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17
PAGE 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from --------------------- to --------
- -----------
Commission file number 1-44
ARCHER-DANIELS-MIDLAND COMPANY
(Exact name of registrant as specified in its charter)
Delaware 41-0129150
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
4666 Faries Parkway Box 1470 Decatur, Illinois 62525
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code217-424-5200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, no par value New York Stock Exchange
Chicago Stock Exchange
Swiss Exchange
Tokyo Stock Exchange
Frankfurt Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 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 __
1
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant.
Common Stock, no par value--$10.2 billion
(Based on the closing price of the New York Stock Exchange on
August 18, 1997)
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Common Stock, no par value--531,196,269 shares
(August 31, 1997)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders' report for the year ended
June 30, 1997 are incorporated by reference into Parts I, II and
IV.
Portions of the annual proxy statement for the year ended June
30, 1997 are incorporated by reference into Part III.
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PART I
Item 1. BUSINESS
(a) General Development of Business
Archer Daniels Midland Company was incorporated
in Delaware in 1923, successor to the Daniels
Linseed Co. founded in 1902.
During the last five years, the Company has
experienced significant growth, spending
approximately $3.8 billion for construction of new
plants, expansions of existing plants and the
acquisitions of plants and transportation equipment.
There have been no significant dispositions during
this period. However, during this period, the
Company has disposed of its Supreme Sugar subsidiary
and its British Arkady bakery ingredient business.
In addition, the Company has contributed its formula
feed operations, its rice milling operations, its
Mexican wheat flour mills and its masa corn flour
business to various unconsolidated joint ventures.
(b) Financial Information About Industry Segments
The Company is in one business segment--
procuring, transporting, storing, processing and
merchandising agricultural commodities and products.
(c) Narrative Description of Business
(i)Principal products
produced and principal markets for and methods of
distribution of such products.
The Company is
engaged in the business of procuring,
transporting, storing, processing and
merchandising agricultural commodities and
products. It is one of the world's largest
processors of oilseeds, corn and wheat. The
Company also processes cocoa beans, milo, oats,
barley and peanuts. Other operations include
transporting, merchandising and storing
agricultural commodities and products. These
operations and processes produce products which
have primarily two end uses: food or feed
ingredients. Each commodity processed is in
itself a feed ingredient as are the by-products
produced during the processing of each commodity.
Production processes
of all commodities are capital intensive and
similar in nature. These processes involve
grinding, crushing or milling with further value
added through extraction, refining and
fermenting. Generally, each commodity can be
processed by any of these methods to generate
additional value-added products. All commodities
and related processed products share the same
network of commodity procurement facilities,
transportation services
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Item 1. BUSINESS--Continued
(including rail,
barge, truck and ocean vessels) and storage
facilities.
The geographic areas,
customers and marketing methods are basically the
same for all commodities and their related
further processed products. Feed ingredient
products and by-products are sold to farmers,
feed dealers and livestock producers, all of whom
purchase products from across the entire
commodity chain. Food ingredient products are
also sold to one basic group of customers: food
and beverage processors. Any single customer may
purchase products produced from all commodities,
and any single food or feed product could include
ingredients produced from all commodities
processed.
Oilseed Products
Soybeans, cottonseed,
sunflower seeds, canola, peanuts, flaxseed and
corn germ are processed to provide vegetable oils
and meals principally for the food and feed
industries. Crude vegetable oil is sold "as is"
or is further processed by refining and
hydrogenating into margarine, shortening, salad
oils and other food products. Partially refined
oil is sold for use in chemicals, paints and
other industrial products. Lecithin, an
emulsifier produced in the vegetable oil refining
process, is marketed as a food and feed
ingredient. Natural source Vitamin E, an
antioxidant, and distilled monoglycerides, an
emulsifier, are produced from soybeans and other
oilseeds.
Oilseed meals supply
more than one-half of the high protein
ingredients used in the domestic manufacture of
commercial livestock and poultry feeds. Soybean
meal is further processed into soy flour and
grits, used in both food and industrial products,
and into value-added soy protein products.
Textured vegetable protein (TVP), a soy protein
product developed by the Company, is sold
primarily to the institutional food market and,
through others, to the food consumer market. The
Company also produces a wide range of other
edible soy protein products including isolated
soy protein, soy protein concentrate, soy-based
milk products, soy flours and vegetable patties
(Harvest Burgers). The Company produces and
markets a wide range of consumer and
institutional health foods based on the Company's
various soy protein products. The Company
produces cottonseed flour which is sold primarily
to the pharmaceutical industry. Cotton cellulose
pulp is manufactured and sold to the chemical,
paper and filter markets.
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Item 1. BUSINESS-Continued
Corn Products
The Company is
engaged in dry milling and wet milling corn
operations. Products produced for use by the food
and beverage industry include syrup, starch,
glucose, dextrose, crystalline dextrose, high
fructose sweeteners, crystalline fructose and
grits. Corn gluten feed and distillers grains are
produced for use as feed ingredients. Ethyl
alcohol is produced to beverage grade or for
industrial use as ethanol. In gasoline, ethanol
increases octane, and is used as an extender and
oxygenate. Corn germ, a by-product of the milling
process, is further processed as an oilseed.
By fermentation of
dextrose, the Company produces citric and lactic
acids, feed-grade amino acids and vitamins,
lactates, sorbitol, and food emulsifiers
principally for the food and feed industries.
Wheat and Other Milled Products
Wheat flour is sold
primarily to large bakeries, durum flour is sold
to pasta manufacturers and bulgur, a gelatinized
wheat food, is sold to both the export and the
domestic food markets. The Company produces wheat
starch and vital wheat gluten for the baking
industry. The Company mills oats into oat bran
and oat flour for institutional and consumer food
customers. The Company also mills milo to produce
industrial flour that is used in the
manufacturing of wall board for the building
industry.
Other Products and Services
The Company buys,
stores and cleans agricultural commodities, such
as oilseeds, corn, wheat, milo, oats and barley,
for resale to other processors worldwide.
The Company grinds cocoa beans and produces cocoa
liquor, cocoa butter, cocoa powder, chocolate and
various compounds for the food processing
industry.
The Company produces
and distributes formula feeds and animal health
and nutrition products to the livestock, dairy
and poultry industries. Many of the feed
ingredients and health and nutrition products are
produced in our other commodity processing
operations.
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The Company produces
bakery products and mixes which are sold to the
baking industry.
Item 1. BUSINESS--Continued
The Company produces
spaghetti, noodles, macaroni, and other consumer
food products. The Company also produces lettuce,
other fresh vegetables and herbs in its
hydroponic greenhouse.
Malt products are
produced for use by the food and beverage
industries.
The Company raises
fish for distribution to consumer food customers.
Hickory Point Bank
and Trust Co. furnishes public banking services,
except commercial loans, as well as cash
management and securities safekeeping services
for the Company.
ADM Investor
Services, Inc. is a registered futures commission
merchant and a clearing member of all principal
commodities exchanges. ADM Securities Inc. is a
securities broker-dealer registered with the
Securities and Exchange Commission and a member
of the National Association of Securities
Dealers, Inc.
Agrinational
Insurance Company acts as a direct insurer and
reinsurer of a portion of the Company's domestic
and foreign property and casualty insurance
risks.
Alfred C. Toepfer
International (Germany) and affiliates, of which
the Company has a 50% interest, is one of the
world's largest, most respected trading companies
specializing in processed agricultural products.
Toepfer has forty-one sales offices worldwide.
Compagnie
Industrielle et Financiere des Produits Amylaces
SA (Luxembourg) and affiliates, of which the
Company has a 41.5% interest, owns European
agricultural processing plants that are primarily
engaged in wet corn milling and wheat starch
production.
Gruma S.A. de C.V.
