10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-13255

SOLUTIA INC.

(Exact name of registrant as specified in its charter)

DELAWARE	43-1781797
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

575 MARYVILLE CENTRE DRIVE, P.O. BOX 66760, ST. LOUIS, MISSOURI	63166-6760
(Address of principal executive offices)	(Zip Code)

(314) 674-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  X   No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes   X      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer   X   Accelerated Filer Non-Accelerated Filer Smaller Reporting Company ­___ (Do not check if a smaller reporting company).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes No   X  

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by Court.  Yes  X    No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at June 30, 2011
Common Stock, $0.01 par value	122,309,180

PART I. FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

SOLUTIA INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions, except per share amounts)
(Unaudited)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Net Sales	$	543		$	502		$	1,052		$	950
Cost of goods sold		373			343			720			643
Gross Profit		170			159			332			307
Selling, general and administrative expenses		60			67			122			132
Research and development expenses		5			4			11			8
Other operating income, net		(2	)		(1	)		(13	)		(1	)
Operating Income		107			89			212			168
Interest expense		(26	)		(36	)		(54	)		(74	)
Other income (loss), net		-			10			(1	)		13
Loss on debt extinguishment or modification		-			-			(2	)		(89	)
Income from Continuing Operations Before Income Tax Expense		81			63			155			18
Income tax expense		11			9			19			19
Income (Loss) from Continuing Operations		70			54			136			(1	)
Loss from Discontinued Operations, net of tax		-			(13	)		-			(15	)
Net Income (Loss)		70			41			136			(16	)
Net income attributable to noncontrolling interest		2			-			3			1
Net Income (Loss) attributable to Solutia	$	68		$	41		$	133		$	(17	)
Basic Income (Loss) per Share attributable to Solutia:
Income (Loss) from Continuing Operations	$	0.57		$	0.45		$	1.11		$	(0.01	)
Loss from Discontinued Operations		-			(0.11	)		-			(0.13	)
Net Income (Loss) attributable to Solutia	$	0.57		$	0.34		$	1.11		$	(0.14	)
Diluted Income (Loss) per Share attributable to Solutia:
Income (Loss) from Continuing Operations	$	0.56		$	0.45		$	1.10		$	(0.01	)
Loss from Discontinued Operations		-			(0.11	)		-			(0.13	)
Net Income (Loss) attributable to Solutia	$	0.56		$	0.34		$	1.10		$	(0.14	)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
(Unaudited)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2011				2010				2011				2010
Net Income (Loss)		$	70			$	41			$	136			$	(16	)
Other Comprehensive Income (Loss):
Accumulated currency adjustments			24				(54	)			81				(89	)
Postretirement adjustments			2				1				3				3
Hedging activity adjustments			(4	)			2				(2	)			2
Comprehensive Income (Loss)			92				(10	)			218				(100	)
Comprehensive Income attributable to noncontrolling interest			2				-				3				1
Comprehensive Income (Loss) attributable to Solutia		$	90			$	(10	)		$	215			$	(101	)
See accompanying Notes to Consolidated Financial Statements.

2

SOLUTIA INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Dollars in millions, except per share amounts)
(Unaudited)
	June 30,			December 31,
	2011			2010
ASSETS
Current Assets:
Cash and cash equivalents	$	169		$	191
Trade receivables, net of allowances of $4 in 2011 and 2010		264			228
Miscellaneous receivables		74			75
Inventories		328			275
Prepaid expenses and other assets		29			27
Current assets of discontinued operations		2			5
Total Current Assets		866			801
Net Property, Plant and Equipment		934			911
Goodwill		759			740
Net Identified Intangible Assets		948			938
Other Assets		149			147
Total Assets	$	3,656		$	3,537
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	194		$	173
Accrued liabilities		220			235
Current liabilities of discontinued operations		13			15
Total Current Liabilities		427			423
Long-Term Debt		1,362			1,463
Postretirement Liabilities		293			308
Environmental Remediation Liabilities		234			244
Deferred Tax Liabilities		248			238
Non-current Liabilities of Discontinued Operations		24			25
Other Liabilities		101			97
Commitments and Contingencies (Note 8)
Equity:
Common stock at $0.01 par value; (500,000,000 shares authorized, 123,279,114 and
122,655,811 shares issued in 2011and 2010, respectively)		1			1
Additional contributed capital		1,646			1,634
Treasury shares, at cost (969,934 in 2011 and 772,686 in 2010)		(8	)		(6	)
Accumulated other comprehensive loss		(112	)		(194	)
Accumulated deficit		(570	)		(703	)
Total Shareholders’ Equity attributable to Solutia		957			732
Equity attributable to noncontrolling interest		10			7
Total Equity		967			739
Total Liabilities and Equity	$	3,656		$	3,537
See accompanying Notes to Consolidated Financial Statements.

3

SOLUTIA INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
	Six Months Ended
	June 30,
	2011			2010
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES:
Net income (loss)	$	136		$	(16	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:
Loss from discontinued operations, net of tax		-			15
Depreciation and amortization		63			55
Pension contributions in excess of expense		(13	)		(52	)
Other postretirement benefit contributions in excess of expense		(9	)		(7	)
Amortization of debt issuance costs and discount		2			5
Deferred income taxes		11			(27	)
Share-based compensation expense		9			9
Other charges:
Non-cash loss on deferred debt issuance cost and debt discount write-off		-			80
Other (gains) charges, including restructuring expenses		(2	)		21
Changes in assets and liabilities:
Income taxes payable		(2	)		11
Trade receivables		(41	)		(5	)
Inventories		(56	)		(16	)
Accounts payable		22			(5	)
Environmental remediation liabilities		(7	)		(8	)
Other assets and liabilities		(16	)		46
Cash Provided by Operations – Continuing Operations		97			106
Cash Used in Operations – Discontinued Operations		(4	)		(23	)
Cash Provided by Operations		93			83
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(40	)		(14	)
Acquisition related payments, net of cash acquired		(5	)		(371	)
Asset disposals		29			-
Other		1			-
Cash Used in Investing Activities – Continuing Operations		(15	)		(385	)
Cash Used in Investing Activities – Discontinued Operations		-			(2	)
Cash Used in Investing Activities		(15	)		(387	)
FINANCING ACTIVITIES:
Proceeds from long-term debt obligations		-			1,144
Payment of long-term debt obligations		(102	)		(878	)
Payment of short-term debt obligations		-			(16	)
Debt issuance costs		-			(27	)
Purchase of treasury shares		(2	)		(1	)
Other, net		-			(9	)
Cash Provided by (Used in) Financing Activities		(104	)		213
Effect of Exchange Rate Changes on Cash and Cash Equivalents		4			(25	)
DECREASE IN CASH AND CASH EQUIVALENTS		(22	)		(116	)
CASH AND CASH EQUIVALENTS:
Beginning of period		191			243
End of period	$	169		$	127
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest	$	55		$	48
Cash payments for income taxes, net of refunds	$	26		$	19
Non-Cash Investing Activities:
Capital expenditures included in accounts payable	$	9		$	4
See accompanying Notes to Consolidated Financial Statements.

4

SOLUTIA INC.
CONSOLIDATED STATEMENT OF EQUITY
(Dollars in millions)
(Unaudited)
	Shareholders' Equity attributable to Solutia
								Accumulated						Equity
			Additional					Other						Attributable to
	Common		Contributed		Treasury			Comprehensive			Accumulated			Noncontrolling		Total
	Stock		Capital		Stock			Loss			Decifit			Interest		Equity
Beginning Balance – January 1, 2010	$	1	$	1,612	$	(2	)	$	(237	)	$	(781	)	$	7	$	600
Comprehensive income (loss):
Net income (loss)		-		-		-			-			(17	)		1		(16	)
Accumulated currency adjustments		-		-		-			(89	)		-			-		(89	)
Postretirement adjustments		-		-		-			3			-			-		3
Hedging activity adjustments		-		-		-			2			-			-		2
Treasury stock purchases		-		-		(1	)		-			-			-		(1	)
Share-based compensation expense		-		9		-			-			-			-		9
Ending Balance – June 30, 2010	$	1	$	1,621	$	(3	)	$	(321	)	$	(798	)	$	8	$	508
Beginning Balance – January 1, 2011	$	1	$	1,634	$	(6	)	$	(194	)	$	(703	)	$	7	$	739
Comprehensive income (loss):
Net income		-		-		-			-			133			3		136
Accumulated currency adjustments		-		-		-			81			-			-		81
Postretirement adjustments		-		-		-			3			-			-		3
Hedging activity adjustments		-		-		-			(2	)		-			-		(2	)
Treasury stock purchases		-		-		(2	)		-			-			-		(2	)
Stock option exercises		-		3		-			-			-			-		3
Share-based compensation expense		-		9		-			-			-			-		9
Ending Balance – June 30, 2011	$	1	$	1,646	$	(8	)	$	(112	)	$	(570	)	$	10	$	967
See accompanying Notes to Consolidated Financial Statements.

5

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

1.  Basis of Presentation

Basis of Presentation

Unless the context requires otherwise, the terms “Solutia”, “Company”, “we” and “our” in this report refer to Solutia Inc. and its subsidiaries. The accompanying consolidated financial statements have not been audited but have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  Therefore, this Report on Form 10-Q should be read in conjunction with Solutia’s Report on Form 10-K for the fiscal year ended December 31, 2010.  In the opinion of management, these unaudited consolidated financial statements contain all adjustments necessary to present fairly our financial position, results of operations and cash flows for the interim periods reported.  Financial information for the first six months of fiscal year 2011 should not be annualized due to the seasonality of our business.

2.  Acquisitions, Divestitures and Discontinued Operations

Acquisitions

On April 30, 2010, we purchased 100 percent of the shares of Novomatrix Pte. Ltd. (“Novomatrix”) for $72, net of the receipt of $1 in the first quarter of 2011 in connection with a preliminary working capital adjustment. Novomatrix is a leader in branding, marketing and distributing performance window films catering to the premium segment in the automotive and architectural markets.  The Novomatrix acquisition allows us to support our growth strategy for our Performance Films reporting segment by expanding our product offerings and global footprint into key emerging regions through Novomatrix’s well-established network in Southeast Asia and the Middle East.

On June 1, 2010, we purchased 100 percent of the shares of Etimex Solar GmbH (“Vistasolar”) for $294 and $3 of incremental working capital.  Vistasolar is a leading supplier of EVA encapsulants to the photovoltaic market and enables us to expand our Advanced Interlayers product portfolio into each of the dominant photovoltaic encapsulant technologies.

The Novomatrix and Vistasolar acquisitions were accounted for as business combinations, and accordingly, the assets and liabilities of the acquired entities were recorded at their estimated fair value.  The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of both acquisitions:

	Novomatrix		Vistasolar
	April 30, 2010		June 1, 2010
Assets:
Trade receivables	$	2	$	10
Miscellaneous receivables		1		-
Inventories		9		3
Property, plant and equipment		-		16
Identified intangible assets		50		119
Goodwill		25		187
Total assets acquired	$	87	$	335
Liabilities:
Accounts payable	$	4	$	2
Accrued liabilities		3		1
Postretirement liabilities		-		1
Deferred tax liabilities		8		34
Total liabilities assumed	$	15	$	38

6

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Goodwill largely consists of expected growth synergies through the application of each company’s innovative technologies and expansion of distribution channels in emerging markets in addition to cost synergies resulting from manufacturing and supply chain work process improvements.  Goodwill resulting from both acquisitions is not deductible for tax purposes.

The following table presents the weighted average life in years and the gross carrying value of the identified intangible assets included in net identified intangible assets within the Consolidated Statement of Financial Position on the date of acquisition for the Novomatrix and Vistasolar acquisitions.  The fair value of the identified intangible assets was determined using Level 3 inputs as defined by U.S. GAAP under the fair value hierarchy, which included valuation reports prepared by third party appraisal firms.

	Novomatrix			Vistasolar
	April 30, 2010			June 1, 2010
	Weighted			Weighted
	Average	Carrying		Average	Carrying
	Life in Years	Value		Life in Years	Value
Technology	-	$	-	20	$	25
Customer relationships	17		29	25		81
Other	5		1	3		5
Trademarks	N/A		20	N/A		8
Total identified intangible assets	17	$	50	23	$	119
Total weighted average life in years	22

Effective May 1, 2010 and June 1, 2010, results from the operations of Novomatrix and Vistasolar, respectively, have been included in our Consolidated Statement of Operations.  In conjunction with these acquisitions, we incurred $3 of costs during the three months ended June 30, 2010 and $7 of costs during the six months ended June 30, 2010.  These acquisition related costs were recorded in selling, general and administrative expenses during the first half of 2010.

The following pro forma financial information presents the combined results of operations of Solutia for the prior year presented as if the Novomatrix and Vistasolar acquisitions had occurred at the beginning of  2010.  The pro forma results below are not necessarily indicative of what actually would have occurred had the acquisitions been in effect for the periods presented and should not be taken as representation of our future consolidated results of operations.  Pro forma results are as follows:

	Three Months Ended		Six Months Ended
	June 30, 2010		June 30, 2010
Net sales	$	523	$	1,005
Net income (loss)	$	47	$	(5	)
Net income (loss) per basic and dilutive share	$	0.39	$	(0.04	)
Net income (loss) attributable to Solutia	$	47	$	(6	)
Net income (loss) attributable to Solutia per basic and dilutive share	$	0.39	$	(0.05	)

Divestitures

Certain Other Rubber Chemicals Businesses

In the first quarter 2011, we sold certain businesses and selected assets previously included in our Technical Specialties reporting segment whereby we recognized a gain of $17 in other operating income, net during the six months ended June 30, 2011.  Our decision to exit these businesses is consistent with our strategy of focusing on businesses that are leaders in their global markets and that have sustainable competitive advantages.

7

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Discontinued Operations

Primary Accelerators

On April 22, 2010, due to overcapacity within the industry, a disadvantaged cost position and increasing pressure from Far Eastern producers, we made the decision to exit our Primary Accelerators business and to cease manufacturing of SANTOCURE® primary accelerator products at the Monsanto Company (“Monsanto”) facility in Antwerp, Belgium, where we operated as a guest.  Our decision to exit this business is consistent with our strategy of focusing on businesses that are leaders in their global markets and that have sustainable competitive advantages.  Manufacturing of these products, the financial results of which had previously been included in our Technical Specialties reportable segment, ceased in the third quarter 2010.  Accordingly, we have reported the results of Primary Accelerators as a discontinued operation and applied this presentation on a retrospective basis.

A summary of the net sales and loss from discontinued operations related to our Primary Accelerators business is as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011		2010			2011		2010
Primary Accelerators:
Operating results:
Net sales	$	-	$	16		$	-	$	34
Loss before income taxes	$	-	$	(37	)	$	-	$	(40	)
Income tax benefit		-		(7	)		-		(8	)
Loss from discontinued operations, net of tax	$	-	$	(30	)	$	-	$	(32	)

Included in the results of discontinued operations is $38 of pre-tax expenses for the second quarter of 2010 related to the shutdown of this business.  The shutdown expenses for the second quarter 2010 include $6 for the impairment of long-lived assets determined using a Level 3 fair value measurement as defined by U.S. GAAP under the fair value hierarchy.

The assets and liabilities of our Primary Accelerators business, classified as discontinued operations, consist of the following:

	June 30,		December 31,
	2011		2010
Assets:
Trade and miscellaneous receivables, net	$	2	$	5
Current assets of discontinued operations	$	2	$	5
Liabilities:
Accounts payable and accrued liabilities	$	13	$	15
Current liabilities of discontinued operations	$	13	$	15
Other liabilities	$	24	$	25
Non-current liabilities of discontinued operations	$	24	$	25
Total liabilities	$	37	$	40

8

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Integrated Nylon

On June 1, 2009, we sold substantially all the assets and certain liabilities, including environmental remediation liabilities and pension liabilities of active employees, of our Integrated Nylon business to S.K. Capital Partners II, L.P. (the “Buyer”).  At the time of sale, we agreed to reimburse the Buyer for indirect residual costs incurred by them resulting from a disputed contractual matter with a guest at the Integrated Nylon plant in Alvin, Texas.  Accordingly, our estimate of the loss associated with the damages and cost reimbursements associated with this contingent liability was accrued in 2009.  On April 20, 2010, we entered into a settlement agreement that resolved all outstanding matters with the guest in exchange for payment by us of $17.  Separately, we entered into an agreement with the Buyer whereby our liability for indirect residual costs at the plant was settled in exchange for a payment by us of $4.  Each settlement became effective and was paid in 2010.  Based on the terms of the settlements, we recognized a gain of $17 in the second quarter 2010 in the results from discontinued operations.

A summary of the income from discontinued operations related to our Integrated Nylon business is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Integrated Nylon:
Operating results:
Income before income taxes		$	-		$	17		$	-		$	17
Income tax expense			-			-			-			-
Income from discontinued operations, net of tax		$	-		$	17		$	-		$	17

3.  Share-Based Compensation

Stock Options

We granted options to purchase a total of  856,705 shares of common stock to eligible employees during the six months endedJune 30, 2011 under our 2007 Management Long-Term Incentive Plan (“2007 Management Plan”).  The options granted (i) have an exercise price equal to the quoted market price of the common stock on the grant date, (ii) become exercisable in four equal installments on the first, second, third and fourth anniversaries of the grant date, subject to the employee’s continued employment and (iii) expire on the tenth anniversary of the grant date.  We did not grant any options under our 2007 Non-Employee Director Stock Compensation Plan (“2007 Director Plan”) during the six months ended June 30, 2011.

We determine the fair value of stock options at the grant date using a Black-Scholes model, which requires us to make several assumptions including risk-free interest rate, expected dividends and volatility.  The risk-free rate is based on the U.S. Treasury yield curve in effect for the expected term of the options at the time of grant.  The dividend yield on our common stock is assumed to be zero since we do not pay dividends and have no current plans to do so.  Due to our emergence from bankruptcy in 2008, our historical volatility data and employee stock option exercise patterns were not considered in determining the volatility data and expected life assumptions.  Instead, volatility assumptions were based on (i) historical volatilities of the stock of comparable chemical companies whose shares are traded using daily stock price returns over a term equivalent to the expected term of the options and (ii) implied volatility.  The expected life of an option was determined based on a simplified assumption that the option will be exercised evenly from the time it becomes exercisable to expiration.

The weighted average fair value of options granted during the six months ended June 30, 2011 was determined based on the following weighted average assumptions:

	June 30, 2011
Expected volatility		37.83	%
Expected term (in years)		6.3
Risk-free rate		2.89	%
Weighted average grant date fair value	$	9.76

9

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

A summary of stock option information as of June 30, 2011 is as follows:

	Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value (a)
Vested or Expected to Vest at June 30, 2011	3,138,881	$	18.55	8.0	$	14
Exercisable at June 30, 2011	1,744,506	$	17.25	6.9	$	10

 (a) Intrinsic value for stock options is calculated based on the difference between the exercise price of the underlying awards and the quoted market price of our common stock as of the reporting date.

During each of the three and six months ended June 30, 2011 and 2010, we recognized $1 and $2 of compensation expense related to our stock options, respectively.  Pre-tax unrecognized compensation expense for stock options, net of estimated forfeitures, was $11 as of June 30, 2011 which will be recognized as expense over a remaining weighted-average period of 2 years.

Restricted Stock Awards

We granted  415,399 shares of restricted stock awards with a weighted average grant date fair value of $25.39 per share to certain employees under our 2007 Management Plan during the six months ended June 30, 2011.  Half of the 2007 Management Plan shares vest upon completion of a service condition and the remaining half of the shares vest based upon the attainment of certain performance and market conditions (“Performance Shares”). The service condition shares vest in four equal installments on the first, second, third and fourth anniversaries of the grant date and the Performance Shares vest in 2014 if attainment of the performance and market conditions is achieved.  The actual vesting of the Performance Shares could range from zero to 175 percent of the targeted number of shares depending upon actual performance.

We granted  25,048 shares of restricted stock awards as an annual equity retainer with a weighted average grant date fair value of $24.41 per share to our non-employee directors under the 2007 Director Plan during the six months ended June 30, 2011.  The shares vest in three equal installments, with the first installment vesting as of the date of the grant and the remaining vesting equally on the first and second anniversary of the grant date.

During the three and six months ended June 30, 2011, we recognized $3 and $7 of compensation expense, respectively, related to our restricted stock awards.  For the three and six months ended June 30, 2010 we recognized $4 and $7 of compensation expense related to our restricted stock awards, respectively.  Pre-tax unrecognized compensation expense for restricted stock awards, net of estimated forfeitures, was $19 as of June 30, 2011 which will be recognized as expense over a remaining weighted average period of 2 years.

4. Goodwill and Other Intangible Assets

Goodwill

Goodwill by reportable segment is as follows:

	Advanced			Performance			Technical
	Interlayers			Films			Specialties			Total
Balance at December 31, 2010		$	407		$	186		$	147		$	740
Currency fluctuations			18			1			-			19
Balance at June 30, 2011		$	425		$	187		$	147		$	759

We do not have any goodwill that is deductible for tax purposes.

10

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Identified Intangible Assets

Identified intangible assets are summarized in aggregate as follows:

	June 30, 2011											December 31, 2010
	Estimated											Estimated
	Useful	Gross							Net			Useful	Gross							Net
	Life in	Carrying			Accumulated				Carrying			Life in	Carrying			Accumulated				Carrying
	Years	Value			Amortization				Value			Years	Value			Amortization				Value
Amortizable intangible assets:
Customer relationships	13 to 27		$	623		$	(69	)		$	554	13 to 27		$	606		$	(56	)		$	550
Technology	5 to 26			234			(35	)			199	5 to 26			225			(29	)			196
Trade names	10 to 25			20			(2	)			18	10 to 25			20			(1	)			19
Patents	13			5			(1	)			4	13			5			(1	)			4
Other	3 to 5			7			(3	)			4	3 to 5			6			(1	)			5
Non-amortizable intangible assets:
Trademarks				169			-				169				164			-				164
Total identified intangible assets			$	1,058		$	(110	)		$	948			$	1,026		$	(88	)		$	938

Amortization expense for intangible assets and its allocation to cost of goods sold and selling, general and administrative expenses in the Consolidated Statement of Operations is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Cost of goods sold		$	3		$	3		$	6		$	5
Selling, general and administrative expenses			7			5			14			10
Total		$	10		$	8		$	20		$	15

We expect to recognize amortization expense for intangible assets of approximately $39 for each of the years ending December 31, 2011 through 2015.

5. Detail of Certain Balance Sheet Accounts

Components of inventories are as follows:

	June 30,		December 31,
Inventories	2011		2010
Finished goods	$	199	$	163
Goods in process		35		36
Raw materials and supplies		94		76
Inventories	$	328	$	275

On January 1, 2010 we changed our method of accounting for inventories in the United States, excluding supplies, from determining cost using the LIFO method to determining cost using the FIFO method, consistent with all of our other operations.  We believe this change is preferable as the FIFO method better reflects the current value of inventories on the Consolidated Statement of Financial Position and provides a uniform costing method across our global operations.  Prior financial statements were not retroactively adjusted due to immateriality. The cumulative effect of the change in accounting principle of $1 was recorded as an increase to cost of goods sold as of January 1, 2010.

11

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Components of property, plant and equipment are as follows:

	June 30,			December 31,
Property, Plant and Equipment	2011			2010
Land	$	35		$	35
Leasehold improvements		11			10
Buildings		223			214
Machinery and equipment		838			796
Construction in progress		84			54
Total property, plant and equipment		1,191			1,109
Less: Accumulated depreciation		(257	)		(198	)
Net Property, Plant, and Equipment	$	934		$	911

Components of accrued liabilities are as follows:

	June 30,		December 31,
Accrued Liabilities	2011		2010
Wages and benefits	$	36	$	45
Foreign currency and interest rate derivative agreements		18		17
Restructuring reserves		6		5
Environmental remediation liabilities		32		29
Accrued income taxes payable		9		19
Accrued taxes other than income		26		27
Accrued selling expenses		14		17
Accrued interest		13		13
Other		66		63
Accrued Liabilities	$	220	$	235

6.  Income Taxes

Income Tax Expense

We recorded net income tax expense of $11 and $19 for the three and six months ended June 30, 2011, respectively, and net income tax expense of $9 and $19 for the three and six months ended June 30, 2010, respectively.  Our income tax expense is affected by changes in unrecognized tax benefits and the mix of income and losses in the tax jurisdictions in which we operate.  For both periods of 2011 and 2010, we recorded income tax expense on ex-U.S. earnings.  No income tax expense was recorded on income from U.S. operations for the three and six months ended June 30, 2011 because we have a U.S. net operating loss deferred tax asset, against which a full valuation allowance has been provided.  For the three and six months ended June 30, 2010, we experience a loss from U.S. operations but no income tax benefit was recognized as a full valuation allowance has been provided against the U.S. deferred tax assets.

Unrecognized Tax Benefits

The total amount of unrecognized tax benefits, inclusive of interest and penalties, at June 30, 2011 and December 31, 2010 was $176 and $167, respectively.  Included in the balance at June 30, 2011 and December 31, 2010 were $72 and $68, respectively, of unrecognized tax benefits that, if recognized, would impact the effective tax rate.  The increase in the amount of the unrecognized tax benefits is mainly the effect of currency exchange rate fluctuations and tax positions with respect to events in the current year offset by the reevaluation of tax positions not yet settled.

12

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

We file income tax returns in the U.S. and various states and foreign jurisdictions.  With few exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2002.  With few exceptions, we are no longer subject to foreign income tax examinations by tax authorities for years before 2006.  It is reasonably possible that within the next 12 months as a result of the resolution of federal, state and foreign examinations and appeals, and the expiration of various statutes of limitation that the unrecognized tax benefits that would affect the effective tax rate will decrease by a range of $0 to $25 and the unrecognized tax benefits that would not affect the effective tax rate will decrease by a range of $0 to $16.

7.  Restructuring Reserves

In an effort to maintain competitiveness across our businesses and the geographic areas in which we operate and to enhance the efficiency and cost effectiveness of our support operations, we periodically initiate certain restructuring activities which result in charges for costs associated with exit or disposal activities, severance and/or impairment of long-lived assets.  Many of these activities are associated with certain strategic divestitures or plant shut-downs executed in order to eliminate non-core products that lack a sustainable competitive advantage.  The region that has historically been most significantly impacted by these actions has been Europe.

To right-size our support structure in Europe and lower our operating costs in the region, we relocated our European regional headquarters in the second quarter 2011 from a building located in Louvain-la-Neuve, Belgium (“LLN”), which we own, to a multi-tenant building in which we lease office space in Zaventem, Belgium.  Accordingly, we have initiated a process to sell the LLN building and have reclassified this asset as held for sale.  In conjunction with this reclassification, we were required to perform an impairment test of this asset group.  For purposes of testing for impairment and using all available evidence as of March 31, 2011, we estimated the fair value of this asset group by weighting estimated sales proceeds and discounted cash flows that the asset group could be expected to generate through the time of an assumed sale using a Level 3 fair value measurement as defined by U.S. GAAP under the fair value hierarchy.  Our test concluded impairment existed on March 31, 2011 and, accordingly, we recorded a charge of $8 to other operating expense (income) to reduce the carrying value of this asset to its estimated fair value and reclassified the asset to prepaid expenses and other current assets.  Further and in addition to the above, we initiated a reduction in support personnel in this region which resulted in charges of $4 to selling, general and administrative for the six months ended June 30, 2011.  There were no charges related to this project during the second quarter.  A summary of the charges recorded to Unallocated and Other related to this restructuring action for the six months ended June 30, 2011 are as follows:

	Employment		Long-Lived
	Reductions		Assets		Total
Six Months Ended and cumulative through June 30, 2011:
Selling, general and administrative expenses	$	4	$	-	$	4
Other operating expense (income)		-		8		8
Total	$	4	$	8	$	12

A summary of all activity on the restructuring liability during the six months ended June 30, 2011 is as follows:

	Contract					Impairment of
	Termination		Employment			Long-Lived
	Payments		Reductions			Assets			Total
Balance at December 31, 2010	$	2	$	5		$	-		$	7
Charges taken		-		4			8			12
Amounts utilized		-		(4	)		-			(4	)
Non-cash reductions		-		-			(8	)		(8	)
Currency fluctuations		-		1			-			1
Balance at June 30, 2011	$	2	$	6		$	-		$	8

We expect $6 of restructuring liabilities as of June 30, 2011 to be utilized within the next twelve months.

13

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

8.  Commitments and Contingencies

Litigation

We are a party to legal proceedings, which have arisen in the ordinary course of business and involve claims for monetary damages.  As of June 30, 2011 and December 31, 2010, we had accrued approximately $2 and $3, respectively, for legal costs to defend ourselves in legal matters.

Except for the potential effect of an unfavorable outcome with respect to our Legacy Tort Claims Litigation, it is our opinion that the aggregate of all claims and lawsuits will not have a material adverse impact on our consolidated financial statements.

Legacy Tort Claims Litigation

Pursuant to the Amended and Restated Settlement Agreement effective February 28, 2008, entered into by us and Monsanto in connection with our emergence from Chapter 11 (the “Monsanto Settlement Agreement”), Monsanto is responsible to defend and indemnify us for any Legacy Tort Claims as that term is defined in the Monsanto Settlement Agreement, while we retain responsibility for tort claims, if any, which may arise out of our conduct after our spinoff from Pharmacia, which occurred on September 1, 1997.  We or our fully owned subsidiary, Flexsys, have been named as defendants in the following actions, and have submitted the matters to Monsanto as Legacy Tort Claims.  However, to the extent these matters relate to post Solutia Spinoff conduct or such matters are not within the meaning of Legacy Tort Claims as defined in the Monsanto Settlement Agreement, we could potentially be liable.

Putnam County, West Virginia Litigation.In December 2004, a purported class action lawsuit was filed in the Circuit Court of Putnam County, West Virginia against Flexsys, Pharmacia, Monsanto and Akzo Nobel (Solutia is not a named defendant) alleging exposure to dioxin from Flexsys’ Nitro, West Virginia facility, which is now closed.  The relevant production activities at the facility occurred during Pharmacia’s ownership and operation of the facility and well prior to the creation of the Flexsys joint venture between Pharmacia (whose interest was subsequently transferred to us in the Solutia Spinoff) and Akzo Nobel.  The plaintiffs are seeking damages for loss of property value, medical monitoring and other equitable relief.  In May 2011, the West Virginia circuit court entered summary judgment in favor of Flexsys in the class action litigation, and dismissed Flexsys with prejudice from the case.  Specifically, the court held that plaintiffs had presented no evidence of contamination or distribution of dioxin by Flexsys during its ownership of the Nitro facility.

Beginning in February 2008, Flexsys, Monsanto, Pharmacia, Akzo Nobel and another third party were named as defendants in approximately seventy-five individual lawsuits, and Solutia was named in two individual lawsuits, filed in various state court jurisdictions by residents or former residents of Putnam County, West Virginia.  The largely identical complaints allege that the residents were exposed to potentially harmful levels of dioxin particles from the Nitro facility.  Plaintiffs did not specify the amount of their alleged damages in their complaints.  In 2009, over fifty additional nearly identical complaints were filed by individual plaintiffs in the Putnam County area, which named Solutia and Flexsys as defendants, and one additional complaint was filed in January 2011.

The claims in this matter concern alleged conduct occurring while Flexsys was a joint venture between us and Akzo Nobel, and any potential damages in these cases would be evenly apportioned between us and Akzo Nobel to the extent such claims are determined not to be Legacy Tort Claims.

Escambia County, Florida Litigation.In June 2008, a group of approximately fifty property owners and business owners in the Pensacola, Florida area filed a lawsuit in the Circuit Court for Escambia County, Florida against Monsanto, Pharmacia, Solutia and the plant manager at Solutia's former Pensacola plant, an Integrated Nylon asset that was included in the divestiture of our Integrated Nylon business.  The lawsuit, entitled John Allen, et al. v. Monsanto Company, et al., alleges that the defendants are responsible for elevated levels of PCBs in the Escambia River and Escambia Bay due to past and continuing releases of PCBs from the Pensacola plant.  The plaintiffs seek: (1) damages associated with alleged decreased property values caused by the alleged contamination and (2) remediation of the alleged contamination in the waterways.  Plaintiffs did not specify the amount of their alleged damages in their complaint.  Plaintiffs have subsequently amended their complaint twice to add additional plaintiffs to the litigation, such that approximately 150 property and business owners are now named as plaintiffs.

14

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

St. Clair County, Illinois and Related Litigation.In February 2009, a purported class action lawsuit was filed in the Circuit Court of St. Clair County, Illinois against Solutia, Pharmacia, Monsanto and two other unrelated defendants alleging the contamination of the plaintiff’s property from PCBs, dioxins, furans and other hazardous substances emanating from the defendants’ facilities in Sauget, Illinois (including our W.G. Krummrich site in Sauget, Illinois).  The proposed class action is comprised of residents who live within a two-mile radius of the Sauget facilities.  The plaintiffs are seeking damages for medical monitoring and the costs associated with remediation and removal of contaminants from their property.  This action is one of several lawsuits (primarily filed by the same plaintiffs’ counsel) over the past year regarding alleged historical contamination from the W.G. Krummrich site.

In addition to the purported class action lawsuit, twenty additional individual lawsuits have been filed since February 2009 against the same defendants (including Solutia) comprised of claims from over one thousand individual residents of Illinois who claim they suffered illnesses and/or injuries as well as property damages as a result of the same PCBs, dioxins, furans and other hazardous substances allegedly emanating from the defendants’ facilities in Sauget.  In June 2010, a group of approximately 1,200 plaintiffs also filed wrongful death claims in a lawsuit in St. Clair County arising out of alleged contamination from the defendants’ facilities.  Moreover, four additional individual lawsuits comprised of claims from twelve plaintiffs were filed between January and April 2010 in Madison County, Illinois, alleging that plaintiffs suffered illnesses resulting from exposure to benzene, PCBs, dioxins, furans and other hazardous substances.  Lastly, in June 2010, a second purported class action lawsuit was filed in the Circuit Court of St. Louis City, Missouri against the same defendants alleging the contamination of the plaintiffs’ property from PCBs, dioxins, furans and other hazardous substances emanating from the defendants’ facilities in Sauget, Illinois and from our now-closed Queeny plant in St. Louis.  The plaintiffs are seeking damages for medical monitoring and the costs associated with remediation and removal of alleged contaminants from their property.  The proposed class members include residents exclusively within the state of Missouri.

Upon assessment of the terms of the Monsanto Settlement Agreement and other defenses available to us, we believe the probability of an unfavorable outcome to us on the Putnam County, West Virginia; Escambia County, Florida; and St. Clair County, Illinois and related litigation against us is remote and, accordingly, we have not recorded a loss contingency.  Nonetheless, if it were subsequently determined these matters are not within the meaning of Legacy Tort Claims, as defined in the Monsanto Settlement Agreement, or other defenses to us were unsuccessful, it is reasonably possible we would be liable for an amount which cannot be estimated but which could have a material adverse effect on our consolidated financial statements.

Resolution of Tax Indemnification

During the second quarter 2010, we received a favorable settlement in a tax indemnification case related to income taxes we paid on a business for periods prior to our acquisition.  The settlement resulted in an $8 gain recorded in other income (loss), net within Unallocated and Other during the three and six months ended June 30, 2010.

