<PAGE> 1
===============================================================================

                                   FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D. C. 20549

(MARK ONE)

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997

                                      OR

         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 001-13255
                       ---------

                                 SOLUTIA INC.
                                 ------------
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                  43-1781797
              --------                                  ----------
  (STATE OR OTHER JURISDICTION OF          (I.R.S. EMPLOYER IDENTIFICATION NO.)
  INCORPORATION OR ORGANIZATION)

10300 OLIVE BOULEVARD, 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)

    INDICATED BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS TO
BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING TWELVE MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X  NO
                                      ---    ---

    INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

                                                           OUTSTANDING AT
                     CLASS                               SEPTEMBER 30, 1997
                     -----                               ------------------
         COMMON STOCK, $0.01 PAR VALUE                   118,397,585 SHARES
         -----------------------------                   ------------------

===============================================================================
<PAGE> 2
                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

<TABLE>
                                 SOLUTIA INC.

                       STATEMENT OF CONSOLIDATED INCOME
                    (DOLLARS IN MILLIONS, EXCEPT PER SHARE)

<CAPTION>
                                              THREE MONTHS          NINE MONTHS
                                                 ENDED                 ENDED
                                             SEPTEMBER 30,         SEPTEMBER 30,
                                          --------------------  --------------------
                                            1997       1996       1997       1996
                                          ---------  ---------  ---------  ---------
<S>                                       <C>        <C>        <C>        <C>
NET SALES...............................  $     749  $     753  $   2,238  $   2,207

Cost of Goods Sold......................        576        553      1,700      1,672
                                          ---------  ---------  ---------  ---------

GROSS PROFIT............................        173        200        538        535

Marketing Expenses......................         32         46        103        131

Administrative Expenses.................         30         37         93        123

Technological Expenses..................         23         21         62         67
                                          ---------  ---------  ---------  ---------

OPERATING INCOME........................         88         96        280        214

Interest Expense........................        (10)        (9)       (31)       (28)

Other Income (Expense)--Net.............         12          3         34         26
                                          ---------  ---------  ---------  ---------

INCOME BEFORE INCOME TAXES..............         90         90        283        212

Income Taxes............................         34         29        100         68
                                          ---------  ---------  ---------  ---------

NET INCOME..............................  $      56  $      61  $     183  $     144
                                          =========  =========  =========  =========

EARNINGS PER SHARE......................  $    0.44  $    0.51  $    1.49  $    1.20
                                          =========  =========  =========  =========

Weighted Average Equivalent Shares (in
  millions).............................                            122.7      119.6
                                                                =========  =========

See accompanying Notes to Consolidated Financial Statements.
</TABLE>

                                       1

<PAGE> 3
<TABLE>
                                 SOLUTIA INC.

                 STATEMENT OF CONSOLIDATED FINANCIAL POSITION
                             (DOLLARS IN MILLIONS)

<CAPTION>
                                                                                SEPTEMBER 30,     DECEMBER 31,
                                                                                    1997              1996
                                                                                -------------     ------------

<S>                                                                               <C>              <C>
                                  ASSETS

CURRENT ASSETS:

Cash and cash equivalents..................................................        $   92           $   --

Trade receivables, net of allowance of $7 in 1997 and 1996.................           468              412

Miscellaneous receivables and prepaid expenses.............................           180               80

Deferred income tax benefit................................................           118              108

Inventories................................................................           315              291
                                                                                   ------           ------
TOTAL CURRENT ASSETS.......................................................         1,173              891

PROPERTY, PLANT AND EQUIPMENT:

Land.......................................................................            17               18

Buildings..................................................................           354              367

Machinery and equipment....................................................         2,664            2,622

Construction in progress...................................................           135              121
                                                                                   ------           ------
Total property, plant and equipment........................................         3,170            3,128

Less accumulated depreciation..............................................         2,251            2,217
                                                                                   ------           ------
NET PROPERTY, PLANT AND EQUIPMENT..........................................           919              911

INVESTMENT IN AFFILIATES...................................................           423              366

LONG-TERM DEFERRED INCOME TAX BENEFIT......................................           283              194

OTHER ASSETS...............................................................           116              121
                                                                                   ------           ------
TOTAL ASSETS...............................................................        $2,914           $2,483
                                                                                   ======           ======

                  LIABILITIES AND MONSANTO COMPANY EQUITY
                          (SHAREOWNERS' DEFICIT)

CURRENT LIABILITIES:

Accounts payable...........................................................        $  227           $  223

Wages and benefits.........................................................            86              156

Restructuring reserves.....................................................            44               79

Miscellaneous accruals.....................................................           343              312
                                                                                   ------           ------
TOTAL CURRENT LIABILITIES..................................................           700              770

LONG-TERM DEBT.............................................................           974               --

POSTRETIREMENT LIABILITIES.................................................           937              634

OTHER LIABILITIES..........................................................           396              423

MONSANTO COMPANY EQUITY (SHAREOWNERS' DEFICIT):

Monsanto Company Equity....................................................            --              656

Common stock (authorized, 600,000,000 shares, par value $0.01)
  Issued and outstanding, 118,397,585 shares in 1997.......................             1               --

  Additional contributed capital...........................................          (100)              --

Unearned ESOP shares.......................................................           (31)              --

Accumulated currency adjustment............................................            17               --

Reinvested earnings........................................................            20               --
                                                                                   ------           ------
TOTAL MONSANTO COMPANY EQUITY (SHAREOWNERS' DEFICIT).......................           (93)             656
                                                                                   ------           ------

TOTAL LIABILITIES AND MONSANTO COMPANY EQUITY (SHAREOWNERS' DEFICIT).......        $2,914           $2,483
                                                                                   ======           ======

See accompanying Notes to Consolidated Financial Statements.
</TABLE>

                                       2

<PAGE> 4
<TABLE>
                                 SOLUTIA INC.

