Filed Pursuant to Rule 424(b)(2)
Registration No. 333-160834

 

CALCULATION OF REGISTRATION FEE

 

 

Prospectus Supplement
(to Prospectus dated July 27, 2009)

$400,000,000

 

Solutia Inc.
83/4% Senior Notes due 2017

 

 

 

 

This is an offering of $400,000,000 aggregate principal amount of our 83/4% Senior Notes due 2017. The notes will mature on November 1, 2017. We will pay interest on the notes on each May 1 and November 1, commencing May 1, 2010. We may redeem some or all of the notes at any time prior to November 1, 2013 at a price equal to 100% of the principal amount of the notes redeemed, plus accrued and unpaid interest to the redemption date and a “make-whole” premium, as described in this prospectus supplement. We may redeem some or all of the notes at any time on or after November 1, 2013 at the redemption prices set forth in this prospectus supplement. In addition, until November 1, 2012, we may redeem up to 35% of the aggregate principal amount of the notes using net proceeds from certain equity offerings at the redemption price set forth in this prospectus supplement. Holders may require us to repurchase the notes upon a change of control. There is no sinking fund for the notes.

 

The notes will be our senior unsecured obligations and will rank equally in right of payment with all of our existing and future senior unsecured debt. The notes will be effectively subordinated to our secured debt to the extent of the value of the assets securing such debt and to the debt and other liabilities of our non-guarantor subsidiaries. The notes will be guaranteed on a senior unsecured basis by all of our direct and indirect subsidiaries that guarantee our obligations or the obligations of our domestic subsidiaries under our senior secured credit facilities.

 

The notes are not expected to be listed on any securities exchange or included in any quotation system.

 

This prospectus supplement and the accompanying prospectus include additional information about the terms of the notes, including optional redemption prices and covenants.

 

See “Risk Factors,” which begins on page S-12 of this prospectus supplement for a discussion of certain of the risks you should consider before investing in the notes.

 

 

 

 

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

 

We expect that delivery of the notes will be made in New York, New York on or about October 15, 2009.

 

 

 

 

Joint Book-Running Managers

 

 

Co-Managers

 

KBC Financial Products

 

 

The date of this Prospectus Supplement is October 9, 2009

 

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements made in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference therein are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Exchange Act of 1934, as amended, or the Exchange Act. The words “believe,” “expect,” “plan,” “intend,” “estimate” or “anticipate” and similar expressions, as well as future or conditional verbs such as “will,” “should,” “would” and “could,” often identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. These risks and uncertainties include, but are not limited to, those described herein and in Solutia’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 under the heading “Risk Factors.” 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. In addition, actual results could differ materially from those projected or suggested in any forward-looking statements as a result of a variety of factors and conditions which include, but are not limited to:

 

 

These forward-looking statements are expressly qualified in their entirety by this cautionary statement and are only made as of the date of this prospectus supplement and, except as required by law, we undertake no obligation to update these forward-looking statements to reflect new information, subsequent events or otherwise.

ABOUT THIS PROSPECTUS SUPPLEMENT

 

This document is in two parts. The first part is the prospectus supplement, which describes the specific terms of the notes we are offering and certain other matters relating to us and our financial condition. The second part, the accompanying prospectus, gives more general information about securities we may offer from time to time, some of which may not apply to the notes we are offering. You should read this prospectus supplement along with the accompanying prospectus and the documents incorporated by reference therein, as well as any free writing prospectus that is filed, including the term sheet for the notes offered hereby. If the description of the offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.

 

NON-GAAP FINANCIAL MEASURES

 

The financial measures EBITDA and Adjusted EBITDA, as presented in this prospectus supplement, are supplemental measures of Solutia’s performance that are not GAAP measures. As presented in this prospectus supplement, EBITDA is defined as earnings from continuing operations before interest expense, income tax expense, depreciation and amortization, less net income attributable to noncontrolling interests and reorganization items, net and Adjusted EBITDA is defined as EBITDA adjusted to exclude unusual gains and charges, which management views as one time items that are not reflective of Solutia’s ongoing operations, cost overhang associated with the Nylon business divested on June 1, 2009, and non-cash stock compensation expense. See “Prospectus Supplement Summary — Summary Historical Consolidated Financial Data.”

 

We present EBITDA and Adjusted EBITDA because we believe these measures provide investors with important additional information to evaluate our operating performance. We believe EBITDA and Adjusted EBITDA are useful to investors because these measures are frequently used by securities analysts, investors and other interested persons in evaluating operating performance in comparison to other companies in our industry. These measures are also frequently provided for in indentures and credit agreements and similar measures will be used in the covenants in the indenture governing the notes and are used in our senior secured credit facilities. EBITDA and Adjusted EBITDA, however, are not measures of financial performance under GAAP, have not been audited and should not be considered alternatives to, or more meaningful than, net income as a measure of operating performance or to cash flows from operating, investing or financing activities as measures of liquidity. Since EBITDA and Adjusted EBITDA are not measures determined in accordance with GAAP and thus are susceptible to varying interpretations and calculations, EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation from, or as a substitute for analysis of, our financial information prepared in accordance with GAAP. Some of these limitations are:

 

 

For a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) attributable to Solutia Inc., see “Prospectus Supplement Summary — Summary Historical Consolidated Financial Data.”

 

MARKET AND INDUSTRY DATA

 

The data included in this prospectus supplement regarding markets and ranking, including the size of certain markets and our position and the position of our competitors within these markets, are based on independent industry publications, other publicly available information and our own estimates. Our estimates are based on information obtained from our customers, distributors, suppliers, trade and business organizations and other contacts in the markets in which we operate and our management’s knowledge and experience. We believe these estimates to be accurate as of the date of this prospectus supplement. However, this information may prove to be inaccurate because of the methods by which we obtained some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in a survey of market size. In addition, although we believe that the independent industry publications and other publicly available information are reliable, we have not independently verified and do not guarantee the accuracy or completeness of this information.

