Exhibit 99
KIRKLAND & ELLIS LLP
Citigroup Center
153 East 53rd Street
New York, New York 10022-4675
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
Richard M. Cieri (RC-6062)
Jonathan S. Henes (JH-1979)
Attorneys for the Debtors and Debtors in Possession
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ---------------------------------------------------x
:
In re : Chapter 11
:
SOLUTIA INC., ET AL., : Case No. 03-17949 (PCB)
:
Debtors. : (Jointly Administered)
:
- ---------------------------------------------------x
THIS MONTHLY OPERATING STATEMENT APPLIES TO:
X All Debtors Axio Research Corporation
- --- ---
Solutia Inc. Solutia Investments, LLC
- --- ---
Solutia Business Enterprises, Inc. Beamer Road Management Company
- --- ---
Solutia Systems, Inc. Monchem, Inc.
- --- ---
Solutia Overseas, Inc. Solutia Inter-America, Inc.
- --- ---
CPFilms Inc. Solutia International Holding, LLC
- --- ---
Solutia Management Company, Inc. Solutia Taiwan, Inc.
- --- ---
Monchem International, Inc. Solutia Greater China, Inc.
- --- ---
MONTHLY OPERATING STATEMENT FOR THE
MONTH OF JANUARY 2006 (1)
-------------------------
<FN>
(1) The information contained in the Debtors' monthly operating report
(the "MOR") is unaudited and is limited to the time period
indicated and is presented in a format prescribed by the bankruptcy
court. The MOR does not purport to represent financial statements
prepared in accordance with GAAP nor is it intended to fully
reconcile to the financial statements filed by Solutia Inc. with
the Securities and Exchange Commission. Additionally, while every
effort has been made to assure its accuracy and completeness,
errors or omissions may have inadvertently occurred and the Debtors
reserve the right to amend their MOR as necessary.
1
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ---------------------------------------------------x
:
In re : Chapter 11
:
SOLUTIA INC., ET AL., : Case No. 03-17949 (PCB)
:
Debtors. : (Jointly Administered)
:
- ---------------------------------------------------x
MONTHLY OPERATING STATEMENT FOR THE
MONTH OF JANUARY 2006
---------------------
DEBTORS' ADDRESS: 575 Maryville Centre Dr.
St. Louis, MO 63141
DEBTORS' ATTORNEY: KIRKLAND & ELLIS LLP
Richard M. Cieri (RC-6062)
Jonathan S. Henes (JH-1979)
Citigroup Center
153 East 53rd Street
New York, New York 10022-4675
CURRENT MONTH NET LOSS ($M): $ 4
REPORT PREPARER: Timothy J. Spihlman
THIS OPERATING STATEMENT MUST BE SIGNED BY A REPRESENTATIVE OF THE DEBTORS
The undersigned, having reviewed the attached report and being familiar with
the Debtors' financial affairs verifies, under penalty of perjury, that the
information contained herein is complete, accurate and truthful to the best
of my knowledge.
DATE: February 28, 2006 /s/ Timothy J. Spihlman
-----------------------
Timothy J. Spihlman
Vice President and Controller
Indicate if this is an amended statement by checking here: _______
2
SOLUTIA INC., ET. AL.,
Case Nos. 03-17948 (PCB) through 03-17962 (PCB)
(Debtors in Possession)
MONTHLY DISBURSEMENTS BY DEBTOR
For the Month of January 2006
- -------------------------------------------------------------------------------
Solutia Inc. $ 230,304,069.15
- -------------------------------------------------------------------------------
Solutia Business Enterprises, Inc.* $ --
- -------------------------------------------------------------------------------
Solutia Systems, Inc. $ 1,284.00
- -------------------------------------------------------------------------------
Solutia Overseas, Inc. * $ --
- -------------------------------------------------------------------------------
CPFilms Inc. $ 9,267,146.50
- -------------------------------------------------------------------------------
Solutia Management Company, Inc. * $ --
- -------------------------------------------------------------------------------
Monchem International, Inc. * $ --
- -------------------------------------------------------------------------------
Axio Research Corporation $ 26.00
- -------------------------------------------------------------------------------
Solutia Investments, LLC * $ --
- -------------------------------------------------------------------------------
Beamer Road Management Company * $ --
- -------------------------------------------------------------------------------
Monchem, Inc. * $ --
- -------------------------------------------------------------------------------
Solutia Inter-America, Inc. $ 9,711.09
- -------------------------------------------------------------------------------
Solutia International Holding, LLC * $ --
- -------------------------------------------------------------------------------
Solutia Taiwan, Inc. $ 16,963.58
- -------------------------------------------------------------------------------
Solutia Greater China, Inc. * $ --
- -------------------------------------------------------------------------------
<FN>
* These non-operating debtors had no constructive disbursements made on
their behalf.