                      STATEMENT OF CONSOLIDATED CASH FLOW
                             (DOLLARS IN MILLIONS)

<CAPTION>
                                                                              NINE MONTHS ENDED
                                                                                SEPTEMBER 30,
                                                                             --------------------
                                                                               1997       1996
                                                                             ---------  ---------

<S>                                                                          <C>        <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES:

Net income.................................................................  $     183  $     144

Adjustments to reconcile to Cash Provided by (Used in) Operations:

    Items that did not use (provide) cash:

        Deferred income taxes..............................................         36         48

        Depreciation and amortization......................................        105        125

        Other..............................................................        (30)       (28)

    Working capital changes that provided (used) cash:

        Accounts receivable................................................        (56)       (60)

        Inventories........................................................        (24)        17

        Accounts payable and accrued liabilities...........................       (111)       (63)

        Other..............................................................       (100)         6

    Other items............................................................        (19)       (40)
                                                                             ---------  ---------

TOTAL CASH PROVIDED BY (USED IN) OPERATIONS................................        (16)       149
                                                                             ---------  ---------

INVESTING ACTIVITIES:

Property, plant and equipment purchases....................................       (126)      (150)

Acquisition and investment payments........................................         (2)       (17)
                                                                             ---------  ---------

CASH USED IN INVESTING ACTIVITIES..........................................       (128)      (167)
                                                                             ---------  ---------

FINANCING ACTIVITIES:

Long-term debt reductions..................................................        (56)        --

Net transactions with Monsanto Company prior to Spinoff....................        292         18
                                                                             ---------  ---------

CASH PROVIDED BY FINANCING ACTIVITIES......................................        236         18
                                                                             ---------  ---------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...........................         92         --

CASH AND CASH EQUIVALENTS:

BEGINNING OF YEAR..........................................................         --         --
                                                                             ---------  ---------

END OF PERIOD..............................................................  $      92  $      --
                                                                             =========  =========

See accompanying Notes to Consolidated Financial Statements.
</TABLE>

                                       3

<PAGE> 5
                                 SOLUTIA INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN MILLIONS)

1. BASIS OF PRESENTATION

    Solutia Inc. (the "Company" or "Solutia") is an international producer
and marketer of a range of high performance chemical-based materials which are
used by its customers to make consumer, household, automotive and industrial
products. Prior to September 1, 1997, the businesses contributed to form the
Company were wholly owned by Monsanto Company ("Monsanto"). On September 1,
1997, Monsanto distributed all of the outstanding shares of common stock of the
Company as a dividend to Monsanto shareowners (the "Spinoff"). The
distribution resulted in the issuance of one share of the Company's common
stock for every five shares of Monsanto common stock held of record as of
August 20, 1997. As a result of the Spinoff, the Company became an independent
publicly held company listed on the New York Stock Exchange and its operations
ceased to be owned by Monsanto. Monsanto and Solutia have entered into a number
of agreements with respect to the separation of the companies and to provide
mechanisms for an orderly transition following the Spinoff. Descriptions of the
various agreements are set forth under the caption "Agreements with Monsanto"
contained in Solutia's Registration Statement on Form S-1 under the Securities
Act of 1933, filed with the Securities and Exchange Commission on September 25,
1997, as amended October 6, 1997 and October 14, 1997 (the "Registration
Statement").

    Financial data included in the accompanying unaudited financial statements,
for periods prior to the Spinoff, were prepared on a basis which reflected an
estimate of what the assets, liabilities and operations would have been if
Solutia had been organized as a separate legal entity, owning certain net
assets of Monsanto. Financial data included in the accompanying unaudited
financial statements, for periods subsequent to the Spinoff, have been prepared
on a basis which reflects the historical assets, liabilities, and operations of
the businesses contributed to Solutia by Monsanto.

    These financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Registration Statement.
As indicated in the notes to the audited financial statements included in the
Registration Statement, Monsanto provided certain general and administrative
services to Solutia prior to the Spinoff. The cost for these services was
allocated to Solutia based upon the net capital employed in Solutia's
operations, as well as other methods which management believed to be
reasonable. In preparation for the Spinoff, Monsanto began a transition plan of
separation. As part of this plan, Monsanto discontinued its allocation of
corporate expenses for these general and administrative services on April 1,
1997 as these expenses were specifically identified and segregated as part of
Solutia's ongoing cost infrastructure.

