financial performance for the full year demonstrates the resilience of our people and our portfolio. We delivered record fourth-quarter adjusted earnings per share (EPS) and resilient full-year EPS, reflecting the value of serving a diverse set of end markets — the benefit of our innovation-driven growth model. Our continued, aggressive cost management delivered approximately $150 million of cost savings, net of inflation, in 2020 compared to 2019.

We continued to put our cash to work in a disciplined way. We returned $418 million to stockholders through share repurchases and our dividend, which we increased for the 11th consecutive year. We also significantly reduced net debt.

I'm incredibly appreciative of all members of the global Eastman team for all they did to deliver this excellent performance. They delivered in a big way in 2020.

## BUILDING ON OUR MOMENTUM IN 2021 AND BEYOND

We have entered 2021 from a strong position, and we have every intention of building on that momentum as the global economy continues to recover. There is still uncertainty due to COVID-19; therefore, we continue to focus on what we can control, beginning with creating our own growth. By leveraging our innovation-driven growth model, we expect to grow corporate new business revenue to greater than $600 million in the coming years. This growth is enabling us to perform better than our recovering end markets, particularly for many of our specialty products.

Although the pandemic slowed our progress last year, we remain fully committed to optimizing our portfolio to address the underperforming parts of Additives & Functional Products, which include the adhesive resins and tire additives businesses. We announced the shutdown of one of our tire additives manufacturing facilities and continue to explore other options in these businesses, including potential joint ventures and divestitures. However, we are careful not to sacrifice innovation and continue to make progress on several programs, such as next-generation Eastman Crystex Cure Pro.

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We also continue to aggressively manage costs and expect our cost structure will be about flat in 2021 compared with 2020. We expect more permanent savings from several specific programs including maintenance efficiency, asset footprint optimization, supply-chain optimization, digitization, and productivity improvements.

With our continued emphasis on cash generation, we again expect our free cash flow to be greater than $1 billion, which means that we will have delivered more than $5 billion in free cash flow since 2017. Our priorities for uses of cash in 2021 are continuing to fund our attractive and growing dividend, reducing net debt, although to a lesser extent than in 2020, and a combination of share repurchases and accretive bolt-on acquisitions.

## ACCELERATING THE CIRCULAR ECONOMY
AND CREATING A NEW VECTOR OF GROWTH

The pandemic has changed our approach to so many aspects of how we do business. Nowhere has that been more evident than in how we engage and collaborate with customers. I'm proud to say that innovation not only continued at Eastman in 2020, but we also found new ways to leverage our innovation-driven growth models and accelerate our circular economy initiatives to create a new vector of growth for the company.

Last year, we declared our intention to be a leader in the circular economy. We have taken a significant step in that direction by announcing plans to invest approximately $250 million over the next two years in a new plastic-to-plastic molecular recycling facility at our Kingsport, Tenn., site. The facility is expected to use approximately 110,000 metric tons of plastic waste annually, enabling the production of between 150,000 and 200,000 metric tons of polymer with recycled content.

Each year, more than 300 million tons of plastic are produced globally, and only about 12% is recycled. Our polyester renewal technology will allow us to take low-quality plastics that are currently hard to recycle and break them down into their virgin form to create new, high-quality plastic materials, which can then be recycled again and again and again. We are diverting waste that would otherwise be incinerated or end up in landfills or waterways and giving it new life an infinite number of times.

We realize that plastic waste is reaching crisis level, and others recognize that too. Big brands like H&M, Patagonia, Tupperware, Estée Lauder, and Lego have made significant commitments to reduce plastic waste by increasing the amount of recycled content in their products and product packaging. Our technology can help them achieve their very aggressive goals. And because the molecules are broken down to their original form, our customers get products made with recycled content that do not sacrifice quality or performance. Our technology, along with other viable solutions, will enable our customers and brand owners to reach their sustainability commitments, and together we will make an impact on plastic waste.

By using plastic waste as feedstock, our polyester renewal technology is less carbon intensive, which contributes to a reduced carbon footprint. When compared with processes using fossil feedstocks, our technology reduces greenhouse gas emissions by between 20%–30%, which will help us achieve our aggressive goal of reducing absolute greenhouse gas emissions by one-third by 2030 and achieving carbon neutrality by 2050.

