UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 31, 2003
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
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 31, 2003, UCB S.A. purchased Solutia's resins, additives and
adhesives businesses pursuant to a Stock and Asset Purchase Agreement by and
between UCB and Solutia dated as of December 2, 2002. Under the terms of the
Agreement, UCB paid Solutia $500 million in cash for these businesses. In
addition, UCB paid an upfront payment of $10 million for a period of
exclusivity.
The terms of the sale are more fully described in the Stock and Asset
Purchase Agreement, a copy of which is attached as Exhibit 2.
Solutia used the net cash proceeds to reduce debt, collateralize
outstanding letters of credit, and purchase the co-generation facility at the
Pensacola, Florida plant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
Pro forma condensed consolidated financial information
reflecting the disposition of Solutia's resins, additives and adhesives
businesses.
(c) Exhibits
Exhibit Number Description
-------------- -----------
2 Stock and Asset Purchase Agreement by and between UCB and
Solutia, dated as of December 2, 2002, including
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
99(i) Press release dated January 31, 2003, announcing the
completion of Solutia's sale of its resins, additives and
adhesives businesses to UCB S.A.
99(ii) Press release dated December 3, 2002, announcing the
agreement to sell Solutia's resins, additives and adhesives
businesses to UCB S.A. (incorporated by reference to
Exhibit 99 of Solutia's Form 8-K filed December 3, 2002)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
information reflects adjustments to the historical Consolidated Statements
of Operations and Statement of Consolidated Financial Position of Solutia
Inc. ("Solutia") to give effect to the sale ("Sale") of the Resins,
Additives and Adhesives business excluding Butvar, Santotac, Adipates and
Scripsets (Resins, Additives & Adhesives) to UCB S.A. (the "Buyer") on
January 31, 2003, as described in this Current Report on Form 8-K. Resins,
Additives & Adhesives operations consist primarily of wholly-owned
subsidiaries in various countries who exclusively or almost exclusively
conduct the business of Resins, Additives & Adhesives. These countries
include: Austria, Denmark, France, Germany, Greece, Italy, Spain, Thailand
and Turkey. Resins, Additives & Adhesives also conducts operations in other
parts of the world through Solutia wholly-owned subsidiaries, which, in
addition to Resins, Additives & Adhesives, conduct business for the other
Solutia businesses. These locations include the United States, Canada, Latin
America, Asia Pacific, United Kingdom, the Netherlands and Belgium.
The unaudited pro forma condensed Statement of Consolidated
Financial Position as of September 30, 2002, assumes the Sale occurred on
September 30, 2002. The unaudited pro forma consolidated Statement of
Operations for the nine months ended September 30, 2002, and for the year
ended December 31, 2001, assume the Sale occurred on January 1, 2001. The pro
forma adjustments relating to the Sale are described in the notes to the
unaudited pro forma condensed consolidated financial information.
The following unaudited pro forma condensed consolidated financial
information has been prepared based upon available information that Solutia
believes is reasonable under the circumstances. This unaudited pro forma
condensed consolidated financial information should be read in conjunction with
the consolidated financial statements and related footnotes included in
Solutia's Annual Report on Form 10-K for the year ended December 31, 2001, and
Solutia's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002,
June 30, 2002, and September 30, 2002. The following unaudited pro forma
condensed consolidated financial information is presented for illustrative
purposes only and is not necessarily indicative of the results of operations or
financial position that would have resulted had the Sale actually occurred on
the dates assumed, nor is it necessarily indicative of the future operating
results or future financial position of Solutia.
1
SOLUTIA INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2002
(UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Pro Forma
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Historical Adjustments Adjusted
---------- ----------- --------
NET SALES....................................................... $ 2,108 $ (429) (a) $ 1,679
Cost of goods sold.............................................. 1,729 (319) (a) 1,410
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GROSS PROFIT.................................................... 379 (110) 269
Marketing expenses.............................................. 137 (27) (b) 110
Administrative expenses......................................... 109 (14) (b) 95
Technological expenses.......................................... 48 (12) (b) 36
Amortization expense............................................ 2 -- 2
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OPERATING INCOME (LOSS)......................................... 83 (57) 26
Equity earnings from affiliates-net of tax...................... 17 -- 17
Interest expense................................................ (76) 16 (c) (60)
Other income - net.............................................. 12 1 (d) 13
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INCOME (LOSS) BEFORE INCOME TAXES............................... 36 (40) (4)
Income taxes (benefit).......................................... (1) (12) (13)
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INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE..................................................... $ 37 $ (28) $ 9
======== ======= =======
BASIC EARNINGS (LOSS) PER SHARE BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE................................ $ 0.35 $ 0.09
======== =======
DILUTED EARNINGS (LOSS) PER SHARE BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE................................ $ 0.35 $ 0.09
======== =======
WEIGHTED AVERAGE EQUIVALENT SHARES (IN MILLIONS):
Basic.................................................... 104.7 104.7
Effect of dilutive securities:
Common share equivalents - common stock issuable
upon exercise of outstanding stock options...... 0.3 0.3
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Diluted.................................................. 105.0 105.0
======== =======
See accompanying Notes to unaudited pro forma consolidated Financial Statements.
