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29
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, 1998
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 ___
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--$8.7 billion
(Based on the closing price of the New York Stock Exchange on
August 24, 1998)
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--567,619,871 shares
(August 31, 1998)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders' report for the year ended
June 30, 1998 are incorporated by reference into Parts I, II and
IV.
Portions of the annual proxy statement for the year ended June
30, 1998 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 $4.5 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 malting
operations, formula feed operations, rice milling
operations, Mexican wheat flour mills and masa corn
flour operations 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.
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Item 1. BUSINESS-Continued
All commodities and related processed products
share the same network of commodity procurement
facilities, transportation services (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 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 soy protein meat substitutes
(Harvest Burgers and Harvest Burgers for
Recipes). The Company produces and markets a wide
range of consumer and institutional health foods
based on the Company's various soy protein
products, including soy-derived isoflavones. 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, xanthan gum, 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 the Company's other commodity
processing operations.
The Company produces
bakery products and mixes which are sold to the
baking industry.
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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.
The Company processes
and distributes edible beans for use in many
parts of the food industry.
The Company raises
fish for distribution to consumer food customers.
Hickory Point Bank
and Trust Co. furnishes public banking and trust
services, 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 Investor Services
International, Ltd. specializes in futures,
options and foreign exchange in the European
marketplace.
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.
The Company owns a
57% interest in Heartland Rail Corporation.
Heartland's 80% owned affiliate, Iowa Interstate
Railroad, operates a regional railroad in Iowa
and Illinois.
Alfred C. Toepfer
International (Germany) and affiliates, in which
the Company has a 50% interest, is one of the
world's largest, most respected trading companies
specializing in agricultural commodities and
processed products. Toepfer has forty-three 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. 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, in seven Mexican-
based wheat flour mills.
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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 42%
ownership of UGG. UGG, with more than 175
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 also has a 50% interest in Kalama Export
Company, a joint venture with Con Agra Inc.,
which operates a grain export elevator in
Washington.
The Company owns a 28% interest in Acatos &
Hutchinson, a U.K. based company, that processes
and markets edible oil.
Eaststarch C.V. (Netherlands), of which the
Company has a 50% interest, operates wet corn
milling plants in Bulgaria, Hungary, Slovakia and
Turkey.
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 50% interest in Sociedad
Aceitera Oriente, S.A., a Bolivian company that
is in the oilseed crushing, refining and bottling
business.
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Item 1. BUSINESS-Continued
International Malting Company, a joint venture
between the Company and the LeSaffre Company,
operates barley malting plants in the United
States, Canada and France. The Company has a 40%
ownership interest in this joint venture.
The Company
participates in various joint ventures that
operate oilseed crushing facilities, oil
refineries and related storage facilities in
China and Indonesia.
The percentage of net
sales and other operating income by classes of
products and services for the last three fiscal
years were as follows:
1998 1997 1996
Oilseed products 63% 64% 61%
Corn products 13 16 18
Wheat and other
milled products 9 12 13
Other products and services 15 8 8
---- ---- ----
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 systems of
North and South America and functions as a
contract carrier of commodities for its own
operations as well as for other companies. The
Company owns and leases approximately 2,250 river
barges and 53 line-haul towboats.
7
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Item 1. BUSINESS-Continued
(ii) Status of new products
The Company continues
to expand its business through the development
and production of new, value-added products.
These new products include a wide-range of health
and nutrition products known as neutraceuticals
or functional foods. The Company has entered the
vitamin market with the production of riboflavin
and vitamin E and is currently expanding
production facilities to produce 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. The Company is developing and
expanding production facilities to produce soy-
derived isoflavones, sterols, granular lecithin,
astaxathin, distilled monoglycerides and xanthan
gum. Additionally, the Company is in the early
stages of development of the antioxidants beta-
carotene, oligosaccharides and tocotrienols.
(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.
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Item 1. BUSINESS-Continued
(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.
(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., Corn
Products International, Inc., 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.
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Item 1. BUSINESS-Continued
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. Starch and
amyolitic enzyme research is done at a laboratory
in Clinton, Iowa. 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. The Company maintains research
centers in Quincy, Illinois that conduct swine
and cattle feeding trials to test new formula
feed products and to develop improved feeding
efficiencies.
The amounts spent during the three years ended
June 30, 1998, 1997 and 1996 for such technical
efforts were approximately $17.1, $12.2 and $11.5
million, respectively.