    The accompanying unaudited consolidated financial statements reflect all
adjustments which in the opinion of management are necessary to present fairly
the financial position, results of operations and cash flows for the interim
periods reported. Such adjustments, other than the asset and liability
allocation discussed below and the adjustments described in Notes 2, 6 and 7,
are of a normal, recurring nature. The results of operations for the nine-month
period ended September 30, 1997 are not necessarily indicative of the results
to be expected for the full year.

    On July 10, 1997, management approved the asset and liability allocation
which set forth the assets contributed to Solutia and the liabilities assumed
by Solutia in connection with the Spinoff. Included in those assets and
liabilities are the following material items which were not included in the
accompanying Statement of Consolidated Financial Position as of December 31,
1996: a joint venture interest in the Company's elemental phosphorus business,
cash of $75 million, debt of $1.029 billion, accrued net pension liability for
the U.S. defined benefit pension plans, and additional obligations for
healthcare and other post-retirement benefits. The following unaudited pro
forma amounts give effect to those items, as well as certain other items, as
set forth in the unaudited pro forma condensed financial statements included in
the Registration Statement. The following unaudited pro forma amounts are
presented as if the Spinoff had occurred on December 31, 1996, with respect to
the unaudited pro forma condensed Statements of Consolidated Financial Position
amounts and as of January 1, 1997 and 1996 with respect to the unaudited pro
forma condensed Statement of Consolidated Income amounts for the nine months
ended September 30, 1997 and 1996, respectively.

                                       4

<PAGE> 6
    Unaudited pro forma condensed Statements of Financial Position as of
December 31, 1996:

<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                                          1996
                                                                                      ------------

<S>                                                                                      <C>
             Total Assets..........................................................      $2,660

             Long-term debt........................................................       1,029

             Postretirement liabilities............................................         876

             Monsanto Company deficit..............................................        (439)

             Total Liabilities and Monsanto Company Deficit........................      $2,660
</TABLE>

    Unaudited pro forma Statements of Consolidated Income for the nine months
ended September 30:

<TABLE>
<CAPTION>
                                                                                         1997       1996
                                                                                         ----       ----

<S>                                                                                      <C>        <C>
             Income Before Income Taxes............................................      $ 228      $ 192

             Net Income............................................................        148        132

             Earnings per Share....................................................      $1.21      $1.11
</TABLE>

    The pro forma information is presented for illustrative purposes only and
may not be indicative of the results that would have been obtained had the
transactions actually occurred on the dates assumed, nor is it necessarily
indicative of the future consolidated results of operations.

2. ACCOUNTING CHANGES

    Effective January 1, 1997, Solutia adopted the American Institute of
Certified Public Accountants' Statement of Position ("SOP") 96-1,
"Environmental Remediation Liabilities." SOP 96-1 establishes authoritative
guidance regarding the recognition, measurement and disclosure of environmental
remediation liabilities. The primary change in Solutia's accounting principles
associated with the adoption of this SOP was an acceleration of the recognition
of certain environmental remediation liabilities at operating facilities. As a
result, Solutia recorded an aftertax charge of $6 million in the first quarter
of 1997. Additional aftertax charges in the range of $9 million to $14 million
are anticipated in 1997 as the criteria for recording these liabilities are
met.

    In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which will be effective for the
Company beginning January 1, 1998. SFAS No. 131 redefines how operating
segments are determined and requires disclosure of certain financial and
descriptive information about a company's operating segments. With the adoption
of SFAS No. 131, the Company will expand its disclosure to include three
segments; Chemicals, Fibers, and Polymers & Resins, which will represent
approximately 32 percent, 33 percent, and 35 percent of revenue, respectively.

3. INVENTORIES

    The components of inventories as of September 30, 1997 and December 31,
1996 were as follows:

<TABLE>
<CAPTION>
                                                                             SEPTEMBER 30,      DECEMBER 31,
                                                                                 1997               1996
                                                                             -------------      ------------

<S>                                                                             <C>                <C>
             Fiinished goods..........................................          $ 256              $ 258

             Goods in process.........................................             57                 47

             Raw materials and supplies...............................            147                126
                                                                                -----              -----

             Inventories, at FIFO cost................................            460                431

             Excess of FIFO over LIFO cost............................           (145)              (140)
                                                                                -----              -----

             Total....................................................          $ 315              $ 291
                                                                                =====              =====
</TABLE>

                                       5

<PAGE> 7
4. INTERCOMPANY TRANSACTIONS

    Transactions with Monsanto prior to the Spinoff, included in the Statement
of Consolidated Income, are summarized as follows:

<TABLE>
<CAPTION>
                                                                          PERIOD ENDED SEPTEMBER 30,
                                                                   ----------------------------------------
                                                                     THREE MONTHS             NINE MONTHS
                                                                   ----------------        ----------------
                                                                   1997        1996        1997        1996
                                                                   ----        ----        ----        ----

<S>                                                                <C>         <C>         <C>         <C>
Intercompany sales..........................................       $  9        $ 18        $ 42        $ 48

General and administrative services.........................         --          17          12          52

Interest expense............................................          5           9          26          28
</TABLE>

    Intercompany sales were made at Monsanto's established transfer prices. In
addition, the costs for certain general and administrative services were
allocated to Solutia. As further discussed in Note 1, Monsanto discontinued its
allocation of the cost of general and administrative expenses to Solutia,
effective April 1, 1997 as part of its transition plan of separation. Such
expenses were specifically identified and segregated as part of Solutia's
on-going cost infrastructure. Interest expense charged to Solutia represents an
allocation from Monsanto of its total interest expense.