 

PROSPECTUS SUPPLEMENT SUMMARY

Insoluble Sulfur (Crystex®)		#1 Globally
Polyvinyl Butryl (PVB) Saflex®		#1 Globally
Premium Custom-Coated Window Films		#1 Globally
High Temperature Heat Transfer Fluids (Therminol®)		#1 Globally
Flame Resistant Aviation Hydraulic Fluid (Skydrol®)		#1 Globally

Issuer		Solutia Inc.
Notes Offered		$400,000,000 aggregate principal amount of 83/4% Senior Notes due 2017.
Maturity Date		The notes will mature on November 1, 2017.
Interest		Interest on the notes will accrue at a rate of 83/4% per annum.
		Interest on the notes will be payable on May 1 and November 1 of each year, beginning on May 1, 2010, and will accrue from the issue date of the notes.
Ranking		The notes will be our senior unsecured obligations and will:

		•      rank senior in right of payment to any of our future senior subordinated or subordinated indebtedness;
		•      rank pari passu in right of payment with all of our existing and future senior indebtedness;
		•      be effectively subordinated in right of payment to our existing senior secured credit facilities and any future secured indebtedness, to the extent of the value of the assets securing such indebtedness, and
		•      be structurally subordinated to all obligations of each of our subsidiaries that is not a guarantor of the notes.

		Similarly, the note guarantees will be senior unsecured obligations of the guarantors and will:

		•      be senior in right of payment to each guarantor’s guarantee of any future senior subordinated or subordinated indebtedness of such guarantor;
		•      be pari passu in right of payment to all existing and future senior indebtedness of each guarantor;
		•      be effectively subordinated to any secured indebtedness of each guarantor to the extent of the value of the assets securing such indebtedness, and
		•      be structurally subordinated to all obligations of any subsidiary of a guarantor if that subsidiary is not also a guarantor of the notes.

		As of June 30, 2009, after giving effect to this offering and the use of proceeds as contemplated under “Use of Proceeds,” we would have had $882 million of indebtedness outstanding under our senior secured credit facilities (excluding $44 million of undrawn letters of credit and approximately $128 million of additional borrowing capacity under our senior secured revolving credit facility), all of which would rank effectively senior to the notes to the extent of the assets securing such indebtedness, and our subsidiaries that are not guarantors would have

		approximately $9 million of indebtedness and other liabilities, all of which would rank structurally senior to the notes.
Guarantees		All of our direct and indirect subsidiaries that guarantee our obligations or the obligations of our domestic subsidiaries under our senior secured credit facilities will guarantee the notes on the issue date on a senior unsecured basis.
		Any subsidiary that guarantees our obligations or the obligations of our domestic subsidiaries under our senior secured credit facilities in the future will guarantee the notes unless we designate such subsidiary as an “unrestricted subsidiary” under the indenture.
Optional Redemption		Prior to November 1, 2013, we may redeem some or all of the notes for cash at a redemption price equal to 100% of their principal amount plus a “make-whole” premium (as described under “Description of Notes — Optional Redemption”), plus accrued and unpaid interest to the redemption date. Beginning on November 1, 2013, we may redeem some or all of the notes at the redemption prices listed under “Description of Notes — Optional Redemption,” plus accrued and unpaid interest to the redemption date.
Optional Redemption After Certain Equity Offerings		In addition, at any time (which may be more than once) until November 1, 2012, we can choose to redeem up to 35% of the outstanding notes with the proceeds of certain equity offerings, so long as:

		•      we pay 108.750% of the face amount of the notes, plus accrued and unpaid interest to the redemption date;
		•      we redeem the notes within 90 days of completing such equity offering; and
		•      at least 65% of the aggregate principal amount of the notes remains outstanding afterwards.

Change of Control Offer		If we experience a change in control, we must give holders of the notes the opportunity to sell us their notes at 101% of their face amount, plus accrued and unpaid interest to the date of purchase.
		We might not be able to pay you the required price for notes you present to us at the time of a change of control, because we might not have enough funds at that time.
Asset Sale Proceeds		If we or our subsidiaries engage in asset sales, we generally must either invest the net cash proceeds from such sales in our business within a period of time, prepay debt under our senior secured credit facilities or make an offer to purchase a principal amount of the notes equal to the excess net cash proceeds. The purchase price of the notes will be 100% of their principal amount, plus accrued and unpaid interest to the date of purchase.
Certain Covenants		The indenture governing the notes will contain covenants limiting our ability and the ability of our restricted subsidiaries to:

		•      incur additional debt or enter into sale and leaseback transactions;
		•      pay dividends or distributions on our capital stock or repurchase our capital stock;

		•    issue stock of subsidiaries;
		•    make certain investments;
		•    create liens on our assets;
		•    enter into transactions with affiliates;
		•    merge or consolidate with another company; and
		•    transfer and sell assets.

		These covenants are subject to a number of important limitations and exceptions. See “Description of Notes — Certain Covenants.”
		During any period that the credit rating on the notes, as determined by both Moody’s Investors Service and Standard and Poor’s Ratings Services, equals or exceeds Baa3 and BBB-, respectively, and no default has occurred and is continuing, we will not be subject to most of the restrictive covenants and corresponding events of default contained in the indenture. Any restrictive covenants or corresponding events of default that cease to apply as a result of achieving these ratings will be restored if one or both of the credit ratings on the notes later falls below these thresholds. See “Description of Notes — Covenant Suspension.”
No Prior Market		The notes will be new securities for which there is currently no market. Although the underwriters have informed us that they intend to make a market in the notes, they are not obligated to do so and they may discontinue market making activities at any time without notice. Accordingly, we cannot assure you that a liquid market for the notes will develop or be maintained.
Use of Proceeds		We intend to use the net proceeds from the notes offered hereby to reduce debt under our senior secured credit facilities, to pay related fees and expenses and for general corporate purposes. See “Use of Proceeds.”
Risk Factors		Investing in the notes involves substantial risks. See “Risk Factors” for a description of certain of the risks you should consider before investing in the notes.