(Mexico) and affiliates, of which the Company has
a 22% interest, is the world's largest producer
and marketer of corn flour and tortillas with
operations in the U.S., Mexico and Central
America.
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Additionally, the
Company has a 20% interest in a joint venture
which consists of the combined U.S. corn flour
operations of ADM and Gruma. The Company also has
a 40% share, through a joint venture with Gruma,
of four Mexican-based wheat flour mills.
Item 1. BUSINESS--Continued
The Company owns a 30% non-voting equity interest
in Minnesota Corn Processors (MCP). MCP operates
wet corn milling plants in Minnesota and
Nebraska.
The Company formed a strategic alliance with
United Grain Growers of Canada (UGG) which
resulted in the Company having approximately 45%
ownership of UGG. UGG, with more than 165
locations throughout Western Canada, is involved
in grain merchandising, crop input marketing and
distribution, livestock production services and
farm business communications.
Consolidated Nutrition, L.C., a joint venture
between the Company and Ag Processing Inc., is a
supplier of premium animal feeds and animal
health products. The Company has a 50% ownership
interest in this joint venture.
ADM/Countrymark, LLC, a joint venture between the
Company and Countrymark Cooperative Inc.,
operates a grain business in Indiana, Kentucky,
Maryland, Michigan and Ohio. The Company has a
50% ownership interest in this joint venture.
The Company owns a 25% interest in Acatos &
Hutchinson, a U.K. based company, that processes
and markets edible oil.
Almidones Mexicanos S.A. (Mexico), of which the
Company has a 50% interest, operates a wet corn
milling plant in Mexico.
Golden Peanut Company, a joint venture between
the Company, Gold Kist, Inc. and Alimenta
Processing Corporation, is a major supplier of
peanuts to both the domestic and export markets.
The Company has a 33 1/3% ownership interest in
this joint venture.
ADM-Riceland
Partnership, a joint venture between the Company
and Riceland Foods, Inc., is a processor of rice
and rice products for institutional and consumer
food customers. The Company has a 50% ownership
interest in this joint venture.
The Company owns a
48% interest in Heartland Rail Corporation.
Heartland's 81% owned affiliate, Iowa Interstate
Railroad, operates a regional railroad in Iowa
and Illinois.
The Company
participates in various joint ventures that
operate oilseed crushing facilities, oil
refineries and related storage facilities in
China and Indonesia.
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Item 1. BUSINESS--Continued
The percentage of net
sales and other operating income by classes of
products and services for the last three fiscal
years were as follows:
1997 1996 1995
---- ---- ----
Oilseed products 64% 61% 61%
Corn products 16 18 19
Wheat and other
milled products 12 13 11
Other products and services 8 8 9
---- ---- ----
100% 100% 100%
==== ==== ====
Methods of Distribution
Since the Company's customers are principally
other manufacturers and processors, its products
are distributed mainly in bulk from processing
plants or storage facilities directly to the
customers' facilities. The Company owns a large
number of trucks and trailers and owns or leases
large numbers of railroad tank cars and hopper
cars to augment those provided by the railroads.
The Company uses the inland waterway system and
functions as a contract carrier of commodities
for its own operations as well as for other
companies. The Company owns and leases
approximately 2,000 river barges and 27
line-haul towboats.
(ii) Status of new products
The Company continues
to expand its business through the development
and production of new, value-added products. The
Company has entered the vitamin market with the
production of riboflavin and vitamin E and is
currently expanding production facilities to
produce biotin and vitamin C. The Company
continues to develop its soy protein meat
substitutes, Harvest Burgers and Harvest Burgers
for Recipes, its soy protein powdered non-dairy
beverage, Nutribev, and its non-dairy frozen
dessert, Dairylike. Additionally, the Company is
developing and expanding production facilities to
produce emulsifiers, distilled monoglycerides,
astaxanthan and isoflavones.
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Item 1. BUSINESS--Continued
(iii) Source and availability of raw materials
Substantially all of
the Company's raw materials are agricultural
commodities. In any single year, the availability
and price of these commodities are subject to
wide fluctuations due to unpredictable factors
such as weather, plantings, government (domestic
and foreign) farm programs and policies, changes
in global demand created by population growth and
higher standards of living and worldwide
production of similar and competitive crops.
(iv) Patents, trademarks and licenses
The Company owns
several valuable patents, trademarks and licenses
but does not consider its business dependent upon
any single or group of patents, trademarks and
licenses.
(v) Extent to which business is seasonal
Since the Company is
so widely diversified in global agribusiness
markets, there are no material seasonal
fluctuations in the manufacture, sale and
distribution of its products and services. There
is a degree of seasonality in the growing season
and procurement of the Company's principal raw
materials: oilseeds, wheat, corn and other
grains. However, the actual physical movement of
the millions of bushels of these crops through
the Company's storage and processing facilities
is reasonably constant throughout the year. The
worldwide need for food is not seasonal and is
ever expanding as is the world's population.
(vi) Working capital items
Price variations and
availability of grain at harvest often cause wide
fluctuations in the Company's inventories and
short-term borrowings.
(vii) Dependence on single customer
No material part of
the Company's business is dependent upon a single
customer or very few customers.
(viii) Amount of backlog
Because of the nature
of the Company's business, the backlog of orders
at year end is not a significant indication of
the Company's activity for the current or
upcoming year.
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Item 1. BUSINESS--Continued
(ix) Business subject to renegotiation
The Company has no
business with the government that is subject to
renegotiation.
(x) Competitive conditions
Markets for the
Company's products are highly price competitive
and sensitive to product substitution. No single
company competes with the Company in all of its
markets; however, a number of large companies
compete in one or more markets. Major competitors
in one or more markets include, but are not
limited to, Cargill, Inc., ConAgra, Inc., CPC
International, Eridania Beghin-Say and Tate &
Lyle.
(xi) Research and development expenditures
Practically all of
the Company's technical efforts and expenditures
are concerned with food and feed ingredient
products. Special efforts are being made to find
improvements in food technology to alleviate the
protein malnutrition throughout the world,
utilizing the three largest United States crops:
corn, soybeans and wheat.
The need to
successfully market new or improved food and feed
ingredients developed in the Company's research
laboratories led to the concept of technical
support. The Company is staffed with technical
representatives who work closely with customers
and potential customers on the development of
food and feed products which incorporate Company-
produced ingredients. These technical
representatives are an adjunct to both the
research and sales functions.
The Company maintains
a research laboratory in Decatur, Illinois where
product and process development activities are
conducted. To develop new bioproducts and to
improve existing bioproducts, new cultures are
developed using classical mutation and genetic
engineering. Protein research is conducted at
facilities in Decatur where meat and dairy pilot
plants support application research. Research to
support sales and development for bakery products
is done at a laboratory in Olathe, Kansas.
Research to support sales and development for
cocoa and chocolate products is done in
Milwaukee, Wisconsin and the Netherlands.
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Item 1. BUSINESS--Continued
The amounts spent
during the three years ended June 30, 1997, 1996
and 1995 for such technical efforts were
approximately $12.2, $11.5 and $11.3 million,
respectively.
(xii)Material effects of
capital expenditures for environmental protection
During 1997, $21
million was spent for equipment, facilities and
programs for pollution control and compliance
with the requirements of various environmental
agencies.
There have been no
material effects upon the earnings and
competitive position of the Company resulting
from compliance with federal, state and local
laws or regulations enacted or adopted relating
to the protection of the environment.
The Company expects
that expenditures for environmental facilities
and programs will continue at approximately the
present rate with no unusual amounts anticipated
for the next two years.
(xiii) Number of employees
The number of persons
employed by the Company was 17,160 at June 30,
1997.