5. MONSANTO COMPANY EQUITY AND SHAREOWNERS' DEFICIT

    The following is an analysis of Monsanto's investment in Solutia, and the
resulting impact of the Spinoff on Solutia's Shareowners' Deficit:

<TABLE>
<CAPTION>
                                                                                         1997
                                                                                         ----

<S>                                                                                    <C>
             MONSANTO COMPANY EQUITY AS OF DECEMBER 31, 1996.......................    $   656

             Net income to date of Spinoff.........................................        163

             Foreign currency translation adjustment to date of Spinoff............         13

             Net transactions with Monsanto Company prior to Spinoff...............        292

             Elimination of Monsanto Company Equity at Spinoff.....................     (1,124)
                                                                                       -------

             MONSANTO COMPANY EQUITY AFTER SPINOFF.................................    $    --
                                                                                       =======

             SOLUTIA'S SHAREOWNERS' DEFICIT AS OF AUGUST 31, 1997..................    $    --

             Net liability transfer to Solutia at Spinoff..........................       (120)

             Net income from date of Spinoff through September 30, 1997............         20

             Foreign currency translation adjustment...............................          7
                                                                                       -------

             SOLUTIA'S SHAREOWNERS' DEFICIT AS OF SEPTEMBER 30, 1997...............    $   (93)
                                                                                       =======
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

    Solutia's Statement of Consolidated Financial Position included accrued
liabilities of $150 million as of September 30, 1997 and December 31, 1996 for
the remediation of identified waste disposal sites. Although the ultimate costs
and results of remediation of contaminated sites cannot be predicted with
certainty, they are not expected to result in a material adverse change in
Solutia's liquidity or financial position as reflected in Solutia's historical
financial statements, but they could have a material adverse effect on
profitability in a given period.

    In June 1997, Monsanto reached a settlement with 811 plaintiffs in six
lawsuits related to the Brio Superfund site near Houston, Texas. The suits were
brought in Harris County District Court or the United States District Court for
the Southern District of Texas on behalf of 960 plaintiffs that claimed
injuries resulting from alleged exposure to substances present at or emanating
from the Brio site. As a result of this settlement, the Company recorded a
pretax charge of $10 million ($6 million aftertax) in cost of goods sold in the
Statement of Consolidated Income during the second quarter of 1997. The
settlement payment was made in the third quarter of 1997.

    Monsanto is a party to a number of lawsuits and claims relating to Solutia,
for which Solutia has assumed responsibility in the Spinoff and, which Solutia
intends to defend vigorously. Such matters arise out of the normal course of
business and relate to product liability, government regulation, including
environmental issues, and other

                                       6

<PAGE> 8
issues. Certain of the lawsuits and claims seek damages in very large amounts.
Although the results of litigation cannot be predicted with certainty,
management's belief, based upon the advice of Company counsel, is that the
final outcome of such litigation will not have a material adverse effect on
Solutia's consolidated financial position, profitability or liquidity in any
one year, as applicable.

7. RESTRUCTURING RESERVES

    During the second quarter of 1997, Solutia reversed approximately $8
million ($5 million aftertax) of excess restructuring reserves from prior
years. The excess was primarily the result of lower exit costs associated with
the sale and closure of nonstrategic facilities included in 1995 restructuring
actions.

8. FINANCING ARRANGEMENTS

    Effective with the Spinoff on September 1, 1997, Solutia assumed $1.029
billion of debt from Monsanto, primarily assumable commercial paper. The
assumable commercial paper was guaranteed by Monsanto until repaid or
refinanced by Solutia at maturity, which was up to 30 days following the
Spinoff.

    On August 14, 1997, Solutia entered into a total of $1.2 billion in
revolving credit facilities with a syndicate of banks to support its commercial
paper. The credit facilities are also available for working capital and other
general corporate purposes. These credit facilities consist of (i) an $800
million five-year revolving credit facility, and (ii) a $400 million 364-day
credit agreement. The interest rates under the credit agreements are based
upon, at the option of Solutia, (i) the London interbank offered rate
("LIBOR") or (ii) the base rate. The base rate shall at all times be equal to
the highest of (a) the prime rate of Citibank, N.A. ("Citibank"), (b) the
federal funds rate plus 0.5 percent or (c) the sum (adjusted to the nearest
1/16 of 1% or, if there is no nearest 1/16 of 1%, to the next higher 1/16 of
1%) of (i) 0.5% plus (ii) the rate obtained by dividing (A) the latest
three-week moving average of secondary market morning offering rates in the
United States for three-month certificates of deposit of major United States
money market banks, by (B) a percentage equal to 100% minus the average of the
daily percentages specified during such three-week period by the Board of
Governors of the Federal Reserve System for determining the maximum reserve
requirement for Citibank with respect to liabilities consisting of or including
(among other liabilities) three-month U. S. dollar non-personal time deposits
in the United States, plus (iii) the average during such three-week period of
the annual assessment rates estimated by Citibank for determining the
then-current annual assessment payable by Citibank to the Federal Deposit
Insurance Corporation (or any successor) for insuring U.S. dollar deposits of
Citibank in the United States.