Environmental Liabilities

In the ordinary course of business, we are subject to numerous environmental laws and regulations covering compliance matters or imposing liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances.  We have incurred, and we may in the future incur, liabilities to investigate and clean up waste or contamination at our current facilities, properties adjacent to our current facilities or facilities operated by third parties at where we may have disposed of waste or other materials.  Under some circumstances, the scope of our liability may extend to damages to natural resources for which we have accrued $2 as of June 30, 2011 and December 31, 2010, which is exclusive of the balances noted below.  In almost all cases, our potential liability arising from historical contamination is based on operations and other events occurring at our facilities or as a result of their operation prior to the Solutia Spinoff.

Further, under terms of the Monsanto Settlement Agreement, we have agreed to share responsibility with Monsanto for the environmental remediation at certain locations outside our plant boundaries in Anniston, Alabama and Sauget, Illinois which were also incurred prior to the Solutia Spinoff (the “Shared Sites”).  Under this cost-sharing arrangement, we are responsible for the funding of environmental liabilities at the Shared Sites from February 28, 2008 (the “Effective Date”) up to a total of $325.  Thereafter, if needed, we and Monsanto will share responsibility equally.  From the Effective Date through June 30, 2011, we have made cash payments of $31 toward remediation of the Shared Sites and have accrued an additional $163 to be paid over the life of the Shared Sites remediation activity.

15

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Reserves for environmental remediation that we believe to be probable and estimable are recorded appropriately as current and long-term liabilities in the Consolidated Statement of Financial Position.  These reserves include liabilities expected to be paid out within fifteen years.  The amounts charged to pre-tax earnings for environmental remediation and related charges are included in cost of goods sold and are summarized below:

	Total
Balance at December 31, 2010	$	273
Net charges taken		3
Amounts utilized		(11)
Currency fluctuations		1
Balance at June 30, 2011	$	266

	June 30, 2011		December 31, 2010
Environmental Remediation Liabilities, current	$	32	$	29
Environmental Remediation Liabilities, long-term		234		244
Total	$	266	$	273

In addition to accrued environmental liabilities, there are costs which have not met the definition of probable, and accordingly, are not recorded in the Consolidated Statement of Financial Position.  These loss contingencies are monitored regularly for a change in fact or circumstance that would require an accrual adjustment.  These matters involve significant unresolved issues, including the interpretation of applicable laws and regulations, the outcome of negotiations with regulatory authorities and alternative methods of remediation. Because of these uncertainties, the potential liability for existing environmental remediation may range up to two times the amount recorded, which would be settled through cash payment over an extended period of time.
 

Except as noted below, we believe that these matters, when ultimately resolved, which may be over an extended period of time, will not have a material adverse effect on our Consolidated Statement of Financial Position, but could have a material adverse effect on our Consolidated Statement of Operations in any given period.  Our significant sites are described in more detail below:

Anniston, Alabama.  On Aug. 4, 2003, the U.S. District Court for the Northern District of Alabama approved a Revised Partial Consent Decree, pursuant to which Pharmacia and Solutia are obligated to perform, among other things, residential cleanup work and a remedial investigation/feasibility study (“RI/FS”) as a result of PCB contamination from our Anniston plant, which occurred prior to the Solutia Spinoff.  The residential cleanup of available properties was completed in 2010.  Furthermore, in 2010 the Anniston Plant Site RI/FS was approved by the United States Environmental Protection Agency (“USEPA”) and we expect the Record of Decision setting out the required remedies associated with the plant to be issued within the next twelve months.  The RI/FS for the non-residential properties and the creeks/floodplain are ongoing but it is probable that some level of remediation and/or sediment removal will be required in the future.  We have accrued for this liability based upon our understanding of the level and extent of contamination in these areas, the remedial effort likely to be required by various governmental organizations and estimated costs associated with similar remediation projects.  We may recover some of our investigation and remediation costs from parties, against whom we filed a cost recovery action in July 2003 but because the eventual outcome of these proceedings is uncertain, our environmental liability at June 30, 2011 does not incorporate this potential reimbursement.  State and Federal Natural Resource Damage Trustees have asserted a claim for potential natural resource damage and advised us that they are preparing to undertake an assessment as to the nature and extent of such damages.  These Trustees have requested we consider entering into a cooperative agreement to perform a damage assessment and discussions on such an agreement are ongoing.  As of June 30, 2011, we have accrued $108 for all environmental remediation projects in the Anniston, Alabama area which represents our best estimate of the ultimate liability.  Timing of the remediation will not be established until we complete the RI/FS, a Record of Decision is issued by the United States Environmental Protection Agency (“USEPA”), and a consent decree is negotiated and entered by the court to cover the selected remediation, which will take several years.

Sauget, Illinois.  A number of industries, including our W.G. Krummrich Plant, have operated and disposed of wastes in Sauget, Illinois.  Areas of contamination from these industrial operations, which for our W.G. Krummrich Plant occurred prior to the Solutia Spinoff, have been classified as part of either the Sauget Area 1 Sites or the Sauget Area 2 Sites.  We conducted a RI/FS for the Sauget Area 1 Sites under an Administrative Order on Consent issued on January 21, 1999.  Although an extensive removal action for one of the Sauget Area 1 Sites was conducted under a Unilateral Administrative Order issued on May 31, 2000, the cost and timing of any additional required remedial actions will be established only after a Record of Decision is issued by the USEPA, and a consent decree is negotiated and entered by the court to cover the selected remediation.  We have an agreement with two other potentially responsible parties (“PRPs”) to enter into an allocation proceeding upon issuance of the Record of Decision to resolve our respective shares of the liability for the Sauget Area 1 Sites.  With respect to the Sauget Area 2 Sites, we, in coordination with 19 other PRPs, are also required to conduct a RI/FS for the Sauget Area 2 Sites under an Administrative Order on Consent issued effective November 24, 2000.  We submitted the revised RI/FS report with these PRPs based on interim allocations and have agreed, upon issuance of the Record of Decision, to participate in an allocation proceeding to fully resolve each PRP’s share of the liability for the investigation and remediation costs.  For each of the Sauget Area 1 and 2 Sites, we anticipate the USEPA and Illinois Environmental Protection Agency (“IEPA”) to issue a Record of Decision with final action for the landfill/impoundment covers within the next two years.   However, although an interim groundwater remedy has been installed pursuant to a Unilateral Administrative Order issued on October 3, 2002, it is uncertain when the USEPA and IEPA will issue a final remedy for the groundwater operable unit.  Our ultimate exposure at these sites will depend on the final remedial actions to be taken and on the level of contribution from other PRPs.  In addition, several PRPs, including Solutia and Pharmacia, received in June 2009 from the U.S. Department of the Interior, on behalf of various federal and state natural resource trustees, a notice of intent to perform and an invitation to cooperate in a natural resource damage assessment for the Sauget Industrial Corridor.  Our best estimate of the ultimate cost of all remedial measures that will be required at the Sauget, Illinois area sites is $68 which we have accrued as of June 30, 2011.

16

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

W. G. Krummrich Site.  We entered into a Consent Order under the U.S. Resource Conservation and Recovery Act of 1976, as amended, effective May 3, 2000, to investigate and remediate soil and groundwater contamination from our manufacturing operations at the W.G. Krummrich Plant, which occurred prior to the Solutia Spinoff.  We conducted an extensive corrective measures study and a Final Decision was issued by the USEPA in February 2008 setting out the required corrective measures to be completed.  Due to the complexity of the contamination issues at this site, certain of the corrective measures will be performed in phases.  Required pilot testing has been completed and the design/implementation of full scale remediation systems has commenced with operation of these systems expected until at least 2015. Our best estimate of the ultimate cost of all corrective measures that will be required at the W.G. Krummrich Site is $22, which we have accrued as of June 30, 2011.

We also have accruals for remedial obligations at several of our current or former manufacturing sites which we have owned or operated since the Solutia Spinoff.  Our best estimate of the ultimate cost of all corrective measures that will be required at these sites is $68 which we have accrued as of June 30, 2011.

9.  Debt Obligations

At December 31, 2010, our senior secured credit facility (“Credit Facility”) consisted of an $850 term loan maturing in March 2017 (“2017 Term Loan”) and a $300 revolving credit facility maturing in 2015 (“2015 Revolver”).  In the first quarter of 2011, we amended the 2017 Term Loan.  The effect of the amendment resulted in the term of the debt being extended to August 2017, a reduction in the interest rate of 100 basis points, greater strategic flexibility and the replacement of previous financial covenants with a single senior secured leverage ratio.  In connection with the amendment, we incurred $2 of fees which were recorded in loss on debt extinguishment or modification in the six months ended June 30, 2011.  In addition, in the six months ended June 30, 2011, we made $102 of principal payments on our 2017 Term Loan, of which $98 were voluntary.

In the first quarter of 2010, we issued $300 of senior unsecured notes, due 2020 (“2020 Notes”), which resulted in net proceeds of $292 after deducting underwriting fees and discounts.  In addition, we extinguished our previous term loan and revolving credit facility, replacing them with our Credit Facility.  As a result of the early extinguishment, we incurred an $80 non-cash charge related to the write-off of deferred debt issuance costs and a $9 prepayment penalty for the early extinguishment.  These amounts were recorded in loss on debt extinguishment or modification for the six months ended June 30, 2010.

We had no short-term borrowings at June 30, 2011 and December 31, 2010.  Components of long-term debt are as follows:

	June 30, 2011			December 31, 2010
2017 Term Loan	$	666		$	768
8.75% Notes due 2017		400			400
7.875% Notes due 2020		300			300
Total principal amount		1,366			1,468
Less: Unamortized debt discount		(4	)		(5	)
Total	$	1,362		$	1,463

17

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

The weighted average interest rate on our total debt outstanding was 6 percent and 6.4 percent at June 30, 2011 and December 31, 2010, respectively.

The $400 notes due in 2017 (“2017 Notes”) were issued at par bearing interest at 8.75 percent and require semi-annual interest payments.  The 2020 Notes were issued at 99.5 percent of par bearing interest at 7.875 percent and require semi-annual interest payments.  Our current subsidiaries CPFilms Inc., Flexsys America L.P., Flexsys America Co., Monchem International, Inc., Solutia Overseas, Inc., S E Investment LLC and future subsidiaries as defined by the 2017 Notes and 2020 Notes (collectively “the Notes”), subject to certain exceptions, are guarantors (“Note Guarantors”) of the Notes as of June 30, 2011.

The 2017 Term loan was originally issued for $850 at 99.5 percent of the principal amount. After the amendment, the principal amount was $700 and bears interest at one month LIBOR plus 2.75 percent with a 0.75 percent LIBOR floor.  We are required to pay 1 percent of principal annually via quarterly payments.  The 2015 Revolver bears interest, at our option, at LIBOR plus 3.25 percent, with no LIBOR floor, or at the prime rate plus 2.25 percent.  LIBOR-based interest for the 2017 Term Loan is payable each month while interest on the 2015 Revolver is payable on the last day of each relevant interest period (defined as one month for the 2015 Revolver or one month, two, three or six months or other periods available to all lenders under the 2015 Revolver) and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period.  Prime-based interest for the 2015 Revolver is payable quarterly in arrears. CPFilms Inc., Flexsys America L.P., Flexsys America Co., Monchem International, Inc., Solutia Overseas, Inc. and future subsidiaries, as defined by the Credit Facility, subject to certain exceptions (the “Credit Facility Guarantors”), are guarantors of our obligations under the Credit Facility.  The Credit Facility and the related guarantees are secured by liens on substantially all of our and the Credit Facility Guarantors’ present and future assets.

The Credit Facility and The Notes include a number of customary covenants and events of default that restrict our ability to, among other things, incur additional debt; make certain investments; pay dividends; repurchase stock; sell certain assets or merge with or into other companies; enter into new lines of business and prepay, redeem or exchange our debt.  The Credit Facility also includes the maintenance of a maximum senior secured indebtedness financial covenant as defined by the Credit Facility.  We were in compliance with all applicable covenants as of June 30, 2011.

10.  Derivatives and Risk Management

Our business operations give rise to market risk exposures that result from changes in foreign currency exchange rates, interest rates and certain commodity prices.  To manage the volatility relating to these exposures, we periodically enter into various derivative transactions that enable us to alleviate the adverse effects of financial market risk.  We evaluate hedge effectiveness at inception and on an ongoing basis.  If a derivative is no longer expected to be effective or if the hedged transaction is no longer probable of occurring, hedge accounting is discontinued.  Hedge ineffectiveness, if any, is recorded into earnings.

Our approved policies and procedures do not permit the purchase or holding of any derivative financial instruments for trading purposes.  Management of counterparty credit risk is achieved through diversification and credit rating reviews of the firms with whom we transact.

Interest Rate Risk

We occasionally enter into interest rate swap and cap agreements to manage interest rate exposures.  In 2008, we entered into interest rate swap agreements with a total notional amount of $800 (“2008 Swaps”) in order to secure a fixed interest rate on a portion of our then existing floating interest rate term debt.  The 2008 Swaps have declining total notional amounts of $800 to $150 which are operational from the second quarter of 2010 through the first quarter of 2014.  Through the first quarter 2009, we designated the 2008 Swaps as cash flow hedges and any changes in fair value were recorded to accumulated other comprehensive loss, a component of equity.  Thereafter, we discontinued hedge accounting on the 2008 Swaps because these derivatives were no longer expected to be effective and all subsequent changes in fair value are recognized as interest expense in the Consolidated Statement of Operations.  To neutralize the impact to earnings on these changes to fair value, and after assessing existing interest rate market conditions, in the third quarter of 2010, we entered into interest rate swap agreements that offset the 2008 Swaps (“Offsetting Swaps”).   The Offsetting Swaps are operational beginning in the third quarter of 2010 with total notional amounts, operational dates and other terms that effectively mirror the 2008 Swaps.

18

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Also in the third quarter of 2010, we entered into interest rate swap agreements with a total notional amount of $600 (“2010 Swaps”) that were operational beginning in the third quarter of 2010 in order to secure a fixed interest rate on a portion of the floating interest rate term debt associated with the 2017 Term Loan.  The total notional amount of the 2010 Swaps declines to $200 through the fourth quarter of 2015.  The 2010 Swaps were designated as cash flow hedges and therefore any changes in fair value were recorded to accumulated other comprehensive loss.  In the first quarter 2011, we terminated the 2010 Swaps in conjunction with the debt modification discussed in Note 9 – Debt Obligations and purchased interest rate cap agreements to protect cash flows on a portion of the modified variable rate term loan against adverse interest rate changes (“2011 Caps”).

 The 2011 Caps became operative in the first quarter 2011 and have notional amounts of $500 in 2011, $400 in 2012 and 2013, $300 in 2014 and $200 in 2015.  Under the 2011 Caps, when the one-month LIBOR rate exceeds 0.75%, we will receive payments from the cap providers.  The combination of the 0.75% LIBOR floor on our 2017 Term Loan along with cash payment on the 2011 Caps results in total payments at a fixed rate of 2.21%, plus the margin of 2.75%, for a total of 4.96% on the notional amounts hedged through 2015.  The 2011 Caps were designated as cash flow hedges and therefore any changes in fair value are recorded to accumulated other comprehensive loss.

Foreign Currency Exchange Rate Risk

We use foreign currency derivative instruments to manage the volatility associated with foreign currency purchases of materials and other assets and liabilities created in the normal course of business and to protect against exposure related to intercompany financing transactions.  These risks are hedged primarily through the use of forward exchange contracts and purchased options with maturities of less than 18 months.  We have chosen not to designate these instruments as hedges to allow the changes in the fair value of these instruments to largely offset the remeasurement of the underlying assets and liabilities in the Consolidated Statement of Operations.  We had currency forward contracts to purchase and sell $148 and $104 of currencies comprised principally of the Euro, U.S. Dollar and Malaysian Ringgit as of June 30, 2011 and December 31, 2010, respectively.

Commodity Price Risk

We periodically enter into a limited number of commodity forward contracts in order to reduce cash flow exposure to changes in the price of certain raw materials and energy resources.  At June 30, 2011 and December 31, 2010, we had no such contracts outstanding requiring fair value treatment.

19

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Our derivatives recorded at their respective fair values at June 30, 2011 and December 31, 2010 in the Consolidated Statement of Financial Position are summarized as follows:

	June 30, 2011
	Asset Derivatives				Liability Derivatives
	Consolidated Statement of Financial Position Presentation	Fair Value			Consolidated Statement of Financial Position Presentation	Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	-	Accrued Liabilities		$	6
	Other Assets		$	1	Other Liabilities		$	-
Total Interest rate contracts				1				6
Derivative not designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	-	Accrued Liabilities		$	11
	Other Assets			7	Other Liabilities			16
Total Interest rate contracts				7				27
Foreign exchange contracts	Miscellaneous Receivables			2	Accrued Liabilities			1
Total Derivatives			$	10			$	34
	December 31, 2010
	Asset Derivatives				Liability Derivatives
	Consolidated Statement of Financial Position Presentation	Fair Value			Consolidated Statement of Financial Position Presentation	Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	-	Accrued Liabilities		$	3
	Other Assets			6	Other Liabilities			-
Total Interest rate contracts				6				3
Derivative not designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	-	Accrued Liabilities		$	13
	Other Assets			5	Other Liabilities			20
Total Interest rate contracts				5				33
Foreign exchange contracts	Miscellaneous Receivables			1	Accrued Liabilities			1
Total Derivatives			$	12			$	37

20

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

A summary of the effect of our derivative instruments for the three and six months ended June 30, 2011 and 2010 on the Consolidated Statement of Operations and Consolidated Statement of Financial Position is as follows:

	Change in Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Loss							Amount of Gain (Loss) Recognized in Income								Consolidated Statement of Operations Presentation
	Three Months Ended June 30,							Three Months Ended June 30,
	2011				2010			2011				2010
Derivatives designated as hedging instruments:
Interest rate contracts		$	(6	)		$	-		$	-			$	-		Interest expense
Derivatives not designated as hedging instruments:
Interest rate contracts		$	-			$	-		$	(2	)		$	(10	)	Interest expense (a)
Foreign exchange contracts			-				-			1				2		Other income (loss), net
Total Derivatives not designated as hedging instruments		$	-			$	-		$	(1	)		$	(8	)
Total Derivatives		$	(6	)		$	-		$	(1	)		$	(8	)

(a) We reclassified $2 of losses from accumulated other comprehensive loss to interest expense during the three months ended June 30, 2011 and 2010 related to the 2008 and 2010 Swaps.

	Change in Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Loss							Amount of Gain (Loss) Recognized in Income								Consolidated Statement of Operations Presentation
	Six Months Ended June 30,							Six Months Ended June 30,
	2011				2010			2011				2010
Derivatives designated as hedging instruments:
Interest rate contracts		$	(6	)		$	-		$	-			$	-		Interest expense
Derivatives not designated as hedging instruments:
Interest rate contracts		$	-			$	-		$	(4	)		$	(16	)	Interest expense (a)
Foreign exchange contracts			-				-			2				4		Other income (loss), net
Total Derivatives not designated as hedging instruments		$	-			$	-		$	(2	)		$	(12	)
Total Derivatives		$	(6	)		$	-		$	(2	)		$	(12	)

(a) We reclassified $4 and $2 of losses from accumulated other comprehensive loss to interest expense during the six months ended June 30, 2011 and 2010 related to the 2008 and 2010 Swaps.

As of June 30, 2011, deferred losses of $8 related to our interest rate derivatives are expected to be reclassified into earnings as interest expense over the next twelve months.

21

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

11.  Fair Value of Financial Instruments

The following tables present our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

	Fair Value Measurements at June 30, 2011
	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Cash Equivalents (a)	$	20	$	20	$	-	$	-
Derivatives – Foreign Exchange (b)		2		-		2		-
Derivatives – Interest Rates (c)		8		-		8		-
Total	$	30	$	20	$	10	$	-
Liabilities:
Derivatives – Foreign Exchange (b)	$	1	$	-	$	1	$	-
Derivatives – Interest Rates (c)	$	33	$	-	$	33	$	-
Total	$	34	$	-	$	34	$	-

	Fair Value Measurements at December 31, 2010
	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Cash Equivalents (a)	$	60	$	60	$	-	$	-
Derivatives – Foreign Exchange (b)		1		-		1		-
Derivatives – Interest Rates (c)		11		-		11		-
Total	$	72	$	60	$	12	$	-
Liabilities:
Derivatives – Foreign Exchange (b)	$	1	$	-	$	1	$	-
Derivatives – Interest Rates (c)		36		-		36		-
Total	$	37	$	-	$	37	$	-

(a)	Includes cash invested in money market funds.
(b)	Includes foreign currency forward and options contracts which are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount.
(c)	Includes interest rate cap and swap agreements which are valued using counterparty quotes, which use discounted cash flows and the then-applicable forward interest rates.

The recorded amounts of cash, trade receivables and accounts payable approximate their fair values at both June 30, 2011 and December 31, 2010, due to the short maturity of these instruments.  The estimated fair value of our long-term debt at June 30, 2011 is $1,420 compared to the recorded amount of $1,362.  The estimated fair value of our long-term debt at  December 31, 2010 was $1,530 compared to the recorded amount of $1,463.  The fair values are estimated by various banks based upon trading levels on the date of measurement.

22

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

12.  Pension Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost

For the three and six months ended June 30, 2011 and 2010, our pension and healthcare and other benefit costs for continuing operations are as follows:

	Pension Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Service costs for benefits earned	$	1		$	-		$	2		$	1
Interest costs on benefit obligation		12			11			24			23
Assumed return on plan assets		(13	)		(12	)		(26	)		(25	)
Amortization of actuarial net loss		3			3			6			5
Settlement Charges		1			-			1			1
Total	$	4		$	2		$	7		$	5

	Healthcare and Other Benefits
	Three Months Ended June 30,								Six Months Ended June 30,
	2011				2010				2011				2010
Service costs for benefits earned		$	1			$	1			$	2			$	2
Interest costs on benefit obligation			2				3				4				5
Assumed return on plan assets			(1	)			(2	)			(3	)			(3	)
Amortization of actuarial net gain			(2	)			(2	)			(4	)			(3	)
Total		$	-			$	-			$	(1	)		$	1

Settlements

For the six months ended June 30, 2011 and 2010 we recorded a settlement charge of $1 for each period, resulting from the significant amount of lump sum distributions in Belgium associated with a reduction of personnel prior to June 30, 2011 and 2010.  These reductions were driven by restructuring activities.

Employer Contributions

 According to the applicable funding rules, we are required to contribute $47 to our pension plans, collectively, in 2011.  For the six months ended June 30, 2011, we contributed $19.

23

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

13.  Accumulated Other Comprehensive Loss

The following table presents the balances of related after-tax components of accumulated other comprehensive loss.

	Accumulated Currency Adjustments			Postretirement Adjustments			Hedging Activity Adjustments			Accumulated Other Comprehensive Loss
Beginning Balance - January 1, 2010	$	(56	)	$	(160	)	$	(21	)	$	(237	)
Currency translation adjustments		(89	)		-			-			(89	)
Pension settlement charge		-			1			-			1
Amortization of net actuarial loss		-			2			-			2
Realized loss on derivative instruments		-			-			2			2
Ending Balance - June 30, 2010	$	(145	)	$	(157	)	$	(19	)	$	(321	)
Beginning Balance - January 1, 2011	$	(66	)	$	(117	)	$	(11	)	$	(194	)
Currency translation adjustments		81			-			-			81
Pension settlement charge		-			1			-			1
Amortization of net actuarial loss		-			2			-			2
Unrealized loss on derivative instruments		-			-			(6	)		(6	)
Realized loss on derivative instruments		-			-			4			4
Ending Balance - June 30, 2011	$	15		$	(114	)	$	(13	)	$	(112	)

14. Segment Data

 We are a global manufacturer and marketer of a variety of high-performance chemical-based materials that are used across automotive, construction, industrial and consumer applications.  Our operations are managed and reported in three reportable segments consisting of Advanced Interlayers, Performance Films and Technical Specialties.
 

The Advanced Interlayers reportable segment is a global manufacturer of interlayers for laminated glass and encapsulants for the photovoltaic market.  The Performance Films reportable segment is a manufacturer of performance films for after-market applications which add functionality to glass.  The Technical Specialties reportable segment is a global manufacturer of specialty chemicals for the rubber, solar energy, process manufacturing and aviation industries.  The major products by reportable segment are as follows:

Reportable Segment	Products
Advanced Interlayers	● ● ●	SAFLEX® plastic interlayer VISTASOLAR® ethyl vinyl acetate encapsulants Specialty intermediate polyvinyl butyral resin and plasticizer
Performance Films	● ●	LLUMAR®, VISTA®, GILA®, V-KOOL®, HUPER OPTIK® and FORMULAONE® professional and retail window films FLEXVUE™ precision coated films and other enhanced polymer films for industrial customers
Technical Specialties	● ● ● ●	CRYSTEX® insoluble sulphur SANTOFLEX® antidegradants THERMINOL® heat transfer fluids SKYDROL® aviation hydraulic fluids

24

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

The performance of our operating segments is evaluated based on Segment Profit, defined as income from continuing operations attributable to Solutia before interest expense, loss on debt extinguishment or modification, income taxes, depreciation and amortization. Segment Profit includes selling, general and administrative, research and development expenses, other operating income or expenses, gains and losses from asset dispositions and restructuring charges, the reduction for net income attributable to noncontrolling interests and other income and expense items that can be directly attributable to the segment.  Certain operations, expenses and other items that are managed outside the reportable segments are reported as Unallocated and Other.  Unallocated and Other is comprised of corporate expenses, adjustments to our LIFO valuation reserve, adjustments to our environmental liabilities, other income and expense items including currency gains/losses, gains and losses from asset dispositions and restructuring charges that are not directly attributable to the reportable segments in addition to non-core operations that do not meet the quantitative threshold for determining reportable segments.  There were no inter-segment sales in the periods presented below.

	Three Months Ended										Six Months Ended
	June 30,										June 30,
	2011					2010					2011					2010
	Net		Profit			Net		Profit			Net		Profit			Net		Profit
	Sales		(Loss)			Sales		(Loss)			Sales		(Loss)			Sales		(Loss)
Reportable Segment
Advanced Interlayers	$	232	$	52		$	208	$	43		$	445	$	101		$	394	$	91
Performance Films		86		19			73		18			162		38			125		27
Technical Specialties		225		82			217		80			445		180			423		157
Reportable Segment Totals		543		153			498		141			1,052		319			942		275
Unallocated and Other		-		(17	)		4		(14	)		-		(48	)		8		(40	)
Total		543		136			502		127			1,052		271			950		235
Reconciliation to Consolidated Totals:
Depreciation and amortization				(31	)				(28	)				(63	)				(55	)
Interest expense				(26	)				(36	)				(54	)				(74	)
Loss on debt extinguishment
or modification				-					-					(2	)				(89	)
Net income attributable to
noncontrolling interest				2					-					3					1
Consolidated Totals:
Net Sales	$	543				$	502				$	1,052				$	950
Income from Continuing
Operations Before Income Taxes			$	81				$	63				$	155				$	18

25

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

15.  Earnings (Loss) Per Share

The following table presents the net income (loss) used in basic and diluted earnings (loss) per share and reconciles weighted average number of shares used in the calculations of basic and diluted earnings (loss) per share.

(Shares in millions)	Three Months Ended June 30,					Six Months Ended June 30,
	2011		2010			2011		2010
Consolidated Statement of Operations:
Income (Loss) from continuing operations	$	70	$	54		$	136	$	(1	)
Less: Net Income attributable to noncontrolling interest		2		-			3		1
Income (Loss) from continuing operations attributable to Solutia		68		54			133		(2	)
Loss from discontinued operations, net of tax		-		(13	)		-		(15	)
Net Income (Loss) attributable to Solutia	$	68	$	41		$	133	$	(17	)
Weighted-average number of shares outstanding used for basic earnings (loss) per share		119.7		118.7			119.5		118.6
Non-vested restricted shares		1.3		1.2			1.3		N/A	(a)
Stock options		0.5		-			0.5		-
Weighted average number of shares outstanding and common equivalent shares used for diluted earnings (loss) per share		121.5		119.9			121.3		118.6

(a) 1.1 million shares of non-vested restricted stock for the six months ended June 30, 2010 were excluded from the dilutive earnings per share calculation because we experienced a net loss for this period.

During the three and six months ended June 30, 2011 and 2010, the following shares were not included in the computation of earnings (loss) per share since the result would have been anti-dilutive.

	Three Months Ended June 30,				Six Months Ended June 30,
(Shares in millions)	2011		2010		2011		2010
Non-vested restricted shares		0.1		0.5		-		0.2
Stock options		1.1		2.6		1.3		2.2
Warrants (a)		4.5		4.5		4.5		4.5

 (a) Upon the Effective Date, we issued warrants to purchase an aggregate of 4,481,168 shares to certain of the holders of our stock based on such holder's pre-petition stock ownership. These warrants have an exercise price of $29.70 and expire on February 27, 2013.

16.  Subsequent Events

On June 1, 2011, we exercised our Put Right pursuant to our Securityholders agreement with S.K. Capital Partners II, L.P. , the buyer of our Integrated Nylon business, to require its purchase of our approximately 2 percent ownership interest in the Integrated Nylon business.  The sale of our ownership interest was for $31 and is expected to result in a gain of approximately $28 when it closes in the second half of 2011.

17.Condensed Consolidating Financial Statements

In accordance with SEC regulation S-X Rule 3-10 “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered,” we are providing condensed consolidating financial statements as the Notes are fully and unconditionally guaranteed on a joint and several basis.

26

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

The following consolidating financial statements present, in separate columns, financial information for:  (i) Solutia, on a parent-only basis, carrying its investment in subsidiaries under the equity method; (ii) Note Guarantors on a combined basis (“Guarantors”), carrying investments in subsidiaries which do not guarantee the debt (the “Non-Guarantors”) under the equity method; (iii) Non-Guarantors on a combined basis; (iv) eliminating entries and (v) consolidated totals as of June 30, 2011 and December 31, 2010 and for the three and six months ended June 30, 2011 and 2010.  The eliminating entries primarily reflect intercompany transactions, such as interest income and expense, accounts receivable and payable, advances, short and long-term debt, royalties and profit in inventory eliminations.

Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2011
	Parent-Only						Non-						Consolidated
	Solutia			Guarantors			Guarantors			Eliminations			Solutia
Net Sales	$	137		$	120		$	486		$	(200	)	$	543
Cost of goods sold		108			77			398			(210	)		373
Gross Profit		29			43			88			10			170
Selling, general and administrative expenses		23			12			25			-			60
Research and development expenses and other operating      expense (income), net		(4	)		2			5			-			3
Operating Income (Loss)		10			29			58			10			107
Equity earnings from affiliates		69			25			-			(94	)		-
Interest expense		(28	)		(1	)		(55	)		58			(26	)
Other income (loss), net		17			16			33			(66	)		-
Income from Continuing Operations Before Income      Tax Expense		68			69			36			(92	)		81
Income tax expense		-			-			11			-			11
Net Income		68			69			25			(92	)		70
Net Income attributable to noncontrolling interest		-			-			2			-			2
Net Income attributable to Solutia	$	68		$	69		$	23		$	(92	)	$	68

27

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2010
	Parent-Only					Non-						Consolidated
	Solutia			Guarantors		Guarantors			Eliminations			Solutia
Net Sales	$	123		$	117	$	455		$	(193	)	$	502
Cost of goods sold		108			72		357			(194	)		343
Gross Profit		15			45		98			1			159
Selling, general and administrative expenses		28			14		25			-			67
Research and development expenses and other operating      expense (income), net		3			1		(1	)		-			3
Operating Income (Loss)		(16	)		30		74			1			89
Equity earnings from affiliates		66			28		-			(94	)		-
Interest expense		(36	)		-		(37	)		37			(36	)
Other income, net		10			10		34			(44	)		10
Income from Continuing Operations Before      Income Tax Expense		24			68		71			(100	)		63
Income tax expense		-			-		11			(2	)		9
Income from Continuing Operations		24			68		60			(98	)		54
Income (Loss) from discontinued operations, net of tax		17			1		(31	)		-			(13	)
Net Income		41			69		29			(98	)		41
Net Income attributable to noncontrolling interest		-			-		-			-			-
Net Income attributable to Solutia	$	41		$	69	$	29		$	(98	)	$	41

28

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2011
	Parent-Only						Non-						Consolidated
	Solutia			Guarantors			Guarantors			Eliminations			Solutia
Net Sales	$	272		$	227		$	951		$	(398	)	$	1,052
Cost of goods sold		226			146			764			(416	)		720
Gross Profit		46			81			187			18			332
Selling, general and administrative expenses		50			25			47			-			122
Research and development expenses and other operating      expense (income), net		3			1			(6	)		-			(2	)
Operating Income (Loss)		(7	)		55			146			18			212
Equity earnings from affiliates		167			84			-			(251	)		-
Interest expense		(60	)		(1	)		(101	)		108			(54	)
Other income (loss), net		35			29			59			(124	)		(1	)
Loss on debt modification		(2	)		-			-			-			(2	)
Income from Continuing Operations Before Income      Tax Expense		133			167			104			(249	)		155
Income tax expense		-			-			18			1			19
Income (Loss) from Continuing Operations		133			167			86			(250	)		136
Net Income		133			167			86			(250	)		136
Net Income attributable to noncontrolling interest		-			-			3			-			3
Net Income attributable to Solutia	$	133		$	167		$	83		$	(250	)	$	133

29

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2010
	Parent-Only					Non-						Consolidated
	Solutia			Guarantors		Guarantors			Eliminations			Solutia
Net Sales	$	235		$	214	$	861		$	(360	)	$	950
Cost of goods sold		203			135		671			(366	)		643
Gross Profit		32			79		190			6			307
Selling, general and administrative expenses		56			28		48			-			132
Research and development expenses and other operating      expense, net		5			2		-			-			7
Operating Income (Loss)		(29	)		49		142			6			168
Equity earnings from affiliates		136			67		-			(203	)		-
Interest expense		(74	)		-		(71	)		71			(74	)
Other income, net		21			23		55			(86	)		13
Loss on debt extinguishment		(88	)		-		(1	)		-			(89	)
Income (Loss) from Continuing Operations Before      Income Tax Expense		(34	)		139		125			(212	)		18
Income tax expense		-			-		23			(4	)		19
Income (Loss) from Continuing Operations		(34	)		139		102			(208	)		(1	)
Income (Loss) from discontinued operations, net of tax		17			-		(32	)		-			(15	)
Net Income (Loss)		(17	)		139		70			(208	)		(16	)
Net Income attributable to noncontrolling interest		-			-		1			-			1
Net Income (Loss) attributable to Solutia	$	(17	)	$	139	$	69		$	(208	)	$	(17	)

30

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Balance Sheet
June 30, 2011
	Parent-Only					Non-					Consolidated
	Solutia			Guarantors		Guarantors		Eliminations			Solutia
ASSETS
Current Assets:
Cash and cash equivalents	$	77		$	3	$	89	$	-		$	169
Trade receivables, net		33			48		183		-			264
Intercompany receivables		80			578		466		(1,124	)		-
Miscellaneous receivables		9			1		64		-			74
Inventories		79			55		233		(39	)		328
Prepaid expenses and other current assets		3			2		15		9			29
Current assets of discontinued operations		-			-		2		-			2
Total Current Assets		281			687		1,052		(1,154	)		866
Net Property, Plant and Equipment		179			143		612		-			934
Investments in Affiliates		2,495			684		933		(4,112	)		-
Goodwill		150			190		419		-			759
Net Identified Intangible Assets		183			302		463		-			948
Intercompany Advances		465			556		2,012		(3,033	)		-
Other Assets		73			3		73		-			149
Total Assets	$	3,826		$	2,565	$	5,564	$	(8,299	)	$	3,656
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	49		$	26	$	119	$	-		$	194
Intercompany payables		680			13		431		(1,124	)		-
Accrued liabilities		104			12		106		(2	)		220
Intercompany short-term debt		53			-		527		(580	)		-
Current liabilities of discontinued operations		-			-		13		-			13
Total Current Liabilities		886			51		1,196		(1,706	)		427
Long-Term Debt		1,362			-		-		-			1,362
Intercompany Long-Term Debt		132			23		2,298		(2,453	)		-
Postretirement Liabilities		209			2		82		-			293
Environmental Remediation Liabilities		216			3		15		-			234
Deferred Tax Liabilities		18			11		219		-			248
Non-Current Liabilities of Discontinued Operations		-			-		24		-			24
Other Liabilities		46			6		49		-			101
Equity:
Common stock		1			-		-		-			1
Additional contributed capital		1,646			2,469		1,671		(4,140	)		1,646
Treasury stock		(8	)		-		-		-			(8	)
Accumulated other comprehensive loss		(112	)		-		-		-			(112	)
Accumulated deficit		(570	)		-		-		-			(570	)
Total Shareholders' Equity attributable to Solutia		957			2,469		1,671		(4,140	)		957
Equity attributable to noncontrolling interest		-			-		10		-			10
Total Equity		957			2,469		1,681		(4,140	)		967
Total Liabilities and Equity	$	3,826		$	2,565	$	5,564	$	(8,299	)	$	3,656

31

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Balance Sheet
December 31, 2010
	Parent-Only					Non-					Consolidated
	Solutia			Guarantors		Guarantors		Eliminations			Solutia
ASSETS
Current Assets:
Cash and cash equivalents	$	98		$	7	$	86	$	-		$	191
Trade receivables, net		26			40		162		-			228
Intercompany receivables		100			497		398		(995	)		-
Miscellaneous receivables		14			-		61		-			75
Inventories		69			47		199		(40	)		275
Prepaid expenses and other current assets		7			2		9		9			27
Current assets of discontinued operations		-			-		5		-			5
Total Current Assets		314			593		920		(1,026	)		801
Net Property, Plant and Equipment		180			139		592		-			911
Investments in Affiliates		2,280			559		908		(3,747	)		-
Goodwill		149			192		399		-			740
Net Identified Intangible Assets		186			309		443		-			938
Intercompany Advances		439			514		1,693		(2,646	)		-
Other Assets		78			2		67		-			147
Total Assets	$	3,626		$	2,308	$	5,022	$	(7,419	)	$	3,537
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	53		$	21	$	99	$	-		$	173
Intercompany payables		630			11		354		(995	)		-
Accrued liabilities		103			10		123		(1	)		235
Intercompany short-term debt		17			-		479		(496	)		-
Current liabilities of discontinued operations		-			-		15		-			15
Total Current Liabilities		803			42		1,070		(1,492	)		423
Long-Term Debt		1,463			-		-		-			1,463
Intercompany Long-Term Debt		108			23		2,019		(2,150	)		-
Postretirement Liabilities		225			3		80		-			308
Environmental Remediation Liabilities		225			3		16		-			244
Deferred Tax Liabilities		21			11		206		-			238
Non-Current Liabilities of Discontinued Operations		-			-		25		-			25
Other Liabilities		49			6		42		-			97
Equity:
Common stock		1			-		-		-			1
Additional contributed capital		1,634			2,220		1,557		(3,777	)		1,634
Treasury stock		(6	)		-		-		-			(6	)
Accumulated other comprehensive loss		(194	)		-		-		-			(194	)
Accumulated deficit		(703	)		-		-		-			(703	)
Total Shareholders' Equity attributable to Solutia		732			2,220		1,557		(3,777	)		732
Equity attributable to noncontrolling interest		-			-		7		-			7
Total Equity		732			2,220		1,564		(3,777	)		739
Total Liabilities and Equity	$	3,626		$	2,308	$	5,022	$	(7,419	)	$	3,537

32

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2011
	Parent-Only						Non-					Consolidated
	Solutia			Guarantors			Guarantors			Eliminations		Solutia
Cash Provided by (Used in) Operations	$	(57	)	$	76		$	74		$	-	$	93
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(7	)		(3	)		(30	)		-		(40	)
Acquisition related payments, net of cash acquired		-			-			(5	)		-		(5	)
Asset disposals		-			3			26			-		29
Other		-			-			1			-		1
Cash Used in Investing Activities		(7	)		-			(8	)		-		(15	)
FINANCING ACTIVITIES:
Payment of long-term debt obligations		(102	)		-			-			-		(102	)
Purchase of treasury shares		(2	)		-			-			-		(2	)
Other, net		1			-			(1	)		-		-
Changes in investments and advances from (to) affiliates		146			(80	)		(66	)		-		-
Cash Provided by (Used in) Financing Activities		43			(80	)		(67	)		-		(104	)
Effect of Exchange Rate Changes on Cash and      Cash Equivalents		-			-			4			-		4
Increase (Decrease) in Cash and Cash Equivalents		(21	)		(4	)		3			-		(22	)
CASH AND CASH EQUIVALENTS:
Beginning of year		98			7			86			-		191
End of year	$	77		$	3		$	89		$	-	$	169

33

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2010
	Parent-Only						Non-					Consolidated
	Solutia			Guarantors			Guarantors			Eliminations		Solutia
Cash Provided by (Used in) Operations	$	(104	)	$	88		$	99		$	-	$	83
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(3	)		(2	)		(9	)		-		(14	)
Acquisition related payments, net of cash acquired		-			(1	)		(370	)		-		(371	)
Asset disposals		(2	)		-			-			-		(2	)
Cash Used in Investing Activities		(5	)		(3	)		(379	)		-		(387	)
FINANCING ACTIVITIES:
Proceeds from long-term debt obligations		1,144			-			-			-		1,144
Payment of long-term debt obligations		(878	)		-			-			-		(878	)
Payment of short-term debt obligations		-			-			(16	)		-		(16	)
Debt issuance costs		(27	)		-			-			-		(27	)
Purchase of treasury shares		(1	)		-			-			-		(1	)
Other, net		(9	)		-			-			-		(9	)
Changes in investments and advances from (to) affiliates		(157	)		(86	)		243			-		-
Cash Provided by (Used in) Financing Activities		72			(86	)		227			-		213
Effect of Exchange Rate Changes on Cash and      Cash Equivalents		-			-			(25	)		-		(25	)
Decrease in Cash and Cash Equivalents		(37	)		(1	)		(78	)		-		(116	)
CASH AND CASH EQUIVALENTS:
Beginning of period		104			1			138			-		243
End of period	$	67		$	-		$	60		$	-	$	127

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Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  These forward-looking statements include all statements regarding expected future financial position, results of operations, profitability, cash flows and liquidity.  Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements herein include, among others, our ability to comply with the terms of our financing agreements; our ability to reduce our overall leveraged position; general economic, business and market conditions; customer acceptance of new products; raw material and energy costs or shortages; limited access to capital resources; currency and interest rate fluctuations; increased competitive and/or customer pressure; gain or loss of significant customers; compression of credit terms with suppliers; exposure to product liability and other litigation; changes in cost of environmental remediation obligations and other environmental liabilities; changes in accounting principles generally accepted in the U.S. (“U.S. GAAP”); ability to implement cost reduction initiatives in a timely manner; geopolitical instability and changes in pension and other postretirement benefit assumptions.

Overview

We are a global manufacturer and marketer of a variety of high-performance chemical-based materials that are used across automotive, construction, industrial and consumer applications.  We report and manage our operations in three reportable segments consisting of Advanced Interlayers, Performance Films and Technical Specialties.  Through our Advanced Interlayers segment, we produce Polyvinyl Butyral (“PVB”) and Ethyl Vinyl Acetate (“EVA”) used in the manufacture of laminated glass for automotive, architectural and solar applications.   Our Performance Films segment manufactures, markets and distributes custom-coated window films for aftermarket automotive and architectural applications in addition to the manufacture of specialized technical films for use in a wide variety of industrial applications.  Technical Specialties is our specialty chemicals segment, which includes the manufacture and sale of specialty chemicals for the rubber, solar energy, process manufacturing and aviation industries.  The major products by reportable segment are as follows:

Reportable Segment	Products
Advanced Interlayers	● ● ●	SAFLEX® plastic interlayer VISTASOLAR® ethyl vinyl acetate encapsulants Specialty intermediate polyvinyl butyral resin and plasticizer
Performance Films	● ●	LLUMAR®, VISTA®, GILA®, V-KOOL®, HUPER OPTIK® and FORMULAONE® professional and retail window films FLEXVUEÔ precision coated films and other enhanced polymer films for industrial customers
Technical Specialties	● ● ● ●	CRYSTEX® insoluble sulphur SANTOFLEX® antidegradants THERMINOL® heat transfer fluids SKYDROL® aviation hydraulic fluids

See Note 14 to the accompanying consolidated financial statements for further information regarding our reportable segments and for the associated definition of segment profit.

Significant Second Quarter 2011 Events

Product Portfolio and Expansions:  As a global manufacturer of performance materials and specialty chemicals used in a broad range of consumer and industrial applications, we actively pursue opportunities to capitalize on underserved or emerging markets or geographies where we have a competitive advantage.  Conversely, we periodically initiate restructuring, divestitures or shut-downs of operations where we participate in product markets and geographies in which these characteristics do not exist.  Consistent with this strategy, in the second quarter 2011, we continued the development and expansion of certain key products.

In the second quarter 2011, we announced the opening of our new Vistasolar® EVA manufacturing center in Suzhou, China. Solutia is the market leader for EVA films in Europe and the first global supplier to build an EVA manufacturing center in China. Chinese solar module manufacturers currently produce more than half of all modules installed globally, and this new manufacturing center will strengthen Solutia's position to reliably and cost effectively supply high-quality solar encapsulants to the Chinese photovoltaic market.

35

 Further, we continued progress on the expansion of our Saflexâ PVB manufacturing facilities in Suzhou, China and Ghent, Belgium, both of which we expect to complete in 2011.  The China upgrade will incorporate a second manufacturing line to serve the architectural, photovoltaic and automotive markets.  The Belgium expansion will significantly expand our capacity to produce acoustic interlayer for automotive applications.

Finally, in the second quarter 2011, we acquired select assets from a leading conductive film manufacturing firm based in Taiwan for $7 million, which will increase our manufacturing capacity for the production of our Flexvue™ film components.

Long-term Capital Structure:  During the second quarter 2011, we made $25 million of voluntary payments on our $850 million senior term loan facility (“2017 Term Loan”).  Over the past twelve months, Solutia has repaid $182 million on the 2017 Term Loan.

Consolidated Results of Operations - Second Quarter 2011 Compared to Second Quarter 2010

	Three Months Ended
		June 30,				Increase		% Increase
(dollars in millions, except per share amounts)	2011			2010		(Decrease)		(Decrease)
Net Sales		$	543	$	502	$	41		8	%
Net Income attributable to Solutia		$	68	$	41	$	27		66	%
Adjusted EBITDA (a)		$	141	$	134	$	7		5	%
Adjusted EPS (a)		$	0.57	$	0.44	$	0.13		30	%
(a) Non-GAAP financial measure. See below for discussion and a reconciliation to GAAP measures

In the second quarter 2011, we reported net sales of $543 million, an 8 percent increase as compared to $502 million reported in the second quarter 2010.  The increase was driven by higher selling prices of $22 million or 4 percent, the impact of the Vistasolar and Novomatrix acquired businesses of $13 million or 3 percent, higher sales volumes of $7 million or 1 percent and favorable currency exchange rate fluctuations of $19 million or 4 percent, partially offset by the impact of divestitures of $20 million or 4 percent.   Net income attributable to Solutia of $68 million for second quarter 2011 represents an improvement of $27 million as compared to net income of $41 million as reported in the same period in 2010.  Significantly impacting results for the three months ended June 30, 2010 is a $13 million loss from discontinued operations, net of tax, as more fully described in Note 2 to the Consolidated Financial Statements.  The remaining improvement in net income was predominately due to higher Adjusted EBITDA of $7 million, as further explained below, and lower interest expense.

Adjusted EBITDA for the second quarter of 2011 was $141 million as compared to $134 million for the same period in 2010, which represents a $7 million or a 5 percent improvement.  The increase in Adjusted EBITDA was driven by higher sales revenue, as discussed above, which generated $28 million of incremental Adjusted EBITDA, and $2 million of lower operating expenses, partially offset by the negative impact from higher raw materials of $18 million, the divestiture of certain other rubber chemical businesses of $4 million and unfavorable currency exchange rate fluctuations of $1 million.  Lower operating expenses were predominantly driven by lower expenses associated with our annual incentive plan.

Adjusted Earnings Per Share for the second quarter of 2011 was $0.57 as compared to $0.44 for the same period in 2010, which represents a $0.13 or a 30 percent improvement.  This improvement was significantly higher than the increase in Adjusted EBITDA due to $10 million of lower interest expense, resulting from our debt paydown throughout 2010 and into 2011 and our 2017 Term Loan refinancing, and a lower effective tax rate, which was partially offset by higher depreciation and amortization associated with assets acquired in the Vistasolar and Novomatrix purchases.

36

Consolidated Results of Operations - Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010

	Six Months Ended
		June 30,					Increase		% Increase
(dollars in millions, except per share amounts)	2011			2010			(Decrease)		(Decrease)
Net Sales		$	1,052	$	950		$	102		11	%
Net Income (Loss) attributable to Solutia		$	133	$	(17	)	$	150		N.M.
Adjusted EBITDA (a)		$	276	$	258		$	18		7	%
Adjusted EPS (a)		$	1.06	$	0.79		$	0.27		34	%
(a)   Non-GAAP financial measure. See below for discussion and a reconciliation to GAAP measures

In the six months ended June 30, 2011, we reported net sales of $1,052 million, an 11 percent increase as compared to $950 million reported in the six months ended June 30, 2010.  The increase was driven by higher sales volumes of $50 million or 5 percent, the impact of the Vistasolar and Novomatrix acquired businesses of $43 million or 5 percent, and higher selling prices of $29 million or 3 percent and favorable currency exchange rate fluctuations of $17 million or 2 percent, partially offset by the impact of divestitures of $37 million or 4 percent.   Net income attributable to Solutia of $133 million for six months ended June 30, 2011 represents an improvement of $150 million as compared to a net a loss of $17 million as reported in the same period in 2010.  Significantly impacting results for the six months ended June 30, 2010 are after tax charges of $97 million discussed in the Summary of Events Affecting Comparability, including an $89 million charge on the write-off of deferred debt issuance costs and a prepayment penalty associated with the early extinguishment of our previous credit facility (“2014 Term Loan” and “2013 Revolver”), as compared to a net gain of $4 million for the same period in 2011.  The remaining improvement was predominately due to higher Adjusted EBITDA of $18 million, as further explained below, and lower interest expense.

Adjusted EBITDA for the first six months of 2011 was $276 million as compared to $258 million for the same period in 2010, which represents a $18 million or 7 percent increase.  The increase in Adjusted EBITDA was driven by higher revenue as discussed above, which generated $66 million of incremental Adjusted EBITDA and $14 million of lower operating expenses, partially offset by the negative impact from higher raw materials of $50 million, the divestiture of certain other rubber chemical businesses of $7 million and unfavorable currency exchange rate fluctuations of $5 million.  Lower operating expenses were predominantly driven by lower expenses associated with our annual incentive plan.

Adjusted Earnings Per Share for the first six months of 2011 was $1.06 as compared to $0.79 for the same period in 2010, which represents a $0.27 or a 34 percent increase.  This improvement was significantly higher than the increase in Adjusted EBITDA due to lower interest expense, resulting from our debt paydown throughout 2010 and into 2011 and our term debt refinancings, and a lower effective tax rate, which was partially offset by higher depreciation and amortization associated with assets acquired in the Vistasolar and Novomatrix purchases.

Outlook

Our current operating premise for the second half of the year in comparison to the first half is sales volumes into the automotive markets will rebound as the Japan related supply disruptions recover.  Second half 2011 architectural sales volumes are expected to be at a rate consistent with the second quarter while solar market sales volumes are expected to experience a modest recovery as the demand profile improves and inventory levels are reduced.  Further, a continuation of a strong Euro relative to the U.S. Dollar through the remainder of 2011, as compared to 2010, will result in higher net sales for 2011.  Finally, the divestiture of certain other rubber chemicals businesses in the first quarter 2011 is expected to reduce full year net sales as compared to 2010 by approximately $40 million.  In aggregating these premises and consistent with our past guidance, our expectation for 2011 is net sales will be within the range of $2.125 billion and $2.2 billion.

With respect to profitability raw material prices, which negatively impacted first half 2011 results by $50 million as compared to the same period in 2010, are expected to remain consistent throughout the second half 2011.  On a year-over-year basis, we expect these higher raw material prices to be more than offset by corresponding year-over-year sales volume and sales price increases.

Our incremental earnings premised in 2011 will generate additional operating cash, which will be offset by higher ex-U.S. tax payments, new product and growth related capital spending, as well as modest investments in working capital related to revenue growth.  In summary and consistent with our past guidance, we are currently anticipating generating cash from operations less capital spending in 2011 in the range of $150 million to $200 million from continuing operations.

37

Non-GAAP Financial Measures

Management’s Discussion and Analysis (“MD&A”) includes financial information prepared in accordance with U.S. generally accepted accounting principles (GAAP), as well as three other financial measures including Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per Share, that are considered “non-GAAP financial measures.”  Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.  The presentation of Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per Share are intended to supplement investors’ understanding of our operating performance.  These non-GAAP financial measures are not intended to be performance measures that should be regarded as an alternative to, or more meaningful than other GAAP measures and may not be comparable to similarly titled measures presented by other companies.

Adjusted EBITDA is defined as income from continuing operations attributable to Solutia before interest expense, loss on debt extinguishment or modification, income taxes, depreciation and amortization, certain gains and losses that affect comparability, cost overhang associated with discontinued operations and non-cash stock compensation expense.  Adjusted Earnings is defined as income from continuing operations attributable to Solutia excluding certain gains and losses, net of tax, that affect comparability.  Adjusted Earnings per Share is defined as Adjusted Earnings divided by weighted average diluted shares outstanding.  We believe Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per Share assist us in comparing our performance over various reporting periods and against our peers on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance.  Further, we believe Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per Share are useful to investors.  The compensation committee of our board of directors determines the annual incentive compensation for certain members of our management based, in part, using each of these financial measures.

See the Non-GAAP Reconciliations sections of this MD&A for reconciliations of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP.

Critical Accounting Policies and Estimates

There were no changes in the six months ended June 30, 2011 with respect to our critical accounting policies, as presented in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2010 Form 10-K filed on February 25, 2011.

Results of Operations - Second Quarter 2011 Compared to Second Quarter 2010

Advanced Interlayers

(dollars in millions)	Three Months Ended
	June 30,				Increase		% Increase
	2011		2010		(Decrease)		(Decrease)
Net Sales	$	232	$	208	$	24		12	%
Segment Profit	$	52	$	43	$	9		21	%
Charges included in Segment Profit	$	-	$	-

The increase in net sales in the second quarter 2011 resulted from higher average selling prices of $6 million or 3 percent, higher sales volumes of $6 million or 3 percent, including the impact of the Vistasolar acquisition which was completed on June 1, 2010 and favorable currency exchange rate fluctuations of $12 million or 6 percent. The increase in selling prices is predominantly the result of price increases in 2011 annual customer contracts related to our SAFLEX® plastic interlayer.  Higher sales volumes were most significantly influenced by sales on VISTASOLAR® EVA encapsulants being realized for a full three months in the second quarter 2011 as compared to one month in the second quarter 2010, as partially offset by a decrease in sales volumes on specialty intermediates.  Sales volumes on SAFLEX® plastic interlayer were effectively unchanged as increases in photovoltaic and architectural markets, particularly in Europe, were offset by lower sales volumes in automotive markets. The favorable currency impact was driven most notably by the increased strength of the Euro versus the U.S. dollar, in comparison to the same period in 2010, due to our strong market positions in Europe.

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The increase in segment profit in the second quarter 2011 resulted primarily from higher net sales, as discussed above, improved fixed cost absorption and lower expenses associated with our annual incentive plan, partially offset by higher raw material costs of $7 million.

Performance Films

(dollars in millions)	Three Months Ended
	June 30,					Increase		% Increase
	2011		2010			(Decrease)		(Decrease)
Net Sales	$	86	$	73		$	13		18	%
Segment Profit	$	19	$	18		$	1		6	%
Charges included in Segment Profit	$	-	$	(1	)

The increase in net sales in the second quarter 2011 resulted from higher sales volumes of $12 million or 17 percent, including the impact of the Novomatrix acquisition which was completed on April 30, 2010, and increased selling prices of $1 million or 1 percent.  Higher sales volumes were experienced on window films, particularly in the Asia Pacific region driven by our acquisition of Novomatrix as well as improved demand in the automotive market, partially offset by a decrease in sales volumes on precision coated films.

The increase in segment profit in the second quarter 2011 resulted primarily from higher net sales, as discussed above, partially offset by higher manufacturing costs and lower fixed cost absorption.

Technical Specialties

(dollars in millions)	Three Months Ended
	June 30,					Increase		% Increase
	2011		2010			(Decrease)		(Decrease)
Net Sales	$	225	$	217		$	8		4	%
Segment Profit	$	82	$	80		$	2		3	%
Charges included in Segment Profit	$	-	$	(4	)

The increase in net sales in the second quarter 2011 resulted from higher average selling prices of $15 million or 7 percent, higher sales volumes of $2 million or 1 percent and favorable currency exchange rate fluctuations of $7 million or 3 percent, partially offset by the divestiture of various other rubber chemical businesses of $16 million or 7 percent. Higher average selling prices were experienced across all of our products in response to a strong demand profile coupled with higher raw material costs. Higher sales volumes were experienced by THERMINOL® heat transfer fluids due to increased demand in the European market, partially offset by lower sales volumes on CRYSTEX® insoluble sulphur due to lower demand in the Asia Pacific market. The favorable currency impact was driven most notably by the increased strength of the Euro versus the U.S. dollar, in comparison to the same period in 2010, due to our strong market positions in Europe.

The increase in segment profit in comparison to the second quarter 2010 resulted primarily from higher net sales, as discussed above, lower charges as discussed in the Summary of Events Affecting Comparability and lower compensation expense related to our annual incentive plan, largely offset by higher raw material costs of $11 million, increased manufacturing costs, and lower fixed cost absorption.

39

Unallocated and Other

(dollars in millions)	Three Months Ended
	June 30,						Increase			% Increase
Components of Unallocated and Other	2011			2010			(Decrease)			(Decrease)
Corporate Expenses		(11	)		(15	)
Share-based Compensation Expense		(4	)		(5	)
Other Unallocated (Expense) Gain, net		(2	)		6
Unallocated and Other results	$	(17	)	$	(14	)	$	(3	)		(21	) %
Net (Charges) Gains Included in Unallocated and Other
Corporate Expenses		-			(1	)
Other Unallocated (Expense) Gain, net		(1	)		5
Net (Charges) Gains Included in Unallocated and Other results	$	(1	)	$	4		$	(5	)		(125	) %

Net losses on Unallocated and Other results increased $3 million for the second quarter 2011 as compared to the same period in 2010 primarily due to higher charges as described in the Summary of Events Affecting Comparability.  After taking into consideration the higher charges in 2011, corporate expenses decreased in 2011 due predominately to lower compensation expense, largely related to our annual incentive plan, and the positive effects of previously completed restructuring events.  Other unallocated expenses, net increased after taking into consideration the higher charges in 2011 due mainly to the absence of foreign currency gains recorded during 2010, partially offset by a decrease in net charges on environmental remediation projects.

Interest Expense

(dollars in millions)	Three Months Ended
	June 30,				Increase			% Increase
	2011		2010		(Decrease)			(Decrease)
Interest expense	$	26	$	36	$	(10	)		(28	) %

Interest expense decreased in the second quarter 2011, as compared to the same period in 2010, predominately due to lower expense related to our interest rate swap contracts combined with a lower average debt balance and a lower average interest rate.  We recognized losses of $2 million on our interest rate swap contracts in the second quarter 2011, as compared to $10 million in the same period in 2010.  The 2010 losses relate primarily to mark-to-market changes while the 2011 losses are comprised of losses that were reclassified out of Other Comprehensive Loss into earnings.  During the quarter ended June 30, 2011, our average debt balance was $1.4 billion compared to $1.5 billion for the same period in 2010.  Our average interest rate dropped from 6.4 percent for the quarter ended June 30, 2010 to 6.0 percent for the same period in 2011 as a result of the modification to our debt facility as discussed in Note 9 in the accompanying consolidated financial statements.

Income Tax Expense

(dollars in millions)	Three Months Ended
	June 30,				Increase		% Increase
	2011		2010		(Decrease)		(Decrease)
Income tax expense	$	11	$	9	$	2		22	%

Income tax expense increased in the second quarter 2011 compared to the same period in 2010 due predominantly to a decrease in discrete tax benefits recognized in 2011, partially offset by a change in the mix of income and losses in the tax jurisdictions in which we operate.  Discrete tax benefits decreased to $2 million in the second quarter 2011 as compared to $7 million for the same period in 2010.  After consideration of discrete items, income tax expense decreased $3 million despite an increase in Income from Continuing Operations Before Income Tax Expense of $18 million.  The decrease in income tax expense is due to a significant proportion of second quarter 2011 earnings realized in the U.S., where we do not recognize income tax expense, as compared to all second quarter 2010 earnings realized in ex-U.S. tax jurisdictions, where we are subject to income tax expense.  We do not recognize income tax expense on U.S. earnings nor do we recognize an income tax benefit on U.S. losses because we have a U.S. net operating loss tax asset against which we have a full valuation allowance.

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Discontinued Operations

(dollars in millions)	Three Months Ended
	June 30,					Increase		% Increase
	2011		2010			(Decrease)		(Decrease)
Integrated Nylon business		-		17
Primary Accelerators business		-		(30	)
Loss from Discontinued Operations, net of tax	$	-	$	(13	)	$	13		100	%

Loss from discontinued operations consists of the results of Primary Accelerators and Integrated Nylon.  The improvement is due to the absence of operations of Primary Accelerators in 2011.  In the second quarter 2010, we recognized a $17 gain on the settlement of contingent liabilities associated with the Alvin, Texas plant included in the sale of our Integrated Nylon business, which was completed on June 1, 2009.

Results of Operations - Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010

Advanced Interlayers

(dollars in millions)	Six Months Ended
	June 30,				Increase		% Increase
	2011		2010		(Decrease)		(Decrease)
Net Sales	$	445	$	394	$	51		13	%
Segment Profit	$	101	$	91	$	10		11	%
Charges included in Segment Profit	$	-	$	-

The increase in net sales for the first six months of 2011 resulted from higher sales volumes of $33 million or 8 percent, including the impact of the Vistasolar acquisition, which was completed on June 1, 2010, higher average selling prices of $8 million or 2 percent and favorable currency exchange rate fluctuations of $10 million or 3 percent. Higher sales volumes were most significantly influenced by sales of VISTASOLAR® EVA encapsulants included for a full six months of 2011 as compared to one month for the same period in 2010, combined with higher sales volumes realized by our SAFLEX® plastic interlayer in the architectural and photovoltaic markets, particularly in Europe.  The increase in selling prices is predominantly the result of price increases on 2011 annual customer contracts related to our SAFLEX® plastic interlayer.  The favorable currency impact was driven most notably by the increased strength of the Euro versus the U.S. dollar, in comparison to the same period in 2010, due to our strong market positions in Europe.

The increase in segment profit for the first six months of 2011 resulted primarily from higher net sales, as discussed above, lower compensation expense related to our annual incentive plan and improved fixed cost absorption, partially offset by higher raw material costs of $19 million.

Performance Films

(dollars in millions)	Six Months Ended
	June 30,					Increase		% Increase
	2011		2010			(Decrease)		(Decrease)
Net Sales	$	162	$	125		$	37		30	%
Segment Profit	$	38	$	27		$	11		41	%
Charges included in Segment Profit	$	-	$	(2	)

The increase in net sales for the first six months of 2011 resulted from higher sales volumes of $36 million or 29 percent, including the impact of the Novomatrix acquisition, which was completed on April 30, 2010, and increased selling prices of $1 million or 1 percent.  Higher sales volumes were experienced on window films, particularly in the Asia Pacific region driven by our acquisition of Novomatrix as well as improved demand in the automotive market, partially offset by a decrease in sales volumes on precision coated films.

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The increase in segment profit in the first six months of 2011 resulted primarily from higher net sales, as discussed above, and lower charges as discussed in the Summary of Events Affecting Comparability, partially offset by higher selling and manufacturing costs.

Technical Specialties

(dollars in millions)	Six Months Ended
	June 30,					Increase		% Increase
	2011		2010			(Decrease)		(Decrease)
Net Sales	$	445	$	423		$	22		5	%
Segment Profit	$	180	$	157		$	23		15	%
Gains (Charges) included in Segment Profit	$	17	$	(9	)

The increase in net sales for the first six months of 2011 resulted from higher sales volumes of $24 million or 6 percent, higher average selling prices of $20 million or 5 percent and favorable currency exchange rate fluctuations of $7 million or 1 percent, as partially offset by the divestiture of various other rubber chemical businesses of $29 million or 7 percent. Higher sales volumes were experienced most significantly by THERMINOL® heat transfer fluids, predominantly within the European and Asia Pacific regions, and CRYSTEX® insoluble sulphur, where a decrease in sales volumes within the Asia Pacific region were more than offset by increases in all other world areas.  Higher average selling prices were experienced across all of our products except SANTOFLEX® antidegradants in response to an improved demand profile coupled with higher raw materials. The favorable currency impact was driven most notably by the increased strength of the Euro versus the U.S. dollar, in comparison to the same period in 2010, due to our strong market positions in Europe.

The increase in segment profit in the first six months of 2011 resulted primarily from higher net sales, as discussed above, higher gains as discussed in the Summary of Events Affecting Comparability and lower compensation expense related to our annual incentive plan, partially offset by higher raw material costs of $31 million and lower fixed cost absorption.

Unallocated and Other

(dollars in millions)	Six Months Ended
	June 30,						Increase			% Increase
Components of Unallocated and Other	2011			2010			(Decrease)			(Decrease)
Other Operations Segment Profit (Loss)	$	-		$	1
Corporate Expenses		(26	)		(30	)
Share-based Compensation Expense		(9	)		(9	)
Other Unallocated Expense, net		(13	)		(2	)
Unallocated and Other results	$	(48	)	$	(40	)	$	(8	)		(20	) %
Net Charges Included in Unallocated and Other
Corporate Expenses		(4	)		(1	)
Other Unallocated Expense, net		(9	)		-
Net Charges Included in Unallocated and Other results	$	(13	)	$	(1	)	$	(12	)		N.M	.

Net losses on Unallocated and Other results increased $8 million for the first six months of 2011 as compared to the same period in 2010 primarily due to higher charges as described in the Summary of Events Affecting Comparability.  After taking into consideration the higher charges in 2011, corporate expenses decreased in 2011 due predominately to lower compensation expense, largely related to our annual incentive plan, and the positive effects of previously completed restructuring events.  Other unallocated expense, net increased, after taking into consideration the higher charges in 2011, due to the absence of foreign currency gains recorded in 2010, partially offset by decreased net charges related to environmental remediation projects.

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Interest Expense

(dollars in millions)	Six Months Ended
	June 30,				Increase			% Increase
	2011		2010		(Decrease)			(Decrease)
Interest expense	$	54	$	74	$	(20	)		(27	) %

Interest expense decreased for the six months ended June 30, 2011, as compared to the same period in 2010, predominantly due to lower expense related to our interest swap contracts combined with a lower average debt balance and a lower average interest rate.  We recognized losses of $4 million on our interest rate swap contracts for the first six months of 2011 as compared to $16 million for the same period in 2010.  The 2010 losses relate primarily to mark-to-market changes while the 2011 losses are comprised of losses that were reclassified out of Other Comprehensive Loss into earnings.  For the six months ended June 30, 2011, our average debt balance was $1.4 billion compared to $1.5 billion for the same period in 2010.  Our average interest rate dropped from 6.9 percent for the six months ended June 30, 2010 to 6.1 percent for the same period in 2011 as a result of the restructurings and modifications to our debt facility as discussed in Note 9 in the accompanying consolidated financial statements.

Loss on Debt Extinguishment or Modification

(dollars in millions)	Six Months Ended
	June 30,				Increase			% Increase
	2011		2010		(Decrease)			(Decrease)
Loss on debt extinguishment or modification	$	2	$	89	$	(87	)		(98	) %

The decrease in the loss on debt extinguishment or modification for the first six months of 2011 is the result of the early extinguishment of our 2014 Term Loan and 2013 Revolver in 2010 as compared to the modification of our 2017 Term Loan in 2011, as discussed in the Summary of Events Affecting Comparability. As a result of the early retirement of our 2014 Term Loan and 2013 Revolver in 2010, we incurred a $9 million prepayment penalty and an $80 million non-cash charge related to the write-off of deferred debt issuance costs related to the facilities while we incurred $2 million of fees related to the modification of the 2017 Term Loan in 2011.

Income Tax Expense

(dollars in millions)	Six Months Ended
	June 30,				Increase		% Increase
	2011		2010		(Decrease)		(Decrease)
Income tax expense	$	19	$	19	$	-		-	%

Income tax expense remained unchanged for the six months ended 2011, as compared to the same period in 2010 due predominantly to a change in the mix of income and losses in the tax jurisdictions in which we operate.  A significant proportion of our 2011 earnings were realized in the U.S., where we do not recognize income tax expense, as compared to all of our 2010 earnings were realized in ex-U.S. tax jurisdictions, where we are subject to income tax expense.  Most significantly affecting the mix, and as more fully discussed in the Summary of Events Affecting Comparability, we recognized $101 million of restructuring and other charges in 2010, including an $89 million charge related to the early extinguishment of a portion of our debt, with the majority of these charges being recorded as an increase to losses experienced in the U.S.  We do not recognize income tax expense on U.S. earnings nor do we recognize an income tax benefit on U.S. losses because we have a U.S. net operating loss tax asset against which we have a full valuation allowance.  

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Discontinued Operations

(dollars in millions)	Six Months Ended
	June 30,					Increase		% Increase
	2011		2010			(Decrease)		(Decrease)
Integrated Nylon business		-		17
Primary Accelerators business		-		(32	)
Loss from Discontinued Operations, net of tax	$	-	$	(15	)	$	15		100	%

Loss from discontinued operations consists of the results of Primary Accelerators and Integrated Nylon.  The improvement is due to the absence of operations of Primary Accelerators in 2011.  In the second quarter 2010, we recognized a $17 gain on the settlement of contingent liabilities associated with the Alvin, Texas plant included in the sale of our Integrated Nylon business which was completed on June 1, 2009.

