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 DECEMBER 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 DECEMBER 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): $ 19
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, 2007 /s/ Timothy J. Spihlman
-----------------------
Timothy J. Spihlman
Vice President and Controller
Indicate if this is an amended statement by checking here: X
---
This statement is being amended to update financial information primarily
related to certain accounting adjustments from Solutia Inc.'s ("Solutia")
joint venture, Flexsys Holding BV, which were made subsequent to the filing of
Current Report on Form 8-K filed on January 31, 2007. These adjustments
affected Solutia's consolidated financial statements on page 2 "Current Month
Net Loss" and pages 5-9.
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 December 2006
- -------------------------------------------------------------------------------
Solutia Inc. $ 219,041,197.48
- -------------------------------------------------------------------------------
Solutia Business Enterprises, Inc.* $ --
- -------------------------------------------------------------------------------
Solutia Systems, Inc. $ 20,000.00
- -------------------------------------------------------------------------------
Solutia Overseas, Inc. * $ --
- -------------------------------------------------------------------------------
CPFilms Inc. $ 8,449,441.30
- -------------------------------------------------------------------------------
Solutia Management Company, Inc. * $ --
- -------------------------------------------------------------------------------
Monchem International, Inc. * $ --
- -------------------------------------------------------------------------------
Axio Research Corporation * $ --
- -------------------------------------------------------------------------------
Solutia Investments, LLC * $ --
- -------------------------------------------------------------------------------
Beamer Road Management Company * $ --
- -------------------------------------------------------------------------------
Monchem, Inc. * $ --
- -------------------------------------------------------------------------------
Solutia Inter-America, Inc. $ 16,887.25
- -------------------------------------------------------------------------------
Solutia International Holding, LLC * $ --
- -------------------------------------------------------------------------------
Solutia Taiwan, Inc. $ 24,525.27
- -------------------------------------------------------------------------------
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 December 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*
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(DOLLARS IN MILLIONS)
MONTH ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2006
------------------- -------------------
TOTAL NET SALES $ 216 $ 2,905
TOTAL COST OF GOODS SOLD 196 2,524
------------------- -------------------
GROSS PROFIT 20 381
TOTAL MAT EXPENSE 29 278
AMORTIZATION EXPENSE - 1
------------------- -------------------
OPERATING INCOME (LOSS) (9) 102
EQUITY EARNINGS FROM AFFILIATES 3 38
INTEREST EXPENSE (9) (104)
OTHER INCOME, NET 2 14
LOSS ON DEBT MODIFICATION - (8)
REORGANIZATION ITEMS:
Professional fees (6) (57)
Provision for rejected executory contracts - -
Employee severance and retention costs - (5)
Adjustment to allowed claim amounts - 2
Settlements of pre-petition claims - -
Other (2) (11)
------------------- -------------------
(8) (71)
------------------- -------------------
LOSS BEFORE TAXES (21) (29)
Income tax expense 5 18
------------------- -------------------
LOSS FROM CONTINUING OPERATIONS (26) (47)
Income from discontinued operations, nex of tax - 58
------------------- -------------------
NET INCOME (LOSS) $ (26) $ 11
=================== ===================
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*
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
AS OF DECEMBER 31, 2006
ASSETS (Dollars
------ in millions)
----------------
Cash 150
Trade Receivables, net 288
Inventories 274
Other Current Assets 136
Assets of Discontinued Operations -
----------------
TOTAL CURRENT ASSETS 848
Property, Plant and Equipment, net 795
Investments in Affiliates 193
Intangible Assets, net 120
Other Assets 99
----------------
TOTAL ASSETS $ 2,055
================
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
Accounts Payable $ 228
Short-Term Debt 650
Other Current Liabilities 245
Liabilities of Discontinued Operations 1
----------------
TOTAL CURRENT LIABILITIES 1,124
Long-Term Debt 210
Other Long-Term Liabilities 289
----------------
TOTAL LIABILITIES NOT SUBJECT TO COMPROMISE 1,623
LIABILITIES SUBJECT TO COMPROMISE 1,849
SHAREHOLDERS' DEFICIT (1,417)
----------------
TOTAL LIABILITIES & SHAREHOLDERS' DEFICIT $ 2,055
================
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*
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(DOLLARS IN MILLIONS)
MONTH ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2006
------------------- -------------------
OPERATING ACTIVITIES:
Net income (loss) $ (26) $ 11
Income from discontinued operations, net of tax - (58)
Depreciation and amortization 10 111
Restructuring expenses and other unusual items 2 5
