Good day, everyone, and welcome to the Eastman Chemical Company First Quarter 2018 Conference Call. Today's conference is being recorded. This call is being broadcast live on the Eastman's website, www.eastman.com. We will now turn the call over to Mr. Greg Riddle of Eastman Chemical Company, Investor Relations. Please go ahead, sir.

Thank you, Lauren, and good morning, everyone, and thanks for joining us. On the call with me today are Mark Costa, Board Chair and CEO; Curt Espeland, Executive Vice President and CFO; and Louis Reavis, Manager, Investor Relations. Before we begin, I'll cover two items. First, during this presentation, you will hear certain forward-looking statements concerning our plans and expectations. Actual events or results could differ materially. Certain factors related to future expectations are or will be detailed in the company's fourth quarter and full year 2017 financial results News Release and in our filings with the Securities and Exchange Commission, including the Form 10-Q filed for the third quarter 2017 and the Form 10-K to be filed for 2017. Second, earnings referenced in this presentation exclude certain non-core and unusual items and has been adjusted for the forecasted tax rate as of the end of the interim periods. Reconciliations to the most directly comparable GAAP financial measures and other associated disclosures, including the description of the excluded and adjusted items are available in the first quarter 2018 financial results news release, which can be found on our website at www.eastman.com in the Investors section. Projections of future earnings exclude any non-core or unusual items and assume that the adjusted tax rate for first quarter 2018 will be the actual tax rate for the projected periods. With that, I'll turn the call over to Mark.

Good morning, everyone. I'll start begin on Page 3. We're off to compelling start to the year with strong first quarter results, which include revenue up over 13% and adjusted EPS up 22% year-over-year. Our results demonstrate the strength of our specialty portfolio as we delivered over 15% revenue growth combined in our two specialty segments, Advanced Materials and Additives and Functional Products. We continue to deliver strong volume growth of high margin specialty product lines through execution of our innovation-driven growth model, particularly in AM and AFP. During the quarter AM and AFP delivered greater than 7% volume growth combined year-over-year, with earnings growth of more than 15%. Through innovation, leadership and specialty markets, we continue to create our own growth. In a moment I'll share two examples of what's fueling our progress and driving a significant increase in new business closes. I'm particularly proud of the quality of this corporate earnings growth coming primarily from our specialty businesses, which is sustainable overtime. Moving next to the cost management front, we remain well on track with our corporate cost reduction efforts without sacrificing our long-term growth initiatives. Our cash from the quarter was consistent with our expectations and we remain on track to deliver over $1.1billion of free cash flow in 2018, enabling an increasing dividend, deleveraging an increasing rate of share repurchases. Beyond these great results, we've also been the recipient of numerous awards over the past several months, which highlight many of the qualities our stakeholders have come to expect from Eastman. We were named one of the World's Most Ethical Company for the fifth consecutive year by Ethisphere for outstanding corporate ethics and corporate responsibility characteristics highly valued by our employees, shareholders, communities and customers. We also earned the Military Friendly Employer designation by Victory Media…

Thanks, Mark and good morning everyone. I'll start with our corporate results on Slide 5. Sales revenue grew to increases in all four business segments. We continue to do a nice job of driving growth in our more specialty businesses which accounted for more than 70% of our top line growth in the quarter. And we executed well on the pricing front as we've realized further positive pricing momentum in the quarter to offset the impact of higher raw material costs. Adjusted EBIT grew due to increases in all four business segments with our specialty businesses accounting for more than 70% of our earnings growth in the quarter. And we are growing earnings while we are continuing to invest in growth for both the near-term and long-term. EBIT margins improved 20 basis points as we improved the quality of earnings through mix improvement with our double-digit growth in many of our innovative specialty products. Overall earnings per share increased year-over-year by 22% with EBIT contributing about 17% of the growth. Moving next to the segment results and starting with advance materials on Slide 6 which delivered another impressive quarter driven by our innovation initiatives. Sales increased due to improved product mix resulting from double-digit growth of high margin innovative products and a favorable shift in foreign currency exchange rates. In particular, we saw an acceleration in volume growth towards the end of the quarter. EBIT increased due to higher sales volume, improved product mix, and a favorable shift in exchange rates partially offset by higher costs associated with growth initiatives. Year-over-year we expanded our EBIT margin 80 basis points to 20%. Looking at the full year, we expect to drive revenue growth from volume and mix in the mid-single digits and continue to get a further lift from price and…

