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

                               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 MARCH 31, 1999

                                  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)

    INDICATE 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                             MARCH 31, 1999
                -----                             --------------

    COMMON STOCK, $0.01 PAR VALUE               111,723,640 SHARES
    -----------------------------               ------------------

=========================================================================

 <PAGE>
<PAGE>

                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

<TABLE>
                                 SOLUTIA INC.

                       STATEMENT OF CONSOLIDATED INCOME
                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
                                                                    THREE MONTHS
                                                                        ENDED
                                                                      MARCH 31,
                                                                  -----------------
                                                                  1999        1998
                                                                  -----       -----
<S>                                                               <C>         <C>
NET SALES...................................................      $ 652       $ 720
Cost of goods sold..........................................        547         533
                                                                  -----       -----
GROSS PROFIT................................................        105         187
Marketing expenses..........................................         31          37
Administrative expenses.....................................         31          31
Technological expenses......................................         17          20
                                                                  -----       -----
OPERATING INCOME............................................         26          99
Equity earnings from affiliates.............................         10           6
Interest expense............................................         (9)        (12)
Other income (expense)--net.................................          6           4
                                                                  -----       -----
INCOME BEFORE INCOME TAXES..................................         33          97
Income taxes................................................         10          33
                                                                  -----       -----
NET INCOME..................................................      $  23       $  64
                                                                  =====       =====
BASIC EARNINGS PER SHARE....................................      $0.21       $0.55
                                                                  =====       =====
DILUTED EARNINGS PER SHARE..................................      $0.20       $0.51
                                                                  =====       =====
Weighted average equivalent shares (in millions):
    Basic...................................................      111.8       117.0
    Effect of dilutive securities:
        Common share equivalents--common shares issuable
          upon exercise of outstanding stock options........        4.2         7.9
                                                                  -----       -----
    Diluted.................................................      116.0       124.9
                                                                  =====       =====
<CAPTION>
                  STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
                               (DOLLARS IN MILLIONS)

                                                                    THREE MONTHS
                                                                        ENDED
                                                                      MARCH 31,
                                                                  -----------------
                                                                  1999        1998
                                                                  -----       -----
<S>                                                               <C>         <C>
NET INCOME..................................................      $  23       $  64
OTHER COMPREHENSIVE INCOME:
Currency translation adjustments............................        (17)         (8)
                                                                  -----       -----
COMPREHENSIVE INCOME........................................      $   6       $  56
                                                                  =====       =====

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

                                       1
 <PAGE>
<PAGE>

<TABLE>
                                 SOLUTIA INC.

                 STATEMENT OF CONSOLIDATED FINANCIAL POSITION
                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<CAPTION>
                                                                  MARCH 31,       DECEMBER 31,
                                                                    1999              1998
                                                                  ---------       ------------
<S>                                                                <C>               <C>
                           ASSETS

CURRENT ASSETS:
Cash and cash equivalents...................................       $   36            $   89
Trade receivables, net of allowance of $7 in 1999 and
  1998......................................................          398               357
Miscellaneous receivables and prepaid expenses..............          123               126
Deferred income tax benefit.................................          101                88
Inventories.................................................          343               331
                                                                   ------            ------
TOTAL CURRENT ASSETS........................................        1,001               991
PROPERTY, PLANT AND EQUIPMENT:
Land........................................................           16                17
Buildings...................................................          366               371
Machinery and equipment.....................................        2,773             2,786
Construction in progress....................................          145               127
                                                                   ------            ------
Total property, plant and equipment.........................        3,300             3,301
Less accumulated depreciation...............................        2,375             2,357
                                                                   ------            ------
NET PROPERTY, PLANT AND EQUIPMENT...........................          925               944
INVESTMENTS IN AFFILIATES...................................          410               394
LONG-TERM DEFERRED INCOME TAX BENEFIT.......................          277               274
OTHER ASSETS................................................          156               162
                                                                   ------            ------
TOTAL ASSETS................................................       $2,769            $2,765
                                                                   ======            ======
           LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:
Accounts payable............................................       $  268            $  278
Accrued liabilities.........................................          467               454
                                                                   ------            ------
TOTAL CURRENT LIABILITIES...................................          735               732
LONG-TERM DEBT..............................................          597               597
POSTRETIREMENT LIABILITIES..................................          973               971
OTHER LIABILITIES...........................................          488               472
SHAREHOLDERS' DEFICIT:
Common stock (authorized, 600,000,000 shares, par value
  $0.01)
  Issued: 118,400,635 shares in 1999 and 1998...............            1                 1
  Additional contributed capital............................         (134)             (131)
  Treasury stock, at cost (6,676,995 shares in 1999 and
    5,629,677 shares in 1998)...............................         (165)             (143)
Unearned ESOP shares........................................          (23)              (25)
Accumulated other comprehensive income......................            2                19
Reinvested earnings.........................................          295               272
                                                                   ------            ------
SHAREHOLDERS' DEFICIT.......................................          (24)               (7)
                                                                   ------            ------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT.................       $2,769            $2,765
                                                                   ======            ======

