·	Net sales of $466 million; an increase of 37% over the same period last year

·	Loss per share from continuing operations of $.49

·	Adjusted diluted EPS from continuing operations of  $.33

·	Record Adjusted EBITDA of $120 million; an increase of 114% over the same period last year

·	Increasing Adjusted EBITDA guidance for the year to a range of $480 million to $500 million, cash from continuing operations less capital spending to a range of $150 million to $175 million, and providing full year Adjusted EPS from continuing operations guidance of a range from $1.40 to $1.50.

Business Segment	Advanced Interlayers	Performance Films	Technical Specialties
Principle Products	Saflex®	LLumar®	Crystex®
	Vanceva®	Vista™	Therminol®
	Butvar®	Gila®	Skydrol®
	VistaSolar®   (at closing)	FormulaOne™	Santoflex®

During the first quarter of 2010, the Company closed a new $1,150 million senior secured credit facility and $300 million senior unsecured notes. “We are pleased with the success of the refinancing which will lower the company’s cost of debt, extend debt maturities and increase operational and strategic flexibility,” said James M. Sullivan, executive vice president and chief financial officer. “Given the strong interest in the Term Loan, we were able to upsize it from $750 million to $850 million at attractive rates with $50 million of these additional proceeds used to improve the funded status of our frozen U.S. pension plan and the remainder to bolster liquidity in support of our strategic growth plans.”

 

		Three Months Ended March 31,
		2010				2009
Net Sales		$	466			$	339
Cost of goods sold			320				258
Gross Profit			146				81
Selling, general and administrative expenses			66				50
Research, development and other operating expenses, net			4				4
Operating Income			76				27
Interest expense			(38	)			(37	)
Other income (loss), net			3				(1	)
Loss on debt extinguishment			(89	)			--
Loss from Continuing Operations Before Income Tax Expense (Benefit)			(48	)			(11	)
Income tax expense (benefit)			9				(7	)
Loss from Continuing Operations			(57	)			(4	)
Loss from Discontinued Operations, net of tax			--				(155	)
Net Loss			(57	)			(159	)
Net income attributable to noncontrolling interest			1				--
Net Loss attributable to Solutia		$	(58	)		$	(159	)
Basic and Diluted Loss per Share attributable to Solutia:
Loss from Continuing Operations attributable to Solutia		$	(0.49	)		$	(0.04	)
Loss from Discontinued Operations, net of tax			--				(1.66	)
Net Loss attributable to Solutia		$	(0.49	)		$	(1.70	)

		March 31, 2010				December 31, 2009
ASSETS
Current Assets:
Cash and cash equivalents		$	458			$	243
Trade receivables, net of allowances of $3 in 2010 and $2 in 2009			283				268
Miscellaneous receivables			75				82
Inventories			271				257
Prepaid expenses and other assets			21				37
Assets of discontinued operations			10				10
Total Current Assets			1,118				897
Net Property, Plant and Equipment			883				919
Goodwill			511				511
Identified Intangible Assets, net			783				803
Other Assets			91				136
Total Assets		$	3,386			$	3,266
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	167			$	169
Accrued liabilities			221				206
Short-term debt, including current portion of long-term debt			24				28
Liabilities of discontinued operations			46				50
Total Current Liabilities			458				453
Long-Term Debt			1,536				1,264
Postretirement Liabilities			353				411
Environmental Remediation Liabilities			255				260
Deferred Tax Liabilities			169				179
Other Liabilities			102				99
Commitments and Contingencies (Note 8)
Shareholders’ Equity:
Common stock at $0.01 par value; (500,000,000 shares authorized, 121,869,293 shares issued in both 2010 and 2009)			1				1
Additional contributed capital			1,616				1,612
Treasury shares, at cost (515,894 in 2010 and 430,203 in 2009)			(3	)			(2	)
Accumulated other comprehensive loss			(270	)			(237	)
Accumulated deficit			(839	)			(781	)
Total Shareholders’ Equity attributable to Solutia			505				593
Equity attributable to noncontrolling interest			8				7
Total Shareholders’ Equity			513				600
Total Liabilities and Shareholders’ Equity		$	3,386			$	3,266

