Solutia Reports First Quarter Earnings of 21 Cents Per Share

Apr 27, 2001, 01:00 ET from Solutia Inc.

    ST. LOUIS, April 27 /PRNewswire/ --
 
     2001 First Quarter Summary
     * Excluding the divestment of the Polymer Modifiers and Phosphorus
       businesses, total revenue of $747 million equals first quarter 2000
     * Earnings per share of 21 cents for the quarter
     * Earnings include a $17 million, or 16 cents per share, gain from an
       insurance settlement and a $4 million, or 4 cents per share, loss from a
       temporary power outage at an Integrated Nylon facility
 
     Financial Summary         1Q 2001     Change from    Change from
     Sales ($M, except EPS) as reported    1Q 2000 (A)   1Q2000 (B)
     Performance Films         $151          -18%            +1%
     Specialty Products        $251          -18%            +4%
     Integrated Nylon          $345           -3%            -3%
     Total Net Sales           $747          -12%          No change
     Net Income                $22           -57%
     Diluted Earnings
      Per Share               $.21           -54%
 
     (A)  Prior year comparisons include sales from businesses divested in
          2000.
     (B)  Prior year comparisons exclude sales from businesses divested in
          2000.
 
     Solutia Inc. (NYSE:   SOI) reported first quarter 2001 net income of
 $22 million or 21 cents per share, on net sales of $747 million.  Net income
 includes a $17 million gain, or 16 cents per share, from an insurance
 settlement related to an explosion and fire at a Wiesbaden, Germany facility
 in October of 2000 and a $4 million, or 4 cents per share, loss resulting from
 a temporary shutdown of the Chocolate Bayou intermediates facility in February
 caused by a power outage.  This compares with net income for the first quarter
 of 2000 of $51 million, or 46 cents per share, on net sales of $846 million.
     "Higher raw material and energy costs, specifically propylene and natural
 gas, a weaker euro and the slowing global economy continue to negatively
 impact Solutia's earnings," said John Hunter, chairman and chief executive
 officer.
     "We are implementing price increases where competition allows,
 aggressively managing capital programs to focus on critical growth
 opportunities and actively working our $100 million cost reduction initiative
 which promises to begin delivering savings in the second half of 2001," he
 said.
 
     Net Sales
     As reported, net sales for the first quarter of 2001 decreased 12 percent
 from the first quarter of 2000.  Excluding the effects of the divestments of
 the Polymer Modifiers and Phosphorus businesses, sales for the on-going
 businesses were even with the prior year's quarter.  The benefit of higher
 average selling prices and improved volume and sales mix were offset by the
 effect of a weaker euro on the translation of euro sales into U.S. dollars.
 
     Segment Data
     Excluding the impact of the divestment of the Polymer Modifiers business,
 sold during third quarter 2000, Performance Films' segment sales for Solutia's
 on-going businesses increased 1 percent on a year over year basis, despite a
 weaker euro.  As reported, the segment's net sales for the first quarter of
 2001 decreased 18 percent compared to the same period of 2000. Performance
 Films' segment profitability decreased 50 percent due to the loss of income
 from the divested Polymer Modifiers business as well as rising raw material
 and energy costs, a weaker euro and higher period manufacturing costs from
 production cutbacks to control inventory, partially offset by improved selling
 prices.
     Excluding the Phosphorus Derivatives business, Specialty Products' segment
 sales increased 4% on a year over year basis.  As reported, net sales for the
 segment decreased 18 percent over the first quarter of 2000.  Sales for the
 period reflect a full quarter of sales from the Pharmaceutical Services
 businesses that were acquired in February of 2000 and the movement of the
 Phosphorus Derivatives business into the Astaris joint venture.  Specialty
 Products' segment profitability declined 28 percent over the comparable prior
 year period primarily due to the loss of income from the Phosphorus
 Derivatives business.
     The Integrated Nylon segment's net sales for the first quarter of 2001
 decreased by 3 percent versus 2000 due to lower volumes, partially offset by
 higher selling prices.  Integrated Nylon recorded a loss of $5 million in the
 first quarter, compared to a profit of $31 million in the first quarter of
 2000. The loss was due to continued high raw material and energy costs and
 declining sales volumes.
 
