St Louis, MO, Jan. 15--Monsanto Co. reiterated in its 10-Q filing Wednesday that it may get stuck with some legal liabilities stemming from Solutia's Chapter 11 bankruptcy filing last month.
Monsanto also said in the filing with the Securities and Exchange Commission that it's unclear what effect the bankruptcy proceeding will have on Monsanto's ability to get reimbursed by Solutia for the liabilities.
It's possible that Monsanto's obligation to indemnify Pfizer's Pharmacia unit "will result in a material adverse effect on Monsanto's financial position, profitability and/or liquidity," the company said in the filing. Monsanto also reiterated that there are too many uncertainties to "reasonably estimate" any possible costs in the matter.
Monsanto executives said during a Dec. 17 conference call that the company won't take on any financial obligations that aren't its own. Chief Financial Officer Terry Crews also said then that Monsanto could have some potential legal liabilities, depending on what happens in bankruptcy court, for Solutia's post retirement benefit costs, environmental remediation costs and litigation costs.
Solutia filed for Chapter 11 bankruptcy protection on Dec. 17, citing the debt and legacy liabilities it inherited when it was spun off in September 1997 from the Monsanto that existed prior to that company's merger with what was then Pharmacia & Upjohn Inc. That merged business was eventually purchased by Pfizer.
Solutia, Monsanto and Pfizer's Pharmacia unit had indemnification clauses in the respective spin-off and merger contracts, describing who would pay the bills if one of the companies couldn't. Monsanto indemnified Pharmacia for certain liabilities assumed by Solutia at its 1997 spinoff if Solutia fails to pay those liabilities.
Monsanto also said in the filing that the U.S. District Court for the Northern District of Alabama on Jan. 8 turned down most of a claim by plaintiffs in the Owens vs. Monsanto lawsuit.
The 1,600 plaintiffs, who claimed they were harmed by polychlorinated biphenlys (PCBs) from a former Monsanto plant in Anniston, Ala., agreed to a settlement of $40 million in April 2001. But the plaintiffs claimed they were entitled to about $100 million more because of the August 2003 settlement in the Tolbert vs. Monsanto and Abernathy vs. Monsanto PCB-related lawsuits.
The court awarded the plaintiffs an additional $1.3 million, or about $800 per plaintiff, Monsanto's filing said.
In its description of contingent liabilities relating to Solutia in its 10-Q filing, Monsanto said the liabilities are considered an off balance sheet arrangement under SEC rules. It's the first time Monsanto has used the term "off balance sheet" in its description of the liabilities.
The SEC has various categories of guarantees in general and Monsanto's "connection" with Solutia puts the contingent liabilities into a category where the term off balance sheet is appropriate, Monsanto spokeswoman Lori Fisher said.