		Three Months Ended March 31,
		2010				2009
INCREASE IN CASH AND CASH EQUIVALENTS OPERATING ACTIVITIES:
Net loss		$	(57	)		$	(159	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Loss from discontinued operations, net of tax			--				155
Depreciation and amortization			27				25
Pension obligation related expense less than contributions			(52	)			(5	)
Other postretirement benefit obligation related expense less than contributions			--				(2	)
Amortization of deferred debt issuance costs and debt discount			4				5
Deferred income taxes			(11	)			(14	)
Other charges (gains)
Non-cash loss on deferred debt issuance write-off			80				--
Other charges (gains), including restructuring expenses			20				(1	)
Changes in assets and liabilities:
Income taxes payable			5				(9	)
Trade receivables			(15	)			33
Inventories			(14	)			31
Accounts payable			(7	)			(42	)
Environmental remediation liabilities			(5	)			(5	)
Restricted cash for environmental remediation and other legacy payments			--				5
Other assets and liabilities			25				13
Cash Provided by Operations – Continuing Operations			--				30
Cash Provided by (Used in) Operations – Discontinued Operations			(4	)			40
Cash Provided by (Used in) Operations			(4	)			70
INVESTING ACTIVITIES:
Property, plant and equipment purchases			(5	)			(15	)
Acquisition and investment payments			(1	)			(1	)
Investment proceeds and property disposals			--				1
Cash Used in Investing Activities – Continuing Operations			(6	)			(15	)
Cash Used in Investing Activities – Discontinued Operations			--				(5	)
Cash Used in Investing Activities			(6	)			(20	)
FINANCING ACTIVITIES:
Net change in lines of credit			--				2
Proceeds from long-term debt obligations			1,144				--
Net change in long-term revolving credit facilities			--				(43	)
Payment of long-term debt obligations			(876	)			(3	)
Debt issuance costs			(25	)			--
Purchase of treasury shares			(1	)			(1	)
Other, net			(9	)			(2	)
Cash Provided by (Used in) Financing Activities			233				(47	)
Effect of Exchange Rate Changes on Cash			(8	)			--
INCREASE IN CASH AND CASH EQUIVALENTS			215				3
CASH AND CASH EQUIVALENTS:
Beginning of period			243				32
End of period		$	458			$	35
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest		$	16			$	19
Cash payments for income taxes, net of refunds		$	7			$	2
Non-Cash Investing Activities:
Capital expenditures included in accounts payable		$	3			$	6
Non-Cash Financing Activities:
Deferred debt costs included in other liabilities		$	2			$	--

Consolidated and segment sales, EBITDA(1) and Adjusted EBITDA(2) three months ended March 2010 and 2009
			Three Months Ended March 31
From Continuing Operations (in millions)			2010				Adjust- ments(3)				2010 As Adjusted				2009				Adjust- ments(3)				2009 As Adjusted				% change
Net Sales
	Advanced Interlayers		$	186							$	186			$	133							$	133				40	%
	Performance Films			52								52				34								34				53	%
	Technical Specialties			224								224				167								167				34	%
	Unallocated and Other			4								4				5								5				-20	%
	Total		$	466							$	466			$	339							$	339				37	%
EBITDA(1)
	Advanced Interlayers		$	48			$	-			$	48			$	19			$	5			$	24				100	%
	Performance Films			9				1				10				1				1				2				400	%
	Technical Specialties			74				5				79				56				(10	)			46				72	%
	Unallocated and Other			(26	)			9				(17	)			(25	)			9				(16	)			-6	%
	Total		$	105			$	15			$	120			$	51			$	5			$	56				114	%
(1)	EBITDA is defined as earnings from continuing operations before interest expense, loss on debt extinguishment, income taxes, depreciation and amortization, less net income attributable to non-controlling interests. Foreign currency gains/losses are included in Unallocated and Other
(2)	Adjusted EBITDA is EBITDA (as defined above), excluding Adjustments (as defined below)
(3)	Adjustments include Events Affecting Comparability (see separate table), cost overhang associated with the sale of the Integrated Nylon business, and non-cash stock compensation expense