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

                                       2
 <PAGE>
<PAGE>
<TABLE>
                                 SOLUTIA INC.

                      STATEMENT OF CONSOLIDATED CASH FLOW
                             (DOLLARS IN MILLIONS)

<CAPTION>
                                                                    THREE MONTHS
                                                                        ENDED
                                                                      MARCH 31,
                                                                  -----------------
                                                                  1999        1998
                                                                  -----       -----
<S>                                                               <C>         <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

OPERATING ACTIVITIES:
Net income..................................................      $  23       $  64
Adjustments to reconcile to Cash From Operations:
    Items that did not use (provide) cash:
        Deferred income taxes...............................        (13)          4
        Depreciation and amortization.......................         35          34
        Other...............................................         49          (4)
    Working capital changes that provided (used) cash:
        Trade receivables...................................        (41)         (9)
        Inventories.........................................        (12)        (29)
        Accounts payable and accrued liabilities............        (59)         30
        Other...............................................         12          13
    Other items.............................................          5           4
                                                                  -----       -----
CASH FROM OPERATIONS........................................         (1)        107
                                                                  -----       -----

INVESTING ACTIVITIES:
Property, plant and equipment purchases.....................        (30)        (18)
Investment and property disposal proceeds...................          3           5
                                                                  -----       -----
CASH FROM INVESTING ACTIVITIES..............................        (27)        (13)
                                                                  -----       -----

FINANCING ACTIVITIES:
Net repayment of debt obligations...........................        --          (69)
Treasury stock purchases....................................        (26)        (41)
Dividend payments...........................................        --           (1)
Common stock issued under employee stock plans..............          1           9
                                                                  -----       -----
CASH FROM FINANCING ACTIVITIES..............................        (25)       (102)
                                                                  -----       -----

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............        (53)         (8)

CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR...........................................         89          24
                                                                  -----       -----
END OF PERIOD...............................................      $  36       $  16
                                                                  =====       =====

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

                                       3
 <PAGE>
<PAGE>
                                 SOLUTIA INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN MILLIONS)

1. BASIS OF PRESENTATION

    Solutia Inc. is an international producer and marketer of a range of high
performance chemical-based materials, including nylon and acrylic fibers and
fiber intermediates, Saflex(R) plastic interlayer, phosphorus derivatives and
specialty chemicals. These materials are used by our customers to make
consumer, household, automotive and industrial products.

    These financial statements should be read in conjunction with the audited
financial statements and notes to consolidated financial statements included in
Solutia's 1998 Annual Report to shareholders and incorporated by reference in
the company's annual report on Form 10-K, filed with the Securities and
Exchange Commission on March 16, 1999.

    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, comprehensive income, and cash
flows for the interim periods reported. Such adjustments are of a normal,
recurring nature. The results of operations for the three-month period ended
March 31, 1999 are not necessarily indicative of the results to be expected for
the full year.

