SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
DECEMBER 22, 1999
SOLUTIA INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OF INCORPORATION)
001-13255 43-1781797
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(COMMISSION (IRS EMPLOYER
FILE NUMBER) IDENTIFICATION NO.)
575 MARYVILLE CENTRE DRIVE, P.O. BOX 66760, ST. LOUIS, MISSOURI 63166-6760
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(314) 674-1000
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
Solutia Inc. (Solutia) hereby files Amendment No. 1 to its Form
8-K filed on January 4, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
(i) Financial statements of Viking Resins Group Holdings B.V.
and subsidiaries, as of and for the nine months ended
September 30, 1999, together with the related Independent
Auditors' Report, attached as Exhibit 99.1 and incorporated
by reference.
(b) Pro Forma Financial Information
(i) Unaudited Pro Forma Combined Condensed Statement of
Financial Position as of September 30, 1999,
including notes thereto.
(ii) Unaudited Pro Forma Combined Condensed Statements
of Income for the year ended December 31, 1998, and
the nine months ended September 30, 1999, including
notes thereto.
(c) Exhibits
See the Exhibit Index attached hereto and incorporated
herein by reference.
Unaudited Pro Forma Combined Condensed Financial Statements
The following unaudited pro forma combined condensed financial
statements give effect to the acquisition of Viking Resins Group Holdings
B.V. and subsidiaries (Viking Resins) using the purchase method of accounting,
after giving effect to the pro forma adjustments described in the notes to the
unaudited pro forma combined condensed financial statements. The unaudited
pro forma combined condensed financial statements were prepared from, and should
be read in conjunction with:
(a) The historical financial statements of Solutia Inc. for
the periods ended September 30, 1999, and December 31,
1998; and,
(b) The historical financial statements of Viking Resins
for the nine months ended September 30, 1999, attached to this
Form 8-K/A as Exhibit 99.1 and incorporated by reference.
It is necessary to present the unaudited pro forma combined condensed
financial information with cautions as to its interpretations and
usefulness. The purchase price allocations are based on preliminary
assumptions and are subject to revision. Accordingly, it is probable
that purchase accounting adjustments will differ from the pro forma
adjustments. The unaudited pro forma combined condensed financial
information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position
that would have occurred if the acquisition of Viking Resins by Solutia
had been consummated as of the dates indicated, nor is it necessarily
indicative of future operating results or financial position of Solutia.
Further, the unaudited pro forma combined condensed financial
information does not reflect any benefits or synergies that are expected
to result from the acquisition.
The Unaudited Pro Forma Combined Condensed Statement of Financial
Position gives effect to the acquisition as if it had occurred on
September 30, 1999, combining the statement of consolidated financial
position for Solutia as of September 30, 1999, and the consolidated
balance sheet for Viking Resins as of September 30, 1999. The Unaudited
Pro Forma Combined Condensed Statements of Income give effect to the
acquisition as if it had occurred at the beginning of the earliest
period presented, combining the results of Solutia for the year ended
December 31, 1998, and the nine months ended September 30, 1999, with the
results of Viking Resins for the year ended December 31, 1998, and the
nine months ended September 30, 1999, respectively.