Financial Condition and Liquidity

As of June 30, 2011, our total liquidity was $447 million which was comprised of $278 million available under our $300 million revolving credit facility (“2015 Revolver”) and $169 million in cash and cash equivalents.  As of June 30, 2011, we had no draws against our 2015 Revolver but availability was reduced by letters of credit of $22 million.

During the second quarter 2011, we made voluntary prepayments of $25 million on our 2017 Term Loan.  For the remainder of 2011, our anticipated use of cash includes fulfillment of our interest, pension, environmental, restructuring and tax obligations, in addition to certain capital expenditures for innovative initiatives, capacity expansion and productivity enhancement and for maintenance and safety requirements, as well as any voluntary debt reductions.  Further, to the extent it is necessary to fund certain seasonal demands of our operations and to support revenue growth, an additional modest use of cash may be needed for working capital.  New sources of liquidity may include additional lines of credit, financing other assets, customer receivables and/or asset sales, all of which are allowable, with certain limitations, under our existing Credit Facility.

In summary, we expect that our cash on hand, coupled with future cash flows from operations and other sources of liquidity, including our 2015 Revolver, will provide sufficient liquidity to allow us to meet our projected cash requirements.

Debt Covenants

Our 2015 Revolver, 2017 Term Loan, $400 million of senior unsecured notes due 2017 and $300 million of senior unsecured notes due 2020 (“2020 Notes”) include a number of customary covenants and events of default that restrict our ability to, among other things, incur additional debt; make certain investments; pay dividends; repurchase stock; sell certain assets or merge with or into other companies and enter into new lines of business.  The 2015 Revolver and 2017 Term Loan also include the maintenance of a maximum senior secured indebtedness financial covenant, as defined by our Credit Facility.  We were in compliance with all applicable covenants at June 30, 2011.  See Note 9 to the accompanying consolidated financial statements for additional information.

Cash Flows - Continuing Operations

Our cash flows from continuing operations attributable to operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows, are summarized in the following table:

	Six Months Ended
Cash Flow Summary - Continuing Operations	June 30,						Increase
(dollars in millions)	2011			2010			(Decrease)
Cash provided by operating activities	$	97		$	106		$	(9	)
Cash used in investing activities		(15	)		(385	)		370
Cash provided by (used in) financing activities		(104	)		213			(317	)
Effect of exchange rate changes on cash		4			(25	)		29
Net change in cash for period attributable to continuing operations	$	(18	)	$	(91	)	$	73

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Operating activities:  The decrease in cash provided by operating activities is primarily attributable to higher payments on our annual incentive plan, higher seasonally driven working capital requirements, higher interest payments and higher tax payments due to an increase in ex-U.S. earnings, as partially offset by higher operating income, lower payments on our postretirement obligations, and lower restructuring payments.  In the first six months of 2011, we paid the remaining portion of our annual incentive plan to our employees, which were earned throughout 2010.  There were no similar payments in the first six months of 2010 as the prior year incentive plan was temporarily suspended.  Higher interest payments for the six months of 2011 as compared to the same period in 2010 are due to the timing of scheduled interest payments associated with the 2020 Notes, which were issued in 2010, along with cash payments associated with our interest rate swap agreements that were not operational in the first quarter 2010.  In the first six months of 2011, we made $13 million in required contributions to our frozen U.S. pension plans, while for the same period in 2010 we contributed $50 million to these plans, which fully satisfied our minimum funding requirement for 2010 and a portion of the 2011 minimum funding requirements.  Finally, excluding the effects of foreign currency exchange rates, cash required for working capital was $12 million higher in the first six months of 2011 as compared to the same period in 2010 on significantly higher sales.

Investing activities:  Cash used investing activities was $15 million in the first six months of 2011 as compared to a usage of $385 million for the same period in 2010 as lower acquisition related payments of $366 million, combined with the receipt of $29 million in proceeds from the sale of certain businesses and select assets, were partially offset by an increase in capital expenditures.  As discussed in Note 2 to the Consolidated Financial Statements, in the second quarter 2010, we completed the acquisition of Novomatrix and Vistasolar for $73 million and $297 million, respectively, excluding subsequent working capital adjustments. Higher capital expenditures in 2011 are predominantly associated with our previously announced expansions in Suzhou, China and Ghent Belgium.

Financing activities:  Cash used by financing activities was $104 million in the first six months of 2011 as compared to cash provided by financing activities of $213 million for the same period in 2010.  During the first six months of 2011, we made $102 million in payments on our 2017 Term Loan, of which $98 was voluntary.  For the same period of 2010, we completed the refinancing of our 2014 Term Loan and 2013 Revolver, along with the issuance of the 2020 Notes, which resulted in net proceeds of $234 million, after a principal reduction in our term debt of $30 million and deducting $34 million in debt issuance costs and a prepayment penalty.  These net proceeds were used to partially fund our acquisition of Novomatrix and Vistasolar.  Also in the first six months of 2010, we used $16 million of cash provided by operations to fully repay all of our short-term borrowings.

Working Capital – Continuing Operations

Working capital used for continuing operations is summarized as follows:

Working Capital - Continuing Operations	June 30,		December 31,			Increase
(dollars in millions)	2011		2010			(Decrease)
Cash and cash equivalents	$	169	$	191
Trade receivables, net		264		228
Inventories		328		275
Other current assets		103		102
Total current assets	$	864	$	796
Accounts Payable	$	194	$	173
Accrued Liabilities		220		235
Total current liabilities	$	414	$	408
Working Capital	$	450	$	388	$	62

Our working capital used for continuing operations increased $62 million in the first six months of 2011 primarily due to seasonally driven higher trade receivables and inventory and the effects of a weaker U.S. dollar versus relevant foreign currencies, as partially offset by seasonally driven higher accounts payable and a net decrease in cash and cash equivalents, as previously discussed.

From time to time we sell trade receivables without recourse to third parties.  These trade receivables were removed from our Consolidated Statement of Financial Position and reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows at the time of sale to the third party.  Uncollected trade receivables sold under these arrangements and removed from the Consolidated Statement of Financial Position were $8 million and $9 million at June 30, 2011 and December 31, 2010, respectively.  The average monthly amounts of trade receivables sold were $7 million for the six months ended June 30, 2011.

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Cash Flows – Discontinued Operations

	Six Months Ended
Cash Flow Summary - Discontinued Operations	June 30,						Increase
(dollars in millions)	2011			2010			(Decrease)
Cash used in operating activities	$	(4	)	$	(23	)	$	19
Cash used in investing activities		-			(2	)		2
Net change in cash for period attributable to discontinued operations	$	(4	)	$	(25	)	$	21

Cash used in discontinued operations for the six months ended June 30, 2011 is comprised of $7 million in exit related payments associated with our Primary Accelerators shutdown, which ceased manufacturing in the third quarter 2010, partially offset by $3 million in cash proceeds from the monetization of working capital.  For the same period in 2010, cash used by discontinued operations of $23 million is comprised primarily of $19 million in settlement payments related to contingent liabilities associated with the sale of Integrated Nylon and $5 million in operating costs of Primary Accelerators.

Capital Expenditures

Capital expenditures are projected to be in the range of $120 million to $130 million during 2011 of which $85 million to $95 million of the projected range is attributable to new products and expansion and productivity projects while the remainder is attributable to maintenance and right-to-operate projects.

Pension Funding

We sponsor several defined benefit pension plans into which we made cash contributions of $19 million in the first six months of 2011.  We expect to contribute additional cash to these pension plans in the range of $35 million to $40 million, inclusive of potential voluntary contributions, during 2011.  Actual contributions to the plans and satisfaction of these outstanding liabilities may differ and will depend on numerous variables, including future changes in actuarial assumptions, legislative changes to pension funding laws, market conditions and whether we choose to make additional voluntary contributions or to contribute our common stock rather than cash to the plans.

Supplementary Information - Second Quarter 2011 Compared to Second Quarter 2010

Summary of Events Affecting Comparability

Charges and gains recorded in the three months ended June 30, 2011 and 2010 and other events affecting comparability have been summarized and described in the table and accompanying footnotes below (dollars in millions):

2011 Events

Increase/(Decrease)	Advanced Interlayers		Performance Films		Technical Specialties		Unallocated/ Other			Consolidated
Impact on:
Selling, general and administrative expenses	$	-	$	-	$	-	$	1		$	1	(a)
Operating Income Impact	$	-	$	-	$	-	$	(1	)	$	(1	)
Income tax impact											-	(b)
After-tax Income Statement Impact										$	(1	)

(a)	Pension settlement charge related to the relocation of our European regional headquarters ($1 million pre-tax and after-tax).
(b)	Income tax impact has been provided on gains and charges in the quarter recognized at the tax rate in the jurisdiction in which they have been or will be realized.

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2010 Events

Increase/(Decrease)	Advanced Interlayers		Performance Films			Technical Specialties			Unallocated/ Other			Consolidated
Impact on:
Cost of goods sold	$	-	$	-		$	1		$	-		$	1		(a)
		-		-			3			-			3		(b)
		-		1			-			-			1		(c)
Selling, general and administrative expenses		-		-			-			1			1		(d)
		-		-			-			3			3		(e)
Operating Income Impact	$	-	$	(1	)	$	(4	)	$	(4	)	$	(9	)
Other income (loss), net		-		-			-			8			8		(f)
Pre-tax Income Statement Impact	$	-	$	(1	)	$	(4	)	$	4		$	(1	)
Income tax impact													(2	)	(g)
After-tax Income Statement Impact												$	1

(a)	Restructuring costs related to the closure of our Ruabon facility ($1 million pre-tax and after-tax).
(b)	Restructuring costs related to the closure of our Cologne facility ($3 million pre-tax and $2 million after-tax).
(c)	Inventory step-up related to the Novomatrix Acquisition ($1 million pre-tax and after-tax).
(d)	Severance and retraining costs related to the general coporate restructuring ($1 million pre-tax and after-tax).
(e)	Acquisition costs related to our agreement to purchase Vistasolar and Novomatrix ($3 million pre-tax and $2 million after-tax).
(f)	Gain on settlement of tax indemnification case ($8 million pre-tax and after-tax).
(g)	Income tax impact has been provided on gains and charges at the tax rate in the jurisdiction in which they have been or will be realized.

Non-GAAP Reconciliations

Reconciliations of our non-GAAP measures to GAAP measures are included below.  Amounts are stated in millions, except per share figures.

	Three Months Ended
	June 30,
Adjusted EBITDA	2011		2010
Net Income attributable to Solutia	$	68	$	41
Plus: Loss from Discontinued Operations, net of tax		-		13
Income from Continuing Operations attributable to Solutia	$	68	$	54
Plus:
Income tax expense	$	11	$	9
Interest expense		26		36
Depreciation and amortization		31		28
Subtotal	$	136	$	127
Plus:
Events affecting comparability (a)	$	1	$	1
Non-cash share-based compensation expense		4		5
Primary Accelerators cost overhang (b)		-		1
Adjusted EBITDA	$	141	$	134

(a)	See table of Events Affecting Comparability.
(b)	Costs incurred related to the shutdown of our Primary Accelerators business that is not reflective of costs of the ongoing operations.

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	Three Months Ended
	June 30,
Adjusted Earnings and Adjusted EPS	2011		2010
Income from Continuing Operations attributable to Solutia	$	68	$	54
Plus: Events affecting comparability, net of tax (a)		1		(1	)
Adjusted Earnings	$	69	$	53
Weighted average diluted shares outstanding		121.5		119.9
Adjusted Earnings per Share	$	0.57	$	0.44
(a) See table of Events Affecting Comparability.

Supplementary Information - Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010

Summary of Events Affecting Comparability

Charges and gains recorded in the six months ended June 30, 2011 and 2010 and other events affecting comparability have been summarized and described in the table and accompanying footnotes below (dollars in millions):

2011 Events

Increase/(Decrease)	Advanced Interlayers		Performance Films		Technical Specialties			Unallocated/ Other			Consolidated
Impact on:
Selling, general and administrative expenses	$	-	$	-	$	-		$	5		$	5		(a)
Other operating income		-		-		-			8			8		(a)
		-		-		(17	)		-			(17	)	(b)
Operating Income Impact	$	-	$	-	$	17		$	(13	)	$	4
Loss on debt extinguishment or modification		-		-		-			(2	)		(2	)	(c)
Pre-tax Income Statement Impact	$	-	$	-	$	17		$	(15	)	$	2
Income tax impact												(2	)	(d)
After-tax Income Statement Impact											$	4

(a)	Severance, pension settlement and other charges related to the relocation of our European regional headquarters ($13 million pre-tax and $9 million after-tax).
(b)	Gain on certain other rubber chemicals divestitures ($17 million pre-tax and $15 million after-tax).
(c)	Charges related to the modification of our 2017 Term Loan ($2 million pre-tax and after-tax).
(d)	Income tax impact has been provided on gains and charges in the quarter recognized at the tax rate in the jurisdiction in which they have been or will be realized.

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2010 Events

Increase/(Decrease)	Advanced Interlayers		Performance Films			Technical Specialties			Unallocated/ Other			Consolidated
Impact on:
Cost of goods sold	$	-	$	1		$	-		$	-		$	1		(a)
		-		-			2			-			2		(b)
				-			5						5		(c)
		-		1			-			-			1		(d)
Selling, general and administrative      expenses		-		-			1			2			3		(a)
		-		-			1			-			1		(c)
		-		-			-			7			7		(e)
Operating Income Impact	$	-	$	(2	)	$	(9	)	$	(9	)	$	(20	)
Other income (loss), net		-		-			-			8			8		(f)
Loss on debt extinguishment		-		-			-			(89	)		(89	)	(g)
Pre-tax Income Statement Impact	$	-	$	(2	)	$	(9	)	$	(90	)	$	(101	)
Income tax impact													(4	)	(h)
After-tax Income Statement Impact												$	(97	)

(a)	Severance, pension settlement and retraining costs related to the general corporate restructuring ($4 million pre-tax and after-tax).
(b)	Restructuring costs related to the closure of our Ruabon facility ($2 million pre-tax and after-tax).
(c)	Restructuring costs related to the closure of our Cologne facility ($6 million pre-tax and $4 million after-tax).
(d)	Inventory set-up related to the Novomatrix Acquisition ($1 million pre-tax and after- tax).
(e)	Acquisition costs related to our agreement to purchase Vistasolar and Novomatrix ($7 million pre-tax and $6 million after-tax).
(f)	Gain on settlement of tax indemnification case ($8 million pre-tax and after-tax).
(g)	Charges related to the early extinguishment of our 2014 Term Loan and 2013 Revolver ($89 million pre-tax and $88 million after-tax).
(h)	Income tax impact has been provided on gains and charges at the tax rate in the jurisdiction in which they have been or will be realized.

Non-GAAP Reconciliations

Reconciliations of our non-GAAP measures to GAAP measures are included below.  Amounts are stated in millions except for per share data.

49

		Six Months Ended
		June 30,
Adjusted EBITDA		2011		2010
Net Income (Loss) attributable to Solutia	$	133	$	(17)
Plus: Loss from Discontinued Operations, net of tax		-		15
Income (Loss) from Continuing Operations attributable to Solutia	$	133	$	(2)
Plus:
Income tax expense	$	19	$	19
Interest expense		54		74
Loss on debt extinguishment or modification		2		89
Depreciation and amortization		63		55
Subtotal	$	271	$	235
Plus:
Events affecting comparability (a)	$	(4)	$	12
Non-cash share-based compensation expense		9		9
Primary Accelerators cost overhang (b)		-		2
Adjusted EBITDA	$	276	$	258
(a)   See table of Events Affecting Comparability.
(b)   Costs incurred related to the shutdown of our Primary Accelerators business that is not reflective of costs of the ongoing operations.

		Six Months Ended
		June 30,
Adjusted Earnings and Adjusted EPS		2011		2010
Income (Loss) from Continuing Operations attributable to Solutia	$	133	$	(2)
Plus: Events affecting comparability, net of tax (a)		(4)		97
Adjusted Earnings	$	129	$	95
Weighted average diluted shares outstanding		121.3		119.7	(b)
Adjusted Earnings per Share	$	1.06	$	0.79

(a)	See table of Events Affecting Comparability.
(b)	1.1 million shares for the six months ended June 30, 2010 were considered dilutive for purposes of the adjusted earnings per share calculation as adjusted operations results in income.

Contingencies

See Note 8 to the accompanying consolidated financial statements for a summary of our contingencies as of June 30, 2011.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FACTORS

There have been no material changes in market risk exposures during the six months ended June 30, 2011 that affect the disclosures presented in the information appearing under “Derivative Financial Instruments” as presented in our 2010 Form 10-K.

Item 4.  CONTROLS AND PROCEDURES

During the period covered by this Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)).  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures are effective.  Further, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarterly period ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

50

PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Our 2010 Form 10-K describes a purported class action lawsuit filed in the Circuit Court of Putnam County, West Virginia against Flexsys, our 100 percent owned subsidiary, Pharmacia, Monsanto and Akzo Nobel (Solutia was not a named defendant) alleging exposure to dioxin from Flexsys’ Nitro, West Virginia facility, which is now closed.  On May 27, 2011, the West Virginia circuit court entered a summary judgment in favor of Flexsys in the class action litigation and dismissed Flexsys with prejudice from the case.  Specifically, the court held that plaintiffs had presented no evidence of contamination or distribution of dioxin by Flexsys during its ownership of the Nitro facility.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Our Credit Facility and our indentures for the 2017 and 2020 Notes include restrictive covenants that limit our ability to repurchase stock and pay dividends.

(c ) Purchases of Equity Securities by the Issuer

Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value (in millions) that May Yet Be Purchased Under the Plans or Programs
April 1-30, 2011		-	$	-		-	$	-
May 1-31, 2011		217	$	23.44		-	$	-
June 1-30, 2011		129	$	23.02		-	$	-
Total		346	$	23.28		-	$	-

(1)	Shares surrendered to the Company by an employee to satisfy individual tax withholding obligations upon vesting of previously issued shares of restricted common stock.  Shares surrendered are held in treasury.
(2)	Average price paid per share reflects the closing price of Solutia common stock on the business date the shares were surrendered by the employee stockholder to satisfy individual tax withholding obligations upon vesting of restricted common stock.

ITEM 5.  OTHER INFORMATION

ITEM 6.  EXHIBITS

See the Exhibit Index at 53 of this report.

51

SIGNATURE

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.
	(Registrant)
By:	/s/Timothy J. Spihlman
	Timothy J. Spihlman
	(Vice President and Controller)
	(On behalf of the Registrant and as
	Principal Accounting Officer

Dated: July 28, 2011

52

EXHIBIT INDEX

These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.

EXHIBIT NUMBER	DESCRIPTION
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Label Linkbase Document
101.PRE	XBRL Taxonomy Presentation Linkbase Document

53

EX-31.1

EXHIBIT 31.1

Certification

I, Jeffry N. Quinn, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Solutia Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: July 28, 2011

By:	/s/Jeffry N. Quinn
	Jeffry N. Quinn
	President, Chief Executive Officer
	and Chairman of the Board

EX-31.2

EXHIBIT 31.2

Certification

I, James M. Sullivan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Solutia Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: July 28, 2011

By:	/s/James M. Sullivan
	James M. Sullivan
	Executive Vice President
	and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Jeffry N. Quinn, Chief Executive Officer of Solutia Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

(1)	the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 28, 2011

By:	/s/Jeffry N. Quinn
	Jeffry N. Quinn
	President, Chief Executive Officer
	and Chairman of the Board

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Solutia Inc. and will be retained by Solutia Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, James M. Sullivan, Chief Financial Officer of Solutia Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

(1)	the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 28, 2011

By:	/s/James M. Sullivan
	James M. Sullivan
	Executive Vice President
	and Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Solutia Inc. and will be retained by Solutia Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML



Document And Entity Information	6 Months Ended
	Jun. 30, 2011
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Entity Registrant Name	SOLUTIA INC
Entity Central Index Key	0001043382
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	122,309,180

XML



Share-Based Compensation

6 Months Ended

Jun. 30, 2011

Share-Based Compensation

Share-Based Compensation

3.  Share-Based Compensation

Stock Options

We granted options to purchase a total of  856,705 shares of common stock to eligible employees during the six months endedJune 30, 2011 under our 2007 Management Long-Term Incentive Plan ("2007 Management Plan").  The options granted (i) have an exercise price equal to the quoted market price of the common stock on the grant date, (ii) become exercisable in four equal installments on the first, second, third and fourth anniversaries of the grant date, subject to the employee's continued employment and (iii) expire on the tenth anniversary of the grant date.  We did not grant any options under our 2007 Non-Employee Director Stock Compensation Plan ("2007 Director Plan") during the six months ended June 30, 2011.

We determine the fair value of stock options at the grant date using a Black-Scholes model, which requires us to make several assumptions including risk-free interest rate, expected dividends and volatility.  The risk-free rate is based on the U.S. Treasury yield curve in effect for the expected term of the options at the time of grant.  The dividend yield on our common stock is assumed to be zero since we do not pay dividends and have no current plans to do so.  Due to our emergence from bankruptcy in 2008, our historical volatility data and employee stock option exercise patterns were not considered in determining the volatility data and expected life assumptions.  Instead, volatility assumptions were based on (i) historical volatilities of the stock of comparable chemical companies whose shares are traded using daily stock price returns over a term equivalent to the expected term of the options and (ii) implied volatility.  The expected life of an option was determined based on a simplified assumption that the option will be exercised evenly from the time it becomes exercisable to expiration.

The weighted average fair value of options granted during the six months ended June 30, 2011 was determined based on the following weighted average assumptions:

	June 30, 2011
Expected volatility		37.83	%
Expected term (in years)		6.3
Risk-free rate		2.89	%
Weighted average grant date fair value	$	9.76

A summary of stock option information as of June 30, 2011 is as follows:

Options		Weighted-Average Exercise Price			Weighted-Average Remaining Contractual Life		Aggregate Intrinsic Value (a)
Vested or Expected to Vest at June 30, 2011	3,138,881		$	18.55		8.0		$	14
Exercisable at June 30, 2011	1,744,506		$	17.25		6.9		$	10

 (a) Intrinsic value for stock options is calculated based on the difference between the exercise price of the underlying awards and the quoted market price of our common stock as of the reporting date.

During each of the three and six months ended June 30, 2011 and 2010, we recognized $1 and $2 of compensation expense related to our stock options, respectively.  Pre-tax unrecognized compensation expense for stock options, net of estimated forfeitures, was $11 as of June 30, 2011 which will be recognized as expense over a remaining weighted-average period of 2 years.

Restricted Stock Awards

We granted  415,399 shares of restricted stock awards with a weighted average grant date fair value of $25.39 per share to certain employees under our 2007 Management Plan during the six months ended June 30, 2011.  Half of the 2007 Management Plan shares vest upon completion of a service condition and the remaining half of the shares vest based upon the attainment of certain performance and market conditions ("Performance Shares"). The service condition shares vest in four equal installments on the first, second, third and fourth anniversaries of the grant date and the Performance Shares vest in 2014 if attainment of the performance and market conditions is achieved.  The actual vesting of the Performance Shares could range from zero to 175 percent of the targeted number of shares depending upon actual performance.

We granted  25,048 shares of restricted stock awards as an annual equity retainer with a weighted average grant date fair value of $24.41 per share to our non-employee directors under the 2007 Director Plan during the six months ended June 30, 2011.  The shares vest in three equal installments, with the first installment vesting as of the date of the grant and the remaining vesting equally on the first and second anniversary of the grant date.

During the three and six months ended June 30, 2011, we recognized $3 and $7 of compensation expense, respectively, related to our restricted stock awards.  For the three and six months ended June 30, 2010 we recognized $4 and $7 of compensation expense related to our restricted stock awards, respectively.  Pre-tax unrecognized compensation expense for restricted stock awards, net of estimated forfeitures, was $19 as of June 30, 2011 which will be recognized as expense over a remaining weighted average period of 2 years.

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Goodwill And Other Intangible Assets

6 Months Ended

Jun. 30, 2011

Goodwill And Other Intangible Assets

Goodwill And Other Intangible Assets

4. Goodwill and Other Intangible Assets

Goodwill

Goodwill by reportable segment is as follows:

	Advanced			Performance			Technical
	Interlayers			Films			Specialties			Total
Balance at December 31, 2010		$	407		$	186		$	147		$	740
Currency fluctuations			18			1			0			19
Balance at June 30, 2011		$	425		$	187		$	147		$	759

We do not have any goodwill that is deductible for tax purposes.

Identified Intangible Assets

Identified intangible assets are summarized in aggregate as follows:

	June 30, 2011											December 31, 2010
	Estimated											Estimated
	Useful	Gross							Net			Useful	Gross							Net
	Life in	Carrying			Accumulated				Carrying			Life in	Carrying			Accumulated				Carrying
	Years	Value			Amortization				Value			Years	Value			Amortization				Value
Amortizable intangible assets:
Customer relationships	13to 27		$	623		$	(69	)		$	554	13to 27		$	606		$	(56	)		$	550
Technology	5to 26			234			(35	)			199	5to 26			225			(29	)			196
Trade names	10to 25			20			(2	)			18	10to 25			20			(1	)			19
Patents	13			5			(1	)			4	13			5			(1	)			4
Other	3to 5			7			(3	)			4	3to 5			6			(1	)			5
Non-amortizable intangible assets:
Trademarks				169			0				169				164			0				164
Total identified intangible assets			$	1,058		$	(110	)		$	948			$	1,026		$	(88	)		$	938

Amortization expense for intangible assets and its allocation to cost of goods sold and selling, general and administrative expenses in the Consolidated Statement of Operations is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Cost of goods sold		$	3		$	3		$	6		$	5
Selling, general and administrative expenses			7			5			14			10
Total		$	10		$	8		$	20		$	15

We expect to recognize amortization expense for intangible assets of approximately $39 for each of the years ending December 31, 2011 through 2015.

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Detail Of Certain Balance Sheet Accounts

6 Months Ended

Jun. 30, 2011

Detail Of Certain Balance Sheet Accounts

Detail Of Certain Balance Sheet Accounts

5. Detail of Certain Balance Sheet Accounts

Components of inventories are as follows:

	June 30,		December 31,
Inventories	2011		2010
Finished goods	$	199	$	163
Goods in process		35		36
Raw materials and supplies		94		76
Inventories	$	328	$	275

On January 1, 2010 we changed our method of accounting for inventories in the United States, excluding supplies, from determining cost using the LIFO method to determining cost using the FIFO method, consistent with all of our other operations.  We believe this change is preferable as the FIFO method better reflects the current value of inventories on the Consolidated Statement of Financial Position and provides a uniform costing method across our global operations.  Prior financial statements were not retroactively adjusted due to immateriality. The cumulative effect of the change in accounting principle of $1 was recorded as an increase to cost of goods sold as of January 1, 2010.

Components of property, plant and equipment are as follows:

	June 30,			December 31,
Property, Plant and Equipment	2011			2010
Land	$	35		$	35
Leasehold improvements		11			10
Buildings		223			214
Machinery and equipment		838			796
Construction in progress		84			54
Total property, plant and equipment		1,191			1,109
Less: Accumulated depreciation		(257	)		(198	)
Net Property, Plant, and Equipment	$	934		$	911

Components of accrued liabilities are as follows:

	June 30,		December 31,
Accrued Liabilities	2011		2010
Wages and benefits	$	36	$	45
Foreign currency and interest rate derivative agreements		18		17
Restructuring reserves		6		5
Environmental remediation liabilities		32		29
Accrued income taxes payable		9		19
Accrued taxes other than income		26		27
Accrued selling expenses		14		17
Accrued interest		13		13
Other		66		63
Accrued Liabilities	$	220	$	235

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Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

6.  Income Taxes

Income Tax Expense

We recorded net income tax expense of $11 and $19 for the three and six months ended June 30, 2011, respectively, and net income tax expense of $9 and $19 for the three and six months ended June 30, 2010, respectively.  Our income tax expense is affected by changes in unrecognized tax benefits and the mix of income and losses in the tax jurisdictions in which we operate.  For both periods of 2011 and 2010, we recorded income tax expense on ex-U.S. earnings.  No income tax expense was recorded on income from U.S. operations for the three and six months ended June 30, 2011 because we have a U.S. net operating loss deferred tax asset, against which a full valuation allowance has been provided.  For the three and six months ended June 30, 2010, we experience a loss from U.S. operations but no income tax benefit was recognized as a full valuation allowance has been provided against the U.S. deferred tax assets.

Unrecognized Tax Benefits

The total amount of unrecognized tax benefits, inclusive of interest and penalties, at June 30, 2011 and December 31, 2010 was $176 and $167, respectively.  Included in the balance at June 30, 2011 and December 31, 2010 were $72 and $68, respectively, of unrecognized tax benefits that, if recognized, would impact the effective tax rate.  The increase in the amount of the unrecognized tax benefits is mainly the effect of currency exchange rate fluctuations and tax positions with respect to events in the current year offset by the reevaluation of tax positions not yet settled.

We file income tax returns in the U.S. and various states and foreign jurisdictions.  With few exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2002.  With few exceptions, we are no longer subject to foreign income tax examinations by tax authorities for years before 2006.  It is reasonably possible that within the next 12 months as a result of the resolution of federal, state and foreign examinations and appeals, and the expiration of various statutes of limitation that the unrecognized tax benefits that would affect the effective tax rate will decrease by a range of $0 to $25 and the unrecognized tax benefits that would not affect the effective tax rate will decrease by a range of $0 to $16.

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Restructuring Reserves

6 Months Ended

Jun. 30, 2011

Restructuring Reserves

Restructuring Reserves

7.  Restructuring Reserves

In an effort to maintain competitiveness across our businesses and the geographic areas in which we operate and to enhance the efficiency and cost effectiveness of our support operations, we periodically initiate certain restructuring activities which result in charges for costs associated with exit or disposal activities, severance and/or impairment of long-lived assets.  Many of these activities are associated with certain strategic divestitures or plant shut-downs executed in order to eliminate non-core products that lack a sustainable competitive advantage.  The region that has historically been most significantly impacted by these actions has been Europe.

To right-size our support structure in Europe and lower our operating costs in the region, we relocated our European regional headquarters in the second quarter 2011 from a building located in Louvain-la-Neuve, Belgium ("LLN"), which we own, to a multi-tenant building in which we lease office space in Zaventem, Belgium.  Accordingly, we have initiated a process to sell the LLN building and have reclassified this asset as held for sale.  In conjunction with this reclassification, we were required to perform an impairment test of this asset group.  For purposes of testing for impairment and using all available evidence as of March 31, 2011, we estimated the fair value of this asset group by weighting estimated sales proceeds and discounted cash flows that the asset group could be expected to generate through the time of an assumed sale using a Level 3 fair value measurement as defined by U.S. GAAP under the fair value hierarchy.  Our test concluded impairment existed on March 31, 2011 and, accordingly, we recorded a charge of $8 to other operating expense (income) to reduce the carrying value of this asset to its estimated fair value and reclassified the asset to prepaid expenses and other current assets.  Further and in addition to the above, we initiated a reduction in support personnel in this region which resulted in charges of $4 to selling, general and administrative for the six months ended June 30, 2011.  There were no charges related to this project during the second quarter.  A summary of the charges recorded to Unallocated and Other related to this restructuring action for the six months ended June 30, 2011 are as follows:

	Employment		Long-Lived
	Reductions		Assets		Total
Six Months Ended and cumulative through June 30, 2011:
Selling, general and administrative expenses	$	4	$	0	$	4
Other operating expense (income)		0		8		8
Total	$	4	$	8	$	12

A summary of all activity on the restructuring liability during the six months ended June 30, 2011 is as follows:

	Contract					Impairment of
	Termination		Employment			Long-Lived
	Payments		Reductions			Assets			Total
Balance at December 31, 2010	$	2	$	5		$	0		$	7
Charges taken		0		4			8			12
Amounts utilized		0		(4	)		0			(4	)
Non-cash reductions		0		0			(8	)		(8	)
Currency fluctuations		0		1			0			1
Balance at June 30, 2011	$	2	$	6		$	0		$	8

We expect $6 of restructuring liabilities as of June 30, 2011 to be utilized within the next twelve months.

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Commitments And Contingencies

6 Months Ended

Jun. 30, 2011

Commitments And Contingencies

Commitments And Contingencies

8.  Commitments and Contingencies

Litigation

We are a party to legal proceedings, which have arisen in the ordinary course of business and involve claims for monetary damages.  As of June 30, 2011 and December 31, 2010, we had accrued approximately $2 and $3, respectively, for legal costs to defend ourselves in legal matters.

Except for the potential effect of an unfavorable outcome with respect to our Legacy Tort Claims Litigation, it is our opinion that the aggregate of all claims and lawsuits will not have a material adverse impact on our consolidated financial statements.

Legacy Tort Claims Litigation

Pursuant to the Amended and Restated Settlement Agreement effective February 28, 2008, entered into by us and Monsanto in connection with our emergence from Chapter 11 (the "Monsanto Settlement Agreement"), Monsanto is responsible to defend and indemnify us for any Legacy Tort Claims as that term is defined in the Monsanto Settlement Agreement, while we retain responsibility for tort claims, if any, which may arise out of our conduct after our spinoff from Pharmacia, which occurred on September 1, 1997.  We or our fully owned subsidiary, Flexsys, have been named as defendants in the following actions, and have submitted the matters to Monsanto as Legacy Tort Claims.  However, to the extent these matters relate to post Solutia Spinoff conduct or such matters are not within the meaning of Legacy Tort Claims as defined in the Monsanto Settlement Agreement, we could potentially be liable.

Putnam County, West Virginia Litigation.In December 2004, a purported class action lawsuit was filed in the Circuit Court of Putnam County, West Virginia against Flexsys, Pharmacia, Monsanto and Akzo Nobel (Solutia is not a named defendant) alleging exposure to dioxin from Flexsys' Nitro, West Virginia facility, which is now closed.  The relevant production activities at the facility occurred during Pharmacia's ownership and operation of the facility and well prior to the creation of the Flexsys joint venture between Pharmacia (whose interest was subsequently transferred to us in the Solutia Spinoff) and Akzo Nobel.  The plaintiffs are seeking damages for loss of property value, medical monitoring and other equitable relief.  In May 2011, the West Virginia circuit court entered summary judgment in favor of Flexsys in the class action litigation, and dismissed Flexsys with prejudice from the case.  Specifically, the court held that plaintiffs had presented no evidence of contamination or distribution of dioxin by Flexsys during its ownership of the Nitro facility.

Beginning in February 2008, Flexsys, Monsanto, Pharmacia, Akzo Nobel and another third party were named as defendants in approximately seventy-five individual lawsuits, and Solutia was named in two individual lawsuits, filed in various state court jurisdictions by residents or former residents of Putnam County, West Virginia.  The largely identical complaints allege that the residents were exposed to potentially harmful levels of dioxin particles from the Nitro facility.  Plaintiffs did not specify the amount of their alleged damages in their complaints.  In 2009, over fifty additional nearly identical complaints were filed by individual plaintiffs in the Putnam County area, which named Solutia and Flexsys as defendants, and one additional complaint was filed in January 2011.

The claims in this matter concern alleged conduct occurring while Flexsys was a joint venture between us and Akzo Nobel, and any potential damages in these cases would be evenly apportioned between us and Akzo Nobel to the extent such claims are determined not to be Legacy Tort Claims.