3
SOLUTIA INC., ET. AL.,
Case Nos. 03-17948 (PCB) through 03-17962 (PCB)
(Debtors in Possession)
STATEMENT ON INSURANCE
For the Month of January 2006
All insurance policy premiums due, including those for workers
compensation and disability insurance, have been paid and all the policies
remain in effect.
4
SOLUTIA INC., ET. AL.,
Case Nos. 03-17948 (PCB) through 03-17962 (PCB)
(Debtors in Possession)
SOLUTIA GROUP*
STATEMENT OF CONSOLIDATED OPERATIONS (UNAUDITED)
(DOLLARS IN MILLIONS)
MONTH ENDED
JANUARY 31, 2006
--------------------
TOTAL NET SALES $ 229
TOTAL COST OF GOODS SOLD 196
--------------------
GROSS PROFIT 33
TOTAL MAT EXPENSE 21
--------------------
OPERATING INCOME 12
EQUITY EARNINGS FROM AFFILIATES 3
INTEREST EXPENSE (7)
OTHER INCOME, NET -
REORGANIZATION ITEMS:
Professional fees (3)
Employee severance and retention costs (1)
Other (1)
--------------------
(5)
--------------------
INCOME BEFORE TAXES 3
Income tax expense 2
--------------------
NET INCOME $ 1
====================
See Accompanying Notes to Consolidated Financial Statements.
<FN>
* Includes non-U.S. subsidiaries of the Solutia Inc. corporate organization
that did not commence Chapter 11 cases
5
SOLUTIA INC., ET. AL.,
Case Nos. 03-17948 (PCB) through 03-17962 (PCB)
(Debtors in Possession)
SOLUTIA GROUP*
STATEMENT OF CONSOLIDATED FINANCIAL POSITION (UNAUDITED)
AS OF JANUARY 31, 2006
ASSETS (Dollars in
------ millions)
---------------
Cash $ 93
Trade Receivables, net 278
Inventories 288
Other Current Assets 125
---------------
TOTAL CURRENT ASSETS 784
Property, Plant and Equipment, net 801
Investments in Affiliates 208
Intangible Assets, net 111
Other Assets 105
---------------
TOTAL ASSETS $ 2,009
===============
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
Accounts Payable $ 214
Short Term Debt 352
Other Current Liabilities 230
---------------
TOTAL CURRENT LIABILITIES 796
Long-Term Debt 250
Other Long-Term Liabilities 253
---------------
TOTAL LIABILITIES NOT SUBJECT TO COMPROMISE 1,299
LIABILITIES SUBJECT TO COMPROMISE 2,163
SHAREHOLDERS' DEFICIT (1,453)
---------------
TOTAL LIABILITIES & SHAREHOLDERS' DEFICIT $ 2,009
===============
See Accompanying Notes to Consolidated Financial Statements.
<FN>
* Includes non-U.S. subsidiaries of the Solutia Inc. corporate organization
that did not commence Chapter 11 cases
6
SOLUTIA INC., ET. AL.,
Case Nos. 03-17948 (PCB) through 03-17962 (PCB)
(Debtors in Possession)
SOLUTIA GROUP*
STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(DOLLARS IN MILLIONS)
MONTH ENDED
NET CASH USED IN OPERATING ACTIVITIES: JANUARY 31, 2006
---------------------
Net income $ 1
Depreciation and amortization 10
Restructuring expenses and other unusual items -
Changes in assets and liabilities:
Trade receivables (25)
Inventories (21)
Accounts payable (5)
Other assets and liabilities (17)
---------------------
NET CASH USED BEFORE REORGANIZATION ITEMS (57)
OPERATING CASH FLOWS - REORGANIZATION ITEMS:
Professional services fees (3)
Employee severance and retention payments (1)
---------------------
NET CASH USED IN REORGANIZATION ITEMS (4)
---------------------
NET CASH USED IN OPERATING ACTIVITIES (61)
=====================
NET CASH USED IN INVESTING ACTIVITIES:
Property, plant and equipment purchases (5)
---------------------
NET CASH USED IN INVESTING ACTIVITIES (5)
=====================
NET CASH PROVIDED BY FINANCING ACTIVITIES:
Net change in short-term debt obligations 52
---------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 52
=====================
NET DECREASE IN CASH AND CASH EQUIVALENTS (14)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 107
---------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 93
=====================
See Accompanying Notes to Consolidated Financial Statements.