Thanks, Curt. On Slide 11 I will discuss our 2018 outlook. We continue to benefit from the strong growth of high value innovative products with leading positions in attractive niche markets. We are also delivering revenue synergies through launching new products and improvements in commercial execution capabilities of our acquired businesses. We are seeing the benefits of scaling integration translating this attractive growth in the earnings. And our continued aggressive productivity is expected to offset inflation and some of our growth investments. In addition, a modest improvement in our tax rate is expected to contribute to growth. Finally, discipline allocation of our strong free cash flow continued to contribute to our growth, including planned increases in our share repurchases in '18 compared to '17. To accelerate our momentum in the coming years, we are also continuing to invest in innovation and product development and capacity expansions to support our growth programs. We expect higher scheduled maintenance costs in the year as we have a significant turnaround here in the second quarter for one of our crackers in Longview, Texas. And lastly we expect pressure in the ethylene spreads impact earnings especially in the second half. Putting this altogether our expectations for 2018 EPS growth have improved to be 10% to 14% compared to 2017. When it comes to the tailwinds and headwinds at this time, I would expect to be in the middle of this range. And when you think about the shape of the year, you should expect first half EPS to be modestly higher than the second half due to our new revenue recognition method, ethylene, and a tough 2018 comp in AFP. And on free cash flow we continue to expect at least a 10% increase which is one of the most compelling in the industry, especially when you consider we are investing in long term growth at the same time. On Slide 12 I will summarize where we are. As you think about our portfolio, we continue to march down the path to make two specialty businesses a much bigger percentage of the total with our goal of driving from 70% to 80%. This all comes together for a terrific bottom line. We can grow faster than the underlying market. We can sustain and improve our margins through mix upgrade. We do this for a unique innovation driven growth model which is the heart of how we win. We also do scaling integration and investing in the unique capabilities we have in place to drive it and finally through disciplined portfolio management. That leads you to one of the strongest free cash flows in the industry, strong return on invested capital that is growing, and a compelling compounded EPS for 2020 and beyond. When you put this altogether, we are well positioned for long-term attractive earnings growth, a sustainable value creation for others.

Thanks, Mark. We've got a lot of people on the line this morning and like to get to as many questions as possible. So please limit yourself to one question and one follow-up. With that, Lauren, we are ready for questions.

Thank you, sir. [Operator Instructions] Our first question comes from David Begleiter with Deutsche Bank.

Thank you. Good morning.

Good morning.

Mark, in AFP you got 6% pricing in the quarter. What do you say on a segment in recapturing offsetting raw material costs?

Good morning, David. We are proud of our discipline in driving price improvements throughout last year and into the first quarter which we are seeing as the accumulation of that action over that period of time. And at this stage our prices have caught up to raw materials. In fact our spreads are a little bit better in the first quarter.

Very good. And also you mentioned enhanced commercial execution in AFP in Q1. Could you give us some concrete examples of that execution?

Sure. It's a great story of creating value through synergies in the acquisitions. We have been building, as we have talked to you about on the Innovation Day, a very powerful growth model that combines how we engage the market, how we leverage our technology and bring it together the application development capability. And you are seeing that right now. One of the strongest drivers of growth that we had in AFP with our animal nutrition and care chemical business and there is a place where we've combined the products of Eastman and Taminco where we have a broader portfolio of organic acids making us much more relevant to the market. Taminco team was somewhat geographically limited in their commercial execution capabilities. So we've now built the broader global capability. We've added application development capability of that, so we can be much more of a formulation expert and enhance what we are offering to the marketplace. And that's all combined to drive significant growth, incredible growth in fact for that combined sort of portfolio to the marketplace. So it's a great example. Same thing is true in tires. We've built integrated capability now where we started with what Solutia had which was somewhat limited in what they had to offer to the market, expanded it with our resin portfolios and other products that we are developing for the innovation side. So now we are not just Crystex and PPDs, but have innovative resins that can improve the performance of tires, built strong application development capability where we are insightful and now we design those products and it can be a true advising consultant in formulating the tire and we've gone for debating the price of Crystex in 2012 to being an innovation partner with all the top MNCs in this space as well as some of the key leading agent players. So these examples of the growth model bringing capability together is driving double-digit growth in tires across that portfolio, strong double-digit growth in animal nutrition and we are doing this in a bunch of other places.