Escambia County, Florida Litigation.In June 2008, a group of approximately fifty property owners and business owners in the Pensacola, Florida area filed a lawsuit in the Circuit Court for Escambia County, Florida against Monsanto, Pharmacia, Solutia and the plant manager at Solutia's former Pensacola plant, an Integrated Nylon asset that was included in the divestiture of our Integrated Nylon business.  The lawsuit, entitled John Allen, et al. v. Monsanto Company, et al., alleges that the defendants are responsible for elevated levels of PCBs in the Escambia River and Escambia Bay due to past and continuing releases of PCBs from the Pensacola plant.  The plaintiffs seek: (1) damages associated with alleged decreased property values caused by the alleged contamination and (2) remediation of the alleged contamination in the waterways.  Plaintiffs did not specify the amount of their alleged damages in their complaint.  Plaintiffs have subsequently amended their complaint twice to add additional plaintiffs to the litigation, such that approximately 150 property and business owners are now named as plaintiffs.

St. Clair County, Illinois and Related Litigation.In February 2009, a purported class action lawsuit was filed in the Circuit Court of St. Clair County, Illinois against Solutia, Pharmacia, Monsanto and two other unrelated defendants alleging the contamination of the plaintiff's property from PCBs, dioxins, furans and other hazardous substances emanating from the defendants' facilities in Sauget, Illinois (including our W.G. Krummrich site in Sauget, Illinois).  The proposed class action is comprised of residents who live within a two-mile radius of the Sauget facilities.  The plaintiffs are seeking damages for medical monitoring and the costs associated with remediation and removal of contaminants from their property.  This action is one of several lawsuits (primarily filed by the same plaintiffs' counsel) over the past year regarding alleged historical contamination from the W.G. Krummrich site.

In addition to the purported class action lawsuit, twenty additional individual lawsuits have been filed since February 2009 against the same defendants (including Solutia) comprised of claims from over one thousand individual residents of Illinois who claim they suffered illnesses and/or injuries as well as property damages as a result of the same PCBs, dioxins, furans and other hazardous substances allegedly emanating from the defendants' facilities in Sauget.  In June 2010, a group of approximately 1,200 plaintiffs also filed wrongful death claims in a lawsuit in St. Clair County arising out of alleged contamination from the defendants' facilities.  Moreover, four additional individual lawsuits comprised of claims from twelve plaintiffs were filed between January and April 2010 in Madison County, Illinois, alleging that plaintiffs suffered illnesses resulting from exposure to benzene, PCBs, dioxins, furans and other hazardous substances.  Lastly, in June 2010, a second purported class action lawsuit was filed in the Circuit Court of St. Louis City, Missouri against the same defendants alleging the contamination of the plaintiffs' property from PCBs, dioxins, furans and other hazardous substances emanating from the defendants' facilities in Sauget, Illinois and from our now-closed Queeny plant in St. Louis.  The plaintiffs are seeking damages for medical monitoring and the costs associated with remediation and removal of alleged contaminants from their property.  The proposed class members include residents exclusively within the state of Missouri.

Upon assessment of the terms of the Monsanto Settlement Agreement and other defenses available to us, we believe the probability of an unfavorable outcome to us on the Putnam County, West Virginia; Escambia County, Florida; and St. Clair County, Illinois and related litigation against us is remote and, accordingly, we have not recorded a loss contingency.  Nonetheless, if it were subsequently determined these matters are not within the meaning of Legacy Tort Claims, as defined in the Monsanto Settlement Agreement, or other defenses to us were unsuccessful, it is reasonably possible we would be liable for an amount which cannot be estimated but which could have a material adverse effect on our consolidated financial statements.

Resolution of Tax Indemnification

During the second quarter 2010, we received a favorable settlement in a tax indemnification case related to income taxes we paid on a business for periods prior to our acquisition.  The settlement resulted in an $8 gain recorded in other income (loss), net within Unallocated and Other during the three and six months ended June 30, 2010.

Environmental Liabilities

In the ordinary course of business, we are subject to numerous environmental laws and regulations covering compliance matters or imposing liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances.  We have incurred, and we may in the future incur, liabilities to investigate and clean up waste or contamination at our current facilities, properties adjacent to our current facilities or facilities operated by third parties at where we may have disposed of waste or other materials.  Under some circumstances, the scope of our liability may extend to damages to natural resources for which we have accrued $2 as of June 30, 2011 and December 31, 2010, which is exclusive of the balances noted below.  In almost all cases, our potential liability arising from historical contamination is based on operations and other events occurring at our facilities or as a result of their operation prior to the Solutia Spinoff.

Further, under terms of the Monsanto Settlement Agreement, we have agreed to share responsibility with Monsanto for the environmental remediation at certain locations outside our plant boundaries in Anniston, Alabama and Sauget, Illinois which were also incurred prior to the Solutia Spinoff (the "Shared Sites").  Under this cost-sharing arrangement, we are responsible for the funding of environmental liabilities at the Shared Sites from February 28, 2008 (the "Effective Date") up to a total of $325.  Thereafter, if needed, we and Monsanto will share responsibility equally.  From the Effective Date through June 30, 2011, we have made cash payments of $31 toward remediation of the Shared Sites and have accrued an additional $163 to be paid over the life of the Shared Sites remediation activity.

Reserves for environmental remediation that we believe to be probable and estimable are recorded appropriately as current and long-term liabilities in the Consolidated Statement of Financial Position.  These reserves include liabilities expected to be paid out within fifteen years.  The amounts charged to pre-tax earnings for environmental remediation and related charges are included in cost of goods sold and are summarized below:

	Total
Balance at December 31, 2010	$	273
Net charges taken		3
Amounts utilized		(11)
Currency fluctuations		1
Balance at June 30, 2011	$	266

	June 30, 2011		December 31, 2010
Environmental Remediation Liabilities, current	$	32	$	29
Environmental Remediation Liabilities, long-term		234		244
Total	$	266	$	273

In addition to accrued environmental liabilities, there are costs which have not met the definition of probable, and accordingly, are not recorded in the Consolidated Statement of Financial Position.  These loss contingencies are monitored regularly for a change in fact or circumstance that would require an accrual adjustment.  These matters involve significant unresolved issues, including the interpretation of applicable laws and regulations, the outcome of negotiations with regulatory authorities and alternative methods of remediation. Because of these uncertainties, the potential liability for existing environmental remediation may range up to two times the amount recorded, which would be settled through cash payment over an extended period of time.
 

Except as noted below, we believe that these matters, when ultimately resolved, which may be over an extended period of time, will not have a material adverse effect on our Consolidated Statement of Financial Position, but could have a material adverse effect on our Consolidated Statement of Operations in any given period.  Our significant sites are described in more detail below:

Anniston, Alabama.  On Aug. 4, 2003, the U.S. District Court for the Northern District of Alabama approved a Revised Partial Consent Decree, pursuant to which Pharmacia and Solutia are obligated to perform, among other things, residential cleanup work and a remedial investigation/feasibility study ("RI/FS") as a result of PCB contamination from our Anniston plant, which occurred prior to the Solutia Spinoff.  The residential cleanup of available properties was completed in 2010.  Furthermore, in 2010 the Anniston Plant Site RI/FS was approved by the United States Environmental Protection Agency ("USEPA") and we expect the Record of Decision setting out the required remedies associated with the plant to be issued within the next twelve months.  The RI/FS for the non-residential properties and the creeks/floodplain are ongoing but it is probable that some level of remediation and/or sediment removal will be required in the future.  We have accrued for this liability based upon our understanding of the level and extent of contamination in these areas, the remedial effort likely to be required by various governmental organizations and estimated costs associated with similar remediation projects.  We may recover some of our investigation and remediation costs from parties, against whom we filed a cost recovery action in July 2003 but because the eventual outcome of these proceedings is uncertain, our environmental liability at June 30, 2011 does not incorporate this potential reimbursement.  State and Federal Natural Resource Damage Trustees have asserted a claim for potential natural resource damage and advised us that they are preparing to undertake an assessment as to the nature and extent of such damages.  These Trustees have requested we consider entering into a cooperative agreement to perform a damage assessment and discussions on such an agreement are ongoing.  As of June 30, 2011, we have accrued $108 for all environmental remediation projects in the Anniston, Alabama area which represents our best estimate of the ultimate liability.  Timing of the remediation will not be established until we complete the RI/FS, a Record of Decision is issued by the United States Environmental Protection Agency ("USEPA"), and a consent decree is negotiated and entered by the court to cover the selected remediation, which will take several years.

Sauget, Illinois.  A number of industries, including our W.G. Krummrich Plant, have operated and disposed of wastes in Sauget, Illinois.  Areas of contamination from these industrial operations, which for our W.G. Krummrich Plant occurred prior to the Solutia Spinoff, have been classified as part of either the Sauget Area 1 Sites or the Sauget Area 2 Sites.  We conducted a RI/FS for the Sauget Area 1 Sites under an Administrative Order on Consent issued on January 21, 1999.  Although an extensive removal action for one of the Sauget Area 1 Sites was conducted under a Unilateral Administrative Order issued on May 31, 2000, the cost and timing of any additional required remedial actions will be established only after a Record of Decision is issued by the USEPA, and a consent decree is negotiated and entered by the court to cover the selected remediation.  We have an agreement with two other potentially responsible parties ("PRPs") to enter into an allocation proceeding upon issuance of the Record of Decision to resolve our respective shares of the liability for the Sauget Area 1 Sites.  With respect to the Sauget Area 2 Sites, we, in coordination with 19 other PRPs, are also required to conduct a RI/FS for the Sauget Area 2 Sites under an Administrative Order on Consent issued effective November 24, 2000.  We submitted the revised RI/FS report with these PRPs based on interim allocations and have agreed, upon issuance of the Record of Decision, to participate in an allocation proceeding to fully resolve each PRP's share of the liability for the investigation and remediation costs.  For each of the Sauget Area 1 and 2 Sites, we anticipate the USEPA and Illinois Environmental Protection Agency ("IEPA") to issue a Record of Decision with final action for the landfill/impoundment covers within the next two years.   However, although an interim groundwater remedy has been installed pursuant to a Unilateral Administrative Order issued on October 3, 2002, it is uncertain when the USEPA and IEPA will issue a final remedy for the groundwater operable unit.  Our ultimate exposure at these sites will depend on the final remedial actions to be taken and on the level of contribution from other PRPs.  In addition, several PRPs, including Solutia and Pharmacia, received in June 2009 from the U.S. Department of the Interior, on behalf of various federal and state natural resource trustees, a notice of intent to perform and an invitation to cooperate in a natural resource damage assessment for the Sauget Industrial Corridor.  Our best estimate of the ultimate cost of all remedial measures that will be required at the Sauget, Illinois area sites is $68 which we have accrued as of June 30, 2011.

 

W. G. Krummrich Site.  We entered into a Consent Order under the U.S. Resource Conservation and Recovery Act of 1976, as amended, effective May 3, 2000, to investigate and remediate soil and groundwater contamination from our manufacturing operations at the W.G. Krummrich Plant, which occurred prior to the Solutia Spinoff.  We conducted an extensive corrective measures study and a Final Decision was issued by the USEPA in February 2008 setting out the required corrective measures to be completed.  Due to the complexity of the contamination issues at this site, certain of the corrective measures will be performed in phases.  Required pilot testing has been completed and the design/implementation of full scale remediation systems has commenced with operation of these systems expected until at least 2015. Our best estimate of the ultimate cost of all corrective measures that will be required at the W.G. Krummrich Site is $22, which we have accrued as of June 30, 2011.

We also have accruals for remedial obligations at several of our current or former manufacturing sites which we have owned or operated since the Solutia Spinoff.  Our best estimate of the ultimate cost of all corrective measures that will be required at these sites is $68 which we have accrued as of June 30, 2011.

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Debt Obligations

6 Months Ended

Jun. 30, 2011

Debt Obligations

Debt Obligations

9.  Debt Obligations

At December 31, 2010, our senior secured credit facility ("Credit Facility") consisted of an $850 term loan maturing in March 2017 ("2017 Term Loan") and a $300 revolving credit facility maturing in 2015 ("2015 Revolver").  In the first quarter of 2011, we amended the 2017 Term Loan.  The effect of the amendment resulted in the term of the debt being extended to August 2017, a reduction in the interest rate of 100 basis points, greater strategic flexibility and the replacement of previous financial covenants with a single senior secured leverage ratio.  In connection with the amendment, we incurred $2 of fees which were recorded in loss on debt extinguishment or modification in the six months ended June 30, 2011.  In addition, in the six months ended June 30, 2011, we made $102 of principal payments on our 2017 Term Loan, of which $98 were voluntary.

In the first quarter of 2010, we issued $300 of senior unsecured notes, due 2020 ("2020 Notes"), which resulted in net proceeds of $292 after deducting underwriting fees and discounts.  In addition, we extinguished our previous term loan and revolving credit facility, replacing them with our Credit Facility.  As a result of the early extinguishment, we incurred an $80 non-cash charge related to the write-off of deferred debt issuance costs and a $9 prepayment penalty for the early extinguishment.  These amounts were recorded in loss on debt extinguishment or modification for the six months ended June 30, 2010.

We had no short-term borrowings at June 30, 2011 and December 31, 2010.  Components of long-term debt are as follows:

	June 30, 2011			December 31, 2010
2017 Term Loan	$	666		$	768
8.75% Notes due 2017		400			400
7.875% Notes due 2020		300			300
Total principal amount		1,366			1,468
Less: Unamortized debt discount		(4	)		(5	)
Total	$	1,362		$	1,463

The weighted average interest rate on our total debt outstanding was 6 percent and 6.4 percent at June 30, 2011 and December 31, 2010, respectively.

The $400 notes due in 2017 ("2017 Notes") were issued at par bearing interest at 8.75 percent and require semi-annual interest payments.  The 2020 Notes were issued at 99.5 percent of par bearing interest at 7.875 percent and require semi-annual interest payments.  Our current subsidiaries CPFilms Inc., Flexsys America L.P., Flexsys America Co., Monchem International, Inc., Solutia Overseas, Inc., S E Investment LLC and future subsidiaries as defined by the 2017 Notes and 2020 Notes (collectively "the Notes"), subject to certain exceptions, are guarantors ("Note Guarantors") of the Notes as of June 30, 2011.

The 2017 Term loan was originally issued for $850 at 99.5 percent of the principal amount. After the amendment, the principal amount was $700 and bears interest at one month LIBOR plus 2.75 percent with a 0.75 percent LIBOR floor.  We are required to pay 1 percent of principal annually via quarterly payments.  The 2015 Revolver bears interest, at our option, at LIBOR plus 3.25 percent, with no LIBOR floor, or at the prime rate plus 2.25 percent.  LIBOR-based interest for the 2017 Term Loan is payable each month while interest on the 2015 Revolver is payable on the last day of each relevant interest period (defined as one month for the 2015 Revolver or one month, two, three or six months or other periods available to all lenders under the 2015 Revolver) and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period.  Prime-based interest for the 2015 Revolver is payable quarterly in arrears. CPFilms Inc., Flexsys America L.P., Flexsys America Co., Monchem International, Inc., Solutia Overseas, Inc. and future subsidiaries, as defined by the Credit Facility, subject to certain exceptions (the "Credit Facility Guarantors"), are guarantors of our obligations under the Credit Facility.  The Credit Facility and the related guarantees are secured by liens on substantially all of our and the Credit Facility Guarantors' present and future assets.

The Credit Facility and The Notes include a number of customary covenants and events of default that restrict our ability to, among other things, incur additional debt; make certain investments; pay dividends; repurchase stock; sell certain assets or merge with or into other companies; enter into new lines of business and prepay, redeem or exchange our debt.  The Credit Facility also includes the maintenance of a maximum senior secured indebtedness financial covenant as defined by the Credit Facility.  We were in compliance with all applicable covenants as of June 30, 2011.

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Derivatives And Risk Management

6 Months Ended

Jun. 30, 2011

Derivatives And Risk Management

Derivatives And Risk Management

10.  Derivatives and Risk Management

Our business operations give rise to market risk exposures that result from changes in foreign currency exchange rates, interest rates and certain commodity prices.  To manage the volatility relating to these exposures, we periodically enter into various derivative transactions that enable us to alleviate the adverse effects of financial market risk.  We evaluate hedge effectiveness at inception and on an ongoing basis.  If a derivative is no longer expected to be effective or if the hedged transaction is no longer probable of occurring, hedge accounting is discontinued.  Hedge ineffectiveness, if any, is recorded into earnings.

Our approved policies and procedures do not permit the purchase or holding of any derivative financial instruments for trading purposes.  Management of counterparty credit risk is achieved through diversification and credit rating reviews of the firms with whom we transact.

Interest Rate Risk

We occasionally enter into interest rate swap and cap agreements to manage interest rate exposures.  In 2008, we entered into interest rate swap agreements with a total notional amount of $800 ("2008 Swaps") in order to secure a fixed interest rate on a portion of our then existing floating interest rate term debt.  The 2008 Swaps have declining total notional amounts of $800 to $150 which are operational from the second quarter of 2010 through the first quarter of 2014.  Through the first quarter 2009, we designated the 2008 Swaps as cash flow hedges and any changes in fair value were recorded to accumulated other comprehensive loss, a component of equity.  Thereafter, we discontinued hedge accounting on the 2008 Swaps because these derivatives were no longer expected to be effective and all subsequent changes in fair value are recognized as interest expense in the Consolidated Statement of Operations.  To neutralize the impact to earnings on these changes to fair value, and after assessing existing interest rate market conditions, in the third quarter of 2010, we entered into interest rate swap agreements that offset the 2008 Swaps ("Offsetting Swaps").   The Offsetting Swaps are operational beginning in the third quarter of 2010 with total notional amounts, operational dates and other terms that effectively mirror the 2008 Swaps.  

Also in the third quarter of 2010, we entered into interest rate swap agreements with a total notional amount of $600 ("2010 Swaps") that were operational beginning in the third quarter of 2010 in order to secure a fixed interest rate on a portion of the floating interest rate term debt associated with the 2017 Term Loan.  The total notional amount of the 2010 Swaps declines to $200 through the fourth quarter of 2015.  The 2010 Swaps were designated as cash flow hedges and therefore any changes in fair value were recorded to accumulated other comprehensive loss.  In the first quarter 2011, we terminated the 2010 Swaps in conjunction with the debt modification discussed in Note 9 – Debt Obligations and purchased interest rate cap agreements to protect cash flows on a portion of the modified variable rate term loan against adverse interest rate changes ("2011 Caps").

 The 2011 Caps became operative in the first quarter 2011 and have notional amounts of $500 in 2011, $400 in 2012 and 2013, $300 in 2014 and $200 in 2015.  Under the 2011 Caps, when the one-month LIBOR rate exceeds 0.75%, we will receive payments from the cap providers.  The combination of the 0.75% LIBOR floor on our 2017 Term Loan along with cash payment on the 2011 Caps results in total payments at a fixed rate of 2.21%, plus the margin of 2.75%, for a total of 4.96% on the notional amounts hedged through 2015.  The 2011 Caps were designated as cash flow hedges and therefore any changes in fair value are recorded to accumulated other comprehensive loss.

Foreign Currency Exchange Rate Risk

We use foreign currency derivative instruments to manage the volatility associated with foreign currency purchases of materials and other assets and liabilities created in the normal course of business and to protect against exposure related to intercompany financing transactions.  These risks are hedged primarily through the use of forward exchange contracts and purchased options with maturities of less than 18 months.  We have chosen not to designate these instruments as hedges to allow the changes in the fair value of these instruments to largely offset the remeasurement of the underlying assets and liabilities in the Consolidated Statement of Operations.  We had currency forward contracts to purchase and sell $148 and $104 of currencies comprised principally of the Euro, U.S. Dollar and Malaysian Ringgit as of June 30, 2011 and December 31, 2010, respectively.

Commodity Price Risk

We periodically enter into a limited number of commodity forward contracts in order to reduce cash flow exposure to changes in the price of certain raw materials and energy resources.  At June 30, 2011 and December 31, 2010, we had no such contracts outstanding requiring fair value treatment.

Our derivatives recorded at their respective fair values at June 30, 2011 and December 31, 2010 in the Consolidated Statement of Financial Position are summarized as follows:

	June 30, 2011
	Asset Derivatives				Liability Derivatives
	Consolidated Statement of Financial Position Presentation	Fair Value			Consolidated Statement of Financial Position Presentation	Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	0	Accrued Liabilities		$	6
	Other Assets		$	1	Other Liabilities		$	0
Total Interest rate contracts				1				6
Derivative not designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	0	Accrued Liabilities		$	11
	Other Assets			7	Other Liabilities			16
Total Interest rate contracts				7				27
Foreign exchange contracts	Miscellaneous Receivables			2	Accrued Liabilities			1
Total Derivatives			$	10			$	34
	December 31, 2010
	Asset Derivatives				Liability Derivatives
	Consolidated Statement of Financial Position Presentation	Fair Value			Consolidated Statement of Financial Position Presentation	Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	0	Accrued Liabilities		$	3
	Other Assets			6	Other Liabilities			0
Total Interest rate contracts				6				3
Derivative not designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	0	Accrued Liabilities		$	13
	Other Assets			5	Other Liabilities			20
Total Interest rate contracts				5				33
Foreign exchange contracts	Miscellaneous Receivables			1	Accrued Liabilities			1
Total Derivatives			$	12			$	37

A summary of the effect of our derivative instruments for the three and six months ended June 30, 2011 and 2010 on the Consolidated Statement of Operations and Consolidated Statement of Financial Position is as follows:

	Change in Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Loss							Amount of Gain (Loss) Recognized in Income								Consolidated Statement of Operations Presentation
	Three Months Ended June 30,							Three Months Ended June 30,
	2011				2010			2011				2010
Derivatives designated as hedging instruments:
Interest rate contracts		$	(6	)		$	0		$	0			$	0		Interest expense
Derivatives not designated as hedging instruments:
Interest rate contracts		$	0			$	0		$	(2	)		$	(10	)	Interest expense (a)
Foreign exchange contracts			0				0			1				2		Other income (loss), net
Total Derivatives not designated as hedging instruments		$	0			$	0		$	(1	)		$	(8	)
Total Derivatives		$	(6	)		$	0		$	(1	)		$	(8	)

(a) We reclassified $2 of losses from accumulated other comprehensive loss to interest expense during the three months ended June 30, 2011 and 2010 related to the 2008 and 2010 Swaps.

	Change in Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Loss							Amount of Gain (Loss) Recognized in Income								Consolidated Statement of Operations Presentation
	Six Months Ended June 30,							Six Months Ended June 30,
	2011				2010			2011				2010
Derivatives designated as hedging instruments:
Interest rate contracts		$	(6	)		$	0		$	0			$	0		Interest expense
Derivatives not designated as hedging instruments:
Interest rate contracts		$	0			$	0		$	(4	)		$	(16	)	Interest expense (a)
Foreign exchange contracts			0				0			2				4		Other income (loss), net
Total Derivatives not designated as hedging instruments		$	0			$	0		$	(2	)		$	(12	)
Total Derivatives		$	(6	)		$	0		$	(2	)		$	(12	)

(a) We reclassified $4 and $2 of losses from accumulated other comprehensive loss to interest expense during the six months ended June 30, 2011 and 2010 related to the 2008 and 2010 Swaps.

As of June 30, 2011, deferred losses of $8 related to our interest rate derivatives are expected to be reclassified into earnings as interest expense over the next twelve months.

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Fair Value Of Financial Instruments

6 Months Ended

Jun. 30, 2011

Fair Value Of Financial Instruments

Fair Value Of Financial Instruments

11.  Fair Value of Financial Instruments

The following tables present our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

	Fair Value Measurements at June 30, 2011
	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Cash Equivalents (a)	$	20	$	20	$	0	$	0
Derivatives – Foreign Exchange (b)		2		0		2		0
Derivatives – Interest Rates (c)		8		0		8		0
Total	$	30	$	20	$	10	$	0
Liabilities:
Derivatives – Foreign Exchange (b)	$	1	$	0	$	1	$	0
Derivatives – Interest Rates (c)	$	33	$	0	$	33	$	0
Total	$	34	$	0	$	34	$	0

	Fair Value Measurements at December 31, 2010
	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Cash Equivalents (a)	$	60	$	60	$	0	$	0
Derivatives – Foreign Exchange (b)		1		0		1		0
Derivatives – Interest Rates (c)		11		0		11		0
Total	$	72	$	60	$	12	$	0
Liabilities:
Derivatives – Foreign Exchange (b)	$	1	$	0	$	1	$	0
Derivatives – Interest Rates (c)		36		0		36		0
Total	$	37	$	0	$	37	$	0

(a)	Includes cash invested in money market funds.
(b)	Includes foreign currency forward and options contracts which are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount.
(c)	Includes interest rate cap and swap agreements which are valued using counterparty quotes, which use discounted cash flows and the then-applicable forward interest rates.

The recorded amounts of cash, trade receivables and accounts payable approximate their fair values at both June 30, 2011 and December 31, 2010, due to the short maturity of these instruments.  The estimated fair value of our long-term debt at June 30, 2011 is $ 1,420 compared to the recorded amount of $1,362.  The estimated fair value of our long-term debt at  December 31, 2010 was $1,530 compared to the recorded amount of $ 1,463.  The fair values are estimated by various banks based upon trading levels on the date of measurement.

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Pension Plans And Other Postretirement Benefits

6 Months Ended

Jun. 30, 2011

Pension Plans And Other Postretirement Benefits

Pension Plans And Other Postretirement Benefits

12.  Pension Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost

For the three and six months ended June 30, 2011 and 2010, our pension and healthcare and other benefit costs for continuing operations are as follows:

	Pension Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Service costs for benefits earned	$	1		$	0		$	2		$	1
Interest costs on benefit obligation		12			11			24			23
Assumed return on plan assets		(13	)		(12	)		(26	)		(25	)
Amortization of actuarial net loss		3			3			6			5
Settlement Charges		1			0			1			1
Total	$	4		$	2		$	7		$	5

	Healthcare and Other Benefits
	Three Months Ended June 30,								Six Months Ended June 30,
	2011				2010				2011				2010
Service costs for benefits earned		$	1			$	1			$	2			$	2
Interest costs on benefit obligation			2				3				4				5
Assumed return on plan assets			(1	)			(2	)			(3	)			(3	)
Amortization of actuarial net gain			(2	)			(2	)			(4	)			(3	)
Total		$	0			$	0			$	(1	)		$	1

Settlements

For the six months ended June 30, 2011 and 2010 we recorded a settlement charge of $1 for each period, resulting from the significant amount of lump sum distributions in Belgium associated with a reduction of personnel prior to June 30, 2011 and 2010.  These reductions were driven by restructuring activities.

Employer Contributions

 According to the applicable funding rules, we are required to contribute $47 to our pension plans, collectively, in 2011.  For the six months ended June 30, 2011, we contributed $19.

 

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Consolidated Statement Of Operations (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Consolidated Statement Of Operations
Net Sales	$ 543	$ 502	$ 1,052	$ 950
Cost of goods sold	373	343	720	643
Gross Profit	170	159	332	307
Selling, general and administrative expenses	60	67	122	132
Research and development expenses	5	4	11	8
Other operating income, net	(2)	(1)	(13)	(1)
Operating Income	107	89	212	168
Interest expense	(26)	(36)	(54)	(74)
Other income (loss), net	0	10	(1)	13
Loss on debt extinguishment or modification	0	0	(2)	(89)
Income from Continuing Operations Before Income Tax Expense	81	63	155	18
Income tax expense	11	9	19	19
Income (Loss) from Continuing Operations	70	54	136	(1)
Loss from Discontinued Operations, net of tax	0	(13)	0	(15)
Net Income (Loss)	70	41	136	(16)
Net Income attributable to noncontrolling interest	2	0	3	1
Net Income (Loss) attributable to Solutia	$ 68	$ 41	$ 133	$ (17)
Basic Income (Loss) per Share attributable to Solutia:
Income (Loss) from Continuing Operations	$ 0.57	$ 0.45	$ 1.11	$ (0.01)
Loss from Discontinued Operations	$ 0.00	$ (0.11)	$ 0.00	$ (0.13)
Net Income (Loss) attributable to Solutia	$ 0.57	$ 0.34	$ 1.11	$ (0.14)
Diluted Income (Loss) per Share attributable to Solutia:
Income (Loss) from Continuing Operations	$ 0.56	$ 0.45	$ 1.10	$ (0.01)
Loss from Discontinued Operations	$ 0.00	$ (0.11)	$ 0.00	$ (0.13)
Net Income (Loss) attributable to Solutia	$ 0.56	$ 0.34	$ 1.10	$ (0.14)

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Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2011

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

13.  Accumulated Other Comprehensive Loss

The following table presents the balances of related after-tax components of accumulated other comprehensive loss.

	Accumulated Currency Adjustments			Postretirement Adjustments			Hedging Activity Adjustments			Accumulated Other Comprehensive Loss
Beginning Balance - January 1, 2010	$	(56	)	$	(160	)	$	(21	)	$	(237	)
Currency translation adjustments		(89	)		0			0			(89	)
Pension settlement charge		0			1			0			1
Amortization of net actuarial loss		0			2			0			2
Realized loss on derivative instruments		0			0			2			2
Ending Balance - June 30, 2010	$	(145	)	$	(157	)	$	(19	)	$	(321	)
Beginning Balance - January 1, 2011	$	(66	)	$	(117	)	$	(11	)	$	(194	)
Currency translation adjustments		81			0			0			81
Pension settlement charge		0			1			0			1
Amortization of net actuarial loss		0			2			0			2
Unrealized loss on derivative instruments		0			0			(6	)		(6	)
Realized loss on derivative instruments		0			0			4			4
Ending Balance - June 30, 2011	$	15		$	(114	)	$	(13	)	$	(112	)

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Segment Data

6 Months Ended

Jun. 30, 2011

Segment Data

Segment Data

14. Segment Data

 We are a global manufacturer and marketer of a variety of high-performance chemical-based materials that are used across automotive, construction, industrial and consumer applications.  Our operations are managed and reported in three reportable segments consisting of Advanced Interlayers, Performance Films and Technical Specialties.
 

The Advanced Interlayers reportable segment is a global manufacturer of interlayers for laminated glass and encapsulants for the photovoltaic market.  The Performance Films reportable segment is a manufacturer of performance films for after-market applications which add functionality to glass.  The Technical Specialties reportable segment is a global manufacturer of specialty chemicals for the rubber, solar energy, process manufacturing and aviation industries.  The major products by reportable segment are as follows:

Reportable Segment	Products
Advanced Interlayers		SAFLEX® plastic interlayer VISTASOLAR® ethyl vinyl acetate encapsulants Specialty intermediate polyvinyl butyral resin and plasticizer
Performance Films		LLUMAR®, VISTA®, GILA®, V-KOOL®, HUPER OPTIK® and FORMULAONE® professional and retail window films FLEXVUE™ precision coated films and other enhanced polymer films for industrial customers
Technical Specialties		CRYSTEX® insoluble sulphur SANTOFLEX® antidegradants THERMINOL® heat transfer fluids SKYDROL® aviation hydraulic fluids

The performance of our operating segments is evaluated based on Segment Profit, defined as income from continuing operations attributable to Solutia before interest expense, loss on debt extinguishment or modification, income taxes, depreciation and amortization. Segment Profit includes selling, general and administrative, research and development expenses, other operating income or expenses, gains and losses from asset dispositions and restructuring charges, the reduction for net income attributable to noncontrolling interests and other income and expense items that can be directly attributable to the segment.  Certain operations, expenses and other items that are managed outside the reportable segments are reported as Unallocated and Other.  Unallocated and Other is comprised of corporate expenses, adjustments to our LIFO valuation reserve, adjustments to our environmental liabilities, other income and expense items including currency gains/losses, gains and losses from asset dispositions and restructuring charges that are not directly attributable to the reportable segments in addition to non-core operations that do not meet the quantitative threshold for determining reportable segments.  There were no inter-segment sales in the periods presented below.

	Three Months Ended										Six Months Ended
	June 30,										June 30,
	2011					2010					2011					2010
	Net		Profit			Net		Profit			Net		Profit			Net		Profit
	Sales		(Loss)			Sales		(Loss)			Sales		(Loss)			Sales		(Loss)
Reportable Segment
Advanced Interlayers	$	232	$	52		$	208	$	43		$	445	$	101		$	394	$	91
Performance Films		86		19			73		18			162		38			125		27
Technical Specialties		225		82			217		80			445		180			423		157
Reportable Segment Totals		543		153			498		141			1,052		319			942		275
Unallocated and Other		0		(17	)		4		(14	)		0		(48	)		8		(40	)
Total		543		136			502		127			1,052		271			950		235
Reconciliation to Consolidated Totals:
Depreciation and amortization				(31	)				(28	)				(63	)				(55	)
Interest expense				(26	)				(36	)				(54	)				(74	)
Loss on debt extinguishment
or modification				0					0					(2	)				(89	)
Net income attributable to
noncontrolling interest				2					0					3					1
Consolidated Totals:
Net Sales	$	543				$	502				$	1,052				$	950
Income from Continuing
Operations Before Income Taxes			$	81				$	63				$	155				$	18

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Earnings (Loss) Per Share

6 Months Ended

Jun. 30, 2011

Earnings (Loss) Per Share

Earnings (Loss) Per Share

15.  Earnings (Loss) Per Share

The following table presents the net income (loss) used in basic and diluted earnings (loss) per share and reconciles weighted average number of shares used in the calculations of basic and diluted earnings (loss) per share.

(Shares in millions)	Three Months Ended June 30,					Six Months Ended June 30,
	2011		2010			2011		2010
Consolidated Statement of Operations:
Income (Loss) from continuing operations	$	70	$	54		$	136	$	(1	)
Less: Net Income attributable to noncontrolling interest		2		0			3		1
Income (Loss) from continuing operations attributable to Solutia		68		54			133		(2	)
Loss from discontinued operations, net of tax		0		(13	)		0		(15	)
Net Income (Loss) attributable to Solutia	$	68	$	41		$	133	$	(17	)
Weighted-average number of shares outstanding used for basic earnings (loss) per share		119.7		118.7			119.5		118.6
Non-vested restricted shares		1.3		1.2			1.3		N/A	(a)
Stock options		0.5		0			0.5		0
Weighted average number of shares outstanding and common equivalent shares used for diluted earnings (loss) per share		121.5		119.9			121.3		118.6

(a) 1.1 million shares of non-vested restricted stock for the six months ended June 30, 2010 were excluded from the dilutive earnings per share calculation because we experienced a net loss for this period.

During the three and six months ended June 30, 2011 and 2010, the following shares were not included in the computation of earnings (loss) per share since the result would have been anti-dilutive.

	Three Months Ended June 30,				Six Months Ended June 30,
(Shares in millions)	2011		2010		2011		2010
Non-vested restricted shares		0.1		0.5		0		0.2
Stock options		1.1		2.6		1.3		2.2
Warrants (a)		4.5		4.5		4.5		4.5

 (a) Upon the Effective Date, we issued warrants to purchase an aggregate of 4,481,168 shares to certain of the holders of our stock based on such holder's pre-petition stock ownership. These warrants have an exercise price of $29.70 and expire on February 27, 2013.

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Subsequent Events

6 Months Ended

Jun. 30, 2011

Subsequent Events

Subsequent Events

16.  Subsequent Events

On June 1, 2011, we exercised our Put Right pursuant to our Securityholders agreement with S.K. Capital Partners II, L.P. , the buyer of our Integrated Nylon business, to require its purchase of our approximately 2 percent ownership interest in the Integrated Nylon business.  The sale of our ownership interest was for $31 and is expected to result in a gain of approximately $28 when it closes in the second half of 2011.

