-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WED2lui1aORGUn1n3wkBPGdxhKrpS/uYAWEoGpqXhihWS7zd/D/i8FMxh34sKpBb 8iQ3GaJTxpQd8R+ttrwZzA== 0001068800-06-001778.txt : 20061228 0001068800-06-001778.hdr.sgml : 20061228 20061228090740 ACCESSION NUMBER: 0001068800-06-001778 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20061208 ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061228 DATE AS OF CHANGE: 20061228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOLUTIA INC CENTRAL INDEX KEY: 0001043382 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 431781797 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13255 FILM NUMBER: 061301645 BUSINESS ADDRESS: STREET 1: 575 MARYVILLE CENTRE DRIVE STREET 2: P O BOX 66760 CITY: ST. LOUIS STATE: MO ZIP: 63166-6760 BUSINESS PHONE: 3146741000 MAIL ADDRESS: STREET 1: P O BOX 66760 CITY: ST. LOUIS STATE: MO ZIP: 63166-6760 FORMER COMPANY: FORMER CONFORMED NAME: QUEENY CHEMICAL CO DATE OF NAME CHANGE: 19970804 8-K 1 sol8k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 8, 2006 SOLUTIA INC. ------------ (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE -------- (STATE OF INCORPORATION) 001-13255 43-1781797 --------- ---------- (COMMISSION (IRS EMPLOYER FILE NUMBER) 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 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 7.01 REGULATION FD DISCLOSURE. On December 8, 2006, Solutia Inc. ("Solutia") entered into a confidentiality agreement (the "Undertaking") with certain of the holders (the "Noteholders") of either or both of the 6.72% notes due October 15, 2037 and/or the 7.375% notes due October 15, 2027 (the "Notes") issued by Solutia pursuant to that certain Indenture dated October 1, 1997. Pursuant to the Undertaking, Solutia agreed to provide certain material non-public information (the "Confidential Information") to the Noteholders to enable discussions between Solutia and the Noteholders regarding a potential negotiated resolution of unresolved issues in Solutia's Chapter 11 cases. To assure that the restrictions on the Noteholders' ability to trade would be limited, Solutia agreed to publicly disseminate the Confidential Information on or before December 28, 2006. In accordance with the provisions of the Undertaking described above, Solutia hereby makes the following disclosures: o On December 8, 2006, Solutia provided to the Noteholders a draft of Solutia's revised business plan (the "Draft Business Plan"), which, at that time, was subject to further review and/or revision by Solutia's management team and approval by Solutia's Board of Directors. A copy of the Draft Business Plan, as provided to the Noteholders, is furnished hereunder as Exhibit 99.1. The Draft Business Plan includes both historical and projected financial information. Because the Company excludes one-time, non-operational gains and losses to prevent distortion of business trends in accounting for historical financial information, the historical financial information is not in accordance with Generally Accepted Accounting Principles (GAAP). Exhibit 99.1 includes a reconciliation of non-GAAP financial measures with GAAP financial measures (the "Reconciliation"). o On December 8, 2006, Solutia provided to the Noteholders its proposal for an amended plan of reorganization (the "Amended Plan Proposal"), which was designed to act as a framework for negotiations among Solutia, the Noteholders, and Solutia's other major stakeholders. A version of the Amended Plan Proposal, which is the same in all material respects to the Amended Plan Proposal provided to the Noteholders, is furnished hereunder as Exhibit 99.2. o On December 8, 2006, Solutia made a presentation to the Noteholders regarding the status of Solutia's efforts to obtain proposals for the sale of the equity of reorganized Solutia (the "Summary Update of the Status of the Sale Process"). A description of the Summary Update of the Status of the Sale Process is furnished hereunder as Exhibit 99.3. 2 In connection with the previously announced fifth amendment to its debtor in possession financing, in contemplation of a meeting with its lenders, Solutia is hereby disclosing financial information, including actual year to date financials through November 2006 and projected financials for the month ended December 2006. A copy of this financial information is furnished hereunder as Exhibit 99.4. The financial information includes projections which have been reconciled with GAAP financial measures in the Reconciliation provided in Exhibit 99.1. CAUTIONARY AND FORWARD LOOKING STATEMENTS. Solutia does not generally publicly disclose its strategic plans or projections for its anticipated financial position or results of operations or the other types of forward looking information contained in the Draft Business Plan or the Amended Plan Proposal. Accordingly, the Draft Business Plan or the Amended Plan Proposal furnished as part of this current report on Form 8-K, remains in the form as was provided to the Noteholders on December 8, 2006 and has not been updated to reflect actual results of operations, changes in financial condition, changes in estimates, expectations or assumptions or other circumstances arising and/or existing or to reflect the occurrence of any unanticipated events in each case as of or through the date of this current report on Form 8-K. Further, Solutia does not intend to update or revise the Draft Business Plan or the Amended Plan Proposal provided to Noteholders and furnished as part of this current report on Form 8-K to reflect changes in future general economic, industry or chemicals category conditions. The Draft Business Plan and Amended Plan Proposal provided to Noteholders and furnished as part of this current report on Form 8-K were not prepared with a view toward general use, but rather were prepared for the limited purpose of providing information to the Noteholders at a point in time pursuant to the Undertaking. The data contained in the Draft Business Plan and Amended Plan Proposal was provided as of December 8, 2006 and represented Solutia's then forecasted expectations as described therein. The estimates and assumptions underlying the Draft Business Plan, the Amended Plan Proposal, any other