Thank you.

Our next question comes from Duffy Fisher with Barclays.

Yes, good morning guys.

Hey, Duffy.

A question around the contract with enterprise and PDH, is there ramping? Was that material in the first quarter? And then going forward, now that you have both that contract and your own crackers, kind of what your balance on propylene and where are we trying to get to over the next year or two with that?

So first on the question on the enterprise contract, that has not had a material impact on our first quarter input costs or performance. On the balance of propylene remember and consumer propylene we produce - I think we are pretty balanced on what we produce now, what we need for derivatives, including that enterprise contract.

And then could you quantify the accounting change? You said it won't impact the year. But when we think through quarter-to-quarter, kind of how big of a number are we talking about between quarters and can you help size that throughout the year?

Sure. So let me just recap the change in revenue recognition hopefully just this one time. In 2007 let me remind you revenue was recorded based on confirmed delivery dates. In 2018 revenue we recorded based on goods shipped which will accelerate when revenue is recognized compared to previous years. So we believe this method is more consistent with industry practice. To transition to this new method, let me also remind you we've recorded an increase to return earnings for $53 million, what this really relates to is the net earnings of approximately $200 million of revenue for product that had shipped and now you delivered at the end of 2017. So this transitional revenue will be recognized in revenue or EBIT in 2018. There is a new method. So this ensures both 2017 and 2018 only have 52 weeks of revenue in each period. So, as such again as you mentioned this change is not expected to have a material impact on revenue or EBIT for 2018 taken as a whole when compared to previous years. However, as you have seen in the first quarter, this impacts seasonal trends of revenue and EBIT within the year. So looking specifically at first quarter, the first quarter revenue impact under the new standard in 2018 was driven mostly by fibers as mentioned in my prepared comments. We had a similar but smaller revenue impact on advance materials offset by similar change in chemical intermediates. So when you put it altogether, the company probably accelerated $30 million of revenue and roughly $18 million of EBIT or $0.10 a share in the first quarter of '18 that would otherwise be recognized later in 2018 if we are under the old method. So again this change has not impacted our expectation of strong revenue and EBIT growth for the company or any segments when comparing 2008 versus 2007 full year.

Great, thank you guys.

Our next question comes from Bob Koort with Goldman Sachs.

Hi, good morning. This is John Campbell on for Bob. For advanced materials you just caught out a stronger sales mix for the premium products, can you provide an update on the percent of the current mix that comes from these premium products?

So we don't provide specific breakup. What I can tell you and we said in the past is Tritan as an example is around $300 million double-digit growth, very powerful story there where we continued to be the most unique offering of clarity chemical resistance and toughness in that marketplace and extending into a lot of new applications and that's just one third if you will of the premium products, so the heads of display [indiscernible] is of similar size, also growing double digits and very attractive margins to the segment and the company and performance films also similar size to Tritan growing at double digits with very attractive margin. So it's a pretty big percentage of the overall total, but it's still got a ton of room to grow double digits for quite some time because these markets are quite a bit bigger than where we are today.

Got it, thank you. And with the increased EPS growth expectations in 2018, do you see a risk to the upside for your longer term 8% to 12% growth or does this kind of create a higher bar to cost for 2018 and 2020?

So first of all we're incredibly excited about 10% to 14% range this year and love to see it being driven by the specialties and stability with some earnings growth in fibers which is a very nice change in stability in CI, so I think its powerful story. As you think about the long term, we still view the long term in the 8% to 12% range, there are some unique advantages we have this year in currency for example that you don't plan on repeating in the future years, but we think that's a very compelling range for us to grow sustainably and consistently every year as we go forward and with an increasing free cash flow to go with it, I think it's a very powerful story for the market.

