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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 28, 2000
SOLUTIA INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OF INCORPORATION)
001-13255 43-1781797
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(Commission (IRS Employer
File Number) Identification No.)
575 Maryville Centre Drive, P.O. Box 66760, St. Louis, Missouri 63166-6760
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(314) 674-1000
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Registrant's telephone number, including area code
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ITEM 5. OTHER EVENTS.
On January 28, 2000, Solutia Inc. issued a press release
announcing Solutia's financial results for the fourth quarter of 1999
and the full year. A copy of that press release is filed as an exhibit
to this report and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) The following exhibit is filed as part of this report:
Exhibit Number Description
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99.1 Press Release dated January 28, 2000,
issued by Solutia Inc.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SOLUTIA INC.
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(Registrant)
/s/ James M. Sullivan
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James M. Sullivan
Vice President and Controller
(Principal Accounting Officer)
DATE: February 1, 2000
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EXHIBIT INDEX
These exhibits are numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K.
Exhibit Number Description
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99.1 Press Release dated January 28, 2000, issued by
Solutia Inc.
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[SOLUTIA LETTERHEAD]
FOR IMMEDIATE RELEASE
Loren Wassell
(314)674-7002
SOLUTIA REPORTS FOURTH QUARTER EARNINGS
1999 FOURTH QUARTER HIGHLIGHTS
* EPS of 46 cents versus 46 cents a year ago
* Total revenue increased 10 percent to $736 million
* Excluding acquisitions, sales volumes increased 10 percent
* Free cash flow reached $29 million
* SOI repurchased 300,000 shares
ST. LOUIS, Jan. 28, 2000 - Solutia Inc. (NYSE: SOI) reported
1999 fourth quarter net income of $51 million, or 46 cents per
share, on net sales of $736 million. Net income for the fourth
quarter of 1998 was $55 million, or 46 cents per share, on net
sales of $667 million.
"We are pleased that we have been able to maintain solid
earnings despite continuing pressure on margins from higher raw
material prices," said John Hunter, chairman and chief executive
officer.
"We have announced price increases across our portfolio to
ultimately restore margins," he said. "Successful implementation
of price increases is critical for near-term growth in earnings."
Solutia also reported 1999 fourth quarter free cash flow of
$29 million. "Generating a strong free cash flow remains a
priority to fund our growth strategy and our share repurchase
program," explained Bob Clausen, senior vice president and chief
financial officer.
"We are committed to a strategy that will grow Solutia to $5
billion in revenue within the next three to four years. In
addition, we are committed to achieving operating margins of at
least 15 percent in all of our businesses and managing our
portfolio accordingly," Hunter said.
"Solutia's growth will come from a combination of internal
growth and strategic acquisitions that build on our strong
product franchises and unique capabilities in process
development, complex manufacturing and technical service," Hunter
said.
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2
"One example is the late December acquisition of Vianova
Resins, which will start contributing to our financial results in
2000," he said.
"Within our current portfolio, we intend to double the sales
in our Performance Films franchise, double the sales in our
Resins and Additives business, and double the sales of our Ascend
and Vydyne nylon polymers," Hunter said.
Overall, net sales for the fourth quarter of 1999 increased
10 percent from the fourth quarter of 1998 on the strength of a
14 percent increase in sales volumes. Excluding CPFilms, which
was acquired in May 1999, sales volumes were up 10 percent
compared to the same period last year.
The Performance Films segment's net sales for the three
months ended December 31, 1999, increased 30 percent as compared
to the three months ended December 31, 1998. The addition of
CPFilms and continued strong volumes in Saflex plastic interlayer
drove this sales increase. Performance Films segment profit for
the fourth quarter of 1999 increased 15 percent as compared to
the fourth quarter of 1998.
Net sales in the Specialty Products segment for the fourth
quarter of 1999 increased three percent from the comparable 1998
quarter primarily as the result of higher volumes in resins and
additives and improved sales mix in phosphorus and derivatives.
Specialty Products segment profit for the quarter ended December
31, 1999, declined by five percent as compared to the quarter
ended December 31, 1998. The segment was affected by unfavorable
foreign exchange rate movements.
