The second number - 120 million pounds - is the amount of nylon staple capacity Solutia has added in the past five years. We're investing in nylon staple capacity for one simple reason: We see significant opportunities for profitable growth.

That may come as a surprise to industry observers who have written off staple as a declining segment. The truth is, there's a lot of resilience in nylon staple - whether you're talking on-floor performance, or business fundamentals. To understand why, let's closer look at recent market dynamics.

Over the past several years, North American demand for staple fiber has plateaued at around 1.1 billion pounds industrywide. Meanwhile, in the past decade, nylon staple's share of the total carpet market has shrunk by about 17%. Some have suggested that these two figures are tantamount to nylon staple's demise. But in our view, they can be more accurately characterized as cause-and-effect.

Here's why: As the staple market matured in the 1990s, it naturally put pressure on the fiber producers which compete there for business. When Solutia emerged as the quality and cost leader in the nylon staple segment, other fiber producers realized they could no longer be competitive, so they exited this portion of the market; and that created a capacity void.

During this same period, Solutia added nylon staple capacity, and our market share has increased. However, there simply was not enough nylon staple capacity added to offset the exit of the higher-cost competitors, so other staple fiber types have taken up some of the slack. But make no mistake: The nylon staple segment has what it takes to recapture share and grow - for a number of reasons.

Reason #1: New geographic markets. North America remains the stronghold for carpet flooring products, but other regional markets are starting to develop. A case in point: The Peoples Republic of China. Although the market is still in the early stages of development, Chinese designers and consumers have a real fondness for plush, cut-pile carpeting.

This emerging demand plays right into nylon staple's traditional strengths as a fiber - the excellent "hand and feel" it provides, particularly in higher weight carpets. Solutia is currently developing a strategic alliance to market US-produced nylon staple carpet in China, and we are already participating in two joint ventures to produce and promote nylon fiber and nylon carpeting locally. As demand develops in China and other world regions, it could well lead to investment in significant new capacity for nylon staple.

Reason #2: Enhanced marketing initiatives. The Carpet & Rug Institute's four-year, $100 million advertising campaign (funded by its members and associates) has already begun to raise consumer top-of-mind awareness of carpeting and its many desirable attributes. Since nylon staple delivers outstanding on-floor performance, it certainly stands to benefit from the campaign's "comfort and quality" positioning. No fiber is better than nylon staple at holding up to heavy foot traffic, resisting stains, or recovering from static loads. (See Performance Property Comparison Chart above.)

Furthermore, the industry's transition to square-foot pricing will strengthen carpeting's competitiveness against other floor coverings at the retail level. Square-foot pricing is an important initiative, because it will help consumers make an apples-to-apples comparison. Square-foot pricing makes it easy for homeowners to discover the tremendous value they get, especially from luxurious top-of-the-line carpets made with nylon staple.

Reason #3: Significant advances in nylon staple technology. Innovation is the lifeblood of the carpet business - the ability to offer performance improvements, new color choices, the latest styles. In recent months, Solutia has introduced or developed new technology which addresses all three innovation opportunities, promising to create new demand for nylon staple.

In early 1998, for example, we launched the Pet Agree product line - a special backing for carpets which prevents spills or pet accidents from penetrating the padding and damaging the subflooring. Like square-foot pricing, Pet Agree products help make carpeting more competitive against hard-surface floor coverings. The protective barrier makes carpeting impervious to liquids, allowing for more effective cleaning, and thereby minimizing the potential for stains and odors.

Of course, carpeting protected with Pet Agree has many other advantages over hard surface products - such as installed cost, comfort underfoot, noise reduction and insulation value, to name a few. Equally important, Pet Agree gives retailers the opportunity to increase revenues and profits on every Wear-Dated carpet they sell.

"Reports of the fiber's decline are greatly exaggerated."
In color technology, Solutia recently introduced a revolutionary new dyeing process called DyeNamix. This new dyeing system significantly enhances the richness, clarity and stability of colors on carpets made with Solutia-type nylon 6,6. The process is now being used to make printed carpets for the specified contract market, where our Ultron VIP brand is a top player, and nylon 6,6 is clearly the industry's preferred fiber.

The DyeNamix technology will soon be available for Wear-Dated brand residential carpets as well. Thanks to DyeNamix, carpet manufacturers can now offer customers an almost infinite variety of patterns and hues, along with the legendary comfort and performance that only nylon staple carpeting provides. New Singeing Technology
Perhaps the most significant recent advance in nylon staple technology, however, is a new singeing process developed by Kuster Corp., with support from Solutia technology. Singeing makes nylon staple more versatile than ever. It cleans up the fiber, burning off tiny hairs - a process which allows mills to produce a nylon staple yarn which retains the excellent aesthetics of spun yarn, while performing in loop constructions like BCF yarn.

Singeing technology makes it possible for nylon staple to compete for applications such as berbers and other loop construction carpets. Until now, polypropylene and nylon BCF captured virtually all of the volume in this billion-pound style segment. But we expect singed spun nylon to be very competitive against filament when this new technology is commercialized late this year or early in 1999.

Singeing doesn't change nylon staple's inherent performance characteristics: A singed spun nylon yarn is just as resilient and wear-resistant as a standard nylon staple product. That fact will appeal to customers in the contract market, who demand outstanding floor performance under heavy traffic conditions. What's more, the singeing process adds very little cost-per-pound, so singed spun nylon yarns promise to be very cost-competitive with nylon BCF in loop carpet applications.

Bright Future For Nylon Staple
Solutia's nylon staple business has been a strong performer for decades. Our year-over-year production volumes continue to grow. From our perspective, then, it's clear why we think reports of the fiber's decline are greatly exaggerated. Nylon staple is clearly the industry's product of choice in carpets at 40-ounces and above - and Solutia's Wear-Dated and Ultron VIP brands are clearly the dominant players in this weight range. The new technologies we're introducing will not only solidify our position in the heavier weight segment of the market, but also open up new opportunities in style categories and price points that we have not participated in previously.

We continue to invest in this business because we're convinced there's plenty of room for nylon staple to grow in the carpet fibers market, both in North America and around the world. That's certainly the case today. And it will become even more true tomorrow, as ongoing innovation opens up exciting new opportunities for this versatile, resilient fiber.