     Cash Flow
     Including cash received from the Wiesbaden insurance settlement, Solutia
 reported negative free cash flow of $65 million for the quarter ended March
 31, 2001, after funding $24 million of capital expenditures.  Lower earnings,
 severance and other restructuring payments and a seasonal increase in overall
 working capital levels adversely impacted Solutia's free cash flow generation
 during the quarter.
 
     Restatement
     When Solutia was formed, the centralization of functional activities was
 important to better understand and control costs, and more efficiently manage
 the implementation of common systems and processes.  Leveraging its world
 class systems and process capabilities developed over the past few years,
 Solutia decentralized its management structure in early 2001 to enhance
 customer and market focus and better align resources to the disparate economic
 realities and challenges faced by our operating segments.  This change
 redefined segment profitability as the costs for certain functional services,
 which were previously managed centrally, are now reflected in the operating
 segments.  Financial data for the prior year has been restated to reflect the
 current presentation.
 
     Outlook
     Assuming key raw material prices and the euro remain at today's levels and
 the overall economic scenario does not deteriorate further, Solutia expects
 second quarter 2001 earnings per share to modestly exceed the earnings from
 operations delivered in the first quarter of
 2001.
 
     Forward Looking Statements
     This press release contains forward-looking statements regarding Solutia's
 future revenue and earnings capability.  Those statements are based on current
 expectations, but actual results may differ materially, depending on such
 important factors as world economic conditions, competitive pressures,
 production capacity, customers acceptance of new products, ability to
 implement cost reduction initiatives in a timely manner, raw material and
 energy pricing, currency fluctuations and other factors identified in
 Solutia's Annual Report on Form 10-K for the period ended December 31, 2000,
 and the Quarterly Report on Form 10-Q, for the period ended March 31, 2001.
 These reports are filed with the U.S. Securities and Exchange Commission and
 can be accessed through Solutia's investor Internet site at
 http://investor.solutia.com .
 
     Corporate Profile
     Solutia ( www.Solutia.com ) uses world-class skills in applied chemistry
 to create solutions for customers, whose products are used by consumers every
 day.  The company is a world leader in performance films for laminated safety
 glass and after-market applications; resins and additives for high-value
 coatings; specialties such as aviation hydraulic fluid and environmentally
 friendly cleaning solvents for aviation; process research, process development
 and scale-up services for pharmaceutical fine chemicals and an integrated
 family of nylon products including high performance polymers and fibers.
 
     Conference Call
     Solutia will host a conference call on Friday, April 27, 2001 at 9:00 am
 Central Time to discuss its performance.  The call will be simulcast on
 Solutia's homepage at http://investor.solutia.com . The call will be available
 to investors on the Internet site for approximately 10 days following the
 call.
 
 
                                  Solutia Inc.
                        Statement of Consolidated Income
                (Dollars in millions, except per share amounts)
 
                                                    Three Months Ended
                                                        March 31,
                                                  ----------------------
                                                    2001           2000
                                               ---------      ---------
     Net Sales                                      $747           $846
     Cost of Goods Sold                              619            648
                                               ---------      ---------
     Gross Profit                                    128            198
     Marketing Expenses                               46             47
     Administrative Expenses                          36             43
     Technological Expenses                           17             22
     Amortization Expense                              8              7
                                               ---------      ---------
     Operating Income                                 21             79
     Equity Earnings from Affiliates                   4              9
     Interest Expense                                (22)           (20)
     Other Income (Expense) - Net                     31              5
                                               ---------      ---------
     Income Before Income Taxes                       34             73
     Income Taxes                                     12             22
                                               ---------      ---------
     Net Income                                      $22            $51
                                               ---------      ---------
     Diluted Earnings Per Share                    $0.21          $0.46
                                               ---------      ---------
     Weighted Average Equivalent Shares            104.8          110.9
                                               ---------      ---------
     Depreciation and Amortization                   $45            $49
                                               ---------      ---------
     Property, Plant and Equipment Purchases         $24            $62
                                               ---------      ---------
 
 
                                  Solutia Inc.
                                  Segment Data
                             (Dollars in millions)
 
                                                    Three Months Ended
                                                        March 31,
                                                ----------------------
                                                    2001           2000
                                               ---------      ---------
                                                     Net            Net
     Segment:                                      Sales          Sales
                                               ---------      ---------
       Performance Films                            $151           $185
       Specialty Products                            251            305
       Integrated Nylon                              345            357
                                               ---------      ---------
     Segment Totals                                  747            847
     Elimination of Intersegment Sales:
       Integrated Nylon                                -             (1)
                                               ---------      ---------
     Consolidated Totals                            $747           $846
                                               ---------      ---------
 