prospective financial information or projections, are inherently subject to significant economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and are beyond the control of Solutia. Accordingly, there can be no assurance that the results set forth in the Draft Business Plan, the Amended Plan Proposal, any other prospective financial information or projections, will be realized. It is likely that there will be differences between actual and projected results, and actual results may be materially higher or lower than those set forth above. This report and the exhibits furnished hereto may contain forward-looking statements, which can be identified by the use of words such as "believes," "expects," "may," "will," "intends," "plans," "estimates" or "anticipates," or other comparable terminology, or by discussions of strategy, plans or intentions. These statements are based on management's current expectations and assumptions about the industries in which Solutia operates. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Solutia's most recent Annual Report on Form 10-K, under "Cautionary Statement About Forward Looking 3 Statements," Solutia's quarterly reports on Form 10-Q, and in filings with the U.S. Bankruptcy Court in connection with the Chapter 11 case of Solutia Inc. and 14 of its U.S. subsidiaries. These reports can be accessed through the "Investors" section of Solutia's website at www.solutia.com. The bankruptcy court filings can be accessed by visiting www.trumbullgroup.com. Solutia disclaims any intent or obligation to update or revise any forward-looking statements in response to new information, unforeseen events, changed circumstances or any other occurrence. LIMITATION ON INCORPORATION BY REFERENCE In accordance with General Instruction B.2 of Form 8-K, the information in this Form 8-K furnished pursuant to Item 7.01 shall not be deemed to be "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Exchange Act or Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing. 4 ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (d) EXHIBITS. Exhibit 99.1 Draft Business Plan, as provided to the Noteholders on December 8, 2006. Exhibit 99.2 Amended Plan Proposal, as provided to the Noteholders on December 8, 2006. Exhibit 99.3 Summary Update of the Status of the Sale Process, as provided to the Noteholders on December 8, 2006. Exhibit 99.4 Solutia Inc. financial information, including actual year to date financials through November 2006 and projected financials for the month ended December 2006. 5 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. SOLUTIA INC. ------------ (Registrant) /s/ Rosemary L. Klein --------------------- Rosemary L. Klein Senior Vice President, General Counsel and Secretary DATE: December 28, 2006 6 EX-99.1 2 ex99p1.txt Exhibit 99.1 2007 BUDGET/LRP PRESENTATION TO AD HOC BONDHOLDERS - DECEMBER 8, 2006 TOPICS: o Key Premises and Assumptions o Sources and Uses o Consolidated Financials o Business Financials EMERGENCE ASSUMPTIONS o Assume emergence from Chapter 11 on December 31, 2006 o Each quarter delay in emergence accounts for an additional cash outlay of $25 million for lack of OPEB funding and reorganization professional fees o Total cash paid at emergence is assumed to be $301 million o $152 million for exit related costs o $149 million to fund the 2007 domestic pension plan RAW MATERIALS AND FOREIGN CURRENCIES o Solutia utilized external industry sources such as CMAI and ChemData to develop the projected raw material and energy cost inputs o Raw material profile by business: Cost Increase / (Decrease) per year 2006 vs. 2007 2008-2010 ------------- --------- Nylon (2.8%) (3.2%) Saflex/Specialties 2% (2.5%) CPFilms 3.5% 2.5% o Assumptions for the major currencies for all years as follows: Actual Actual Budget 2005 2006 YTD 2007-2011 ---- -------- --------- $ / (euro) 1.24 1.25 1.27 $ / (pound) 1.81 1.82 1.91 $ / (yen) .0091 .0086 .0092 BUSINESS RESTRUCTURING ACTIONS o Shutdown of the LaSalle plant assumed to occur in February 2008 following expiration of the Ineos contract o No changes to commercial and operating agreements assumed at Chocolate Bayou, Antwerp or San Jose Dos Campos locations o Asset set as of the end of 2006 is held constant throughout the period SUMMARY WORKING CAPITAL ASSUMPTIONS Enterprise 2006 2007 2008 2009 2010 2011 ---- ---- ---- ---- ---- ---- DSO 39.7 39.7 41.3 42.8 42.6 42.4 Change in A/R ($M) (49) (55) (12) (43) 2 (7) DOH 35.7 34.3 34.2 33.4 34.6 35.2 Change in Inv ($M) 9 (9) 5 (3) (2) (5) DPO 28.3 34.1 36.4 36.0 36.1 35.9 Change in A/P ($M) (13) 51 11 8 (7) 1 Key Trends o Modest increase in DSO primarily due to transition of mix of Nylon business from Fiber to Plastics offset by improvements in other businesses o DPO improves approximately 8 days over Planning Period as a result of exit from Chapter 11 and improved performance over Planning Period CAPITAL EXPENDITURES ($M) 2006 2007 2008 2009 2010 2011 ---- ---- ---- ---- ---- ---- Integrated Nylon $49 $45 $46 $45 $45 $45 Maintenance 49% 61% 62% 43% 67% 58% Cost Improvement/Growth 51% 39% 38% 57% 33% 42% Saflex $39 $47 $51 $53 $47 $14 Maintenance 20% 20% 17% 29% 27% 39% Cost Improvement/Growth 80% 80% 83% 71% 73% 61% CPFilms $7 $10 $14 $7 $12 $11 Maintenance 55% 34% 68% 38% 38% Cost Improvement/Growth 45% 66% 32% 62% 62% CATEGORY A SITES - SOLUTIA SPEND ($M) Provision Payment --------- ------- 2006 18 8 2007 7 11 2008 16 15 2009 8 25 2010 4 18 2011 17 14 CATEGORY C SITES - SHARED RESPONSIBILITY ($M) Gross $50M $25M Net SOI Cash Funding Funding Cash Provision Flows Allocated Discretionary Flow --------- ----- --------- ------------- ---- 2006 -- 3 -- -- 3 2007 206 14 (14) -- -- 2008 3 24 (24) -- -- 2009 3 26 (14) (12) -- 2010 3 19 -- (4) 15 2011 3 22 -- -- 22 o Category C Sites include Anniston and Sauget Offsite o Spend at Category C Sites projected to be in the $23 - $29 million range per year for 2012-2015 and expected to decline thereafter PENSION, OPEB AND LITIGATION PENSION o Assuming prefunding pension of $149 million at emergence (2007), required minimum pension contributions, are as follows: ($M) Contributions Funding Level Pension Expense (Income) ------------- ------------- ------------------------ 2006 179 61% 24 2007 149 71% 5 2008 -- 