Reconciliation of Loss from Continuing Operations to Adjusted EBITDA from Continuing Operations
		Three Months				Three Months
		Ended				Ended
		March 31,				March 31,
(dollars in millions)		2010				2009
Loss from Continuing Operations		$	(57	)		$	(4	)
Less:  Net Income attributable to noncontrolling interest			1				-
Loss from Continuing Operations attributable to Solutia			(58	)			(4	)
Plus:
Income Tax Expense (Benefit)			9				(7	)
Interest Expense			38				37
Loss on Debt Extinguishment			89				-
Depreciation and Amortization			27				25
Events affecting comparability, pre-tax:
Other items (see below)			11				(1	)
Non-cash Stock Compensation Expense			4				5
Nylon Cost Overhang			-				1
Adjusted EBITDA from Continuing Operations		$	120			$	56

Reconciliation of Loss from Continuing Operations to Income (Loss) from Continuing Operations attributable to Solutia before Events Affecting Comparability
		Three Months				Three Months
		Ended				Ended
		March 31,				March 31,
(dollars in millions)		2010				2009
Loss from Continuing Operations		$	(57	)		$	(4	)
Less:  Net Income attributable to noncontrolling interest			1				-
Loss from Continuing Operations attributable to Solutia			(58	)			(4	)
Plus:
Events affecting comparability, pre-tax:
Loss on debt extinguishment			89				-
Other items (see below)			11				(1	)
Events affecting comparability, income tax impact			(2	)			-
Income (Loss) from Continuing Operations attributable to Solutia before events affecting comparability		$	40			$	(5	)

Summary of Events Affecting Comparability
In 2010, (Gains) and Charges affecting comparability are as follow:
Three
Months
Ended
March 31,
2010			(dollars in millions)
$	3		Severance and retraining costs related to the general corporate restructuring
	1		Charges related to the closure of the Ruabon, Wales facility
	3		Charges related to the closure of the Cologne, Germany facility
	4		Acquisition costs related to our agreement to purchase Etimex Solar
$	11		EBITDA impact
	89		Charges related to the early extinguishment of our 2014 Term Loan and 2013 Revolver
$	100		Pre-tax income statement impact
	(2	)	Income tax impact
$	98		After-tax income statement impact
In 2009, (Gains) and Charges affecting comparability are as follow:
Three
Months
Ended
March 31,
	2009		(dollars in millions)
$	(23	)	Gain related to the reduction in the 2008 annual incentive plan
	17		Severance and retraining costs related to the general corporate restructuring
	4		Charges related to the closure of the SAFLEX® production line at the Trenton, Michigan facility
	1		Charges related to the closure of the Ruabon, Wales facility
$	(1	)	EBITDA impact
	-		Interest Expense
$	(1	)	Pre-tax income statement impact
	-		Income tax impact
$	(1	)	After-tax income statement impact

Adjusted Earnings Per Share - Reconciliation of a Non-US GAAP Measure
		Three Months				Three Months
		Ended				Ended
(in $ millions, except per share data)		March 31, 2010				March 31, 2009
Loss from continuing operations before tax		$	(48	)		$	(11	)
Less:  Net Income attributable to noncontrolling interest			1				-
Loss from continuing operations before tax attributable to Solutia			(49	)			(11	)
Non-GAAP Adjustments before tax(1)			100				(1	)
Adjusted earnings from continuing operations before tax			51				(12	)
Income tax expense (benefit) on adjusted earnings			(11	)			7
Adjusted earnings for adjusted EPS		$	40			$	(5	)
Diluted Shares (millions)
Weighted average shares outstanding - Basic			118.5				93.3
Assumed conversion of Restricted Stock			1.5				0.0
Weighted average shares outstanding - Diluted			120.0				93.3
Adjusted EPS - Basic		$	0.34			$	(0.05	)
Adjusted EPS - Diluted		$	0.33			$	(0.05	)
(1) See table of Summary of Events Affecting Comparability