    Interest rates based on LIBOR will be increased by a spread of between 13.5
and 22.5 basis points for the five-year revolving credit facility and 20.0 and
40.0 basis points for the 364-day revolving credit facility depending upon the
actual ratings (the "ratings") by two credit rating agencies of senior
unsecured long-term debt issued by the Company, or if there is no such debt,
the indicative rating of the Company by such rating agencies.

    If the Company elects to borrow under either credit facility, the total
spread (including facilities fees) over LIBOR would be 32.5 basis points for
each credit facility.

    The credit agreements contain various covenants, which among other things,
restrict the ability of Solutia to merge with another entity, to create liens
against assets, or to amend, cancel or terminate agreements entered into with
Monsanto to effect the Spinoff. These credit agreements also require Solutia to
meet certain leverage and interest coverage ratios.

    Effective October 27, 1997, Solutia terminated the $400 million 364-day
credit agreement following the placement of $600 million of long-term debt
described below.

    On October 21, 1997, Solutia consummated the sale of $150,000,000 aggregate
principal amount of the Company's 6.50% Notes due 2002, $300,000,000 aggregate
principal amount of the Company's 7.375% Debentures due 2027, and $150,000,000
aggregate principal amount of the Company's 6.72% Debentures due 2037 (the
"Offerings"). The proceeds of the Offerings were used to refinance a portion
of the Company's commercial paper when it became due. Subject to the level of
future cash flows, the Company intends to refinance its remaining commercial
paper on a long-term basis.

                                       7

<PAGE> 9
9. EARNINGS PER SHARE

    For periods prior to the Spinoff, the number of weighted average shares
outstanding used in the earnings per share calculation was based upon the
weighted average number of Monsanto shares outstanding for the applicable
period, adjusted for the distribution ratio in the Spinoff of one share of the
Company's common stock for every five shares of Monsanto common stock.

    Subsequent to the Spinoff, earnings per share were computed using 122.7
million weighted average common shares and common share equivalents
outstanding. Common share equivalents, totaling 4.3 million, consist of common
stock issuable upon exercise of outstanding stock options. As of September 30,
1997, options on approximately 28 million shares were outstanding.

    Earnings per share assuming full dilution were not significantly different
from the primary amounts.

    In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128").
Under this new standard, the presentation of primary and fully diluted earnings
per share required by current standards is replaced by basic and diluted
earnings per share. Basic earnings per share measures operating performance
assuming no dilution from securities or contracts to issue common stock.
Diluted earnings per share measures operating performance giving effect to the
dilution that would occur when securities or contracts to issue common stock
are exercised or converted. This statement is effective for Solutia for
financial statements issued after December 15, 1997. Based upon the historical
net income presented in the Statement of Consolidated Income, pro forma
earnings per share computed under the provisions of FAS 128 would have been:

<TABLE>
<CAPTION>
                                                                FOR THE THREE MONTHS  FOR THE NINE MONTHS
                                                                 ENDED SEPTEMBER 30,   ENDED SEPTEMBER 30,
                                                                --------------------  --------------------
                                                                   1997       1996       1997       1996
                                                                   ----       ----       ----       ----

<S>                                                               <C>        <C>        <C>        <C>
Basic earnings per share....................................      $0.47      $0.52      $1.55      $1.24

Diluted earnings per share..................................      $0.44      $0.51      $1.49      $1.20
</TABLE>

                                       8

<PAGE> 10
        UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

    The following unaudited pro forma condensed consolidated statement of
income for the three and nine months ended September 30, 1997 give effect to
the Spinoff and the Offering as if the Spinoff and the Offering had occurred at
January 1, 1997. The pro forma information is presented for illustrative
purposes only and may not be indicative of the results that would have been
obtained had the transactions actually occurred on the date assumed, nor is it
necessarily indicative of future consolidated results of operations.

    The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the historical financial statements and the related
notes thereto contained elsewhere in this report on Form 10-Q.

<TABLE>
                                 SOLUTIA INC.

        UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
                    (DOLLARS IN MILLIONS, EXCEPT PER SHARE)

<CAPTION>
                                                                             THREE MONTHS ENDED SEPTEMBER 30, 1997
                                                                          -------------------------------------------
                                                                                                PRO FORMA
                                                                          HISTORICAL   ------------------------------
                                                                            SOLUTIA    ADJUSTMENTS            SOLUTIA
                                                                          ----------   -----------            -------

<S>                                                                          <C>        <C>                     <C>
NET SALES.............................................................       $ 749                              $ 749

Cost of Goods Sold....................................................         576                                576
                                                                             -----                              -----

GROSS PROFIT..........................................................         173                                173

Marketing, administrative, and technological expenses.................          85           3  <FB>               95

                                                                                             7  <FE>
                                                                             -----      ------                  -----