<FN>
* Includes non-U.S. subsidiaries of the Solutia Inc. corporate organization
that did not commence Chapter 11 cases
7
SOLUTIA INC., ET. AL.,
Case Nos. 03-17948 (PCB) through 03-17962 (PCB)
(Debtors in Possession)
SOLUTIA CHAPTER 11 DEBTORS
STATEMENT OF CONSOLIDATED OPERATIONS (UNAUDITED)
(DOLLARS IN MILLIONS)
MONTH ENDED
JANUARY 31, 2006
-------------------
TOTAL NET SALES $ 189
TOTAL COST OF GOODS SOLD 171
-------------------
GROSS PROFIT 18
TOTAL MAT EXPENSE 17
-------------------
OPERATING INCOME 1
EQUITY EARNINGS FROM AFFILIATES 3
INTEREST EXPENSE, NET (5)
OTHER INCOME, NET 2
REORGANIZATION ITEMS:
Professional fees (3)
Employee severance and retention costs (1)
Other (1)
-------------------
(5)
-------------------
LOSS BEFORE TAXES (4)
Income tax expense -
-------------------
NET LOSS $ (4)
===================
See Accompanying Notes to Consolidated Financial Statements.
8
SOLUTIA INC., ET. AL.,
Case Nos. 03-17948 (PCB) through 03-17962 (PCB)
(Debtors in Possession)
SOLUTIA CHAPTER 11 DEBTORS
STATEMENT OF CONSOLIDATED FINANCIAL POSITION (UNAUDITED)
AS OF JANUARY 31, 2006
ASSETS (Dollars in
------ millions)
---------------
Cash $ 8
Trade Receivables, net 149
Account Receivables-Unconsolidated Subsidiaries 43
Inventories 186
Other Current Assets 86
---------------
TOTAL CURRENT ASSETS 472
Property, Plant and Equipment, net 669
Investments in Subsidaries and Affiliates 541
Intangible Assets, net 100
Other Assets 63
---------------
TOTAL ASSETS $ 1,845
===============
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
Accounts Payable $ 173
Short Term Debt 352
Other Current Liabilities 162
---------------
TOTAL CURRENT LIABILITIES 687
Other Long-Term Liabilities 200
---------------
TOTAL LIABILITIES NOT SUBJECT TO COMPROMISE 887
LIABILITIES SUBJECT TO COMPROMISE 2,268
SHAREHOLDERS' DEFICIT (1,310)
---------------
TOTAL LIABILITIES & SHAREHOLDERS' DEFICIT $ 1,845
===============
See Accompanying Notes to Consolidated Financial Statements.
9
SOLUTIA INC., ET. AL.,
Case Nos. 03-17948 (PCB) through 03-17962 (PCB)
(Debtors in Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND BANKRUPTCY PROCEEDINGS
Nature of Operations
Solutia Inc., together with its subsidiaries (referred to herein as
"Solutia", the "Solutia Group" or the "Company"), is a global manufacturer
and marketer of a variety of high-performance chemical-based materials.
Solutia is a world leader in performance films for laminated safety glass
and after-market applications; specialty products such as water treatment
chemicals, heat transfer fluids and aviation hydraulic fluids; and an
integrated family of nylon products including high-performance polymers and
fibers.
Prior to September 1, 1997, Solutia was a wholly-owned subsidiary
of the former Monsanto Company (now known as Pharmacia Corporation, a
wholly-owned subsidiary of Pfizer, Inc.). On September 1, 1997, Pharmacia
distributed all of the outstanding shares of common stock of Solutia as a
dividend to Pharmacia stockholders (the "spinoff"). As a result of the
spinoff, on September 1, 1997, Solutia became an independent publicly held
company and its operations ceased to be owned by Pharmacia. A net deficiency
of assets of $113 million resulted from the spinoff.