(d)Financial Information About Foreign and Domestic
Operations and Export Sales
The Company's foreign operations are principally
in developed countries and do not entail any undue
or unusual business risks. Geographic financial
information is set forth in "Note 10 of Notes to
Consolidated Financial Statements" of the annual
shareholders' report for the year ended June 30,
1997 and is incorporated herein by reference.
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Item 1. BUSINESS--Continued
(e) Executive Officers and Certain Significant
Employees
Name Title Age
G. Allen Andreas President and Chief Executive 54
Officer from 1997. Counsel to
the Executive Committee from
September 1994. Vice President
from 1988.
Michael D. Andreas Currently on a temporary 48
administrative leave from the
Company. Vice Chairman of the
Board
of Directors from October 1992 to
October 1996. Executive Vice
President from 1988 to October
1996.
Martin L. Andreas Senior Vice President from 1988.58
Assistant to the Chairman.
Charles P. Archer Treasurer from October 1992. 42
Assistant Treasurer from 1988
to 1992.
Lewis W. Batchelder Group Vice President from 52
July 1997. Senior Vice President
of ADM/Growmark. Various grain
merchandising positions since
1971.
Charles T. Bayless Executive Vice President from 62
July 1997. Group Vice President
from January 1993. Vice President
from 1992. President of ADM
Processing Division since 1980.
Howard E. Buoy Group Vice President from 70
January 1993. Vice President
of ADM Processing Division
from 1979.
William H. Camp Vice President from April 1993.48
Vice President of ADM Processing
Division from 1990 to 1993.
Mark J. Cheviron Vice President from July 1997.48
Vice President of Corporate
Security and Administrative
Services since May 1997. Director
of Security since 1980.
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Item 1. BUSINESS-Continued
Barrie R. Cox Vice President from January 1996.
50
President of ADM Food Additives
Division from 1994. Vice
President
of ADM Corn Processing Division
from 1990 to 1995.
Larry H. Cunningham Group Vice President and 53
President of ADM Corn Processing
Division from October 1996.
Vice President and President
of Protein Specialties
Division since July 1993.
Formerly President of
A. E. Staley Manufacturing Co.
Craig L. Hamlin Group Vice President from 51
October 1994. President of
ADM Milling from 1989.
Edward A. Harjehausen Vice President from October46
1992. Vice President of ADM
Corn Processing Division from
1988.
James C. Ielase Group Vice President since 56
July 1997. President of Golden
Peanut Company from April 1995
to June 1997. Private investments
from 1992 to April 1995.
Burnell D Kraft Senior Vice President from 66
July 1997. Group Vice President
from January 1993. Vice President
from 1984. President of
ADM/Growmark, Collingwood Grain
and Tabor Grain Co. subsidiaries.
Paul L. Krug, Jr. Vice President from 1991 and 53
President of ADM Investor
Services.
John E. Long Vice President from July 1996.68
President of ADM Research
Division from 1992. Various
senior research positions from
1975.
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Item 1. BUSINESS-Continued
Jack McDonald Vice President from October 1994.
65
President of Southern Cotton Oil
Division from 1990.
John D. McNamara Group Vice President and 49
President of North American
Oilseed Processing Division from
July 1997. President of ADM Agri-
Industries since 1992.
International merchandising
positions since 1984.
Steven R. Mills Controller from October 1994. 42
Various senior treasury and
accounting positions from 1979.
Paul B. Mulhollem Group Vice President from 48
July 1997. Vice President from
January 1996. Managing Director
of ADM International, Ltd., from
1993. International merchandising
positions since 1992.
Brian F. Peterson Vice President from January 1996.
55
President of ADM BioProducts
Division from 1995. Various
merchandising positions from
1980.
Raymond V. Preiksaitis Group Vice President from44
July 1997. Vice President -
Management Information Systems
from 1988.
John G. Reed Vice President from 1982. 67
Richard P. Reising Senior Vice President from July53
1997. Vice President, Secretary
and General Counsel from
1991 to 1997.
John D. Rice Vice President from 1993 and 43
President of ADM Food Oils
Division since December 1996.
Vice President of ADM Processing
Division from 1992.
Kenneth A. Robinson Vice President from January 1996.
50
Vice President of ADM Processing
Division from 1985.
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Item 1. BUSINESS-Continued
Douglas J. Schmalz Vice President and Chief 51
Financial Officer from 1986.
Controller from 1986 to 1994.
David J. Smith Vice President, Secretary and 42
General Counsel from July, 1997.
Assistant General Counsel from
1995. Assistant Secretary from
1988 to July 1997. Member of the
Law
Department since 1981.
Stephen H. Yu Vice President from January 1996.
37
Managing Director of ADM
Asia-Pacific, Ltd., from 1993.
Various merchandising positions
with Continental Grain Company
from 1986.
Officers of the registrant are
elected by the Board of Directors for terms of one
year and until their successors are duly elected and
qualified.
G. Allen Andreas and Martin L.
Andreas are nephews of Dwayne O. Andreas, a director
of the registrant. Michael D. Andreas is the son of
Dwayne O. Andreas. Charles P. Archer is the son of
S. M. Archer, Jr., a director of the registrant.
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Item 2. PROPERTIES
(a) Processing Facilities
The Company owns, leases, or has
a 50% or greater interest in the following
processing plants:
United Foreign Total
States
-------------------------
----
Owned 133 67 200
Leased 3 - 3
Joint Venture 54 21 75
---- ---- ----
190 88 278
=== === ===
The Company's operations are such that most products
are efficiently processed near the source of raw
materials. Consequently, the Company has many plants
located strategically in grain producing areas. The
annual volume processed will vary depending upon
availability of raw materials and demand for finished
products.
The Company operates thirty-seven domestic and nine
foreign oilseed crushing plants with a daily processing
capacity of approximately 84,000 metric tons. The
domestic plants are located in Alabama, Arkansas,
Georgia, Illinois, Indiana, Iowa, Kansas, Louisiana,
Minnesota, Missouri, Mississippi, Nebraska, North
Dakota, Ohio, South Carolina, Tennessee and Texas. The
foreign plants are located in Canada, England, Germany,
Mexico and the Netherlands.
The Company operates four wet corn milling and two dry
corn milling plants with a daily grind capacity of
approximately 1,600,000 bushels. These plants and other
related properties, including corn germ extraction,
corn gluten pellet, and alcohol bottling plants, are
located in Illinois, Iowa, New York, and North Dakota.
The Company also has interests, through joint ventures,
in corn milling plants in Mexico, Bulgaria, Hungary,
Slovakia, and Turkey.
The Company operates twenty-nine domestic wheat and
durum flour mills, a domestic bulgur plant, and
thirteen foreign flour mills with a total daily
capacity of approximately 408,000 cwt. of flour. The
Company also operates seven bakery mix and specialty
ingredient plants, three corn flour mills, two milo
mills, two pasta plants, and two starch and gluten
plants. These plants and other related properties are
strategically located across North and Central America
in California, Illinois, Indiana, Iowa, Kansas,
Louisiana, Minnesota, Missouri, Nebraska, New York,
North Carolina, Oklahoma, Oregon, Pennsylvania,
Tennessee, Texas, Washington, Wisconsin, Canada,
Barbados, Belize and Jamaica.
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Item 2. PROPERTIES
The Company also has an interest, through a joint
venture, in rice milling plants in Arkansas and
Louisiana.
The Company operates eleven domestic oilseed refineries
in Georgia, Illinois, Indiana, Iowa, Nebraska,
Tennessee and Texas as well as eight foreign refineries
in Canada, England, Germany, and the Netherlands. The
Company also has an interest, through a joint venture,
in an oilseed refinery in Texas. The Company produces
packaged oils in California, Georgia, Illinois and
Germany. The Company also has an interest, through a
joint venture, in a packaged oils plant in England. Soy
protein specialty products are produced in Illinois and
the Netherlands, lecithin products are produced in
Illinois, Iowa, Nebraska, Canada, Germany and the
Netherlands, and Vitamin E is produced in Illinois.