Got it, thank you. Operator We'll go next to Jim Sheen [ph] with SunTrust.

Good morning. Could you update us on your plans to - on your strategic options for the long view ethylene excess capacity?

Sure, we remain committed to address our excess ethylene position as we've mentioned in the past. We remain engaged with multiple parties with a long term view who are interested in leveraging our integrated ethylene position in the United States as well as there's parties interested in our land utilities and other infrastructure to build a derivative project at the Longview site. So we're working diligently to see what we can get done within these current market dynamics and will update you as we make any progress on.

And on adhesive resins, could you give us more color on the competitive pressure you're seeing there, is it all hydrogenated or non-hydrogenated type of resins?

So the specific change in the marketplace is Exxon's bringing on some capacity in Asia this year and we expect that to have some impact on margins. It has not yet had an impact on margins, they're still in the process of starting up and qualifying that product to the marketplace, so it's really more of a back half of your risk at this point. To keep in mind of the amount of capacity outings is around 90,000 tons, the market's growing around 25,000 to 30,000 tons a year because it has this incredible underlying market growth of 5% to 7% hygiene. Also the markets are incredibly tight right now, so there's a lot of pent up demand for hydrogenated resins that we expect to help fill out that asset and accelerate fill out rate. And another thing to keep in mind is their market trend's now driving rosins to be converted to resins, rosins is about the same size as the resin market - overall resin market. And there's a lot of pressure on that there's a very strong order to raw [ph] and not great color and so the market has become very sensitive to order in adhesives especially in Asia, so a lot of people are looking to sort of convert from one to the other, so that's another way of demand sort of filling up this asset. Overall, we feel comfortable that this is a great attractive business long term. Obviously we'll see some short term pressure here as that capacity comes to the marketplace, but there's such strong demand potential we see the long term margins being quite attractive.

Thank you.

We'll go next to P. J. Juvekar with Citi.

Yes, hi good morning.

Good morning P.J.

Mark you shifted some products from intermediates AFP, I think that's small about $18 million, but that's about 2% growth in AFP, so what are these products in our big two specialty in terms of margins?

Yeah, it's a great question and it goes back to something I talked about in the first question. As we have built this growth model and seeing the power of how application development connects sort of markets and technology together, we launched a program last year not just to build this capability but to reexamine how our business teams are structured and making sure that we have the right products aligned to take advantage of that capability. And we realize that there are some products that were still being sold in CI that would be much more effectively sold in AFP by bringing our better market connect and our application development capability to bear in these products we could accelerated growth sustain those margins. And these products are actually pretty attractive margins to start off with and some of them are already being sold partially by AFP and we're just consolidating all the product into one place to be more efficient in how we manage the assets. So it just made sense, so animal nutrition was one of those places where we saw that opportunity, with the success we're now seeing in that marketplace and we're cleaning that up and there are also some products in coatings that made sense to sort of have all sold in one place with that greater commercial and technical capability. So the natural thing you do is you're still revolving your strategy and see what you can do and want to maximize your growth.

Okay, thank you and then you got strong double digit volume growth in tow after several years of declines, do you believe that we've ended destocking cycle or was there any other factors like your repositioning into textiles that caused the volume growth?

So as Curt mentioned around revenue recognition, the principal driver of the revenue looking higher on a year-over-year basis in the first quarter was actually revenue recognition method being different this year versus last year, it's a very long supply chain for a lot of that tow to go from Kingsport, Tennessee to markets around the world. And as a result of the coal gas incident we weren't shipping as much in the beginning of the quarter as we normally do as we were bringing out asset back up and then ramping up the production of the downstream tow product. So a lot of that product shipped in March that would have shipped earlier and so we have these two different methods it just gets caught up as recognized revenue this year, but would've not shown up in the same way last year, so that's part of it P.J. The other part was obviously some of the revenue being transferred, the 30 million revenue from other two - the fiber segment, so we actually sort of put it on an apples to apples basis from a revenue recognition basis. The two volumes within this story are about flat year-over-year, so it isn't a story of growth or decline in tow. It's stable as we said last year, we expected to volume to be stable this year to last year and that's what we expect and you'll see on a full year basis that will be stable.

