Exhibit 99
[Solutia Inc. logo]
FOR IMMEDIATE RELEASE
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Contact: Investor Relations - Liesl Livingston 314-674-7777
Media - Glenn Ruskin 202-822-1692
SOLUTIA REPORTS FIRST
QUARTER LOSS OF 16 CENTS PER SHARE
FROM CONTINUING OPERATIONS,
INCLUDING 8 CENTS OF NET CHARGES
QUARTERLY SUMMARY
o SALES 15% ABOVE FIRST QUARTER 2002; 6% ABOVE FOURTH QUARTER 2002
o SUCCESSFUL CLOSURE OF THE RESINS, ADDITIVES AND ADHESIVES DIVESTITURE
o DEBT DECREASED BY $341 MILLION, TO $856 MILLION
o COST REDUCTIONS INITIATED
SALES SUMMARY
FROM CONTINUING OPERATIONS ($M)
SALES CHANGE FROM CHANGE FROM
1Q 2003 1Q 2002 4Q 2002
------- ------- -------
Performance Products and Services $243 +8% +6%
Integrated Nylon $353 +19% +6%
Total Net Sales $596 +15% +6%
ST. LOUIS, Apr. 24, 2003/PRNewswire-FirstCall/ -- Solutia Inc.
(NYSE:SOI) today reported a first quarter loss from continuing operations of
$17 million, or 16 cents per share, on net sales of $596 million. This
compares to income from continuing operations for the first quarter of 2002
of $4 million, or 4 cents per share, on net sales of $520 million.
Solutia's continuing operations for the first quarter versus the
year-ago period were negatively impacted by elevated raw material and energy
costs, increased interest expense and lower equity earnings from joint
ventures, offset to some extent by higher sales prices, increased sales
volumes and favorable exchange rate fluctuations.
The first quarter net loss included net charges of approximately
$9 million aftertax resulting from several events. The Company eliminated
approximately 170 positions during the quarter, incurring severance charges
of $7 million aftertax. The Flexsys and Astaris joint ventures, in which the
Company has a fifty percent ownership stake, incurred restructuring charges
during the quarter related to asset impairments and severance charges.
Solutia's share of these charges was approximately $5 million aftertax.
In addition, Solutia realized a benefit of $3 million aftertax related to
the recovery of certain receivables, established prior to 1997, which had
previously been written off.
"During the quarter, Solutia's businesses showed considerable
improvements in volume growth both sequentially and on a year-over-year
basis. However, we continued to be adversely impacted by the weakened state
of the global economy and the dramatic rise in raw material and energy costs
due to the war in Iraq and a declaration of force majeure by certain
suppliers of propylene, a key raw material for Solutia," said Chairman and
Chief Executive Officer John Hunter. "We continue to take the actions
necessary to offset these circumstances, such as reducing our cost to
operate as well as passing along price increases in many of our business
lines," Hunter said.
Hunter further noted, "Solutia and many of its peer companies
continue to experience a difficult operating environment highlighted by a
continued weakness in the manufacturing sector, underutilization of assets,
intense competitive pricing pressure, and raw material and energy costs that
are not indicative of current supply and demand dynamics. We continue to
prudently manage our businesses so we are positioned to benefit from an
improvement in the global economy."
RESULTS FROM CONSOLIDATED OPERATIONS
Solutia reported a consolidated net loss of $19 million, or
18 cents per share, for the first quarter of 2003 versus a consolidated net
loss of $153 million, or $1.46 per share, for the first quarter of 2002.
Consolidated earnings for the first quarter of 2003 included a net loss of
$2 million from the results of the Resins, Additives and Adhesives
businesses, which are presented as discontinued operations. Consolidated
earnings for the first quarter of 2002 included a $167 million charge
associated with the adoption of the goodwill and intangible asset accounting
standard, a gain of $3 million aftertax from the sale of Solutia's interest
in the Advanced Elastomer Systems joint venture and net income of
$10 million from the results of discontinued operations.
SEGMENT DATA
Performance Products and Services net sales for the first quarter
of 2003 increased $19 million compared to the same period of 2002 primarily
due to stronger foreign currencies, slightly higher volumes and better
average selling prices. Net sales increased in the Performance Films product
lines and Pharmaceutical Services on a quarter-over-quarter basis primarily
because of strengthened foreign currencies. Net sales increased in
Industrial Products product lines on a quarter-over-quarter basis because of
higher average selling prices, higher volumes and strengthening foreign
currencies.
Performance Products and Services profitability in the quarter
decreased $4 million versus the prior-year quarter. This was primarily due
to severance charges incurred in the first quarter, unfavorable
manufacturing variances and higher raw material and energy costs, which were
partially offset by higher net sales.
Integrated Nylon's net sales for the first quarter of 2003
increased $57 million compared to the first quarter of 2002 driven by
improved prices and volumes. First quarter price increases occurred
principally in Nylon intermediate chemicals. While the Company announced
price increases in Nylon carpet fibers during the quarter, they were not
effective until April 1.
Sales volumes were up in most segments and included benefits from
reintegrating the marketing responsibilities for nylon molding resins. These
activities were previously performed under a marketing alliance with Dow
Plastics, a business unit of Dow Chemical.