Cotton linter pulp is produced in Tennessee and
cottonseed flour is produced in Texas.
The Company produces feed and food additives at seven
bioproducts plants located in Illinois, North Carolina,
and Ireland. The Company also operates formula feed and
animal health and nutrition plants in Georgia,
Illinois, Iowa, Minnesota, Ohio, Texas, Washington,
Canada, Ireland, Barbados, Belize, China and Puerto
Rico. The Company also has an interest, through a joint
venture, in formula feed and pet food plants in
Alabama, Arkansas, Georgia, Illinois, Iowa, Indiana,
Kansas, Kentucky, Michigan, Minnesota, Missouri,
Nebraska, Ohio, Pennsylvania, Tennessee, Wisconsin,
Canada, Puerto Rico and Trinidad.
The Company operates three domestic and seven foreign
chocolate and cocoa bean processing plants located in
Massachusetts, North Carolina, Wisconsin, Canada,
China, France, Germany, the Netherlands and Singapore.
The Company operates five North American barley malting
plants located in Illinois, Minnesota, Wisconsin and
Canada.
The Company operates various other food ingredient
plants in England, France and Germany.
16
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Item 2. PROPERTIES--Continued
(b) Procurement Facilities
The Company operates one hundred ninety domestic
terminal, country and river elevators covering the
major grain producing states, including one hundred
twenty-eight country elevators and sixty-two terminal
and river loading facilities including three grain
export elevators in Louisiana. Elevators are located in
Colorado, Georgia, Illinois, Indiana, Iowa, Kansas,
Louisiana, Minnesota, Missouri, Montana, Nebraska,
North Carolina, North Dakota, Oklahoma, South Carolina,
Tennessee, and Texas. Domestic grain terminals,
elevators and processing plants have an aggregate
storage capacity of approximately 401,000,000 bushels.
The Company also has an interest, through a joint
venture, in fourteen grain terminals and elevators
located in Indiana, Kentucky, Maryland, Michigan, and
Ohio with an aggregate storage capacity of
approximately 58,000,000 bushels. The Company also
operates forty-six foreign grain elevators in Barbados,
Brazil, Canada, Ireland and Germany. Thirteen cotton
gins are located in Texas and serve the cottonseed
crushing plants in that area.
Item 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
In 1993, the State of Illinois Environmental Protection
Agency ("IEPA") brought administrative enforcement
proceedings arising out of the Company's alleged
failure to obtain permits for certain pollution control
equipment at certain of the Company's processing
facilities in Illinois. The Company and IEPA have
executed a settlement agreement with respect to one of
these proceedings. That agreement is currently before
the Illinois Pollution Control Board for approval. The
Company believes it has meritorious defenses to the
remaining proceeding. In management's opinion this
settlement and the remaining proceeding will not either
individually or in the aggregate, have a material
adverse effect on the Company's financial condition or
results of operations.
The Company is involved in approximately 35
administrative and judicial proceedings in which it has
been identified as a potentially responsible party
(PRP) under the federal Superfund law and its state
analogs for the study and clean-up of sites
contaminated by material discharged into the
environment. In all of these matters, there are
numerous PRPs. Due to various factors such as the
required level of remediation and participation in the
clean-up effort by others, the Company's future clean-
up costs at these sites cannot be reasonably estimated.
However, in management's opinion these proceedings will
not, either individually or in the aggregate, have a
material adverse effect on the Company's financial
condition or results of operations.
17
PAGE 18
LITIGATION REGARDING ALLEGED ANTICOMPETITIVE PRACTICES
The Company and certain of its current and former
officers and directors are currently defendants in
various lawsuits related to alleged anticompetitive
practices by the Company as described in more detail
below. The Company and the individual defendants named
in these actions intend to vigorously defend the
actions unless they can be settled on terms deemed
acceptable to the parties. The Company has paid and
intends to continue to pay the legal expenses of its
current and former officers and directors and to
indemnify these persons with respect to these actions
in accordance with Article X of the Bylaws of the
Company.
GOVERNMENTAL INVESTIGATIONS
Federal grand juries in the Northern Districts of
Illinois, California and Georgia, under the direction
of the United States Department of Justice ("DOJ"),
have been investigating possible violations by the
Company and others with respect to the sale of lysine,
citric acid and high fructose corn syrup, respectively.
In connection with an agreement with the DOJ, the
Company has paid the United States a fine of $100
million. This agreement constitutes a global resolution
of all matters between the DOJ and the Company
and brought to a close all DOJ investigations of the
Company.
The Company received notice that certain foreign
governmental entities were commencing investigations to
determine whether anticompetitive practices occurred in
their jurisdictions. In February 1997, the Company's
three Mexican subsidiaries were notified that the
Mexican Federal Competition Commission commenced an
investigation as to whether the Company's marketing and
sale of lysine in Mexico resulted in violations of that
country's federal antitrust laws. In June 1997, the
Company and several of its European subsidiaries were
notified that the Commission of the European
Communities initiated an investigation as to their
possible anticompetitive practices in the amino acid
markets, in particular the lysine market, in the
European Union. In September 1997, the Company received
a request for information from the Commission of the
European Communities with respect to an investigation
being conducted by that Commission into the possible
existence of certain agreements and/or concerted
practices in the citric acid market within the European
Union. Each of these investigations is in the early
stages and, accordingly, their ultimate outcome and
materiality cannot presently be determined.
HIGH FRUCTOSE CORN SYRUP ACTIONS
The Company, along with other companies, has been named
as a defendant in thirty antitrust suits involving the
sale of high fructose corn syrup. Twenty-nine of these
actions have been brought as putative class actions.
18
PAGE 19
FEDERAL ACTIONS. Twenty-two of these putative class
actions allege violations of federal antitrust laws,
including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels
the prices of high fructose corn syrup, and seek
injunctions against continued alleged illegal conduct,
treble damages of an unspecified amount, attorneys fees
and costs, and other unspecified relief. The putative
classes in these cases comprise certain direct
purchasers of high fructose corn syrup during certain
periods in the 1990s. These twenty-two actions have
been transferred to the United States District Court
for the Central District of Illinois and consolidated
under the caption In Re High Fructose Corn Syrup
Antitrust Litigation, MDL No. 1087 and Master File No.
95-1477. The parties are in the midst of discovery in
this action.
On January 14, 1997, the Company, along with other
companies, was named a defendant in a non-class action
antitrust suit involving the sale of high fructose corn
syrup and corn syrup. This action which is encaptioned
Gray & Co. v. Archer Daniels Midland Co., et al, No. 97-
69-AS and was filed in federal court in Oregon, alleges
violations of federal antitrust laws and Oregon and
Michigan state antitrust laws, including allegations
that defendants conspired to fix, raise, maintain and
stabilize the price of corn syrup and
high fructose corn syrup, and seeks treble damages,
attorneys' fees and costs of an unspecified amount. The
parties are in the midst of discovery in this action.
STATE ACTIONS. The Company, along with other companies,
also has been named as a defendant in six putative
class action antitrust suits filed in California state
court involving the sale of high fructose corn syrup.
These California actions allege violations of the
California antitrust and unfair competition laws,
including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels
the prices of high fructose corn syrup, and seek treble
damages of an unspecified amount, attorneys fees and
costs, restitution and other unspecified relief. One of
the California putative classes comprises certain
direct purchasers of high fructose corn syrup in the
State of California during certain periods in the
1990s. This action was filed on October 17, 1995 in
Superior Court for the County of Stanislaus, California
and encaptioned Kagome Foods, Inc. v Archer-Daniels-
Midland Co. et al., Civil Action No. 37236. This action
has been removed to federal court and consolidated with
the federal class action litigation pending in the
Central District of Illinois referred to above. The
other five California putative classes comprise certain
indirect purchasers of high fructose corn syrup and
dextrose in the State of California during certain
periods in the 1990s. One such action was filed on July
21, 1995 in the Superior Court of the County of Los
Angeles, California and is encaptioned Borgeson v.