That's helpful, thank you.

We'll go next to Jeff Zekauskas with JPMorgan

Thanks very much. Can you remind us how much of the chemical intermediates volume, as a percentage goes for internal purposes versus external purposes?

It's about a fifty-fifty split Jeff.

Okay, so if it turns out that your operating income in chemical intermediates was up about 7 million, is it fair to say that there's a 7 million benefit that filters through your other segments as they capture the same margin differential and since for the year you guys think that you'll be down a little bit does that mean that the overall margin benefits the other segments will also be down a little bit?

Jeff, you can't translate that in that direct way. You've got different set of products you're selling in specialties with different supply demand dynamics and selling on values, the price of those olefin derivatives are going to be determined by those market conditions and even within CI, in the market prices and the value captured isn't directly correlated to ethylene and propylene. I know that everyone sort of tends to make that simplistic assumption that there's all going up and down with propylene and ethylene prices, but it doesn't work that way. We don't sell propylene at all, right. We sell derivatives and specialties and chemical intermediates and the value in the pricing of that's actually holding up quite well through the first quarter as well as into the second including ethylene. Of course some of that is being offset by the bulk ethylene that we're selling into the marketplace at much lower prices, so you can't sort of do that translation one for one like that.

Thanks very much

We'll go next to Aleksey Yefremov with Nomura Instinet.

Good morning everyone, thank you. With regards to Aerafin capacity expansion are you currently sold out in these types of adhesives and what percent of your capacity does this represent in terms of percent or killer times and when will this project be finished.

So Aerafin has been a product we've had in the marketplace for over a year and the growth rate in interest of it has been quite strong fifty some a component over all of overall more polyolefin program which in total is showing very strong double digit growth but in this particular area we're seeing a strong uptake and we had some capacity limits or expect to I should say as we go into this year. And we're right and expand capacity going seeing any risk of missing orders but we're rushing to get this capacity online to continue supporting the strong interest but we're not going to provide the detail breakout on a quantitative basis.

Okay, thank you. But you also mentioned animal nutrition and care chemicals as the source of offset in the first quarter was it pricing or volume of both and is there something that's sustainable going forward?

So animal nutrition has been tremendous volume growth as well as improvement in pricing as a markets become tighter for two factors. The first would be the answer to David's question around how we build a better commercial technical capability the second factor driving it is China environmental enforcement has shut down some of our competitors in this space as well as competitors in the tire space and some of the coatings sourcing benefits across the segment AFP as well as CI. And that's helped on the pricing front as well as the volume growth from a sustainability point of view the innovation the commercial executions all very much sustainable it's just growing in the marketplace in China environmental force and part of that question I think is we'll have to see oil plays out. I mean these are players that have been shut down for environmental violations they have to either rebuild in a chemical park and operate a higher cost structure under better environmental standard if they can get the financing or they will come back. And so in a few places you can see people trying to build and that and they will come back bench a little higher cost structure and in some places we don't expect that they will so that we'll have to just see how it plays out over time but for this year we expected to be to be very attractive. Both pricing and volume growth I would emphasize that there's a sustainable advantage that we get out of all this and that many of our customers both the big MNC around the world as well as many of our Chinese customers have learned a painful lesson about how much they want to depend on a small private single plant in China supplying their needs on critical products so pretty much apartments are having to revaluate how much of that risk they want to take going forward. And I think it really emphasizes the value that we provide as assists and sustainable supplier on a global basis.

Thank you.

Our next question comes from Kevin McCarthy with Vertical Research Partners.

Good morning Mark back at the Investor Day and I think on various earnings calls you've alluded to the concept of upgrading your mix across a variety of specialty products is there a way to quantify the benefit from that either or either retrospectively or prospected Lee in terms of margin uplift you've got a lot going on across a lot of different products just wondering if you have in your mind any sort of path or rule to help us understand better the benefits associated with those efforts on the margin line.

