Exhibit 99
[SOLUTIA Letterhead]
FOR IMMEDIATE RELEASE
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Contact: Investor Relations - Marleen Judge 314-674-7777
Media - Liesl Livingston 314-674-5555
SOLUTIA REPORTS THIRD QUARTER
LOSS OF $1.70 PER SHARE
SALES SUMMARY
FROM CONTINUING OPERATIONS ($M)
SALES CHANGE FROM CHANGE FROM
3Q 2003 3Q 2002 2Q 2003
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Performance Products and Services $253 +3% -3%
Integrated Nylon $325 -1% -7%
Total Net Sales $578 +1% -5%
ST. LOUIS, Oct. 23, 2003/PRNewswire-FirstCall/ -- Solutia Inc.
(NYSE: SOI) today reported a third quarter net loss of $178 million, or
$1.70 per share, on net sales of $578 million. This compares to a loss from
continuing operations for the third quarter of 2002 of $6 million, or 6
cents per share, on net sales of $574 million.
The net loss for the third quarter of 2003 included charges of $156
million after tax or $1.49 per share. These charges included $5 million
after tax related to the Company's adoption of FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities," that was recorded as a
cumulative effect of change in accounting principle for consolidating the
variable interest entity which holds the Company's lease on its corporate
headquarters building in St. Louis, Missouri. This charge was not included
in previous communication as the accounting guidance as to the effective
date of this adoption had not been finalized at the time of that
communication. Additionally, the impact of adoption resulted in the
consolidation of $37 million of fixed assets and $43 million of debt and,
prospectively, will result in a reclass of approximately $3 million of rent
expense to interest expense.
The third quarter loss from continuing operations in 2003 also
included charges of $151 million after tax resulting from several events. A
charge of $76 million after tax was recorded for the
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previously announced Alabama PCB settlement and to increase certain other
litigation accruals. This charge included $37 million after tax for the
warrants issuable to Monsanto and represents the value determined as of the
date of the courts approval of the settlement. The Astaris joint venture, in
which the Company has a fifty percent ownership stake, recorded
restructuring charges during the quarter to reduce fixed costs through
selective product and facility rationalizations, including the Conda, Idaho,
purified wet acid facility which has performed significantly below
expectations established during the formation of the joint venture.
Solutia's share of these charges was $57 million after tax. In addition, as
required by SFAS No. 88, the Company recorded a pension settlement charge of
$18 million after tax. The pension settlement was triggered by a significant
level of year-to-date lump sum distributions from the Company's qualified
pension plan, primarily related to headcount reductions. The third quarter
loss from continuing operations in 2002 included a pension settlement charge
of $8 million after tax and a legal settlement charge of $3 million after
tax.
After consideration of these charges, Solutia's results for the
third quarter versus the year ago period were also negatively impacted by
elevated raw material and energy costs, the extended down time at the
acrylonitrile facility at the Alvin, Texas plant and lower sales volumes,
offset to some extent by improved manufacturing performance and favorable
currency exchange rates.
"In the past few months, we settled the Alabama PCB litigation and
we completed the refinancing of our credit facility. Notwithstanding these
accomplishments, there is still much to be done to improve the overall
operational and financial health of the Company," said John Hunter, chairman
and chief executive officer. "We continue to take cost containment actions
and we continue to focus on the significant financial issues ahead of us
including addressing debt maturities, reducing our leverage, managing the
continuing drain from legacy liabilities and satisfying our pension funding
obligations. We will continue to explore all alternatives to properly
address these issues," Hunter said.
YEAR-TO-DATE RESULTS FROM CONTINUING OPERATIONS
For the nine months ended September 30, 2003, Solutia's loss from
continuing operations was $228 million, or $2.18 per share, on net sales of
$1,785 million. The loss from continuing operations for the first nine
months of 2003 included the aforementioned charges of $151 million incurred
during the third quarter, an environmental charge of $17 million after tax
for the Anniston, Alabama partial consent decree and charges of $19 million
after tax primarily related to workforce reductions of approximately 460
positions and restructuring charges at the Flexsys and Astaris joint
ventures,
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partially offset by a gain of $3 million after tax from the recovery of a
previously written off customer account. This compares to income from
continuing operations for the first nine months of 2002 of $9 million, or 9
cents per share, on net sales of $1,679 million. Earnings from continuing
operations for the nine months ended September 30, 2002, included a gain of
$3 million after tax from the sale of Solutia's interest in the Advanced
Elastomer Systems joint venture, a pension settlement charge of $8 million
after tax and a legal settlement charge of $3 million after tax.