Integrated Nylon's segment profitability decreased $18 million over
the prior year quarter. This was primarily due to approximately $60 million
of higher raw material and energy costs and severance charges incurred in
the quarter, which were partially offset by higher net sales and favorable
manufacturing variances.
RESULTS FROM DISCONTINUED OPERATIONS
For discontinued operations, Solutia reported a first quarter net
loss of $2 million, or 2 cents per share, inclusive of a $24 million pretax
gain from the sale of the Resins, Additives and Adhesives businesses.
Interest expense associated with debt that was paid down with the
transaction proceeds was allocated to discontinued operations, totaling
$24 million pretax for the first quarter of 2003. Net income from discontinued
operations for the first quarter of 2002 was $10 million, or 9 cents per
share.
CASH FLOW
Cash used in operations was $35 million in the first quarter of
2003 compared to $14 million in the first quarter of 2002, for continuing
operations. Solutia reported negative free cash flow (cash flow from
operations less capital expenditures as presented on the statement of cash
flows) of $75 million for the first quarter, after funding $40 million of
capital expenditures. Capital expenditures in the first quarter of 2003
included the $32 million purchase of the cogeneration facility at the
Pensacola manufacturing site, as required by Solutia's credit facility. This
compares to negative free cash flow of $25 million in the first quarter of
2002, after funding $11 million of capital expenditures. The decrease in
free cash flow was principally due to a $60 million income tax refund
received in 2002, higher capital expenditures and lower earnings, partially
offset by working capital improvements.
DEBT REDUCTION
In the first quarter of 2003, Solutia reduced its debt by
approximately $341 million from fourth quarter 2002 levels to $856 million
by using proceeds from the sale of the Resins, Additives and Adhesives
businesses. The Company paid down the remaining $275 million under the term
loan as well as the majority of its borrowings under the $300 million
revolving credit facility.
ENVIRONMENTAL REMEDIATION
Solutia awaits approval of the consent decree between the Company
and the Environmental Protection Agency relating to remediation in the
Anniston, Alabama community. If the necessary regulatory and judicial
approvals are obtained for the consent decree, the Company expects to incur
an additional charge of approximately $30 million. This charge will increase
its environmental reserves to primarily reflect the agreement to expedite
the cleanup of residential properties in Anniston that contain PCB levels of
1 ppm or greater.
SECOND QUARTER OUTLOOK
For the second quarter, we expect global economies to experience
greater stability and are cautiously optimistic about signs of a recovery in
the manufacturing sector. We expect the improved volume trend experienced in
the first quarter to continue and anticipate improvements in pricing from
our fully implemented price increases. We believe feedstock and energy costs
will remain at the current elevated levels given the continued uncertainty
in these markets. As we continue to focus on cost control, the Company will
be taking further restructuring actions, incurring severance charges
currently estimated to be $3 million aftertax in the second quarter.
Including this charge, Solutia expects results in the second quarter to
range from a breakeven position to a 5 cent loss.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements regarding
future sales, earnings and pricing. These statements are based on current
expectations, but results may differ materially, depending on such important
factors as world economic conditions, competitive pressures, gain or loss of
significant customers, labor relations and disruption of operations, raw
material and energy pricing or shortages, 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, geopolitical instability and other factors
identified in Solutia's Annual Report on Form 10-K for the period ended
December 31, 2002. This report is filed with the U.S. Securities and
Exchange Commission and can be accessed through Solutia's investor Internet
site at www.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;
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, April 25, 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/investor_relations.asp
under the presentations and speeches tab. The call will be available to
investors on the Internet site for approximately five days following the
call.
-oOo-
SOURCE: SOLUTIA INC.
St. Louis
Date 4/24/03
Solutia Inc.
Statement of Consolidated Loss
(Dollars in millions, except per share amounts)
Unaudited
Three Months Ended
March 31,
-----------------------
2003 2002
-------- --------
Net Sales $ 596 $ 520
Cost of Goods Sold 527 433
-------- --------
Gross Profit 69 87
Marketing Expenses 39 35
Administrative Expenses 30 32
Technological Expenses 12 11
Amortization Expense 1 1
-------- --------
Operating Income (Loss) (13) 8
Equity Earnings (Loss) from Affiliates,
net of tax (2) 8
Interest Expense (23) (19)
Other Income - Net 7 7
-------- --------
Income (Loss) Before Income Taxes (31) 4
Income Taxes (Benefit) (14) -
-------- --------
Income (Loss) Before Discontinued Operations
and Cumulative Effect of Change
in Accounting Principle (17) 4
Income (Loss) from Discontinued
Operations, net of tax (2) 10
Cumulative Effect of Change in Accounting
Principle, net of tax - (167)
-------- --------
Net Loss (19) (153)
======== ========
Loss Per Share $ (0.18) $ (1.46)
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Weighted Average Equivalent Shares 104.7 105.1
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Solutia Inc.