83% (6) 2009 32 84% (6) 2010 29 87% (6) 2011 27 90% (7) OPEB Payments ($M) Gross $175M Net Pre-Spin Funding Pre-Spin Post-Spin Total -------- ------- -------- --------- ----- 2006 46 -- 46 42 72 2007 39 (39) -- 29 29 2008 28 (28) -- 27 27 2009 25 (25) -- 25 25 2010 23 (23) -- 23 23 2011 22 (22) -- 23 23 Expense ($M) Pre-Spin Post-Spin Total -------- --------- ----- 2006 12 16 28 2007 7 12 19 2008 2 12 14 2009 2 11 13 2010 2 11 13 2011 2 11 13 LITIGATION o Assumes all pre-petition, debtor litigation except for Anniston Settlement litigation is discharged as part of the bankruptcy proceedings OTHER MISCELLANEOUS ASSUMPTIONS o No cash flow impacts are assumed throughout the projection period for other litigation matters o Miscellaneous surplus property asset sales are assumed to generate cash of $7.5 million in both 2007 and 2008, and $5 million per year thereafter o US NOL carry-forward as of 12/31/2005 is approximately $817 million. Additional US tax losses expected to arise in 2006 and 2007 are $443 million. NOL carry-forward is expected to be reduced by CODI of $382 million. US NOL carry-forward expected to be subjected to the limitations of IRC Sec 382 is $878 million. These limitations are not expected to result in a US cash tax obligation during the LRP years. At the end of the LRP period, NOL carry-forward of $759 million is expected to still be available of which $511 would then be free of limitation o Outside the US, tax payments total approximately $150 million over the 5 years of the LRP. Effective tax rate on ex-US earnings is approximately 28%
PROFORMA SOURCES AND USES ($M) SOURCES: USES: (1) Surplus Cash $115 DIP (Drawn) $657 (2) Exit Revolver 65 2009 Bonds 223 Exit Term Loan B - USD Tranche 700 Pension Pre-Funding 149 Exit Term Loan B - Euro Tranche 254 Euro Loan 203 Exit Subordinated Bonds 250 Fees/Misc.-Other 152 Maryville Note 20 Maryville Note 20 TOTAL SOURCE $1,404 TOTAL USES $1,404 Notes: Assumes Emergence 12/31/06 (1) Cash balance reduced from $130 million to $15 million at Emergence with no restrictions (2) Total Revolver $400 million, after LC's/drawings pro-forma liquidity on 12/31/06 would be ~$280 million
CONSOLIDATED INCOME STATEMENT ($M)
============ ============ ============ ============ ============ 2003 2004 2005 2006 2007 ACTUAL ACTUAL ACTUAL FORECAST BUDGET - ---------------------------------------------------------------------------------------------------- INCOME STATEMENT NET SALES 2,379 2,636 2,759 2,936 3,162 COGS 2,094 2,364 2,426 2,564 2,686 ------------ ------------ ------------ ------------ ------------ GROSS PROFIT 285 273 334 372 476 MARKETING 149 136 135 135 150 ADMINISTRATION 101 92 91 94 95 TECHNOLOGY 43 41 44 48 42 ------------ ------------ ------------ ------------ ------------ TOTAL MAT 293 269 270 277 288 AMORTIZATION 1 1 1 1 1 ------------ ------------ ------------ ------------ ------------ OPERATING INCOME (9) 3 63 94 187 EQUITY INCOME 1 23 44 39 29 OTHER INCOME/(EXPENSE) 6 2 6 10 3 CURRENCY (1) (3) (1) (3) REORGANIZATION ITEMS (23) (51) (54) (57) 0 INTEREST INCOME 0 2 2 8 5 ------------ ------------ ------------ ------------ ------------ EBIT (25) (24) 61 90 225 ============ ============ ============ ============ ============ INTEREST EXPENSE 105 88 84 101 116 ------------ ------------ ------------ ------------ ------------ INCOME BEFORE TAXES (130) (112) (23) (11) 109 TAXES (32) 4 11 25 30 ------------ ------------ ------------ ------------ ------------ INCOME FROM CONT OPS (98) (116) (35) (36) 79 ============ ============ ============ ============ ============ EBITDA 102 96 172 201 334 EBITDAR 125 147 226 258 334 % RELATIONSHIP TO SALES: GROSS PROFIT 12.0% 10.3% 12.1% 12.7% 15.1% MAT 12.3% 10.2% 9.8% 9.4% 9.1% EBIT -1.1% -0.9% 2.2% 3.1% 7.1% EBITDA 4.3% 3.6% 6.2% 6.8% 10.5% - ---------------------------------------------------------------------------------------------------- ============ ============ ============ =========== 2008 2009 2010 2011 LRP LRP LRP LRP - ------------------------------------------------------------------------------------ INCOME STATEMENT NET SALES 3,222 3,382 3,354 3,409 COGS 2,673 2,768 2,694 2,705 ------------ ------------ ------------ ----------- GROSS PROFIT 549 614 660 704 MARKETING 158 169 175 186 ADMINISTRATION 96 95 94 95 TECHNOLOGY 45 46 48 49 ------------ ------------ ------------ ----------- TOTAL MAT 299 310 317 330 AMORTIZATION 1 1 1 0 ------------ ------------ ------------ ----------- OPERATING INCOME 249 303 341 374 EQUITY INCOME 27 27 27 27 OTHER INCOME/(EXPENSE) 2 2 2 2 CURRENCY 0 0 0 0 REORGANIZATION ITEMS 0 0 0 0 INTEREST INCOME 4 2 1 1 ------------ ------------ ------------ ----------- EBIT 283 334 371 404 ============ ============ ============ =========== INTEREST EXPENSE 109 98 88 73 ------------ ------------ ------------ ----------- INCOME BEFORE TAXES 173 237 283 331 TAXES 50 71 86 103 ------------ ------------ ------------ ----------- INCOME FROM CONT OPS 124 166 197 228 ============ ============ ============ =========== EBITDA 380 435 470 503 EBITDAR 380 435 470 503 % RELATIONSHIP TO SALES: GROSS PROFIT 17.0% 18.2% 19.7% 20.7% MAT 9.3% 9.2% 9.5% 9.7% EBIT 8.8% 9.9% 11.1% 11.9% EBITDA 11.8% 12.9% 14.0% 14.8% - --------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET ($M)
============== ============== ============== ============= 2004 2005 2006 2007 ACTUAL ACTUAL FORECAST BUDGET - --------------------------------------------------------------------------------------------------------- Assets ------ CASH 115 107 130 15 TRADE RECEIVABLES 279 246 301 343 OTHER CURRENT ASSETS 135 196 128 121 TOTAL LIFO INVENTORIES 222 254 255 256 -------------- -------------- -------------- ------------- TOTAL CURRENT ASSETS 751 803 814 736 GROSS PROPERTY 3,243 3,253 3,350 3,422 ACCUMULATED DEPRECIATION (2,442) (2,482) (2,558) (2,616) -------------- -------------- -------------- ------------- NET PROPERTY 801 770 792 806 INVESTMENT IN EQUITY AFFILIATES 177 205 198 207 OTHER LONG TERM ASSETS 331 192 208 1,959 FUNDING COMPANY 0 0 0 204 -------------- -------------- -------------- ------------- NON-CURRENT DEFERRED TAXES 16 12 16 16 -------------- -------------- -------------- ------------- TOTAL ASSETS 2,076 1,982 2,029 3,927 ============== ============== ============== ============= LIABILITIES ----------- ACCOUNTS PAYABLE 192 216 209 258 ACCRUALS 266 249 233 234 SHORT TERM DEBT 300 300 657 17 -------------- -------------- -------------- ------------- TOTAL CURRENT LIABILITIES 758 765 1,099 509 LONG TERM DEBT 286 247 205 1,224 LIABILITIES SUBJECT TO COMPROMISE 2,187 2,176 1,934 0 OTHER LIABILITIES 247 215 225 521 POST RETIREMENT 42 33 35 559 -------------- -------------- -------------- ------------- TOTAL LIABILITIES 3,520 3,436 3,498 2,812 -------------- -------------- -------------- ------------- TOTAL STOCKHOLDER'S EQUITY (DEFICIT) (1,444) (1,455) (1,470) 1,115 -------------- -------------- -------------- ------------- TOTAL LIABILITIES AND EQUITY 2,076 1,982 2,029 3,927 ============== ============== ============== ============= - ----------------------------------------- -------------- -------------- -------------- ------------- BALANCE SHEET STATISTICS: DSO 39.7 35.1 39.7 39.7 DOH 33.5 39.5 35.7 34.3 DPO 28.4 33.4 28.3 34.1 - --------------------------------------------------------------------------------------------------------- ============ ============ ============ ============ 2008 2009 2010 2011 LRP LRP LRP LRP - ------------------------------------------------------------------------------------------------ ASSETS ------ CASH 15 15 15 15 TRADE RECEIVABLES 355 399 397 404 OTHER CURRENT ASSETS 121 121 121 121 TOTAL LIFO INVENTORIES 251 255 256 262 ------------ ------------ ------------ ------------ TOTAL CURRENT ASSETS 743 789 789 802 GROSS PROPERTY 3,443 3,555 3,664 3,739 ACCUMULATED DEPRECIATION (2,613) (2,709) (2,806) (2,904) ------------ ------------ ------------ ------------ NET PROPERTY 830 846 858 835 INVESTMENT IN EQUITY AFFILIATES 214 221 228 235 OTHER LONG TERM ASSETS 1,953 1,928 1,928 1,925 FUNDING COMPANY 156 107 86 67 ------------ ------------ ------------ ------------ NON-CURRENT DEFERRED TAXES 16 16 16 16 ------------ ------------ ------------ ------------ TOTAL ASSETS 3,912 3,908 3,905 3,881 ============ ============ ============ ============ LIABILITIES ----------- ACCOUNTS PAYABLE 269 277 270 271 ACCRUALS 254 293 340 408 SHORT TERM DEBT 0 0 0 0 ------------ ------------ ------------ ------------ TOTAL CURRENT LIABILITIES 523 570 610 680 LONG TERM DEBT 1,147 1,057 921 687 LIABILITIES SUBJECT TO COMPROMISE 0 0 0 0 OTHER LIABILITIES 487 443 404 379 POST RETIREMENT 516 445 380 317 ------------ ------------ ------------ ------------ TOTAL LIABILITIES 2,673 2,514 2,315 2,063 ------------ ------------ ------------ ------------ TOTAL STOCKHOLDER'S EQUITY (DEFICIT) 1,239 1,394 1,590 1,818 ------------ ------------ ------------ ------------ TOTAL LIABILITIES AND EQUITY 3,912 3,908 3,905 3,881 ============ ============ ============ ============ - ----------------------------------------- ------------ ------------ ------------ ------------ BALANCE SHEET STATISTICS: DSO 41.3 42.8 42.6 42.4 DOH 34.2 33.4 34.6 35.2 DPO 36.4 36.0 36.1 35.9 - ---------------------------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT ($M)
=========== =========== =========== =========== =========== =========== 2006 2007 2008 2009 2010 2011 FORECAST BUDGET LRP LRP LRP LRP - ------------------------------------------------------------------------------------------------------------------------------------ FREE CASH FLOW ACTIVITIES: - ------------------------- EBIT 90 225 283 334 371 404 DEPRECIATION & AMORTIZATION, GROSS 111 109 98 101 99 99 ----------- ----------- ----------- ----------- ----------- ----------- EBITDA 201 334 380 435 470 503 INTEREST PAYMENTS (104) (122) (104) (92) (83) (68) TAX PAYMENTS (11) (17) (23) (34) (38) (41) LEGACY PAYMENTS: LITIGATION (5) (5) (5) (5) (5) (5) OPEB (57) (39) (28) (25) (23) (22) ENVIRONMENTAL (3) (14) (24) (26) (19) (22) FUNDING CO 0 58 57 56 26 22 PENSION CONTRIBUTION (179) 0 0 (32) (29) (27) NON LEGACY ENVIRONMENTAL (4) (11) (15) (25) (18) (14) NON LEGACY OPEB (34) (29) (27) (25) (23) (23) CHANGES IN BALANCE SHEET ACCOUNTS: NET WORKING CAPITAL (53) (13) 4 (39) (7) (12) ACCOUNTS RECEIVABLE (49) (55) (12) (43) 2 (7) INVENTORY 9 (9) 5 (3) (2) (5) ACCOUNTS PAYABLE (13) 51 11 8 (7) 1 TOTAL OTHER BALANCE SHEET CHANGES 14 28 (1) 18 (2) 22 ----------- ----------- ----------- ----------- ----------- ----------- CASH PROVIDED BY (USED IN) OPERATIONS (234) 169 216 207 250 314 CAPITAL EXPENDITURES (99) (121) (121) (117) (114) (80) ----------- ----------- ----------- ----------- ----------- ----------- FREE CASH FLOW (333) 48 95 90 136 233 =========== =========== =========== =========== =========== =========== - ------------------------------------------------------------------------------------------------------------------------------------
INTEGRATED NYLON ($M)
============ ============ ============ ============ ============ 2003 2004 2005 2006 2007 ACTUAL ACTUAL ACTUAL FORECAST BUDGET - ------------------------------------------------------------------------------------------------------ INCOME STATEMENT NET SALES 1,392 1,588 1,642 1,770 1,922 COGS 1,337 1,552 1,574 1,671 1,755 ------------ ------------ ------------ ------------ ------------ GROSS PROFIT 55 35 68 100 167 MARKETING 70 54 47 46 52 ADMINISTRATION 23 16 13 14 14 TECHNOLOGY 21 20 20 21 15 ------------ ------------ ------------ ------------ ------------ TOTAL MAT 113 90 80 81 82 AMORTIZATION 0 0 0 0 0 ------------ ------------ ------------ ------------ ------------ OPERATING INCOME (58) (55) (13) 18 85 EQUITY INCOME 0 0 0 0 0 OTHER INCOME/(EXPENSE) 4 2 1 1 1 INTEREST INCOME 0 0 1 1 1 ------------ ------------ ------------ ------------ ------------ EBIT (54) (53) (11) 20 87 ============ ============ ============ ============ ============ EBITDA 26 23 58 83 147 % RELATIONSHIP TO SALES: GROSS PROFIT 4.0% 2.2% 4.1% 5.6% 8.7% MAT 8.1% 5.6% 4.9% 4.6% 4.3% EBIT -3.9% -3.4% -0.7% 1.1% 4.5% EBITDA 1.8% 1.4% 3.5% 4.7% 7.6% - ------------------------------------------------------------------------------------------------------ ============ ============ ============ ============ 2008 2009 2010 2011 LRP LRP LRP LRP - --------------------------------------------------------------------------------------- INCOME STATEMENT NET SALES 1,920 1,991 1,878 1,854 COGS 1,719 1,787 1,675 1,652 ------------ ------------ ------------ ------------ GROSS PROFIT 201 204 203 202 MARKETING 54 56 57 58 ADMINISTRATION 13 12 10 10 TECHNOLOGY 15 16 17 17 ------------ ------------ ------------ ------------ TOTAL MAT 83 84 84 85 AMORTIZATION 0 0 0 0 ------------ ------------ ------------ ------------ OPERATING INCOME 118 119 119 117 EQUITY INCOME 0 0 0 0 OTHER INCOME/(EXPENSE) 1 1 1 1 INTEREST INCOME 1 1 1 1 ------------ ------------ ------------ ------------ EBIT 120 121 121 119 ============ ============ ============ ============ EBITDA 175 175 175 175 % RELATIONSHIP TO SALES: GROSS PROFIT 10.5% 10.2% 10.8% 10.9% MAT 4.3% 4.2% 4.5% 4.6% EBIT 6.3% 6.1% 6.4% 6.4% EBITDA 9.1% 8.8% 9.3% 9.4% - -----------------------------------------------------------------------------------------