Proceedings Under Chapter 11 of the Bankruptcy Code
On December 17, 2003, Solutia Inc. and its 14 U.S. subsidiaries
(the "Debtors") filed voluntary petitions for reorganization under Chapter
11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern
District of New York (the "Chapter 11 Cases"). The cases were consolidated
for the purpose of joint administration and were assigned case number
03-17949 (PCB). Solutia's subsidiaries outside the United States were not
included in the Chapter 11 filing.
The filing was made to restructure Solutia's balance sheet by
reducing indebtedness to appropriate levels, to streamline operations and to
reduce costs, in order to allow Solutia to emerge from Chapter 11 as a
viable going concern, and to obtain relief from the negative financial
impact of liabilities for litigation, environmental remediation and certain
post-retirement benefits (the "Legacy Liabilities") and liabilities under
operating contracts, all of which were assumed at the time of the Solutia
Spinoff. These factors, combined with the weakened state of the chemical
manufacturing sector, general economic conditions and continuing high,
volatile energy and crude oil costs have been an obstacle to Solutia's
financial stability and success.
Under Chapter 11, Solutia is operating its businesses as a
debtor-in-possession ("DIP") under court protection from creditors and
claimants. Since the Chapter 11 filing, all orders sufficient to enable
Solutia to conduct normal business activities, including the approval of
Solutia's DIP financing, have been entered by the bankruptcy court. While
Solutia is subject to Chapter 11, all transactions not in the ordinary
course of business require the prior approval of the bankruptcy court.
On January 16, 2004, pursuant to authorization from the bankruptcy
court, Solutia entered into a $525 million DIP credit facility. This DIP
facility consists of (i) a $50 million multiple draw term loan; (ii) a $300
million single draw term loan, which was drawn in full on the effective date
of the facility; and
10
(iii) a $175 million borrowing-based revolving credit facility, which
includes a $150 million letter of credit subfacility. The DIP credit
facility was subsequently amended on March 1, 2004 and July 20, 2004. A
third amendment was entered into on June 1, 2005, with bankruptcy court
approval. The third amendment reduced the interest rate on the term loan
component of the DIP facility to LIBOR plus 4.25 percent from the previous
interest rate of the greater of the prime rate plus 4.0 percent or 8.0
percent, extended the maturity date of the current facility to June 19, 2006
from the previous December 19, 2005 maturity date, and made other minor
modifications.
As a consequence of the Chapter 11 filing, pending litigation
against Solutia is generally stayed, and no party may take any action to
collect its pre-petition claims except pursuant to order of the bankruptcy
court. November 30, 2004 was the last date by which holders of pre-filing
date claims against the Debtors could file such claims. Any holder of a
claim that was required to file such claim by November 30, 2004, and did not
do so may be barred from asserting such claim against the Debtors and,
accordingly, may not be able to participate in any distribution on account
of such claim. Differences between claim amounts identified by the Debtors
and claims filed by claimants will be investigated and resolved in
connection with the Debtors' claims resolution process, and only holders of
claims that are ultimately allowed for purposes of the Chapter 11 case will
be entitled to distributions. Solutia has not yet completed its analysis of
all the proofs of claim. Since the settlement terms of allowed claims are
subject to a confirmed plan of reorganization, the ultimate distribution
with respect to allowed claims is not presently ascertainable.
On February 14, 2006, the Debtors filed with the Bankruptcy Court
their Joint Plan of Reorganization (the "Plan") and Disclosure Statement
(the "Disclosure Statement"). The Plan and Disclosure Statement along with
the Relationship Agreement (as defined below) and Retiree Settlement
Agreement, entered into among Solutia, the official committee of unsecured
creditors and official committee of retirees appointed in the Chapter 11
Cases, Monsanto, certain retirees and the other parties thereto (the
"Retiree Settlement"), set forth the terms of a global settlement the
"Global Settlement") between Solutia, the Official Committee of Unsecured
Creditors in the Debtors' Chapter 11 Cases (the "Unsecured Creditors'
Committee"), Monsanto Company ("Monsanto") and Pharmacia. The Global
Settlement provides for, among other things, the reallocation of certain
Legacy Liabilities among Solutia, Monsanto and Pharmacia and the treatment
various constituencies in the Chapter 11 Cases will receive under the Plan.
