Approximately $50 million of the after-tax charges represent Solutia's share of the costs associated with restructuring actions at Astaris, LLC, a 50/50 joint venture between Solutia and FMC Corporation, and at Flexsys, L. P., a 50/50 joint venture between Solutia and Akzo Nobel N. V. The restructuring charges at Astaris include the previously announced costs to cease production at its elemental phosphorus production facility in Pocatello, Idaho.
Approximately $30 million of the after-tax charges will cover estimated costs for remedial environmental work arising from recently completed agreements with the U.S. Environmental Protection Agency and to increase the company's self-insurance reserves. The company's annual cash spend for environmental remediation and litigation activities is not expected to change.
Approximately $5 million of the after-tax charges are for additional severance costs associated with the company's $100 million cost reduction initiative in 2001. Solutia's Chairman and CEO, John Hunter said, "In anticipation of a prolonged economic downturn, we have aggressively reduced our permanent and contract workforce through a combination of involuntary severance actions and normal attrition. These actions provide a sustainable and improved cost structure which will make Solutia a stronger company in the future."
The remainder of the after-tax charges primarily represents the costs to write-off certain non-performing and non-strategic assets.
Fourth Quarter Outlook
The company continues to be negatively affected by the global economic slowdown. As expected, weak North American demand and deterioration of economic activity in Europe and Asia are having a significant impact on Solutia's fourth quarter earnings. Consistent with previous guidance, the company anticipates a modest earnings per share loss in the fourth quarter, in the range of $0.05 to $0.08, excluding special charges.
Solutia announces special charges; confirms 4th quarter forecast
Solutia Inc. announced that it will record after-tax charges in the range of $90 to $100 million in the fourth quarter of 2001 principally to cover its share of restructuring costs at its Astaris and Flexsys joint ventures, to increase environmental and self-insurance reserves, to cover additional severance costs associated with its $100 million cost reduction initiative in 2001 and to write off certain non-performing assets.