2
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2001
(UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Pro Forma
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Historical Adjustments Adjusted
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NET SALES....................................................... $ 2,817 $ (549) (a) $ 2,268
Cost of goods sold.............................................. 2,388 (430) (a) 1,958
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GROSS PROFIT.................................................... 429 (119) 310
Marketing expenses.............................................. 175 (33) (b) 142
Administrative expenses......................................... 160 (18) (b) 142
Technological expenses.......................................... 66 (16) (b) 50
Amortization expense............................................ 34 (22) 12
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OPERATING INCOME (LOSS)......................................... (6) (30) (36)
Equity earnings (loss) from affiliates-net of tax............... (13) -- (13)
Interest expense................................................ (90) 20 (c) (70)
Gain on sale of Polymer Modifiers business...................... -- -- --
Other income (expense) - net.................................... 32 (37) (d) (5)
-------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES............................... (77) (47) (124)
Income taxes (benefit).......................................... (18) (25) (43)
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NET INCOME (LOSS)............................................... $ (59) $ (22) $ (81)
======== ======= =======
BASIC AND DILUTED LOSS PER SHARE................................ $ (0.57) $ (0.78)
======== =======
WEIGHTED AVERAGE EQUIVALENT SHARES (IN MILLIONS):
Basic and diluted........................................ 103.9 103.9
======== =======
See accompanying Notes to unaudited pro forma consolidated Financial Statements.
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SOLUTIA INC.
PRO FORMA STATEMENT OF CONSOLIDATED FINANCIAL POSITION
SEPTEMBER 30, 2002
(UNAUDITED)
(DOLLARS IN MILLIONS)
Pro Forma
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Historical Adjustments Adjusted
---------- ----------- --------
ASSETS
CURRENT ASSETS:
Restricted cash, cash and cash equivalents.......................... $ 174 $ -- $ 174
Trade receivables, net of allowances................................ 395 (103) (e) 292
Miscellaneous receivables and prepaid expenses...................... 126 (3) (e) 162
39 (f)
Deferred income tax benefit......................................... 123 -- 123
Inventories......................................................... 323 (69) (e) 254
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TOTAL CURRENT ASSETS................................................ 1,141 (136) 1,005
PROPERTY, PLANT AND EQUIPMENT:
Gross property, plant and equipment................................. 3,624 (281) (e) 3,375
32 (f)
Less accumulated depreciation....................................... 2,493 (91) (e) 2,402
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NET PROPERTY, PLANT AND EQUIPMENT................................... 1,131 (158) 973
INVESTMENTS IN AFFILIATES........................................... 241 -- 241
GOODWILL, net....................................................... 321 (182) (e) 139
IDENTIFIED INTANGIBLE ASSETS, net .................................. 73 (10) (e) 63
LONG-TERM DEFERRED INCOME TAX BENEFIT............................... 301 (5) (e) 296
OTHER ASSETS........................................................ 305 (24) (e) 281
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TOTAL ASSETS........................................................ $ 3,513 $ (515) $2,998
======== ======= =======
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.................................................... $ 248 $ (42) (e) $ 206
Wages and benefits.................................................. 54 (8) (e) 46
Postretirement liabilities.......................................... 94 -- 94
Miscellaneous accruals.............................................. 348 (32) (e) 316
Short-term debt..................................................... 303 (145) (f) 158
-------- ------- -------
TOTAL CURRENT LIABILITIES........................................... 1,047 (227) 820
LONG-TERM DEBT...................................................... 1,102 (1) (e) 826
(275) (f)
POSTRETIREMENT LIABILITIES.......................................... 1,203 (21) (e) 1,182
OTHER LIABILITIES................................................... 430 (43) (e) 387
TOTAL SHAREHOLDERS' DEFICIT......................................... (269) 52 (e) (217)
-------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT......................... $ 3,513 $ (515) $ 2,998
======== ======= =======
See accompanying Notes to unaudited pro forma consolidated Financial Statements
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SOLUTIA INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. The unaudited pro forma Statement of Consolidated Financial Position
as of September 30, 2002, assumes the Sale occurred on September 30,
2002. The unaudited pro forma consolidated Statement of Operations for
the nine months ended September 30, 2002, and for the year ended
December 31, 2001, assume the Sale occurred on January 1, 2001. The
unaudited pro forma financial statements include certain assumptions
that are documented in these notes to the pro forma financial
statements.
2. Adjustment explanations:
(a) Reflects revenues and related cost of revenues associated with the
sale of Resins, Additives and Adhesives that was sold to the Buyer.
(b) Reflects operating expenses attributed to the assets, properties and
related personnel sold to the Buyer. Such expenses primarily relate
to personnel costs, marketing, and sales activities, bad debt
expenses and other operating costs.
(c) Reflects the reduction of interest expense on debt that was required
to be paid off with the proceeds from the sale of Resins, Additives
and Adhesives to the Buyer.
(d) Reflects other income and expenses for items associated with the
Resins, Additives and Adhesives businesses that was sold to the
Buyer.
(e) To adjust for assets sold to and liabilities assumed by the Buyer.
(f) To adjust for the application of sales proceeds to provide $39
million cash collateral for certain outstanding letters of credit,
purchase the co-generation facility at Pensacola, Florida, for $32
million and pay down borrowings of $420 million from Solutia's credit
facility in accordance with bank agreements.
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SIGNATURES
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: FEBRUARY 18, 2003
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EXHIBIT INDEX
These exhibits are numbered in accordance with the Exhibit Table of Item 601 of
Regulation S-K.
Exhibit Number Description
-------------- -----------
2 Stock and Asset Purchase Agreement by and between UCB
and Solutia, dated as of December 2, 2002, including
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
99(i) Press release dated January 31, 2003, announcing the
completion of Solutia's sale of its resins, additives and
adhesives businesses to UCB S.A.
99(ii) Press release dated December 3, 2002, announcing the
agreement to sell Solutia's resins, additives and
adhesives businesses to UCB S.A. (incorporated by
reference to Exhibit 99 of Solutia's Form 8-K filed
December 3, 2002)
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