| | EXHIBIT 99.1 |
| 575 Maryville Centre Drive St. Louis, Missouri 63141, USA www.solutia.com |
FOR IMMEDIATE RELEASE | NEWS |
|
Media: Melissa Zona +1.314.674.5555 Investors: Susannah Livingston +1.314.674.8914 |
Solutia Reports Fourth Quarter and Full-Year 2011 Results
ST LOUIS – January 27, 2012
Fourth Quarter Highlights
| • | Net sales of $526 million; an 8% increase from the same period in 2010 |
| • | Diluted Earnings per Share from continuing operations of $.45 |
| • | Adjusted Earnings per Share (“Adjusted EPS”) from continuing operations of $.49, a 36% increase from the same period in 2010 |
| • | Completed strategic acquisition of Southwall Technologies Inc. |
Full-Year Highlights
| • | Net sales of $2,097 million; an 8% increase from the same period in 2010 |
| • | Diluted earnings per share from continuing operations of $2.16 |
| • | Adjusted EPS of $2.00, a 27% increase from the same period in 2010 |
| • | Debt paydown of $127 million, reducing debt to $1,224 million |
Note: See reconciliation tables below for adjustments made to U.S. GAAP financial measures and discussion of items affecting results.
“In 2011, Solutia achieved record revenue performance and maintained strong margins despite a challenging economic environment. The strength of our global businesses and diversity of end-markets continues to allow Solutia to deliver consistent financial results characterized by steady growth, solid cash flow generation and a strong balance sheet,” said Jeffry N. Quinn, chairman, president and chief executive officer of Solutia Inc.
Fourth Quarter 2011: Consolidated Results from Continuing Operations
Solutia Inc. (NYSE: SOA) today reported net sales for the fourth quarter 2011 of $526 million, up $37 million or 8 percent from the same period in 2010. Adjusting for the divestiture of certain other rubber chemicals businesses, sales were up $51 million or 10 percent. Reported income from continuing operations attributable to Solutia was $54 million for the fourth quarter 2011, up $11 million from the same period in 2010. The fourth quarter of 2011 was impacted by certain events affecting comparability (detailed below), which resulted in a net after-tax charge of $5 million. Excluding these items, income increased $16 million. Adjusted EBITDA (defined below) in the fourth quarter of 2011 totaled $121 million, up $5 million from the same period in 2010. Adjusted EPS totaled $.49, up $.13 or 36 percent from the same period in 2010 as a result of higher sales volumes, a favorable selling price/raw material cost spread, lower interest expense and a lower tax rate. These improvements were partially offset by higher R&D expenditures and the loss of earnings resulting from the divestiture of certain other rubber chemicals businesses.
Full-Year 2011: Consolidated Results from Continuing Operations
Net sales for the full year 2011 were $2,097 million, an increase of 8 percent as compared to 2010. Adjusting for acquisitions and the divestiture of certain other rubber chemicals businesses, sales were up $168 million or 9 percent. Income from continuing operations attributable to Solutia was $262 million in 2011 compared to $87 million in 2010. These results were impacted by certain events affecting comparability (detailed below), which resulted in a net after-tax gain of $19 million in 2011 and a net after-tax loss of $101 million in 2010. After consideration of these items in both periods, Adjusted Earnings increased by $55 million, from $188 million in 2010 to $243 million in 2011. Adjusted EBITDA totaled $518 million in 2011 versus $504 million from the same period in 2010. Adjusted EPS totaled $2.00 in 2011, up $.43 from the same period in 2010. This increase in Adjusted EPS was primarily due to higher sales volumes and improved product mix, lower annual incentive compensation expense, lower interest expense and a lower tax rate. These improvements were partially offset by an unfavorable selling price/raw material cost spread, increased R&D expenditures, higher depreciation and amortization, and the loss of earnings from the divestiture of certain other rubber chemicals businesses.
Segment Data
In order to aid understanding of Solutia’s business performance, the results of its business segments are presented on an adjusted basis and reconciled to the comparable GAAP measures in the tables below.
Advanced Interlayers Segment
Advanced Interlayers’ fourth quarter 2011 net sales totaled $225 million, an increase of $3 million or 1 percent from the same period in 2010. Adjusted EBITDA decreased $4 million to $46 million for the fourth quarter of 2011 compared to the prior year period. This earnings decrease was primarily due to lower average selling prices and volumes in the Vistasolar® EVA encapsulants business, partially offset by a favorable selling price/raw material cost spread on Saflex® PVB interlayer . Advanced Interlayers’ 2011 annual net sales totaled $897 million, an increase of $69 million or 8 percent from the same period in 2010. Adjusted EBITDA increased $4 million to $194 million for 2011 compared to the prior year period. This earnings increase was primarily due to higher sales volumes of Saflex® PVB interlayer, lower manufacturing cost and lower annual incentive compensation expense, partially offset by lower average selling prices and volumes of Vistasolar® EVA encapsulants and an unfavorable selling price/raw material cost spread on Saflex® PVB interlayer.