(xii)Material effects of
capital expenditures for environmental protection
During 1998, $16
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.
Item 1. BUSINESS-Continued
(xiii) Number of employees
The number of persons
employed by the Company was 23,132 at June 30,
1998.
(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 11 of Notes to Consolidated Financial Statements" of the
annual shareholders' report for the year ended June 30, 1998 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 55
Officer from 1997. Counsel to
the Executive Committee from
September 1994. Vice President
from 1988.
Martin L. Andreas Senior Vice President from 1989.59
Assistant to the Chairman.
Charles P. Archer Treasurer from October 1992. 42
Lewis W. Batchelder Group Vice President from 53
July 1997. Senior Vice President
of ADM/Growmark. Various grain
merchandising positions since
1971.
Charles T. Bayless Executive Vice President from 63
July 1997. Group Vice President
from January 1993.
Howard E. Buoy Group Vice President from 72
January 1993.
William H. Camp Vice President from April 1993.49
Mark J. Cheviron Vice President from July 1997.49
Vice President of Corporate
Security and Administrative
Services since May 1997. Director
of Security since 1980.
Larry H. Cunningham Group Vice President and 54
President of ADM Corn Processing
Division from October 1996.
Vice President and President
of Protein Specialties
Division since July 1993.
Craig L. Hamlin Group Vice President from 52
October 1994. President of
ADM Milling from 1989.
Edward A. Harjehausen Vice President from October48
1992.
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Item 1. BUSINESS-Continued
James C. Ielase Group Vice President since 57
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 67
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 54
President of ADM Investor
Services.
John E. Long Vice President from July 1996.69
President of ADM Research
Division from 1992. Various
senior research positions from
1975.
Claudia M. Madding Secretary to the Executive 47
Committee from September 1997.
Executive Assistant to the
Chairman
since July 1997. Assistant
Secretary
from 1993. Administrative
Assistant
to the Chairman since 1984.
Jack McDonald Vice President from October 1994.
66
President of Southern Cotton Oil
Division from 1990.
John D. McNamara Group Vice President and 50
President of North American
Oilseed Processing Division from
July 1997. President of ADM Agri-
Industries since 1992.
Steven R. Mills Controller from October 1994. 43
Various senior treasury and
accounting positions from 1979.
Stephen W. Minder Corporate Compliance Officer from
42
July 1997. Various senior
internal
audit positions since 1990.
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Item 1. BUSINESS-Continued
Paul B. Mulhollem Group Vice President from 49
July 1997. Vice President from
January 1996. Managing Director
of ADM International, Ltd., from
1993.
Brian F. Peterson Vice President from January 1996.
56
President of ADM BioProducts
Division from 1995. Various
merchandising positions from
1980.
Raymond V. Preiksaitis Group Vice President from46
July 1997. Vice President -
Management Information Systems
from 1988.
John G. Reed Vice President from 1982. 68
Richard P. Reising Senior Vice President from July54
1997. Vice President, Secretary
and General Counsel from
1991 to 1997.
John D. Rice Vice President from 1993 and 44
President of ADM Food Oils
Division since December 1996.
Vice President of ADM Processing
Division from 1992.
Scott A. Roberts Assistant Secretary and Assistant
38
General Counsel from July 1997.
Member of the Law Department
since 1985.
Kenneth A. Robinson Vice President from January 1996.
51
Vice President of ADM Processing
Division from 1985.
Douglas J. Schmalz Vice President and Chief 52
Financial Officer from 1986.
Controller from 1986 to 1994.
David J. Smith Vice President, Secretary and 43
General Counsel from July, 1997.
Assistant General Counsel from
1995. Assistant Secretary from
1988 to July 1997. Member of the
Law
Department since 1981.
Item 1. BUSINESS-Continued
Stephen H. Yu Vice President from January 1996.
38
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 o
f Dwayne O. Andreas, a director of the
registrant.
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PAGE 14
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 197 77 274
Leased 2 1 3
Joint Venture 48 27 75
____ ________
247 105 352
=== === ===
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-nine domestic and
fifteen foreign oilseed crushing plants with a daily
processing capacity of approximately 94,000 metric
tons (3.5 million bushels). 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 Brazil, Canada, England,
Germany, India, Mexico, the Netherlands and Poland.
The Company also has an interest, through a joint
venture, in an oilseed crushing plant in Bolivia.
