Exhibit 99.1
[SOLUTIA LETTERHEAD]
FOR IMMEDIATE RELEASE
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Contact: Investor Relations - Liesl M. Livingston 314-674-7777
Media - Beth L. Rusert 314-674-8527
SOLUTIA REPORTS CONSOLIDATED FOURTH
QUARTER LOSS OF 20 CENTS PER SHARE,
IN LINE WITH RECENT GUIDANCE
HIGHLIGHTS
o Agreement to sell Resins, Additives and Adhesives announced; reported as
discontinued operations
o Company initiates strategic realignment and additional cost cutting actions
o Debt reduced by $56 million in the quarter
SALES SUMMARY
FROM CONTINUING OPERATIONS ($M)
SALES CHANGE FROM CHANGE FROM
4Q 2002 4Q 2001 3Q 2002
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Performance Products $230 +1% -7%
Integrated Nylon $332 +14% +1%
Total Net Sales $562 +8% -2%
ST. LOUIS, Jan. 31, 2003/PRNewswire-FirstCall/ -- Solutia Inc.
(NYSE:SOI) today reported a consolidated net loss of $21 million, or
20 cents per share, for the fourth quarter of 2002 versus a net loss of
$101 million, or 97 cents per share, for the fourth quarter of 2001. These
results are in line with the Company's guidance provided on January 9, 2003.
Excluding a charge of $4 million, or 4 cents per share, in the
fourth quarter of 2002 and charges of $96 million, or 92 cents per share, in
the fourth quarter of 2001, Solutia reported a net loss of $17 million, or
16 cents per share, in the fourth quarter of 2002 and a net loss of
$5 million or 5 cents per share, in the fourth quarter of 2001.
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"During the quarter, Solutia experienced significant revenue growth
over the prior year's quarter. However, consolidated earnings were adversely
impacted by lower equity earnings from joint ventures and higher interest
expense resulting from the Company's refinancing," noted John Hunter,
chairman and chief executive officer.
"Throughout this year, our employees have remained focused on the
actions that will continue to drive this company forward; strong cash
generation, reduction of debt and continued prudent funding of growth
initiatives. Despite the difficult and uncertain environment in which we
have been operating, we generated in excess of $100 million of free cash
flow in 2002 and were able to reduce our debt by $110 million over previous
year-end levels. In addition, the impending sale of the Resins, Additives
and Adhesives businesses, will place Solutia in a stronger financial
position going forward," Hunter stated.
"Looking ahead, difficult market conditions, including relatively
weak demand and elevated energy and raw material costs will continue to
challenge our businesses over the ensuing months. To combat this difficult
operating environment, and in anticipation of the sale of the Resins,
Additives and Adhesives businesses, Solutia realigned its businesses and
management structure in December 2002 into two operating segments:
Performance Products and Integrated Nylon. This strategic realignment, in
combination with additional downsizing and other cost cutting actions
currently being implemented, will result in a lower cost structure and a
more focused organization, both of which are critically important as we
manage through these uncertain times," he said.
CONSOLIDATED RESULTS
On a consolidated basis, Solutia reported a fourth quarter net loss
of $21 million, or 20 cents per share, on net sales of $692 million. The
fourth quarter 2002 net loss included a charge of $4 million, or 4 cents per
share, associated with the write-down of assets in the Flexsys rubber
chemicals joint venture. This compares to a net loss for the fourth quarter
of 2001 of $101 million, or 97 cents per share, on net sales of
$643 million. The net loss for the fourth quarter of 2001 included charges of
$96 million, or 92 cents per share, taken during the quarter for 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.
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Excluding charges in both periods, Solutia's consolidated net loss
for the fourth quarter versus the year-ago period increased $12 million, or
11 cents per share, due to elevated raw material and energy costs, lower
equity earnings from joint ventures and increased interest expense, offset
to some extent by higher sales prices, continued benefits from cost
reductions and lower amortization expense.
For the full year, Solutia reported a net loss of $151 million, or
$1.44 per share, which included a charge of $167 million, or $1.59 per
share, associated with the adoption of SFAS No. 142 and net charges of
$12 million, or 12 cents per share, comprised of a gain from the sale of the
AES joint venture, a charge for a litigation settlement, a non-cash pension
settlement and a charge associated with an asset write-down in the Flexsys
joint venture. This compares to a net loss of $59 million, or 57 cents per
share, for the full year ended December 31, 2001. The net loss for 2001
included the aforementioned charges of $96 million, or 92 cents per share,
taken during the fourth quarter, and a $17 million, or 16 cents per share,
gain from an insurance settlement.