OPERATING INCOME......................................................          88         (10)                    78

Interest Expense......................................................         (10)         (6) <FF>              (16)

Other Income (Expense)--Net...........................................          12                                 12
                                                                             -----      ------                  -----

INCOME BEFORE INCOME TAXES............................................          90         (16)                    74

Income Taxes..........................................................          34          (6) <FG>               28
                                                                             -----      ------                  -----

NET INCOME............................................................       $  56      $  (10)                 $  46
                                                                             =====      ======                  =====

EARNINGS PER SHARE....................................................       $0.44      $(0.07)                 $0.37
                                                                             =====      ======                  =====

Weighted average equivalent shares....................................                                          122.7
                                                                                                                =====

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
</TABLE>

                                       9

<PAGE> 11
<TABLE>
                                 SOLUTIA INC.

        UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
                    (DOLLARS IN MILLIONS, EXCEPT PER SHARE)

<CAPTION>
                                                                            NINE MONTHS ENDED SEPTEMBER 30, 1997
                                                                        -------------------------------------------
                                                                                                PRO FORMA
                                                                        HISTORICAL    -----------------------------
                                                                          SOLUTIA     ADJUSTMENTS           SOLUTIA
                                                                        ----------    -----------           -------

<S>                                                                      <C>         <C>                   <C>
NET SALES.............................................................   $   2,238   $      (9) <FA>       $   2,229

Cost of Goods Sold....................................................       1,700          (1) <FB>           1,697

                                                                                             1  <FC>

                                                                                            (3) <FD>
                                                                         ---------   ---------             ---------

GROSS PROFIT..........................................................         538          (6)                  532

Marketing, administrative, and technological expenses.................         258          14  <FB>             288

                                                                                            (9) <FD>

                                                                                            25  <FE>
                                                                         ---------   ---------             ---------

OPERATING INCOME......................................................         280         (36)                  244

Interest Expense......................................................         (31)        (19) <FF>             (50)

Other Income (Expense)--Net...........................................          34                                34
                                                                         ---------   ---------             ---------

INCOME BEFORE INCOME TAXES............................................         283         (55)                  228

Income Taxes..........................................................         100         (20) <FG>              80
                                                                         ---------   ---------             ---------

NET INCOME............................................................   $     183   $     (35)            $     148
                                                                         =========   =========             =========

EARNINGS PER SHARE....................................................   $    1.49   $   (0.28)            $    1.21
                                                                         =========   =========             =========

Weighted average equivalent shares....................................                                         122.7
                                                                                                           =========

<FN>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

                                      10

<PAGE> 12
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


<FA>       To record the estimated effect of new selling prices and arrangements on former intercompany
           sales from the Company to Monsanto. The Company sells certain products to Monsanto under
           arms-length long-term contracts with formula-based or market-based pricing mechanisms. The
           Company also acts as the agent for Monsanto in purchasing additional quantities of one of
           these products. The net effect of these changes in supply arrangements and prices is to
           reduce the overall net sales of the Company.

<FB>       To record the assumed increase in retiree medical and pension costs as a result of the
           Spinoff. For the purpose of the Company's historical financial statements, the annual costs
           for retiree medical and pension liabilities have been allocated generally based upon the
           percentage of payroll costs to total Monsanto payroll costs. In connection with the Spinoff,
           the Company assumed retiree medical liabilities for its active employees and former employees
           who last worked at a chemicals business facility. In addition, in connection with the
           Spinoff, the Company assumed the U.S. pension liabilities, and received related assets, for
           its active employees and for certain former employees of the Company who left Monsanto in
           earlier years. The amount of these liabilities assumed by the Company is significantly
           greater than the amounts allocated historically. As a result, pension and postretirement
           costs for the Company have increased significantly in total following the Spinoff.

<FC>       To record the estimated effect of transactions with the venture formed for the mining of
           phosphate rock and the production of elemental phosphorus (the "P4 Joint Venture") formed
           by Monsanto in conjunction with the Spinoff. In connection with the Spinoff, Monsanto
           contributed a 40% interest in the P4 Joint Venture to the Company. The amounts reflect
           assumed payments from the Company to Monsanto of $2 million for the nine months ended
           September 30, 1997 for premiums related to production taken over certain specified levels.
           This amount is offset by assumed accrued income for option fee payments from Monsanto to the
           Company for the nine months ended September 30, 1997 of $1 million. Estimates of the premium
           payments and option fees for the third quarter of 1997 were not significant.

<FD>       To reverse the historical Monsanto corporate expense allocation to the Company because the
           Company is no longer subject to the allocation of corporate expenses from Monsanto following
           the Spinoff. The allocated corporate expenses include, among other items, executive
           administration, Monsanto's business and organizational development initiatives, and the cost
           of corporate incentives. For purposes of the historical financial statements, such expenses
           were allocated on the basis of the net capital employed by the businesses contributed by
           Monsanto to Solutia in the Spinoff. For the nine months ended September 30, 1997, $12 million
           of such expenses were allocated to the Company. As further discussed in Note 4 of "Notes to
           Consolidated Financial Statements," the allocation of such expenses was discontinued in the
           second quarter of 1997.