The decline in earnings for the first nine months of 2003 was
primarily due to elevated raw material and energy costs, increased interest
expense and lower sales volumes offset to some extent by higher sales
prices, favorable currency exchange rate fluctuations and improved
manufacturing operations.
SEGMENT DATA
Performance Products and Services' net sales for the third quarter
of 2003 increased $7 million compared to the same period of 2002 primarily
due to strengthened foreign currencies and modestly higher volumes. This
sales increase was primarily in the Performance Films product lines and in
Industrial Products. Pharmaceutical Services had a quarterly sales decline
due to lower volumes.
Performance Products and Services' profitability in the quarter
increased $3 million versus the prior-year quarter. This increase was
primarily due to higher net sales and favorable manufacturing variances,
partially offset by higher raw material costs.
For the first nine months of 2003, Performance Products and
Services' net sales increased $42 million over the comparable prior year
period primarily due to favorable currency exchange rate fluctuations and
modest volume gains. Segment profitability increased $2 million primarily
because of increased sales volume, lower marketing, administrative and
technological expenses, and favorable manufacturing operations partially
offset by severance charges associated with workforce reductions and
increased raw material costs.
Integrated Nylon's net sales for the third quarter of 2003
decreased $3 million compared to the third quarter of 2002 because of volume
declines in acrylic fibers, partially offset by higher average selling
prices. Price increases occurred principally in nylon intermediate
chemicals. In addition, carpet fibers recorded modest improvements in
average selling prices and volumes. Acrylic fiber sales
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volumes were down considerably reflecting weakness in the U.S. textiles
industry which prompted the previously announced downsizing of this
business.
Integrated Nylon's segment profitability decreased $16 million over
the prior year quarter. This was primarily due to higher raw material and
energy costs of approximately $18 million and the extended down time at the
acrylonitrile facility at the Alvin, Texas plant, offset by cost containment
activities completed in the current year.
For the first nine months of 2003, Integrated Nylon's net sales
increased $64 million over the comparable prior year period because of
higher average selling prices, partially offset by sales volume declines
principally in acrylic fiber. Segment profitability declined by $64 million
primarily because of approximately $125 million of higher raw material and
energy costs and severance charges associated with cost reduction
initiatives, partially offset by increased sales.
LIQUIDITY
Cash provided by continuing operations was $45 million in the third
quarter of 2003, compared to $18 million in the third quarter of 2002.
Solutia reported free cash flow (cash flow from continuing operations less
capital expenditures as presented on the statement of cash flows) of $32
million for the third quarter, after funding $13 million of capital
expenditures. This compares to free cash flow of $1 million in the third
quarter of 2002, after funding $17 million of capital expenditures. The
increase in free cash flow was principally due to a $25 million advance
payment received from Monsanto during the quarter for goods to be shipped
over the next year, and no voluntary contributions to the qualified pension
plan, partially offset by lower earnings. In exchange for the advance
payment received from Monsanto, Solutia agreed to a modification of an
existing supply contract.
Cash and available borrowings as of September 30, 2003, after
taking into consideration the impact of the new credit facility which was
completed on October 9, 2003, was approximately $150 million.
OUTLOOK
While some broad indicators have shown recent evidence of a
domestic economic recovery, we, like many of our peers, have not experienced
the recovery and we remain guarded as to its timing and pace. Given the
recent rise in energy costs, sluggish demand and weak consumer confidence,
we do not
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expect a meaningful improvement in operating results for the fourth quarter
2003 or first quarter 2004. Accordingly, and consistent with the terms of
our new credit facility, no dividends will be paid in the calendar year
2003.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements including
statements regarding litigation matters, future cost of raw materials and
energy, earnings, and free cash flow. 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 costs, currency and interest rate 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 year ended December 31, 2002 and Quarterly
Report on Form 10-Q for the period ended June 30, 2003. 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.