		Predecessor													Successor
																											Twelve
										Two Months					Ten Months				Four Months				Six Months				Months
		Year Ended								Ended					Ended				Ended				Ended				Ended
		December 31,								February 29,					December 31,				June 30,				June 30,				June 30,
		2006				2007				2008					2008				2008				2009				2009
		(dollars in millions)
Statement of Operations Data:
Net Sales		$	1,064			$	1,643			$	335				$	1,775			$	759			$	749			$	1,765
Cost of goods sold			793				1,260				241					1,408				632				546				1,322
Gross Profit			271				383				94					367				127				203				443
Selling, general and administrative expenses			182				218				42					243				89				104				258
Research, development and other operating expenses, net			20				24				3					9				1				6				14
Operating Income(1)			69				141				49					115				37				93				171
Equity earnings from affiliates			38				12				—					—												—
Interest expense(2)			(100	)			(134	)			(21	)				(141	)			(65	)			(67	)			(143	)
Other income (Loss), net			14				34				3					24				9				(2	)			13
Loss on debt modification			(8	)			(7	)			—					—				—				—				—
Reorganization items, net			(71	)			(298	)			1,433					—				—				—				—
Income (Loss) from Continuing Operations Before Income Tax Expense			(58	)			(252	)			1,464					(2	)			(19	)			24				41
Income tax expense(3)			18				17				214					13				—				3				16
Income (Loss) from Continuing Operations(4)			(76	)			(269	)			1,250					(15	)			(19	)			21				25
Income (Loss) from Discontinued Operations, net of tax(5)			80				64				204					(648	)			(24	)			(169	)			(793	)
Net Income (Loss)			4				(205	)			1,454					(663	)			(43	)			(148	)			(768	)
Net Income attributable to noncontrolling interest			2				3				—					5				3				1				3
Net Income (Loss) attributable to Solutia Inc.		$	2			$	(208	)		$	1,454				$	(668	)		$	(46	)		$	(149	)		$	(771	)
Balance Sheet Data (at end of period) (Continuing Operations):
Cash and cash equivalents		$	150			$	173			$	180				$	32			$	47			$	83			$	83
Working Capital(6)			257				472				515					366				473				398				398
Property, Plant and Equipment, net(7)			353				619				629					952				1,014				932				932
Total Assets			1,298				1,832				1,931					3,244				3,568				3,169				3,169
Long-Term Debt(8)			210				359				386					1,359				1,768				1,170				1,170
Liabilities Subject to Compromise			1,849				1,922				1,962					—				—				—				—
Shareholders’ Equity (Deficit)			(1,399	)			(1,589	)			(1,682	)				529				1,032				552				552

		Predecessor													Successor
																											Twelve
										Two Months					Ten Months				Four Months				Six Months				Months
		Year Ended								Ended					Ended				Ended				Ended				Ended
		December 31,								February 29,					December 31,				June 30,				June 30,				June 30,
		2006				2007				2008					2008				2008				2009				2009
		(dollars in millions)
Cash Flow Data (Continuing Operations):
Cash Provided by (Used in) Continuing Operations Before Reorganization Activities		$	(140	)		$	(38	)		$	(16	)			$	155			$	50			$	89			$	194
Cash Used in Reorganization Activities			(65	)			(80	)			(348	)				(32	)			(27	)			—				(5	)
Cash Provided by (Used in) Operations			(205	)			(118	)			(364	)				123				23				89				189
Cash Used in Investing Activities			(66	)			(218	)			(15	)				(35	)			21				(23	)			(79	)
Cash Provided by (Used in) Financing activities			275				279				351					2				(12	)			(95	)			(81	)
Net change in cash for period attributable to continuing operations		$	4			$	(57	)		$	(28	)			$	90			$	32			$	(29	)		$	29
Segment Data (Continuing Operations):
Net Sales
Saflex		$	663			$	727			$	125				$	697			$	288			$	293			$	702
CP Films			214				234				39					197				94				88				191
Technical Specialties			146				646				164					851				363				357				845
Reportable Segment Totals		$	1,023			$	1,607			$	328				$	1,745			$	745			$	738			$	1,738
Unallocated and Other			41				36				7					30				14				11				27
Total		$	1,064			$	1,643			$	335				$	1,775			$	759			$	749			$	1,765
Adjusted EBITDA(9)
Saflex		$	109			$	113			$	17				$	124			$	55			$	63			$	132
CP Films			51				58				9					46				29				16				33
Technical Specialties			23				124				40					195				77				104				222
Reportable Segment Totals		$	183			$	295			$	66				$	365			$	161			$	183			$	387
Unallocated costs
Corporate expenses			(70	)			(58	)			(8	)				(44	)			(15	)			(23	)			(52	)
LIFO adjustments			(2	)			5				—					—				—				—				—
Other income (expense), net			71				27				2					11				3				(8	)			—
Total		$	182			$	269			$	60				$	332			$	149			$	152			$	335
Other Financial Data (Continuing Operations):
Cash interest expense		$	97			$	122			$	43				$	114			$	48			$	61			$	127
Capital expenditures		$	55			$	99			$	15				$	84			$	25			$	23			$	82
Net debt(10)		$	710			$	1,168			$	1,304				$	1,364			$	1,756			$	1,108			$	1,108
Ratio of net debt to Adjusted EBITDA(9), (10)																												3.31
Ratio of Adjusted EBITDA to cash interest expense(9)																												2.64

(1)		Operating income includes net restructuring (gains)/charges and other items of ($7) million in the year ended December 31, 2006, $41 million in the year ended December 31, 2007, ($2) million in the two months ended February 29, 2008, $102 million in the ten months ended December 31, 2008, $70 million in the four months ended June 30, 2008 and $1 million in the six months ended June 30, 2009.
(2)		Predecessor excludes unrecorded contractual interest expense of $32 million in each of the years ended December 31, 2006 and 2007 and $5 million in the two months ended February 29, 2008.
(3)		Income tax expense includes an increase (decrease) in valuation allowances of $35 million in the year ended December 31, 2006, $82 million in the year ended December 31, 2007, ($259) million in the two months ended February 29, 2008 and $8 million in the ten months ended December 31, 2008.
(4)		Income (loss) from continuing operations includes net restructuring charges and other (gains)/charges of $4 million in 2006, $28 million in 2007, ($2) million in the two months ended February 29, 2008, $79 million in the ten months ended December 31, 2008, $51 million in the four months ended June 30, 2008 and $7 million in the six months ended June 30, 2009.
(5)		Discontinued operations reflects the sale of our Nylon business on June 1, 2009.
(6)		Working capital excludes short-term debt and is defined as total current assets less total current liabilities.
(7)		Net of accumulated depreciation of $827 million as of December 31, 2006, $1,102 million as of December 31, 2007, $1,134 million as of February 29, 2008, $24 million as of June 30, 2008, $56 million as of December 31, 2008 and $92 million as of June 30, 2009.
(8)		Long-term debt excludes $668 million as of December 31, 2006 and $659 million as of December 31, 2007 of debt classified as subject to compromise in accordance with Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, as a result of our Chapter 11 bankruptcy filing in 2003.