We are confident in this investment because we have been one of the pioneers in developing this technology at commercial scale, and we have more than three decades of expertise in this innovative recycling process. We expect to start this facility at a higher-than-normal utilization rate as we begin

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production, serving markets like packaging. We will upgrade the mix of this facility over time as we ramp up penetration into higher-value specialty markets, an approach in which Eastman has tremendous expertise.

Beyond the positive societal impact, this investment is also economically attractive. We expect the return on capital to be above the high end of the 10%–15% range. In addition, we expect our circular economy initiatives to make a meaningful contribution to corporate revenue growth going forward. We expect to demonstrate to all stakeholders that a solution to the plastic waste crisis is possible — with an attractive return.

In short, we are proving that molecular recycling is scalable, economically viable, and can contribute to solving the plastic waste crisis while reducing our carbon footprint. And we are just getting started. The global plastic and climate crises are too large for one group to solve, which is why we must come together. We see this as an opportunity to build plants through partnerships around the world.

## A BETTER CIRCLE

At Eastman, we take our purpose of enhancing the quality of life in a material way seriously, as we do our responsibility to be a leader in sustainability.

We continue to make progress in this area and were named as one of The Wall Street Journal's Most Sustainably Managed Companies of 2020. We also ranked No. 27 on Barron's 100 Most Sustainable Companies list for 2021.

As a materials innovator, Eastman is uniquely positioned to address these challenges and to help create solutions that serve everyone. It's what we refer to as "a better circle." Through this approach, we will:

## Mitigate climate change

Eastman has a responsibility to continuously improve its operational footprint. The company supports the Paris Agreement and, in alignment with it, Eastman is committing to achieve carbon neutrality by 2050. As we face this significant challenge, we view Eastman as an active innovation partner. We have developed a variety of innovative products that enable our customers and consumers to reduce their carbon footprint.

## Mainstream circularity

As I discussed earlier in this letter, Eastman intends to be a leader in the circular economy. That means keeping plastic waste out of landfills and the environment through recycling innovations that convert waste to materials, thereby reducing the use of fossil feedstocks.

## Care for society

Eastman's business begins and ends with people. By working from the inside out to ensure our employee population mirrors the world's population in our diverse makeup and aligning our external partnerships and support with our key impact areas, Eastman will contribute to creating a more equitable society. Our innovation strategy has also been focused on products that live up to our purpose of enhancing the quality of life in a material way.

I encourage you to read our specific goals in each of these areas in our 2020 sustainability report "A Better Circle." Our sustainability strategy builds on the progress we have made and the crucial insights we have gained in sustainable innovation. We are committed to advancing both environmental and social practices across our corporation and within our communities and to be open and transparent in our progress.

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## WORKING TOWARD A BRIGHTER FUTURE

I close this letter by again recognizing the true heroes — the men and women of Eastman who show up each day, whether at our manufacturing facilities, at the office, or at home. Under extraordinary circumstances, they continue to make essential products, supply our customers, run our businesses, innovate new solutions, and do the necessary work to keep our company moving forward. I want to thank them and the teams who are working tirelessly to keep our employees safe from COVID-19 by continuously monitoring, communicating, and implementing vital protocols and procedures.

This disease has taken its toll on all of us, and no one has felt it more than the loved ones of those we have lost, including the families and colleagues of seven team members. Their heartbreaking losses, along with the millions of others who have been afflicted by this disease, are a sobering reminder of why we must keep doing everything we can to ensure the health and safety of our employees.

As we embark on a new century of success at Eastman, we are optimistic that brighter days are ahead as COVID-19 vaccines are more widely distributed, as the global economy continues to recover, and as we regain a greater sense of normalcy in our daily lives. There is much we intend to accomplish in 2021, and I am confident that we will.

You play an important role in our success, so on behalf of the global Eastman team, thank you for your continued support. We remain committed to rewarding your investment and delivering on the confidence that you have placed in us.

Sincerely,

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Mark Costa
March 19, 2021