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BORROWINGS | 3 Months Ended
--- | ---
Mar. 31, 2018
Debt Disclosure [Abstract] |
BORROWINGS | BORROWINGS
| March 31, |  | December 31,
(Dollars in millions) | 2018 |  | 2017
Borrowings consisted of: |  |  |
5.5% notes due November 2019 | $ | 250 |  |  | $ | 250 |
2.7% notes due January 2020 | 798 |  |  | 797 |
4.5% notes due January 2021 (1) | 192 |  |  | 185 |
3.6% notes due August 2022 (1) | 753 |  |  | 738 |
1.50% notes due May 2023 (2) | 920 |  |  | 895 |
7 1/4% debentures due January 2024 | 197 |  |  | 197 |
7 5/8% debentures due June 2024 | 43 |  |  | 43 |
3.8% notes due March 2025 | 689 |  |  | 690 |
1.875% notes due November 2026 (2) | 609 |  |  | 592 |
7.60% debentures due February 2027 | 195 |  |  | 195 |
4.8% notes due September 2042 | 493 |  |  | 493 |
4.65% notes due October 2044 | 871 |  |  | 871 |
Commercial paper and short term borrowings | 588 |  |  | 389 |
Credit facilities borrowings | 300 |  |  | 200 |
Capital leases and other | 2 |  |  | 5 |
Total borrowings | 6,900 |  |  | 6,540 |
Borrowings due within one year | 589 |  |  | 393 |
Long-term borrowings | $ | 6,311 |  |  | $ | 6,147 |
(1) | In January 2018, the Company entered into fixed-to-fixed cross-currency swaps with $180 million maturing 2021 and $320 million maturing 2022 and designated these swaps to hedge a portion of its net investment in a euro functional currency denominated subsidiary against foreign currency fluctuations. The hedged portion of the carrying value of the U.S. denominated 4.5% notes due January 2021 and 3.6% notes due August 2022 will fluctuate with changes in the euro exchange rate. During the three months ended March 31, 2018, pre-tax losses of $11 million were recognized in "Other comprehensive income (loss)" ("OCI") for revaluation of the hedged portion of these notes.
(2) | The carrying value of the euro-denominated 1.50% notes due May 2023 and 1.875% notes due November 2026 will fluctuate with changes in the euro exchange rate. The carrying value of these euro-denominated borrowings have been designated as non-derivative net investment hedges of a portion of the Company's net investments in euro functional-currency denominated subsidiaries to offset foreign currency fluctuations. During the three months ended March 31, 2018, pre-tax losses of $42 million were recognized in OCI for revaluation of these notes.
Credit Facilities and Commercial Paper Borrowings In December 2016, the Company borrowed $300 million under a five-year term loan agreement ("2021 Term Loan"). As of March 31, 2018, the 2021 Term Loan agreement balance outstanding was $200 million with an interest rate of 2.90 percent. As of December 31, 2017, the 2021 Term Loan agreement balance outstanding was $200 million with an interest rate of 2.60 percent. Borrowings under the 2021 Term Loan agreement are subject to interest at varying spreads above quoted market rates. The Company has access to a $1.25 billion revolving credit agreement (the "Credit Facility") expiring October 2021. Borrowings under the Credit Facility are subject to interest at varying spreads above quoted market rates and a commitment fee is paid on the total unused commitment. The Credit Facility provides available liquidity for general corporate purposes and supports commercial paper borrowings. Commercial paper borrowings are classified as short-term. At March 31, 2018 and December 31, 2017, the Company had no outstanding borrowings under the Credit Facility. At March 31, 2018, the Company's commercial paper borrowings were $452 million with a weighted average interest rate of 2.30 percent. At December 31, 2017, the Company's commercial paper borrowings were $280 million with a weighted average interest rate of 1.61 percent. In April 2018, the Company amended its $250 million accounts receivable securitization agreement (the "A/R Facility") to extend the maturity to April 2020. Eastman Chemical Financial Corporation ("ECFC"), a subsidiary of the Company, has an agreement to sell interests in trade receivables under the A/R Facility to a third party purchaser. Third party creditors of ECFC have first priority claims on the assets of ECFC before those assets would be available to satisfy the Company's general obligations. Borrowings under the A/R Facility are subject to interest rates based on a spread over the lender's borrowing costs, and ECFC pays a fee to maintain availability of the A/R Facility. In first quarter 2018, $100 million available under the A/R Facility was borrowed and remained outstanding at March 31, 2018 with an interest rate of 2.69 percent. At December 31, 2017, the Company had no borrowings under the A/R Facility. The Credit and A/R Facilities and other borrowing agreements contain customary covenants and events of default, some of which require the Company to maintain certain financial ratios that determine the amounts available and terms of borrowings. The Company was in compliance with all covenants at both March 31, 2018 and December 31, 2017. The Company has access to borrowings of up to €150 million ($185 million) under a receivables facility based on the discounted value of selected customer accounts receivable. This facility expires December 2020 and renews for another one year period if not terminated with 90 days notice by either party. These arrangements include receivables in the United States, Belgium, and Finland, and are subject to various eligibility requirements. Borrowings under this facility are subject to interest at an agreed spread above EURIBOR for euro denominated drawings and the counterparty's cost of funds for drawings in any other currencies, plus administration and insurance fees and are classified as short-term. At March 31, 2018, the Company's amount of outstanding borrowings under this facility were $136 million with a weighted average interest rate of 1.32 percent. At December 31, 2017, the Company's amount of outstanding borrowings under this facility were $109 million with a weighted average interest rate of 1.31 percent. Fair Value of Borrowings Eastman has classified its total borrowings at March 31, 2018 and December 31, 2017 under the fair value hierarchy as defined in the accounting policies in Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2017 Annual Report on Form 10-K. The fair value for fixed-rate debt securities is based on current market prices and is classified as Level 1. The fair value for the Company's other borrowings primarily under the Term Loan, commercial paper, A/R Facility, and a receivables facility equals the carrying value and is classified as Level 2. The Company had no borrowings classified as Level 3 as of March 31, 2018 and December 31, 2017.
|  |  |  | Fair Value Measurements at March 31, 2018
(Dollars in millions) |  | Recorded Amount March 31, 2018 |  | Total Fair Value |  | Quoted Prices in Active Markets for Identical Liabilities (Level 1) |  | Significant Other Observable Inputs (Level 2)
Total borrowings |  | $ | 6,900 |  |  | $ | 7,192 |  |  | $ | 6,303 |  |  | $ | 889 |
|  |  |  | Fair Value Measurements at December 31, 2017
(Dollars in millions) |  | Recorded Amount December 31, 2017 |  | Total Fair Value |  | Quoted Prices in Active Markets for Identical Liabilities (Level 1) |  | Significant Other Observable Inputs (Level 2)
Total borrowings |  | $ | 6,540 |  |  | $ | 6,980 |  |  | $ | 6,386 |  |  | $ | 594 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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