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, October 24, 2003 at
9 a.m. CDT 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 teleconferences and presentations tab. The call will be available
to investors on the Internet site for approximately five days following the
call.
Source: Solutia Inc.
St. Louis
Date 10/23/03
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Solutia Inc.
Statement of Consolidated Income (Loss)
(Dollars in millions, except per share amounts)
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
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2003 2002 2003 2002
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Net Sales $ 578 $ 574 $ 1,785 $ 1,679
Cost of Goods Sold 628 488 1,717 1,410
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Gross Profit (50) 86 68 269
Marketing Expenses 38 39 117 110
Administrative Expenses 43 32 106 95
Technological Expenses 14 13 37 36
Amortization Expense 1 1 2 2
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Operating Income (Loss) (146) 1 (194) 26
Equity Earnings (Loss) from
Affiliates - Net of Tax (58) 5 (60) 17
Interest Expense (25) (25) (73) (60)
Other Income - Net 1 4 9 13
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Loss Before Income Taxes (228) (15) (318) (4)
Income Taxes (Benefit) (55) (9) (90) (13)
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Income (Loss) from Continuing Operations
Before Discontinued Operations and Cumulative
Effect of Change in Accounting Principle (173) (6) (228) 9
Income (Loss) from Discontinued Operations,
Net of Tax - 6 (2) 28
Cumulative Effect of Change in Accounting
Principle, net of tax (5) - (5) (167)
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Net Income (Loss) $ (178) $ - $ (235) $ (130)
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Diluted Earnings (Loss) Per Share $ (1.70) $ - $ (2.25) $ (1.24)
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Weighted Average Equivalent Shares 104.5 104.8 104.6 105.0
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Solutia Inc.
Segment Data
(Dollars in millions)
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
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2003 2002 2003 2002
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Net Net Net Net
Segment: Sales Sales Sales Sales
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Performance Products and Services $ 253 $ 246 $ 757 $ 715
Integrated Nylon 325 328 1,028 964
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Consolidated Totals 578 574 1,785 1,679
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Segment: Profit Profit Profit Profit
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Performance Products and Services (a) $ 30 $ 27 $ 73 $ 71
Integrated Nylon (b) (19) (3) (50) 14
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Segment Totals 11 24 23 85
Corporate Expenses (c) (158) (21) (214) (53)
Equity Earnings (Loss) from
Affiliates - Net of Tax (d) (58) 5 (61) 16
Interest Expense (25) (25) (73) (60)
Other Income - Net (e), (f) 2 2 7 8
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Income Before Income Taxes $ (228) $ (15) $ (318) $ (4)
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<FN>
(a) Performance Products and Services' profit for three and nine months
ended September 30, 2003 includes severance charges of $1 million and
$12 million, respectively, related to workforce reductions.
(b) Integrated Nylon loss for the nine months ended September 30, 2003
includes severance charges of $5 million related to workforce
reductions. For the nine months ended September 30, 2002, amount
includes a $5 million charge from the resolution of a construction
dispute with the contractor of the acrylonitrile plant in Alvin, Texas.
(c) For the three and nine months ended September 30, 2003, corporate
expenses include a $99 million charge related to the Company's share of
the Anniston PCB litigation settlement and to increase certain other
litigation accruals, and a $30 million charge related to 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." For the nine months ended September 30, 2003,
corporate expenses includes an environmental charge of $27 million for
the partial consent decree approved on August 4, 2003 related to
remediation at Anniston, Alabama, and severance charges of $4 million
related to workforce reductions. For the nine months ended September 30,
2002, amount includes a a $13 million charge for a pension settlement
loss.
(d) For the three and nine months ended September 30, 2003, amounts include
severance related to workforce reductions and other restructuring
charges at Flexsys and Astaris of $57 million and $64 million,
respectively.