The Integrated Nylon segment's net sales for the three-month
period ended December 31, 1999, increased approximately five
percent versus the three-month period ended December 31, 1998.
This increase was caused by higher volume growth in all of the
segment's businesses partially offset by lower average selling
prices across the fiber and polymer businesses. Segment profit
for Integrated Nylon increased three percent due to the higher
volume, partially offset by higher raw material costs.
The positive impact on Solutia's operating income caused by
overall higher segment profit was offset primarily by the adverse
effect of higher raw material costs on inventory values not
allocated to the individual segments.
Solutia also reported fourth quarter repurchases of 300,000
shares, bringing total share repurchases since inception to 10.2
million shares. Authorization for an additional 4.8 million
shares remains available under the company's third 5-million-
share repurchase program.
For the year ended December 31, 1999, Solutia reported net
income, excluding first quarter special charges of $40 million
aftertax, of $246 million, or $2.15 per share, on net sales of
$2.83 billion. Including the special charges of $40 million
aftertax, net income for the year ended December 31, 1999, was
$206 million, or $1.80 per share. Net income for the year ended
December 31, 1998, was $249 million, or $2.03 per share, on net
sales of $2.84 billion.
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3
Looking ahead, Solutia continues to expect long-term
earnings-per-share growth averaging at least 10 percent. The
growth rate in 2000 is likely to be lower in light of the
significant escalation in raw material costs, uncertainty around
the timing and magnitude of selling price improvements, and
activities associated with Solutia's growth strategy.
In another matter, the Solutia board of directors
established February 28, 2000, as the record date for the
company's April 26 annual meeting of shareowners.
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 aftermarket
applications; resins and additives for high-value coatings;
specialties such as aviation hydraulic fluid and environmentally
friendly cleaning solvents for aviation; and an integrated family
of nylon products including high-performance polymers and fibers.
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, raw material pricing, and other factors
identified in Solutia's Annual Report on Form 10-K for the year
ended December 31, 1998, and its Report on Form 10-Q for the
period ended September 30, 1999. Both reports are filed with
the U.S. Securities and Exchange Commission and can be accessed
through the investor information section of the Solutia internet
site (http://investor.solutia.com).
-oOo-
NOTE TO EDITORS: Ascend, Saflex and Vydyne are trademarks of
Solutia Inc.
St. Louis
012800
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4
<TABLE>
Solutia Inc.
Statement of Consolidated Income
(Dollars in millions, except per share)
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 736 $ 667 $ 2,830 $ 2,835
Cost of Goods Sold 565 498 2,178 2,085
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Gross Profit 171 169 652 750
Marketing Expenses 45 36 153 145
Administrative Expenses 31 35 122 136
Technological Expenses 22 21 80 83
Amortization Expense 1 - 3 -
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Operating Income 72 77 294 386
Equity Earnings from Affiliates 10 8 36 25
Interest Expense (10) (9) (40) (43)
Other Income (Expense) - Net 3 5 13 7
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Income Before Income Taxes 75 81 303 375
Income Taxes 24 26 97 126
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Net Income $ 51 $ 55 $ 206 $ 249
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Diluted Earnings Per Share $ 0.46 $ 0.46 $ 1.80 $ 2.03
--------- --------- --------- ---------
Weighted Average Equivalent Shares 112.0 119.3 114.6 122.8
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Depreciation and Amortization $ 39 $ 40 $ 151 $ 147
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Property, Plant and Equipment
Purchases $ 68 $ 74 $ 257 $ 158
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</TABLE>
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5
<TABLE>
Solutia Inc.