Excluding charges in both periods, Solutia's 2002 net income
increased $8 million, or 8 cents per share, versus 2001 due to lower raw
material and energy costs, continued benefits from cost reductions and lower
amortization expense, partially offset by lower average selling prices and
higher interest expense.
RESULTS FROM CONTINUING OPERATIONS
For continuing operations, Solutia reported a fourth quarter net
loss of $17 million, or 16 cents per share, on net sales of $562 million.
Fourth quarter 2002 net income included the aforementioned charge of
$4 million, or 4 cents per share. This compares to a net loss from continuing
operations for the fourth quarter of 2001 of $102 million, or 98 cents per
share, on net sales of $518 million. The net loss from continuing operations
for the fourth quarter of 2001 included the aforementioned charges of
$96 million, or 92 cents per share.
For 2002, Solutia reported a net loss from continuing operations of
$8 million, or 8 cents per share, including $12 million, or 12 cents per
share, of the aforementioned charges. This compares to a net loss of
$81 million, or 78 cents per share, for the full year 2001. The net loss from
continuing operations for 2001 included aforementioned charges of
$96 million, or 92 cents per share.
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SEGMENT DATA
Performance Products' net sales for the fourth quarter of 2002
increased $3 million compared to the same period of 2001 primarily due to
strengthened foreign currencies and higher volumes, partially offset by
lower average selling prices. Net sales increased in the films' businesses
on a quarter over quarter basis as Solutia continues to enhance its customer
base.
For the full year, Performance Products' net sales decreased
$15 million primarily due to volume and price weakness in the chlorobenzenes
product line.
Excluding charges of $3 million taken in the fourth quarter 2001,
Performance Products' profitability in the quarter decreased $2 million
versus the prior-year quarter primarily due to higher raw material and
energy costs.
On a full year basis, excluding charges taken in the fourth quarter
of 2001, Performance Products' profitability decreased $2 million versus the
prior year due to losses in the chlorobenzenes product line, partially
offset by lower raw material and energy costs.
Integrated Nylon's net sales for the fourth quarter of 2002
increased $41 million compared to fourth quarter 2001 driven by higher
intermediates volumes and selling prices and stronger volumes in the nylon
plastics and polymers business.
2002 sales for Integrated Nylon decreased $12 million versus 2001
due primarily to lower average selling prices caused by weakness in the
North American economy.
Excluding charges in the prior year, Integrated Nylon's segment
profitability increased $11 million over the prior year quarter. This
improvement was driven primarily by improved selling prices, favorable
manufacturing variances, partially offset by higher year over year raw
material and energy costs.
Excluding charges in both periods, 2002 profitability for
Integrated Nylon increased $11 million versus the prior year due to lower
raw material and energy prices, partially offset by lower average selling
prices.
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RESULTS FROM DISCONTINUED OPERATIONS
For discontinued operations, Solutia reported a fourth quarter net
loss of $4 million, or 4 cents per share. This compares to net income from
discontinued operations for the fourth quarter of 2001 of $1 million, or
1 cent per share.
For the year, Solutia reported net income from discontinued
operations of $24 million, or 23 cents per share. This compares to net
income from discontinued operations of $22 million, or 21 cents per share,
for the full year ended December 31, 2001. The net income from discontinued
operations for 2001 included a gain of $17 million, or 16 cents per share,
from an insurance settlement.
Full year results from discontinued operations exclude certain
costs previously allocated to these businesses, which were required to be
reported in continuing operations. These costs are primarily administrative
in nature and impacted continuing operations by $10 million and $12 million
pre-tax for 2002 and 2001, respectively. As previously mentioned, the
Company is taking actions to eliminate these costs in 2003. In addition,
interest expense associated with debt that is required to be paid down with
the anticipated transaction proceeds was allocated to discontinued
operations, totaling $26 million and $20 million on a pre-tax basis for 2002
and 2001, respectively.
CASH FLOW
Solutia reported consolidated free cash flow (cash flow from
operations less capital expenditures) of $67 million for the fourth quarter,
after funding $17 million of capital expenditures. Focused working capital
management helped deliver strong free cash flow for the quarter. Solutia
reported free cash flow of $103 million for the full year 2002, after
funding $68 million of capital expenditures. This compares to negative free
cash flow of $50 million in 2001, after funding $94 million of capital
expenditures. The increase from 2001 is primarily attributable to higher
income tax refunds, lower working capital and lower restructuring costs.
DEBT REDUCTION
In the fourth quarter of 2002, Solutia reduced its debt by
approximately $56 million from third quarter levels, in addition to using
$150 million in cash proceeds from the July bond offering that had been held
in escrow to pay off the October 2002 maturity. For the full year, Solutia's
debt was reduced by $110 million.