Yes So one this is the heart of our story and our strategy it's a great question we've got double digit growth in a wide range of products across AM and AFP from Triton to heads up display could secure layers, to performance films to some display products that the resins in tires touch or shield and they in AFP, the list goes on. So all these are above segment average margins as well as above company average margins and so as they grow the weighted average mix on the variable margin of the corporate line is going up so it's attractive from a specific point of view we actually provided several slides that innovation day that actually give you sort quantitative look about how we've dramatically improve the margins from 2010 to '17 and our outlook for how those margins will continue to improve at the corporate level and as well as an example in that in advance materials from 2018 to '20, so I think those slides will be helpful for you.

All right and then second, how would you describe your strategic playbook in the event that China proceeds with tariffs on cellulose acetate flake?

Yeah, so the tariff question is a good one on that acetate flake side. It's unclear - first of all it's unclear what projects will finally be implemented versus what's on a preliminary list, they often change. Second, it's unclear when they might implement this if ever and in this case it's unclear how the tariff would be applied seen to she's a government entity so you're sort of just moving tax revenue from one pocket to another pocket, so we'll just have to see how that all plays out.

Thank you very much.

We'll go next to Vincent Andrews with Morgan Stanley.

Thank you just a question on the tow volume. Mark, you referenced a very long supply chain and I've noticed that two of the larger tobacco companies reported already and they've got volume down about 6%, 7%. So I'm just wondering you're expecting to be flat for the year and cigarette volumes move around all the time, so I don't read too much into to one quarter of their results, but when would we expect to see that type of a down quarter flow through your tow volume?

Good question, Vincent and you said the key thing in the beginning or at the end or your comments, which is one quarter is not something we're active by a couple of companies, I think we need to see how they all report, you share ships around a lot between these guys on a quarter-to-quarter basis and what the overall market trends are. We're not seeing anything that says that there's certainly been an acceleration or the downturn of cigarette demand from what our customers are telling us. So at this stage we're not expecting a change in tow demand in a material way. I think we're just have to see how this plays out. There's been a lot of very consistent steady sort of 2% or 3% decline in this business for a very long time and I think we need to give it a little more time before we start to sort of reacting to sort of that one quarter benefit.

Okay and just is there sort of a wisdom on sort of how long supply chain or so?

On the supply chain side, in this case, it's probably six months.

Okay, thanks very much.

Our next question comes from Michael Sison with KeyBanc.

Hey guys, nice start to the year. In terms of - you talked about $350 million of new business in 2018 and if I combine AFP and AM together, it's about 6% growth, and you got pricing as a tailwind, so I'm just curious in terms of your outlook for revenue for AM and AFP, it seems a little bit conservative. Can you maybe walk us through any negatives that were missing?

No, negatives in AM, I think we're just going to see a strong high single digit revenue growth for the year driven by the things you just mentioned, volume, significant mix of grades that we've consistently done for several years now, some pricing improvement, FX tailwind all sort of come together to sort of deliver that. On the AFP side, it's obviously been incredibly strong in the first quarter, we expect to continue the strength in the second quarter and by the way AM and AFP we do expect seasonal improvement in revenue and earnings from first and second quarter. But there is a tougher comp in the back half of the year AFP. You have to remember last year we had very high solar fill volume for a couple of huge projects come in, in the third and the fourth quarter. That won't repeat this year, we do see fills coming in '19 and '20, so it's just sort of chunkiness issue in this year versus last year and the future. There's also the other dynamic. This environmental China enforcement drove constant and meaningful share improvement for us through last year, so you saw the benefit of that really in the third and fourth quarter. There is an additional environmental enforcement on top of what we benefited from, so we're holding our share this year but obviously that's a tougher comp to last year in the back half. And then the third thing is some price pressure in adhesives as I already mentioned. All those sort of make the comp tougher. We do expect earnings growth year-over-year in the back half of the year and just to be clear and we actually expect margins to sequentially improve from first quarter to second and third as the mix continues to improve the specialty innovation products, but will just be a tougher comp to '17.