2. INVENTORY VALUATION

    The components of inventories as of March 31, 1999 and December 31, 1998
were as follows:

<TABLE>
<CAPTION>
                                                    MARCH 31,       DECEMBER 31,
                                                      1999              1998
                                                    ---------       ------------
<S>                                                   <C>              <C>
          Finished goods......................        $ 271            $ 252
          Goods in process....................          110               87
          Raw materials and supplies..........           82              116
                                                      -----            -----
          Inventories, at FIFO cost...........          463              455
          Excess of FIFO over LIFO cost.......         (120)            (124)
                                                      -----            -----
          TOTAL...............................        $ 343            $ 331
                                                      =====            =====
</TABLE>

3. SPECIAL OPERATIONS CHARGES

    During the first quarter of 1999, Solutia recorded special operations
charges of $34 million ($22 million aftertax) related to manufacturing
operations in the Chemicals and Fibers segments.

    In February 1999, Chemicals' ammonia unit experienced the failure of
certain equipment critical to the production process. Based on an analysis
of the economics of purchased ammonia and the cost to repair the equipment,
Solutia decided to exit the ammonia business. A $28 million ($18 million
aftertax) charge to cost of goods sold was recorded in the first quarter to
complete the exit plan. The charge included $2 million to write down the assets
to fair value, $4 million of dismantling costs, and $22 million of costs for
which Solutia is contractually obligated under an operating agreement.
Excluding the contractually obligated costs, Solutia expects to complete the
dismantling of the equipment and exit of the business by the end of 1999. The
ammonia business' net sales for the three months ended March 31, 1999 and 1998,
were $1 million and $8 million, respectively. Operating income for those
periods was minimal.

    A special operations charge of $6 million ($4 million aftertax) was also
recorded primarily to write down a Fibers' segment bulk continuous filament
(BCF) spinning machine to fair value as a result of a noncompetitive cost
position. The charge is due to a Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and Assets to Be
Disposed Of," review which indicated that the carrying amount of the assets
exceeded the identifiable undiscounted cash flows related to the assets. Fair
value of the assets was

                                       4
 <PAGE>
<PAGE>

determined based on estimates of market prices. Operating income derived from
the machinery was minimal in the three month periods ended March 31, 1999 and
1998.

4. CONTINGENCIES

    During the first quarter of 1999, Solutia recorded a $29 million ($18
million aftertax) charge to cost of goods sold to increase reserves related to
the anticipated settlement of two lawsuits brought against Monsanto Company
("Monsanto"), for which Solutia assumed responsibility in the 1997 spin-off
from Monsanto, relating to the alleged discharge of polychlorinated biphenyls
("PCBs"), from the Anniston, Alabama plant site, and to environmental
remediation of the allegedly affected areas. The anticipated settlement of
these cases provided information that allowed management to estimate more
accurately the company's position with respect to such litigation.

    Monsanto is a party to a number of lawsuits and claims relating to Solutia,
for which Solutia assumed responsibility in the Spinoff. In addition, Solutia
is also a named party to a number of lawsuits and claims directly. Solutia
intends to defend all suits and claims vigorously. Such matters arise out of
the normal course of business and relate to product liability; government
regulation, including environmental issues; employee relations; and other
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 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.

5. SUBSEQUENT EVENTS

  CPFilms Inc. Acquisition

    On April 19, 1999, Solutia announced it had reached an agreement to acquire
CPFilms Inc. from Akzo Nobel N.V. for approximately $200 million. CPFilms is
the world market leader in window film and other high technology film products
for automotive and architectural after-markets, and a variety of other
specialty film applications. CPFilms' annual net sales are approximately $130
million.

    The acquisition will be accounted for as a purchase, and includes CPFilms'
manufacturing sites, located in the United States and the United Kingdom, and
its international distribution network. Solutia expects to close the
acquisition in late May 1999.

  Phosphorus Derivatives Joint Venture

    On April 30, 1999, the company announced it had entered into an agreement
in principle with FMC Corporation to form a joint venture to manufacture and
market phosphorus chemicals. Solutia will contribute its Phosphorus Derivatives
business to this joint venture. The joint venture will have annual net sales of
approximately $600 million. Solutia and FMC will each have a 50 percent
ownership share.