(9)		We present EBITDA and Adjusted EBITDA because we believe these measures provide investors with important additional information to evaluate our operating performance. We believe EBITDA and Adjusted EBITDA are useful to investors because these measures are frequently used by securities analysts, investors and other interested persons in evaluating operating performance in comparison to other companies in our industry. These measures are also frequently provided for in indentures and credit agreements, and similar measures are used in our senior secured credit facilities and will be used in the covenants in the indenture governing the notes. EBITDA and Adjusted EBITDA, however, are not measures of financial performance under GAAP, have not been audited and should not be considered alternatives to, or more meaningful than, net income as a measure of operating performance or to cash flows from operating, investing or financing activities as measures of liquidity. Since EBITDA and Adjusted EBITDA are not measures determined in accordance with GAAP and thus are susceptible to varying interpretations and calculations, EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation from, or as a substitute for analysis of, our financial information prepared in accordance with GAAP. Some of these limitations are: (a) they do not reflect cash outlays for capital expenditures or future contractual commitments; (b) they do not reflect changes in, or cash requirements for, working capital; (c) they do not reflect interest expense or the cash requirements necessary to service interest, or principal payments, on indebtedness; (d) they do not reflect income tax expense or the cash necessary to pay income taxes; (e) they do not reflect available liquidity to our company; and (f) other companies, including companies in our industry, may not use such measures or may calculate such measures differently than as presented in this prospectus supplement, limiting their usefulness as comparative measures. Below is a reconciliation of net income (loss) attributable to Solutia Inc. to EBITDA and to Adjusted EBITDA.

		Predecessor													Successor
										Two Months					Ten Months				Four Months				Six Months				Twelve
										Ended					Ended				Ended				Ended				Months Ended
		Year Ended December 31,								February 29,					December 31,				June 30,				June 30,				June 30,
		2006				2007				2008					2008				2008				2009				2009
		(dollars in millions)
Net Income (Loss) attributable to Solutia Inc.		$	2			$	(208	)		$	1,454				$	(668	)		$	(46	)		$	(149	)		$	(771	)
Interest expense			100				134				21					141				65				67				143
Income tax expense			18				17				214					13				—				3				16
Depreciation and amortization			46				59				11					89				36				51				104
Reorganization items, net			71				298				(1,433	)				—				—				—				—
(Income) Loss from Discontinued Operations, net of tax			(80	)			(64	)			(204	)				648				24				169				793
EBITDA			157				236				63					223				79				141				285
Adjustments to EBITDA:
Restructuring charges			18				33				1					37				6				24				55
Gains on tort litigation matters, insurance settlements and sales of surplus land			(21	)			(21	)			(3	)				(6	)			(3	)			—				(3	)
Loss on debt modification			8				7				—					—				—				—				—
Net pension plan settlements			—				5				—					—				—				—				—
Gain on reduction of incentive plan			—				—				—					—				—				(23	)			(23	)
Fresh Start related charges, net			—				—				—					64				63				—				1
Step-up in basis on acquisition of Flexsys			—				3				—					—				—				—				—
Non-cash stock compensation expense			—				—				—					11				3				9				17
Nylon cost overhang			20				6				(1	)				3				1				1				3
Adjusted EBITDA		$	182			$	269			$	60				$	332			$	149			$	152			$	335

(10)		Net debt is defined as short-term debt plus long-term debt less cash and cash equivalents. Net debt at February 29, 2008 was $1,726 million immediately after giving effect to the plan of reorganization and fresh start accounting.

 

An investment in the notes is subject to numerous risks, including those listed below. You should carefully consider the following risks, along with the information provided elsewhere in this prospectus supplement, together with the accompanying prospectus and the documents incorporated by reference therein, including the risks described under the heading “Risk Factors” in our most recent Annual Report on Form 10-K for the year ended December 31, 2008 and Quarterly Reports on Form 10-Q for the periods ended March 31, 2009 and June 30, 2009, before investing in the notes. These risks could materially affect our ability to meet our obligations under the notes. You could lose all or part of your investment in, and the expected return on, the notes.

 

Risks Related to Our Emergence From Bankruptcy

 

Our actual financial results may vary significantly from the projections filed with the Bankruptcy Court.

 

In connection with the Plan of Reorganization process, we were required to prepare projected financial information to demonstrate to the Bankruptcy Court the feasibility of the Plan of Reorganization and our ability to continue operations upon emergence from bankruptcy. We filed projected financial information with the Bankruptcy Court most recently on October 22, 2007 and furnished it to the SEC, and as part of the disclosure statement approved by the Bankruptcy Court. The projections reflect numerous assumptions concerning anticipated future performance and prevailing and anticipated market and economic conditions that were and continue to be beyond our control and that may not materialize. Projections are inherently subject to uncertainties and to a wide variety of significant business, economic and competitive risks. Our actual results will vary from those contemplated by the projections for a variety of reasons, including the fact that, given our emergence from bankruptcy, we have adopted the provisions of AICPA SOP 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code (“SOP 90-7”) regarding fresh-start accounting. As indicated in the disclosure statement, the projections applied fresh-start accounting provisions. However, these projections were limited by the information available to us as of the date of the preparation of the projections. Therefore variations from the projections may be material. The projections have not been incorporated by reference into this prospectus supplement or the accompanying prospectus, and neither the projections nor any version of the disclosure statement should be considered or relied upon in connection with the purchase of the notes offered hereby.

 

Because our consolidated financial statements reflect fresh-start accounting adjustments made upon emergence from bankruptcy, and because of the effects of the transactions that became effective pursuant to the Plan of Reorganization, financial information in our future financial statements will not be comparable to our financial information from prior periods.