<FE>       Because the Company is no longer subject to the allocation of corporate expenses from
           Monsanto, a pro forma adjustment was made to record estimated general corporate costs that
           the Company believes it would have incurred had the Company been a separate public company
           for the periods presented.

<FF>       To record additional interest expense as a result of the Company's assumption of debt from
           Monsanto and the borrowings of the Offering.

<FG>       To record the estimated provision for income tax as a result of the pro forma adjustments
           referred to in Notes (A) through (F) above at an estimated combined U.S. federal and state
           income tax rate of 36%.
</TABLE>

                                      11

<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

RESULTS OF OPERATIONS--THIRD QUARTER 1997 COMPARED WITH THE THIRD QUARTER 1996

    Net sales for the quarter declined slightly when compared with net sales in
the third quarter of 1996. The decline was primarily the result of lower sales
volumes for carpet fibers, principally because of lower sales into the
residential carpet market. The effect of lower carpet fiber sales was partially
offset by higher sales volumes of Acrilan(R) acrylic fiber because of high
domestic demand in the upholstery and apparel markets. In addition, higher
sales volumes of industrial nylon fibers helped to mitigate the overall sales
decline for the quarter.

    Operating income for Solutia during the quarter decreased $8 million, or 8
percent, from the third quarter of 1996 to $88 million. The decrease in
operating income can be attributed primarily to higher raw material and
manufacturing costs, combined with the effects of the lower sales volumes
discussed above. Higher raw material costs were driven by higher propylene,
cyclohexane and natural gas prices. With the exception of propylene costs,
near-term raw material price reductions are not anticipated. Higher
manufacturing costs resulted from downtime for maintenance and upgrade
projects, as well as startup costs associated with a new production process in
the industrial nylon fibers business, and a capacity expansion project in the
nylon plastics & polymers business. The decrease in operating income was
partially offset by the effects of lower marketing and administrative expenses.
The decrease in administrative expenses can be attributed primarily to cost
savings realized through restructuring actions taken last year. The timing of
expenditures and reduced spending on certain programs resulted in lower
marketing expenses for the quarter.

    The increase in "Other Income (Expense)--Net" was principally the result
of higher earnings from equity affiliates.

RESULTS OF OPERATIONS--FIRST NINE MONTHS 1997 COMPARED WITH FIRST NINE MONTHS
1996

    For the nine months ended September 30, 1997, Solutia's net sales of $2,238
million increased $31 million, or 1 percent, as compared with the same period
in 1996. Approximately $23 million of the increase can be attributed to higher
sales volumes and an improved sales mix, with the remainder of the increase
attributable to higher average selling prices. The sales increase was driven by
increased demand and was principally the result of higher sales volumes of
intermediates, nylon plastics & polymers, as well as higher sales volumes of
Saflex(R) plastic interlayer. The sales increase was partially offset by lower
sales volumes for carpet fibers, principally because of lower sales into the
residential carpet market. Combined sales of the other business units for the
first nine months of 1997 were essentially even with sales in the same period
of 1996.

    Solutia's operating income for the first nine months of 1997 increased $66
million, or 31 percent, versus the first nine months of 1996. However, as
further discussed in Note 2 of "Notes to Consolidated Financial Statements,"
operating income for the first nine months of 1997 includes $10 million of
pretax charges associated with the adoption of the American Institute of
Certified Public Accountants' Statement of Position ("SOP") 96-1 for
environmental reserves at operating locations. In addition, as further
described in Notes 6 and 7 of "Notes to Consolidated Financial Statements,"
operating income in the first nine months of 1997 reflects a pretax charge of
$10 million for environmental-related litigation at the Brio Superfund site, as
well as $8 million in reversals of excess restructuring reserves from prior
years. If the net effect of these items was excluded, operating income in the
first nine months of 1997 would have increased 36 percent compared with the
same period last year. Lower administrative and marketing expenses, combined
with the effect of increased sales described above all contributed to the
significant increase in operating income. The decrease in administrative
expenses can be attributed primarily to cost savings realized through
restructuring actions taken last year and lower allocations related to the
Monsanto's business and organizational development initiatives. The timing of
expenditures and reduced spending on certain programs resulted in lower
marketing expenses for the period.

    The increase in "Other Income (Expense)--Net" was principally the result
of higher earnings from equity affiliates.

    The Company is affected by certain general economic conditions,
particularly as they relate to the housing industry in the United States and
the automotive industry both in the United States and internationally, which
are cyclical businesses. In addition, global competition and customer demands
for efficiency will continue to make

                                      12

<PAGE> 14
sustained price increases difficult. The prices of purchased raw materials used
by the Company fluctuate in the short term and are affected by factors such as
plant outages, oil prices and supply and demand. However, in the long term, the
Company believes that the addition of new worldwide capacity should exert
downward pressure on raw material costs.

    In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which will be effective for the
Company beginning January 1, 1998. SFAS No. 131 redefines how operating
segments are determined and requires disclosure of certain financial and
descriptive information about a company's operating segments. With the adoption
of SFAS No. 131, the Company will expand its disclosure to include three
segments; Chemicals, Fibers, and Polymers & Resins, which will represent
approximately 32 percent, 33 percent, and 35 percent of revenue, respectively.