 
     Segment:                                     Profit         Profit
                                               ---------      ---------
       Performance Films                             $16            $32
       Specialty Products (a)                         49             29
       Integrated Nylon                               (5)            31
                                               ---------      ---------
     Segment Totals                                   60             92
     Corporate Expenses                              (10)           (12)
     Equity Earnings from Affiliates                   5             10
     Interest Expense                                (22)           (20)
     Other Income - Net                                1              3
                                               ---------      ---------
     Income Before Income Taxes                      $34            $73
                                               ---------      ---------
 
     (a) Specialty Products profit for the three months ended March 31, 2001,
         includes a gain from an insurance settlement associated with the
         explosion and fire that destroyed the Vianova printing inks and
         phenolics production facility in Wiesbaden, Germany
         ($28 million pretax, $17 million aftertax).
 
 
                                  Solutia Inc.
                  Statement of Consolidated Financial Position
                             (Dollars in millions)
                                                  Mar. 31,       Dec. 31
     ASSETS                                         2001           2000
                                               ---------      ---------
     Current Assets:
       Cash and cash equivalents                     $10            $19
       Receivables                                   523            532
       Deferred income tax benefit                   112            107
       Inventories                                   371            357
                                               ---------       --------
         Total Current Assets                      1,016          1,015
                                               ---------      ---------
     Net Property, Plant and Equipment             1,179          1,205
     Investment in Affiliates                        356            351
     Net Goodwill                                    400            421
     Net Identified Intangible Assets                205            217
     Long-Term Deferred Income Tax Benefit           171            190
     Other Assets                                    178            182
                                               ---------       --------
     Total Assets                                 $3,505         $3,581
                                               ---------      ---------
     LIABILITIES AND SHAREHOLDERS' DEFICIT
     Current Liabilities:
       Accounts payable                             $320           $359
       Accrued liabilities                           478            496
       Short-term debt                               546            494
                                               ---------       --------
     Total Current Liabilities                     1,344          1,349
                                               ---------      ---------
     Long-Term Debt                                  774            784
     Postretirement Liabilities                      935            941
     Other Liabilities                               493            541
 
     Shareholders' Deficit:
       Common stock                                    1              1
       Additional contributed capital               (149)          (141)
       Treasury stock                               (283)          (296)
       Unearned ESOP shares                           (7)            (9)
       Accumulated other comprehensive income       (144)          (108)
       Reinvested earnings                           541            519
                                               ---------       --------
         Total Shareholders' Deficit                 (41)           (34)
                                               ---------       --------
     Total Liabilities and Shareholders'
      Deficit                                     $3,505         $3,581
                                               ---------      ---------
 
 
                                  Solutia Inc.
                      Statement of Consolidated Cash Flow
                             (Dollars in millions)
                                            Three Months Ended March 31,
                                                 ------------------
                                                    2001           2000
                                               ---------       --------
     Increase (Decrease) in Cash and
      Cash Equivalents
     Operating Activities:
     Net income                                      $22            $51
     Adjustments to reconcile to Cash
      From Operations:
       Items that did not use (provide) cash:
         Deferred income taxes                        20             11
         Depreciation and amortization                45             49
         Amortization of deferred credits             (3)            (3)
         Other                                        (1)           (14)
       Working capital changes that provided
        (used) cash:
         Trade receivables                           (20)           (27)
         Inventories                                 (14)           (12)
         Accounts payable and accrued liabilities    (65)            34
         Other                                        31             (2)
       Net pretax gains from asset disposals         (28)             -
       Other items                                   (58)           (13)
                                               ---------       --------
      Cash From Operations                           (71)            74
                                               ---------      ---------
     Investing Activities:
       Property, plant and equipment
        purchases                                    (24)           (62)
       Acquisition and investment payments,
        net of cash acquired                          (1)          (107)
       Property disposals and investment and
        proceeds, net                                 31              4
                                               ---------       --------
     Cash From Investing Activities                    6           (165)
                                               ---------      ---------
     Financing Activities:
       Net change in short-term debt                  51            117
       Long-term debt reductions                       -             (8)
       Treasury stock purchases                        -            (18)
       Common stock issued under employee
        stock plans                                    5              1
                                               ---------       --------
     Cash From Financing Activities                   56             92
                                               ---------      ---------
     Increase (Decrease) in Cash and
      Cash Equivalents                                (9)             1
 