Performance Films Segment
Performance Films’ fourth quarter 2011 net sales totaled $62 million, an increase of $8 million or 15 percent from the same period in 2010. Adjusted EBITDA decreased $1 million to $5 million for the fourth quarter of 2011 compared to the prior year period. This earnings decrease was primarily due to increased selling costs as resources were added to support the future growth of the business and higher manufacturing costs, substantially offset by higher sales volumes and improved product mix. Performance Films’ 2011 annual net sales totaled $298 million, an increase of $46 million or 18 percent from the same period in 2010. Adjusted EBITDA increased $7 million to $55 million for 2011 compared to the prior year period. This earnings increase was primarily due to higher sales volumes and improved product mix, partially offset by higher manufacturing costs. Selling and research and development costs were also higher year-on-year as we invested in resources to progress future growth.
Technical Specialties Segment
Technical Specialties’ fourth quarter 2011 net sales totaled $239 million, an increase of $26 million or 12 percent from the same period in 2010. Adjusting for divested other rubber chemicals businesses, sales were up $40 million or 19 percent. Adjusted EBITDA increased $8 million to $83 million for the fourth quarter of 2011 compared to the prior year period. This increase in earnings was primarily due to higher sales volumes particularly in the Therminol business and a favorable selling price/raw material cost spread, partially offset by higher manufacturing costs, higher R&D expenditures and the loss of earnings resulting from the divestiture of certain other rubber chemicals businesses. Technical Specialties’ 2011 annual net sales totaled $902 million, an increase of $42 million or 5 percent from the same period in 2010. Adjusting for divested other rubber chemicals businesses, sales were up $98 million or 11 percent. Adjusted EBITDA decreased $3 million to $321 million for 2011 compared to the prior year period. This decrease in earnings was primarily due to an unfavorable selling price/raw material cost spread , higher R&D expenditures and the loss of earnings resulting from the divestiture of other rubber chemicals businesses. This was partially offset by higher sales volumes and lower annual incentive compensation expense.
Unallocated and Other
Unallocated and other expenses reduced Adjusted EBITDA by $13 million, a $2 million improvement compared to the fourth quarter of 2010, primarily attributed to lower expenses associated with our annual incentive compensation program.
Leverage and Liquidity
The Company ended the year with net debt (gross debt less cash) of $1,224 million, and liquidity of $391 million. Total paydown of debt for 2011 was $127 million. Cash provided by continuing operations less capital expenditures for the 12 months ended December 2010 was $127 million compared to $230 million for the same period in 2010. The $103 million year-over-year decrease in cash flow was primarily attributed to increased working capital due to strategic building of inventory and increased growth capital expenditures. A cash dividend of $.0375 per share on the Company’s common stock is payable on March 15, 2012 to shareholders of record at the close of business on February 15.
Outlook
The Company expects that global automotive, architectural, energy solutions and the electronics markets will grow in 2012, driven predominantly by China. The Company premises modest price increases in certain product lines targeted predominantly to recover higher raw material costs, and a weaker Euro. Operating margins for 2012 are expected to be consistent with or slightly higher than those realized in 2011 as we expect to operate at higher utilization rates to meet the stronger demand profile. These gains will be partially offset by increased raw material and energy costs, which are expected to increase 4.5 percent, and the negative earnings impact associated with a weaker Euro. As previously announced, in 2012, Solutia expects to generate revenue between $2.125 billion and $2.275 billion and Adjusted EPS of $2.00 to $2.30.
Fourth Quarter Conference Call
There will be no conference call for fourth quarter earnings.
Important Information Regarding Outlook
There is no guarantee that Solutia will achieve its projected financial expectation for 2012 which is based on management estimates, currently available information and assumptions which management believes to be reasonable. Such forward-looking statements are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management. See “Forward-Looking Statements” below.