 

Upon our emergence from Chapter 11, we adopted fresh-start accounting in accordance with SOP 90-7, pursuant to which our reorganization value, which represents the fair value of the entity before considering liabilities and approximates the amount a willing buyer would pay for the assets of the entity immediately after the reorganization, has been allocated to the fair value of assets in conformity with Statement of Financial Accounting Standards No. 141, Business Combinations, using the purchase method of accounting for business combinations. We stated liabilities, other than deferred taxes, at a present value of amounts expected to be paid. The amount remaining after allocation of the reorganization value to the fair value of identified tangible and intangible assets is reflected as goodwill, which is subject to periodic evaluation for impairment. In addition, under fresh-start accounting the accumulated deficit has been eliminated. In addition to fresh-start accounting, our consolidated financial statements reflect all effects of the transactions contemplated by the Plan of Reorganization. Thus, our future statements of financial position and statements of operations data will not be comparable in many respects to our consolidated statements of financial position and consolidated statements of operations data for periods prior to our adoption of fresh-start accounting and prior to accounting for the effects of the reorganization.

Risks Related to Our Business and Industry

 

Continued extreme disruption in global financial markets and sustained weakening in our markets could significantly impact our results of operations, liquidity and long term anticipated growth rate.

 

As widely reported, financial markets in the United States, Europe and Asia have been experiencing extreme disruption, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. Governments have taken unprecedented actions intended to address extreme market conditions that include severely restricted credit and declines in real estate values. The tightening of credit in financial markets adversely affects the ability of customers and suppliers to obtain financing for significant purchases and operations and could result in a decrease in or cancellation of orders for our products, our ability to procure necessary raw materials from suppliers, our ability to secure credit from our suppliers at terms granted to us historically and our ability to collect from our customers amounts due on trade receivables at terms previously experienced by us. Although we are not a direct Tier 1 supplier to domestic automotive manufacturers, many of our customers are. Bankruptcy filings by domestic automotive manufacturers could impact our ability to collect accounts receivable from customers who are Tier 1 suppliers. Our global business is also adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending that impact the construction, home furnishings, automotive, rubber chemicals and aviation and transportation markets. The weakening of these markets, if not temporary, could significantly impact our results of operations, our liquidity, our long-term anticipated growth rate. Further, stemming from our emergence from bankruptcy, the carrying amount of our goodwill and intangible assets was established at fair value as of February 28, 2008 and therefore is more susceptible to impairment if business operation results and/or macroeconomic conditions deteriorate. Impairment charges, if any, could be material to our results of operations. We are unable to predict the likely duration and severity of the current disruption in financial markets and adverse economic conditions in the U.S. and other countries. However, if macroeconomic conditions continue to worsen, it is possible these factors could result in a decline in our future profitability and cash from operating activities.

 

Our operations are restricted by our senior secured credit facilities and could be impacted by the failure of our lenders to perform.

 

Our senior secured credit facilities include a number of significant restrictive covenants. These covenants could impair our financing and operational flexibility and make it difficult for us to react to market conditions and satisfy our ongoing capital needs and unanticipated cash requirements. Specifically, such covenants restrict our ability and, if applicable, the ability of our subsidiaries to, among other things:

 

 

In addition, our senior secured credit facilities require us to satisfy certain financial maintenance covenants. See “Description of Other Indebtedness”. These financial covenants could limit our ability to react to market conditions or satisfy extraordinary capital needs and could otherwise restrict our financing and operations.

 

Our ability to comply with the covenants and other terms of our debt obligations will depend, among other things, on our future operating performance. If we fail to comply with such covenants and terms, we would be required to obtain waivers from our lenders to maintain compliance with our debt obligations. If we are unable to obtain any necessary waivers and the debt is accelerated, a material adverse effect on our financial condition and future operating performance would result.

 

Our senior secured revolving credit facility is a syndicated credit agreement in which each lender is severally liable for only its agreed part of the loan commitments. Although all lenders have performed their individual obligations under the terms of the revolving credit agreement to date, there can be no assurance that this will continue given the current turmoil in the financial services industry. One or more lender’s failure to perform on their obligations could have a material adverse effect on our ability to fund our ongoing operations and other commitments.

 

Problems encountered in operating our production facilities could adversely impact our business.

 

Our production facilities are subject to hazards associated with the manufacture, handling, storage and transportation of chemical materials and products, including leaks and ruptures, explosions, fires, inclement weather and natural disasters, unscheduled down time and environmental hazards. From time to time in the past, we have had incidents that have temporarily shut down or otherwise disrupted our manufacturing, causing production delays and resulting in liability for workplace injuries and fatalities. We are dependent upon the continued safe operation of our production facilities.

 

In addition, some of our products involve the manufacture or handling of a variety of reactive, explosive and flammable materials. Use of these products by our employees, customers and contractors could result in liability to us if an explosion, fire, spill or other accident were to occur.

 

Turnover in the senior management team and losses of other key personnel could have a significant adverse effect on our results of operations.

 

The services of our senior management team, as well as other key personnel, will be critical to the successful implementation of our business strategies going forward. If the terms of incentive compensation programs are not adequate, we may have difficulty retaining current senior management and other key personnel and be unable to hire qualified personnel to fill any resulting vacancies, which could have a significant adverse effect on our results of operations.

 

We operate in a highly competitive industry that includes competitors with greater resources than ours.

 

The markets in which we compete are highly competitive. Competition in these markets is based on a number of factors, such as price, product, quality and service. Some of our competitors may have greater financial, technological and other resources and may be better able to withstand changes in market conditions. In addition, some of our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements than us. Consolidation of our competitors or customers may also adversely affect our businesses. Furthermore, global competition and customer demands for efficiency will continue to make price increases difficult.

 

We operate in cyclical business segments and our financial results are likely to fluctuate accordingly.

 

We operate in cyclical business segments. Specifically, a substantial portion of our sales are to customers involved, directly or indirectly, in the housing and automotive industries, both of which are, by their nature, cyclical industries. A downturn in either or both of these industries would and has resulted in lower demand

for our products among customers involved in those industries and a reduced ability to pass on cost increases to these customers.

 

If we are unable to protect our intellectual property rights, our sales and financial performance could be adversely affected.