Changes in assets and liabilities:
Trade receivables 44 43)
Inventories (1) (14)
Accounts payable 5 12
Liabilities subject to compromise:
Pension plan liabilities (29) (196)
Other postretirement benefits liabilities (45) (102)
Other liabilities subject to compromise - (9)
Other assets and liabilities 91 162
------------------- -------------------
NET CASH PROVIDED (USED) BEFORE REORGANIZATION ITEMS-CONTINUING OPERATIONS 51 (121)
NET CASH PROVIDED BEFORE REORGANIZATION ITEMS-DISCONTINUED OPERATIONS - 2
------------------- -------------------
NET CASH PROVIDED (USED) BEFORE REORGANIZATION ITEMS 51 (119)
OPERATING CASH FLOWS - REORGANIZATION ITEMS-CONTINUING OPERATIONS:
Professional services fees (8) (57)
Employee severance and retention payments - (4)
Other - (4)
------------------- -------------------
NET CASH USED IN REORGANIZATION ITEMS-CONTINUING OPERATIONS (8) (65)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES-CONTINUING OPERATIONS 43 (186)
NET CASH PROVIDED BY OPERATING ACTIVITIES-DISCONTINUED OPERATIONS - 2
------------------- -------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 43 (184)
=================== ===================
INVESTING ACTIVITIES:
Property, plant and equipment purchases (9) (106)
Acquisition and Investment Payments - (16)
Other investing activities - 5
------------------- -------------------
NET CASH USED IN INVESTING ACTIVITIES-CONTINUING OPERATIONS (9) (117)
NET CASH PROVIDED BY INVESTING ACTIVITIES-DISCONTINUED OPERATIONS - 69
------------------- -------------------
NET CASH USED IN INVESTING ACTIVITIES-TOTAL (9) (48)
=================== ===================
FINANCING ACTIVITIES:
Net change in short-term debt obligations - 350
Proceeds from long-term debt obligations - (51)
Deferred debt issuance costs - (17)
Other financing activities - (7)
------------------- -------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 275
=================== ===================
NET INCREASE IN CASH AND CASH EQUIVALENTS 34 43
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 116 107
------------------- -------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 150 $ 150
=================== ===================
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
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(DOLLARS IN MILLIONS)
MONTH ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2006
------------------- --------------------
TOTAL NET SALES $ 170 $ 2,388
TOTAL COST OF GOODS SOLD 162 2,159
------------------- --------------------
GROSS PROFIT 8 229
TOTAL MAT EXPENSE 19 214
AMORTIZATION EXPENSE - 1
------------------- --------------------
OPERATING INCOME (LOSS) (11) 14
EQUITY EARNINGS FROM AFFILIATES 7 45
INTEREST EXPENSE, NET (7) (83)
OTHER INCOME, NET 3 45
LOSS ON DEBT MODIFICATION - (8)
REORGANIZATION ITEMS:
Professional Fees (6) (57)
Provision for rejected executory contracts - -
Employee severance and retention costs - (5)
Adjustment to allowed claim amounts - 2
Settlements of pre-petition claims - -
Other (1) (11)
------------------- --------------------
(7) (71)
------------------- --------------------
LOSS BEFORE TAXES (15) (58)
Income tax expense 4 8
------------------- --------------------
NET LOSS $ (19) $ (66)
=================== ====================
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
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
AS OF DECEMBER 31, 2006
ASSETS (Dollars
------ in millions)
----------------
Cash $ 38
Trade Receivables, net 146
Account Receivables-Unconsolidated Subsidiaries 47
Inventories 176
Other Current Assets 90
Assets of Discontinued Operations -
----------------
TOTAL CURRENT ASSETS 497
Property, Plant and Equipment, net 660
Investments in Subsidiaries and Affiliates 566
Intangible Assets, net 100
Other Assets 58
----------------
TOTAL ASSETS $ 1,881
================
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
Accounts Payable $ 200
Short-Term Debt 650
Other Current Liabilities 168
Liabilities of Discontinued Operations 1
----------------
TOTAL CURRENT LIABILITIES 1,019
Other Long-Term Liabilities 197
----------------
TOTAL LIABILITIES NOT SUBJECT TO COMPROMISE 1,216
LIABILITIES SUBJECT TO COMPROMISE 1,963
SHAREHOLDERS' DEFICIT (1,298)
----------------
TOTAL LIABILITIES & SHAREHOLDERS' DEFICIT $ 1,881
================
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. ("Pharmacia")). On September 1, 1997,
Pharmacia distributed all of the outstanding shares of common stock of Solutia
as a dividend to Pharmacia stockholders (the "Solutia Spinoff"). As a result
of the Solutia 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 (the "Chapter 11 Cases") in the U.S. Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court"). 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, to
streamline operations and to reduce costs, in order to allow Solutia to emerge
from Chapter 11 as a viable going concern. The filing was also made 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 were 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, 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. Under 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 extensions of this exclusivity period. The exclusivity
period continues until the order disposing of the current motion is entered on
the Bankruptcy Court's docket.