| SOLUTIA INC. | |
| CONSOLIDATED STATEMENT OF OPERATIONS | |
| (Dollars in millions, except per share amounts) | |
| (Unaudited) | |
| | | | | | | | | | |
| | | Twelve Months Ended December 31, | | | Three Months Ended December 31, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| Net Sales | | $ | 2,097 | | | $ | 1,950 | | | $ | 526 | | | $ | 489 | |
| Cost of goods sold | | | 1,463 | | | | 1,342 | | | | 373 | | | | 346 | |
| Gross Profit | | | 634 | | | | 608 | | | | 153 | | | | 143 | |
| Selling, general and administrative expenses | | | 250 | | | | 261 | | | | 63 | | | | 67 | |
| Research and development expenses | | | 24 | | | | 18 | | | | 7 | | | | 5 | |
| Other operating income, net | | | (44 | ) | | | (2 | ) | | | (1 | ) | | | (4 | ) |
| Operating income | | | 404 | | | | 331 | | | | 84 | | | | 75 | |
| Interest expense | | | (101 | ) | | | (139 | ) | | | (23 | ) | | | (30 | ) |
| Other income (loss), net | | | (2 | ) | | | 19 | | | | (1 | ) | | | 4 | |
| Loss on debt extinguishment or modification | | | (4 | ) | | | (89 | ) | | | - | | | | - | |
Income from Continuing Operations Before Income Tax Expense | | | 297 | | | | 122 | | | | 60 | | | | 49 | |
| Income tax expense | | | 30 | | | | 31 | | | | 5 | | | | 5 | |
| Income for Continuing Operations | | | 267 | | | | 91 | | | | 55 | | | | 44 | |
| Loss from Discontinued Operations, net of tax | | | - | | | | (9 | ) | | | - | | | | 4 | |
| Net Income | | | 267 | | | | 82 | | | | 55 | | | | 48 | |
| Net Income attributable to noncontrolling interest | | | 5 | | | | 4 | | | | 1 | | | | 1 | |
| Net Income attributable to Solutia | | $ | 262 | | | $ | 78 | | | $ | 54 | | | $ | 47 | |
| | | | | | | | | | | | | | | | | |
| Basic Income (Loss) per Share attributable to Solutia: | | | | | | | | | | | | | | | | |
| Income from Continuing Operations | | $ | 2.19 | | | $ | 0.73 | | | $ | 0.45 | | | $ | 0.36 | |
| Income (Loss) from Discontinued Operations | | | - | | | | (0.08 | ) | | | - | | | | 0.03 | |
| Net Income attributable to Solutia | | $ | 2.19 | | | $ | 0.65 | | | $ | 0.45 | | | $ | 0.39 | |
| | | | | | | | | | | | | | | | | |
| Diluted Income (Loss) per Share attributable to Solutia: | | | | | | | | | | | | | | | | |
| Income from Continuing Operations | | $ | 2.16 | | | $ | 0.73 | | | $ | 0.45 | | | $ | 0.36 | |
| Income (Loss) from Discontinued Operations | | | - | | | | (0.08 | ) | | | - | | | | 0.03 | |
| Net Income attributable to Solutia | | $ | 2.16 | | | $ | 0.65 | | | $ | 0.45 | | | $ | 0.39 | |
| SOLUTIA INC. | |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |
| (Dollars in millions, except per share amounts) | |
| (Unaudited) | |
| | | December 31, | | | December 31, | |
| | | 2011 | | | 2010 | |
| ASSETS | | | | | | |
| Current Assets: | | | | | | |
| Cash and cash equivalents | | $ | 113 | | | $ | 191 | |
| Trade receivables, net of allowances of $6 in 2011and $4 in 2010 | | | 236 | | | | 228 | |
| Miscellaneous receivables | | | 75 | | | | 75 | |
| Inventories | | | 335 | | | | 275 | |
| Prepaid expenses and other assets | | | 27 | | | | 27 | |
| Current assets of discontinued operations | | | 1 | | | | 5 | |
| Total Current Assets | | | 787 | | | | 801 | |
| Net Property, Plant and Equipment | | | 945 | | | | 911 | |
| Goodwill | | | 783 | | | | 740 | |
| Net Identified Intangible Assets | | | 916 | | | | 938 | |
| Other Assets | | | 95 | | | | 147 | |
| Total Assets | | $ | 3,526 | | | $ | 3,537 | |
| | | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | | |
| Current Liabilities: | | | | | | | | |
| Accounts payable | | $ | 186 | | | $ | 173 | |
| Accrued liabilities | | | 227 | | | | 235 | |
| Current liabilities of discontinued operations | | | 8 | | | | 15 | |
| Total Current Liabilities | | | 421 | | | | 423 | |
| Long-Term Debt | | | 1,337 | | | | 1,463 | |
| Postretirement Liabilities | | | 308 | | | | 308 | |
| Environmental Remediation Liabilities | | | 227 | | | | 244 | |
| Deferred Tax Liabilities | | | 190 | | | | 238 | |
| Non-current Liabilities of Discontinued Operations | | | 18 | | | | 25 | |
| Other Liabilities | | | 98 | | | | 97 | |
| | | | | | | | | |
| Equity: | | | | | | | | |