 

We own a large number of patents that relate to a wide variety of products and processes and have a substantial number of patent applications pending. We own a considerable number of established trademarks in many countries under which we market our products. These patents and trademarks in the aggregate are of material importance to the operations of our businesses. Our performance may depend in part on our ability to establish, protect and enforce such intellectual property and to defend against any claims of infringement, which could involve complex legal, scientific and factual questions and uncertainties.

 

In the future, we may have to rely on litigation to enforce our intellectual property rights and contractual rights. In addition, we may face claims of infringement that could interfere with our ability to use technology or other intellectual property rights that are material to our business operations. If litigation that we initiate is unsuccessful, we may not be able to protect the value of some of our intellectual property. In the event a claim of infringement against us is successful, we may be required to pay royalties or license fees to continue to use technology or other intellectual property rights that we had been using or we may be unable to obtain necessary licenses from third parties at a reasonable cost or within a reasonable period of time. If we are unable to obtain licenses on reasonable terms, we may be forced to cease selling or using any of our products that incorporate the challenged intellectual property, or to redesign or, in the case of trademark claims, rename our products to avoid infringing the intellectual property rights of third parties, which may not be possible and may be time-consuming. Any litigation of this type, whether successful or unsuccessful, could result in substantial costs to us and diversions of some of our resources. Our intellectual property rights may not have the value that we believe them to have, which could result in a competitive disadvantage or adversely affect our business and financial performance. See also “Business — Intellectual Property.”

 

Legal proceedings, including proceedings related to environmental and other regulatory obligations, may have a materially negative impact on our future results of operations.

 

We have been, and may in the future be, subject to various lawsuits and other legal proceedings, including proceedings related to our environmental and other regulatory obligations. As a manufacturer of chemical-based materials, we may become subject to litigation alleging personal injury, or product liability associated with our products and businesses. Adverse judgments or rulings against us in these legal proceedings, or the filing of additional environmental or other damage claims against us, may have a materially negative impact on our future results of operations, cash flows and financial condition. Additionally, we may incur significant administrative and legal costs associated with defending or settling litigation.

 

The applicability of numerous environmental laws to our manufacturing facilities could cause us to incur material costs and liabilities.

 

We are subject to extensive federal, state, local and foreign environmental, safety and health laws and regulations concerning, among other things, emissions to the air, discharges to land and water and the generation, handling, treatment and disposal of hazardous waste and the distribution of chemical substances. We are also required to maintain various environmental permits and licenses, many of which require periodic modification and renewal and related governmental approvals. Our operations entail the risk of violations of these laws and regulations, many of which provide for substantial fines and criminal sanctions for violations.

 

In addition, these requirements and their enforcement may become more stringent in the future. Non-compliance with such future requirements could subject us to material liabilities, such as government fines, third- party lawsuits or the suspension of non-compliant operations. Future requirements may also result in our making significant site or operational modifications at substantial cost. Future regulatory and enforcement developments could also restrict or eliminate our ability to continue to manufacture certain products or could require us to make modifications to our products.

At any given time, we are involved in litigation, administrative proceedings and investigations of various types in a number of jurisdictions involving potential environmental liabilities, including clean-up costs associated with contaminated sites, natural resource damages, property damages and personal injury. For example, natural resource trustees have asserted certain natural resource damage claims against us principally relating to our Anniston and Sauget facilities, the liability for which we share with Monsanto pursuant to our Plan of Reorganization. The natural resource trustees have estimated the value of the natural resource damages at between $366.0 million and $604.0 million; we dispute these estimates and have received estimates from third party experts of $14.0 million to $51.0 million for such asserted damages. These damage estimates are preliminary and subject to change and do not take into account reductions to damages possible through projects to restore natural resources. We may be required to spend substantial sums to defend or settle these and other actions, to pay any fines levied against us or satisfy any judgments or other rulings rendered against us and such sums may be material.

 

Under certain environmental laws, we can be held strictly liable for hazardous substance contamination at real property we have owned, operated or used as a disposal site or for natural resource damages associated with such contamination. Liability under environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis. One liable party can be held responsible for all costs at a site, regardless of fault, percentage of contribution to the site or the legality of the original disposal. As described in more detail above and in the following paragraph, we could incur significant costs, including cleanup costs, natural resources damages, civil or criminal fines and sanctions and third-party claims as a result of hazardous substance contamination.

 

We have made and will continue to make substantial expenditures for environmental and regulatory compliance and remediation projects. The substantial amounts that we may be required to spend on environmental capital projects and programs could cause substantial cash outlays and, accordingly, could have a material effect on our consolidated financial position, liquidity and profitability or limit our financial and operating flexibility. In addition, although we believe that we have correctly budgeted and, to the extent appropriate under applicable accounting principles, reserved for these amounts, factors beyond our control may render these budgeted and reserved amounts inadequate. These factors include changing governmental policies and regulations; the commencement of new governmental proceedings or third party litigation regarding environmental remediation; new releases of regulated materials that result in personal injury, property damage or harm to the environment; and the discovery of unknown conditions of contamination or unforeseen problems encountered in the environmental remediation programs.

 

Our recent Chapter 11 case was caused, in significant part, by an accumulation of legacy liabilities, including, among others, “legacy environmental liability” arising from historical operations of Pharmacia prior to the Solutia spin-off. In the course of the Chapter 11 case we achieved a substantial reallocation of the risk from these legacy liabilities. In particular, pursuant to the settlement agreement entered into between Monsanto and us, Monsanto agreed to be financially responsible for remediation costs and other environmental liabilities for sites owned, operated or used by Pharmacia but never owned, operated or used by us after the Solutia spin-off; to share liabilities with respect to offsite areas at the Sauget and Anniston plant sites; and to be financially responsible for personal injury and property damage claims associated with exposures to hazardous substances arising from legacy Pharmacia operations (so-called “Legacy Toxic Tort Claims”). If Monsanto and/or Pharmacia fail to honor their respective obligation with respect to such remediation costs or Legacy Toxic Tort Claims, we could become responsible for some or all of such liabilities except for the remediation costs and other environmental liabilities for sites owned, operated or used by Pharmacia but never owned, operated or used by us for which Solutia received a discharge under the Plan which liabilities could be material. See also “Business — Environmental Matters.”