Segment Data
(Dollars in millions)
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
1999 1998 1999 1998
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Net Net Net Net
Segment: Sales Sales Sales Sales
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<S> <C> <C> <C> <C>
Performance Films $ 200 $ 154 $ 713 $ 614
Specialty Products 156 151 615 613
Integrated Nylon 382 364 1,508 1,613
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Segment Totals 738 669 2,836 2,840
Elimination of Intersegment Sales:
Specialty Products (1) (1) (2) (3)
Intergrated Nylon (1) (1) (4) (4)
Other Revenues - - - 2
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Consolidated Totals $ 736 $ 667 $ 2,830 $ 2,835
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Segment: Profit Profit Profit Profit
--------- --------- --------- ---------
Performance Films $ 45 $ 39 $ 189 $ 168
Specialty Products 39 41 159 152
Integrated Nylon 63 61 289 376
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Segment Totals<F1> 147 141 637 696
Less Unallocated Services<F2>:
Cost of Goods Sold <F3> (19) (2) (124) (70)
Marketing, Administrative
and Technological Expenses (55) (62) (216) (240)
Amortization Expense (1) - (3) -
Equity Earnings from Affiliates 10 8 36 25
Interest Expense (10) (9) (40) (43)
Other Income (Expense) - Net 3 5 13 7
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Income Before Income Taxes $ 75 $ 81 $ 303 $ 375
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<FN>
<F1> Segment profit only includes operating expenses directly attributable
to the segment.
<F2> Unallocated service costs are managed centrally and primarily include
costs of technology, engineering and manufacturing services that are
provided to the segments.
<F3> Unallocated cost of goods sold for the twelve months ended December 31, 1999
includes first quarter 1999 special charges related to exiting Integrated
Nylon's ammonia business ($28 million pretax, $18 million aftertax), the
write down of an Integrated Nylon segment bulk continuous filament spinning
machine ($6 million pretax, $4 million aftertax), and the anticipated
settlement of certain pending property claims litigation relating to the
Anniston, Alabama plant site ($29 million pretax, $18 million aftertax).
</TABLE>
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6
<TABLE>
Solutia Inc.
Statement of Consolidated Financial Position
(Dollars in millions)
<CAPTION>
Dec. 31, Dec. 31,
ASSETS 1999 1998
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<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 28 $ 89
Receivables 614 483
Deferred income tax benefit 101 88
Inventories 379 331
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Total Current Assets 1,122 991
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Net Property, Plant and Equipment 1,316 944
Investments in Affiliates 377 394
Long-term Deferred Income Tax Benefit 232 274
Other Assets 735 162
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Total Assets $ 3,782 $ 2,765
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 312 $ 278
Accrued liabilities 513 454
Short-term debt 511 -
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Total Current Liabilities 1,336 732
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Long-Term Debt 802 597
Postretirement Liabilities 1,001 971
Other Liabilities 561 472
Shareholders' Equity (Deficit):
Common stock 1 1
Additional contributed capital (137) (131)
Treasury stock (209) (143)
Unearned ESOP shares (18) (25)
Accumulated other comprehensive income (29) 19
Reinvested earnings 474 272
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Total Shareholders' Equity (Deficit) 82 (7)
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Total Liabilities and Shareholders' Equity (Deficit) $ 3,782 $ 2,765
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</TABLE>
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7
<TABLE>
Solutia Inc.
Statement of Consolidated Cash Flow
(Dollars in millions)
<CAPTION>
Twelve Months Ended
December 31,
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1999 1998
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<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Operating Activities:
Net income $ 206 $ 249
Adjustments to reconcile to Cash From Operations
Items that did not use (provide) cash:
Deferred income taxes 23 31
Depreciation and amortization 151 147
Amortization of deferred credits (10) (7)
Other 78 18
Working capital changes that provided (used) cash:
Trade receivables (18) 68
Inventories 42 (6)
Accounts payable and accrued liabilities (114) 3
Other 6 15
Other items - 19
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Cash From Operations 364 537
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Investing Activities:
Property, plant and equipment purchases (257) (158)
Acquisition and investment payments (835) (8)
Investment and property disposal proceeds 30 22
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Cash From Investing Activities (1,062) (144)
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Financing Activities:
Net change in debt 712 (190)
Treasury stock purchases (79) (161)
Dividend payments (4) (5)
Common stock issued under employee stock plans 8 28
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Cash From Financing Activities 637 (328)
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Increase (Decrease) in Cash and Cash Equivalents (61) 65
Cash and Cash Equivalents:
Beginning of Year 89 24
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End of Period $ 28 $ 89
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</TABLE>