PERFORMANCE PRODUCTS ($M)
============ ============ ============ ============ ============ 2003 2004 2005 2006 2007 ACTUAL ACTUAL ACTUAL FORECAST BUDGET - ------------------------------------------------------------------------------------------------------ INCOME STATEMENT NET SALES 975 1,041 1,115 1,165 1,239 COGS 728 786 843 877 916 ------------ ------------ ------------ ------------ ------------ GROSS PROFIT 247 256 273 288 323 MARKETING 77 81 88 88 98 ADMINISTRATION 35 37 33 38 40 TECHNOLOGY 21 22 23 26 27 ------------ ------------ ------------ ------------ ------------ TOTAL MAT 134 139 145 152 164 AMORTIZATION 0 0 0 1 1 ------------ ------------ ------------ ------------ ------------ OPERATING INCOME 113 116 128 135 158 EQUITY INCOME 1 1 2 1 0 OTHER INCOME/(EXPENSE) (0) 0 4 7 1 INTEREST INCOME 0 0 0 0 0 ------------ ------------ ------------ ------------ ------------ EBIT 115 118 134 142 160 ============ ============ ============ ============ ============ EBITDA 156 156 172 185 202 % RELATIONSHIP TO SALES: GROSS PROFIT 25.3% 24.6% 24.5% 24.7% 26.1% MAT 13.7% 13.4% 13.0% 13.1% 13.2% EBIT 11.8% 11.3% 12.0% 12.2% 12.9% EBITDA 16.0% 15.0% 15.5% 15.9% 16.3% - ------------------------------------------------------------------------------------------------------ ============ ============ ============ ============ 2008 2009 2010 2011 LRP LRP LRP LRP - --------------------------------------------------------------------------------------- INCOME STATEMENT NET SALES 1,302 1,392 1,476 1,554 COGS 936 973 1,015 1,036 ------------ ------------ ------------ ------------ GROSS PROFIT 366 419 461 519 MARKETING 103 112 118 128 ADMINISTRATION 41 42 43 44 TECHNOLOGY 30 30 31 32 ------------ ------------ ------------ ------------ TOTAL MAT 174 184 191 203 AMORTIZATION 1 1 1 0 ------------ ------------ ------------ ------------ OPERATING INCOME 191 234 269 315 EQUITY INCOME 0 0 0 0 OTHER INCOME/(EXPENSE) 1 0 0 0 INTEREST INCOME 0 0 0 0 ------------ ------------ ------------ ------------ EBIT 192 235 269 316 ============ ============ ============ ============ EBITDA 232 278 310 355 % RELATIONSHIP TO SALES: GROSS PROFIT 28.1% 30.1% 31.2% 33.4% MAT 13.4% 13.2% 13.0% 13.1% EBIT 14.7% 16.9% 18.2% 20.3% EBITDA 17.8% 20.0% 21.0% 22.8% - -----------------------------------------------------------------------------------------
CORE ($M)
============ ============ ============ ============ ============ 2003 2004 2005 2006 2007 ACTUAL ACTUAL ACTUAL FORECAST BUDGET - ------------------------------------------------------------------------------------------------------- INCOME STATEMENT NET SALES 11 7 1 1 0 COGS 29 26 9 17 14 ------------ ------------ ------------ ------------ ------------ GROSS PROFIT (18) (18) (7) (16) (14) MARKETING 2 1 0 1 0 ADMINISTRATION 43 40 44 42 41 TECHNOLOGY 2 (0) 1 1 0 ------------ ------------ ------------ ------------ ------------ TOTAL MAT 46 41 45 44 42 AMORTIZATION 0 0 0 0 0 ------------ ------------ ------------ ------------ ------------ OPERATING INCOME (64) (59) (52) (59) (56) EQUITY INCOME (0) 22 42 38 29 OTHER INCOME/(EXPENSE) 2 1 1 2 0 CURRENCY (1) (3) (1) (3) 0 REORGANIZATION ITEMS (23) (51) (54) (57) 0 INTEREST INCOME 0 2 2 7 5 ------------ ------------ ------------ ------------ ------------ EBIT (86) (89) (63) (72) (22) ============ ============ ============ ============ ============ EBITDA (80) (83) (58) (68) (16) EBITDAR (57) (31) (5) (11) (16) - ------------------------------------------------------------------------------------------------------- ============ ============ ============ ============ 2008 2009 2010 2011 LRP LRP LRP LRP - --------------------------------------------------------------------------------------- INCOME STATEMENT NET SALES 0 0 0 0 COGS 18 8 4 16 ------------ ------------ ------------ ------------ GROSS PROFIT (18) (8) (4) (16) MARKETING 0 0 0 0 ADMINISTRATION 41 41 41 41 TECHNOLOGY 0 0 0 0 ------------ ------------ ------------ ------------ TOTAL MAT 42 42 42 42 AMORTIZATION 0 0 0 0 ------------ ------------ ------------ ------------ OPERATING INCOME (60) (50) (46) (58) EQUITY INCOME 27 27 27 27 OTHER INCOME/(EXPENSE) 0 0 0 0 CURRENCY 0 0 0 0 REORGANIZATION ITEMS 0 0 0 0 INTEREST INCOME 4 2 1 1 ------------ ------------ ------------ ------------ EBIT (29) (21) (18) (30) ============ ============ ============ ============ EBITDA (26) (18) (14) (26) EBITDAR (26) (18) (14) (26) - ------------------------------------------------------------------------------------------
Reconciliation of Non-GAAP Financial Measures to GAAP Measures of Performance(1) Management believes that measures of income excluding non-recurring, non-operational items are meaningful because they provide insight with respect to ongoing operating results of the Company. Such measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance. Reconciliations of non-GAAP measures to GAAP are detailed below for the fiscal years of 2005, 2004 and 2003. The below tables include the identification of non-recurring, non-operational items which have been excluded from the income statement used by management for internal evaluation purposes (consolidated income statement included in Exhibit A). EBITDAR, which is earnings before interest, taxes, depreciation, amortization and reorganization items, is a non-GAAP measure that is a typical financial measure for Companies during the restructuring process. Management uses this measure as a way to identify operating results of the Company had it not been in the reorganization process during the time period being reported upon.