 

We face currency and other risks associated with international sales.

 

We generate significant revenue from export sales, as well as from operations conducted outside the United States. Operations outside the United States expose us to risks including fluctuations in currency values, trade restrictions, tariff and trade regulations, U.S. export controls, foreign tax laws, shipping delays, and economic and political instability. For example, violations of U.S. export controls could result in fines and

the suspension or loss of export privileges which would adversely affect our results of operations and financial conditions.

 

The functional currency of each of our non-U.S. operations is generally the local currency. Exchange rates between some of these currencies and U.S. dollars have fluctuated significantly in recent years and may do so in the future. It is possible that fluctuations in foreign exchange rates will have a negative effect on our results of operations.

 

Many of our products and manufacturing processes are subject to technological change and our business will suffer if we fail to keep pace.

 

Many of the markets in which our products (and their corresponding manufacturing processes) compete are subject to technological change and new product introductions and enhancements. We must continue to enhance our existing products and to develop and manufacture new products with improved capabilities to continue to be a market leader. We must also continue to make improvements in our manufacturing processes and productivity to maintain our competitive position. When we invest in new technologies, processes or production facilities, we will face risks related to construction delays, cost over-runs and unanticipated technical difficulties related to start-up. Our inability to anticipate, respond to, capitalize on or utilize changing technologies could have an adverse effect on our consolidated results of operations, financial condition and cash flows in any given period.

 

Significant payments may be required to maintain the funding of our domestic qualified pension plan.

 

We maintain a qualified pension plan under which certain of our employees and retirees are entitled to receive benefits. Although we have frozen future benefit accruals under our U.S. pension plan, significant liabilities still remain. In order to fund the pension plan, we made significant contributions to the pension plan in 2008 amounting to approximately $46 million, and, through June 30, 2009, approximately $10 million, and will have to fund more going forward. If our cash flow from operations is insufficient to fund such pension plan contributions, we may be unable to obtain financing to make these pension plan contributions. In addition, even if financing for these contributions is obtained, the funding obligations and the carrying costs of debt incurred to fund the obligations could have a significant adverse effect on our results of operations.

 

Labor disruptions with the unionized portion of our workforce could have a negative effect.

 

While we believe that our relations with our employees are good, we may not be able to negotiate these or other collective bargaining agreements on the same or more favorable terms as the current agreements, or at all, and without production interruptions, including labor stoppages. A prolonged labor dispute, which could include a work stoppage, could impact our ability to satisfy our customers’ requirements and negatively affect our financial condition.

 

Risk Relating to the Notes

 

Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under the notes.

 

We will have substantial indebtedness after this offering. As of June 30, 2009, as adjusted to give effect to this offering and the use of proceeds as described under “Use of Proceeds,” we would have had total indebtedness of $1,291 million (of which $882 million would have been secured indebtedness (excluding $44 million of undrawn letters of credit)) and would have had approximately $128 million of additional borrowing capacity under our senior secured revolving credit facility.

 

Our substantial indebtedness could have important consequences to you. For example, it could:

 

 

 

In addition, the indenture governing the notes will contain restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debts.

 

Furthermore, our ability to satisfy our debt service obligations will depend upon, among other things, fluctuations in interest rates, our future operating performance and ability to refinance indebtedness when necessary. These factors depend partly on economic, financial, competitive and other factors beyond our control. We have hedged a significant portion of our variable rate debt with derivative instruments. We may not be able to generate sufficient cash from operations to meet our debt service obligations as well as fund necessary capital expenditures, pension funding obligations and investments in research and development. In addition, if we need to refinance our debt, obtain additional financing or sell assets or equity, we may not be able to do so on commercially reasonably terms, if at all. Finally, counterparties to our derivative instruments may not be able to honor their contractual obligations.

 

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.

 

As of June 30, 2009, as adjusted to give effect to this offering and the use of proceeds as described under “Use of Proceeds,” we would have had $1,291 million of total indebtedness. The terms of our senior secured credit facilities permit, and the terms of the indenture governing the notes will permit, us to incur substantial additional indebtedness in the future. See “Description of Notes.” If we incur any additional indebtedness that ranks equal to the notes, the holders of that debt will be entitled to share ratably with you in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of us. If new debt is added to our and our subsidiaries’ current debt levels, the related risks that we and they now face could intensify.

 

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

 

Our ability to make payments on and to refinance our indebtedness, including the notes offered hereby, and to fund planned capital expenditures and other general corporate purposes will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

 

We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to refinance our indebtedness, including the notes offered hereby, or to fund our other liquidity needs. If our cash flows and capital resources are insufficient to allow us to make scheduled payments on our indebtedness, we may need to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance all or a portion of our indebtedness, including the notes offered hereby, on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including the notes offered hereby, on commercially reasonable terms or at all, or that the terms of that indebtedness will allow any of the above alternative measures or that these measures would satisfy our scheduled debt service obligations. If we are unable to generate sufficient

cash flow or refinance our debt on favorable terms, it could significantly adversely affect our financial condition, the value of our outstanding debt and our ability to make any required cash payments under our indebtedness.

 

Payment of principal and interest on the notes will be effectively subordinated to our secured debt to the extent of the value of the assets securing that debt.

 

The notes will be effectively subordinated to claims of our secured creditors to the extent of the value of the assets securing such claims, and the note guarantees will be effectively subordinated to the claims of our secured creditors as well as the secured creditors of our subsidiary guarantors. As of June 30, 2009, as adjusted to give effect to this offering and the use of proceeds as described under “Use of Proceeds,” we estimate that we would have had approximately $882 million of borrowings outstanding under our senior secured credit facilities to which the notes would be effectively subordinated, approximately $44 million of letters of credit outstanding and approximately $128 million of additional borrowing capacity under our senior secured revolving credit facility. See “Description of Other Indebtedness.” Holders of our secured obligations, including obligations under our senior secured credit facilities, will have claims that are prior to claims of the holders of the notes with respect to the assets securing those obligations. In the event of a liquidation, dissolution, reorganization, bankruptcy or any similar proceeding, our assets and those of our subsidiaries will be available to pay obligations on the notes and the note guarantees only after holders of our senior secured debt have been paid the value of the assets securing such obligations. Accordingly, there may not be sufficient funds remaining to pay amounts due on all or any of the notes.