| Common stock at $0.01 par value; (500,000,000 shares authorized, 123,316,852 and | | | | | | | | |
| 122,655,811 shares issued in 2011 and 2010, respectively) | | | 1 | | | | 1 | |
| Additional contributed capital | | | 1,651 | | | | 1,634 | |
| Treasury shares, at cost (1,247,183 in 2011 and 772,686 in 2010) | | | (13 | ) | | | (6 | ) |
| Accumulated other comprehensive loss | | | (279 | ) | | | (194 | ) |
| Accumulated deficit | | | (441 | ) | | | (703 | ) |
| Total Shareholders’ Equity attributable to Solutia | | | 919 | | | | 732 | |
| Equity attributable to noncontrolling interest | | | 8 | | | | 7 | |
| Total Equity | | | 927 | | | | 739 | |
| Total Liabilities and Equity | | $ | 3,526 | | | $ | 3,537 | |
| | | | | | | | | |
| SOLUTIA INC. | |
| CONSOLIDATED STATEMENT OF CASH FLOWS | |
| (Dollars in millions) | |
| (Unaudited) | |
| | | Year Ended December 31, | |
| | | 2011 | | | 2010 | |
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS OPERATING ACTIVITIES: | | | | | | |
| Net income (loss) | | $ | 267 | | | $ | 82 | |
| Adjustments to reconcile net income (loss) to net cash provided by operations: | | | | | | | | |
| Loss from discontinued operations, net of tax | | | - | | | | 9 | |
| Depreciation and amortization | | | 125 | | | | 117 | |
| Pension contributions in excess of expense | | | (39 | ) | | | (57 | ) |
| Other postretirement benefit contributions in excess of expense | | | (9 | ) | | | (18 | ) |
| Amortization of debt issuance costs and discount | | | 5 | | | | 8 | |
| Deferred income taxes | | | (17 | ) | | | (7 | ) |
| Shared-based compensation expense | | | 16 | | | | 20 | |
| Other charges: | | | | | | | | |
| Non-cash loss on deferred debt issuance cost and debt discount write-off | | | - | | | | 80 | |
| Other (gains) charges, including restructuring expenses | | | (16 | ) | | | 27 | |
| Changes in assets and liabilities, net of acquisitions and divestitures: | | | | | | | | |
| Income taxes payable | | | - | | | | (1 | ) |
| Trade receivables | | | (10 | ) | | | 42 | |
| Inventories | | | (51 | ) | | | (22 | ) |
| Accounts payable | | | 7 | | | | (4 | ) |
| Environmental remediation liabilities | | | (17 | ) | | | (18 | ) |
| Other assets and liabilities | | | (29 | ) | | | 38 | |
| Cash Provided by Operations—Continuing Operations | | | 232 | | | | 296 | |
| Cash Used in Operations—Discontinued Operations | | | (10 | ) | | | (22 | ) |
| Cash Provided by Operations | | | 222 | | | | 274 | |
| | | | | | | | | |
| INVESTING ACTIVITIES: | | | | | | | | |
| Property, plant and equipment purchases | | | (105 | ) | | | (66 | ) |
| Acquisition payments, net of cash acquired | | | (114 | ) | | | (371 | ) |
| Asset disposals and investment sales | | | 60 | | | | 8 | |
| Cash Used in Investing Activities—Continuing Operations | | | (159 | ) | | | (429 | ) |
| Cash Provided by Investing Activities—Discontinued Operations | | | 1 | | | | - | |
| Cash Used in Investing Activities | | | (158 | ) | | | (429 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES: | | | | | | | | |
| Proceeds from long-term debt obligations | | | - | | | | 1,144 | |
| Payment of long-term debt obligations | | | (127 | ) | | | (958 | ) |
| Debt issuance costs | | | - | | | | (27 | ) |
| Payment of short-term debt obligations | | | (4 | ) | | | (16 | ) |
| Purchase of treasury shares | | | (7 | ) | | | (4 | ) |
| Dividends attributable to noncontrolling interest | | | (4 | ) | | | (4 | ) |
| Other, net | | | (2 | ) | | | (8 | ) |
| Cash Provided by (Used in) Financing Activities | | | (144 | ) | | | 127 | |
| | | | | | | | | |
| Effect of Exchange Rate Changes on Cash and Cash Equivalents | | | 2 | | | | (24 | ) |
| | | | | | | | | |
| DECREASE IN CASH AND CASH EQUIVALENTS | | | (78 | ) | | | (52 | ) |
| CASH AND CASH EQUIVALENTS: | | | | | | | | |
| Beginning of period | | | 191 | | | | 243 | |
| End of period | | $ | 113 | | | $ | 191 | |
The tables below are provided to assist the reader with comparability between the three months ended December 31, 2011 and comparable period in 2010 by providing consolidated and segment net sales, Segment Profit (1) and Adjusted EBITDA (2).