                                       5
 <PAGE>
<PAGE>

6. SEGMENT DATA

    Segment data for the three months ended March 31, 1999 and 1998 were as
follows:

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED MARCH 31,
                                         -----------------------------------------------------------------------------------
                                                         1999                                          1998
                                         -------------------------------------         -------------------------------------
                                          NET        INTERSEGMENT                       NET        INTERSEGMENT
                                         SALES          SALES           PROFIT         SALES          SALES           PROFIT
                                         -----       ------------       ------         -----       ------------       ------
<S>                                      <C>             <C>             <C>           <C>             <C>             <C>
SEGMENT:
  Chemicals..........................    $204            $  2            $ 56          $225            $  2            $ 56
  Fibers.............................     210             --               32           251             --               58
  Polymers & Resins..................     240             --               66           244             --               64
                                         ----            ----            ----          ----            ----            ----
SEGMENT TOTALS.......................     654               2             154           720               2             178
RECONCILIATION TO CONSOLIDATED
TOTALS:
  Sales eliminations.................      (2)             (2)                           (2)             (2)
  Other revenues.....................     --                                              2
  Less unallocated service costs:
    Cost of goods sold<F1>...........                                     (76)                                          (23)
    Marketing, administrative and
      technological expenses.........                                     (52)                                          (56)
  Equity earnings from affiliates....                                      10                                             6
  Interest expense...................                                      (9)                                          (12)
  Other income (expense)--net........                                       6                                             4
CONSOLIDATED TOTALS:
                                         ----            ----                          ----            ----
  NET SALES..........................    $652            $--                           $720            $--
                                         ====            ====            ----          ====            ====            ----
  INCOME BEFORE INCOME TAXES.........                                    $ 33                                          $ 97
                                                                         ====                                          ====
    Segment profit includes only operating expenses directly attributable to
the segment. Unallocated service costs are managed centrally and primarily
include costs of technology, engineering and manufacturing services that are
provided to the segments.

<F1> Unallocated cost of goods sold for the three months ended March 31, 1999,
     includes special charges related to exiting the ammonia business ($28
     million pretax, $18 million aftertax), the write down of a Fibers' segment
     bulk continuous filament spinning machine ($6 million pretax, $4 million
     aftertax), and the anticipated settlement of certain pending property
     claims litigation relating to the Anniston, Alabama plant site ($29
     million pretax, $18 million aftertax).
</TABLE>

                                       6
 <PAGE>
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

    This section includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These include all statements
regarding the expected future financial position, results of operations, cash
flows, effect of changes in accounting due to recently issued accounting
standards, benefits from new technology, the cost of remediating the year 2000
issue and the effect of any unremediated or undiscovered year 2000 issues on
the Company's operations. Important factors that could cause actual results to
differ materially from the expectations reflected in the forward-looking
statements herein include, among others, those set forth below as well as
general economic, business and market conditions, customer acceptance of new
products, raw material pricing, efficacy of new technology and facilities, and
increased competitive and/or customer pressure.

RESULTS OF OPERATIONS--FIRST QUARTER 1999 COMPARED WITH FIRST QUARTER 1998

    Net sales for the first quarter of 1999 decreased by 9 percent as compared
with the first quarter of 1998. Lower average selling prices and lower sales
volume contributed equally to the decline.

  Chemicals Segment

    Net sales declines in the Chemicals segment occurred primarily as the
result of volume declines, and to a lesser extent, downward pressure on
pricing. The decline in sales volume was driven primarily by two intermediates
products: ammonia and chlorobenzenes. The ammonia sales decline was caused by
the failure of certain critical production equipment at the Luling, Louisiana
facility. Because of the cost to repair the equipment and the availability of
ammonia in the marketplace, Solutia has decided not to repair the equipment,
and instead to exit the business. The exit of the ammonia business is further
discussed below in Operating Income. The decrease in chlorobenzene volumes was
anticipated and is primarily due to lower demand as the Flexsys, L.P.
("Flexsys") rubber chemicals joint venture sourced more raw material from its
new PPD2 operation. Pricing declines experienced in the first quarter of 1999,
as compared to the first quarter of 1998, were caused by acrylonitrile sales
contracts which contain contracted price declines.

    In spite of the decline in net sales, segment profit for the three-month
period ended March 31, 1999, was flat as compared to the three-month period
ended March 31, 1998. Solutia's cost reduction efforts, including those related
to personnel costs, and favorable manufacturing performance for phosphorus
derivatives products were sufficient to offset the net sales declines. For the
1999 first quarter, segment profit as a percentage of net sales was 27 percent
as compared with 25 percent for the first quarter of 1998.