Archer-Daniels-Midland Co., et al., Civil Action No.
BC131940. This action and the other four indirect
purchases actions have been coordinated before a single
court in Stanislaus County, California under the
caption, Food Additives (HFCS) cases, Master File No.
39693. The other four actions are encaptioned, Goings
v. Archer Daniels Midland Co., et al., Civil Action No.
750276 (Filed on July 21, 1995, Orange County Superior
Court); Rainbow Acres v. Archer Daniels Midland Co., et
al., Civil Action No. 974271 (Filed on November 22,
1995, San Francisco County Superior Court); Patane v.
Archer Daniels Midland Co., et al., Civil Action No.
212610 (Filed on January 17, 1996, Sonoma County
Superior Court); and St. Stan's Brewing Co. v. Archer
Daniels Midland Co., et al., Civil Action No. 37237
(Filed on October 17, 1995, Stanislaus County Superior
Court). The parties are in the midst of discovery in
this action.
The Company, along with other companies, also has been
named a defendant in a putative class action antitrust
suit filed in Alabama state court. The Alabama action
alleges violations of the Alabama, Michigan and
Minnesota antitrust laws, including allegations that
defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose
corn syrup, and seeks an injunction against continued
illegal conduct, damages of an unspecified amount,
attorneys fees and costs, and other unspecified relief.
The putative class in the Alabama action
comprises certain indirect purchasers in Alabama,
Michigan and Minnesota during the period March 18, 1994
to March 18, 1996. This action was filed on March 18,
1996 in the Circuit Court of Coosa County, Alabama, and
is encaptioned Caldwell v. Archer-Daniels-Midland Co.,
et al., Civil Action No. 96-17. On April 23, 1997, the
court granted the defendants' motion to sever and
dismiss
the non-Alabama claims. The remaining parties are in
the midst of discovery in this action.
LYSINE ACTIONS
The Company, along with other companies, had been named
as a defendant in twenty-one putative class action
antitrust suits involving the sale of lysine. Except
for several plaintiffs that opted out of the federal
class action settlement and the actions specifically
described below, all such suits have been settled,
dismissed or withdrawn.
19
PAGE 20
STATE ACTIONS. The Company has been named as a
defendant, along with other companies, in two putative
class action antitrust suits and one non-class action
suit filed in Alabama state court, one putative class
action antitrust suit filed in Tennessee state court
and one putative class action antitrust suit filed in
Michigan state court involving the sale of lysine. The
two putative Alabama class actions allege violations of
the Alabama antitrust laws, including allegations that
the defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of lysine, and seek
an injunction against continued alleged illegal
conduct, damages of an unspecified amount, attorneys
fees and costs, and other unspecified relief. The two
putative classes in the Alabama actions comprise
certain indirect purchasers of lysine in the State of
Alabama during certain periods in the 1990s. One such
action was filed on August 17, 1995 in the Circuit
Court of DeKalb County, Alabama, and is encaptioned
Ashley v. Archer-Daniels-Midland Co., et al., Civil
Action No. 95-336. The parties are in the midst of
discovery in this action. The other Alabama action,
encaptioned Bailey v. Archer Daniels Midland Co., et
al., Civil Action No. 95-165, and filed on December 11,
1995 in the Circuit Court of Tallapoosa County, has
been placed on the court's administrative docket
pending the outcome of the Ashley action. The non-class
action, encaptioned Kent v. Archer Daniels Midland Co.,
et al, No. CV 9701108, and filed on February 21, 1997
in the Circuit Court of Jefferson County, Alabama,
includes allegations that are similar to these
contained in the putative class actions and seeks
monetary relief in the amount of $670,000, injunctive
relief against alleged illegal conduct, attorneys fees
and costs, punitive damages and other unspecified
relief. The Tennessee action, encaptioned McCormack
Farms v. Archer Daniels Midland Co., et al., Civil
Action No. 96C-2190, and filed on June 11, 1996 in
Davidson County Circuit Court, alleges a restraint of
trade in violation of the Tennessee Trade Practices Act
and Tennessee Consumer Protection Act. This action
includes
allegations that defendants conspired to fix, maintain
or stabilize the prices of lysine and seeks an
injunction against continued illegal conduct, treble
damages of an unspecified amount, attorneys' fees and
costs, and other unspecified relief. The putative class
in this case comprises certain indirect purchasers of
lysine within the State of Tennessee during the period
June 10, 1992 through June 10, 1996. The Company has
not yet filed a responsive pleading. The Michigan
action alleges a restraint of trade in violation of the
Michigan Antitrust Reform Act and include allegations
that defendants conspired to fix, raise, maintain and
stabilize the price of lysine and seeks an injunction
against continued illegal conduct, treble damages of an
unspecified amount, attorneys' fees and costs, and
other unspecified relief. The putative class in this
case comprises certain indirect purchasers of lysine
within the State of Michigan during certain periods in
the 1990s. This action, encaptioned Michigan Pork
Producers Assn, et al. v. Archer Daniels Midland Co.,
et al., No. 906-10696-CZ, was filed on September 25,
1996 in Kent County Circuit Court. The Company has not
yet filed a responsive pleading in either action.
CITRIC ACID ACTIONS
The Company, along with other companies, had been named
as a defendant in eleven putative class action
antitrust suits and two non-class action antitrust
suits involving the sale of citric acid. Except for
several plaintiffs that opted out of the federal class
action settlement and the actions specifically
described below, all such suits have been settled or
dismissed.
FEDERAL ACTIONS. Seven of these actions alleged
violations of federal antitrust laws, including
allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of citric acid, and sought injunctions against
continued alleged illegal conduct, treble damages of an
unspecified amount, attorneys fees and costs, and other
unspecified relief. The putative classes in these cases
comprise certain direct purchasers of citric acid for
certain periods in the 1990s. These six actions were
transferred to the United States District Court for the
Northern District of California and consolidated as In
Re Citric Acid Antitrust Litigation, MDL No. 1092,
Master File No. C-95-2963(FMS). On September 27, 1996
the Company entered into an agreement with counsel for
the plaintiff class in this consolidated action in
which among other things, the Company agreed to pay $35
million to members of the class, without admitting the
alleged violations of law. On March 3, 1997, the court
preliminarily approved the settlement and final
approval was granted on July 23, 1997. On February 4,
1997, a class action complaint, encaptioned Galavan
Supplements Ltd. v. Archer Daniels Midland Co., et al.,
No. 97-0704 JGD (VAPx), was filed in the United States
District Court for the Central District of California.