10
On January 16, 2004, pursuant to authorization from the Bankruptcy
Court, Solutia entered into a DIP credit facility. This DIP credit facility
has subsequently been amended from time to time, with Bankruptcy Court
approval. The DIP credit facility, as amended, currently consists of: (a) a
$975 million fully-drawn term loan; and (b) a $250 million borrowing-based
revolving credit facility, which includes a $150 million letter of credit
subfacility. Of the $1,225 million facility, $150 million must be utilized to
acquire Akzo Nobel's 50% interest in the Flexsys joint venture between Solutia
and Akzo Nobel.
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 an order of the Bankruptcy Court.
November 30, 2004 was the last date by which holders of pre-petition 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 fully 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 a
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 the Retiree Settlement Agreement, entered
into among Solutia, the Official Committee of Unsecured Creditors (the
"Unsecured Creditors' Committee") and Official Committee of Retirees appointed
in the Chapter 11 Cases (the "Retirees' Committee"), Monsanto Company
("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 Unsecured Creditors' Committee, the
Retirees' Committee, Monsanto and Pharmacia. The Global Settlement provides
for, among other things, a reallocation of certain Legacy Liabilities among
Solutia, Monsanto and Pharmacia and the treatment that various constituencies
in the Chapter 11 Cases would receive under the Plan. The reallocation of
liabilities between Solutia and Monsanto is set forth in a Relationship
Agreement (the "Relationship Agreement") which would be entered into between
Solutia and Monsanto upon confirmation of the Plan. Since the February 14,
2006 filing, the Bankruptcy Court has not moved forward with the process to
approve the Disclosure Statement and confirm the Plan.
There are two adversary proceedings ongoing in our Chapter 11 case.
JPMorgan, as indenture trustee of Solutia's debentures due 2027 and 2037,
filed litigation against Solutia claiming that such debentures are entitled to
secured status as opposed to general unsecured status as set forth in the
Plan. In addition, the Official Committee of Equity Security Holders ("Equity
Committee") in Solutia's bankruptcy case has filed litigation against
Pharmacia and Monsanto, arguing that holders of Solutia's existing equity are
entitled to a distribution in the Chapter 11 case.
Solutia is in discussions with the major stakeholders in our Chapter
11 case in an effort to modify the Global Settlement and Plan and achieve a
confirmable Plan. In addition, Solutia continues to evaluate and explore all
other reasonable alternatives to reorganize the Company, such as a sale of the
reorganized Company's equity or a sale of certain of its businesses or assets
that may present a means of maximizing the value of the estate for
stakeholders.
11
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 consolidated statement of 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.
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
At December 31, 2006, total liquidity for the Solutia Group was
approximately $245 million, consisting of $150 million of cash and DIP
facility availability of $95 million. At December 31, 2006, total liquidity
for the Solutia Chapter 11 Debtors was approximately $133 million, consisting
of $38 million of cash and DIP facility availability of $95 million.
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies are consistent with those listed
in the Company's 2005 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 15, 2006.
3. SUPPLEMENTAL INFORMATION - RESTRUCTURING EXPENSES AND OTHER UNUSUAL ITEMS
Month Ended December 31, 2006
- -----------------------------
Restructuring expenses and other unusual items included in the
consolidated statement of operations and the consolidated statement of cash
flows were approximately $2 million of net loss for the month ended December
31, 2006 related to severance and retraining costs incurred from headcount
reductions throughout the organization.