The Company operates four wet corn milling and two
dry corn milling plants with a daily grind capacity
of approximately 41,700 metric tons (1.6 million
bushels). These plants and other related
properties, including corn germ extraction and corn
gluten pellet plants, are located in Illinois, Iowa,
New York and North Dakota. The Company also has
interests, through joint ventures, in corn milling
plants in Bulgaria, Hungary, Mexico, Slovakia and
Turkey.
The Company operates twenty-nine domestic wheat and
durum flour mills, a domestic bulgur plant, three
domestic corn flour mills, two domestic milo mills,
and twelve foreign flour mills with a total daily
milling capacity of approximately 30,700 metric tons
(1.1 million bushels). The Company also operates
seven bakery mix and specialty ingredient plants,
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,
Item 2. PROPERTIES--continued
Kansas, Louisiana, Minnesota, Missouri, Nebraska,
New York, North Carolina, Oklahoma, Oregon,
Pennsylvania, Tennessee, Texas, Washington,
Wisconsin, Barbados, Belize, Canada and Jamaica.
The Company also has an interest, through a joint
venture, in rice milling plants in Arkansas and
Louisiana.
The Company operates fifteen domestic oilseed
refineries in Arkansas, Georgia, Illinois, Indiana,
Iowa, Minnesota, Nebraska, North Dakota, Tennessee
and Texas as well as ten foreign refineries in
Brazil, Canada, Germany, India and the Netherlands.
The Company also has interests, through joint
ventures, in oilseed refineries in Texas, Bolivia
and England. The Company produces packaged oils in
California, Georgia, Illinois, Brazil and Germany
and has interests, through joint ventures, in
packaged oils plants in Bolivia and England. Soy
protein specialty products are produced in Illinois
and the Netherlands, lecithin products are produced
in Arkansas, 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
fifteen domestic and nine foreign formula feed and
animal health and nutrition plants. The domestic
plants are located in Georgia, Illinois, Indiana,
Iowa, Minnesota, Nebraska, Ohio, Texas and
Washington. The foreign plants are located in
Barbados, Belize, Canada, China, Ireland and Puerto
Rico. The Company also has interests, through joint
ventures, in formula feed plants in Arkansas,
Georgia, Illinois, Iowa, Indiana, Kansas, Kentucky,
Michigan, Minnesota, Missouri, Nebraska, Ohio,
Pennsylvania, Tennessee, Wisconsin, Canada, China,
Puerto Rico and Trinidad.
The Company operates five domestic and eleven
foreign chocolate and cocoa bean processing plants.
The domestic plants are located in Georgia,
Massachusetts, New Jersey, North Carolina and
Wisconsin, and the foreign plants are located in
Brazil, Canada, China, England, France, Germany, the
Netherlands, Poland and Singapore.
The Company operates forty-nine domestic edible bean
processing facilities located in California,
Colorado, Idaho, Kansas, Michigan, Minnesota, North
Dakota and Wyoming.
The Company operates various other food and food
ingredient plants in England, France, Germany and
Jamaica.
14
PAGE 15
Item 2. PROPERTIES--continued
Procurement Facilities
The Company operates two hundred domestic terminal,
country, and river elevators covering the major
grain producing states, including one hundred thirty-
seven country elevators and sixty-three terminal and
river loading facilities including three grain
export elevators in Louisiana. Elevators are
located in Arkansas, Colorado, Georgia, Illinois,
Indiana, Iowa, Kansas, Kentucky, Louisiana,
Michigan, 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
412,000,000 bushels.
The Company also has interests, through joint
ventures, in seventeen domestic grain terminals and
elevators, including two export terminals, one in
the state of Washington and the other in Maryland.
The other joint venture grain terminals and
elevators are located in Indiana, Kentucky,
Michigan, Minnesota, and Ohio. Domestic joint
venture grain terminals and elevators have an
aggregate storage capacity of approximately
62,000,000 bushels.
The Company also operates one hundred thirty-four
foreign grain elevators with an aggregate storage
capacity of approximately 89,000,000 bushels,
including three export facilities located in Brazil.
These elevators are located in Barbados, Brazil,
Canada, Germany, Ireland and Paraguay. The Company
also has an interest, through a joint venture, in
fourteen grain elevators in Bolivia with an
aggregate storage capacity of approximately
7,000,000 bushels.
Eleven cotton gins are located in Texas and serve
the cottonseed crushing plants in that area.
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PAGE 16
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.