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CONSENT DECREE
During the first quarter of 2003, Solutia anticipates approval of
the consent decree between the Company and the Environmental Protection
Agency relating to remediation in the Anniston, Alabama community. Upon
approval of the decree, Solutia plans to take a charge to increase its
environmental reserves to reflect additional environmental spending needed
to perform the work.
OUTLOOK
The Company anticipates that uncertain economic conditions will
remain in its marketplaces for the foreseeable future. Volatile raw material
and energy costs will also continue to impact operating results. Despite
these anticipated difficult conditions, the Company expects to continue
generating positive free cash flow.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements regarding
future sales, earnings, free cash flow and environmental reserves as well as
the expected sale of Solutia's Resins, Additives and Adhesives businesses
and the impact the transaction is expected to have on Solutia. These
statements are based on current expectations, but results may differ
materially, depending on such important factors as ability to obtain timely
regulatory approvals and satisfy other closing conditions, success in
managing changes resulting from this transaction and other factors. Actual
results for Solutia's remaining businesses may differ materially, depending
on such important factors as world economic conditions, competitive
pressures, gain or loss of significant customers, inability to consummate
sale of business, labor relations and disruption of operations, raw material
and energy pricing, currency fluctuations, success in implementing pricing
actions and managing spending, operating rates, exposure to product
liability and other litigation costs, environmental remediation, cost of
debt, and other factors identified in Solutia's Annual Report on Form 10-K
for the period ended December 31, 2001 and Quarterly Report on Form 10-Q for
the period ended Sept. 30, 2002. These reports are filed with the U.S.
Securities and Exchange Commission and can be accessed through Solutia's
investor Internet site at www.Solutia.com.
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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;
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 Fri., Jan. 31, 2003 at
9 a.m. Central Time to discuss its performance. The call will be simulcast on
Solutia's homepage at, http://www.solutia.com/pages/corporate/investors/
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investor_relations.asp under the presentations and speeches tab. The call
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will be available to investors on the Internet site for approximately five
days following the call.
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Source: Solutia Inc.
St. Louis
Date 1/31/03
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Solutia Inc.
Statement of Consolidated Income
(Dollars in millions, except per share amounts)
Unaudited
Three Months Ended Twelve Months Ended
December 31, December 31,
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2002 2001 2002 2001
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Net Sales $ 562 $ 518 $ 2,241 $ 2,268
Cost of Goods Sold 469 503 1,878 1,958
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Gross Profit 93 15 363 310
Marketing Expenses 37 35 147 142
Administrative Expenses 32 42 128 142
Technological Expenses 11 14 47 50
Amortization Expense 1 4 3 12
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Operating Income (Loss) 12 (80) 38 (36)
Equity Earnings (Loss) from Affiliates (4) (33) 13 (13)
Interest Expense (24) (19) (84) (70)
Other Income (Expense) - Net 1 (4) 14 (5)
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Loss Before Income Taxes (15) (136) (19) (124)
Income Taxes (Benefit) 2 (34) (11) (43)
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Loss Before Discontinued Operations
and Cumulative Effect of Change
in Accounting Principle (17) (102) (8) (81)
Income (Loss) from Discontinued
Operations, net of tax (4) 1 24 22
Cumulative Effect of Change in Accounting
Principle, net of tax - - (167) -
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Net Loss (21) (101) (151) (59)
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Loss Per Share $ (0.20) $ (0.97) $ (1.44) $ (0.57)
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Weighted Average Equivalent Shares 104.8 104.4 104.7 103.9
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Solutia Inc.
Segment Data
(Dollars in millions)
Unaudited
Three Months Ended Twelve Months Ended
December 31, December 31,
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2002 2001 2002 2001
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Net Net Net Net
Segment: Sales Sales Sales Sales
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Performance Products 230 227 945 960
Integrated Nylon 332 291 1,296 1,308
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Consolidated Totals $ 562 $ 518 $ 2,241 $ 2,268
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Segment: Profit Profit Profit Profit
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Performance Products (a) 7 6 78 77
Integrated Nylon (b), (c) 9 (14) 24 6
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Segment Totals 16 (8) 102 83
Corporate Expenses (d), (e) (7) (73) (61) (120)
Equity Earnings (Loss)
from Affiliates (f), (g) (2) (34) 14 (14)
Interest Expense (24) (19) (84) (70)
Other Income (Expense) - Net (h), (i) 2 (2) 10 (3)
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Loss Before Income Taxes $ (15) $ (136) $ (19) $ (124)
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<FN>
(a) Performance Products profit for periods ended December 31, 2001, includes
charges related to the termination of a former CarboGen AG owner ($3 million pretax).