Consolidated and segment Net Sales, Segment Profit(1) and Adjusted EBITDA(2) three months ended December 2011 and 2010 |
| | | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | |
From Continuing Operations (in millions) | | 2011 | | Adjust- ments(3) | | 2011 As Adjusted | | | 2010 | | Adjust- ments(3) | | 2010 As Adjusted | | | % change | |
| Net Sales | | | | | | | | | | | | | | | | | |
| Advanced Interlayers | | $ | 225 | | | | $ | 225 | | | $ | 222 | | | | $ | 222 | | | | 1 | % |
| Performance Films | | | 62 | | | | | 62 | | | | 54 | | | | | 54 | | | | 15 | % |
| Technical Specialties | | | 239 | | | | | 239 | | | | 213 | | | | | 213 | | | | 12 | % |
| Unallocated and Other | | | - | | | | | - | | | | - | | | | | - | | | | n/m | |
| Total | | $ | 526 | | | | $ | 526 | | | $ | 489 | | | | $ | 489 | | | | 8 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Segment Profit(1) and Adjusted EBITDA(2) | | | | | | | | | | | | | | |
| Advanced Interlayers | | $ | 46 | | $ | - | | $ | 46 | | | $ | 49 | | $ | 1 | | $ | 50 | | | | -8 | % |
| Performance Films | | | 5 | | | - | | | 5 | | | | 6 | | | - | | | 6 | | | | -17 | % |
| Technical Specialties | | | 83 | | | - | | | 83 | | | | 79 | | | (4 | ) | | 75 | | | | 11 | % |
| Unallocated and Other | | | (21 | ) | | 8 | | | (13 | ) | | | (23 | ) | | 8 | | | (15 | ) | | | 13 | % |
| Total | | $ | 113 | | $ | 8 | | $ | 121 | | | $ | 111 | | $ | 5 | | $ | 116 | | | | 4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated and segment Net Sales, Segment Profit(1) and Adjusted EBITDA(2) twelve months ended December 2011 and 2010 |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Twelve Months Ended December 31, | |
From Continuing Operations (in millions) | | | 2011 | | Adjust- ments(3) | | 2011 As Adjusted | | | | 2010 | | Adjust- ments(3) | | 2010 As Adjusted | | | % change | |
| Net Sales | | | | | | | | | | | | | | | | | | | | | | | | |
| Advanced Interlayers | | $ | 897 | | | | | $ | 897 | | | $ | 828 | | | | | $ | 828 | | | | 8 | % |
| Performance Films | | | 298 | | | | | | 298 | | | | 252 | | | | | | 252 | | | | 18 | % |
| Technical Specialties | | | 902 | | | | | | 902 | | | | 860 | | | | | | 860 | | | | 5 | % |
| Unallocated and Other | | | - | | | | | | - | | | | 10 | | | | | | 10 | | | | -100 | % |
| Total | | $ | 2,097 | | | | | $ | 2,097 | | | $ | 1,950 | | | | | $ | 1,950 | | | | 8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Segment Profit(1) and Adjusted EBITDA(2) | | | | | | | | | | | | | | | | | | |
| Advanced Interlayers | | $ | 194 | | $ | - | | $ | 194 | | | $ | 188 | | $ | 2 | | $ | 190 | | | | 2 | % |
| Performance Films | | | 53 | | | 2 | | | 55 | | | | 46 | | | 2 | | | 48 | | | | 15 | % |
| Technical Specialties | | | 338 | | | (17 | ) | | 321 | | | | 316 | | | 8 | | | 324 | | | | -1 | % |
| Unallocated and Other | | | (63 | ) | | 11 | | | (52 | ) | | | (87 | ) | | 29 | | | (58 | ) | | | 10 | % |
| Total | | $ | 522 | | $ | (4 | ) | $ | 518 | | | $ | 463 | | $ | 41 | | $ | 504 | | | | 3 | % |
| (1) | Segment Profit is defined as income from continuing operations attributable to Solutia before interest expense, loss on debt extinguishment or modification, income taxes, depreciation and amortization. Foreign currency gains/losses are included in Unallocated and Other. |
| | |
| (2) | Adjusted EBITDA is Segment Profit (as defined above), excluding Adjustments (as defined below). |
| | |
| (3) | Adjustments include Events Affecting Comparability (see separate table), cost overhang associated with the shutdown of the Primary Accelerators business and non-cash share-based compensation expense. |
Use of Non-U.S. GAAP Financial Information and Reconciliation to Comparable GAAP Number
For the purpose of this press release, the company has used certain financial measures such as Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per Share that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. The presentation of Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per Share are intended to supplement investors’ understanding of our operating performance. These non-GAAP financial measures are not intended to be performance measures that should be regarded as an alternative to or more meaningful than other GAAP measures and may not be comparable to similarly titled measures presented by other companies.
Adjusted EBITDA is defined as income from continuing operations attributable to Solutia before interest expense, loss on debt extinguishment or modification, income taxes, depreciation and amortization, certain gains and losses that affect comparability, cost overhang associated with discontinued operations and non-cash share-based stock compensation expense. Adjusted Earnings is defined as income from continuing operations attributable to Solutia excluding certain gains and losses, net of tax, that affect comparability. Adjusted Earnings per Share is defined as Adjusted Earnings divided by weighted average diluted shares outstanding. We believe Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per Share assist us in comparing our performance over various reporting periods and against our peers on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance. Further, we believe Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per Share are useful to investors. The compensation committee of our board of directors determines the annual incentive compensation for certain members of our management based, in part, using each of these financial measures.