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Condensed Consolidating Financial Statements

6 Months Ended

Jun. 30, 2011

Condensed Consolidating Financial Statements

Condensed Consolidating Financial Statements

17.Condensed Consolidating Financial Statements

In accordance with SEC regulation S-X Rule 3-10 "Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered," we are providing condensed consolidating financial statements as the Notes are fully and unconditionally guaranteed on a joint and several basis.

The following consolidating financial statements present, in separate columns, financial information for:  (i) Solutia, on a parent-only basis, carrying its investment in subsidiaries under the equity method; (ii) Note Guarantors on a combined basis ("Guarantors"), carrying investments in subsidiaries which do not guarantee the debt (the "Non-Guarantors") under the equity method; (iii) Non-Guarantors on a combined basis; (iv) eliminating entries and (v) consolidated totals as of June 30, 2011 and December 31, 2010 and for the three and six months ended June 30, 2011 and 2010.  The eliminating entries primarily reflect intercompany transactions, such as interest income and expense, accounts receivable and payable, advances, short and long-term debt, royalties and profit in inventory eliminations.

Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2011
	Parent-Only						Non-						Consolidated
	Solutia			Guarantors			Guarantors			Eliminations			Solutia
Net Sales	$	137		$	120		$	486		$	(200	)	$	543
Cost of goods sold		108			77			398			(210	)		373
Gross Profit		29			43			88			10			170
Selling, general and administrative expenses		23			12			25			0			60
Research and development expenses and other operating      expense (income), net		(4	)		2			5			0			3
Operating Income (Loss)		10			29			58			10			107
Equity earnings from affiliates		69			25			0			(94	)		0
Interest expense		(28	)		(1	)		(55	)		58			(26	)
Other income (loss), net		17			16			33			(66	)		0
Income from Continuing Operations Before Income      Tax Expense		68			69			36			(92	)		81
Income tax expense		0			0			11			0			11
Net Income		68			69			25			(92	)		70
Net Income attributable to noncontrolling interest		0			0			2			0			2
Net Income attributable to Solutia	$	68		$	69		$	23		$	(92	)	$	68

Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2010
	Parent-Only					Non-						Consolidated
	Solutia			Guarantors		Guarantors			Eliminations			Solutia
Net Sales	$	123		$	117	$	455		$	(193	)	$	502
Cost of goods sold		108			72		357			(194	)		343
Gross Profit		15			45		98			1			159
Selling, general and administrative expenses		28			14		25			0			67
Research and development expenses and other operating      expense (income), net		3			1		(1	)		0			3
Operating Income (Loss)		(16	)		30		74			1			89
Equity earnings from affiliates		66			28		0			(94	)		0
Interest expense		(36	)		0		(37	)		37			(36	)
Other income, net		10			10		34			(44	)		10
Income from Continuing Operations Before      Income Tax Expense		24			68		71			(100	)		63
Income tax expense		0			0		11			(2	)		9
Income from Continuing Operations		24			68		60			(98	)		54
Income (Loss) from discontinued operations, net of tax		17			1		(31	)		0			(13	)
Net Income		41			69		29			(98	)		41
Net Income attributable to noncontrolling interest		0			0		0			0			0
Net Income attributable to Solutia	$	41		$	69	$	29		$	(98	)	$	41

Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2011
	Parent-Only						Non-						Consolidated
	Solutia			Guarantors			Guarantors			Eliminations			Solutia
Net Sales	$	272		$	227		$	951		$	(398	)	$	1,052
Cost of goods sold		226			146			764			(416	)		720
Gross Profit		46			81			187			18			332
Selling, general and administrative expenses		50			25			47			0			122
Research and development expenses and other operating      expense (income), net		3			1			(6	)		0			(2	)
Operating Income (Loss)		(7	)		55			146			18			212
Equity earnings from affiliates		167			84			0			(251	)		0
Interest expense		(60	)		(1	)		(101	)		108			(54	)
Other income (loss), net		35			29			59			(124	)		(1	)
Loss on debt modification		(2	)		0			0			0			(2	)
Income from Continuing Operations Before Income      Tax Expense		133			167			104			(249	)		155
Income tax expense		0			0			18			1			19
Income (Loss) from Continuing Operations		133			167			86			(250	)		136
Net Income		133			167			86			(250	)		136
Net Income attributable to noncontrolling interest		0			0			3			0			3
Net Income attributable to Solutia	$	133		$	167		$	83		$	(250	)	$	133

Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2010
	Parent-Only					Non-						Consolidated
	Solutia			Guarantors		Guarantors			Eliminations			Solutia
Net Sales	$	235		$	214	$	861		$	(360	)	$	950
Cost of goods sold		203			135		671			(366	)		643
Gross Profit		32			79		190			6			307
Selling, general and administrative expenses		56			28		48			0			132
Research and development expenses and other operating      expense, net		5			2		0			0			7
Operating Income (Loss)		(29	)		49		142			6			168
Equity earnings from affiliates		136			67		0			(203	)		0
Interest expense		(74	)		0		(71	)		71			(74	)
Other income, net		21			23		55			(86	)		13
Loss on debt extinguishment		(88	)		0		(1	)		0			(89	)
Income (Loss) from Continuing Operations Before      Income Tax Expense		(34	)		139		125			(212	)		18
Income tax expense		0			0		23			(4	)		19
Income (Loss) from Continuing Operations		(34	)		139		102			(208	)		(1	)
Income (Loss) from discontinued operations, net of tax		17			0		(32	)		0			(15	)
Net Income (Loss)		(17	)		139		70			(208	)		(16	)
Net Income attributable to noncontrolling interest		0			0		1			0			1
Net Income (Loss) attributable to Solutia	$	(17	)	$	139	$	69		$	(208	)	$	(17	)

Condensed Consolidating Balance Sheet
June 30, 2011
	Parent-Only					Non-					Consolidated
	Solutia			Guarantors		Guarantors		Eliminations			Solutia
ASSETS
Current Assets:
Cash and cash equivalents	$	77		$	3	$	89	$	0		$	169
Trade receivables, net		33			48		183		0			264
Intercompany receivables		80			578		466		(1,124	)		0
Miscellaneous receivables		9			1		64		0			74
Inventories		79			55		233		(39	)		328
Prepaid expenses and other current assets		3			2		15		9			29
Current assets of discontinued operations		0			0		2		0			2
Total Current Assets		281			687		1,052		(1,154	)		866
Net Property, Plant and Equipment		179			143		612		0			934
Investments in Affiliates		2,495			684		933		(4,112	)		0
Goodwill		150			190		419		0			759
Net Identified Intangible Assets		183			302		463		0			948
Intercompany Advances		465			556		2,012		(3,033	)		0
Other Assets		73			3		73		0			149
Total Assets	$	3,826		$	2,565	$	5,564	$	(8,299	)	$	3,656
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	49		$	26	$	119	$	0		$	194
Intercompany payables		680			13		431		(1,124	)		0
Accrued liabilities		104			12		106		(2	)		220
Intercompany short-term debt		53			0		527		(580	)		0
Current liabilities of discontinued operations		0			0		13		0			13
Total Current Liabilities		886			51		1,196		(1,706	)		427
Long-Term Debt		1,362			0		0		0			1,362
Intercompany Long-Term Debt		132			23		2,298		(2,453	)		0
Postretirement Liabilities		209			2		82		0			293
Environmental Remediation Liabilities		216			3		15		0			234
Deferred Tax Liabilities		18			11		219		0			248
Non-Current Liabilities of Discontinued Operations		0			0		24		0			24
Other Liabilities		46			6		49		0			101
Equity:
Common stock		1			0		0		0			1
Additional contributed capital		1,646			2,469		1,671		(4,140	)		1,646
Treasury stock		(8	)		0		0		0			(8	)
Accumulated other comprehensive loss		(112	)		0		0		0			(112	)
Accumulated deficit		(570	)		0		0		0			(570	)
Total Shareholders' Equity attributable to Solutia		957			2,469		1,671		(4,140	)		957
Equity attributable to noncontrolling interest		0			0		10		0			10
Total Equity		957			2,469		1,681		(4,140	)		967
Total Liabilities and Equity	$	3,826		$	2,565	$	5,564	$	(8,299	)	$	3,656

Condensed Consolidating Balance Sheet
December 31, 2010
	Parent-Only					Non-					Consolidated
	Solutia			Guarantors		Guarantors		Eliminations			Solutia
ASSETS
Current Assets:
Cash and cash equivalents	$	98		$	7	$	86	$	0		$	191
Trade receivables, net		26			40		162		0			228
Intercompany receivables		100			497		398		(995	)		0
Miscellaneous receivables		14			0		61		0			75
Inventories		69			47		199		(40	)		275
Prepaid expenses and other current assets		7			2		9		9			27
Current assets of discontinued operations		0			0		5		0			5
Total Current Assets		314			593		920		(1,026	)		801
Net Property, Plant and Equipment		180			139		592		0			911
Investments in Affiliates		2,280			559		908		(3,747	)		0
Goodwill		149			192		399		0			740
Net Identified Intangible Assets		186			309		443		0			938
Intercompany Advances		439			514		1,693		(2,646	)		0
Other Assets		78			2		67		0			147
Total Assets	$	3,626		$	2,308	$	5,022	$	(7,419	)	$	3,537
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	53		$	21	$	99	$	0		$	173
Intercompany payables		630			11		354		(995	)		0
Accrued liabilities		103			10		123		(1	)		235
Intercompany short-term debt		17			0		479		(496	)		0
Current liabilities of discontinued operations		0			0		15		0			15
Total Current Liabilities		803			42		1,070		(1,492	)		423
Long-Term Debt		1,463			0		0		0			1,463
Intercompany Long-Term Debt		108			23		2,019		(2,150	)		0
Postretirement Liabilities		225			3		80		0			308
Environmental Remediation Liabilities		225			3		16		0			244
Deferred Tax Liabilities		21			11		206		0			238
Non-Current Liabilities of Discontinued Operations		0			0		25		0			25
Other Liabilities		49			6		42		0			97
Equity:
Common stock		1			0		0		0			1
Additional contributed capital		1,634			2,220		1,557		(3,777	)		1,634
Treasury stock		(6	)		0		0		0			(6	)
Accumulated other comprehensive loss		(194	)		0		0		0			(194	)
Accumulated deficit		(703	)		0		0		0			(703	)
Total Shareholders' Equity attributable to Solutia		732			2,220		1,557		(3,777	)		732
Equity attributable to noncontrolling interest		0			0		7		0			7
Total Equity		732			2,220		1,564		(3,777	)		739
Total Liabilities and Equity	$	3,626		$	2,308	$	5,022	$	(7,419	)	$	3,537

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2011
	Parent-Only						Non-					Consolidated
	Solutia			Guarantors			Guarantors			Eliminations		Solutia
Cash Provided by (Used in) Operations	$	(57	)	$	76		$	74		$	0	$	93
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(7	)		(3	)		(30	)		0		(40	)
Acquisition related payments, net of cash acquired		0			0			(5	)		0		(5	)
Asset disposals		0			3			26			0		29
Other		0			0			1			0		1
Cash Used in Investing Activities		(7	)		0			(8	)		0		(15	)
FINANCING ACTIVITIES:
Payment of long-term debt obligations		(102	)		0			0			0		(102	)
Purchase of treasury shares		(2	)		0			0			0		(2	)
Other, net		1			0			(1	)		0		0
Changes in investments and advances from (to) affiliates		146			(80	)		(66	)		0		0
Cash Provided by (Used in) Financing Activities		43			(80	)		(67	)		0		(104	)
Effect of Exchange Rate Changes on Cash and      Cash Equivalents		0			0			4			0		4
Increase (Decrease) in Cash and Cash Equivalents		(21	)		(4	)		3			0		(22	)
CASH AND CASH EQUIVALENTS:
Beginning of year		98			7			86			0		191
End of year	$	77		$	3		$	89		$	0	$	169

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2010
	Parent-Only						Non-					Consolidated
	Solutia			Guarantors			Guarantors			Eliminations		Solutia
Cash Provided by (Used in) Operations	$	(104	)	$	88		$	99		$	0	$	83
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(3	)		(2	)		(9	)		0		(14	)
Acquisition related payments, net of cash acquired		0			(1	)		(370	)		0		(371	)
Asset disposals		(2	)		0			0			0		(2	)
Cash Used in Investing Activities		(5	)		(3	)		(379	)		0		(387	)
FINANCING ACTIVITIES:
Proceeds from long-term debt obligations		1,144			0			0			0		1,144
Payment of long-term debt obligations		(878	)		0			0			0		(878	)
Payment of short-term debt obligations		0			0			(16	)		0		(16	)
Debt issuance costs		(27	)		0			0			0		(27	)
Purchase of treasury shares		(1	)		0			0			0		(1	)
Other, net		(9	)		0			0			0		(9	)
Changes in investments and advances from (to) affiliates		(157	)		(86	)		243			0		0
Cash Provided by (Used in) Financing Activities		72			(86	)		227			0		213
Effect of Exchange Rate Changes on Cash and      Cash Equivalents		0			0			(25	)		0		(25	)
Decrease in Cash and Cash Equivalents		(37	)		(1	)		(78	)		0		(116	)
CASH AND CASH EQUIVALENTS:
Beginning of period		104			1			138			0		243
End of period	$	67		$	0		$	60		$	0	$	127

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Acquisitions, Divestitures And Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2011

Fair Values Of Assets Acquired And Liabilities Assumed

	Novomatrix		Vistasolar
	April 30, 2010		June 1, 2010
Assets:
Trade receivables	$	2	$	10
Miscellaneous receivables		1		0
Inventories		9		3
Property, plant and equipment		0		16
Identified intangible assets		50		119
Goodwill		25		187
Total assets acquired	$	87	$	335
Liabilities:
Accounts payable	$	4	$	2
Accrued liabilities		3		1
Postretirement liabilities		0		1
Deferred tax liabilities		8		34
Total liabilities assumed	$	15	$	38

Summary Of Identified Intangible Assets

	Novomatrix			Vistasolar
	April 30, 2010			June 1, 2010
	Weighted			Weighted
	Average	Carrying		Average	Carrying
	Life in Years	Value		Life in Years	Value
Technology	0	$	0	20	$	25
Customer relationships	17		29	25		81
Other	5		1	3		5
Trademarks	N/A		20	N/A		8
Total identified intangible assets	17	$	50	23	$	119
Total weighted average life in years	22

Summary Of Pro Forma Information For Consolidated Results Of Operations

	Three Months Ended		Six Months Ended
	June 30, 2010		June 30, 2010
Net sales	$	523	$	1,005
Net income (loss)	$	47	$	(5	)
Net income (loss) per basic and dilutive share	$	0.39	$	(0.04	)
Net income (loss) attributable to Solutia	$	47	$	(6	)
Net income (loss) attributable to Solutia per basic and dilutive share	$	0.39	$	(0.05	)

Primary Accelerators [Member]

Summary Of Assets And Liabilities Classified As Discontinued Operations

	June 30,		December 31,
	2011		2010
Assets:
Trade and miscellaneous receivables, net	$	2	$	5
Current assets of discontinued operations	$	2	$	5
Liabilities:
Accounts payable and accrued liabilities	$	13	$	15
Current liabilities of discontinued operations	$	13	$	15
Other liabilities	$	24	$	25
Non-current liabilities of discontinued operations	$	24	$	25
Total liabilities	$	37	$	40

Summary Of Operating Results From Discontinued Operations

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011		2010			2011		2010
Primary Accelerators:
Operating results:
Net sales	$	0	$	16		$	0	$	34
Loss before income taxes	$	0	$	(37	)	$	0	$	(40	)
Income tax benefit		0		(7	)		0		(8	)
Loss from discontinued operations, net of tax	$	0	$	(30	)	$	0	$	(32	)

Integrated Nylon [Member]

Summary Of Operating Results From Discontinued Operations

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Integrated Nylon:
Operating results:
Income before income taxes		$	0		$	17		$	0		$	17
Income tax expense			0			0			0			0
Income from discontinued operations, net of tax		$	0		$	17		$	0		$	17

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2011

Share-Based Compensation

Weighted Average Fair Value Of Options Granted

	June 30, 2011
Expected volatility		37.83	%
Expected term (in years)		6.3
Risk-free rate		2.89	%
Weighted average grant date fair value	$	9.76

Stock Option Information

Options		Weighted-Average Exercise Price			Weighted-Average Remaining Contractual Life		Aggregate Intrinsic Value (a)
Vested or Expected to Vest at June 30, 2011	3,138,881		$	18.55		8.0		$	14
Exercisable at June 30, 2011	1,744,506		$	17.25		6.9		$	10

 (a) Intrinsic value for stock options is calculated based on the difference between the exercise price of the underlying awards and the quoted market price of our common stock as of the reporting date.

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Goodwill And Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2011

Goodwill And Other Intangible Assets

Goodwill By Reportable Segment

	Advanced			Performance			Technical
	Interlayers			Films			Specialties			Total
Balance at December 31, 2010		$	407		$	186		$	147		$	740
Currency fluctuations			18			1			0			19
Balance at June 30, 2011		$	425		$	187		$	147		$	759

Summarized Identified Intangible Assets

	June 30, 2011											December 31, 2010
	Estimated											Estimated
	Useful	Gross							Net			Useful	Gross							Net
	Life in	Carrying			Accumulated				Carrying			Life in	Carrying			Accumulated				Carrying
	Years	Value			Amortization				Value			Years	Value			Amortization				Value
Amortizable intangible assets:
Customer relationships	13to 27		$	623		$	(69	)		$	554	13to 27		$	606		$	(56	)		$	550
Technology	5to 26			234			(35	)			199	5to 26			225			(29	)			196
Trade names	10to 25			20			(2	)			18	10to 25			20			(1	)			19
Patents	13			5			(1	)			4	13			5			(1	)			4
Other	3to 5			7			(3	)			4	3to 5			6			(1	)			5
Non-amortizable intangible assets:
Trademarks				169			0				169				164			0				164
Total identified intangible assets			$	1,058		$	(110	)		$	948			$	1,026		$	(88	)		$	938

Amortization Expense And Its Allocation

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Cost of goods sold		$	3		$	3		$	6		$	5
Selling, general and administrative expenses			7			5			14			10
Total		$	10		$	8		$	20		$	15

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Detail Of Certain Balance Sheet Accounts (Tables)

6 Months Ended

Jun. 30, 2011

Detail Of Certain Balance Sheet Accounts

Components Of Inventories

	June 30,		December 31,
Inventories	2011		2010
Finished goods	$	199	$	163
Goods in process		35		36
Raw materials and supplies		94		76
Inventories	$	328	$	275

Components Of Property, Plant And Equipment

	June 30,			December 31,
Property, Plant and Equipment	2011			2010
Land	$	35		$	35
Leasehold improvements		11			10
Buildings		223			214
Machinery and equipment		838			796
Construction in progress		84			54
Total property, plant and equipment		1,191			1,109
Less: Accumulated depreciation		(257	)		(198	)
Net Property, Plant, and Equipment	$	934		$	911

Components Of Accrued Liabilities

	June 30,		December 31,
Accrued Liabilities	2011		2010
Wages and benefits	$	36	$	45
Foreign currency and interest rate derivative agreements		18		17
Restructuring reserves		6		5
Environmental remediation liabilities		32		29
Accrued income taxes payable		9		19
Accrued taxes other than income		26		27
Accrued selling expenses		14		17
Accrued interest		13		13
Other		66		63
Accrued Liabilities	$	220	$	235

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Restructuring Reserves (Tables)

6 Months Ended

Jun. 30, 2011

Restructuring Reserves

Summary Of Restructuring Charges

	Employment		Long-Lived
	Reductions		Assets		Total
Six Months Ended and cumulative through June 30, 2011:
Selling, general and administrative expenses	$	4	$	0	$	4
Other operating expense (income)		0		8		8
Total	$	4	$	8	$	12

Summary Restructuring Costs

	Contract					Impairment of
	Termination		Employment			Long-Lived
	Payments		Reductions			Assets			Total
Balance at December 31, 2010	$	2	$	5		$	0		$	7
Charges taken		0		4			8			12
Amounts utilized		0		(4	)		0			(4	)
Non-cash reductions		0		0			(8	)		(8	)
Currency fluctuations		0		1			0			1
Balance at June 30, 2011	$	2	$	6		$	0		$	8

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Consolidated Statement Of Comprehensive Income (Loss) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Consolidated Statement Of Comprehensive Income (Loss)
Net Income (Loss)	$ 70	$ 41	$ 136	$ (16)
Other Comprehensive Income (Loss):
Accumulated currency adjustments	24	(54)	81	(89)
Postretirement adjustments	2	1	3	3
Hedging activity adjustments	(4)	2	(2)	2
Comprehensive Income (Loss)	92	(10)	218	(100)
Comprehensive Income attributable to noncontrolling interest	2	0	3	1
Comprehensive Income (Loss) attributable to Solutia	$ 90	$ (10)	$ 215	$ (101)

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Commitments And Contingencies (Tables)

6 Months Ended

Jun. 30, 2011

Commitments And Contingencies

Environmental Liabilities

	Total
Balance at December 31, 2010	$	273
Net charges taken		3
Amounts utilized		(11)
Currency fluctuations		1
Balance at June 30, 2011	$	266

Environmental Remediation Liabilities

	June 30, 2011		December 31, 2010
Environmental Remediation Liabilities, current	$	32	$	29
Environmental Remediation Liabilities, long-term		234		244
Total	$	266	$	273

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Debt Obligations (Tables)

6 Months Ended

Jun. 30, 2011

Debt Obligations

Schedule Of Long-Term Debt

	June 30, 2011			December 31, 2010
2017 Term Loan	$	666		$	768
8.75% Notes due 2017		400			400
7.875% Notes due 2020		300			300
Total principal amount		1,366			1,468
Less: Unamortized debt discount		(4	)		(5	)
Total	$	1,362		$	1,463

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Derivatives And Risk Management (Tables)

6 Months Ended

Jun. 30, 2011

Derivatives And Risk Management

Fair Values Of Derivatives

	June 30, 2011
	Asset Derivatives				Liability Derivatives
	Consolidated Statement of Financial Position Presentation	Fair Value			Consolidated Statement of Financial Position Presentation	Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	0	Accrued Liabilities		$	6
	Other Assets		$	1	Other Liabilities		$	0
Total Interest rate contracts				1				6
Derivative not designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	0	Accrued Liabilities		$	11
	Other Assets			7	Other Liabilities			16
Total Interest rate contracts				7				27
Foreign exchange contracts	Miscellaneous Receivables			2	Accrued Liabilities			1
Total Derivatives			$	10			$	34
	December 31, 2010
	Asset Derivatives				Liability Derivatives
	Consolidated Statement of Financial Position Presentation	Fair Value			Consolidated Statement of Financial Position Presentation	Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	0	Accrued Liabilities		$	3
	Other Assets			6	Other Liabilities			0
Total Interest rate contracts				6				3
Derivative not designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables		$	0	Accrued Liabilities		$	13
	Other Assets			5	Other Liabilities			20
Total Interest rate contracts				5				33
Foreign exchange contracts	Miscellaneous Receivables			1	Accrued Liabilities			1
Total Derivatives			$	12			$	37

Summary Of Gains And Losses On Derivative Instruments

Change in Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Loss								Amount of Gain (Loss) Recognized in Income								Consolidated Statement of Operations Presentation
	Three Months Ended June 30,								Three Months Ended June 30,
	2011				2010				2011				2010
Derivatives designated as hedging instruments:
Interest rate contracts		$	(6	)		$	0			$	0			$	0		Interest expense
Derivatives not designated as hedging instruments:
Interest rate contracts		$	0			$	0			$	(2	)		$	(10	)	Interest expense (a)
Foreign exchange contracts			0				0				1				2		Other income (loss), net
Total Derivatives not designated as hedging instruments		$	0			$	0			$	(1	)		$	(8	)
Total Derivatives		$	(6	)		$	0			$	(1	)		$	(8	)

(a) We reclassified $2 of losses from accumulated other comprehensive loss to interest expense during the three months ended June 30, 2011 and 2010 related to the 2008 and 2010 Swaps.

	Change in Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Loss							Amount of Gain (Loss) Recognized in Income								Consolidated Statement of Operations Presentation
	Six Months Ended June 30,							Six Months Ended June 30,
	2011				2010			2011				2010
Derivatives designated as hedging instruments:
Interest rate contracts		$	(6	)		$	0		$	0			$	0		Interest expense
Derivatives not designated as hedging instruments:
Interest rate contracts		$	0			$	0		$	(4	)		$	(16	)	Interest expense (a)
Foreign exchange contracts			0				0			2				4		Other income (loss), net
Total Derivatives not designated as hedging instruments		$	0			$	0		$	(2	)		$	(12	)
Total Derivatives		$	(6	)		$	0		$	(2	)		$	(12	)

(a) We reclassified $4 and $2 of losses from accumulated other comprehensive loss to interest expense during the six months ended June 30, 2011 and 2010 related to the 2008 and 2010 Swaps.

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Fair Value Of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2011

Fair Value Of Financial Instruments

Assets And Liabilities Measured At Fair Value On A Recurring Basis

	Fair Value Measurements at June 30, 2011
	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Cash Equivalents (a)	$	20	$	20	$	0	$	0
Derivatives – Foreign Exchange (b)		2		0		2		0
Derivatives – Interest Rates (c)		8		0		8		0
Total	$	30	$	20	$	10	$	0
Liabilities:
Derivatives – Foreign Exchange (b)	$	1	$	0	$	1	$	0
Derivatives – Interest Rates (c)	$	33	$	0	$	33	$	0
Total	$	34	$	0	$	34	$	0

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Pension Plans And Other Postretirement Benefits (Tables)

6 Months Ended

Jun. 30, 2011

Pension Benefits [Member]

Components Of Net Periodic Benefit Cost

Pension Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Service costs for benefits earned	$	1		$	0		$	2		$	1
Interest costs on benefit obligation		12			11			24			23
Assumed return on plan assets		(13	)		(12	)		(26	)		(25	)
Amortization of actuarial net loss		3			3			6			5
Settlement Charges		1			0			1			1
Total	$	4		$	2		$	7		$	5

Healthcare And Other Benefits [Member]

Components Of Net Periodic Benefit Cost

Healthcare and Other Benefits
	Three Months Ended June 30,								Six Months Ended June 30,
	2011				2010				2011				2010
Service costs for benefits earned		$	1			$	1			$	2			$	2
Interest costs on benefit obligation			2				3				4				5
Assumed return on plan assets			(1	)			(2	)			(3	)			(3	)
Amortization of actuarial net gain			(2	)			(2	)			(4	)			(3	)
Total		$	0			$	0			$	(1	)		$	1

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2011

Accumulated Other Comprehensive Loss

Schedule Of Accumulated Other Comprehensive Loss

	Accumulated Currency Adjustments			Postretirement Adjustments			Hedging Activity Adjustments			Accumulated Other Comprehensive Loss
Beginning Balance - January 1, 2010	$	(56	)	$	(160	)	$	(21	)	$	(237	)
Currency translation adjustments		(89	)		0			0			(89	)
Pension settlement charge		0			1			0			1
Amortization of net actuarial loss		0			2			0			2
Realized loss on derivative instruments		0			0			2			2
Ending Balance - June 30, 2010	$	(145	)	$	(157	)	$	(19	)	$	(321	)
Beginning Balance - January 1, 2011	$	(66	)	$	(117	)	$	(11	)	$	(194	)
Currency translation adjustments		81			0			0			81
Pension settlement charge		0			1			0			1
Amortization of net actuarial loss		0			2			0			2
Unrealized loss on derivative instruments		0			0			(6	)		(6	)
Realized loss on derivative instruments		0			0			4			4
Ending Balance - June 30, 2011	$	15		$	(114	)	$	(13	)	$	(112	)

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Segment Data (Tables)

6 Months Ended

Jun. 30, 2011

Segment Data

Operating Results For Each Segment

	Three Months Ended										Six Months Ended
	June 30,										June 30,
	2011					2010					2011					2010
	Net		Profit			Net		Profit			Net		Profit			Net		Profit
	Sales		(Loss)			Sales		(Loss)			Sales		(Loss)			Sales		(Loss)
Reportable Segment
Advanced Interlayers	$	232	$	52		$	208	$	43		$	445	$	101		$	394	$	91
Performance Films		86		19			73		18			162		38			125		27
Technical Specialties		225		82			217		80			445		180			423		157
Reportable Segment Totals		543		153			498		141			1,052		319			942		275
Unallocated and Other		0		(17	)		4		(14	)		0		(48	)		8		(40	)
Total		543		136			502		127			1,052		271			950		235
Reconciliation to Consolidated Totals:
Depreciation and amortization				(31	)				(28	)				(63	)				(55	)
Interest expense				(26	)				(36	)				(54	)				(74	)
Loss on debt extinguishment
or modification				0					0					(2	)				(89	)
Net income attributable to
noncontrolling interest				2					0					3					1
Consolidated Totals:
Net Sales	$	543				$	502				$	1,052				$	950
Income from Continuing
Operations Before Income Taxes			$	81				$	63				$	155				$	18

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Earnings (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2011

Earnings (Loss) Per Share

Schedule Of Earnings Per Share, Basic And Diluted

(Shares in millions)	Three Months Ended June 30,					Six Months Ended June 30,
	2011		2010			2011		2010
Consolidated Statement of Operations:
Income (Loss) from continuing operations	$	70	$	54		$	136	$	(1	)
Less: Net Income attributable to noncontrolling interest		2		0			3		1
Income (Loss) from continuing operations attributable to Solutia		68		54			133		(2	)
Loss from discontinued operations, net of tax		0		(13	)		0		(15	)
Net Income (Loss) attributable to Solutia	$	68	$	41		$	133	$	(17	)
Weighted-average number of shares outstanding used for basic earnings (loss) per share		119.7		118.7			119.5		118.6
Non-vested restricted shares		1.3		1.2			1.3		N/A	(a)
Stock options		0.5		0			0.5		0
Weighted average number of shares outstanding and common equivalent shares used for diluted earnings (loss) per share		121.5		119.9			121.3		118.6

Schedule Of Anti-Dilutive Securities Excluded From Computation Of Earnings Per Share

	Three Months Ended June 30,				Six Months Ended June 30,
(Shares in millions)	2011		2010		2011		2010
Non-vested restricted shares		0.1		0.5		0		0.2
Stock options		1.1		2.6		1.3		2.2
Warrants (a)		4.5		4.5		4.5		4.5

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Condensed Consolidating Financial Statements (Tables)

6 Months Ended

Jun. 30, 2011

Condensed Consolidating Financial Statements

Condensed Consolidating Statement Of Operations

Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2011
	Parent-Only						Non-						Consolidated
	Solutia			Guarantors			Guarantors			Eliminations			Solutia
Net Sales	$	137		$	120		$	486		$	(200	)	$	543
Cost of goods sold		108			77			398			(210	)		373
Gross Profit		29			43			88			10			170
Selling, general and administrative expenses		23			12			25			0			60
Research and development expenses and other operating      expense (income), net		(4	)		2			5			0			3
Operating Income (Loss)		10			29			58			10			107
Equity earnings from affiliates		69			25			0			(94	)		0
Interest expense		(28	)		(1	)		(55	)		58			(26	)
Other income (loss), net		17			16			33			(66	)		0
Income from Continuing Operations Before Income      Tax Expense		68			69			36			(92	)		81
Income tax expense		0			0			11			0			11
Net Income		68			69			25			(92	)		70
Net Income attributable to noncontrolling interest		0			0			2			0			2
Net Income attributable to Solutia	$	68		$	69		$	23		$	(92	)	$	68

Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2010
	Parent-Only					Non-						Consolidated
	Solutia			Guarantors		Guarantors			Eliminations			Solutia
Net Sales	$	123		$	117	$	455		$	(193	)	$	502
Cost of goods sold		108			72		357			(194	)		343
Gross Profit		15			45		98			1			159
Selling, general and administrative expenses		28			14		25			0			67
Research and development expenses and other operating      expense (income), net		3			1		(1	)		0			3
Operating Income (Loss)		(16	)		30		74			1			89
Equity earnings from affiliates		66			28		0			(94	)		0
Interest expense		(36	)		0		(37	)		37			(36	)
Other income, net		10			10		34			(44	)		10
Income from Continuing Operations Before      Income Tax Expense		24			68		71			(100	)		63
Income tax expense		0			0		11			(2	)		9
Income from Continuing Operations		24			68		60			(98	)		54
Income (Loss) from discontinued operations, net of tax		17			1		(31	)		0			(13	)
Net Income		41			69		29			(98	)		41
Net Income attributable to noncontrolling interest		0			0		0			0			0
Net Income attributable to Solutia	$	41		$	69	$	29		$	(98	)	$	41

Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2011
	Parent-Only						Non-						Consolidated
	Solutia			Guarantors			Guarantors			Eliminations			Solutia
Net Sales	$	272		$	227		$	951		$	(398	)	$	1,052
Cost of goods sold		226			146			764			(416	)		720
Gross Profit		46			81			187			18			332
Selling, general and administrative expenses		50			25			47			0			122
Research and development expenses and other operating      expense (income), net		3			1			(6	)		0			(2	)
Operating Income (Loss)		(7	)		55			146			18			212
Equity earnings from affiliates		167			84			0			(251	)		0
Interest expense		(60	)		(1	)		(101	)		108			(54	)
Other income (loss), net		35			29			59			(124	)		(1	)
Loss on debt modification		(2	)		0			0			0			(2	)
Income from Continuing Operations Before Income      Tax Expense		133			167			104			(249	)		155
Income tax expense		0			0			18			1			19
Income (Loss) from Continuing Operations		133			167			86			(250	)		136
Net Income		133			167			86			(250	)		136
Net Income attributable to noncontrolling interest		0			0			3			0			3
Net Income attributable to Solutia	$	133		$	167		$	83		$	(250	)	$	133

Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2010
	Parent-Only					Non-						Consolidated
	Solutia			Guarantors		Guarantors			Eliminations			Solutia
Net Sales	$	235		$	214	$	861		$	(360	)	$	950
Cost of goods sold		203			135		671			(366	)		643
Gross Profit		32			79		190			6			307
Selling, general and administrative expenses		56			28		48			0			132
Research and development expenses and other operating      expense, net		5			2		0			0			7
Operating Income (Loss)		(29	)		49		142			6			168
Equity earnings from affiliates		136			67		0			(203	)		0
Interest expense		(74	)		0		(71	)		71			(74	)
Other income, net		21			23		55			(86	)		13
Loss on debt extinguishment		(88	)		0		(1	)		0			(89	)
Income (Loss) from Continuing Operations Before      Income Tax Expense		(34	)		139		125			(212	)		18
Income tax expense		0			0		23			(4	)		19
Income (Loss) from Continuing Operations		(34	)		139		102			(208	)		(1	)
Income (Loss) from discontinued operations, net of tax		17			0		(32	)		0			(15	)
Net Income (Loss)		(17	)		139		70			(208	)		(16	)
Net Income attributable to noncontrolling interest		0			0		1			0			1
Net Income (Loss) attributable to Solutia	$	(17	)	$	139	$	69		$	(208	)	$	(17	)

Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet
June 30, 2011
	Parent-Only					Non-					Consolidated
	Solutia			Guarantors		Guarantors		Eliminations			Solutia
ASSETS
Current Assets:
Cash and cash equivalents	$	77		$	3	$	89	$	0		$	169
Trade receivables, net		33			48		183		0			264
Intercompany receivables		80			578		466		(1,124	)		0
Miscellaneous receivables		9			1		64		0			74
Inventories		79			55		233		(39	)		328
Prepaid expenses and other current assets		3			2		15		9			29
Current assets of discontinued operations		0			0		2		0			2
Total Current Assets		281			687		1,052		(1,154	)		866
Net Property, Plant and Equipment		179			143		612		0			934
Investments in Affiliates		2,495			684		933		(4,112	)		0
Goodwill		150			190		419		0			759
Net Identified Intangible Assets		183			302		463		0			948
Intercompany Advances		465			556		2,012		(3,033	)		0
Other Assets		73			3		73		0			149
Total Assets	$	3,826		$	2,565	$	5,564	$	(8,299	)	$	3,656
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	49		$	26	$	119	$	0		$	194
Intercompany payables		680			13		431		(1,124	)		0
Accrued liabilities		104			12		106		(2	)		220
Intercompany short-term debt		53			0		527		(580	)		0
Current liabilities of discontinued operations		0			0		13		0			13
Total Current Liabilities		886			51		1,196		(1,706	)		427
Long-Term Debt		1,362			0		0		0			1,362
Intercompany Long-Term Debt		132			23		2,298		(2,453	)		0
Postretirement Liabilities		209			2		82		0			293
Environmental Remediation Liabilities		216			3		15		0			234
Deferred Tax Liabilities		18			11		219		0			248
Non-Current Liabilities of Discontinued Operations		0			0		24		0			24
Other Liabilities		46			6		49		0			101
Equity:
Common stock		1			0		0		0			1
Additional contributed capital		1,646			2,469		1,671		(4,140	)		1,646
Treasury stock		(8	)		0		0		0			(8	)
Accumulated other comprehensive loss		(112	)		0		0		0			(112	)
Accumulated deficit		(570	)		0		0		0			(570	)
Total Shareholders' Equity attributable to Solutia		957			2,469		1,671		(4,140	)		957
Equity attributable to noncontrolling interest		0			0		10		0			10
Total Equity		957			2,469		1,681		(4,140	)		967
Total Liabilities and Equity	$	3,826		$	2,565	$	5,564	$	(8,299	)	$	3,656

Condensed Consolidating Balance Sheet
December 31, 2010
	Parent-Only					Non-					Consolidated
	Solutia			Guarantors		Guarantors		Eliminations			Solutia
ASSETS
Current Assets:
Cash and cash equivalents	$	98		$	7	$	86	$	0		$	191
Trade receivables, net		26			40		162		0			228
Intercompany receivables		100			497		398		(995	)		0
Miscellaneous receivables		14			0		61		0			75
Inventories		69			47		199		(40	)		275
Prepaid expenses and other current assets		7			2		9		9			27
Current assets of discontinued operations		0			0		5		0			5
Total Current Assets		314			593		920		(1,026	)		801
Net Property, Plant and Equipment		180			139		592		0			911
Investments in Affiliates		2,280			559		908		(3,747	)		0
Goodwill		149			192		399		0			740
Net Identified Intangible Assets		186			309		443		0			938
Intercompany Advances		439			514		1,693		(2,646	)		0
Other Assets		78			2		67		0			147
Total Assets	$	3,626		$	2,308	$	5,022	$	(7,419	)	$	3,537
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	53		$	21	$	99	$	0		$	173
Intercompany payables		630			11		354		(995	)		0
Accrued liabilities		103			10		123		(1	)		235
Intercompany short-term debt		17			0		479		(496	)		0
Current liabilities of discontinued operations		0			0		15		0			15
Total Current Liabilities		803			42		1,070		(1,492	)		423
Long-Term Debt		1,463			0		0		0			1,463
Intercompany Long-Term Debt		108			23		2,019		(2,150	)		0
Postretirement Liabilities		225			3		80		0			308
Environmental Remediation Liabilities		225			3		16		0			244
Deferred Tax Liabilities		21			11		206		0			238
Non-Current Liabilities of Discontinued Operations		0			0		25		0			25
Other Liabilities		49			6		42		0			97
Equity:
Common stock		1			0		0		0			1
Additional contributed capital		1,634			2,220		1,557		(3,777	)		1,634
Treasury stock		(6	)		0		0		0			(6	)
Accumulated other comprehensive loss		(194	)		0		0		0			(194	)
Accumulated deficit		(703	)		0		0		0			(703	)
Total Shareholders' Equity attributable to Solutia		732			2,220		1,557		(3,777	)		732
Equity attributable to noncontrolling interest		0			0		7		0			7
Total Equity		732			2,220		1,564		(3,777	)		739
Total Liabilities and Equity	$	3,626		$	2,308	$	5,022	$	(7,419	)	$	3,537

Condensed Consolidating Statement Of Cash Flows

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2011
	Parent-Only						Non-					Consolidated
	Solutia			Guarantors			Guarantors			Eliminations		Solutia
Cash Provided by (Used in) Operations	$	(57	)	$	76		$	74		$	0	$	93
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(7	)		(3	)		(30	)		0		(40	)
Acquisition related payments, net of cash acquired		0			0			(5	)		0		(5	)
Asset disposals		0			3			26			0		29
Other		0			0			1			0		1
Cash Used in Investing Activities		(7	)		0			(8	)		0		(15	)
FINANCING ACTIVITIES:
Payment of long-term debt obligations		(102	)		0			0			0		(102	)
Purchase of treasury shares		(2	)		0			0			0		(2	)
Other, net		1			0			(1	)		0		0
Changes in investments and advances from (to) affiliates		146			(80	)		(66	)		0		0
Cash Provided by (Used in) Financing Activities		43			(80	)		(67	)		0		(104	)
Effect of Exchange Rate Changes on Cash and      Cash Equivalents		0			0			4			0		4
Increase (Decrease) in Cash and Cash Equivalents		(21	)		(4	)		3			0		(22	)
CASH AND CASH EQUIVALENTS:
Beginning of year		98			7			86			0		191
End of year	$	77		$	3		$	89		$	0	$	169

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2010
	Parent-Only						Non-					Consolidated
	Solutia			Guarantors			Guarantors			Eliminations		Solutia
Cash Provided by (Used in) Operations	$	(104	)	$	88		$	99		$	0	$	83
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(3	)		(2	)		(9	)		0		(14	)
Acquisition related payments, net of cash acquired		0			(1	)		(370	)		0		(371	)
Asset disposals		(2	)		0			0			0		(2	)
Cash Used in Investing Activities		(5	)		(3	)		(379	)		0		(387	)
FINANCING ACTIVITIES:
Proceeds from long-term debt obligations		1,144			0			0			0		1,144
Payment of long-term debt obligations		(878	)		0			0			0		(878	)
Payment of short-term debt obligations		0			0			(16	)		0		(16	)
Debt issuance costs		(27	)		0			0			0		(27	)
Purchase of treasury shares		(1	)		0			0			0		(1	)
Other, net		(9	)		0			0			0		(9	)
Changes in investments and advances from (to) affiliates		(157	)		(86	)		243			0		0
Cash Provided by (Used in) Financing Activities		72			(86	)		227			0		213
Effect of Exchange Rate Changes on Cash and      Cash Equivalents		0			0			(25	)		0		(25	)
Decrease in Cash and Cash Equivalents		(37	)		(1	)		(78	)		0		(116	)
CASH AND CASH EQUIVALENTS:
Beginning of period		104			1			138			0		243
End of period	$	67		$	0		$	60		$	0	$	127

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Acquisitions, Divestitures And Discontinued Operations (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2010	Jun. 30, 2010	Jun. 30, 2011 Certain Other Rubber Chemicals Businesses [Member]	Jun. 30, 2010 Primary Accelerators [Member]	Apr. 20, 2010 Integrated Nylon [Member]	Jun. 30, 2010 Integrated Nylon [Member]	Mar. 31, 2011 Novomatrix [Member]	Apr. 30, 2010 Novomatrix [Member]	Jun. 01, 2010 Vistasolar [Member]
Percentage of shares purchased								100.00%	100.00%
Purchase consideration for acquisition of business								$ 72	$ 294
Receipt of preliminary working capital adjustment							1
Purchase consideration for incremental working capital acquired									3
Acquisition related costs including legal and accounting fees	3	7
Gain in other operating expense (income), net recognized in divestiture			17
Discontinued operations costs				38
Impairment of long-lived assets				6
Payment for settlement of outstanding matters					17
Payment to settle liabilities					4
Prior period gain (loss) adjustment on disposals						$ 17

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Consolidated Statement Of Financial Position (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 169	$ 191
Trade receivables, net of allowances of $4 in 2011 and 2010	264	228
Miscellaneous receivables	74	75
Inventories	328	275
Prepaid expenses and other assets	29	27
Current assets of discontinued operations	2	5
Total Current Assets	866	801
Net Property, Plant and Equipment	934	911
Goodwill	759	740
Net Identified Intangible Assets	948	938
Other Assets	149	147
Total Assets	3,656	3,537
LIABILITIES AND EQUITY
Accounts payable	194	173
Accrued liabilities	220	235
Current liabilities of discontinued operations	13	15
Total Current Liabilities	427	423
Long-Term Debt	1,362	1,463
Postretirement Liabilities	293	308
Environmental Remediation Liabilities	234	244
Deferred Tax Liabilities	248	238
Non-Current Liabilities of Discontinued Operations	24	25
Other Liabilities	101	97
Commitments and Contingencies (Note 8)
Equity:
Common stock at $0.01 par value; (500,000,000 shares authorized, 123,279,114 and 122,655,811 shares issued in 2011and 2010, respectively)	1	1
Additional contributed capital	1,646	1,634
Treasury shares, at cost (969,934 in 2011 and 772,686 in 2010)	(8)	(6)
Accumulated other comprehensive loss	(112)	(194)
Accumulated deficit	(570)	(703)
Total Shareholders' Equity attributable to Solutia	957	732
Equity attributable to noncontrolling interest	10	7
Total Equity	967	739
Total Liabilities and Equity	$ 3,656	$ 3,537

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Acquisitions, Divestitures And Discontinued Operations (Fair Values Of Assets Acquired And Liabilities Assumed) (Details) (USD $) In Millions	Apr. 30, 2010 Novomatrix [Member]	Jun. 01, 2010 Vistasolar [Member]
Trade receivables	$ 2	$ 10
Miscellaneous receivables	1	0
Inventories	9	3
Property, plant and equipment	0	16
Identified intangible assets	50	119
Goodwill	25	187
Total assets acquired	87	335
Accounts payable	4	2
Accrued liabilities	3	1
Postretirement liabilities	0	1
Deferred tax liabilities	8	34
Total liabilities assumed	$ 15	$ 38

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Acquisitions, Divestitures And Discontinued Operations (Summary Of Identified Intangible Assets) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended				3 Months Ended	4 Months Ended				4 Months Ended	3 Months Ended
	Apr. 30, 2010 Novomatrix [Member] years	Apr. 30, 2010 Novomatrix [Member] Customer Relationships [Member] years	Apr. 30, 2010 Novomatrix [Member] Other [Member] years	Apr. 30, 2010 Novomatrix [Member] Trademarks [Member]	Apr. 30, 2010 Novomatrix [Member] Technology [Member] years	Jun. 01, 2010 Vistasolar [Member] years	Jun. 01, 2010 Vistasolar [Member] Customer Relationships [Member] years	Jun. 01, 2010 Vistasolar [Member] Other [Member] years	Jun. 01, 2010 Vistasolar [Member] Trademarks [Member]	Jun. 01, 2010 Vistasolar [Member] Technology [Member] years	Apr. 30, 2010 Novamatrix And Vistasolar [Member] years
Weighted Average Life in Years	17	17	5		0	23	25	3		20
Identified indefinite lived intangible assets, carrying value				$ 20					$ 8
Identified finite-lived intangible assets, carrying value		29	1		0		81	5		25
Identified indefinite-lived intangible assets, carrying value	$ 50					$ 119
Total weighted average life in years											22

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Acquisitions, Divestitures And Discontinued Operations (Summary Of Pro Forma Information For Consolidated Results Of Operations) (Details) (USD $) In Millions, except Per Share data	3 Months Ended	6 Months Ended
	Jun. 30, 2010	Jun. 30, 2010
Acquisitions, Divestitures And Discontinued Operations
Net sales	$ 523	$ 1,005
Net income (loss)	47	(5)
Net income (loss) per basic and dilutive share	$ 0.39	$ (0.04)
Net income (loss) attributable to Solutia	$ 47	$ (6)
Net income (loss) attributable to Solutia per basic and dilutive share	$ 0.39	$ (0.05)

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Acquisitions, Divestitures And Discontinued Operations (Summary Of Operating Results From Discontinued Operations) (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Income (Loss) from discontinued operations, net of tax	$ 0	$ (13)	$ 0	$ (15)
Primary Accelerators [Member]
Net sales	0	16	0	34
Income (loss) before income taxes	0	(37)	0	(40)
Income tax expenses (benefit)	0	(7)	0	(8)
Income (Loss) from discontinued operations, net of tax	0	(30)	0	(32)
Integrated Nylon [Member]
Income (loss) before income taxes	0	17	0	17
Income tax expenses (benefit)	0	0	0	0
Income (Loss) from discontinued operations, net of tax	$ 0	$ 17	$ 0	$ 17

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Acquisitions, Divestitures And Discontinued Operations (Summary Of Assets And Liabilities Classified As Discontinued Operations) (Details) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Current assets of discontinued operations	$ 2	$ 5
Current liabilities of discontinued operations	13	15
Non-current liabilities of discontinued operations	24	25
Primary Accelerators [Member]
Trade and miscellaneous receivables, net	2	5
Current assets of discontinued operations	2	5
Accounts payable and accrued liabilities	13	15
Current liabilities of discontinued operations	13	15
Other liabilities	24	25
Non-current liabilities of discontinued operations	24	25
Total liabilities	37	40
Parent Company [Member]
Current assets of discontinued operations	0	0
Current liabilities of discontinued operations	0	0
Non-current liabilities of discontinued operations	$ 0	$ 0

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Share-Based Compensation (Narrative) (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011 years	Jun. 30, 2010
Maximum [Member] | Non-Vested Restricted Shares [Member]
Actual vesting of shares			175.00%
Minimum [Member] | Non-Vested Restricted Shares [Member]
Actual vesting of shares			0.00%
Stock Options [Member]
Assumed dividend yield			0.00%
Compensation expense	$ 1	$ 1	$ 2	$ 2
Pre-tax unrecognized compensation expense for stock options, net of forfeitures	11		11
Remaining weighted average period (in years)			2.0
Stock Options [Member] | 2007 Management Plan [Member]
Granted options to purchase			856,705
Stock Options [Member] | 2007 Director Plan [Member]
Granted options to purchase			0
Non-Vested Restricted Shares [Member]
Pre-tax unrecognized compensation expense for stock options, net of forfeitures	19		19
Remaining weighted average period (in years)			2
Restricted stock expense awards	$ 3	$ 4	$ 7	$ 7
Non-Vested Restricted Shares [Member] | 2007 Management Plan [Member]
Restricted stock awards granted			415,399
Weighted average grant date fair value of restricted stock awards			$ 25.39
Non-Vested Restricted Shares [Member] | 2007 Non-employee Director Compensation Plan [Member]
Restricted stock awards granted			25,048
Weighted average grant date fair value of restricted stock awards			$ 24.41

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Share-Based Compensation (Weighted Average Fair Value of Options Granted) (Details) (USD $)	6 Months Ended
	Jun. 30, 2011 years
Share-Based Compensation
Expected volatility	37.83%
Expected term (in years)	6.3
Risk-free rate	2.89%
Weighted average grant date fair value	$ 9.76

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Share-Based Compensation (Stock Option Information) (Details) (USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2011 years
Share-Based Compensation
Vested or Expected to Vest, Options	3,138,881
Vested or Expected to Vest, Weighted-Average Exercise Price	$ 18.55
Vested or Expected to Vest, Weighted-Average Remaining Contractual Life	8.0
Vested or Expected to Vest, Aggregate Intrinsic Value	$ 14	[1]
Exercisable, Options	1,744,506
Exercisable, Weighted-Average Exercise Price	$ 17.25
Exercisable, Weighted-Average Remaining Contractual Term	6.9
Exercisable, Aggregate Intrinsic Value	$ 10	[1]

[1] Intrinsic value for stock options is calculated based on the difference between the exercise price of the underlying awards and the quoted market price of our common stock as of the reporting date.

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Goodwill And Other Intangible Assets (Narrative) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011
Goodwill And Other Intangible Assets
Amortization expense for 2011	$ 39
Amortization expense for 2012	39
Amortization expense for 2013	39
Amortization expense for 2014	39
Amortization expense for 2015	$ 39

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Goodwill And Other Intangible Assets (Goodwill By Reportable Segment) (Details) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011
Beginning Balance	$ 740
Currency fluctuations	19
Ending Balance	759
Advanced Interlayers [Member]
Beginning Balance	407
Currency fluctuations	18
Ending Balance	425
Performance Films [Member]
Beginning Balance	186
Currency fluctuations	1
Ending Balance	187
Technical Specialties [Member]
Beginning Balance	147
Currency fluctuations	0
Ending Balance	$ 147

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Consolidated Statement Of Financial Position (Parenthetical) (USD $) In Millions, except Share data	Jun. 30, 2011	Dec. 31, 2010
Consolidated Statement Of Financial Position
Trade receivables net of, allowances	$ 4	$ 4
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	123,279,114	122,655,811
Treasury stock, shares	969,934	772,686

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Goodwill And Other Intangible Assets (Summarized Identified Intangible Assets) (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2011 years	Dec. 31, 2010 years
Gross Carrying Value	$ 1,058	$ 1,026
Accumulated Amortization	(110)	(88)
Net Carrying Value	948	938
Customer Relationships [Member]
Estimated Useful Life in Years, Minimum	13	13
Estimated Useful Life in Years, Maximum	27	27
Gross Carrying Value	623	606
Accumulated Amortization	(69)	(56)
Net Carrying Value	554	550
Technology [Member]
Estimated Useful Life in Years, Minimum	5	5
Estimated Useful Life in Years, Maximum	26	26
Gross Carrying Value	234	225
Accumulated Amortization	(35)	(29)
Net Carrying Value	199	196
Trade Names [Member]
Estimated Useful Life in Years, Minimum	10	10
Estimated Useful Life in Years, Maximum	25	25
Gross Carrying Value	20	20
Accumulated Amortization	(2)	(1)
Net Carrying Value	18	19
Patents [Member]
Estimated Useful Life in Years	13	13
Gross Carrying Value	5	5
Accumulated Amortization	(1)	(1)
Net Carrying Value	4	4
Other [Member]
Estimated Useful Life in Years, Minimum	3	3
Estimated Useful Life in Years, Maximum	5	5
Gross Carrying Value	7	6
Accumulated Amortization	(3)	(1)
Net Carrying Value	4	5
Trademarks [Member]
Gross Carrying Value	169	164
Accumulated Amortization	0	0
Net Carrying Value	$ 169	$ 164

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Goodwill And Other Intangible Assets (Amortization Expense And Its Allocation) (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Goodwill And Other Intangible Assets
Cost of goods sold	$ 3	$ 3	$ 6	$ 5
Selling, general and administrative expenses	7	5	14	10
Total	$ 10	$ 8	$ 20	$ 15

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Detail Of Certain Balance Sheet Accounts (Narrative) (USD $) In Millions	12 Months Ended
	Dec. 31, 2010
Detail Of Certain Balance Sheet Accounts
Cumulative effect of change in accounting principle recorded to cost of goods sold	$ 1

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Detail Of Certain Balance Sheet Accounts (Components Of Inventories) (Details) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Detail Of Certain Balance Sheet Accounts
Finished goods	$ 199	$ 163
Goods in process	35	36
Raw materials and supplies	94	76
Inventories	$ 328	$ 275

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Detail Of Certain Balance Sheet Accounts (Components Of Property, Plant And Equipment) (Details) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Detail Of Certain Balance Sheet Accounts
Land	$ 35	$ 35
Leasehold improvements	11	10
Buildings	223	214
Machinery and equipment	838	796
Construction in progress	84	54
Total property, plant and equipment	1,191	1,109
Less: Accumulated depreciation	(257)	(198)
Net Property, Plant, and Equipment	$ 934	$ 911

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Detail Of Certain Balance Sheet Accounts (Components Of Accrued Liabilities) (Details) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Detail Of Certain Balance Sheet Accounts
Wages and benefits	$ 36	$ 45
Foreign currency and interest rate hedge agreements	18	17
Restructuring reserves	6	5
Environmental remediation liabilities	32	29
Accrued income taxes payable	9	19
Accrued taxes other than income	26	27
Accrued selling expenses	14	17
Accrued interest	13	13
Other	66	63
Accrued Liabilities	$ 220	$ 235

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Income Taxes (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010
Income tax expense	$ 11	$ 9	$ 19	$ 19
Unrecognized tax benefits, inclusive of interest and penalties	176		176		167
Unrecognized tax benefits that will impact effective tax rate	72		72		68
U.S. [Member]
Income tax expense	0		0
Impacting The Effective Tax Rate [Member]
Unrecognized tax benefit, range minimum	0		0
Unrecognized tax benefits, range maximum	25		25
Not Impacting The Effective Tax Rate [Member]
Unrecognized tax benefit, range minimum	0		0
Unrecognized tax benefits, range maximum	16		16
Parent Company [Member]
Income tax expense	$ 0	$ 0	$ 0	$ 0

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Restructuring Reserves (Narrative) (Details) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011	Dec. 31, 2010
Long lived assets impairment charge	$ 8
Employee reduction charges	4
Restructuring liabilities to be utilized within next twelve months	6	5
Other Operating Expense (Income) [Member]
Long lived assets impairment charge	8
Employee reduction charges	$ 0

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Restructuring Reserves (Summary Of Restructuring Charges) (Details) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011
Employment Reductions	$ 4
Long-Lived Assets	8
Total	12
Selling, General And Administrative Expense [Member]
Employment Reductions	4
Long-Lived Assets	0
Total	4
Other Operating Expense (Income) [Member]
Employment Reductions	0
Long-Lived Assets	8
Total	$ 8

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Restructuring Reserves (Summary Of Restructuring Costs) (Details) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011
Restructuring charges, opening balance	$ 7
Charges taken	12
Amounts utilized	(4)
Non-cash reductions	(8)
Currency fluctuations	1
Restructuring charges, closing balance	8
Contract Termination Payments [Member]
Restructuring charges, opening balance	2
Charges taken	0
Amounts utilized	0
Non-cash reductions	0
Currency fluctuations	0
Restructuring charges, closing balance	2
Employment Reductions [Member]
Restructuring charges, opening balance	5
Charges taken	4
Amounts utilized	(4)
Non-cash reductions	0
Currency fluctuations	1
Restructuring charges, closing balance	6
Impairment of Long-Lived Assets [Member]
Restructuring charges, opening balance	0
Charges taken	8
Amounts utilized	0
Non-cash reductions	(8)
Currency fluctuations	0
Restructuring charges, closing balance	$ 0

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Consolidated Statement Of Cash Flows (USD $) In Millions	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS OPERATING ACTIVITIES:
Net income (loss)	$ 136	$ (16)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:
Loss from discontinued operations, net of tax	0	15
Depreciation and amortization	63	55
Pension contributions in excess of expense	(13)	(52)
Other postretirement benefit contributions in excess of expense	(9)	(7)
Amortization of debt issuance costs and discount	2	5
Deferred income taxes	11	(27)
Share-based compensation expense	9	9
Other charges:
Non-cash loss on deferred debt issuance cost and debt discount write-off	0	80
Other (gains) charges, including restructuring expenses	(2)	21
Changes in assets and liabilities:
Income taxes payable	(2)	11
Trade receivables	(41)	(5)
Inventories	(56)	(16)
Accounts payable	22	(5)
Environmental remediation liabilities	(7)	(8)
Other assets and liabilities	(16)	46
Cash Provided by Operations - Continuing Operations	97	106
Cash Used in Operations - Discontinued Operations	(4)	(23)
Cash Provided by Operations	93	83
INVESTING ACTIVITIES:
Property, plant and equipment purchases	(40)	(14)
Acquisition related payments, net of cash acquired	(5)	(371)
Asset disposals	29	0
Other	1	0
Cash Used in Investing Activities - Continuing Operations	(15)	(385)
Cash Used in Investing Activities - Discontinued Operations	0	(2)
Cash Used in Investing Activities	(15)	(387)
FINANCING ACTIVITIES:
Proceeds from long-term debt obligations	0	1,144
Payment of long-term debt obligations	(102)	(878)
Payment of short-term debt obligations	0	(16)
Debt issuance costs	0	(27)
Purchase of treasury shares	(2)	(1)
Other, net	0	(9)
Cash Provided by (Used in) Financing Activities	(104)	213
Effect of Exchange Rate Changes on Cash and Cash Equivalents	4	(25)
DECREASE IN CASH AND CASH EQUIVALENTS	(22)	(116)
CASH AND CASH EQUIVALENTS:
Beginning of period	191	243
End of period	169	127
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest	55	48
Cash payments for income taxes, net of refunds	26	19
Non-Cash Investing Activities:
Capital expenditures included in accounts payable	$ 9	$ 4

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Commitments And Contingencies (Narrative) (Details) (USD $) In Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010	Feb. 28, 2008
Legal costs		$ 2		$ 3
Settlement in a tax indemnification	8		8
Accrued additional payments for remediation		2		2
Funding of environmental liabilities					325
Cash payments toward remediation		31
Accrual for environmental loss contingencies		68
Anniston, Alabama [Member]
Accrual for environmental loss contingencies		108
Sauget, Illinois [Member]
Accrual for environmental loss contingencies		68
W. G. Krummrich Site [Member]
Accrual for environmental loss contingencies		22
Shared Sites [Member]
Accrued additional payments for remediation		$ 163

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Commitments And Contingencies (Environmental Liabilities) (Details) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011
Commitments And Contingencies
Beginning balance	$ 273
Net charges taken	3
Amounts utilized	(11)
Currency fluctuations	1
Ending balance	$ 266

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Commitments And Contingencies (Environmental Remediation Liabilities) (Details) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Commitments And Contingencies
Environmental Remediation Liabilities, current	$ 32	$ 29
Environmental Remediation Liabilities, long-term	234	244
Total	$ 266	$ 273

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Debt Obligations (Narrative) (Details) (USD $)	6 Months Ended			6 Months Ended	3 Months Ended	6 Months Ended			6 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010	Jun. 30, 2010 Parent Company [Member]	Mar. 31, 2010 7.875% Notes Due 2020 [Member]	Jun. 30, 2011 7.875% Notes Due 2020 [Member]	Dec. 31, 2010 7.875% Notes Due 2020 [Member]	Dec. 31, 2010 Credit Facility [Member]	Jun. 30, 2011 2017 Term Loan [Member]	Dec. 31, 2010 2017 Term Loan [Member]	Jun. 30, 2011 2015 Revolver [Member]	Dec. 31, 2010 2015 Revolver [Member]	Jun. 30, 2011 2017 Notes [Member]
Term Loan								$ 850,000,000	$ 666,000,000	$ 768,000,000
Line of credit facility												300,000,000
Interest rate of basis points	100
Loss on debt loss on debt extinguishment	(2,000,000)					(9,000,000)
Notes payable					300,000,000	300,000,000	300,000,000						400,000,000
Proceeds from issuance of long-term debt obligations	0	1,144,000,000		1,144,000,000	292,000,000
Debt instrument maturity date						2020			2017		2015
Write-off of deferred debt issuance cost	0	80,000,000				80,000,000
Penalty for the early extinguishment of debt	(2,000,000)					(9,000,000)
Principal payment									102,000,000
Voluntary payment									98,000,000
Short-term borrowings	0		0
Debt instrument interest rate percentage						7.875%							8.75%
Weighted average interest rate on total debt	6.00%		6.40%
Debt instrument issued percent of par						99.50%			99.50%
Percentage of principal to be paid quarterly									1.00%
Term loan issued									850,000,000
Total principal amount	1,366,000,000		1,468,000,000
Amendment Principal amount									$ 700,000,000

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Debt Obligation (Schedule Of Long-Term Debt) (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2011	Dec. 31, 2010	Mar. 31, 2010
Total principal amount	$ 1,366	$ 1,468
Less: Unamortized debt discount	(4)	(5)
Total	1,362	1,463
2017 Term Loan [Member]
Term Loan	666.0	768.0
Debt instrument maturity date	2017
7.875% Notes Due 2020 [Member]
Notes	300	300	300
Debt instrument interest rate percentage	7.875%
Debt instrument maturity date	2020
8.75% Notes Due 2017 [Member]
Notes	$ 400	$ 400
Debt instrument interest rate percentage	8.75%
Debt instrument maturity date	2017

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Derivatives And Risk Management (Narrative) (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended											6 Months Ended
	Jun. 30, 2011	Dec. 31, 2010	Jun. 30, 2011 Notional Amount Year 2012 [Member] 2011 Caps [Member]	Jun. 30, 2011 Notional Amount Year 2013 [Member] 2011 Caps [Member]	Jun. 30, 2011 Notional Amount Year 2014 [Member] 2011 Caps [Member]	Jun. 30, 2011 Notional Amount Year 2015 [Member] 2011 Caps [Member]	Dec. 31, 2008 Maximum [Member] 2008 Swap [Member]	Jun. 30, 2011 Maximum [Member] 2010 Swap [Member]	Jun. 30, 2011 Maximum [Member] 2011 Caps [Member]	Jun. 30, 2011 Minimum [Member] 2008 Swap [Member]	Jun. 30, 2011 Minimum [Member] 2010 Swap [Member]	Jun. 30, 2011 2011 Caps [Member]	Jun. 30, 2010 2011 Caps [Member]
Notional amount of interest rate derivatives			$ 400	$ 400	$ 300	$ 200	$ 800	$ 600	$ 500	$ 150	$ 200
Interest rate margin												0.75%
Fixed interest rate												2.21%
Fixed derivatives margin												2.75%
Notional amount interest rate												4.96%
Foreign currency forward contracts value	148	104
Forward exchange contract, maximum maturity period (months)	18
Deferred losses expected reclassification period (months)	twelve
Deferred losses to be reclassified	$ 8
Derivative, description of terms													The combination of the 0.75% LIBOR floor on our 2017 Term Loan along with cash payment on the 2011 Caps results in total payments at a fixed rate of 2.21%, plus the margin of 2.75%, for a total of 4.96% on the notional amounts hedged through 2015.

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Derivatives And Risk Management (Fair Values Of Derivatives) (Details) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Derivative assets, fair value	$ 10	$ 12
Derivative liabilities, fair value	34	37
Interest Rate Contracts [Member] | Derivatives Designated As Hedging Instruments [Member]
Derivative assets, fair value	1	6
Derivative liabilities, fair value	6	3
Interest Rate Contracts [Member] | Derivatives Designated As Hedging Instruments [Member] | Miscellaneous Receivables [Member]
Derivative assets, fair value	0	0
Interest Rate Contracts [Member] | Derivatives Designated As Hedging Instruments [Member] | Accrued Liabilities [Member]
Derivative liabilities, fair value	6	3
Interest Rate Contracts [Member] | Derivatives Designated As Hedging Instruments [Member] | Other Assets [Member]
Derivative assets, fair value	1	6
Interest Rate Contracts [Member] | Derivatives Designated As Hedging Instruments [Member] | Other Liabilities [Member]
Derivative liabilities, fair value	0	0
Interest Rate Contracts [Member] | Derivatives Not Designated As Hedging Instruments [Member]
Derivative assets, fair value	7	5
Derivative liabilities, fair value	27	33
Interest Rate Contracts [Member] | Derivatives Not Designated As Hedging Instruments [Member] | Miscellaneous Receivables [Member]
Derivative assets, fair value	0	0
Interest Rate Contracts [Member] | Derivatives Not Designated As Hedging Instruments [Member] | Accrued Liabilities [Member]
Derivative liabilities, fair value	11	13
Interest Rate Contracts [Member] | Derivatives Not Designated As Hedging Instruments [Member] | Other Assets [Member]
Derivative assets, fair value	7	5
Interest Rate Contracts [Member] | Derivatives Not Designated As Hedging Instruments [Member] | Other Liabilities [Member]
Derivative liabilities, fair value	16	20
Foreign Exchange Contracts [Member] | Derivatives Not Designated As Hedging Instruments [Member] | Miscellaneous Receivables [Member]
Derivative assets, fair value	2	1
Foreign Exchange Contracts [Member] | Derivatives Not Designated As Hedging Instruments [Member] | Accrued Liabilities [Member]
Derivative liabilities, fair value	$ 1	$ 1

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Derivatives And Risk Management (Summary Of Gains And Losses On Derivative Instruments) (Details) (USD $) In Millions	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Amount of Gain (Loss) Recognized in Income	$ (1)		$ (8)		$ (2)		$ (12)
Change in Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Loss	(6)		0		(6)		0
Interest Rate Contracts [Member]
Reclassification of losses from accumulated other comprehensive loss to interest expenses	2		2		4		2
Interest Rate Contracts [Member] | Derivatives Designated As Hedging Instruments [Member]
Change in Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Loss	(6)		0		(6)		0
Interest Rate Contracts [Member] | Derivatives Designated As Hedging Instruments [Member] | Interest Expense [Member]
Amount of Gain (Loss) Recognized in Income	0		0		0		0
Interest Rate Contracts [Member] | Derivatives Not Designated As Hedging Instruments [Member]
Change in Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Loss	0		0		0		0
Interest Rate Contracts [Member] | Derivatives Not Designated As Hedging Instruments [Member] | Interest Expense [Member]
Amount of Gain (Loss) Recognized in Income	(2)	[1]	(10)	[1]	(4)	[2]	(16)	[2]
Foreign Exchange Contracts [Member] | Derivatives Not Designated As Hedging Instruments [Member]
Change in Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Loss	0		0		0		0
Foreign Exchange Contracts [Member] | Derivatives Not Designated As Hedging Instruments [Member] | Other Income Loss Net [Member]
Amount of Gain (Loss) Recognized in Income	1		2		2		4
Derivatives Not Designated As Hedging Instruments [Member]
Amount of Gain (Loss) Recognized in Income	(1)		(8)		(2)		(12)
Change in Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Loss	$ 0		$ 0		$ 0		$ 0

[1] We reclassified $2 of losses from accumulated other comprehensive loss to interest expense during the three months ended June 30, 2011 and 2010 related to the 2008 and 2010 Swaps.