  Fibers Segment

    The Fibers segment net sales for the first quarter of 1999 were down
approximately 16 percent versus the first quarter of 1998. Pricing and volume
contributed equally to the year-over-year decrease. Acrilan(R) acrylic fiber
continued to show poor operating results, as compared to the prior year, due to
the effect of the Asian financial crisis on the businesses' sales to that
region, and its residual effect on the Americas. The impact of these events
began early in the third quarter of 1998 and have continued into the first
quarter of 1999. The carpet business experienced lower average sales prices in
the first quarter of 1999 as compared to the same period of the prior year due
to the consolidation of the carpet mill industry and a higher proportion of
unbranded sales. Also affecting the comparison of the first quarter 1999 with
the first quarter 1998 is the first quarter 1998 price increase which gradually
eroded during 1998. Subsequent to the end of the first quarter, Solutia moved
to match a competitor's sales price increase effective May 1, 1999.

    Segment profit for Fibers decreased $26 million due to the net sales
decline and lower capacity utilization, but was partially offset by lower raw
material costs and the effects of Solutia's cost reduction initiatives,
including those related to personnel costs.

                                       7
 <PAGE>
<PAGE>

  Polymers & Resins Segment

    Net sales for the first quarter of 1999 in the Polymers & Resins segment
were down slightly from the first quarter of 1998. Businesses in this segment
experienced average selling prices lower than those in the year-ago quarter due
to the sharing of raw material price reductions with customers and pricing
provisions of some long-term sales contracts. Offsetting the average selling
price declines were improved volumes in the Saflex(R) plastic interlayer and
resins businesses. Saflex(R) plastic interlayer volumes were a record for a
first quarter. Resins volumes improved due to new product introductions in the
GME adhesives family. Additionally, volumes for Vydyne(R) nylon plastics were a
record for a first quarter, benefiting from Solutia's marketing alliance with
Dow Plastics. However, overall nylon plastics and polymers volumes were down
from the year-ago quarter due to lower merchant polymer volume.

    Polymers & Resins segment profit for the first quarter of 1999 was 3
percent higher than for the first quarter of 1998 due to the lower raw material
costs, improved capacity utilization and Solutia's cost reduction efforts,
including those related to personnel costs. These factors led segment profit as
a percentage of segment net sales to increase to 28 percent in the 1999 first
quarter from 26 percent in the 1998 first quarter.

  Operating Income

    Operating income for the first quarter of 1999 declined to $26 million as
compared to $99 million for the first quarter of 1998 due to lower segment
profit discussed above and special charges affecting the 1999 quarter.

    In February 1999, the Chemicals' ammonia unit experienced the failure of
certain equipment critical to the production process. Based on an analysis of
the economics of purchased ammonia and the cost to repair the equipment,
Solutia decided to exit the ammonia business. A $28 million ($18 million
aftertax) special operations charge to cost of goods sold was recorded in the
first quarter of 1999 to complete the exit plan. The charge included $2 million
to write down the assets to fair value, $4 million of dismantling costs, and
$22 million of costs for which Solutia is contractually obligated under an
operating agreement. Excluding the contractually obligated costs, Solutia
expects to complete the dismantling of the equipment and exit of the business
by the end of 1999. The ammonia business' net sales for the three months ended
March 31, 1999 and 1998 were $1 million and $8 million, respectively. Operating
income for those periods was minimal.

    A special operations charge of $6 million ($4 million aftertax) was
recorded to write down certain Fibers segment assets to their fair values. The
charge is due to a review under Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and Assets to Be
Disposed Of," ("SFAS No. 121"). The review stemmed from a historical trend of
operating losses and a forecast that the trend would continue. The SFAS No. 121
review indicated that the carrying amount of the assets exceeded the
identifiable undiscounted cash flows related to the assets. Fair value of the
assets was determined based on estimates of market prices. Operating income
derived from the machinery was minimal in the three month periods ended March
31, 1999 and 1998.