Segment Data
(Dollars in millions)
Unaudited
Three Months Ended
March 31,
-----------------------
2003 2002
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Net Net
Segment: Sales Sales
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Performance Products and Services $ 243 $ 224
Integrated Nylon 353 296
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Consolidated Totals $ 596 $ 520
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Segment: Profit Profit
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Performance Products and Services (a) $ 17 $ 21
Integrated Nylon (b) (11) 7
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Segment Totals 6 28
Corporate Expenses (c) (15) (17)
Equity Earnings (Loss)
from Affiliates, net of tax (d) (3) 8
Interest Expense (23) (19)
Other Income - Net (e), (f) 4 4
-------- --------
Income (Loss) Before Income Taxes $ (31) $ 4
-------- --------
<FN>
(a) Performance Products and Services profit for period ended March 31,
2003, includes severance charges related to workforce reductions
($6 million pretax).
(b) Integrated Nylon loss for the period ended March 31, 2003, includes
severance charges related to workforce reductions ($3 million pretax).
(c) For the period ended March 31, 2003, corporate expenses include
severance charges related to workforce reductions ($2 million pretax).
(d) For the period ended March 31, 2003, amount includes impairment charges
to write down production assets to fair value at Flexsys' facility in
Nitro, West Virginia, and severance charges related to workforce
reductions at Flexsys and Astaris ($5 million pretax).
(e) For the period ended March 31, 2003, amount includes a gain related to
the recovery of certain receivables, established prior to 1997, which
had previously been written off ($4 million pretax).
(f) For the period ended March 31, 2002, the Company recorded a gain
resulting from the sale of its 50 percent interest in the Advanced
Elastomer Systems joint venture ($5 million pretax).
Solutia Inc.
Statement of Consolidated Financial Position
(Dollars in millions)
Unaudited
Mar. 31, Dec. 31,
2003 2002
---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 17 $ 17
Receivables and prepaids 423 384
Deferred income tax benefit 131 108
Inventories 270 262
Assets of Discontinued Operations - 636
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Total Current Assets 841 1,407
---------- ----------
Net Property, Plant and Equipment 944 930
Investments in Affiliates 234 232
Goodwill 146 144
Identified Intangible Assets, net 66 66
Long-term Deferred Income Tax Benefit 229 290
Other Assets 301 273
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Total Assets $ 2,761 $ 3,342
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 241 $ 234
Accrued liabilities 378 449
Short-term debt 6 358
Liabilities of Discontinued Operations - 165
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Total Current Liabilities 625 1,206
---------- ----------
Long-Term Debt 850 839
Postretirement Liabilities 1,157 1,164
Other Liabilities 361 382
Shareholders' Deficit:
Common stock 1 1
Additional contributed capital 19 19
Treasury stock (251) (251)
Net deficiency of assets at spin (113) (113)
Accumulated other comprehensive loss (109) (146)
Reinvested earnings 221 241
---------- ----------
Total Shareholders' Deficit (232) (249)
---------- ----------
Total Liabilities and Shareholders' Deficit $ 2,761 $ 3,342
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Solutia Inc.
Statement of Consolidated Cash Flows
(Dollars in millions)
Unaudited
Three Months Ended
March 31,
-----------------------
2003 2002
-------- --------
Increase (Decrease) in Cash and Cash Equivalents
Operating Activities:
Net loss $ (19) $ (153)
Adjustments to reconcile to Cash From Operations:
Cumulative effect of change in accounting principle - 167
Depreciation and amortization 34 34
(Income) loss from discontinued line of business, net of tax 2 (10)
Amortization of deferred credits (3) (3)
Amortization of deferred debt issuance costs and debt discount 4 3
Restructuring expenses and other special items 12 -
Net pretax gains from asset disposals - (5)
Changes in assets and liabilities:
Income and deferred taxes (15) 63
Trade receivables (41) (28)
Inventories (8) (9)
Accounts payable 7 (1)
Other assets and liabilities (8) (72)
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Cash Used in Continuing Operations (35) (14)
-------- --------
Cash Provided by (Used in) Discontinued Operations (11) 5
-------- --------
Cash Used in Operations (46) (9)
-------- --------
Investing Activities:
Property, plant and equipment purchases (40) (11)
Property disposals and investment proceeds - 98
-------- --------
Cash Provided by (Used in) Investing Activities - Continuing Operations (40) 87
-------- --------
Cash Provided by (Used in) Investing Activities - Discontinued Operations 482 (2)
-------- --------
Cash Provided by Investing Activities 442 85
-------- --------
Financing Activities:
Net change in short-term debt obligations (352) (81)
Common stock issued under employee stock plans - 1
Other financing activities (39) -
-------- --------
Cash Used in Financing Activities - Continuing Operations (391) (80)
-------- --------
Cash Used in Financing Activities - Discontinued Operations (5) -
-------- --------
Cash Used in Financing Activities (396) (80)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents - (4)
Cash and Cash Equivalents:
Beginning of Year 17 23
-------- --------
End of Period $ 17 $ 19
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Free Cash Flow Reconciliation:
Cash Used in Continuing Operations (35) (14)
Less: Property, plant and equipment purchases 40 11
-------- --------
Free Cash Flow $ (75) $ (25)
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