     Cash and Cash Equivalents:
     Beginning of Year                                19             28
                                               ---------       --------
     End of Period                                   $10            $29
                                               ---------      ---------
 
 
                                  Solutia Inc.
                           Restated 2000 Segment Data
                             (Dollars in millions)
                             -------------------      -------------------
                              1Q 2000   2Q 2000        3Q 2000   4Q 2000
                             --------- ---------      --------- ---------
                                Net       Net            Net       Net
     Segment:                  Sales     Sales          Sales     Sales
                           --------- ---------      --------- ---------
       Performance Films        $185      $197           $165      $145
       Specialty Products        305       248            237       214
       Integrated Nylon          357       389            372       372
                           --------- ---------      --------- ---------
     Segment Totals              847       834            774       731
     Elimination of
       Intersegment Sales:
     Integrated Nylon             (1)        -              -         -
                           --------- ---------      --------- ---------
     Consolidated Totals        $846      $834           $774      $731
                           --------- ---------      --------- ---------
 
 
     Segment:                 Profit    Profit         Profit    Profit
                           --------- ---------      --------- ---------
       Performance Films         $32       $33            $24       $17
       Specialty Products
        (b),(h)                   29         2             14       (13)
       Integrated Nylon
        (c),(i),(j)               31         1             11       (72)
                           --------- ---------      --------- ---------
     Segment Totals               92        36             49       (68)
     Corporate Expenses
      (d),(k)                    (12)      (19)           (12)      (64)
     Equity Earnings from
     Affiliates (d),(e)           10        (1)            14        14
     Interest Expense            (20)      (21)           (22)      (20)
     Gain on sale of Polymer
     Modifiers business (g)        -         -             73         -
     Other Income (Expense)
      - Net (d),(f)                3        11              1        (3)
                           --------- ---------      --------- ---------
     Income Before Income
      Taxes                      $73        $6           $103     $(141)
                           --------- ---------      --------- ---------
 
     (b) Specialty Products profit for the three months ended June 30, 2000,
     includes a restructuring charge related to exiting operations at the Port
     Plastics site in Addyston, Ohio ($8 million pretax, $5 million aftertax).
 
     (c) Integrated Nylon profit for the three months ended June 30, 2000,
     includes charges to writedown certain investments in Asia based upon
     indicators that the loss in their values was other than temporary ($14
     million pretax, $8 million aftertax), and to accrue for the payment of
     debt obligations   associated with one of the investments ($5 million
     pretax, $3 million aftertax).
 
     (d) For the three months ended June 30, 2000, amounts include special
     operation operations charge related to the formation and startup of the
     Astaris joint venture ($16 million pretax, $11 million aftertax).
 
     (e) For the three months ended June 30, 2000, amount includes special
     operations charge associated with the impairment and closure of certain
     manufacturing operations in the United Kingdom for the Flexsys joint
     venture ($13 million pretax, $13 million aftertax).
 
     (f) For the three months ended June 30, 2000, amount includes a gain on
     the sale of P4 LLC, a phosphorus manufacturing venture ($15 million
     pretax, $9 million aftertax).
 
     (g) For the three months ended September 30, 2000, amount includes a gain
     on the sale of the Polymer Modifiers business and related manufacturing
     facilities ($73 million pretax, $46 million aftertax).
 
     (h) Specialty Products profit for the three months ended December 31,
     2000, includes an impairment charge ($15 million pretax, $9 million
     aftertax) to cost of goods sold primarily for the writedown of certain
     non-strategic production assets.
 
     (i) Integrated Nylon profit for the three months ended December 31, 2000,
     includes impairment charges ($76 million pretax, $48 million aftertax) to
     cost of goods sold primarily for the writedown of certain non-performing
     and non-strategic production assets.
 
     (j) Integrated Nylon profit for the three months ended December 31, 2000,
     includes a charge ($10 million pretax, $6 million aftertax) primarily to
     reserve for advances and working capital loans to an Asian equity
     affiliate.
 
     (k) For the three months ended December 31, 2000, amount includes a
     restructuring charge ($53 million pretax, $33 million aftertax) to cost of
     goods sold for workforce reductions of approximately 700 people across all
     world areas and functions of the company and the closure of certain non
     strategic facilities.
 