The Disclosure Statement contains a description of the events that led up to
the Debtors' bankruptcy filings, the actions the Debtors' have taken to
improve their financial situation while in bankruptcy and a current
description of the Debtors' businesses. The reallocation of liabilities
between Solutia and Monsanto is set forth in a Relationship Agreement (the
"Relationship Agreement") to be entered into between Solutia and Monsanto
upon confirmation of the Plan. The Relationship Agreement was filed with the
Bankruptcy Court on February 21, 2006 as an exhibit to the Plan. The Plan
including the Relationship Agreement and Retiree Settlement Agreement, and
the Disclosure Statement were furnished as exhibits to a Form 8-K filed on
February 21, 2006.
The Plan, which incorporates the Relationship Agreement and Retiree
Settlement, is subject to approval by the Bankruptcy Court and the approval
of other constituencies in accordance with the Bankruptcy Code as well as
various other conditions and contingencies, some of which are not within the
control of Solutia, and therefore are subject to change and are not binding
upon any party. The Disclosure Statement remains subject to change pending a
hearing in the Bankruptcy Court to consider the legal adequacy of the
Disclosure Statement. Once the Disclosure Statement is approved by the
Bankruptcy Court, it will be distributed to all constituencies entitled to
vote on the Plan. Solutia cannot provide any
11
assurance that any plan of reorganization ultimately confirmed by the
Bankruptcy Court, or any disclosure statement ultimately approved by the
Bankruptcy Court, will be consistent with the terms of the Plan and
Disclosure Statement.
If confirmed, the Plan will provide Solutia with significant relief
from the Legacy Liabilities it was required to assume in the Solutia
Spinoff. These Legacy Liabilities included: (1) retiree medical, retiree
life insurance and retiree disability benefits ("Retiree Welfare Benefits")
for those individuals who retired or became disabled prior to the Solutia
Spinoff ("Pre-Spin Retirees"); (2) environmental remediation costs related
to activities of the chemicals business of Pharmacia that occurred prior to
the Solutia Spinoff; and (3) toxic tort litigation costs relating to
chemical exposure associated with the activities of Pharmacia that occurred
prior to the Solutia Spinoff.
Under the Plan, Solutia would emerge from bankruptcy as an
independent publicly held company ("reorganized Solutia"). The Plan provides
for $250 million of new investment in a reorganized Solutia. This new
investment will be in the form of a rights offering to certain unsecured
creditors, who will be given the opportunity to purchase 22.7 percent of the
common stock in the reorganized company. Monsanto will backstop the rights
offering, meaning it will commit to purchase up to the entire $250 million
of stock, making up for any amount of the rights offering left unsubscribed
by the unsecured creditors. If Monsanto is required to make the full new
money investment under the rights offering, Monsanto's equity interest in
reorganized Solutia is expected to range from approximately 45 percent to 49
percent, depending on the actual amount of allowed general unsecured claims.
The holders of allowed general unsecured claims would receive the remainder
of the common stock in reorganized Solutia.
Of this $250 million new investment, $175 million will be set aside
in a Voluntary Employees' Beneficiary Association ("VEBA") Retiree Trust to
fund the Retiree Welfare Benefits for those Pre-Spin Retirees who receive
these benefits from Solutia, and $50 million will be used to fund Solutia's
environmental remediation commitments in Anniston, Alabama and Sauget,
Illinois, as described below. The remaining $25 million will be available
for Solutia to pay any of the Legacy Liabilities that it is retaining.