Year Ended December 31, 2006
- ----------------------------
Restructuring expenses and other unusual items included in the
consolidated statement of operations and the consolidated statement of cash
flows were approximately $5 million of net income for the year ended December
31, 2006. These restructuring expenses and other unusual items consisted of
(i) a $20 million gain from the reversal of previously established litigation
reserves; (ii) an environmental charge of approximately $9 million that was
precipitated by the notification by a third-party of its intent to terminate a
tolling agreement at one of Solutia's facilities outside the U.S. that will
likely result in the cessation of operations at that site; (iii) a charge of
$9 million associated with the March 2006 DIP
12
amendment that resulted from the write-off of debt issuance costs and to
record the DIP facility as modified at its fair value; (iv) a charge of $3
million related to the early extinguishment of debt; (v) $4 million of
severance and retraining costs incurred from headcount reductions throughout
the organization.
4. SUPPLEMENTAL INFORMATION - YEAR-TO-DATE RESULTS OF OPERATIONS
Solutia's net sales for the year ended December 31, 2006 increased
$146 million, or 5 percent, as compared to the year ended December 31, 2005
primarily due to higher average selling prices of approximately 6 percent,
partially offset by lower sales volumes of approximately 1 percent. The lower
sales volumes were largely precipitated by portfolio changes made in 2005 when
Solutia exited certain unprofitable businesses. Solutia's results of
operations for the year ended December 31, 2006 improved by $54 million as
compared to the year ended December 31, 2005 primarily as a result of higher
net sales and controlled spending, partially offset by unfavorable
manufacturing variances and higher overall raw material and energy costs of
$91 million. The unfavorable manufacturing costs were precipitated by a
manufacturing interruption incurred at the Alvin, Texas facility, resulting in
a significant turnaround being accelerated in its timing, as well as extended
in its duration.
5. SUPPLEMENTAL INFORMATION - DISCONTINUED OPERATIONS
Pharmaceuticals Divestiture
- ---------------------------
On May 23, 2006, Solutia's wholly-owned subsidiary, Solutia Europe
S.A./N.V. ("SESA"), agreed to sell its pharmaceutical services business to
Dishman Pharmaceuticals & Chemicals Ltd. ("Dishman") pursuant to a Stock and
Asset Purchase Agreement dated as of May 23, 2006 between SESA and Dishman.
Closing of the sale occurred on August 22, 2006 and included the transfer of
all economic benefits and liabilities of the pharmaceutical services business
from August 1, 2006 through the closing date. Under the terms of the
agreement, Dishman purchased 100 percent of the stock of the pharmaceutical
services business, as well as certain other assets used in the pharmaceutical
services business, for $77 million. Solutia recorded a gain on the sale of the
pharmaceutical services business of $49 million. Further, Solutia used $51
million of the proceeds from the sale to pay down SESA's (euro)200 million
credit facility.