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SOURCE Solutia Inc.
    ST. LOUIS, April 27 /PRNewswire/ --
 
     2001 First Quarter Summary
     * Excluding the divestment of the Polymer Modifiers and Phosphorus
       businesses, total revenue of $747 million equals first quarter 2000
     * Earnings per share of 21 cents for the quarter
     * Earnings include a $17 million, or 16 cents per share, gain from an
       insurance settlement and a $4 million, or 4 cents per share, loss from a
       temporary power outage at an Integrated Nylon facility
 
     Financial Summary         1Q 2001     Change from    Change from
     Sales ($M, except EPS) as reported    1Q 2000 (A)   1Q2000 (B)
     Performance Films         $151          -18%            +1%
     Specialty Products        $251          -18%            +4%
     Integrated Nylon          $345           -3%            -3%
     Total Net Sales           $747          -12%          No change
     Net Income                $22           -57%
     Diluted Earnings
      Per Share               $.21           -54%
 
     (A)  Prior year comparisons include sales from businesses divested in
          2000.
     (B)  Prior year comparisons exclude sales from businesses divested in
          2000.
 
     Solutia Inc. (NYSE:   SOI) reported first quarter 2001 net income of
 $22 million or 21 cents per share, on net sales of $747 million.  Net income
 includes a $17 million gain, or 16 cents per share, from an insurance
 settlement related to an explosion and fire at a Wiesbaden, Germany facility
 in October of 2000 and a $4 million, or 4 cents per share, loss resulting from
 a temporary shutdown of the Chocolate Bayou intermediates facility in February
 caused by a power outage.  This compares with net income for the first quarter
 of 2000 of $51 million, or 46 cents per share, on net sales of $846 million.
     "Higher raw material and energy costs, specifically propylene and natural
 gas, a weaker euro and the slowing global economy continue to negatively
 impact Solutia's earnings," said John Hunter, chairman and chief executive
 officer.
     "We are implementing price increases where competition allows,
 aggressively managing capital programs to focus on critical growth
 opportunities and actively working our $100 million cost reduction initiative
 which promises to begin delivering savings in the second half of 2001," he
 said.
 
     Net Sales
     As reported, net sales for the first quarter of 2001 decreased 12 percent
 from the first quarter of 2000.  Excluding the effects of the divestments of
 the Polymer Modifiers and Phosphorus businesses, sales for the on-going
 businesses were even with the prior year's quarter.  The benefit of higher
 average selling prices and improved volume and sales mix were offset by the
 effect of a weaker euro on the translation of euro sales into U.S. dollars.
 
     Segment Data
     Excluding the impact of the divestment of the Polymer Modifiers business,
 sold during third quarter 2000, Performance Films' segment sales for Solutia's
 on-going businesses increased 1 percent on a year over year basis, despite a
 weaker euro.  As reported, the segment's net sales for the first quarter of
 2001 decreased 18 percent compared to the same period of 2000. Performance
 Films' segment profitability decreased 50 percent due to the loss of income
 from the divested Polymer Modifiers business as well as rising raw material
 and energy costs, a weaker euro and higher period manufacturing costs from
 production cutbacks to control inventory, partially offset by improved selling
 prices.
     Excluding the Phosphorus Derivatives business, Specialty Products' segment
 sales increased 4% on a year over year basis.  As reported, net sales for the
 segment decreased 18 percent over the first quarter of 2000.  Sales for the
 period reflect a full quarter of sales from the Pharmaceutical Services
 businesses that were acquired in February of 2000 and the movement of the
 Phosphorus Derivatives business into the Astaris joint venture.  Specialty
 Products' segment profitability declined 28 percent over the comparable prior
 year period primarily due to the loss of income from the Phosphorus
 Derivatives business.
     The Integrated Nylon segment's net sales for the first quarter of 2001
 decreased by 3 percent versus 2000 due to lower volumes, partially offset by
 higher selling prices.  Integrated Nylon recorded a loss of $5 million in the
 first quarter, compared to a profit of $31 million in the first quarter of
 2000. The loss was due to continued high raw material and energy costs and
 declining sales volumes.
 
     Cash Flow
     Including cash received from the Wiesbaden insurance settlement, Solutia
 reported negative free cash flow of $65 million for the quarter ended March
 31, 2001, after funding $24 million of capital expenditures.  Lower earnings,
 severance and other restructuring payments and a seasonal increase in overall
 working capital levels adversely impacted Solutia's free cash flow generation
 during the quarter.
 