INCREASE/(DECREASE) 2006 2005 2004 2003 ------------------- ---- ---- ---- ---- IMPACT ON: Net Sales -- (66) (61) (51)(e) Cost of goods sold.......................... $ 1 $ 1 $ 18 $ 29 (a) -- 9 26 26 (d) -- 51 57 75 (e) -- -- 8 -- (f) -- -- 1 -- (g) 9 -- -- -- (t) (20) -- -- -- (u) -- -- -- 27 (i) -- -- -- 99 (j) -- -- -- 20 (k) -------------------------------------- Total cost of goods sold ................... (10) 61 110 276 Marketing .................................. 1 -- -- 2 (a) -- 1 2 2 (d) -- 6 5 3 (e) Administrative ............................. -- -- -- 6 (a) -- 2 4 4 (d) -- -- -- 22 (l) -- 5 6 9 (e) Technological .............................. -- -- -- 6 (a) -- 1 3 3 (d) -- -- -- 1 (e) Amortization ............................... -- -- 1 2 (e) Impairment of Intangible Assets ............ -- -- 28 75 (e) -- -- -- 3 (m) -------------------------------------- Operating Income (Loss) Impact.............. 9 (10) (98) (363) Equity income (loss) from affiliates........ (2) 52 (49) (134)(n) - ------------------------------------------------------------------------------------------ - -------- (1) This Reconciliation was not part of the Draft Business Plan provided to the Noteholders on December 8, 2006.
Loss on debt Modification................... -- -- (15) -- (o) (8) -- -- -- (v) Other Income................................ -- -- -- 4 (p) -------------------------------------- 3 -- 2 (e) EBITDAR Impact.............................. (1) 45 (162) (491) Interest Expense............................ -- -- -- (14)(q) -- -- (25) -- (c) (1) -- -- -- (w) (3) -- -- -- (x) -- -- -- (1)(e) Reorganization Items, net................... (12) 5 (22) -- (r) -- -- -- 22 (l) -------------------------------------- Pre-tax Income Statement Impact............. (17) 50 (209) (484) Income tax expense (benefit) impact......... (3) -- (6) 430 (s) -- 3 (4) (33)(e) -------------------------------------- After-tax Income Statement Impact from (14) 47 (199) (881) Continuing Operations....................... Income (Loss) from Discontinued 58 -- -- (2)(b) Operations, net of tax...................... Cumulative Effect of Change in -- (3) -- (5)(h) Accounting Principle, net of tax............ -------------------------------------- Net Income (Loss) Impact $ 44 $ 44 $(199) $(888) - ----------------------------------------------======================================----- FOOTNOTES --------- a) Restructuring costs related principally to the closure of certain non-strategic operations including costs for decommissioning and dismantling activities, asset impairments, future costs for non-cancelable operating leases and severance and retraining costs. b) Discontinued operations for the UCB business is excluded from continuing operations in the internal financial statements. c) Write-off of unamortized debt issuance costs related to the retirement of the October 2003 and interim DIP credit facilities. d) Net pension and other postretirement benefit plan curtailments and settlements. e) Results of the Pharmaceutical Services Business which was sold during 2006. The amounts have been excluded from continuing operations in the internal financial statements. f) Losses incurred directly related to the hurricanes experienced in the U.S. in 2004 resulting in the disruption of operations and property damage at Solutia's operations in the Integrated Nylon chain located principally in the Southeastern part of the U.S., and the Performance Products and Services location in Martinsville, Virginia. These costs included primarily asset write-offs and repairs and maintenance costs. g) Loss on the sale of the assets of Axio Research Corporation. h) Cumulative effect of change in accounting principle is excluded from continuing operations in the internal financial statements. i) Charge for environmental remediation and funding for an educational trust related to the partial consent decree in Anniston, Alabama j) Charge related to Solutia's share of the Anniston litigation settlement and to increase certain other litigation accruals. k) Increase to environmental reserves related to exiting the Nitro, West Virginia facility. l) Prior to the filing for bankruptcy in December, the Company incurred significant professional services expense related to the attempted out-of-court restructuring initiative. The amount had been re-classed from administrative expense to reorganization items, net in the internal financial statements. m) Write-down of non-deductible goodwill in accordance with SFAS No. 142 for Axio Research Corporation within the Performance Products segment. n) Net one-time gains (losses) related to Solutia's Flexsys and Astaris joint ventures, in each of which Solutia has a fifty percent interest. o) Loss due to the modification of Solutia's Euronotes in January 2004. p) Recovery of certain receivables, established prior to 1997, which had previously been written off. q) Write-off of unamortized debt issuance cost related to retired credit facilities. r) Includes expenses related to asset write-offs associated with contract rejections and terminations, employee severance costs, adjustments to record certain pre-petition claims at estimated amounts of the allowed claims and differences between the settlement amount of certain pre-petition obligations and the corresponding amounts previously recorded. Only professional fees for services provided by debtor and creditor professionals directly related to Solutia's reorganization proceedings and costs associated with a retention plan for certain Solutia employees are included in reorganization items, net in the internal financial statements. s) With the exception of those items that relate to ex-U.S. operations, the above items are considered to have like pre-tax and after-tax impact as the tax benefit or expense realized from these events is offset by the change in valuation allowance for U.S. deferred tax assets resulting from uncertainty as to their recovery due to Solutia's Chapter 11 bankruptcy filing. t) Environmental charge precipitated by the notification by a third-party of its intent to terminate a tolling agreement at one of Solutia's facilities outside the U.S. that will likely result in the cessation of operations at the site. u) Gain resulting from the reversal of a litigation reserve with respect to a litigation matter that was decided favorably during 2006. v) Write-off of debt issuance costs and to record the DIP facility as modified at its fair value. w) Write off of unamortized debt issuance costs associated with the DIP facility at time of modification. x) Solutia refinanced its Euronotes and recorded early extinguishment costs at the time of refinancing.
