Exhibit 99.1 [Solutia Logo] News Solutions for a better life.(TM) SOLUTIA INC. 575 Maryville Centre Drive St. Louis, Missouri 63141 P.O. Box 66760 St. Louis, Missouri 63166-6760 FOR IMMEDIATE RELEASE - --------------------------------------------------------------------------- Contact: Liesl M. Livingston (314) 674-7777 SOLUTIA REPORTS FOURTH QUARTER LOSS OF $.05 PER SHARE, EXCLUDING PREVIOUSLY ANNOUNCED CHARGES ST. LOUIS, JAN. 24, 2002/PRNEWSWIRE/ SUMMARY o Total revenue of $643 million, 12 percent below fourth quarter 2000 o Per share loss of 5 cents, excluding previously announced charges, versus earnings of 12 cents for the fourth quarter of 2000, excluding charges o Recession-like demand and the effects of aggressive competitor actions in many of Solutia's global markets have more than offset the benefits of improving raw material and energy costs and Solutia's $100 million cost reduction initiative o Outstanding debt was reduced to $1.31 billion, approximately $57 million below third quarter 2001 levels o Progress on Performance Films' and Specialty Products' growth initiatives continues despite weak global economic conditions o Pharmaceutical Services achieves its $60 million sales target o Agreement reached in principle with ExxonMobil Chemical Company to purchase Solutia's interest in the AES joint venture FINANCIAL SUMMARY ($M, EXCEPT PER SHARE AMOUNTS) AS REPORTED CHARGES EXCLUDING CHARGES ----------- ------- ----------------- 4Q 2001 Net Loss $(101) $(96) $(5) Loss Per Share $(0.97) $(0.92) $(0.05) 4Q 2000 Net Income/(Loss) $(84) $(96) $12 Earnings/(Loss) Per Share $(0.81) $(0.93) $0.12 2001 Net Income/(Loss) $(59) $(79) $20 Earnings/(Loss) Per Share $(0.57) $(0.76) $0.19 2000 Net Income/(Loss) $49 $(74) $123 Earnings/(Loss) Per Share $0.46 $(0.68) $1.14 2 Solutia Inc. (NYSE:SOI) reported a fourth quarter 2001 net loss of $5 million, or 5 cents per share, on net sales of $643 million, excluding previously announced charges of $96 million, or 92 cents per share, taken during the fourth quarter of 2001. The charges cover Solutia's share of restructuring costs at its Astaris and Flexsys joint ventures, increases to environmental and self-insurance reserves, additional severance costs and the write-down of certain non-performing assets. Net income for the fourth quarter of 2000 was $12 million, or 12 cents per share, on sales of $731 million, excluding $96 million, or 93 cents per share, of after-tax charges associated with the $100 million cost reduction initiative and the write-down of certain non-performing, non-strategic assets. Including previously announced charges, Solutia reported a net loss for the fourth quarter 2001 of $101 million, or 97 cents per share, compared to a net loss of $84 million, or 81 cents per share, for the fourth quarter of 2000. Solutia's results for the quarter versus the year ago period were positively impacted by the effects of significantly lower raw material costs and the implementation of its $100 million cost reduction program. However, these benefits were more than offset by the effects of lower average selling prices and lower sales volumes associated with recession-like demand and aggressive competitor actions in many of Solutia's global markets. In addition, unfavorable manufacturing volume variances from significantly reduced capacity utilization rates continue to adversely impact the company's profitability. "Solutia's businesses have weathered a very challenging year by aggressively implementing our cost reduction program, which delivered more than $50 million to Solutia's bottom line in 2001. We are focusing on our straight-forward portfolio strategy and delivering on the opportunities in the portfolio that can provide shorter-term appreciation in cash flow and earnings growth," John Hunter, chairman and chief executive officer said. "In these uncertain economic times, we remain committed to prudently managing our costs, focusing our growth and capital spending on those opportunities that can deliver the most immediate return to our shareholders and positioning our businesses to take advantage of a future global economic recovery," said Hunter. 3 NET SALES As reported, net sales for the fourth quarter of 2001 decreased 12 percent from the fourth quarter of 2000. The quarter over quarter decline can be attributed to a combination of lower sales volumes and lower average selling prices associated with depressed global demand and increased competitive pressures. The decline was partially offset by the effects of favorable foreign currency fluctuations. SEGMENT DATA Performance Films' net sales for the fourth quarter of 2001 decreased 6 percent compared to the same period of 2000 on lower volumes and lower average selling prices due to competitive pressures, offset partially by favorable foreign currency fluctuations. Performance Films' profitability decreased $10 million due to the impact of lower sales and higher manufacturing volume variances associated with