    Also during the 1999 first quarter, Solutia recorded a $29 million ($18
million aftertax) charge to cost of goods sold related to the anticipated
settlement of two lawsuits brought against Monsanto Company relating to the
alleged discharge of polychlorinated biphenyls ("PCBs") from the Anniston,
Alabama plant site. The anticipated settlement of these cases provided
information that allowed management to estimate more accurately the company's
position with respect to such litigation.

    Partially offsetting the decline in operating income, caused by the special
charges and lower segment profit discussed above, were lower personnel and
benefits costs associated with Solutia's on-going cost reduction efforts.

  Equity Earnings from Affiliates

    Equity Earnings from Affiliates increased to $10 million in the first
quarter of 1999 from $6 million in the comparable 1998 quarter. The increase
was driven by improved profitability at the Flexsys joint venture, which
benefited from the PPD2 unit's good operating performance.

LIQUIDITY AND CAPITAL RESOURCES

    Solutia's working capital at March 31, 1999, increased to $266 million from
$259 million at December 31, 1998. The increase was primarily driven by higher
accounts receivable, partially offset by lower cash balances. The

                                       8
 <PAGE>
<PAGE>

increase in accounts receivable is consistent with normal sales and collection
trends. Cash balances declined primarily due to lower cash from operations.

    Solutia continued to reinvest in itself through share repurchases in the
first quarter of 1999. Shares repurchased under the second 5 million share
repurchase program totaled 1.2 million shares. The cost for shares repurchased
during the quarter was approximately $26 million.

    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.

THE YEAR 2000 ISSUE

  Overview

    The year 2000 ("Y2K") issue refers to the inability of a date-sensitive
computer program to recognize a two-digit date field designated "00" as the
year 2000. Mistaking "00" for 1900 could result in a system failure or
miscalculations causing disruptions to operations, including manufacturing, a
temporary inability to process transactions, send invoices, or engage in other
normal business activities. This is a significant issue for most, if not all
companies, with far reaching implications, some of which cannot be anticipated
or predicted with any degree of certainty.

    Solutia began addressing its Y2K issues in 1996. The planning phase of the
process was completed during 1997. Effective December 31, 1998, Solutia adopted
the Y2K Readiness Disclosure format of the Chemical Manufacturers Association
("CMA"), of which the company is a member. The CMA disclosure format uses four
process categories and five functional areas. Solutia has conformed its Y2K
reporting to the CMA disclosure format. The following sections contain a
summary of Solutia's Y2K readiness and detailed discussions of Solutia's Y2K
issues.

  Summary of Y2K Readiness

    The following table summarizes Solutia's Y2K readiness. The percentage in
each column indicates the completion of each process step listed.

<TABLE>
<CAPTION>
                                                                                            CONTINGENCY         PLANNED
                          INVENTORY/                                                           PLANS         IMPLEMENTATION
                          ASSESSMENT      REMEDIATION      TESTING      IMPLEMENTATION       DEVELOPED            DATE
                          ----------      -----------      -------      --------------      -----------      --------------
<S>                          <C>              <C>            <C>             <C>             <C>              <C>
Business
  Applications..........     100%             80%            80%             80%                See             Mid-1999
Manufacturing and
  Warehousing
  Equipment...........       100%             75%            75%             75%             Comments        2nd Qtr. 1999
Information Technology
  Technical
  Infrastructure......        75%             50%            50%             50%               Below         2nd Qtr. 1999
Environmental
  Operations
  Systems.............       100%             75%            75%             75%                             2nd Qtr. 1999
Business Partners.....        80%             --             --              --                              2nd Qtr. 1999
</TABLE>

  Business Applications

    Solutia inventoried and assessed its business applications during 1997. At
that time, the company determined that significant portions of its software
required modification or repair to function properly beyond December 31, 1999.
Solutia is addressing the majority of these Y2K issues through the previously
planned installation of software licensed from SAP AG which is Y2K compliant.
The implementation of SAP involves a series of transitions, the first of which
occurred in January 1997. Through December 31, 1998, all implementations were
completed in accordance with the transition schedule. During the first quarter
of 1999, the company decided to delay the transitions to SAP scheduled for
January 31, 1999, and March 31, 1999, by 30 days each to perform additional
testing, to complete personnel training, and to minimize problems with the
transition. The first of the delayed transitions (rescheduled for February 28,
1999) was completed successfully and, as a result, approximately 85 percent of
Solutia's businesses (based on net sales) have implemented SAP. The final
transition to SAP is underway. Critical issues that are not

                                       9
 <PAGE>
<PAGE>

addressed by SAP are in the process of being remediated. The company expects
to complete remediation of critical business applications by the end of April
1999, except for a limited number of applications that will be remediated just
before Y2K integrated testing. Y2K integrated testing of SAP and non-SAP
systems will occur during mid-1999.