EX-99.2 3 ex99p2.txt Exhibit 99.2 SOLUTIA SETTLEMENT TERM SHEET DECEMBER 8, 2006 SCOPE OF TERM SHEET: The term sheet outlines the key terms of (i) a modification of the Global Settlement as described in Solutia's Disclosure Statement filed with the Bankruptcy Court on February 14, 2006; (ii) a final settlement of the JP Morgan Adversary Proceeding; and (iii) a final settlement of the Equity Committee Adversary Proceeding. The term sheet is for discussion purposes only, may not be used by any party in litigation or otherwise disclosed to the Court or the Court's staff, or to other parties, without the express written permission of Solutia, and shall not be deemed a solicitation of acceptances of a Plan of Reorganization.(1) GENERAL PLAN ASSUMPTIONS: o Total Enterprise Value (TEV) of $2.507 billion. o Pro forma net debt of $1.507 billion.(2) o Implied Equity Value of $1.0 billion. (3) o Solutia acquires Akzo-Nobel's 50% joint venture ownership in Flexsys and effects the sale of a business unit. o General Unsecured Claims pool of $765 million.(4) o Plan stock price per share of $10.00 (the "Plan Stock Price"). The rights will be struck at a 25.0% discount to the Plan Stock Price per share, as explained below.(5) o In total, 108.3 million common shares will be issued upon emergence (the "Common Shares"). As explained below, 75.0 million shares will be distributed directly to the Noteholders, the general unsecured creditors, - ------------------------------------ (1) Capitalized terms, used but not defined herein, shall have the meanings ascribed to them in the disclosure statement (the "Disclosure Statement") filed by Solutia with the Bankruptcy Court for the Southern District of New York on February 14, 2006. (2) Pro forma debt of $1.522 billion less pro forma cash of $15 million. (3) The implied equity value is subject to a final determination by the Bankruptcy Court in connection with the confirmation of an amended plan. (4) Based on estimated claim amounts as of November 2006. Includes Noteholder Claims of $455.4 million, trade claims of approximately $87 million, contract claims of approximately $158 million (including Calpine claim of approximately $100 million), Maryville claim of approximately $27 million, employee claims of approximately $20 million and approximately $18 million of other claims. Excludes environmental, intercompany, Monsanto/Pharmacia, Officer & Director Indemnification, Retiree and Tort claims. (5) Implies theoretical share price of Common Shares of $9.23 per share, after accounting for the Rights Offering. Monsanto and the Retirees (the "Primary Common Shares"), and another 33.3 million shares will be distributed on a pro rata basis to holders of Noteholder Claims, General Unsecured Claims, Monsanto and the Retirees pursuant to the Rights Offering, as explained in Section III below. o Effective Date of the Plan: March 31, 2007. o No change to the other key terms of the Debtor's Plan of Reorganization dated February 14, 2006 (e.g., Retiree Settlement, pension funding, settlement of environmental liabilities, releases, etc.). I. TREATMENT OF NOTEHOLDER CLAIMS: ------------------------------- NOTEHOLDER CLAIMS: The claims of the holders of (i) the 6.72% notes due October 15, 2037, and (ii) the 7.375% notes due October 15, 2027 (together, the "Noteholder Claims") will be classified separately from other claims. The aggregate allowed amount of the Noteholder Claims is $455.4 million, calculated as principal amount plus accrued and unpaid interest through the Petition Date. TREATMENT: The Noteholder Claims will be exchanged for: (i) 36.52 million Primary Common Shares; and (ii) rights to purchase 16.23 million Common Shares in the Rights Offering. II. TREATMENT OF OTHER CLAIMS: -------------------------- CLASSIFICATION OF GENERAL As used herein, "General Unsecured UNSECURED CLAIMS: Claims" excludes the Noteholder Claims, Monsanto's Claim and the Retiree Claim. TREATMENT OF GENERAL General Unsecured Claims will be UNSECURED CLAIMS: exchanged for: (i) 19.66 million Primary Common Shares; and (ii) rights to purchase 8.74 million Common Shares in the Rights Offering. TREATMENT OF MONSANTO: Monsanto's claim against the estates will be classified separately from other claims and will be exchanged for: (i) 17.0 million Primary Common Shares; and (ii) rights to purchase 7.56 million Common Shares in the Rights Offering. TREATMENT OF RETIREE CLAIM: In accordance with the terms of the Retiree Settlement, the Retiree Claim will be exchanged for: (i) 1.82 million Primary Common Shares; and (ii) rights to purchase 0.81 million Common Shares in the Rights Offering. TREATMENT OF EQUITY INTERESTS: Holders of Equity Interests will not receive a distribution under the Plan. Monsanto will resolve the Equity Committee 2 Adversary Proceeding at its sole cost. III. RIGHTS OFFERING: ---------------- SIZE OF RIGHTS OFFERING: $250.0 million. RIGHTS OFFERING PRICE: $7.50 per share, implying a 25.0% discount to the Plan Stock Price. TOTAL SHARES UNDERLYING 33.3 million. RIGHTS OFFERING: TREATMENT OF RIGHTS OFFERING: Holders of Noteholder Claims, General Unsecured Claims, Monsanto and the Retirees will receive rights on a pro rata basis based on the number of Primary Common Shares they are receiving under the Plan. The rights will be transferable and the terms of such transferability will be determined by Solutia in consultation with the stakeholders. OVERSUBSCRIPTION: Holders of rights may elect to subscribe for additional shares, over and above the amount they would otherwise be eligible to purchase in the Rights Offering. If the total number of shares subscribed for in the Rights Offering exceeds 33.3 million, the oversubscribed shares will be distributed to the electing Rights Offering participants on a pro rata basis. BACKSTOP: The Rights Offering will be backstopped by a market participant and effected at a market clearing discount to the Implied Equity Value. IV. CORPORATE GOVERNANCE: --------------------- BOARD OF DIRECTORS: The Company's post-reorganization Board of Directors shall initially consist of 9 members, including the Company's Chairman and Chief Executive Officer, Jeffry Quinn and two continuing directors of the Company. The ad hoc committee of noteholders shall select 2 directors and the Creditors' Committee and Monsanto shall select 1 director each. The remaining 2 directors shall be selected by the initial 7 directors from a panel of candidates identified by a national search firm employed by the Company. 3 V. FULLY-DILUTED EQUITY ALLOCATION: --------------------------------
EQUITY ALLOCATION PRE-RIGHTS Shares Rights % of OFFERING SUBSCRIPTION: (mm) Offering Total Total ------ ------- ----- ----- Noteholders 36.52 - 36.52 33.71% GUCs 19.66 - 19.66 18.15 Monsanto 17.00 - 17.0 15.69 Retirees 1.82 - 1.82 1.68 Rights - 33.33 33.33 30.77 Offering ----- ----- ------ ------ Total 75.00 33.33 108.33 100.00% EQUITY ALLOCATION POST-RIGHTS Shares (mm) % of Total OFFERING SUBSCRIPTION(6): ----------- ---------- Noteholders 52.76 48.70% GUCs 28.39 26.21 Monsanto 24.56 22.67 Retirees 2.63 2.43 ------ ------ Total 108.33 100.00%
VI. RECOVERY ANALYSIS ($ IN MILLIONS)(7): ------------------------------------- RECOVERY TO NOTEHOLDERS(8): - --------------------------- Value of Primary Common Shares Received $337.1 Net Value from Rights Offering exercise 28.1 ------ Total Net Value $365.2 Net Recovery % 80.2% - ------------------------------------ (6) Assumes full subscription to Rights Offering by all constituents. (7) All recoveries are net of the cost to exercise the rights at the Rights Offering Price of $7.50 per share. Based on implied theoretical share price of Common Shares of $9.23 per share, after accounting for the Rights Offering. (8) Assumes Noteholder Claims of $455.4 million.