In the fourth quarter of 1999, Solutia issued approximately $669 million
of commercial paper to finance the acquisition of Viking Resins. For
purposes of the unaudited pro forma combined condensed financial
statements, this commercial paper is assumed to be outstanding during
the periods presented.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF FINANCIAL POSITION
AS OF SEPTEMBER 30, 1999
(DOLLARS IN MILLIONS)
HISTORICAL
--------------------------
VIKING PRO FORMA PRO FORMA
SOLUTIA RESINS ADJUSTMENTS COMBINED
------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7 $ 55 $ -- $ 62
Trade receivables 442 90 -- 532
Miscellaneous receivables and prepaid expenses 131 8 -- 139
Deferred income tax benefit 103 -- -- 103
Inventories 337 59 1 <F3> 397
------ ---- ----- ------
TOTAL CURRENT ASSETS 1,020 212 1 1,233
NET PROPERTY, PLANT AND EQUIPMENT 1,094 189 26 <F3> 1,309
INVESTMENTS IN AFFILIATES 396 8 -- 404
LONG-TERM DEFERRED INCOME TAX BENEFIT 251 13 -- 264
GOODWILL 83 167 233 483
<F2>
<F3>
<F4>
<F5>
OTHER ASSETS 189 30 (10)<F2> 209
<F3>
------ ---- ----- ------
TOTAL ASSETS $3,033 $619 $ 250 $3,902
====== ==== ===== ======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 296 $ 45 $ -- $ 341
Accrued liabilities 527 43 3 <F5> 573
Short-term debt 76 11 669 <F2> 756
------ ---- ----- ------
TOTAL CURRENT LIABILITIES 899 99 672 1,670
LONG-TERM DEBT 597 444 (440)<F2> 601
POSTRETIREMENT LIABILITIES 970 21 -- 991
OTHER LIABILITIES 497 71 2 <F2> 570
<F4>
<F5>
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock 1 4 (4)<F1> 1
Additional contributed capital (137) 10 (10)<F1> (137)
Treasury stock (200) -- -- (200)
Unearned ESOP shares (21) -- -- (21)
Accumulated other comprehensive income -- (2) 2 <F1> --
Reinvested earnings 427 (28) 28 <F1> 427
------ ---- ----- ------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) 70 (16) 16 70
------ ---- ----- ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $3,033 $619 $ 250 $3,902
====== ==== ===== ======
See accompanying notes to unaudited pro forma combined condensed statement of financial position.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF FINANCIAL
POSITION AS OF SEPTEMBER 30, 1999
The pro forma adjustments to the Unaudited Pro Forma Combined Condensed
Statement of Financial Position were made to reflect the following:
[FN]
<F1> To record the write-off of Viking Resins' historical equity.
<F2> To record Solutia's issuance of $669 million of commercial paper
to fund the acquisition of Viking Resins, the refinancing of
debt assumed, as required by the purchase and sale agreements,
and the write-off of capitalized debt finance costs and accrued
interest payable related to the debt refinanced.
<F3> To record the excess of the purchase price of Viking Resins
over the fair market value of Viking Resins net assets, and to
adjust Viking Resins net assets acquired to estimated fair
market values.
<F4> To record liabilities assumed in the acquisition.
<F5> To record deferred taxes related to Notes (3) and (4) above,
based on an effective tax rate of 32%.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN MILLIONS)
HISTORICAL
--------------------------
VIKING PRO FORMA PRO FORMA
SOLUTIA RESINS ADJUSTMENTS COMBINED
------------------------------------------------------------
NET SALES $2,094 $382 $(11)<F4> $2,465
Cost of goods sold 1,613 278 2 <F1> 1,893
------ ---- ---- ------
GROSS PROFIT 481 104 (13) 572
Marketing expenses 108 25 (11)<F4> 122
Administrative expenses 91 25 -- 116
Technological expenses 58 12 -- 70
Amortization expense 2 7 8 <F1> 17
------ ---- ---- ------
OPERATING INCOME 222 35 (10) 247
Equity income from affiliates 26 -- -- 26
Interest expense (30) (31) 3 <F2> (58)
Other income (expense) - net 10 1 -- 11
------ ---- ---- ------
INCOME BEFORE INCOME TAXES 228 5 (7) 226
Income taxes 73 10 (2)<F3> 81
------ ---- ---- ------
NET INCOME (LOSS) $ 155 $ (5) $ (5) $ 145
====== ==== ==== ======
BASIC EARNINGS PER SHARE $1.40 $1.31
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DILUTED EARNINGS PER SHARE $1.34 $1.25
===== =====
Weighted-average equivalent shares (in millions):
Basic 111.1 111.1
Effect of dilutive securities:
Common share equivalents - common stock
issuable upon exercise of outstanding stock
options 4.5 4.5
----- -----
Diluted 115.6 115.6
===== =====
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN MILLIONS)
HISTORICAL
----------------------------
VIKING PRO FORMA PRO FORMA
SOLUTIA RESINS ADJUSTMENTS COMBINED
-------------------------------------------------------------
NET SALES $2,835 $533 $(15)<F4> $3,353
Cost of goods sold 2,085 384 2 <F1> 2,471