The Company, along with other companies, was named a
defendant in this putative class
action brought on behalf of a class consisting of all
persons and entities outside of the United States who
purchased citric acid directly from any defendants
through their foreign facilities during the time period
July 1, 1991 through June 30, 1995. This action alleges
violations of the federal antitrust laws, including
allegations that the defendants conspired to fix,
maintain and stabilize the price of citric acid and to
allocate amongst themselves their major citric acid
customers, accounts and market shares on a worldwide
basis. The Company, along with other defendants, has
moved to dismiss this action. The Company, along with
other companies, also has been named as a defendant in
two non-class action federal antitrust suits involving
the sale of citric acid. One action was filed on June
9, 1997 in the United States District Court for the
Northern District of California and is encaptioned The
Proctor & Gamble Manufacturing Co., et al. v. Archer-
Daniels-Midland Company, et al., Civil Action No. 97-
2155 (VRW). The other action was filed on June 26, 1997
in the United States District Court for the Northern
District of California and is encaptioned Conopco,
Inc., et al. v. Archer-Daniels-Midland Company, et al.,
Civil Action No. 97-2407 (MMC). Both actions
20
PAGE 21
allege violations of federal antitrust laws, including
allegations that defendants agreed to fix, raise and
maintain the price of citric acid, and seek an
injunction against continued alleged illegal conduct,
treble damages of an unspecified amount, attorney's
fees and costs, and other unspecified relief. These
actions, which have been brought by entities that opted
out of the federal class action, have been coordinated
with In Re Citric Acid Antitrust Litigation that also
is pending in the United States District Court for the
Northern District of California. The Company and the
plaintiffs in Conopco have reached a tentative
settlement agreement which provides for consideration
to be paid by the Company in the form of cash and
product in amounts not deemed material. The parties are
in the midst of discovery in the remaining action.
STATE ACTIONS. The Company, along with other companies,
also has been named as a defendant in one putative
class action antitrust suit filed in Alabama state
court involving the sale of citric acid. This action
alleges violations of the Alabama antitrust laws,
including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels
the prices of citric acid, and seeks an injunction
against continued alleged illegal conduct, damages of
an unspecified amount, attorneys fees and costs, and
other unspecified relief. The putative class in the
Alabama action comprises certain indirect purchasers of
citric acid in the State of Alabama from July 1993
until July 1995. This action was filed on July 27, 1995
in the Circuit Court of Walker County, Alabama and is
encaptioned Seven Up Bottling Co. of Jasper, Inc. v.
Archer-Daniels-Midland Co., et al., Civil Action No. 95-
436. The Company currently is seeking appellate review
of the denial of its motion to dismiss this action. The
Company, along with other companies, also has been
named as a defendant in
two putative class action antitrust suits filed in
California state court involving the sale of citric
acid. These actions allege violations of the California
antitrust and unfair competition laws, including
allegations that the defendants
conspired to fix, maintain or stabilize the price of
citric acid, and seek injunctions against continued
illegal conduct, treble damages of an unspecified
amount, attorneys fees and costs, and other unspecified
relief. The putative classes in these cases comprise
certain indirect purchasers of citric acid within the
State of California during certain periods in the
1990s. One such action was filed on June 12, 1996 in
the Superior Court of the County of San Francisco,
California and is encaptioned Bianco v. Archer Daniels
Midland Co., et al., Civil Action No. 978912. The
second action was filed on June 28, 1996 in San
Francisco County Superior Court and is encaptioned
Wignall v. Archer Daniels Midland Co., et al., Civil
Action No. 979360. These actions recently have been
coordinated before a single court in San Francisco,
County, California under the caption, Food Additives
(Lysine/Citric Acid) cases, Coordination Proceeding No.
3265. The Company, along with other companies, also has
been named as a defendant in one putative class action
antitrust suit filed in Wisconsin state court involving
the sale of citric acid. This action alleges violations
of the laws of Wisconsin, Minnesota, Alabama, Arizona,
California, District of Columbia, Florida, Tennessee,
West Virginia, Mississippi, New Mexico, North Carolina,
South Dakota, North Dakota, Kansas, Louisiana, Michigan
and Maine, including allegations that defendants
conspired to maintain the price of citric acid at
artificially high levels and seeks injunctive relief,
treble damages of an unspecified amount, attorneys fees
and costs and other unspecified relief. The putative
class in this case comprises certain indirect
purchasers of citric acid in the above referenced
states during the period July 1, 1991 through June 27,
1995. This action was filed on December 20, 1996 in the
Circuit Court for Milwaukee County, Wisconsin and is
encaptioned Raz, et al. v. Archer-Daniels-Midland Co.,
et al., No. 96-CV-9729. The Company has moved to
dismiss this action and that motion is set for hearing
in October, 1997.
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID STATE CLASS
ACTIONS
The Company, along with other companies, has been named
as a defendant in six putative class action antitrust
suits involving the sale of both high fructose corn
syrup and citric acid. Two of these actions allege
violations of the California antitrust and unfair
competition laws, including allegations that the
defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose
corn syrup and citric acid, and seek treble damages of
an unspecified amount, attorneys fees and costs,
restitution and other unspecified relief. The putative
class in one of these California cases comprises
certain direct purchasers of high fructose corn syrup
and citric acid in the State of
California during the period January 1, 1992 until at
least October 1995. This action was filed on October
11, 1995 in the Superior Court of Stanislaus County,
California and is entitled Gangi Bros. Packing Co. v.
Archer-Daniels-Midland Co., et al., Civil Action No.
37217. The putative class in the other California
case comprises certain indirect purchasers of high
fructose corn syrup and citric acid in the state of
California during the period October 12, 1991 until
November 20, 1995. This action was filed on November
20, 1995 in the Superior Court of San Francisco County
and is encaptioned MCFH, Inc. v. Archer-Daniels-Midland
Co., et al., Civil Action No. 974120. The California
Judicial Council has bifurcated the citric acid and
high fructose corn syrup claims in these actions and
coordinated them with other actions in San Francisco
County Superior Court and Stanislaus County Superior
Court. The Company, along with other companies, also
has been named as a defendant in at least one putative
class action antitrust suit filed in West Virginia
state court involving the sale of high fructose corn
syrup and citric acid. This action also alleges
violations of the West Virginia antitrust laws,
including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels
the prices of high fructose corn syrup and citric acid,
and seeks treble damages of an unspecified amount,
attorneys fees and costs, and other unspecified relief.
The putative class in the West Virginia action
comprises certain entities within the State of West
Virginia that purchased products containing high
fructose corn syrup and/or citric acid for resale from
at least 1992 until 1994. This action was filed on
October 26, 1995, in the Circuit Court for Boone
County, West Virginia, and is encaptioned Freda's v.
Archer-Daniels-Midland Co., et al., Civil Action No. 95-
C-125. The parties are in the midst of discovery in
this action. The Company, along with other companies,
also has been named as defendant in a putative class
action antitrust suit filed in Michigan state court
involving the sale of high fructose corn syrup and
citric acid. This action alleges violations of the
Michigan antitrust laws, including allegations that the
defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose
corn syrup and citric acid, and seeks treble damages of
an unspecified amount, attorneys fees and costs, and
other unspecified relief. The putative class in the
Michigan action comprises certain persons within the
State of Michigan that purchased products containing
high fructose corn syrup and/or citric acid during the
period January 1993 through June 27, 1995. This action
was filed on February 26, 1996 in the Circuit Court for
Ingham County, Michigan, and is encaptioned Wilcox v.
Archer-Daniels-Midland Co., et al., Civil Action No. 96-
82473-CP. The parties are in the midst of discovery in
this action. The Company, along with other companies,
also has been named as a defendant in a putative class
action antitrust suit filed in the Superior Court for
the District of Columbia involving the sale of high
fructose corn syrup and citric acid. This action
alleges violations of the District of Columbia
antitrust laws, including allegations that the
defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose
corn syrup and citric acid, and seeks treble damages of
an unspecified amount, attorneys fees and costs, and
other unspecified relief. The putative class in the
District of Columbia action comprises certain persons
within the District of Columbia that purchased products
containing high fructose corn syrup and/or citric acid
during the period January 1, 1992 through December 31,
1994. This action was filed on April 12, 1996 in the
Superior Court for the District of Columbia, and is
encaptioned Holder v. Archer-Daniels-Midland Co., et
al., Civil Action No. 96-2975. The parties are in the
midst of discovery in this action. The Company, along
with other companies, has been named as a defendant in
a putative class action antitrust suit filed in Kansas
state court involving the sale of high fructose corn
syrup and citric acid. This action alleges violations
of the Kansas antitrust laws, including allegations
that the defendants agreed to fix, stabilize and
maintain at artificially high levels the prices of high
fructose corn syrup and citric acid, and seeks treble
damages of an unspecified amount, court costs and other
unspecified relief. The putative class in the Kansas
action comprises certain persons within the State of
Kansas that purchased products containing high fructose
corn syrup and/or citric acid during at least the
period January 1, 1992 through December 31, 1994. This
action was filed on May 7, 1996 in the District Court
of Wyandotte County, Kansas and is encaptioned Waugh v.
