"While selling prices trailed raw material cost increases in the quarter, in particular in the Integrated Nylon segment, this was not unexpected given the increasing cost profile across the quarter. We are off to a solid start in 2008, and are focused on getting selling prices up over the coming quarters."
Fresh Start Accounting: Upon emergence from chapter 11 reorganization, Solutia adopted fresh-start accounting, as required by generally accepted accounting principles. This resulted in the company having a new capital structure, a new basis in identifiable assets and liabilities and no retained earnings or accumulated losses as of March 1, 2008.
Accordingly, the company's financial information shown for periods prior to March 1, 2008 (Predecessor) is not comparable to consolidated financial statements presented on or after March 1, 2008 (Successor).
As a result of the increased asset values through the application of fresh-start accounting and the implementation of new stock based incentive plans at emergence, 2008 operating earnings include an additional $3 million of non-cash expenses consisting of $2 million additional depreciation and amortization expense and stock compensation expense of $1 million.
In addition, reported profitability in all segments was adversely affected by charges resulting from the step-up in basis of the company's inventory in accordance with fresh start accounting in the aggregate amount of $25 million.