  Manufacturing and Warehousing Equipment and Environmental Operations Systems

    The manufacturing and warehousing equipment and the environmental
operations systems areas include primary process control systems and devices
with embedded chips. Primary process control systems were inventoried and
assessed during late 1997. Remediation and testing of these systems is
continuing. The inventory and assessment of the company's devices with embedded
chip systems was completed during December 1998. Remediation of the Y2K issues
found is continuing. Some slippage from planned schedules occurred during 1998
as resources were temporarily redirected to other Y2K areas. However,
substantial resources are being directed towards the remediation of Y2K issues
detected and the testing and implementation of repaired systems. Solutia
expects that work on the critical issues in these areas will be completed on
schedule by the end of the second quarter of 1999, with the exception of a
small portion of systems that will be repaired and tested during planned plant
shutdowns in the second half of 1999.

  Information Technology Technical Infrastructure

    The information technology ("IT") technical infrastructure area is
primarily comprised of host server systems, computer networking infrastructure,
voice systems, and desktop computer workstations and software. The inventory
and assessment of known long lead-time items is complete. Major projects were
identified during 1998 and remediation is scheduled for completion during 1999.
An exhaustive and comprehensive follow-up investigation of this area to assure
that no critical components were overlooked is complete, except for network and
mainframe/midrange software. The assessment, remediation and testing of the
issues identified will be completed by the end of the second quarter 1999.
However, remediation and testing of a small number of systems will occur in the
second half of 1999 to coincide with scheduled system outages.

  Business Partners

    Solutia's business partners include its suppliers and service providers
(supply chain), and its customers. Solutia has continued its process to
identify and assess those business partners in the supply chain that provide
materials, products or services critical to the company's operations. These
continued reviews have led Solutia to survey additional business partners
during the first quarter of 1999. Approximately two-thirds of Solutia's
critical suppliers report that they have either completed their remediation
efforts or have plans to complete their remediation by mid-1999. Investigation
of the remaining Y2K issues with critical suppliers is continuing on schedule.
Audits of selected suppliers to verify the status and/or completion of their
remediation are planned for the first half of 1999.

    Solutia has been working with customers to address their Y2K concerns
regarding Solutia's ability to operate. Plans to address the ability of our
significant customers to accept our products after December 31, 1999, will be
determined as contingency plans are developed.

  Integrated Testing

    The company intends to perform integrated Y2K testing of critical systems
in all functional areas throughout 1999, with the majority of such testing
occurring during the second and third quarters of 1999. Given the nature of
Solutia's manufacturing and other operations, full-scale integrated testing may
not be practical in some areas and, therefore, may be limited in scope to avoid
significant disruption of the company's operations. Statements of compliance
from vendors and other compliance evidence are expected to mitigate the risk of
not performing integrated testing in those areas.

  Contingency Planning

    During the first quarter of 1999, Solutia completed the development of a
contingency planning process for Y2K issues. The process engages the
manufacturing sites in the evaluation of their existing contingency plans in
light of possible Y2K effects, such as the loss of electrical and telephone
utilities. Solutia expects that the Y2K contingency plans for all manufacturing
sites will be in place by the beginning of the third quarter 1999. The
contingency
                                      10
 <PAGE>
<PAGE>

planning process has been modified for use in non-manufacturing areas and
development of those plans is underway. Contingency plans for non-manufacturing
areas will be completed by the end of third quarter 1999. For both
manufacturing and non-manufacturing areas, the plans will include procedures
that attempt to minimize the impact of any unremediated and unresolved Y2K
issues on Solutia's operations and financial position.