lower capacity utilization rates. Modest improvements in raw material costs and the benefits from cost reductions were partially offsetting. Net sales for Specialty Products were essentially even with the fourth quarter of 2000. Lower volumes were offset by increased average selling prices and favorable foreign currency fluctuations primarily in the Resins and Additives product line. Demand for services offered by our Pharmaceutical Services businesses remains strong. Excluding charges in both the fourth quarter of 2000 and 2001, Specialty Products segment profitability increased $8 million over the prior year quarter primarily because of the benefits of the cost reduction initiative, lower raw material costs and the effects of higher average pricing. Including charges, segment profit in the fourth quarter of 2001 was $7 million compared to a segment loss of $13 million in the fourth quarter of 2000. Integrated Nylon's net sales for the fourth quarter of 2001 decreased by 22 percent versus 2000 due to lower sales volumes and lower average selling prices in all of its businesses. Excluding charges in both the fourth quarter of 2000 and 2001, the Integrated Nylon segment was at break-even for the fourth quarter of 2001, down $14 million from the previous year. Lower raw 4 material and energy costs and the benefits from the $100 million cost reduction initiative, were more than offset by the impact of lower sales and higher manufacturing volume variances associated with lower capacity utilization rates. Including charges, the Integrated Nylon segment had a loss of $13 million in the fourth quarter of 2001, compared to a loss of $72 million in the fourth quarter of 2000. CASH FLOW Solutia reported free cash flow of $65 million for the quarter ended December 31, 2001, after funding $29 million of capital expenditures. While severance payments and low earnings continue to limit free cash flow, strong working capital management helped deliver positive free cash flow for the quarter. Solutia reported negative free cash flow of $42 million for the full year after funding $94 million of capital expenditures and approximately $67 million in restructuring costs. FULL YEAR DATA For the year ended December 31, 2001, Solutia reported net income of $20 million, or $.19 per share, on net sales of $2.8 billion, excluding $79 million, or 76 cents per share, of net after-tax charges which were comprised of the costs associated with the actions taken in the fourth quarter and a gain from an insurance settlement related to an incident that occurred at a facility in 2000. Net income for the year ended December 31, 2000 totaled $123 million, or $1.14 per share, on net sales of $3.2 billion, excluding $74 million, or 68 cents per share, of net after-tax charges taken in 2000. Including the charges in both years, Solutia reported a net loss for the year ended December 31, 2001 of $59 million, or 57 cents per share, compared with net earnings of $49 million, or 46 cents per share, for the year ended December 31, 2000. OTHER EVENTS An agreement has been reached in principle with ExxonMobil Chemical Company to purchase Solutia's interest in the AES joint venture. The sale, which is slated to close during the first quarter of 2002, is expected to generate a modest gain. The net sales proceeds from the transaction will be used to pay down debt. 5 OUTLOOK In 2002, Solutia expects to benefit from more normalized raw material and energy costs, lower personnel and contractor costs from its $100 million cost reduction program, prudent management of capital and growth spending, slightly improved manufacturing operating rates and future pricing actions. Due to these factors, Solutia anticipates a return to modest profitability in the first quarter of 2002. FORWARD LOOKING STATEMENTS This press release contains forward-looking statements regarding Solutia's earnings capability, profitability, future growth, revenue and cost reduction. These statements are based on current expectations, but actual results may differ materially, depending on such important factors as world economic conditions, competitive pressures, raw material and energy pricing, currency fluctuations, production capacity, customers acceptance of new products, effect of cost reduction initiatives, success in implementing pricing actions, operating rates, ability to manage capital and growth spending and other factors identified in Solutia's Annual Report on Form 10-K for the period ended December 31, 2000 and Quarterly Report on Form 10-Q for the period ended September 30, 2001. These reports are filed with the U.S. Securities and Exchange Commission and can be accessed through Solutia's investor Internet site at http://investor.solutia.com. CORPORATE PROFILE Solutia (http://www.Solutia.com) uses world-class skills in applied chemistry to create value-added solutions for customers, whose products improve the lives of consumers every day. Solutia is a world leader in performance