We are unable to reconcile our Adjusted EPS projections to comparable GAAP numbers because of the difficulty in predicting adjustments that would be required such as, but not limited to, income taxes, depreciation, amortization and other items.
| Reconciliation of Net Income attributable to Solutia to Adjusted EBITDA |
| | | | | | | | | | | | | |
| | | Three Months | | | Three Months | | | Twelve Months | | | Twelve Months | |
| | | Ended | | | Ended | | | Ended | | | Ended | |
| | | December 31, | | | December 31, | | | December 31, | | | December 31, | |
| (in millions) | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| Net Income attributable to Solutia | | $ | 54 | | | $ | 47 | | | $ | 262 | | | $ | 78 | |
| Plus: (Income) Loss from Discontinued Operations | | | - | | | | (4 | ) | | | - | | | | 9 | |
| Income from Continuing Operations attributable to Solutia | | $ | 54 | | | $ | 43 | | | $ | 262 | | | $ | 87 | |
| | | | | | | | | | | | | | | | | |
| Plus: | | | | | | | | | | | | | | | | |
| Income tax expense | | | 5 | | | | 5 | | | | 30 | | | | 31 | |
| Interest expense | | | 23 | | | | 30 | | | | 101 | | | | 139 | |
| Loss on debt extinguishment or modification | | | - | | | | - | | | | 4 | | | | 89 | |
| Depreciation and amortization | | | 31 | | | | 33 | | | | 125 | | | | 117 | |
| | | | | | | | | | | | | | | | | |
| Subtotal | | $ | 113 | | | $ | 111 | | | $ | 522 | | | $ | 463 | |
| | | | | | | | | | | | | | | | | |
| Plus: | | | | | | | | | | | | | | | | |
Events affecting comparability (1) | | | 5 | | | | - | | | | (22 | ) | | | 18 | |
Non-cash share-based compensation expense (2) | | | 3 | | | | 5 | | | | 18 | | | | 20 | |
| Primary Accelerators cost overhang | | | - | | | | - | | | | - | | | | 3 | |
| | | | | | | | | | | | | | | | | |
| Adjusted EBITDA | | $ | 121 | | | $ | 116 | | | $ | 518 | | | $ | 504 | |
| (1) | See table of Summary of Events Affecting Comparability |
| | |
| (2) | Non-cash share-based compensation expense for the twelve months ended December 31, 2011 includes a charge of $2 related to an executive officer separation agreement; see table of Summary of Events Affecting Comparability |
| Reconciliation of Income from Continuing Operations attributable to Solutia to Adjusted Earnings and Calculation of Adjusted Earnings Per Share | |
| | | | | | | | | | | | | |
| | | Three Months | | | Three Months | | | Twelve Months | | | Twelve Months | |
| | | Ended | | | Ended | | | Ended | | | Ended | |
| | | December 31, | | | December 31, | | | December 31, | | | December 31, | |
| (in millions, except per share amounts) | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| Income from Continuing Operations attributable to Solutia | | $ | 54 | | | $ | 43 | | | $ | 262 | | | $ | 87 | |
| | | | | | | | | | | | | | | | | |
Plus: Events affecting comparability, net of tax (1) | | | 5 | | | | - | | | | (19 | ) | | | 101 | |
| | | | | | | | | | | | | | | | | |
| Adjusted Earnings | | $ | 59 | | | $ | 43 | | | $ | 243 | | | $ | 188 | |
| | | | | | | | | | | | | | | | | |
| Weighted average diluted shares outstanding | | | 121.1 | | | | 120.8 | | | | 121.3 | | | | 120.0 | |
| Adjusted Earnings per Share | | $ | 0.49 | | | $ | 0.36 | | | $ | 2.00 | | | $ | 1.57 | |
| (1) | See table of Summary of Events Affecting Comparability |
| Summary of Events Affecting Comparability |
| | | | | | | | | | | | | |
| | | Three Months | | | Three Months | | | Twelve Months | | | Twelve Months | |
| | | Ended | | | Ended | | | Ended | | | Ended | |
| | | December 31, | | | December 31, | | | December 31, | | | December 31, | |
| (in millions) | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | | | | | | | | | | | |
| Plant closures, divestitures and other restructuring: | | | | | | | | | | | | |
| Severance, pension settlement and other charges related to the relocation of our European regional headquarters | | $ | 1 | | | $ | - | | | $ | 14 | | | $ | - | |