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, in fiscal 1997 the Company 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 federal grand jury in
the Northern District of Illinois (lysine) has been closed.
The Company has 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. On June 22, 1998 the Mexican Federal
Competition Commission issued resolutions concluding its
investigation relative to the Company's subsidiaries and
imposing a fine in the approximate amount of $125,000. In
June 1997, the Company and several of its European
subsidiaries were notified that the Commission of the
European Communities had initiated an investigation as to
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. In December, 1997,
the Company was notified by the Canadian Competition Bureau
that it is among the subjects of a formal inquiry into an
alleged conspiracy to fix prices and sales volumes in the
production, sale and supply of lysine. In connection with
an agreement with the Canadian Competition Bureau and the
Attorney General of Canada, the Company paid a fine in the
approximate amount of $11 million. This agreement
constitutes a global resolution of all matters between the
Canadian Competition Bureau and the Company. The ultimate
outcome and materiality of the proceedings of the
Commission of the European Communities can not presently be
determined. The Company may become the subject of similar
antitrust investigations conducted by the applicable
regulatory authorities of other countries.
HIGH FRUCTOSE CORN SYRUP ACTIONS
The Company, along with other companies, has been named as
a defendant in thirty-one antitrust suits involving the
sale of high fructose corn syrup. Thirty of these actions
have been brought as putative class actions.
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.
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PAGE 17
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 seven 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 six 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 four other indirect
purchaser 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). On October 8, 1997,
Varni Brothers Corp. filed a complaint in intervention
with respect to the coordinated action pending in
Stanislaus County Superior Court, asserting the same
claims as those advanced in the consolidated class action.
The parties are in the midst of discovery in the
coordinated action.
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PAGE 18
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 the actions
specifically described below, all such suits have been
settled, dismissed or withdrawn.
STATE ACTIONS. The Company has been named as a defendant,
along with other companies in two putative class action
antitrust suits. These two putative 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 putative classes in these 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. On
March 13, 1998, the court denied plaintiff's motion for
class certification. Subsequently, the plaintiff has
amended his complaint to add approximately 187 plaintiffs.
On May 7, 1998, the Company moved for summary judgment as
to the original named plaintiff's claim. That motion is
pending. 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.
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PAGE 19
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 the actions specifically
described below, all such suits have been settled or
dismissed.
STATE ACTIONS. The Company, along with other companies,
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 have been coordinated before a single court
in San Francisco County, California under the caption,
Food Additives Cases II California Indirect Purchaser
Citric Acid Antitrust Litigation, Coordination Proceeding
No. 3265. On June 18, 1998, the Company executed a
settlement agreement with counsel for the plaintiff class
in which, among other things, the Company agreed to pay
$1,053,366 to the plaintiff class. The settlement has
received final court approval. 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,
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PAGE 20
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. On
June 26, 1998, the Company executed a settlement agreement
with counsel for the plaintiff class in which, among other
things, the Company agreed to pay $1,831,634 to the
plaintiff class. This settlement has received preliminary
court approval and a final approval hearing will be on
November 20, 1998.
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID STATE CLASS ACTIONS
The Company, along with other companies, has been named as
a defendant in five 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 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. Plaintiff's motion for class
certification is currently pending. 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. Plaintiff's motion for class
certification is currently pending.
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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 in prior filings, 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.
SODIUM GLUCONATE ACTIONS
The Company, along with other companies, has been named as
a defendant in three federal antitrust class actions
involving the sale of sodium gluconate. These actions
allege violations of federal antitrust laws, including
allegations that the defendants agreed to fix, raise and
maintain at artificially high levels the prices of sodium
gluconate, and seek various relief, including 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
sodium gluconate during periods in the 1990s. One such
action was filed on December 2, 1997, in the United States
District Court for the Northern District of California and
is encaptioned Chemical Distribution, Inc, v. Akzo Nobel
Chemicals BV, et al., No. C -97-4141 (CW). The second
action was filed on December 31, 1997, in the United
States District Court for the District of Massachusetts
and is encaptioned Stetson Chemicals, Inc. v. Akzo Nobel
Chemicals BV, 97-CV-1285 RCL. The third action, which was
amended on February 12, 1998 to name the Company as a
defendant, was filed in the United States District Court
for the Northern District of Illinois. On April 9, 1998,
the Judicial Panel on Multidistrict Litigation transferred
all three sodium gluconate actions to the United States
District Court for the Northern District of California for
coordinated or consolidated pretrial proceedings. The
parties are in the midst of discovery in this action.