(e) For the nine months ended September 30, 2003, amount includes a gain of
$4 million related to the recovery of certain receivables, established
prior to 1997, which had previously been written off.
(f) For the nine months ended September 30, 2002, amount includes a gain of
$5 million from the sale of Solutia's 50 percent interest in the
Advanced Elastomer Systems joint venture.
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Solutia Inc.
Statement of Consolidated Financial Position
(Dollars in millions)
September 30, December 31,
ASSETS 2003 2002
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(Unaudited)
Current Assets:
Cash and cash equivalents $ 55 $ 17
Receivables and prepaids 423 384
Deferred income tax benefit 142 108
Inventories 247 262
Assets of Discontinued Operations - 636
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Total Current Assets 867 1,407
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Net Property, Plant and Equipment 945 930
Investments in Affiliates 204 232
Net Goodwill 147 144
Net Identified Intangible Assets 67 66
Long-term Deferred Income Tax Benefit 384 290
Other Assets 240 273
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Total Assets $ 2,854 $ 3,342
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 159 $ 234
Accrued liabilities 509 449
Short-term debt 86 358
Liabilities of Discontinued Operations - 165
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Total Current Liabilities 754 1,206
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Long-Term Debt 909 839
Postretirement Liabilities 1,132 1,164
Other Liabilities 428 382
Shareholders' Deficit:
Common stock 1 1
Additional Contributed Capital 56 19
Treasury stock (251) (251)
Net deficiency of assets at spinoff (113) (113)
Accumulated other comprehensive loss (68) (146)
Reinvested earnings 6 241
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Total Shareholders' Deficit (369) (249)
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Total Liabilities and Shareholders' Deficit $ 2,854 $ 3,342
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Solutia Inc.
Statement of Consolidated Cash Flows
(Dollars in millions)
(Unaudited)
Nine Months
Ended September 30,
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2003 2002
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Increase (Decrease) in Cash and Cash Equivalents
Operating Activities:
Net loss $ (235) $ (130)
Adjustments to reconcile to Cash From Operations:
Cumulative effect of change in accounting principle, net of tax 5 167
Depreciation and amortization 102 100
(Income) Loss from discontinued operations, net of tax 2 (28)
Amortization of deferred credits (10) (11)
Restructuring expenses and other special items 237 18
Other, net 12 3
Changes in assets and liabilities:
Income and deferred taxes (101) 50
Trade receivables (3) (27)
Inventories 15 (12)
Accounts payable (75) 13
Other assets and liabilities 55 (86)
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Cash Provided by Continuing Operations 4 57
Cash Provided by (Used in) Discontinued Operations (11) 30
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Cash Provided by (Used in) Operations (7) 87
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Investing Activities:
Property, plant and equipment purchases (59) (44)
Acquisition and investment payments, net of cash acquired (48) (31)
Property disposals and investment proceeds 1 107
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Cash Provided by (Used in) Investing Activities-Continuing Operations (106) 32
Cash Provided by (Used in) Investing Activities-Discontinued Operations 475 (8)
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Cash Provided by Investing Activities 369 24
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Financing Activities:
Net change in short-term debt obligations (272) (107)
Proceeds from issuance of long-term debt obligations - 182
Restricted cash for repayment of October 2002 maturities - (150)
Issuance of stock warrants - 19
Deferred debt issuance cost (6) (28)
Common stock issued under employee stock plans - 2
Other, net (41) (15)
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Cash Used in Financing Activities - Continuing Operations (319) (97)
Cash Used in Financing Activities - Discontinued Operations (5) (18)
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Cash Used in Financing Activities (324) (115)
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Increase (Decrease) in Cash and Cash Equivalents 38 (4)
Cash and Cash Equivalents:
Beginning of Year 17 23
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End of Period $ 55 $ 19
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Three Months Nine Months
Ended September 30, Ended September 30,
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Free Cash Flow Reconciliation: 2003 2002 2003 2002
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Cash Provided by Continuing Operations 45 18 4 57
Less: Property, plant and
equipment purchases 13 17 59 44
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Free Cash Flow $ 32 $ 1 $ (55) $ 13
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