Okay, great and a quick follow up in terms of tire business continues to see good momentum, a lot of tire companies look sluggish this quarter, any thoughts there in terms of underlying demand and is it really just your new products that are driving the growth.

It is not a primary demand story, we go to extensive effort in our market segmentation and targeting where we have the best value proposition and aligning ourselves with the customers who we believe are going to have the highest growth, so we have really seen benefits in Asia in particular of aligning with the winners in that market and seeing the benefit as they're taking share and consolidating frankly failing Chinese tire companies into themselves and so we're benefiting from that. On top of that you have the share gains as I mentioned from environmental enforcement, on top of that you have the innovation growth that's happening where we have double digit growth and things like our tire resins, it all combines together to a story of where we're creating our own growth in a market where the underlying primary demand as you noted is not that strong.

Great, thank you.

Our next question comes from Frank Mitsch with Wells Fargo Securities.

Hey good morning gentlemen.

Good morning Frank.

Apologies, I'm feeling pretty good after last night's drift. And so celebratory environment kind of like you guys are celebrating a nice start to the year and speaking on the nice start, you reiterated that you expect to get a greater than 1.1 billion in free cash flow this year, was there a thought to raise that metric as you raise the EPS guidance?

While the delivering greater than 1.1 by itself is a pretty remarkable effort Frank and let us deliver on that this year, if we do a little bit better will celebrate with you in the fall with some maybe some victories.

Terrific, something for me to look forward to. Mark you just indicated that to you do expect a seasonal improvement in some of your businesses in Q2, can you talk about the pace of business so far in Q2 on a geographic basis that you're seeing out there?

So as you saw in the first quarter tremendous growth in Europe and Asia and we'll continue to see strong growth in those regions as the economies are improving in Europe, Asia still may not be the growth of old days in China, it's still very attractive growth compared to the rest the world and we're benefiting from our positions in there as well throughout Asia. And their overall sort of automotive market is going a little stronger than people expected at the beginning the year, so that's great for us of course. So I'd say it feels good everywhere. To be clear forecast isn't forecasting improved economy, so if that does happen that would be upside to our forecast. We believe in sort of realizing the growth that we're having. It's also important to member that revenue growth doesn't just include volume, it includes FX and price improvements et cetera.

Terrific, thank you.

Our next question comes from John Roberts with UBS.

Thank you. The zinc tow industry was still declining gradually over time and eventually need more consolidation in rationalization, do you see the block of the merger of cigarettes and Blackstone business a problem down the road if the industry can't consolidate and how do you see things planning out longer term?

So let me sort of take that in two parts, first is sort of our overall view of demand in the world and then I'll get to sort of the second part of the question. Overall, demand as I mentioned, we don't see a significant change in the overall demand of cigarettes, we expect sort of slow decline outside of China. If you look at Chinaman at primary level, I think it's actually been a lot more stable than any of us thought, there was a overbuilding of inventory that was occurring in '11m '12 and '13 and then there was a destocking in that backward integration that they had with JV's with us and others that created a huge serve up and then down in tow in that marketplace. But underlying it I think it's stable. I'd also note that at this stage the exposure to imports into China with tow is down to about 5% of our revenue in the segment or half of 1% at the company level, so the exposure we have to that question right now has been dramatically reduced on what happens inside China. The key element of how we think about this business stays the same as it always has been. We're focused on running our business the best we possibly can and I think we're doing a good job of that. So we've secured a lot of our volume outside of China, two thirds of it in these long term agreement to provide stability and volume and pricing for our customers and for us. We're obviously pursuing productivity aggressively this year in amount of cost we think we can improve including our raw materials and that's going to help offset - will offset the price declines that we expect this year. But most importantly to our story is on the asset side when we added capacity in China we took out capacity in UK and now we're down to our last asset in flake largest lowest cost asset back with integrated coal and our tow capacity that we have left matches that flake. So we're focused on how we fill that remaining capacity, that excess capacity including what declines may come with their innovation, so as I just told you in the beginning of this call we're seeing tremendous success in textiles, we're also seeing success in the non-olefins where we're going to get strong double digit growth this year over last year in this space. And while the margins on tow, they're decent attractive margins somewhere to sort of company average. And that's how we feel these assets and driver - earnings growth net for this business. And so we're going to repurpose those assets - this excess capacity to markets where we see attractive growth, the ability to value them up over time and where markets actually grow and that's what we've done for 90 years in cellulosic and we'll keep doing it.