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PAGE 22
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. On January 21, 1998 the
Court of Appeals dismissed the appeal. On April 21, 1998, a
petition for writ of certiorari before the United States
Supreme Court was filed with respect to the dismissal by
the United States Court of Appeals for the Seventh Circuit.
The individual director defendants and the Company recently
filed oppositions to the petition for certiorari. The
parties will jointly seek dismissal of the Delaware actions
with prejudice once the federal action is concluded.
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DELAWARE STATE LAW ACTION
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 and damages 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 plaintiffs an opportunity
to replead. The revised complaint was filed on November
21, 1997. On June 16, 1998, the Company executed a
Stipulation and Agreement of Compromise and Settlement
with counsel for the plaintiff class in which, among other
things, the Company agreed to pay no more than $500,000 in
attorneys' fees to plaintiffs, as determined by the court,
and agreed to certain changes in the rules governing the
conduct of shareholder meetings. Final approval of the
settlement was granted on August 5, 1998 and the court
awarded $300,000 in attorneys' fees to plaintiffs.
OTHER
As described in the notes to the unaudited 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.
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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,
1998 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, 1998 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, 1998 and is incorporated herein by
reference.
Item 7A.QUANTITIVE 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, 1998 and is incorporated herein by
reference.
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, 1998 are incorporated herein by
reference:
Consolidated balance sheets--June 30, 1998 and 1997
Consolidated statements of earnings--Years ended
June 30, 1998, 1997 and 1996
Consolidated statements of shareholders' equity--Years
ended
June 30, 1998, 1997 and 1996
Consolidated statements of cash flows--Years ended
June 30, 1998, 1997 and 1996
Notes to consolidated financial statements--June 30,
1998
Summary of Significant Accounting Policies
Report of Independent Auditors
Quarterly Financial Data (Unaudited)
24
PAGE 25
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 1998
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 Committee
Report" of the definitive proxy statement for 1998 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 1998 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 1998 and is incorporated
herein by reference.
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, 1998, are
incorporated by reference in Item 8, and are also
incorporated herein by reference:
Consolidated balance sheets--June 30, 1998 and 1997
Consolidated statements of earnings--Years ended
June 30, 1998, 1997 and 1996
Consolidated statements of shareholders' equity--
Years ended June 30, 1998, 1997 and 1996
25
PAGE 26
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
` --Continued
Consolidated statements of cash flows--Years ended
June 30, 1998, 1997 and 1996
Notes to consolidated financial
statements--June 30, 1998
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:
(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;
(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;
26
PAGE 27
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
--Continued
(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,
the $350,000,000 - 7 1/2% Debentures due March
15, 2027, the $200,000,000 - 6 3/4% Debentures
due December 15, 2027, and the $250,000,000 - 6
7/8% Debentures due
December 15, 2097.
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
and stock unit 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.
(ii)Registration Statement No. 33-49409 on Form S-
8 dated
March 15, 1993 relating to the Archer Daniels M
idland
1991 Incentive Stock Option Plan and Archer Dan
iels
Midland Company Savings and Investment Plan.
27
PAGE 28
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
--Continued
(iii)Registration Statement No. 333-39605 on Fo
rm S-8 dated November 5, 1997 relating to the
ADM Savings and Investment Plan for Salaried
Employees and the ADM Savings and Investment
Plan for Hourly Employees.
(iv)Registration Statement No. 333-51381 on For
m S-8 dated April 30, 1998 relating to the
Archer-Daniels-Midland Company 1996 Stock
Option Plan.
(v)The Archer-Daniels-Midland Company Stock Uni
t Plan for Nonemployee Directors (incorporated
by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997).
(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, 1998.
28
PAGE 29
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 24, 1998
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 24, 1998,
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/ J. R. Block /s/ R. S. Strauss
J. R. Block*, R. S. Strauss*,
Director Director
/s/ R. R. Burt /s/ J. K. Vanier
R. R. Burt*, J. K. Vanier*,
Director Director
/s/ Mrs. M. H. Carter /s/ O. G. Webb
Mrs. M. H. Carter*, O. G. Webb*,
Director Director
/s/ G. O. Coan /s/ A. Young
G. O. Coan*, A. Young*,
Director Director
/s/ F. R. Johnson /s/ D. J. Smith
F. R. Johnson*, Attorney-in-Fact
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.
29