13
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 DECEMBER 31, 2006
PRE-PETITION POST-PETITION TOTAL
AMOUNT AMOUNT AMOUNT
--------------------- --------------------- ----------------------
1. GROSS SALARIES AND WAGES 0.00 19,932,744.22 19,932,744.22
2. PAYROLL TAXES WITHHELD 0.00 5,759,482.89 5,759,482.89
3. EMPLOYER PAYROLL TAX CONTRIBUTED 0.00 1,637,054.27 1,637,054.27
4. GROSS TAXABLE SALES 0.00 743,862.29 743,862.29
5. SALES TAXES COLLECTED / USE TAX PAID 0.00 230,623.33 230,623.33
6. PROPERTY TAXES PAID 0.00 4,490,586.51 4,490,586.51
7. OTHER TAXES PAID 0.00 66,500.35 66,500.35
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 DECEMBER 31, 2006
DATES AND AMOUNTS PAID TO TAXING AGENCIES (ITEMS 2, 3, 5, 6, 7)
PRE-PETITION POST-PETITION TOTAL ITEM
ITEM
DEBTOR ENTITY DATE AMOUNT AMOUNT AMOUNT TYPE OF TAX NUMBER
- -----------------------------------------------------------------------------------------------------------------------------------
Solutia Inc. 12/01/06 0.00 288,828.85 288,828.85 Employee Payroll Taxes 2
Solutia Inc. 12/06/06 0.00 98,984.16 98,984.16 Employee Payroll Taxes 2
Solutia Inc. 12/07/06 0.00 215,758.36 215,758.36 Employee Payroll Taxes 2
Solutia Inc. 12/08/06 0.00 178,523.06 178,523.06 Employee Payroll Taxes 2
Solutia Inc. 12/13/06 0.00 86,632.04 86,632.04 Employee Payroll Taxes 2
Solutia Inc. 12/14/06 0.00 71,392.05 71,392.05 Employee Payroll Taxes 2
Solutia Inc. 12/15/06 0.00 1,777,785.97 1,777,785.97 Employee Payroll Taxes 2
Solutia Inc. 12/20/06 0.00 90,707.64 90,707.64 Employee Payroll Taxes 2
Solutia Inc. 12/21/06 0.00 195,964.14 195,964.14 Employee Payroll Taxes 2
Solutia Inc. 12/22/06 0.00 209,358.44 209,358.44 Employee Payroll Taxes 2
Solutia Inc. 12/27/06 0.00 416,339.37 416,339.37 Employee Payroll Taxes 2
Solutia Inc. 12/28/06 0.00 76,950.81 76,950.81 Employee Payroll Taxes 2
Solutia Inc. 12/29/06 0.00 1,751,358.30 1,751,358.30 Employee Payroll Taxes 2
Solutia Inc. 12/01/06 0.00 59,574.12 59,574.12 Employer Payroll Taxes 3
Solutia Inc. 12/06/06 0.00 28,998.33 28,998.33 Employer Payroll Taxes 3
Solutia Inc. 12/07/06 0.00 70,681.63 70,681.63 Employer Payroll Taxes 3
Solutia Inc. 12/08/06 0.00 36,272.05 36,272.05 Employer Payroll Taxes 3
Solutia Inc. 12/13/06 0.00 25,510.27 25,510.27 Employer Payroll Taxes 3
Solutia Inc. 12/14/06 0.00 21,130.77 21,130.77 Employer Payroll Taxes 3
Solutia Inc. 12/15/06 0.00 493,461.79 493,461.79 Employer Payroll Taxes 3
Solutia Inc. 12/20/06 0.00 26,234.65 26,234.65 Employer Payroll Taxes 3
Solutia Inc. 12/21/06 0.00 63,854.22 63,854.22 Employer Payroll Taxes 3
Solutia Inc. 12/22/06 0.00 38,586.44 38,586.44 Employer Payroll Taxes 3
Solutia Inc. 12/27/06 0.00 83,894.01 83,894.01 Employer Payroll Taxes 3
Solutia Inc. 12/28/06 0.00 22,167.28 22,167.28 Employer Payroll Taxes 3
Solutia Inc. 12/29/06 0.00 480,414.48 480,414.48 Employer Payroll Taxes 3
Solutia Inc. 12/19/06 0.00 192,572.16 192,572.16 Sales/Use Tax 5
CPFilms Inc. 12/31/06 0.00 38,051.17 38,051.17 Sales & Use 5
CPFilms Inc. 12/01/06 0.00 536,406.77 536,406.77 Property Tax 6
Solutia Inc. 12/23/06 0.00 7,795.13 7,795.13 Property Tax 6
Solutia Inc. 12/27/06 0.00 30,668.53 30,668.53 Property Tax 6
Solutia Inc. 12/28/06 0.00 3,618,202.41 3,618,202.41 Property Tax 6
Solutia Inc. 12/29/06 0.00 297,513.67 297,513.67 Property Tax 6
Solutia Inc. 12/11/06 0.00 115.00 115.00 Annual Report 7
CPFilms Inc. 12/15/06 0.00 34,000.00 34,000.00 Other-Income Tax 7
Solutia Systems, Inc. 12/15/06 0.00 20,000.00 20,000.00 Other-Income Tax 7
Solutia Inc. 12/22/06 0.00 310.35 310.35 Railcar Tax 7
Solutia Inc. 12/27/06 0.00 75.00 75.00 Business License 7
CPFilms Inc. 12/30/06 0.00 12,000.00 12,000.00 Other-Income Tax 7
15