Archer-Daniels-Midland Co., et al., Case No. 96-C-2029.
The parties are in the midst of discovery in this
action.
21
PAGE 22
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID/LYSINE STATE CLASS
ACTIONS
The Company, along with other companies, has been named
as a defendant in six putative class action antitrust
suits filed in California state court involving the
sale of high fructose corn syrup, citric acid and/or
lysine. These actions allege violations of the
California antitrust and unfair competition laws,
including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels
the prices of high fructose corn syrup, citric acid
and/or lysine, and seek treble damages of an
unspecified amount, attorneys fees and costs,
restitution and other unspecified relief. One of the
putative classes comprises certain direct purchasers of
high fructose corn syrup, citric acid and/or lysine in
the State of California during a certain period in the
1990s. This action was filed on December 18, 1995 in
the Superior Court for Stanislaus County, California
and is encaptioned Nu Laid Foods, Inc. v. Archer-
Daniels-Midland Co., et al., Civil Action No. 39693.
The other five putative classes comprise certain
indirect purchasers of high fructose corn syrup, citric
acid and/or lysine in the State of California during
certain periods in the 1990s. One such action was filed
on
December 14, 1995 in the Superior Court for Stanislaus
County, California and is encaptioned Batson v. Archer-
Daniels-Midland Co., et al., Civil Action No. 39680.
The other actions are encaptioned Nu Laid Foods, Inc.
v. Archer Daniels Midland Co., et al., No 39693 (Filed
on December 18, 1995 Stanislaus County Superior Court);
Abbott v. Archer Daniels Midland Co., et al., No. 41014
(Filed on December 21, 1995, Stanislaus County Superior
Court); Noldin v. Archer Daniels Midland Co., et al.,
No. 41015 (Filed on December 21, 1995, Stanislaus
County Superior Court); Guzman v. Archer Daniels
Midland Co., et al., No. 41013 (Filed on December 21,
1995, Stanislaus County Superior Court) and Ricci v.
Archer Daniels Midland Co., et al., No. 96-AS-00383
(Filed on February 6, 1996, Sacramento County Superior
Court). As noted above, the plaintiffs in these actions
and the lysine defendants have executed a settlement
agreement that has been approved by the court and the
California Judicial Council has bifurcated the citric
acid and high fructose corn syrup claims and
coordinated them with other actions in San Francisco
County Superior Court and Stanislaus County Superior
Court.
SHAREHOLDER DERIVATIVE ACTIONS
Following the public announcement of the grand
jury investigations in June 1995 discussed above, three
shareholder derivative suits were filed against certain
of the Company's then current directors and executive
officers and nominally against the Company in the
United States District Court for the Northern District
of Illinois and fourteen similar shareholder derivative
suits were filed in the Delaware Court of Chancery. The
derivative suits filed in federal court in Illinois
were consolidated under the name Felzen, et al. v.
Andreas, et al., Civil Action No. 95-C-4006, 95-C-4535,
and a consolidated amended derivative complaint was
filed on September 29, 1995. This complaint names all
then current directors of the Company (except Mr. Coan)
and one former director as defendants and names the
Company as a nominal defendant. It alleges breach of
fiduciary duty, waste of corporate assets, abuse of
control and gross mismanagement, based on the antitrust
allegations described above, as well as other alleged
wrongdoing. On October 31, 1995, the Court granted the
defendants' motion to transfer the Illinois
consolidated derivative action to the Central District
of Illinois, wherein it now bears the case number 95-
2279. On April 26, 1996, the court dismissed the suit
without prejudice and permitted the plaintiffs twenty-
one days to refile it. The plaintiffs refiled the
complaint on May 17, 1996. The defendants again moved
to dismiss the complaint on June 1, 1996. Plaintiffs
have supplemented the complaint to include the
antitrust settlements and guilty plea described above.
The fourteen shareholder derivative suits filed in the
Delaware Court of Chancery have been consolidated as In
Re Archer Daniels Midland Derivative Litigation,
Consolidated No. 14403. An amended and consolidated
complaint was filed on November 19, 1996. ADM moved to
dismiss the complaint on December 12, 1996. On May 29,
1997, the Company executed a Memorandum of
Understanding with counsel for both the Illinois and
Delaware shareholder derivative plaintiffs. This
Memorandum of Understanding provides for, among other
things, $8 million to be paid by or on behalf of
certain defendants in these actions to the Company and
certain changes in the structure and policies of the
Company's Board of Directors. On May 30, 1997, the
United States District Court for the Central District
of Illinois preliminarily approved this settlement and
on July 7, 1997 final approval was granted. Certain
entities appealed the final settlement approval order
to the United States Court of Appeals for the Seventh
Circuit and that appeal is pending. Provided the order
approving the Memorandum of Understanding is affirmed,
the parties have agreed to jointly seek dismissal of
the Delaware actions with prejudice.
DELAWARE STATE LAW/FEDERAL SECURITIES LAWS ACTIONS
The Company and certain of its current and former
directors also have been named as defendants in a
putative class action suit encaptioned Loudon v. Archer-
Daniels-Midland Co., et al., Civil Action No. 14638,
filed in the Delaware Court of Chancery on October 20,
1995. This action alleges violations of Delaware state
law and seeks invalidation of the 1995 election of the
Company's directors on the basis of alleged omissions
from the proxy statement issued by the Company prior to
its October 19, 1995 annual meeting of shareholders.
The Delaware Court of Chancery dismissed this action on
February 20, 1996. On September 17, 1997, the Supreme
Court of Delaware affirmed the lower court's judgment
and remanded the case to provide the plaintiff's an
opportunity to replead.
22
PAGE 23
OTHER
As described in the notes to the consolidated financial
statements and management's discussion of operations
and financial condition, the Company has made
provisions to cover assessed fines, litigation
settlements and related costs and expenses described
above. However, because of the early stage of other
putative class actions and proceedings described above,
including those related to high fructose corn syrup,
the ultimate outcome and materiality of these matters
cannot presently be determined. Accordingly, no
provision for any liability that may result therefrom
has been made in the consolidated financial statements.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information responsive to this Item is set forth in
"Common Stock Market Prices and Dividends" of the
annual shareholders' report for the year ended June 30,
1997 and is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
Information responsive to this Item is set forth in the
"Ten-Year Summary of Operating, Financial and Other
Data" of the annual shareholders' report for the year
ended June 30, 1997 and is incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information responsive to this Item is set forth in
"Management's Discussion of Operations and Financial
Condition" of the annual shareholders' report for the
year ended June 30, 1997 and is incorporated herein by
reference.
Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Information responsive to this Item is set forth in
"Management's Discussion of Operations and Financial
Condition" of the annual shareholders' report for the
year ended June 30, 1997 and is incorporated herein by
reference.
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PAGE 24
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and supplementary
data included in the annual shareholders' report for
the year ended June 30, 1997 are incorporated herein by
reference:
Consolidated balance sheets--June 30, 1997 and 1996
Consolidated statements of earnings--Years ended
June 30, 1997, 1996 and 1995
Consolidated statements of shareholders' equity--Years
ended
June 30, 1997, 1996 and 1995
Consolidated statements of cash flows--Years ended
June 30, 1997, 1996 and 1995
Notes to consolidated financial statements--June 30,
1997
Summary of Significant Accounting Policies
Report of Independent Auditors
Quarterly Financial Data (Unaudited)
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to directors and executive
officers is set forth in "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting
Compliance" of the definitive proxy statement for 1997
and is incorporated herein by reference. Certain
information with respect to executive officers is
included in Item 1(e) of this report.