Thank you.

Our next question comes from a Lawrence Alexander with Jefferies.

Hi, it's Dan Rizzo on for Lawrence. How are you doing guys?

Doing good.

You mentioned mix –we've talked a lot about mix improvement and how that can help drive - help support growth, I was wondering if the productivity efforts and cost controls can also add to margin improvement over the next two to three years.

Well, over the next two to three years what we've been talking about is we do have cost productivity goals. To some degree those are being used to help offset some of the increase in manufacturing costs, some of the turnaround cost et cetera. So our productivity is helping us grow in the right places, but you all will see some growth in some of the SG&A and R&D areas. Manufacturing does an outstanding job offsetting inflation and trying to give us a little bit more than that, but again those investments what we call cost increases they are investments and you need to see those in great increases because that's what drives the future growth profile of this company.

Okay, thanks. And then with the solar fill volumes should we think about the cadence going forward that they'll be like a very strong period of say one to two quarters followed by some weakness, is that how it kind of plays out like over a period of quarters and years?

Yeah, these are these huge concentrated solar power arrays, these mirrors that are out and [indiscernible], so they're massive projects and once they finish the construction a couple weeks they fill the plane up with fluid, so you will literally build this inventory over like a year, year and a half and then you fill it, so it comes in chunky bits in quarters and across years. It's very attractive business, we love it, but it has a tendency to be a little chunky. The good news is the new revenue recognition method will smooth out all of that better because it will be more based on issue goods issue rather than delivered.

Thank you very much.

Our next question comes from Matthew Blair with Tudor Pickering & Holt.

Good morning Mark and Curt. I want to go back to the accounting impact Curt, I think you said that it provided about it $0.10 EPS boost in Q1, but would not affect really to the full year number. Could you talk about when that $0.10 benefit would roll off as we progress through the rest of the year?

Sure, if I think about recognition of the new method compared to 2017 what you're going to see is you'll see a little bit of this same impact in the second quarter, but on a smaller degree it will start reversing in third quarter and you'll really feel the reversal in fourth.

Got it, thanks and then we've also seen some price increases come through from Eastman that were attributable to free surcharges, did you have any volume impact in the quarter due to logistics restrictions and what percent of your product is moved by truck?

So we first of all we haven't seen any impact on volume due to sort of logistical constraints, so we're meeting every customer need in order across the planet. Our supply chain does sort of miraculous things every day. When you think about how we didn't miss an order through the hurricanes last year, when you think about the phenomenal things we did of bringing acetic acid into the site during the coal gas interruption and then also managing a very complex inventory supply chain problem to serve all of our customers last year and not miss any orders through that recovery effort and we're really good at this. And so we've got it covered on the logistical front we are seeing higher cost like everyone else for the cost of trucking which isn't a huge portion of our cost structure I want to come to logistics. And we're pricing to recover it like everyone else is doing.

Thank you.

Let's make the next question the last one please.

Our final question comes from Arun Viswanathan with RBC Capital Markets.

Hi, there is a lot of volatility in Q1 on propylene and ethylene, I guess going forward, would you expect your propylene based products to increase given recent inflation or would that be a headwind? Thank you.

On the propylene side I think we - what I would say is, we expect some stability. It's been good pricing improvements through the first quarter, we expect those mostly to hold into the second and that business to be stable through the year. I think it's obviously a different story, but even on there the out lenders are pretty stable, so just down to the ball cap win where obviously prices were lower, which is really a second half impact. If you remember the second quarter has our shut down in it with one of our crackers, so we just are producing much excess ethylene in the second quarter. So this is really more about the second half when you think about that.

Thanks.

Okay, thanks again everyone for joining us this morning. A replay of this call will be available on our website later this morning. Thanks again.

This does conclude today's conference. Thank you for your participation. You may now disconnect.