[2] We reclassified $4 and $2 of losses from accumulated other comprehensive loss to interest expense during the six months ended June 30, 2011 and 2010 related to the 2008 and 2010 Swaps

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Fair Value Of Financial Instruments (Narrative) (Details) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Fair Value Of Financial Instruments
Long-term debt, estimated fair value	$ 1,420	$ 1,530
Long-Term Debt	$ 1,362	$ 1,463

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Fair Value Of Financial Instruments (Assets And Liabilities Measured At Fair Value On A Recurring Basis) (USD $) In Millions	Jun. 30, 2011		Dec. 31, 2010
Cash Equivalents	$ 20	[1]	$ 60	[1]
Total Assets	30		72
Total Liabilities	34		37
Interest Rate Contracts [Member]
Derivative Assets	8	[2]	11	[2]
Derivative Liabilities	33		36	[2]
Interest Rate Contracts [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Derivative Assets	0	[2]	0	[2]
Derivative Liabilities	0		0	[2]
Interest Rate Contracts [Member] | Significant Other Observable Inputs (Level 2) [Member]
Derivative Assets	8	[2]	11	[2]
Derivative Liabilities	33		36	[2]
Interest Rate Contracts [Member] | Significant Unobservable Inputs (Level 3) [Member]
Derivative Assets	0	[2]	0	[2]
Derivative Liabilities	0		0	[2]
Foreign Exchange Contracts [Member]
Derivative Assets	2	[3]	1	[3]
Derivative Liabilities	1		1	[3]
Foreign Exchange Contracts [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Derivative Assets	0	[3]	0	[3]
Derivative Liabilities	0		0	[3]
Foreign Exchange Contracts [Member] | Significant Other Observable Inputs (Level 2) [Member]
Derivative Assets	2	[3]	1	[3]
Derivative Liabilities	1		1	[3]
Foreign Exchange Contracts [Member] | Significant Unobservable Inputs (Level 3) [Member]
Derivative Assets	0	[3]	0	[3]
Derivative Liabilities	0		0	[3]
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Cash Equivalents	20	[1]	60	[1]
Total Assets	20		60
Total Liabilities	0		0
Significant Other Observable Inputs (Level 2) [Member]
Cash Equivalents	0	[1]	0	[1]
Total Assets	10		12
Total Liabilities	34		37
Significant Unobservable Inputs (Level 3) [Member]
Cash Equivalents	0	[1]	0	[1]
Total Assets	0		0
Total Liabilities	$ 0		$ 0

[1] Includes cash invested in money market funds.

[2] Includes interest rate cap and swap agreements which are valued using counterparty quotes, which use discounted cash flows and the then-applicable forward interest rates.

[3] Includes foreign currency forward and options contracts which are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount.

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Consolidated Statement Of Equity (USD $) In Millions	Common Stock [Member]	Additional Contributed Capital [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Loss [Member]	Accumulated Deficit [Member]	Equity Attributable to Noncontrolling Interest [Member]	Total
Beginning Balance at Dec. 31, 2009	$ 1	$ 1,612	$ (2)	$ (237)	$ (781)	$ 7	$ 600
Comprehensive income (loss):
Net income (loss)	0	0	0	0	(17)	1	(16)
Accumulated currency adjustments	0	0	0	(89)	0	0	(89)
Postretirement adjustments	0	0	0	3	0	0	3
Hedging activity adjustments	0	0	0	2	0	0	2
Treasury stock purchases	0	0	(1)	0	0	0	(1)
Share-based compensation expense	0	9	0	0	0	0	9
Ending Balance at Jun. 30, 2010	1	1,621	(3)	(321)	(798)	8	508
Beginning Balance at Dec. 31, 2010	1	1,634	(6)	(194)	(703)	7	739
Comprehensive income (loss):
Net income (loss)	0	0	0	0	133	3	136
Accumulated currency adjustments	0	0	0	81	0	0	81
Postretirement adjustments	0	0	0	3	0	0	3
Hedging activity adjustments	0	0	0	(2)	0	0	(2)
Treasury stock purchases	0	0	(2)	0	0	0	(2)
Stock option exercises	0	3	0	0	0	0	3
Share-based compensation expense	0	9	0	0	0	0	9
Ending Balance at Jun. 30, 2011	$ 1	$ 1,646	$ (8)	$ (112)	$ (570)	$ 10	$ 967

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Pension Plans And Other Postretirement Benefits (Narrative) (Details) (USD $) In Millions	3 Months Ended		6 Months Ended			12 Months Ended
	Jun. 30, 2011 Pension Benefits [Member]	Jun. 30, 2010 Pension Benefits [Member]	Jun. 30, 2011 Pension Benefits [Member]	Jun. 30, 2010 Pension Benefits [Member]	Jun. 30, 2011 Pension Contribution [Member]	Dec. 31, 2011 Pension Contribution [Member]
Settlement charges	$ 1	$ 0	$ 1	$ 1
Expected contributions by employer to pension plans						47
Contributions by employer to pension plans					$ 19

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Pension Plans And Other Postretirement Benefits (Components Of Net Periodic Benefit Cost) (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Pension Benefits [Member]
Service costs for benefits earned	$ 1	$ 0	$ 2	$ 1
Interest costs on benefit obligation	12	11	24	23
Assumed return on plan assets	(13)	(12)	(26)	(25)
Amortization of net actuarial gain/loss	3	3	6	5
Settlement Charges	1	0	1	1
Total	4	2	7	5
Healthcare And Other Benefits [Member]
Service costs for benefits earned	1	1	2	2
Interest costs on benefit obligation	2	3	4	5
Assumed return on plan assets	(1)	(2)	(3)	(3)
Amortization of net actuarial gain/loss	(2)	(2)	(4)	(3)
Total	$ 0	$ 0	$ (1)	$ 1

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Accumulated Other Comprehensive Loss (Schedule Of Accumulated Other Comprehensive Loss) (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Beginning Balance			$ (194)
Accumulated currency adjustments	24	(54)	81	(89)
Ending Balance	(112)		(112)
Accumulated Currency Adjustments [Member]
Beginning Balance			(66)	(56)
Accumulated currency adjustments			81	(89)
Pension settlement charge			0	0
Amortization of net actuarial loss			0	0
Unrealized loss on derivative instruments			0
Realized loss on derivative instruments			0	0
Ending Balance	15	(145)	15	(145)
Postretirement Adjustments [Member]
Beginning Balance			(117)	(160)
Accumulated currency adjustments			0	0
Pension settlement charge			1	1
Amortization of net actuarial loss			2	2
Unrealized loss on derivative instruments			0
Realized loss on derivative instruments			0	0
Ending Balance	(114)	(157)	(114)	(157)
Hedging Activity Adjustments [Member]
Beginning Balance			(11)	(21)
Accumulated currency adjustments			0	0
Pension settlement charge			0	0
Amortization of net actuarial loss			0	0
Unrealized loss on derivative instruments			(6)
Realized loss on derivative instruments			4	2
Ending Balance	(13)	(19)	(13)	(19)
Accumulated Other Comprehensive Loss [Member]
Beginning Balance			(194)	(237)
Accumulated currency adjustments			81	(89)
Pension settlement charge			1	1
Amortization of net actuarial loss			2	2
Unrealized loss on derivative instruments			(6)
Realized loss on derivative instruments			4	2
Ending Balance	$ (112)	$ (321)	$ (112)	$ (321)

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Segment Data (Operating Results For Each Segment) (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Total Net Sales	$ 543	$ 502	$ 1,052	$ 950
Total Profit (Loss)	136	127	271	235
Depreciation and amortization	(31)	(28)	(63)	(55)
Interest expense	(26)	(36)	(54)	(74)
Loss on debt extinguishment or modification	0	0	(2)	(89)
Net Income attributable to noncontrolling interest	2	0	3	1
Income from Continuing Operations Before Income Taxes	81	63	155	18
Advanced Interlayers [Member]
Net Sales	232	208	445	394
Profit (Loss)	52	43	101	91
Performance Films [Member]
Net Sales	86	73	162	125
Profit (Loss)	19	18	38	27
Technical Specialties [Member]
Net Sales	225	217	445	423
Profit (Loss)	82	80	180	157
Reportable Segment [Member]
Net Sales	543	498	1,052	942
Profit (Loss)	153	141	319	275
Unallocated And Other [Member]
Net Sales	0	4	0	8
Profit (Loss)	$ (17)	$ (14)	$ (48)	$ (40)

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Earnings (Loss) Per Share (Schedule Of Earnings Per Share, Basic And Diluted) (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Income (loss) from continuing operations	$ 70	$ 54	$ 136	$ (1)
Less: Net Income attributable to noncontrolling interest	2	0	3	1
Income (loss) from continuing operations attributable to Solutia	68	54	133	(2)
Loss from Discontinued Operations, net of tax	0	(13)	0	(15)
Net Income (Loss) attributable to Solutia	68	41	133	(17)
Weighted-average number of shares outstanding used for basic earnings (loss) per share	119.7	118.7	119.5	118.6
Non-vested restricted shares	1.3	1.2	1.3		[1]
Stock options	0.5	0	0.5
Weighted average number of shares outstanding and common equivalent shares used for diluted earnings (loss) per share	121.5	119.9	121.3	118.6
Parent Company [Member]
Income (loss) from continuing operations		24	133	(34)
Less: Net Income attributable to noncontrolling interest	0	0	0	0
Loss from Discontinued Operations, net of tax		17		17
Net Income (Loss) attributable to Solutia	$ 68	$ 41	$ 133	$ (17)

[1] 1.1 million shares of non-vested restricted stock for the six months ended June 30, 2010 were excluded from the dilutive earnings per share calculation because we experienced a net loss for this period.

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Earning (Loss) Per Share (Schedule of Anti-Dilutive Securities Excluded from Computation of Earnings Per Share) (Details) (USD $)	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Shares authorized to purchase through warrant					4,481,168
Warrants exercise price					29.70
Warrants expiration date					Feb. 27, 2013
Non-Vested Restricted Shares [Member]
Shares excluded in the computation of earnings (loss) per share	100,000		500,000		0		200,000
Stock Options [Member]
Shares excluded in the computation of earnings (loss) per share	1,100,000		2,600,000		1,300,000		2,200,000
Warrants [Member]
Shares excluded in the computation of earnings (loss) per share	4,500,000	[1]	4,500,000	[1]	4,500,000	[1]	4,500,000	[1]

[1] Upon the Effective Date, we issued warrants to purchase an aggregate of 4,481,168 shares to certain of the holders of our stock based on such holder's pre-petition stock ownership. These warrants have an exercise price of $29.70 and expire on February 27, 2013.

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Subsequent Events (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Dec. 31, 2011	Jun. 30, 2011
Subsequent Events
Interest in cost method investment		2.00%
Proceeds from sale of ownership interest	$ 31
Gain on sale of ownership interest	$ 28

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Condensed Consolidating Financial Statements (Condensed Consolidating Statement of Operations) (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Net Sales	$ 543	$ 502	$ 1,052	$ 950
Cost of goods sold	373	343	720	643
Gross Profit	170	159	332	307
Selling, general and administrative expenses	60	67	122	132
Research and development expenses and other operating expense (income), net	3	3	(2)	7
Operating Income (Loss)	107	89	212	168
Equity earnings from affiliates	0	0	0	0
Interest expense	(26)	(36)	(54)	(74)
Other income (loss), net	0	10	(1)	13
Loss on debt extinguishment or modification	0	0	(2)	(89)
Income from Continuing Operations Before Income Tax Expense	81	63	155	18
Income tax expense	11	9	19	19
Income (Loss) from Continuing Operations	70	54	136	(1)
Loss from Discontinued Operations, net of tax	0	(13)	0	(15)
Net Income (Loss)	70	41	136	(16)
Net Income attributable to noncontrolling interest	2	0	3	1
Net Income (loss) attributable to Solutia	68	41	133	(17)
Parent Company [Member]
Net Sales	137	123	272	235
Cost of goods sold	108	108	226	203
Gross Profit	29	15	46	32
Selling, general and administrative expenses	23	28	50	56
Research and development expenses and other operating expense (income), net	(4)	3	3	5
Operating Income (Loss)	10	(16)	(7)	(29)
Equity earnings from affiliates	69	66	167	136
Interest expense	(28)	(36)	(60)	(74)
Other income (loss), net	17	10	35	21
Loss on debt extinguishment or modification			(2)	(88)
Income from Continuing Operations Before Income Tax Expense	68	24	133	(34)
Income tax expense	0	0	0	0
Income (Loss) from Continuing Operations		24	133	(34)
Loss from Discontinued Operations, net of tax		17		17
Net Income (Loss)	68	41	133	(17)
Net Income attributable to noncontrolling interest	0	0	0	0
Net Income (loss) attributable to Solutia	68	41	133	(17)
Guarantors [Member]
Net Sales	120	117	227	214
Cost of goods sold	77	72	146	135
Gross Profit	43	45	81	79
Selling, general and administrative expenses	12	14	25	28
Research and development expenses and other operating expense (income), net	2	1	1	2
Operating Income (Loss)	29	30	55	49
Equity earnings from affiliates	25	28	84	67
Interest expense	(1)	0	(1)	0
Other income (loss), net	16	10	29	23
Loss on debt extinguishment or modification			0	0
Income from Continuing Operations Before Income Tax Expense	69	68	167	139
Income tax expense	0	0	0	0
Income (Loss) from Continuing Operations		68	167	139
Loss from Discontinued Operations, net of tax		1		0
Net Income (Loss)	69	69	167	139
Net Income attributable to noncontrolling interest	0	0	0	0
Net Income (loss) attributable to Solutia	69	69	167	139
Non-Guarantors [Member]
Net Sales	486	455	951	861
Cost of goods sold	398	357	764	671
Gross Profit	88	98	187	190
Selling, general and administrative expenses	25	25	47	48
Research and development expenses and other operating expense (income), net	5	(1)	(6)	0
Operating Income (Loss)	58	74	146	142
Equity earnings from affiliates	0	0	0	0
Interest expense	(55)	(37)	(101)	(71)
Other income (loss), net	33	34	59	55
Loss on debt extinguishment or modification			0	(1)
Income from Continuing Operations Before Income Tax Expense	36	71	104	125
Income tax expense	11	11	18	23
Income (Loss) from Continuing Operations		60	86	102
Loss from Discontinued Operations, net of tax		(31)		(32)
Net Income (Loss)	25	29	86	70
Net Income attributable to noncontrolling interest	2	0	3	1
Net Income (loss) attributable to Solutia	23	29	83	69
Eliminations [Member]
Net Sales	(200)	(193)	(398)	(360)
Cost of goods sold	(210)	(194)	(416)	(366)
Gross Profit	10	1	18	6
Selling, general and administrative expenses	0	0	0	0
Research and development expenses and other operating expense (income), net	0	0	0	0
Operating Income (Loss)	10	1	18	6
Equity earnings from affiliates	(94)	(94)	(251)	(203)
Interest expense	58	37	108	71
Other income (loss), net	(66)	(44)	(124)	(86)
Loss on debt extinguishment or modification			0	0
Income from Continuing Operations Before Income Tax Expense	(92)	(100)	(249)	(212)
Income tax expense	0	(2)	1	(4)
Income (Loss) from Continuing Operations		(98)	(250)	(208)
Loss from Discontinued Operations, net of tax		0		0
Net Income (Loss)	(92)	(98)	(250)	(208)
Net Income attributable to noncontrolling interest	0	0	0	0
Net Income (loss) attributable to Solutia	$ (92)	$ (98)	$ (250)	$ (208)

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Condensed Consolidating Financial Statements (Condensed Consolidating Balance Sheets) (Details) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010	Jun. 30, 2010	Dec. 31, 2009
ASSETS
Cash and cash equivalents	$ 169	$ 191	$ 127	$ 243
Trade receivables, net	264	228
Intercompany receivables	0	0
Miscellaneous receivables	74	75
Inventories	328	275
Prepaid expenses and other current assets	29	27
Current assets of discontinued operations	2	5
Total Current Assets	866	801
Net Property, Plant and Equipment	934	911
Investments in Affiliates	0	0
Goodwill	759	740
Net Identified Intangible Assets	948	938
Intercompany Advances	0	0
Other Assets	149	147
Total Assets	3,656	3,537
LIABILITIES AND EQUITY
Accounts payable	194	173
Intercompany payables	0	0
Accrued liabilities	220	235
Intercompany short-term debt	0	0
Current liabilities of discontinued operations	13	15
Total Current Liabilities	427	423
Long-Term Debt	1,362	1,463
Intercompany Long-Term Debt	0	0
Postretirement Liabilities	293	308
Environmental Remediation Liabilities	234	244
Deferred Tax Liabilities	248	238
Non-Current Liabilities of Discontinued Operations	24	25
Other Liabilities	101	97
Equity:
Common stock	1	1
Additional contributed capital	1,646	1,634
Treasury stock	(8)	(6)
Accumulated other comprehensive loss	(112)	(194)
Accumulated deficit	(570)	(703)
Total Shareholders' Equity attributable to Solutia	957	732
Equity attributable to noncontrolling interest	10	7
Total Equity	967	739	508	600
Total Liabilities and Equity	3,656	3,537
Parent Company [Member]
ASSETS
Cash and cash equivalents	77	98	67	104
Trade receivables, net	33	26
Intercompany receivables	80	100
Miscellaneous receivables	9	14
Inventories	79	69
Prepaid expenses and other current assets	3	7
Current assets of discontinued operations	0	0
Total Current Assets	281	314
Net Property, Plant and Equipment	179	180
Investments in Affiliates	2,495	2,280
Goodwill	150	149
Net Identified Intangible Assets	183	186
Intercompany Advances	465	439
Other Assets	73	78
Total Assets	3,826	3,626
LIABILITIES AND EQUITY
Accounts payable	49	53
Intercompany payables	680	630
Accrued liabilities	104	103
Intercompany short-term debt	53	17
Current liabilities of discontinued operations	0	0
Total Current Liabilities	886	803
Long-Term Debt	1,362	1,463
Intercompany Long-Term Debt	132	108
Postretirement Liabilities	209	225
Environmental Remediation Liabilities	216	225
Deferred Tax Liabilities	18	21
Non-Current Liabilities of Discontinued Operations	0	0
Other Liabilities	46	49
Equity:
Common stock	1	1
Additional contributed capital	1,646	1,634
Treasury stock	(8)	(6)
Accumulated other comprehensive loss	(112)	(194)
Accumulated deficit	(570)	(703)
Total Shareholders' Equity attributable to Solutia	957	732
Equity attributable to noncontrolling interest	0	0
Total Equity	957	732
Total Liabilities and Equity	3,826	3,626
Guarantors [Member]
ASSETS
Cash and cash equivalents	3	7	0	1
Trade receivables, net	48	40
Intercompany receivables	578	497
Miscellaneous receivables	1	0
Inventories	55	47
Prepaid expenses and other current assets	2	2
Current assets of discontinued operations	0	0
Total Current Assets	687	593
Net Property, Plant and Equipment	143	139
Investments in Affiliates	684	559
Goodwill	190	192
Net Identified Intangible Assets	302	309
Intercompany Advances	556	514
Other Assets	3	2
Total Assets	2,565	2,308
LIABILITIES AND EQUITY
Accounts payable	26	21
Intercompany payables	13	11
Accrued liabilities	12	10
Intercompany short-term debt	0	0
Current liabilities of discontinued operations	0	0
Total Current Liabilities	51	42
Long-Term Debt	0	0
Intercompany Long-Term Debt	23	23
Postretirement Liabilities	2	3
Environmental Remediation Liabilities	3	3
Deferred Tax Liabilities	11	11
Non-Current Liabilities of Discontinued Operations	0	0
Other Liabilities	6	6
Equity:
Common stock	0	0
Additional contributed capital	2,469	2,220
Treasury stock	0	0
Accumulated other comprehensive loss	0	0
Accumulated deficit	0	0
Total Shareholders' Equity attributable to Solutia	2,469	2,220
Equity attributable to noncontrolling interest	0	0
Total Equity	2,469	2,220
Total Liabilities and Equity	2,565	2,308
Non-Guarantors [Member]
ASSETS
Cash and cash equivalents	89	86	60	138
Trade receivables, net	183	162
Intercompany receivables	466	398
Miscellaneous receivables	64	61
Inventories	233	199
Prepaid expenses and other current assets	15	9
Current assets of discontinued operations	2	5
Total Current Assets	1,052	920
Net Property, Plant and Equipment	612	592
Investments in Affiliates	933	908
Goodwill	419	399
Net Identified Intangible Assets	463	443
Intercompany Advances	2,012	1,693
Other Assets	73	67
Total Assets	5,564	5,022
LIABILITIES AND EQUITY
Accounts payable	119	99
Intercompany payables	431	354
Accrued liabilities	106	123
Intercompany short-term debt	527	479
Current liabilities of discontinued operations	13	15
Total Current Liabilities	1,196	1,070
Long-Term Debt	0	0
Intercompany Long-Term Debt	2,298	2,019
Postretirement Liabilities	82	80
Environmental Remediation Liabilities	15	16
Deferred Tax Liabilities	219	206
Non-Current Liabilities of Discontinued Operations	24	25
Other Liabilities	49	42
Equity:
Common stock	0	0
Additional contributed capital	1,671	1,557
Treasury stock	0	0
Accumulated other comprehensive loss	0	0
Accumulated deficit	0	0
Total Shareholders' Equity attributable to Solutia	1,671	1,557
Equity attributable to noncontrolling interest	10	7
Total Equity	1,681	1,564
Total Liabilities and Equity	5,564	5,022
Eliminations [Member]
ASSETS
Cash and cash equivalents	0	0	0	0
Trade receivables, net	0	0
Intercompany receivables	(1,124)	(995)
Miscellaneous receivables	0	0
Inventories	(39)	(40)
Prepaid expenses and other current assets	9	9
Current assets of discontinued operations	0	0
Total Current Assets	(1,154)	(1,026)
Net Property, Plant and Equipment	0	0
Investments in Affiliates	(4,112)	(3,747)
Goodwill	0	0
Net Identified Intangible Assets	0	0
Intercompany Advances	(3,033)	(2,646)
Other Assets	0	0
Total Assets	(8,299)	(7,419)
LIABILITIES AND EQUITY
Accounts payable	0	0
Intercompany payables	(1,124)	(995)
Accrued liabilities	(2)	(1)
Intercompany short-term debt	(580)	(496)
Current liabilities of discontinued operations	0	0
Total Current Liabilities	(1,706)	(1,492)
Long-Term Debt	0	0
Intercompany Long-Term Debt	(2,453)	(2,150)
Postretirement Liabilities	0	0
Environmental Remediation Liabilities	0	0
Deferred Tax Liabilities	0	0
Non-Current Liabilities of Discontinued Operations	0	0
Other Liabilities	0	0
Equity:
Common stock	0	0
Additional contributed capital	(4,140)	(3,777)
Treasury stock	0	0
Accumulated other comprehensive loss	0	0
Accumulated deficit	0	0
Total Shareholders' Equity attributable to Solutia	(4,140)	(3,777)
Equity attributable to noncontrolling interest	0	0
Total Equity	(4,140)	(3,777)
Total Liabilities and Equity	$ (8,299)	$ (7,419)

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Condensed Consolidating Financial Statements (Condensed Consolidating Statement Of Cash Flows) (Details) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash Provided by (Used in) Operations	$ 93	$ 83
INVESTING ACTIVITIES:
Property, plant and equipment purchases	(40)	(14)
Acquisition related payments, net of cash acquired	(5)	(371)
Asset disposals	29	(2)
Other	1	0
Cash Used in Investing Activities	(15)	(387)
FINANCING ACTIVITIES:
Proceeds from long-term debt obligations	0	1,144
Payment of long-term debt obligations	(102)	(878)
Payment of short-term debt obligations	0	(16)
Debt issuance costs	0	(27)
Purchase of treasury shares	(2)	(1)
Other, net	0	(9)
Changes in investments and advances from (to) affiliates	0	0
Cash Provided by (Used in) Financing Activities	(104)	213
Effect of Exchange Rate Changes on Cash and Cash Equivalents	4	(25)
Increase (Decrease) in Cash and Cash Equivalents	(22)	(116)
CASH AND CASH EQUIVALENTS:
Beginning of period	191	243
End of period	169	127
Parent Company [Member]
Cash Provided by (Used in) Operations	(57)	(104)
INVESTING ACTIVITIES:
Property, plant and equipment purchases	(7)	(3)
Acquisition related payments, net of cash acquired	0	0
Asset disposals	0	(2)
Other	0
Cash Used in Investing Activities	(7)	(5)
FINANCING ACTIVITIES:
Proceeds from long-term debt obligations		1,144
Payment of long-term debt obligations	(102)	(878)
Payment of short-term debt obligations		0
Debt issuance costs		(27)
Purchase of treasury shares	(2)	(1)
Other, net	1	(9)
Changes in investments and advances from (to) affiliates	146	(157)
Cash Provided by (Used in) Financing Activities	43	72
Effect of Exchange Rate Changes on Cash and Cash Equivalents	0	0
Increase (Decrease) in Cash and Cash Equivalents	(21)	(37)
CASH AND CASH EQUIVALENTS:
Beginning of period	98	104
End of period	77	67
Guarantors [Member]
Cash Provided by (Used in) Operations	76	88
INVESTING ACTIVITIES:
Property, plant and equipment purchases	(3)	(2)
Acquisition related payments, net of cash acquired	0	(1)
Asset disposals	3	0
Other	0
Cash Used in Investing Activities	0	(3)
FINANCING ACTIVITIES:
Proceeds from long-term debt obligations		0
Payment of long-term debt obligations	0	0
Payment of short-term debt obligations		0
Debt issuance costs		0
Purchase of treasury shares	0	0
Other, net	0	0
Changes in investments and advances from (to) affiliates	(80)	(86)
Cash Provided by (Used in) Financing Activities	(80)	(86)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	0	0
Increase (Decrease) in Cash and Cash Equivalents	(4)	(1)
CASH AND CASH EQUIVALENTS:
Beginning of period	7	1
End of period	3	0
Non-Guarantors [Member]
Cash Provided by (Used in) Operations	74	99
INVESTING ACTIVITIES:
Property, plant and equipment purchases	(30)	(9)
Acquisition related payments, net of cash acquired	(5)	(370)
Asset disposals	26	0
Other	1
Cash Used in Investing Activities	(8)	(379)
FINANCING ACTIVITIES:
Proceeds from long-term debt obligations		0
Payment of long-term debt obligations	0	0
Payment of short-term debt obligations		(16)
Debt issuance costs		0
Purchase of treasury shares	0	0
Other, net	(1)	0
Changes in investments and advances from (to) affiliates	(66)	243
Cash Provided by (Used in) Financing Activities	(67)	227
Effect of Exchange Rate Changes on Cash and Cash Equivalents	4	(25)
Increase (Decrease) in Cash and Cash Equivalents	3	(78)
CASH AND CASH EQUIVALENTS:
Beginning of period	86	138
End of period	89	60
Eliminations [Member]
Cash Provided by (Used in) Operations	0	0
INVESTING ACTIVITIES:
Property, plant and equipment purchases	0	0
Acquisition related payments, net of cash acquired	0	0
Asset disposals	0	0
Other	0
Cash Used in Investing Activities	0	0
FINANCING ACTIVITIES:
Proceeds from long-term debt obligations		0
Payment of long-term debt obligations	0	0
Payment of short-term debt obligations		0
Debt issuance costs		0
Purchase of treasury shares	0	0
Other, net	0	0
Changes in investments and advances from (to) affiliates	0	0
Cash Provided by (Used in) Financing Activities	0	0
Effect of Exchange Rate Changes on Cash and Cash Equivalents	0	0
Increase (Decrease) in Cash and Cash Equivalents	0	0
CASH AND CASH EQUIVALENTS:
Beginning of period	0	0
End of period	$ 0	$ 0

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Basis Of Presentation

6 Months Ended

Jun. 30, 2011

Basis Of Presentation

Basis Of Presentation

1.  Basis of Presentation

Basis of Presentation

Unless the context requires otherwise, the terms "Solutia", "Company", "we" and "our" in this report refer to Solutia Inc. and its subsidiaries. The accompanying consolidated financial statements have not been audited but have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  Therefore, this Report on Form 10-Q should be read in conjunction with Solutia's Report on Form 10-K for the fiscal year ended December 31, 2010.  In the opinion of management, these unaudited consolidated financial statements contain all adjustments necessary to present fairly our financial position, results of operations and cash flows for the interim periods reported.  Financial information for the first six months of fiscal year 2011 should not be annualized due to the seasonality of our business.

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Acquisitions, Divestitures And Discontinued Operations

6 Months Ended

Jun. 30, 2011

Acquisitions, Divestitures And Discontinued Operations

Acquisitions, Divestitures And Discontinued Operations

2.  Acquisitions, Divestitures and Discontinued Operations

Acquisitions

On April 30, 2010, we purchased 100 percent of the shares of Novomatrix Pte. Ltd. ("Novomatrix") for $72, net of the receipt of $1 in the first quarter of 2011 in connection with a preliminary working capital adjustment. Novomatrix is a leader in branding, marketing and distributing performance window films catering to the premium segment in the automotive and architectural markets.  The Novomatrix acquisition allows us to support our growth strategy for our Performance Films reporting segment by expanding our product offerings and global footprint into key emerging regions through Novomatrix's well-established network in Southeast Asia and the Middle East.

On June 1, 2010, we purchased 100 percent of the shares of Etimex Solar GmbH ("Vistasolar") for $294 and $3 of incremental working capital.  Vistasolar is a leading supplier of EVA encapsulants to the photovoltaic market and enables us to expand our Advanced Interlayers product portfolio into each of the dominant photovoltaic encapsulant technologies.

The Novomatrix and Vistasolar acquisitions were accounted for as business combinations, and accordingly, the assets and liabilities of the acquired entities were recorded at their estimated fair value.  The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of both acquisitions:

	Novomatrix		Vistasolar
	April 30, 2010		June 1, 2010
Assets:
Trade receivables	$	2	$	10
Miscellaneous receivables		1		0
Inventories		9		3
Property, plant and equipment		0		16
Identified intangible assets		50		119
Goodwill		25		187
Total assets acquired	$	87	$	335
Liabilities:
Accounts payable	$	4	$	2
Accrued liabilities		3		1
Postretirement liabilities		0		1
Deferred tax liabilities		8		34
Total liabilities assumed	$	15	$	38

Goodwill largely consists of expected growth synergies through the application of each company's innovative technologies and expansion of distribution channels in emerging markets in addition to cost synergies resulting from manufacturing and supply chain work process improvements.  Goodwill resulting from both acquisitions is not deductible for tax purposes.

The following table presents the weighted average life in years and the gross carrying value of the identified intangible assets included in net identified intangible assets within the Consolidated Statement of Financial Position on the date of acquisition for the Novomatrix and Vistasolar acquisitions.  The fair value of the identified intangible assets was determined using Level 3 inputs as defined by U.S. GAAP under the fair value hierarchy, which included valuation reports prepared by third party appraisal firms.

	Novomatrix			Vistasolar
	April 30, 2010			June 1, 2010
	Weighted			Weighted
	Average	Carrying		Average	Carrying
	Life in Years	Value		Life in Years	Value
Technology	0	$	0	20	$	25
Customer relationships	17		29	25		81
Other	5		1	3		5
Trademarks	N/A		20	N/A		8
Total identified intangible assets	17	$	50	23	$	119
Total weighted average life in years	22

Effective May 1, 2010 and June 1, 2010, results from the operations of Novomatrix and Vistasolar, respectively, have been included in our Consolidated Statement of Operations.  In conjunction with these acquisitions, we incurred $3 of costs during the three months ended June 30, 2010 and $7 of costs during the six months ended June 30, 2010.  These acquisition related costs were recorded in selling, general and administrative expenses during the first half of 2010.

The following pro forma financial information presents the combined results of operations of Solutia for the prior year presented as if the Novomatrix and Vistasolar acquisitions had occurred at the beginning of  2010.  The pro forma results below are not necessarily indicative of what actually would have occurred had the acquisitions been in effect for the periods presented and should not be taken as representation of our future consolidated results of operations.  Pro forma results are as follows:

	Three Months Ended		Six Months Ended
	June 30, 2010		June 30, 2010
Net sales	$	523	$	1,005
Net income (loss)	$	47	$	(5	)
Net income (loss) per basic and dilutive share	$	0.39	$	(0.04	)
Net income (loss) attributable to Solutia	$	47	$	(6	)
Net income (loss) attributable to Solutia per basic and dilutive share	$	0.39	$	(0.05	)

Divestitures

Certain Other Rubber Chemicals Businesses

In the first quarter 2011, we sold certain businesses and selected assets previously included in our Technical Specialties reporting segment whereby we recognized a gain of $17 in other operating income, net during the six months ended June 30, 2011.  Our decision to exit these businesses is consistent with our strategy of focusing on businesses that are leaders in their global markets and that have sustainable competitive advantages.

Discontinued Operations

Primary Accelerators

On April 22, 2010, due to overcapacity within the industry, a disadvantaged cost position and increasing pressure from Far Eastern producers, we made the decision to exit our Primary Accelerators business and to cease manufacturing of SANTOCURE® primary accelerator products at the Monsanto Company ("Monsanto") facility in Antwerp, Belgium, where we operated as a guest.  Our decision to exit this business is consistent with our strategy of focusing on businesses that are leaders in their global markets and that have sustainable competitive advantages.  Manufacturing of these products, the financial results of which had previously been included in our Technical Specialties reportable segment, ceased in the third quarter 2010.  Accordingly, we have reported the results of Primary Accelerators as a discontinued operation and applied this presentation on a retrospective basis.

A summary of the net sales and loss from discontinued operations related to our Primary Accelerators business is as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011		2010			2011		2010
Primary Accelerators:
Operating results:
Net sales	$	0	$	16		$	0	$	34
Loss before income taxes	$	0	$	(37	)	$	0	$	(40	)
Income tax benefit		0		(7	)		0		(8	)
Loss from discontinued operations, net of tax	$	0	$	(30	)	$	0	$	(32	)

Included in the results of discontinued operations is $38 of pre-tax expenses for the second quarter of 2010 related to the shutdown of this business.  The shutdown expenses for the second quarter 2010 include $6 for the impairment of long-lived assets determined using a Level 3 fair value measurement as defined by U.S. GAAP under the fair value hierarchy.

The assets and liabilities of our Primary Accelerators business, classified as discontinued operations, consist of the following:

	June 30,		December 31,
	2011		2010
Assets:
Trade and miscellaneous receivables, net	$	2	$	5
Current assets of discontinued operations	$	2	$	5
Liabilities:
Accounts payable and accrued liabilities	$	13	$	15
Current liabilities of discontinued operations	$	13	$	15
Other liabilities	$	24	$	25
Non-current liabilities of discontinued operations	$	24	$	25
Total liabilities	$	37	$	40

Integrated Nylon

On June 1, 2009, we sold substantially all the assets and certain liabilities, including environmental remediation liabilities and pension liabilities of active employees, of our Integrated Nylon business to S.K. Capital Partners II, L.P. (the "Buyer").  At the time of sale, we agreed to reimburse the Buyer for indirect residual costs incurred by them resulting from a disputed contractual matter with a guest at the Integrated Nylon plant in Alvin, Texas.  Accordingly, our estimate of the loss associated with the damages and cost reimbursements associated with this contingent liability was accrued in 2009.  On April 20, 2010, we entered into a settlement agreement that resolved all outstanding matters with the guest in exchange for payment by us of $17.  Separately, we entered into an agreement with the Buyer whereby our liability for indirect residual costs at the plant was settled in exchange for a payment by us of $4.  Each settlement became effective and was paid in 2010.  Based on the terms of the settlements, we recognized a gain of $17 in the second quarter 2010 in the results from discontinued operations.

A summary of the income from discontinued operations related to our Integrated Nylon business is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Integrated Nylon:
Operating results:
Income before income taxes		$	0		$	17		$	0		$	17
Income tax expense			0			0			0			0
Income from discontinued operations, net of tax		$	0		$	17		$	0		$	17