(b) Integrated Nylon profit for the period ended December 31, 2002, includes a charge
related to the resolution of a construction dispute with the contractor of the
acrylonitrile plant in Alvin, Texas ($5 million pretax).
(c) Integrated Nylon profit for the periods ended December 31, 2001, includes charges to
write down certain non-performing assets ($12 million pretax).
(d) For the period ended December 31, 2002, corporate expenses include a non-cash pension
settlement charge ($13 million pretax).
(e) 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).
(f) For the periods ended December 31, 2002, amount includes charges for the write down of
production assets to fair market at Flexsys' facility in Nitro, West Virginia
($4 million pretax).
(g) 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), and the closure of Flexsys' 4NDPA manufacturing facility in
Newport, Wales ($4 million pretax).
(h) For the period ended December 31, 2002, the Company recorded a gain resulting from the
sale of the its 50 percent interest in the Advanced Elastomer Systems joint venture
($5 million pretax).
(i) 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).
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Solutia Inc.
Statement of Consolidated Financial Position
(Dollars in millions)
Unaudited
Dec. 31, Dec. 31,
ASSETS 2002 2001
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Current Assets:
Cash and cash equivalents $ 17 $ 23
Receivables and prepaids 384 379
Deferred income tax benefit 111 123
Inventories 262 242
Current Assets - Discontinued Operations 201 154
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Total Current Assets 975 921
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Net Property, Plant and Equipment 930 961
Investments in Affiliates 232 313
Net Goodwill 144 126
Net Identified Intangible Assets 66 64
Long-term Deferred Income Tax Benefit 290 248
Other Assets 273 187
Long-term Assets - Discontinued Operations 432 588
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Total Assets $ 3,342 $ 3,408
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 234 $ 195
Accrued liabilities 449 455
Short-term debt 133 683
Current Liabilities - Discontinued Operations 93 83
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Total Current Liabilities 909 1,416
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Long-Term Debt 1,064 626
Postretirement Liabilities 1,164 929
Other Liabilities 382 441
Long-Term Liabilities - Discontinued Operations 72 109
Shareholders' Deficit:
Common stock 1 1
Additional contributed capital 19 -
Treasury stock (251) (257)
Net deficiency of assets at spin (113) (113)
Unearned ESOP shares - (1)
Accumulated other comprehensive loss (146) (144)
Reinvested earnings 241 401
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Total Shareholders' Deficit (249) (113)
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Total Liabilities and Shareholders' Deficit $ 3,342 $ 3,408
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Solutia Inc.
Statement of Consolidated Cash Flow
(Dollars in millions)
Unaudited
Twelve Months Ended
December 31,
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2002 2001
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Increase (Decrease) in Cash and Cash Equivalents
Operating Activities:
Net loss $ (151) $ (59)
Adjustments to reconcile to Cash From Operations:
Cumulative effect of change in accounting principle 167 -
Depreciation and amortization 133 142
Income from discontinued line of business, net of tax (24) (22)
Amortization of deferred credits (14) (14)
Amortization of deferred debt issuance costs and debt discount 11 2
Restructuring expenses and other unusual items 23 127
Net pretax gains from asset disposals (6) (2)
Changes in assets and liabilities:
Income and deferred taxes 53 (57)
Trade receivables (6) 36
Inventories (20) 52
Accounts payable 41 (105)
Other assets and liabilities (81) (79)
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Cash From Continuing Operations 126 21
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Cash From Discontinued Operations 45 23
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Cash From Operations 171 44
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Investing Activities:
Property, plant and equipment purchases from continuing operations (55) (83)
Acquisition and investment payments, net of cash acquired (38) (33)
Property disposals and investment proceeds, net 109 9
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Cash From Investing Activities - Continuing Operations 16 (107)
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Cash From Investing Activities - Discontinued Operations (3) 21
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Cash From Investing Activities 13 (86)
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Financing Activities:
Net change in short-term debt obligations (327) 41
Proceeds from issuance of long-term debt obligations 182 -
Issuance of stock warrants 19 -
Dividend payments (4) (4)
Common stock issued under employee stock plans 2 13
Deferred debt issuance costs (29) (4)
Other financing activities (13) -
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Cash From Financing Activities - Continuing Operations (170) 46
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Cash From Financing Activities - Discontinued Operations (20) -
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Cash From Financing Activities (190) 46
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Increase (Decrease) in Cash and Cash Equivalents (6) 4
Cash and Cash Equivalents:
Beginning of Year 23 19
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End of Period $ 17 $ 23
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