LIQUIDITY AND CAPITAL RESOURCES

    Solutia's working capital at September 30, 1997 increased to $473 million
from $121 million at December 31, 1996, primarily because of increases in cash,
receivables and prepaid expenses, combined with lower accrued liabilities. The
decrease in accrued liabilities was attributed to lower accruals for wages and
benefits and a reduction in restructuring reserves.

    Effective with the Spinoff on September 1, 1997, Solutia assumed $1.029
billion of debt from Monsanto, primarily assumable commercial paper. The
assumable commercial paper was guaranteed by Monsanto until repaid or
refinanced by Solutia at maturity, which was up to 30 days following the
Spinoff.

    On August 14, 1997, Solutia entered into a total of $1.2 billion in
revolving credit facilities with a syndicate of banks to support its commercial
paper. The credit facilities are also available for working capital and other
general corporate purposes. See Note 8 of "Notes to Consolidated Financial
Statements."

    The credit agreements contain various covenants, which among other things,
restrict the ability of Solutia to merge with another entity, to create liens
against assets, or to amend, cancel or terminate agreements entered into with
Monsanto to effect the Spinoff. These credit agreements also require Solutia to
meet certain leverage and interest coverage ratios.

    On October 21, 1997, Solutia consummated the sale of $150,000,000 aggregate
principal amount of the Company's 6.50% Notes due 2002, $300,000,000 aggregate
principal amount of the Company's 7.375% Debentures due 2027, and $150,000,000
aggregate principal amount of the Company's 6.72% Debentures due 2037 (the
"Offerings"). The proceeds of the Offerings were used to refinance a portion
of the Company's commercial paper when it became due. Subject to the level of
future cash flows, the Company intends to refinance its remaining commercial
paper on a long-term basis.

    On September 3, 1997, the Company's board of directors authorized the
purchase of up to 5 million shares of Company Common Stock for general
corporate purposes. The Company currently plans to complete these purchases
over the next 18 months.

    The Company believes that its cash flow from operations, supplemented by
periodic additional borrowings, provides it with sufficient resources to
finance operations and planned capital needs.

                                      13

<PAGE> 15
                          PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

    The Company filed a Registration Statement on Form S-1, File No. 333-36355
(the "Registration Statement"), to register the following debt securities:
$150,000,000 principal amount of 6.50% Notes due 2002, $300,000,000 principal
amount of 7.375% Debentures due 2027, and $150,000,000 principal amount of
6.72% Debentures due 2037. The Securities and Exchange Commission declared the
Registration Statement, as amended, effective on October 15, 1997. The
managing underwriter of these offerings was Goldman, Sachs & Co. The offering
date was October 16, 1997. The aggregate offering prices and the amounts sold
were as follows:

<TABLE>
<S>                                                             <C>
        6.50% Notes due 2002.............................  $149,506,500

        7.375% Debentures due 2027.......................  $297,663,000

        6.72% Debentures due 2037........................  $149,964,000
</TABLE>

    Since the Registration Statement was declared effective after the period
ending September 30, 1997, the expenses incurred in connection with the
offerings and the use of the net offering proceeds will, pursuant to Item 701
of Regulation S-K, be reported in the Company's Form 10-K for the period ending
December 31, 1997.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a) Exhibits--See the Exhibit Index at page 16 of this report.

    (b) Reports on Form 8-K during the quarter ended September 30, 1997:

        A Form 8-K as of August 14, 1997, was filed by the Company regarding
        its change of name from Queeny Chemical Company to Solutia Inc.

        A Form 8-K as of September 1, 1997, was filed by the Company regarding
        the consummation of its spinoff by Monsanto Company.

                                      14

<PAGE> 16
                                   SIGNATURE

    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)

                                                      ROGER S. HOARD
                                          -------------------------------------
                                             (Vice President and Controller)
                                           (On behalf of the Registrant and as
                                              Principal Accounting Officer)

Date: November 12, 1997

                                      15

<PAGE> 17
                                 EXHIBIT INDEX

    These Exhibits are numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K.

<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                                                      DESCRIPTION
    -------                                                     -----------

      <C>        <S>
       2         Omitted--Inapplicable

       3         Omitted--Inapplicable

       4         1. Indenture dated as of October 1, 1997, between Solutia Inc. and The Chase Manhattan Bank, as Trustee

                 2. 6.50% Notes due 2002 in the principal amount of $150,000,000

                 3. 7.375% Debentures due 2027 in the principal amount of $200,000,000

                 4. 7.375% Debentures due 2027 in the principal amount of $100,000,000

                 5. 6.72% Debentures due 2037 in the principal amount of $150,000,000

      10         Omitted--Inapplicable

      11         Omitted--Inapplicable; see Note 9 of "Notes to Consolidated Financial Statements" on page 8.

      15         Omitted--Inapplicable

      18         Omitted--Inapplicable

      19         Omitted--Inapplicable

      22         Omitted--Inapplicable

      23         Consent of Company Counsel

      24         Omitted--Inapplicable

      27         Financial Data Schedule

      99         Omitted--Inapplicable
</TABLE>

                                      16