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): DECEMBER 20, 2002
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 9. REGULATION FD DISCLOSURE
The information that follows is furnished pursuant to Item 9 and
shall not be deemed to be "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the liabilities of
that section.
In anticipation of the divestiture of the its resins, additives and
adhesives businesses, Solutia reorganized its management structure and
realigned its reportable segments during the fourth quarter of 2002. The
purpose of this filing is to present Solutia's results of operations under
the new reportable segments for each quarter and corresponding year-to-date
timeframe for the years ended December 31, 2002 and 2001. The operating
results of Solutia's reportable segments provided in this filing include
certain allocated expenses of $10 million in 2002 and $12 million in 2001,
which had been previously allocated to the resins, additives and adhesives
businesses. In addition, interest expense of $26 million in 2002 and
$20 million in 2001, associated with debt that was repaid with the sale
proceeds from the divestiture, was removed from continuing operations and
allocated to discontinued operations.
Solutia evaluates the performance of its operating segments based
on segment earnings before interest expense and income taxes (EBIT), which
includes marketing, administrative, technological, and amortization expenses
and other restructuring and asset impairment charges that can be directly
attributable to the segment profit/(loss). Certain expenses and other items
that are managed outside of the segments are excluded. These unallocated
items consist primarily of corporate expenses, equity earnings (loss) from
affiliates, interest expense, other income--net and expense items, gains and
losses from asset dispositions and restructuring charges that are not
directly attributable to the operating segment.
Segment data for the three months ended March 31, 2002, and 2001
were as follows:
THREE MONTHS ENDED MARCH 31,
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2002 2001
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NET NET
SALES PROFIT SALES PROFIT
----- ------ ----- ------
SEGMENT:
Performance Products and Services........... $224 $ 21 $249 $ 24
Integrated Nylon............................ 296 7 345 (6)
---- ---- ---- ----
SEGMENT TOTALS.............................. 520 28 594 18
RECONCILIATION TO CONSOLIDATED TOTALS:
Corporate expenses...................... (17) (10)
Equity earnings from affiliates, net of
tax................................... 8 5
Interest expense........................ (19) (17)
Other income--net (a)................... 4 1
CONSOLIDATED TOTALS: ---- ----
NET SALES............................... $520 $594
==== ---- ==== ----
INCOME (LOSS) BEFORE INCOME TAXES....... $ 4 $ (3)
==== ====
<FN>
(a) Other income--net for the period ended March 31, 2002, includes a
gain from the sale of Solutia's 50 percent interest in the
Advanced Elastomer Systems joint venture ($5 million pretax).
Segment data for the three and six months ended June 30, 2002, and
2001, were as follows:
THREE MONTHS ENDED JUNE 30,
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2002 2001
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NET NET
SALES PROFIT SALES PROFIT
----- ------ ----- ------
SEGMENT:
Performance Products and Services................. $245 $ 23 $250 $ 24
Integrated Nylon ................................. 340 10 344 7
---- ---- ---- ----
SEGMENT TOTALS....................................... 585 33 594 31
RECONCILIATION TO CONSOLIDATED TOTALS:
Corporate expenses................................ (15) (16)
Equity earnings from affiliates, net of tax....... 3 7
Interest expense.................................. (16) (17)
Other income--net................................. 2 --
CONSOLIDATED TOTALS: ---- ----
NET SALES......................................... $585 $594
==== ---- ==== ----
INCOME BEFORE INCOME TAXES........................ $ 7 $ 5
==== ====
SIX MONTHS ENDED JUNE 30,
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2002 2001
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NET NET
SALES PROFIT SALES PROFIT
----- ------ ----- ------
SEGMENT:
Performance Products and Services................. $ 469 $ 44 $ 499 $ 48
Integrated Nylon ................................. 636 17 689 1
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SEGMENT TOTALS....................................... 1,105 61 1,188 49
RECONCILIATION TO CONSOLIDATED TOTALS:
Corporate expenses................................ (32) (26)
Equity earnings from affiliates, net of tax....... 11 12
Interest expense.................................. (35) (34)
Other income--net (b)............................. 6 1
CONSOLIDATED TOTALS: ------ ------
NET SALES......................................... $1,105 $1,188
====== ---- ====== ----
INCOME BEFORE INCOME TAXES........................ $ 11 $ 2
==== ====
<FN>
(b) Other income--net for the period ended June 30, 2002, includes a
gain from the sale of Solutia's 50 percent interest in the
Advanced Elastomer Systems joint venture ($5 million pretax).