------ ---- ---- ------
GROSS PROFIT 750 149 (17) 882
Marketing expenses 145 61 (15)<F4> 191
Administrative expenses 136 30 -- 166
Technological expenses 83 20 -- 103
Amortization expense -- 2 18 <F1> 20
------ ---- ---- ------
OPERATING INCOME 386 36 (20) 402
Equity income from affiliates 25 -- -- 25
Interest expense (43) (8) (30)<F2> (81)
Other income (expense) - net 7 2 -- 9
------ ---- ---- ------
INCOME BEFORE INCOME TAXES 375 30 (50) 355
Income taxes 126 12 (17)<F3> 121
------ ---- ---- ------
NET INCOME $ 249 $ 18 $(33) $ 234
====== ==== ==== ======
BASIC EARNINGS PER SHARE $2.16 $2.03
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DILUTED EARNINGS PER SHARE $2.03 $1.91
===== =====
Weighted-average equivalent shares (in millions):
Basic 115.5 115.5
Effect of dilutive securities:
Common share equivalents - common stock
issuable upon exercise of outstanding stock
options 7.3 7.3
----- -----
Diluted 122.8 122.8
===== =====
See accompanying notes to unaudited pro forma combined condensed statements of income.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
AND THE YEAR ENDED DECEMBER 31, 1998
The pro forma adjustments to the Unaudited Pro Forma Combined Condensed
Statements of Income were made to reflect the following:
[FN]
<F1> To record additional depreciation and amortization expense
resulting from the fair market value adjustments to property,
plant and equipment and goodwill recorded in connection with
the acquisition.
<F2> To record interest expense related to the issuance of $669
million of commercial paper to fund the acquisition.
<F3> To record the income tax effects of the tax-deductible pro
forma adjustments in Notes 1 and 2, based on an effective tax
rate of 32.0% for the nine months ended September 30, 1999,
and 33.6% for the year ended December 31, 1998.
<F4> To reclassify to conform to Solutia's presentation.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SOLUTIA INC.
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(Registrant)
/s/ James M. Sullivan
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Vice President and Controller
(Principal Accounting Officer)
DATE: March 6, 2000
EXHIBIT INDEX
These exhibits are numbered in accordance with the Exhibit
Table of Item 601 of Regulation S-K.
Exhibit
Number Description
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2 1. Agreement, dated November 10, 1999, for the sale and
purchase of class A shares, preference shares and loan
stock and the cancellation of warrants in Viking Resins
Group Holdings B.V. between (a) Solutia Inc., as
purchaser, (b) the holders of the A shares, preference
shares and loan stock as sellers, and (c) the
warrantholders, plus identification of contents of
omitted schedules and agreement to furnish supplementally
a copy of any omitted schedule to the Securities and
Exchange Commission upon request (incorporated herein by
reference to Exhibit 2.1 of Solutia's Form 8-K filed
January 4, 2000).
2. Agreement, dated December 22, 1999, for the sale and
purchase of class B shares in Viking Resins Group
Holdings B.V. between Helmut Strametz, as seller and
Solutia Inc., as purchaser, plus (a) identification of
contents of omitted schedules and agreement to furnish
supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request and (b) a
schedule identifying substantially identical documents
between Solutia Inc. and the other minority shareholders
(incorporated herein by reference to Exhibit 2.2 of
Solutia's Form 8-K filed January 4, 2000).
3. Agreement, dated December 21, 1999, for the sale and
purchase of class B shares in Viking Resins Group
Holdings B.V. between Heinrich Otto Geidt, as seller and
Solutia Inc., as purchaser, plus identification of
contents of omitted schedules and agreement to furnish
supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request
(incorporated herein by reference to Exhibit 2.3 of
Solutia's Form 8-K filed January 4, 2000).
23 1. Consent of Deloitte & Touche Accountants.
99 1. Financial statements of Viking Resins Group Holdings B.V. and
subsidiaries as of and for the nine months ended September 30,
1999.
2. Press release dated December 22, 1999, issued by Solutia
Inc., announcing the completion of Solutia's acquisition
of the Vianova Resins business (incorporated herein by
reference to Exhibit 99.1 of Solutia's Form 8-K filed
January 4, 2000).
3. Press release dated November 11, 1999, issued by Solutia
Inc., announcing Solutia's agreement to acquire the
Vianova Resins business (incorporated by reference to
Exhibit 99.1 of Solutia's Form 8-K filed November 12,
1999).