     Restatement
     When Solutia was formed, the centralization of functional activities was
 important to better understand and control costs, and more efficiently manage
 the implementation of common systems and processes.  Leveraging its world
 class systems and process capabilities developed over the past few years,
 Solutia decentralized its management structure in early 2001 to enhance
 customer and market focus and better align resources to the disparate economic
 realities and challenges faced by our operating segments.  This change
 redefined segment profitability as the costs for certain functional services,
 which were previously managed centrally, are now reflected in the operating
 segments.  Financial data for the prior year has been restated to reflect the
 current presentation.
 
     Outlook
     Assuming key raw material prices and the euro remain at today's levels and
 the overall economic scenario does not deteriorate further, Solutia expects
 second quarter 2001 earnings per share to modestly exceed the earnings from
 operations delivered in the first quarter of
 2001.
 
     Forward Looking Statements
     This press release contains forward-looking statements regarding Solutia's
 future revenue and earnings capability.  Those statements are based on current
 expectations, but actual results may differ materially, depending on such
 important factors as world economic conditions, competitive pressures,
 production capacity, customers acceptance of new products, ability to
 implement cost reduction initiatives in a timely manner, raw material and
 energy pricing, currency fluctuations and other factors identified in
 Solutia's Annual Report on Form 10-K for the period ended December 31, 2000,
 and the Quarterly Report on Form 10-Q, for the period ended March 31, 2001.
 These reports are filed with the U.S. Securities and Exchange Commission and
 can be accessed through Solutia's investor Internet site at
 http://investor.solutia.com .
 
     Corporate Profile
     Solutia ( www.Solutia.com ) uses world-class skills in applied chemistry
 to create solutions for customers, whose products are used by consumers every
 day.  The company is a world leader in performance films for laminated safety
 glass and after-market applications; resins and additives for high-value
 coatings; specialties such as aviation hydraulic fluid and environmentally
 friendly cleaning solvents for aviation; process research, process development
 and scale-up services for pharmaceutical fine chemicals and an integrated
 family of nylon products including high performance polymers and fibers.
 
     Conference Call
     Solutia will host a conference call on Friday, April 27, 2001 at 9:00 am
 Central Time to discuss its performance.  The call will be simulcast on
 Solutia's homepage at http://investor.solutia.com . The call will be available
 to investors on the Internet site for approximately 10 days following the
 call.
 
 
                                  Solutia Inc.
                        Statement of Consolidated Income
                (Dollars in millions, except per share amounts)
 
                                                    Three Months Ended
                                                        March 31,
                                                  ----------------------
                                                    2001           2000
                                               ---------      ---------
     Net Sales                                      $747           $846
     Cost of Goods Sold                              619            648
                                               ---------      ---------
     Gross Profit                                    128            198
     Marketing Expenses                               46             47
     Administrative Expenses                          36             43
     Technological Expenses                           17             22
     Amortization Expense                              8              7
                                               ---------      ---------
     Operating Income                                 21             79
     Equity Earnings from Affiliates                   4              9
     Interest Expense                                (22)           (20)
     Other Income (Expense) - Net                     31              5
                                               ---------      ---------
     Income Before Income Taxes                       34             73
     Income Taxes                                     12             22
                                               ---------      ---------
     Net Income                                      $22            $51
                                               ---------      ---------
     Diluted Earnings Per Share                    $0.21          $0.46
                                               ---------      ---------
     Weighted Average Equivalent Shares            104.8          110.9
                                               ---------      ---------
     Depreciation and Amortization                   $45            $49
                                               ---------      ---------
     Property, Plant and Equipment Purchases         $24            $62
                                               ---------      ---------
 
 
                                  Solutia Inc.
                                  Segment Data
                             (Dollars in millions)
 
                                                    Three Months Ended
                                                        March 31,
                                                ----------------------
                                                    2001           2000
                                               ---------      ---------
                                                     Net            Net
     Segment:                                      Sales          Sales
                                               ---------      ---------
       Performance Films                            $151           $185
       Specialty Products                            251            305
       Integrated Nylon                              345            357
                                               ---------      ---------
     Segment Totals                                  747            847
     Elimination of Intersegment Sales:
       Integrated Nylon                                -             (1)
                                               ---------      ---------
     Consolidated Totals                            $747           $846
                                               ---------      ---------
 