 

Claims of noteholders will be structurally subordinated to claims of creditors of our subsidiaries that do not guarantee the notes.

 

The notes will not be guaranteed by non-U.S. subsidiaries or certain other subsidiaries. Accordingly, claims of holders of the notes will be structurally subordinated to the claims of creditors of these non-guarantor subsidiaries, including trade creditors. All obligations of these subsidiaries will have to be satisfied before any of the assets of such subsidiaries would be available for distribution, upon a liquidation or otherwise, to us or creditors of us, including the holders of the notes. As of June 30, 2009, after giving effect to this offering and use of proceeds as contemplated under “Use of Proceeds,” our subsidiaries that are not guarantors would have approximately $9 million of indebtedness and other liabilities, all of which would rank structurally senior to the notes.

 

We estimate that our subsidiaries that do not guarantee the notes accounted for approximately $484 million, or 65% of our net sales, and approximately $83 million, or 89% of our operating income, for the six months ended June 30, 2009, and approximately $1,585 million, or 50% of our total assets as of June 30, 2009. Amounts are presented after giving effect to intercompany eliminations.

 

We may not have the ability to raise funds necessary to finance any change of control offer required under the indenture governing the notes offered hereby and our senior secured credit facilities.

 

If a change of control (as defined in the indenture) occurs, we will be required to offer to purchase your notes at 101% of their principal amount plus accrued and unpaid interest. See “Description of Notes — Change of Control.” If a purchase offer obligation arises under the indenture governing the notes offered hereby, a change of control could also have occurred under our senior secured credit facilities, which could result in the acceleration of the indebtedness outstanding thereunder. Any of our future debt agreements may contain similar restrictions and provisions. If a purchase offer were required under the indenture governing the

notes offered hereby and under the senior secured credit facilities, we may not have sufficient funds to pay the purchase price of all debt, including your notes, that we are required to purchase or repay.

 

Many of the covenants in the indenture will be suspended if the notes are rated investment grade by both Moody’s and Standard & Poor’s.

 

Many of the covenants in the indenture governing the notes will no longer apply to us during any time that the notes are rated investment grade by both Moody’s and Standard & Poor’s, provided that at such time no default or event of default has occurred and is continuing. These covenants will restrict, among other things, our ability to pay distributions, incur debt and to enter into certain other transactions. There can be no assurance that the notes will ever be rated investment grade, or that if they are rated investment grade, that the notes will maintain these ratings. However, suspension of these covenants would allow us to engage in certain transactions that would not be permitted while these covenants were in force. See “Description of Notes — Covenant Suspension.”

 

Active trading markets may not develop for the notes.

 

The notes are new issues of securities. There are no active public trading markets for the notes. We do not intend to apply for listing of the notes on a security exchange. The underwriters of the notes have informed us that they intend to make a market in the notes. However, the underwriters may cease their market making at any time. The liquidity of the trading markets in the notes and the market prices quoted for the notes may be adversely affected by changes in the overall market for high yield securities and by changes in our financial performance or prospects or in the prospects for companies in our industries generally. As a consequence, an active trading market may not develop for your notes, you may not be able to sell your notes, or, even if you can sell your notes, you may not be able to sell them at an acceptable price.

 

Federal and state laws allow courts, under certain circumstances, to void guarantees and require note holders to return payments received from guarantors.

 

The notes will be guaranteed by all of our direct and indirect subsidiaries that guarantee our obligations or the obligations of our domestic subsidiaries under our senior secured credit facilities. The guarantees may be subject to review under U.S. federal bankruptcy law and comparable provisions of state fraudulent conveyance laws if a bankruptcy or insolvency proceeding or a lawsuit is commenced by or on behalf of us or one of our guarantors or by our unpaid creditors or the unpaid creditors of one of our guarantors. Under these laws, a court could void the obligations under the guarantee, subordinate the guarantee of the notes to that guarantor’s other debt or take other action detrimental to the holders of the notes and the guarantees of the notes, if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its guarantee:

 

 

In those cases where our solvency or the solvency of one of our guarantors is a relevant factor, the measures of insolvency will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a party would be considered insolvent if:

 

 

We cannot be sure as to the standard that a court would use to determine whether or not a party was solvent at the relevant time, or, regardless of the standard that the court uses, that the issuance of the guarantees would not be voided or the guarantees would not be subordinated to the guarantors’ other debt. If such a case were to occur, the guarantee could also be subject to the claim that, since the guarantee was incurred for our benefit and only indirectly for the benefit of the guarantor, the obligations of the applicable guarantor were incurred for less than fair consideration.

 

The expected estimated sources and uses of the proceeds from the notes offered hereby are shown in the table below. Actual amounts will vary from estimated amounts depending on several factors, including differences from our estimate of fees and expenses.

 

 

 

 

The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2009 on a historical basis and an as adjusted basis after giving effect to this offering and the use of proceeds therefrom. The information in this table is unaudited and should be read in conjunction with “Selected Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included elsewhere in this prospectus supplement.

 

 

 

 

 

The following table sets forth our selected historical consolidated financial data at the dates and for the periods indicated. The selected historical consolidated financial data as of December 31, 2006, December 31, 2007, February 29, 2008 and December 31, 2008 and for the years ended December 31, 2006 and December 31, 2007, the two months ended February 29, 2008 and the ten months ended December 31, 2008 have been derived from our audited consolidated financial statements included elsewhere in this prospectus supplement, which have been audited by Deloitte & Touche LLP. The selected historical consolidated financial data as of June 30, 2008 and 2009 and for the four months ended June 30, 2008 and the six months ended June 30, 2009 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus supplement, which have been prepared on a basis consistent with our audited financial statements. The results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.

 

The selected historical consolidated financial data for the twelve months ended June 30, 2009 has been prepared by adding our consolidated results for the six months ended June 30, 2009 to our consolidated results for the ten months ended December 31, 2008 and subtracting our consolidated results for the four months ended June 30, 2008.

 

The selected historical consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our audited consolidated financial statements and related notes and our unaudited interim consolidated financial statements and related notes appearing elsewhere in this prospectus supplement.