Under the Plan and Relationship Agreement, as between Monsanto and
Solutia, Monsanto will be responsible for all current and future tort
litigation costs arising from Pharmacia's chemical business prior to the
Solutia Spinoff, including litigation arising from exposure to PCBs and
other chemicals. In addition, Monsanto will accept financial responsibility
for environmental remediation obligations at all sites for which Solutia was
required to assume responsibility as part of the Solutia Spinoff but which
were never owned or operated by Solutia. This includes more than 50 sites
with active remediation projects and approximately 200 additional known
sites and off-site disposal facilities, as well as sites that have not yet
been identified. Finally, Monsanto will share financial responsibility with
Solutia for off-site remediation costs in Anniston, Alabama and Sauget,
Illinois. Under this cost-sharing mechanism, the first $50 million will be
paid from the proceeds of the rights offering (as described above), Monsanto
would pay the next $50 million (less amounts it has paid for remediation at
these sites during the Chapter 11 Cases, which totaled over $30 million as
of January 31, 2006), Solutia would be responsible for the next $325 million
in costs, and any further costs would be shared equally between Solutia and
Monsanto. Under certain circumstances, Solutia would be able to defer paying
a portion of its shared responsibility with respect to the Anniston and
Sauget sites in excess of $30 million in any calendar year, up to $25
million in the aggregate. Any deferred amounts would be paid by Monsanto,
but subject to repayment by Solutia at a later date. The Plan and
Relationship Agreement provide that Solutia will continue to pay its annual
installment and education fund obligations relating to the August 2003
Anniston polychlorinated biphenyls ("PCBs") settlement and education fund
obligations relating to the Anniston Partial Consent Decree.
The Plan incorporates the terms of the Retiree Settlement
Agreement, which was negotiated with the Official Retirees Committee, which
represents more than 23,000 former employees of Pharmacia and Solutia and
their dependents. Although the Retiree Settlement Agreement includes benefit
modifications,
12
the Plan, through the $175 million from the rights offering that will be set
aside into the VEBA Trust, provides significant current funding which will
greatly improve Solutia's ability to meet these benefit obligations going
forward. Under the Retiree Settlement Agreement, retirees will retain their
company-provided medical benefits, although the cost to retirees for such
benefits will increase. Most retirees will retain their company-provided
life insurance benefits, although some will experience a modification in the
benefit provided. The settlement also maintains Solutia's rights according
to a separate 2001 settlement and a post-settlement retiree medical plan,
under which Solutia intends to make certain changes effective January 1,
2007, including the elimination of company-provided medical benefits for
certain groups of retirees that also are eligible for Medicare coverage.
In consideration of the benefit modifications being accepted by
retirees pursuant to the Retiree Settlement Agreement, the Plan contemplates
that the retirees will receive an unsecured claim for $35 million in
Solutia's bankruptcy case. The common stock in the reorganized Solutia
received on account of this claim would be deposited in the VEBA Trust and
used to pay Retiree Welfare Benefits. This would be in addition to the $175
million contributed to the VEBA Trust from the proceeds of the rights
offering. The VEBA Trust would be a bankruptcy-remote entity and would be
managed by an independent trustee.
The Plan does not provide for distributions to the holders of
Solutia's existing equity. Solutia's existing shares of common stock, as
well as options and warrants to purchase its common stock, would be
cancelled and holders of Solutia's common stock, including options and
warrants to purchase Solutia's common stock, would receive no consideration
for that stock or those options and warrants. Although the Plan does not
provide for any distributions to holders of Solutia's existing equity, the
Official Committee of Equity Security Holders in Solutia's bankruptcy case
has filed a complaint against Pharmacia and Monsanto, and an objection to
the proofs of claim filed by Monsanto and Pharmacia in Solutia's bankruptcy,
arguing that holders of Solutia's existing equity are entitled to some form
of distribution.
In order to exit Chapter 11 successfully, Solutia must propose and
obtain confirmation by the bankruptcy court of a plan of reorganization that
satisfies the requirements of the U.S. Bankruptcy Code. As provided by the
U.S. Bankruptcy Code, Solutia had the exclusive right to propose a plan of
reorganization for 120 days following the Chapter 11 filing date. The
bankruptcy court has subsequently approved several extensions of the
exclusivity period, the most recent of which is set to expire on April 10,
2006. Although Solutia expects to receive further extensions of the
exclusivity period, no assurance can be given that any such future extension
requests will be granted by the bankruptcy court. Moreover, although Solutia
has filed the Plan which provides for Solutia's emergence from bankruptcy as
a going concern, there can be no assurance that the Plan, or any other plan
of reorganization, will be confirmed by the bankruptcy court or that any
such plan will be implemented successfully.
Basis of Consolidation
The consolidated financial statements of the Solutia Group include
the accounts of Solutia Inc. and its majority-owned U.S. and non-U.S.
subsidiaries. The non-U.S. subsidiaries did not commence Chapter 11 cases.