4 RECOVERY TO GENERAL UNSECURED CREDITORS(9): - ------------------------------------------- Value of Primary Common Shares Received $181.5 Net Value from Rights Offering exercise 15.1 -------- Total Net Value $196.6 Net Recovery % 63.5%
RECOVERY TO MONSANTO(10): - ------------------------- Value of Primary Common Shares Received $156.9 Net Value from Rights Offering exercise 13.1 -------- Total Net Value $170.0 Net Recovery % 44.4% RECOVERY TO RETIREES(11): - ------------------------- Value of Primary Common Shares Received $16.8 Net Value from Rights Offering exercise 1.4 -------- Total Net Value $18.2 Net Recovery % 52.0% - ------------------------------------ (9) Assumes a General Unsecured Claims Pool of $309.6 million. (10) Claim of $382.8 million based on Monsanto's estimate. (11) Assumes Retiree Claim of $35.0 million.
5 VII. PRO FORMA SOURCES AND USES: --------------------------- Surplus Cash(12) $115 DIP (Drawn) $650 Exit Revolver(13) 52 2009 Bonds 223 Exit Term Loan B - USD Tranche 850 Pension Funding 149 Exit Term Loan B - Euro Tranche 350 Euro Loan 203 Exit Subordinated Bonds 250 One-Time Exit Costs-Fees/Admin Items(14) 152 Sale of a businss unit 60 Flexsys acquisition 300 Maryville Note 20 Maryville Note 20 ------ ------ Total Sources: $1,697 Total Uses: $1,697 ====== ====== - ------------------------------------ (12) Cash balance reduced from $130 million to $15 million at emergence with no restrictions. (13) Total Revolver $400 million, after LC's/drawings pro-forma liquidity on 12/31/06 would be $280 million. (14) $152 million total includes: $40.0 Exit Financing Bank & Legal Fees $15.0 Accrued Interest on 2009 Bonds and EuroLoan $9.0 CPFilms Trade AP $25.0 Secured, Administrative and Priority Claims to be paid in cash (Tax/Reclamation/Mechanics Liens/Other) $20.0 Cure Costs on Executory Contracts that must be assumed $34.5 Advisor Fees $2.5 KERP Due on Emergence $6.0 D&O and Fiduciary Run-off Policies
6 EX-99.3 4 ex99p3.txt Exhibit 99.3 SUMMARY UPDATE OF SALE PROCESS ------------------------------ At a hearing conducted on November 16, 2006, Solutia Inc. ("Solutia") informed the Bankruptcy Court that it was undertaking an exploratory sale process (a "Sale"), which could involve the sale of the equity of reorganized Solutia, through Solutia's plan of reorganization, to a third party purchaser. If a Sale is consummated, Solutia contemplates that the proceeds from the Sale will be used to fund the settlement with Solutia's retirees, certain ongoing legacy liabilities, and cash distributions to Solutia's creditors. In connection with the Sale process, Solutia and/or its advisors contacted 18 potential strategic and financial purchasers. Solutia's management team made business and financial presentations to these potential purchasers. Indications of interest were due on December 19, 2006. The Company is currently evaluating the indications of interest in consultation with its legal and financial advisors. CAUTIONARY AND FORWARD LOOKING STATEMENTS. This Summary Update of Sale Process may contain forward-looking ------------------------------ statements, which can be identified by the use of words such as "believes," "expects," "may," "will," "intends," "plans," "estimates" or "anticipates," or other comparable terminology, or by discussions of strategy, plans or intentions. These statements are based on management's current expectations and assumptions about the industries in which Solutia operates. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Solutia's most recent Annual Report on Form 10-K, under "Cautionary Statement About Forward Looking Statements," Solutia's quarterly reports on Form 10-Q, and in filings with the U.S. Bankruptcy Court in connection with the Chapter 11 case of Solutia Inc. and 14 of its U.S. subsidiaries. These reports can be accessed through the "Investors" section of Solutia's website at www.solutia.com. The bankruptcy court filings can be accessed by visiting www.trumbullgroup.com. Solutia disclaims any intent or obligation to update or revise any forward-looking statements in response to new information, unforeseen events, changed circumstances or any other occurrence. EX-99.4 5 ex99p4.txt Exhibit 99.4 2006 CURRENT FORECAST ACTUALS THROUGH THE END OF NOVEMBER AND FORECAST FOR DECEMBER ($M) NET SALES Integrated Nylon $1,740 Performance Products $1,172 Other $ 1 ----------- Consolidated Net Sales $2,913 GROSS PROFIT Integrated Nylon $ 94 Performance Products $ 293 Other $ (16) ----------- Consolidated Gross Profit $ 371 MAT Integrated Nylon $ 80 Performance Products $ 151 Other $ 42 ----------- Consolidated MAT $ 273 EBITDA AND EBITDAR Integrated Nylon $ 79 Performance Products $ 190 Equity Income $ 39 Other $ (104) ----------- Consolidated EBITDA $ 204 Reorganization Items $ 57 ----------- Consolidated EBITDAR $ 261 INTEREST EXPENSE $ 101 SHORT TERM DEBT $ 677 CONSOLIDATED CASH FLOW DATA Cash Flow from Operations $ (230) Capital Expenditures $ (109) ----------- Free Cash Flow from Continuing Operations $ (339) TOTAL LIQUIDITY $ 207 ** Financials exclude one-time or non-operating items -----END PRIVACY-ENHANCED MESSAGE-----