films for laminated safety glass and after-market applications; resins and additives for high-value coatings; process development and scale-up services for pharmaceutical fine chemicals; specialties such as water treatment chemicals, heat transfer fluids and aviation hydraulic fluid and an integrated family of nylon products including high-performance polymers and fibers. Solutia .... Solutions For A Better Life. CONFERENCE CALL Solutia will host a conference call on Friday, Jan. 25, 2002 at 9:00 am Central Time to discuss its performance. The call will be simulcast on Solutia's homepage at http://investor.solutia.com. The call will be available to investors on the Internet site for approximately 5 days following the call. -oOo- Source: Solutia, Inc. St. Louis Date 01/24/02 6 Solutia Inc. Statement of Consolidated Income (Dollars in millions, except per share amounts) Three Months Ended Twelve Months Ended December 31, December 31, ---------------------- ---------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Net Sales $ 643 $ 731 $ 2,817 $ 3,185 Cost of Goods Sold 599 746 2,388 2,702 -------- -------- -------- -------- Gross Profit 44 (15) 429 483 Marketing Expenses 44 43 175 172 Administrative Expenses 46 40 160 172 Technological Expenses 18 20 66 82 Amortization Expense 9 9 34 33 -------- -------- -------- -------- Operating Income (Loss) (73) (127) (6) 24 Equity Earnings (Loss) from Affiliates (34) 14 (13) 35 Interest Expense (24) (20) (90) (83) Gain on Sale of Polymer Modifiers business - - - 73 Other Income (Expense) - Net (2) (8) 32 (8) -------- -------- -------- -------- Income (Loss) Before Income Taxes (133) (141) (77) 41 Income Taxes (Benefit) (32) (57) (18) (8) -------- -------- -------- -------- Net Income (Loss) $ (101) $ (84) $ (59) $ 49 -------- -------- -------- -------- Diluted Earnings Per Share $ (0.97) $ (0.81) $ (0.57) $ 0.46 -------- -------- -------- -------- Weighted Average Equivalent Shares 104.4 104.3 103.9 107.5 -------- -------- -------- -------- Depreciation and Amortization $ 48 $ 52 $ 184 $ 191 -------- -------- -------- -------- Property, Plant and Equipment Purchases $ 29 $ 41 $ 94 $ 221 -------- -------- -------- -------- 7 Solutia Inc. Segment Data (Dollars in millions) Three Months Ended Twelve Months Ended December 31, December 31, ---------------------- ---------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Net Net Net Net Segment: Sales Sales Sales Sales -------- -------- -------- -------- Performance Films $ 137 $ 145 $ 591 $ 692 Specialty Products 215 214 918 1,004 Integrated Nylon 291 372 1,308 1,490 -------- -------- -------- -------- Segment Totals 643 731 2,817 3,186 Elimination of Intersegment Sales: Integrated Nylon - - - (1) -------- -------- -------- -------- Consolidated Totals $ 643 $ 731 $ 2,817 $ 3,185 -------- -------- -------- -------- Segment: Profit Profit Profit Profit -------- -------- -------- -------- Performance Films $ 7 $ 17 $ 61 $ 106 Specialty Products (a), (b), (c) 7 (13) 77 32 Integrated Nylon (d), (e) (13) (72) 11 (29) -------- -------- -------- -------- Segment Totals 1 (68) 149 109 Corporate Expenses (f), (g), (h) (74) (64) (121) (107) Equity Earnings (Loss) from Affiliates (h), (i), (j) (34) 14 (13) 37 Interest Expense (24) (20) (90) (83) Gain on Sale of Polymer Modifiers business (k) - - - 73 Other Income (Expense)-Net (h), (l), (m) (2) (3) (2) 12 -------- -------- -------- -------- Income (Loss) Before Income Taxes $ (133) $ (141) $ (77) $ 41 -------- -------- -------- -------- <FN> (a) Specialty Products profit for periods ended December 31, 2001, includes charges related to the termination of a former CarboGen AG owner ($3 million pretax, $2 million aftertax). (b) Specialty Products profit for the twelve months ended December 31, 2001, includes a gain from an insurance settlement associated with the explosion and fire that destroyed the Vianova printing inks and phenolics production facility in Wiesbaden, Germany ($28 million pretax, $17 million aftertax). (c) Specialty Products profit for the periods ended December 31, 2000, includes an impairment charge to write off chlorobenzenes' production equipment ($15 million pretax, $10 million aftertax), and for the twelve months ended December 31, 2000, a restructuring charge related to exiting operations at the Port Plastics site in Addyston, Ohio ($8 million pretax, $5 million aftertax). (d) Integrated Nylon profit for the periods ended December 31, 2001, includes charges to write down certain non-performing assets ($12 million pretax, $8 million aftertax). 