  Costs

    To date, the company has incurred approximately $8 million in costs related
to Y2K work, excluding the cost of SAP implementation. Management currently
estimates that additional costs to evaluate and remediate the remaining issues
will be less than $5 million. These costs will be expensed as incurred during
1999.

  Risks

    Based on the status of the company's work to address its Y2K issues,
including the implementation of SAP, management does not expect the Y2K issue
to pose significant operational problems for the company. However, if the
remediation of critical issues is not completed in a timely manner, Y2K could
have a material adverse effect on the company, depending on the nature and
extent of any remaining unremediated or unresolved issues. Furthermore, if the
company's customers, suppliers, and service providers fail to rectify their Y2K
issues in their own systems, the resultant effect on the company may be
material. Management anticipates the most reasonably likely worst-case scenario
would involve a temporary shutdown of certain units if, in management's
judgment, the company cannot run certain processes safely from an
environmental, safety and health standpoint because of the failure of the
company or a supplier to resolve Y2K issues. Through the development of
contingency plans, the company expects to mitigate the effect that any such
temporary shutdowns would have on the company or third parties.

    The estimated costs and date of completion of Y2K remediation are based on
management's best estimates, which were derived from numerous assumptions about
future events. These assumptions include the availability of certain resources,
third-party modification plans and other factors. There can be no guarantee
that these estimates will be achieved and actual results could differ
materially. Specific factors that might cause material differences include, but
are not limited to, the availability and cost of personnel trained in this
area, the ability to identify and correct all relevant computer codes, and the
cost and availability of replacements for devices with embedded chips.

RECENTLY ISSUED ACCOUNTING STANDARDS

    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activity." SFAS No. 133
provides comprehensive and consistent standards for the recognition and
measurement of derivative and hedging activities. It requires that derivatives
be recorded on the Statement of Consolidated Financial Position at fair value
and establishes criteria for hedges of changes in the fair value of assets,
liabilities or firm commitments, hedges of variable cash flows of forecasted
transactions, and hedges of foreign currency exposures of net investments in
foreign operations. Changes in the fair value of derivatives that do not meet
the criteria for hedges would be recognized in the Statement of Consolidated
Income. This statement will be effective for the Company beginning January 1,
2000. The Company does not expect the adoption of SFAS No. 133 to have a
material effect on the consolidated financial statements.

                                      11
 <PAGE>
<PAGE>

                          PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

    The Company's report on Form 10-K for the year ended December 31, 1998,
described a number of lawsuits brought against Monsanto relating to the alleged
discharge of polychlorinated biphenyls ("PCBs"), from the Anniston, Alabama
plant site. The Company has arrived at an agreement in principle, subject to
Court approval, to settle actions pending in Circuit Court in St. Clair County
which had been consolidated and certified as a class action on behalf of
property owners in a specified area along waterways near the plant (Dyer, et al
v. Monsanto Company, et al.). Under the terms of the agreement, the Company
will pay $23 million in cash to the property owners and has guaranteed that it
will spend $18 million, in addition to the $3 million already expended, over a
period of approximately 6 years on remediation activities directed to the
waterways.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a) Exhibits--See the Exhibit index at page 14 of this report.

    (b) The Company did not file any reports on Form 8-K during the quarter
ended March 31, 1999.

                                      12
 <PAGE>
<PAGE>

                                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: April 30, 1999

                                      13
 <PAGE>
<PAGE>

                              EXHIBIT INDEX

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

EXHIBIT
NUMBER                                DESCRIPTION
-------                               -----------

   2          Omitted--Inapplicable

   3          (i) Omitted--Inapplicable

              (ii) By-Laws of Solutia Inc., as amended April 28, 1999

   4          Omitted--Inapplicable

  10          Solutia Inc. Non-Employee Director Compensation Plan, as
              amended February 24, 1999

  11          Omitted--Inapplicable; see "Statement of Consolidated
              Income" on page 1.

  15          Omitted--Inapplicable

  18          Omitted--Inapplicable

  19          Omitted--Inapplicable

  22          Omitted--Inapplicable

  23          Omitted--Inapplicable

  24          Omitted--Inapplicable

  27          Financial Data Schedule

  99          Omitted--Inapplicable

                                      14