Item 11. EXECUTIVE COMPENSATION
Information responsive to this Item is set forth in
"Executive Compensation" and "Compensation and Stock
Option Committee Report" of the definitive proxy
statement for 1997 and is incorporated herein by
reference.
Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information responsive to this Item is set forth in
"Principal Holders of Voting Securities" of the
definitive proxy statement for 1997 and is incorporated
herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information responsive to this Item is set forth in
"Certain Relationships and Related Transactions" of the
definitive proxy statement for 1997 and is incorporated
herein by reference.
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PAGE 25
PART IV
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) The following consolidated
financial statements and other financial data of
the registrant and its subsidiaries, included in
the annual report of the registrant to its
shareholders for the year ended June 30, 1997, are
incorporated by reference in Item 8, and are also
incorporated herein by reference:
Consolidated balance sheets--June 30, 1997 and 1996
Consolidated statements of earnings--Years ended
June 30, 1997, 1996 and 1995
Consolidated statements of shareholders' equity--
Years ended June 30, 1997, 1996 and 1995
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
--Continued
Consolidated statements of cash flows--Years ended
June 30, 1997, 1996 and 1995
Notes to consolidated financial
statements--June 30,
1997
Summary of Significant Accounting Policies
Quarterly Financial Data (Unaudited)
(a)(2) Schedules are not applicable and
therefore not included in this report.
Financial statements of affiliates accounted for
by the equity method have been omitted because
they do not, considered individually, constitute
significant subsidiaries.
(a)(3) LIST OF EXHIBITS
(3)
Composite Certificate of Incorporation and Bylaws
filed on November 7, 1986 as Exhibits 3(a) and
3(b), respectively, to Post Effective Amendment
No. 1 to Registration Statement on Form S-3,
Registration No. 33-6721, are incorporated herein
by reference.
(4)
Instruments defining the rights of security
holders, including:
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PAGE 26
(i)Indenture dated May 15, 1981, between the r
egistrant and Morgan Guaranty Trust Company of
New York, as Trustee (incorporated by reference
to Exhibit 4(b) to Amendment No. 1 to
Registration Statement No. 2-71862), relating
to the $250,000,000 - 7% Debentures due May 15,
2011;
(ii)Indenture dated May 1, 1982, between the r
egistrant and Morgan Guaranty Trust Company of
New York, as Trustee (incorporated by reference
to Exhibit 4(c) to Registration Statement No. 2-
77368), relating to the $400,000,000 Zero
Coupon Debentures due May 1, 2002;
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
--Continued
(iii)Indenture dated as of March 1, 1984 betwe
en the registrant and Chemical Bank, as Trustee
(incorporated by reference to Exhibit 4 to the
registrant's Current Report on Form 8-K dated
August 3, 1984 (File No. 1-44)), as
supplemented by the Supplemental Indenture
dated as of January 9, 1986, between the
registrant and Chemical Bank, as Trustee
(incorporated by reference to Exhibit 4 to the
registrant's Current Report on Form 8-K dated
January 9, 1986 (File No. 1-44)), relating to
the $100,000,000 - 10 1/4% Debentures due
January 15, 2006;
(iv)Indenture dated June 1, 1986 between the r
egistrant and Chemical Bank, (as successor to
Manufacturers Hanover Trust Company), as
Trustee (incorporated by reference to Exhibit
4(a) to Registration Statement No. 33-6721),
and Supplemental Indenture dated as of August
1, 1989 between the registrant and Chemical
Bank (as successor to Manufacturers Hanover
Trust Company), as Trustee (incorporated by
reference to Exhibit 4(c) to Post-Effective
Amendment No. 3 to Registration Statement No.
33-6721), relating to the $300,000,000 - 8 7/8%
Debentures due April 15, 2011, the
$300,000,000 - 8 3/8%
Debentures due April 15, 2017, the
$300,000,000 - 8 1/8%
Debentures due June 1, 2012, the $250,000,000
- 6 1/4%
Notes due May 15, 2003, the $250,000,000 - 7
1/8%
Debentures due March 1, 2013, and the
$350,000,000 -
7 1/2% Debentures due March 15, 2027.
Copies of constituent instruments defining
rights of holders of long-term debt of the
Company and Subsidiaries, other than the
Indentures specified herein, are not filed
herewith, pursuant to Instruction (b)(4)
(iii)(A) to Item 601 of Regulation S-K, because
the total amount of securities authorized under
any such instrument does not exceed 10% of the
total assets of the Company and Subsidiaries on
a consolidated basis. The registrant hereby
agrees that it will, upon request by the
Commission, furnish to the Commission a copy of
each such instrument.
(10)
Material Contracts--Copies of the Company's stock
option plans and its savings and investment
plans, pursuant to Instruction (10)(iii)(A) to
Item 601 of Regulation S-K, are incorporated
herein by reference as follows:
(i)Registration Statement No. 2-91811 on Form S
-8 dated June 22, 1984 (definitive Prospectus
dated July 16, 1984) relating to the Archer
Daniels Midland 1982 Incentive Stock Option
Plan.
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PAGE 27
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
--Continued
(ii)Registration Statement No. 33-49409 on Form
S-8 dated March 15, 1993 relating to the Archer
Daniels Midland 1991 Incentive Stock Option
Plan and Archer Daniels Midland Company Savings
and Investment Plan.
(iii)Registration Statement No. 33-58387 on For
m S-8 dated April 3, 1995 relating to the ADM
Savings and Investment Plan for Salaried
Employees and the ADM Savings and Investment
Plan for Hourly Employees.
(13)Portions of annual report to
shareholders incorporated by reference
(21)Subsidiaries of the registra
nt
(23)Consent of independent audit
ors
(24) Powers of attorney
(27) Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K was not filed during the quarter ended
June 30, 1997.
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PAGE 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 26, 1997
ARCHER-DANIELS-MIDLAND COMPANY
/s/ D. J. Smith /s/ D. J. Schmalz /s/ S. R. Mills
D. J. Smith D. J. Schmalz S. R. Mills
Vice President, Secretary Vice President
and Controller
and General Counsel Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on September 26, 1997,
by the following persons on behalf of the Registrant and in
the capacities indicated.
/s/ G. A. Andreas
G. A. Andreas*,
Chief Executive and Director
(Principal Executive Officer)
/s/ D. O. Andreas /s/ M. B. Mulroney
D. O. Andreas*, M. B. Mulroney*,
Chairman of the Board of Director
Directors
/s/ S. M. Archer, Jr. /s/ R. S. Strauss
S. M. Archer, Jr.*, R. S. Strauss*,
Director Director
/s/ J. R. Block /s/ J. K. Vanier
J. R. Block*, J. K. Vanier*,
Director Director
/s/ R. R. Burt /s/ O. G. Webb
R. R. Burt*, O. G. Webb*,
Director Director
/s/ Mrs. M. H. Carter /s/ A. Young
Mrs. M. H. Carter*, A. Young*,
Director Director
/s/ G. O. Coan /s/ D. J. Smith
G. O. Coan*, Attorney-in-Fact
Director
/s/ F. R. Johnson
F. R. Johnson*,
Director
*Powers of Attorney authorizing R. P. Reising, D. J. Schmalz and
D. J. Smith and each of them, to sign the Form 10-K on behalf of
the above-named officers and directors of the Company are being
filed with the Securities and Exchange Commission.
28