| Severance costs on executive officer separation agreement | | | - | | | | - | | | | 3 | | | | - | |
| Severance, pension settlement and retraining costs related to the general corporate restructuring | | | - | | | | 2 | | | | - | | | | 6 | |
| Charges related to the closure of certain European other rubber chemicals manufacturing facilities | | | - | | | | 1 | | | | - | | | | 10 | |
| Loss related to the sale of the European Plastic Products business | | | - | | | | - | | | | - | | | | 5 | |
| Gain related to the sale of our remaining 2% ownership interest in Ascend Performance Materials Holdings, Inc. | | | - | | | | - | | | | (29 | ) | | | - | |
| Gain on certain other rubber chemicals divestitures | | | - | | | | (5 | ) | | | (17 | ) | | | (5 | ) |
| Acquisition-related costs: | | | | | | | | | | | | | | | | |
| Acquisition-related and start-up expenses on acquired businesses | | | 4 | | | | - | | | | 7 | | | | 8 | |
| Other unusual (gains) / charges: | | | | | | | | | | | | | | | | |
| Gain on settlement of tax indemnification case | | | - | | | | - | | | | | | | | (8 | ) |
| Settlement of a contractual dispute | | | - | | | | 2 | | | | - | | | | 2 | |
| Adjusted EBITDA Impact | | $ | 5 | | | $ | - | | | $ | (22 | ) | | $ | 18 | |
| Non-cash share-based compensation expense on executive officer separation agreement | | | - | | | | - | | | | 2 | | | | - | |
| Charges related to the modification, early extinguishment or repurchase of debt | | | - | | | | - | | | | 4 | | | | 89 | |
| Pre-tax Income Statement Impact | | $ | 5 | | | $ | - | | | $ | (16 | ) | | $ | 107 | |
| Income tax impact | | | - | | | | - | | | | (3 | ) | | | (6 | ) |
| After-tax Income Statement Impact | | $ | 5 | | | $ | - | | | $ | (19 | ) | | $ | 101 | |
Advanced Interlayers Highlights
| | | | | | | | | | | | | | |
| $ Millions | | | Q4 2011 | | | | Q4 2010 | | | Y-o-Y Chg | | | | 2011 | | | | 2010 | | | Y-o-Y Chg | |
| Net Sales | | $ | 225 | | | $ | 222 | | | | 1 | % | | $ | 897 | | | $ | 828 | | | | 8 | % |
Adj. EBITDA (1) | | $ | 46 | | | $ | 50 | | | | -8 | % | | $ | 194 | | | $ | 190 | | | | 2 | % |
| Adj. EBITDA margin | | | 20 | % | | | 23 | % | | | -13 | % | | | 22 | % | | | 23 | % | | | -4 | % |
| | | | | Qtr Y-o-Y | | | | 2011 Y-o-Y | | |
| Net Sales change | | Volume/Mix | | | -4 | % | | | -1 | % | |
| | | Selling Price | | | 4 | % | | | 3 | % | |
| | | Currency | | | 1 | % | | | 3 | % | |
| | | Acquisitions | | | --- | | | | 3 | % | |
| | | Total | | | 1 | % | | | 8 | % | |
| | | | | | | | | | | | |
Adj. EBITDA (1) change | | Volume/Mix (2) | | $ | (6 | ) | | $ | 8 | | |
| | | Selling Price | | $ | 10 | | | $ | 23 | | |
| | | Currency | | | --- | | | | --- | | |
| | | Raw Material Prices | | $ | (8 | ) | | $ | (39 | ) | |
| | | Mfg. Cost | | | --- | | | $ | 5 | | |
| | | SG&A/Other | | | --- | | | $ | 7 | | |
| | | Total | | $ | (4 | ) | | $ | 4 | | |
| (1) | Non GAAP measure, see reconciliations |
| (2) | Volume/Mix includes impact of acquisitions |
Performance Films Highlights
| | | | | | | | | | | | | | | | | |
| $ Millions | | | Q4 2011 | | | | Q4 2010 | | | Y-o-Y Chg | | | | 2011 | | | | 2010 | | | Y-o-Y Chg | |
| Net Sales | | $ | 62 | | | $ | 54 | | | | 15 | % | | $ | 298 | | | $ | 252 | | | | 18 | % |
Adj. EBITDA (1) | | $ | 5 | | | $ | 6 | | | | -17 | % | | $ | 55 | | | $ | 48 | | | | 15 | % |
| Adj. EBITDA margin | | | 8 | % | | | 11 | % | | | -27 | % | | | 18 | % | | | 19 | % | | | -5 | % |
| | | | | | Qtr Y-o-Y | | | | 2011 Y-o-Y | | |
| Net Sales change | | Volume/Mix | | | 9 | % | | | 8 | % | |
| | | Selling Price | | | 2 | % | | | 1 | % | |
| | | Currency | | | --- | | | | --- | | |
| | | Acquisitions | | | 4 | % | | | 9 | % | |
| | | Total | | | 15 | % | | | 18 | % | |
| | | | | | | | | | | | |
Adj. EBITDA (1) change | | Volume/Mix (2) | | $ | 4 | | | $ | 16 | | |
| | | Selling Price | | $ | 1 | | | $ | 3 | | |
| | | Currency | | | --- | | | | --- | | |
| | | Raw Material Prices | | $ | (1 | ) | | $ | (2 | ) | |
| | | Mfg. Cost | | $ | (2 | ) | | $ | (4 | ) | |