PAGE>
Segment data for the three and nine months ended September 30, 2002,
and 2001, were as follows:
THREE MONTHS ENDED SEPTEMBER 30,
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2002 2001
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NET SALES PROFIT NET SALES PROFIT
--------- ------ --------- ------
SEGMENT:
Performance Products and Services................. $246 $ 27 $234 $ 22
Integrated Nylon (c).............................. 328 (3) 328 19
---- ---- ---- ----
SEGMENT TOTALS....................................... 574 24 562 41
RECONCILIATION TO CONSOLIDATED TOTALS:
Corporate expenses (d)............................ (21) (21)
Equity earnings from affiliates, net of tax....... 5 9
Interest expense.................................. (25) (17)
Other income (expense)--net....................... 2 (2)
CONSOLIDATED TOTALS:
---- ----
NET SALES......................................... $574 $562
==== ---- ==== ----
INCOME (LOSS) BEFORE INCOME TAXES................. $(15) $ 10
==== ====
NINE MONTHS ENDED SEPTEMBER 30,
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2002 2001
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NET SALES PROFIT NET SALES PROFIT
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SEGMENT:
Performance Products and Services................. $ 715 $ 71 $ 733 $ 70
Integrated Nylon (c).............................. 964 14 1,017 20
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SEGMENT TOTALS....................................... 1,679 85 1,750 90
RECONCILIATION TO CONSOLIDATED TOTALS:
Corporate expenses (d)............................ (53) (47)
Equity earnings from affiliates, net of tax....... 16 21
Interest expense.................................. (60) (51)
Other income (expense)--net (e)................... 8 (1)
CONSOLIDATED TOTALS: ------ ------
NET SALES......................................... $1,679 $1,750
====== ---- ====== ----
INCOME (LOSS) BEFORE INCOME TAXES................. $ (4) $ 12
==== ====
<FN>
(c) Integrated Nylon's profit (loss) for the periods ended
September 30, 2002, includes a charge resulting from the resolution
of a construction dispute with the contractor of its acrylonitrile
plant in Alvin, Texas ($5 million pretax).
(d) Corporate expenses for the periods ended September 30, 2002,
include a pension settlement loss as required by SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits" ($13 million
pretax).
(e) Other income (expense)--net for the period ended September 30,
2002, includes a gain from the sale of Solutia's 50 percent
interest in the Advanced Elastomer Systems joint venture
($5 million pretax).
Segment data for the three and twelve months ended December 31, 2002,
and 2001, were as follows:
THREE MONTHS ENDED DECEMBER 31,
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2002 2001
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NET SALES PROFIT NET SALES PROFIT
--------- ------ --------- ------
SEGMENT:
Performance Products and Services (j)............. $230 $ 7 $227 $ 7
Integrated Nylon (k) ............................. 332 10 291 (14)
---- ---- ---- -----
SEGMENT TOTALS....................................... 562 17 518 (7)
RECONCILIATION TO CONSOLIDATED TOTALS:
Corporate expenses (f), (l)....................... (8) (74)
Equity earnings from affiliates, net of tax (g), (2) (34)
(m).............................................
Interest expense.................................. (24) (19)
Other income (expense)--net (n)................... 2 (2)
CONSOLIDATED TOTALS:
---- ----
NET SALES......................................... $562 $518
==== ---- ==== -----
INCOME (LOSS) BEFORE INCOME TAXES................. $(15) $(136)
==== =====
TWELVE MONTHS ENDED DECEMBER 31,
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2002 2001
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NET SALES PROFIT NET SALES PROFIT
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SEGMENT:
Performance Products and Services (j)............. $ 945 $ 78 $ 960 $ 77
Integrated Nylon (h), (k)......................... 1,296 24 1,308 6
------ ---- ------ -----
SEGMENT TOTALS....................................... 2,241 102 2,268 83
RECONCILIATION TO CONSOLIDATED TOTALS:
Corporate expenses (f), (l)....................... (61) (121)
Equity earnings from affiliates, net of tax (g), 14 (13)
(m).............................................
Interest expense.................................. (84) (70)
Other income (expense)--net (i), (n).............. 10 (3)
CONSOLIDATED TOTALS: ------ ------
NET SALES......................................... $2,241 $2,268
====== ---- ====== -----
INCOME (LOSS) BEFORE INCOME TAXES................. $(19) $(124)
==== =====
<FN>
(f) Corporate expenses for the three month period and twelve month
period ended December 31, 2002, include a pension settlement loss
as required by SFAS No. 88, "Employers' Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits" ($4 million pretax and $17 million pretax,
respectively).
(g) Charges for the Flexsys joint venture for the periods ended
December 31, 2002, related to the write down of production assets
to fair value ($4 million aftertax).
(h) Integrated Nylon's profit (loss) for the period ended December 31,
2002, includes a charge resulting from the resolution of a
construction dispute with the contractor of its acrylonitrile
plant in Alvin, Texas ($5 million pretax).
(i) Other income (expense)--net for period ended December 31, 2002,
includes a gain from the sale of Solutia's 50 percent interest in
the Advanced Elastomer Systems joint venture ($5 million pretax).
(j) Charges recorded in the Performance Products and Services profit
for periods ended December 31, 2001, related to the termination of
a former Pharmaceutical Services owner ($3 million pretax).
(k) Integrated Nylon profit for the periods ended December 31, 2001,
includes charges to write down certain notes, primarily from
textile fiber customers, and to write down certain non-performing
assets ($12 million pretax).
(l) For the periods ended December 31, 2001, corporate expenses
include charges primarily to increase environmental and
self-insurance reserves and cover additional severance costs
($66 million pretax).
(m) 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).
(n) 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).
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/ J. M. Sullivan
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J. M. Sullivan
Vice President and Controller
DATE: MARCH 10, 2003