8 (e) Integrated Nylon profit for the periods ended December 31, 2000, includes charges to write off certain non-performing and non-strategic production assets ($76 million pretax, $47 million aftertax), and reserve for advances and working capital loans primarily to an Asian equity affiliate ($10 million pretax, $6 million aftertax). For the twelve months ended December 31, 2000, charges to write off certain investments in Asia based upon indicators that the loss in their values was permanent ($14 million pretax, $8 million aftertax), and accrue for payment of debt obligations associated with one of the investments ($5 million pretax, $3 million aftertax). (f) For the periods ended December 31, 2001, amount includes charges primarily to increase environmental and self-insurance reserves and cover additional severance costs associated with the $100 million cost reduction initiative ($66 million pretax, $42 million aftertax). (g) For the periods ended December 31, 2000, amount includes a restructuring charge for workforce reductions of approximately 700 people across all world areas and functions of the company and closure of certain non-strategic facilities ($53 million pretax, $33 million aftertax). (h) For the twelve months ended December 31, 2000, amounts include charges related to the formation and startup of the Astaris joint venture ($16 million pretax, $11 million aftertax). (i) For the periods ended December 31, 2001, amount includes charges for the closure of Astaris' elemental phosphorus production facility in Pocatello, Idaho ($37 million pretax, $37 million aftertax), and the closure of Flexsys' 4NDPA manufacturing facility in Newport, Wales ($4 million pretax, $4 million aftertax). (j) For the twelve months ended December 31, 2000, amount includes a charge associated with the impairment and closure of certain manufacturing operations in the UK for the Flexsys joint venture ($13 million pretax, $13 million aftertax). (k) For the twelve months ended December 31, 2000, amount includes a gain on the sale of the Polymer Modifiers business and related manufacturing facilities ($73 million pretax, $46 million aftertax). (l) For the periods ended December 31, 2001, amount includes a charge to write down an e-commerce investment based upon indicators that the loss in its value was permanent ($5 million pretax, $3 million aftertax). (m) For the twelve months ended December 31, 2000, amount includes a gain on the sale of P4 Production L.L.C., a phosphorus manufacturing venture ($15 million pretax, $9 million aftertax). 9 Solutia Inc. Statement of Consolidated Financial Position (Dollars in millions) Dec. 31, Dec. 31, ASSETS 2001 2000 -------- -------- Current Assets: Cash and cash equivalents $ 23 $ 19 Receivables 442 532 Deferred income tax benefit 153 107 Inventories 303 357 -------- -------- Total Current Assets 921 1,015 -------- -------- Net Property, Plant and Equipment 1,143 1,205 Investments in Affiliates 313 351 Net Goodwill 386 421 Net Identified Intangible Assets 224 217 Long-term Deferred Income Tax Benefit 254 190 Other Assets 167 182 -------- -------- Total Assets $ 3,408 $ 3,581 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Liabilities: Accounts payable $ 233 $ 359 Accrued liabilities 500 496 Short-term debt 683 494 -------- -------- Total Current Liabilities 1,416 1,349 -------- -------- Long-Term Debt 627 784 Postretirement Liabilities 947 941 Other Liabilities 531 541 Shareholders' Equity (Deficit): Common stock 1 1 Additional contributed capital (113) (113) Treasury stock (257) (288) Unearned ESOP shares (1) (9) Accumulated other comprehensive loss (144) (108) Reinvested earnings 401 483 -------- -------- Total Shareholders' Equity (Deficit) (113) (34) -------- -------- Total Liabilities and Shareholders' Equity (Deficit) $ 3,408 $ 3,581 -------- -------- 10 Solutia Inc. Statement of Consolidated Cash Flow (Dollars in millions) Twelve Months Ended December 31, ---------------------- 2001 2000 -------- -------- Increase (Decrease) in Cash and Cash Equivalents Operating Activities: Net income (loss) $ (59) $ 49 Adjustments to reconcile to Cash From Operations Items that did not use (provide) cash: Deferred income taxes (96) 23 Depreciation and amortization 184 191 Amortization of deferred credits (14) (12) Restructuring expenses and other charges-net 127 195 Other 5 (15) Working capital changes that provided (used) cash: Trade receivables 47 69 Inventories 57 (18) Accounts payable and accrued liabilities (134) (64) Other 39 (1) Net pretax gains from asset disposals (36) (79) Other items (76) (94) -------- -------- Cash From Operations 44 244 -------- -------- Investing Activities: Property, plant and equipment purchases (94) (221) Acquisition and investment payments, net of cash acquired (35) (110) Property disposals and investment proceeds, net 43 220 -------- -------- Cash From Investing Activities (86) (111) -------- -------- Financing Activities: Net change in short-term debt obligations 185 (23) Net change in long-term debt obligations (148) (13) Treasury stock purchases - (106) Dividend payments (4) (4) Common stock issued under employee stock plans 13 4 -------- -------- Cash From Financing Activities 46 (142) -------- -------- Increase (Decrease) in Cash and Cash Equivalents 4 (9) Cash and Cash Equivalents: Beginning of Year 19 28 -------- -------- End of Period $ 23 $ 19 -------- --------