| | | SG&A/Other | | $ | (3 | ) | | $ | (6 | ) | |
| | | Total | | $ | (1 | ) | | $ | 7 | | |
| | | Total | | $ | 8 | | | $ | (3 | ) | |
| (1) | Non GAAP measure, see reconciliations |
| (2) | Volume/Mix includes impact of acquisitions |
Technical Specialties Highlights
| | | | | | | | | | | | | | |
| $ Millions | | | Q4 2011 | | | | Q4 2010 | | | Y-o-Y Chg | | | | 2011 | | | | 2010 | | | Y-o-Y Chg | |
| Net Sales | | $ | 239 | | | $ | 213 | | | | 12 | % | | $ | 902 | | | $ | 860 | | | | 5 | % |
Adj. EBITDA (1) | | $ | 83 | | | $ | 75 | | | | 11 | % | | $ | 321 | | | $ | 324 | | | | -1 | % |
| Adj. EBITDA margin | | | 35 | % | | | 35 | % | | | --- | | | | 36 | % | | | 38 | % | | | -5 | % |
| | | | | Qtr Y-o-Y | | | | 2011 Y-o-Y | | |
| Net Sales change | | Volume/Mix | | | 9 | % | | | 4 | % | |
| | | Selling Price | | | 9 | % | | | 6 | % | |
| | | Currency | | | 1 | % | | | 2 | % | |
| | | Divestitures | | | -7 | % | | | -7 | % | |
| | | Total | | | 12 | % | | | 5 | % | |
| | | | | | | | | | | | |
Adj. EBITDA (1) change | | Volume/Mix | | $ | 9 | | | $ | 16 | | |
| | | Selling Price | | $ | 18 | | | $ | 50 | | |
| | | Currency | | | 1 | | | | 2 | | |
| | | Raw Material Prices | | $ | (16 | ) | | $ | (63 | ) | |
| | | Mfg. Cost | | $ | (1 | ) | | $ | 2 | | |
| | | SG&A/Other | | $ | (2 | ) | | $ | 1 | | |
| | | Divestitures | | $ | (1 | ) | | $ | (11 | ) | |
| | | Total | | $ | 8 | | | $ | (3 | ) | |
| (1) | Non GAAP measure, see reconciliations |
###
Notes to Editor: SOLUTIA and the Radiance Logo™ and all other trademarks listed below are trademarks of Solutia Inc. and/or its affiliates.
Forward Looking Statements
This press release may contain forward-looking statements, which can be identified by the use of words such as “believes,” “expects,” “may,” “will,” “intends,” “plans,” “estimates” or “anticipates,” or other comparable terminology, or by discussions of strategy, plans or intentions. These statements are based on management’s current expectations and assumptions about the industries in which Solutia operates. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, those risk and uncertainties described in Solutia’s most recent Annual Report on Form 10-K, including under “Cautionary Statement About Forward Looking Statements” and “Risk Factors”, and Solutia’s quarterly reports on Form 10-Q. These reports can be accessed through the “Investors” section of Solutia’s website at www.solutia.com. Solutia disclaims any intent or obligation to update or revise any forward-looking statements in response to new information, unforeseen events, changed circumstances or any other occurrence.
Corporate Profile
Solutia is a market-leading performance materials and specialty chemicals company. The company focuses on providing solutions for a better life through a range of products, including: Saflex® polyvinyl butyral interlayers for glass lamination and for photovoltaic module encapsulation and VISTASOLAR® ethylene vinyl acetate films for photovoltaic module encapsulation; LLumar®, Vista™, EnerLogic®, FormulaOne®, Gila®, V-KOOL®, Huper Optik®, IQue™, Sun-X™ and Nanolux™ aftermarket performance films for automotive and architectural applications; XIR® and Heat Mirror® performance films that are incorporated into aftermarket window films, laminated glass products and suspended insulated glass units for use in automotive and architectural applications. Flexvue™ advanced film component solutions for solar and electronic technologies; and technical specialties products including Crystex® insoluble sulfur, Santoflex® PPD antidegradants, Therminol® heat transfer fluids and Skydrol® aviation hydraulic fluids. Solutia's businesses are world leaders in each of their market segments. With its headquarters in St. Louis, Missouri, USA, the company operates globally with approximately 3,400 employees in more than 50 worldwide locations. More information is available at www.Solutia.com.
Source: Solutia Inc.
St. Louis
1/27/2012