 
     Segment:                                     Profit         Profit
                                               ---------      ---------
       Performance Films                             $16            $32
       Specialty Products (a)                         49             29
       Integrated Nylon                               (5)            31
                                               ---------      ---------
     Segment Totals                                   60             92
     Corporate Expenses                              (10)           (12)
     Equity Earnings from Affiliates                   5             10
     Interest Expense                                (22)           (20)
     Other Income - Net                                1              3
                                               ---------      ---------
     Income Before Income Taxes                      $34            $73
                                               ---------      ---------
 
     (a) Specialty Products profit for the three months ended March 31, 2001,
         includes a gain from an insurance settlement associated with the
         explosion and fire that destroyed the Vianova printing inks and
         phenolics production facility in Wiesbaden, Germany
         ($28 million pretax, $17 million aftertax).
 
 
                                  Solutia Inc.
                  Statement of Consolidated Financial Position
                             (Dollars in millions)
                                                  Mar. 31,       Dec. 31
     ASSETS                                         2001           2000
                                               ---------      ---------
     Current Assets:
       Cash and cash equivalents                     $10            $19
       Receivables                                   523            532
       Deferred income tax benefit                   112            107
       Inventories                                   371            357
                                               ---------       --------
         Total Current Assets                      1,016          1,015
                                               ---------      ---------
     Net Property, Plant and Equipment             1,179          1,205
     Investment in Affiliates                        356            351
     Net Goodwill                                    400            421
     Net Identified Intangible Assets                205            217
     Long-Term Deferred Income Tax Benefit           171            190
     Other Assets                                    178            182
                                               ---------       --------
     Total Assets                                 $3,505         $3,581
                                               ---------      ---------
     LIABILITIES AND SHAREHOLDERS' DEFICIT
     Current Liabilities:
       Accounts payable                             $320           $359
       Accrued liabilities                           478            496
       Short-term debt                               546            494
                                               ---------       --------
     Total Current Liabilities                     1,344          1,349
                                               ---------      ---------
     Long-Term Debt                                  774            784
     Postretirement Liabilities                      935            941
     Other Liabilities                               493            541
 
     Shareholders' Deficit:
       Common stock                                    1              1
       Additional contributed capital               (149)          (141)
       Treasury stock                               (283)          (296)
       Unearned ESOP shares                           (7)            (9)
       Accumulated other comprehensive income       (144)          (108)
       Reinvested earnings                           541            519
                                               ---------       --------
         Total Shareholders' Deficit                 (41)           (34)
                                               ---------       --------
     Total Liabilities and Shareholders'
      Deficit                                     $3,505         $3,581
                                               ---------      ---------
 
 
                                  Solutia Inc.
                      Statement of Consolidated Cash Flow
                             (Dollars in millions)
                                            Three Months Ended March 31,
                                                 ------------------
                                                    2001           2000
                                               ---------       --------
     Increase (Decrease) in Cash and
      Cash Equivalents
     Operating Activities:
     Net income                                      $22            $51
     Adjustments to reconcile to Cash
      From Operations:
       Items that did not use (provide) cash:
         Deferred income taxes                        20             11
         Depreciation and amortization                45             49
         Amortization of deferred credits             (3)            (3)
         Other                                        (1)           (14)
       Working capital changes that provided
        (used) cash:
         Trade receivables                           (20)           (27)
         Inventories                                 (14)           (12)
         Accounts payable and accrued liabilities    (65)            34
         Other                                        31             (2)
       Net pretax gains from asset disposals         (28)             -
       Other items                                   (58)           (13)
                                               ---------       --------
      Cash From Operations                           (71)            74
                                               ---------      ---------
     Investing Activities:
       Property, plant and equipment
        purchases                                    (24)           (62)
       Acquisition and investment payments,
        net of cash acquired                          (1)          (107)
       Property disposals and investment and
        proceeds, net                                 31              4
                                               ---------       --------
     Cash From Investing Activities                    6           (165)
                                               ---------      ---------
     Financing Activities:
       Net change in short-term debt                  51            117
       Long-term debt reductions                       -             (8)
       Treasury stock purchases                        -            (18)
       Common stock issued under employee
        stock plans                                    5              1
                                               ---------       --------
     Cash From Financing Activities                   56             92
                                               ---------      ---------
     Increase (Decrease) in Cash and
      Cash Equivalents                                (9)             1
 