The consolidated financial statements of the Solutia Chapter 11 Debtors
include the accounts of Solutia Inc. and its majority-owned U.S.
subsidiaries, with investments in non-U.S. subsidiaries accounted for on the
cost basis. In each case, all significant intercompany transactions and
balances have been eliminated in consolidation. Companies in which Solutia
has a significant interest but not a controlling interest are accounted for
under the equity method of accounting and included in investments in
subsidiaries and affiliates in the statement of consolidated financial
position. Solutia's proportionate share of these companies' net earnings or
losses is reflected in equity earnings (loss) from affiliates in the
consolidated statement of operations. In accordance with Financial
Accounting Standards Board Interpretation No. 46, Consolidation of Variable
Interest Entities, variable interest entities in which Solutia is the
primary beneficiary are consolidated within the consolidated financial
statements.
13
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles in the United States of America have been condensed or
omitted for purposes of this Operating Report. The consolidated statement of
operations for any interim period is not necessarily indicative of the
results that may be expected for a quarter, full year, or any future interim
period.
Liquidity
Solutia announced in February 2006 that it received a fully
underwritten commitment for $825 million of debtor-in-possession ("DIP")
financing, maturing March 31, 2007. This represents a $300 million increase
and more than a nine-month extension over Solutia's current DIP financing.
The increased availability under the DIP financing provides Solutia with
additional liquidity for operations and the ability to fund mandatory
pension payments that are coming due in 2006. The DIP financing can be
repaid by Solutia at any time without prepayment penalties. This amendment
requires bankruptcy court approval, which Solutia expects to receive in
March 2006.
At January 31, 2006, total liquidity for the Solutia Group was
approximately $172 million, consisting of $93 million of cash and DIP
facility availability of $79 million. At January 31, 2006, total liquidity
for the Solutia Chapter 11 Debtors was approximately $87 million, consisting
of $8 million of cash and DIP facility availability of $79 million.
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies are consistent with those
listed in the Company's 2004 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 10, 2005 with the exception of
Solutia's change in accounting principle in 2005 related specifically to the
adoption of FASB issued Interpretation No. 47, Accounting for Conditional
Asset Retirement Obligations - an interpretation of FASB Statement No. 143
("FIN 47"). FIN 47 clarifies that the term "conditional asset retirement
obligation" as used in Statement of Financial Accounting Standards No.143,
Accounting for Asset Retirement Obligations ("SFAS No. 143"), refers to a
legal obligation to perform an asset retirement activity in which the timing
and (or) method of settlement are conditional on a future event that may or
may not be within the control of the entity.
14
SOLUTIA INC., ET. AL.,
Case Nos. 03-17948 (PCB) through 03-17962 (PCB)
(Debtors in Possession)
SOLUTIA CHAPTER 11 DEBTORS
SCHEDULE OF FEDERAL, STATE AND LOCAL TAXES COLLECTED, WITHHELD OR PAID
MONTH ENDED JANUARY 31, 2006
PRE-PETITION POST-PETITION TOTAL