     Cash and Cash Equivalents:
     Beginning of Year                                19             28
                                               ---------       --------
     End of Period                                   $10            $29
                                               ---------      ---------
 
 
                                  Solutia Inc.
                           Restated 2000 Segment Data
                             (Dollars in millions)
                             -------------------      -------------------
                              1Q 2000   2Q 2000        3Q 2000   4Q 2000
                             --------- ---------      --------- ---------
                                Net       Net            Net       Net
     Segment:                  Sales     Sales          Sales     Sales
                           --------- ---------      --------- ---------
       Performance Films        $185      $197           $165      $145
       Specialty Products        305       248            237       214
       Integrated Nylon          357       389            372       372
                           --------- ---------      --------- ---------
     Segment Totals              847       834            774       731
     Elimination of
       Intersegment Sales:
     Integrated Nylon             (1)        -              -         -
                           --------- ---------      --------- ---------
     Consolidated Totals        $846      $834           $774      $731
                           --------- ---------      --------- ---------
 
 
     Segment:                 Profit    Profit         Profit    Profit
                           --------- ---------      --------- ---------
       Performance Films         $32       $33            $24       $17
       Specialty Products
        (b),(h)                   29         2             14       (13)
       Integrated Nylon
        (c),(i),(j)               31         1             11       (72)
                           --------- ---------      --------- ---------
     Segment Totals               92        36             49       (68)
     Corporate Expenses
      (d),(k)                    (12)      (19)           (12)      (64)
     Equity Earnings from
     Affiliates (d),(e)           10        (1)            14        14
     Interest Expense            (20)      (21)           (22)      (20)
     Gain on sale of Polymer
     Modifiers business (g)        -         -             73         -
     Other Income (Expense)
      - Net (d),(f)                3        11              1        (3)
                           --------- ---------      --------- ---------
     Income Before Income
      Taxes                      $73        $6           $103     $(141)
                           --------- ---------      --------- ---------
 
     (b) Specialty Products profit for the three months ended June 30, 2000,
     includes a restructuring charge related to exiting operations at the Port
     Plastics site in Addyston, Ohio ($8 million pretax, $5 million aftertax).
 
     (c) Integrated Nylon profit for the three months ended June 30, 2000,
     includes charges to writedown certain investments in Asia based upon
     indicators that the loss in their values was other than temporary ($14
     million pretax, $8 million aftertax), and to accrue for the payment of
     debt obligations   associated with one of the investments ($5 million
     pretax, $3 million aftertax).
 
     (d) For the three months ended June 30, 2000, amounts include special
     operation operations charge related to the formation and startup of the
     Astaris joint venture ($16 million pretax, $11 million aftertax).
 
     (e) For the three months ended June 30, 2000, amount includes special
     operations charge associated with the impairment and closure of certain
     manufacturing operations in the United Kingdom for the Flexsys joint
     venture ($13 million pretax, $13 million aftertax).
 
     (f) For the three months ended June 30, 2000, amount includes a gain on
     the sale of P4 LLC, a phosphorus manufacturing venture ($15 million
     pretax, $9 million aftertax).
 
     (g) For the three months ended September 30, 2000, amount includes a gain
     on the sale of the Polymer Modifiers business and related manufacturing
     facilities ($73 million pretax, $46 million aftertax).
 
     (h) Specialty Products profit for the three months ended December 31,
     2000, includes an impairment charge ($15 million pretax, $9 million
     aftertax) to cost of goods sold primarily for the writedown of certain
     non-strategic production assets.
 
     (i) Integrated Nylon profit for the three months ended December 31, 2000,
     includes impairment charges ($76 million pretax, $48 million aftertax) to
     cost of goods sold primarily for the writedown of certain non-performing
     and non-strategic production assets.
 
     (j) Integrated Nylon profit for the three months ended December 31, 2000,
     includes a charge ($10 million pretax, $6 million aftertax) primarily to
     reserve for advances and working capital loans to an Asian equity
     affiliate.
 
     (k) For the three months ended December 31, 2000, amount includes a
     restructuring charge ($53 million pretax, $33 million aftertax) to cost of
     goods sold for workforce reductions of approximately 700 people across all
     world areas and functions of the company and the closure of certain non
     strategic facilities.
 
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 SOURCE  Solutia Inc.