AMOUNT AMOUNT AMOUNT
--------------------- ---------------------- ----------------------
C
1. GROSS SALARIES AND WAGES - 26,210,835.13 26,210,835.13
2. PAYROLL TAXES WITHHELD - 5,319,709.01 5,319,709.01
3. EMPLOYER PAYROLL TAX CONTRIBUTED - 2,448,357.25 2,448,357.25
4. GROSS TAXABLE SALES - 831,662.78 831,662.78
5. SALES TAXES COLLECTED / USE TAX PAID - 430,008.65 430,008.65
6. PROPERTY TAXES PAID - 35,126.31 35,126.31
7. OTHER TAXES PAID - 2,334.47 2,334.47
15
SOLUTIA INC., ET. AL.,
Case Nos. 03-17948 (PCB) through 03-17962 (PCB)
(Debtors in Possession)
SOLUTIA CHAPTER 11 DEBTORS
SCHEDULE OF FEDERAL, STATE AND LOCAL TAXES COLLECTED, WITHHELD OR PAID
MONTH ENDED JANUARY 31, 2006
DATES AND AMOUNTS PAID TO TAXING AGENCIES (ITEMS 2, 3, 5, 6, 7)
PRE-PETITION POST-PETITION TOTAL ITEM
DEBTOR ENTITY DATE AMOUNT AMOUNT AMOUNT TYPE OF TAX NUMBER
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Solutia Inc. 1/3/2006 - 26,458.03 26,458.03 Employee Payroll Taxes 2
Solutia Inc. 1/4/2006 - 111,116.98 111,116.98 Employee Payroll Taxes 2
Solutia Inc. 1/5/2006 - 171,154.94 171,154.94 Employee Payroll Taxes 2
Solutia Inc. 1/6/2006 - 286,578.65 286,578.65 Employee Payroll Taxes 2
Solutia Inc. 1/9/2006 - 6,141.18 6,141.18 Employee Payroll Taxes 2
Solutia Inc. 1/11/2006 - 99,401.85 99,401.85 Employee Payroll Taxes 2
Solutia Inc. 1/13/2006 - 1,243,272.30 1,243,272.30 Employee Payroll Taxes 2
Solutia Inc. 1/18/2006 - 89,453.11 89,453.11 Employee Payroll Taxes 2
Solutia Inc. 1/19/2006 - 216,631.91 216,631.91 Employee Payroll Taxes 2
Solutia Inc. 1/20/2006 - 227,870.10 227,870.10 Employee Payroll Taxes 2
Solutia Inc. 1/25/2006 - 90,416.46 90,416.46 Employee Payroll Taxes 2
Solutia Inc. 1/26/2006 - 74,860.27 74,860.27 Employee Payroll Taxes 2
Solutia Inc. 1/27/2006 - 220,831.01 220,831.01 Employee Payroll Taxes 2
Solutia Inc. 1/31/2006 - 1,550,359.05 1,550,359.05 Employee Payroll Taxes 2
Solutia Inc. 1/3/2006 - 118.83 118.83 Employer Payroll Taxes 3
Solutia Inc. 1/4/2006 - 31,331.18 31,331.18 Employer Payroll Taxes 3
Solutia Inc. 1/5/2006 - 56,682.05 56,682.05 Employer Payroll Taxes 3
Solutia Inc. 1/6/2006 - 79,833.96 79,833.96 Employer Payroll Taxes 3
Solutia Inc. 1/9/2006 - 2,036.87 2,036.87 Employer Payroll Taxes 3
Solutia Inc. 1/11/2006 - 28,756.56 28,756.56 Employer Payroll Taxes 3
Solutia Inc. 1/13/2006 - 611,842.40 611,842.40 Employer Payroll Taxes 3
Solutia Inc. 1/18/2006 - 26,564.89 26,564.89 Employer Payroll Taxes 3
Solutia Inc. 1/19/2006 - 70,835.05 70,835.05 Employer Payroll Taxes 3
Solutia Inc. 1/20/2006 - 50,243.15 50,243.15 Employer Payroll Taxes 3
Solutia Inc. 1/25/2006 - 26,937.46 26,937.46 Employer Payroll Taxes 3
Solutia Inc. 1/26/2006 - 22,699.81 22,699.81 Employer Payroll Taxes 3
Solutia Inc. 1/27/2006 - 50,449.78 50,449.78 Employer Payroll Taxes 3
Solutia Inc. 1/31/2006 - 556,926.70 556,926.70 Employer Payroll Taxes 3
CP Films Inc. 1/31/06 - 44,078.25 44,078.25 Sales 5
Solutia Inc. 1/19/06 - 378,763.20 378,763.20 Sales/Use 5
CP Films Inc. 1/31/06 - 7,167.20 7,167.20 Use 5
Solutia Inc. 1/30/06 - 22,366.11 22,366.11 Property Tax 6
Solutia Inc. 1/25/06 - 12,760.20 12,760.20 Property Tax 6
Solutia Systems Inc. 1/31/06 - 1,284.00 1,284.00 Annual Report 7
Solutia Inc. 1/31/06 - 505.00 505.00 Business License 7
Solutia Inc. 1/31/06 - 29.49 29.49 Federal Excise Tax 7
Solutia Inc. 1/30/06 - 200.00 200.00 Polluant Tax Bond 7
Solutia Inc. 1/30/06 - 315.98 315.98 Subdivision Fee 7
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