PAGE 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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
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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, no par value--519,951,198 shares
(April 30, 1996)
1
PAGE 2
PART I - FINANCIAL INFORMATION
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
-------------------------
(In thousands, except
per share amounts)
<S> <C> <C>
Net sales and other operating income $3,486,665 $3,299,662
Cost of products sold and other
operating
costs 3,147,794
2,874,149
_________
_________
Gross Profit 338,871
425,513
Selling, general and administrative 120,959
expenses 98,726
_________
_________
Earnings From Operations 217,912
326,787
Other income (expense) 29,489
(30,270)
_________
_________
Earnings Before Income Taxes 247,401
296,517
Income taxes 84,116
100,816
_________ _________
Net Earnings $ 163,285 $
195,701
=========
=========
Average number of shares outstanding 520,811
541,950
Net earnings per common share $.31 $.36
Dividends per common share $.05 $.024
</TABLE>
See notes to consolidated financial statements.
2
PAGE 3
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
MARCH 31,
1996
1995
-----------------
- ---------
(In thousands,
except
per share
amounts)
<S> <C> <C>
Net sales and other operating $9,536,68
income $10,022,461 9
Cost of products sold and other
operating
costs
8,962,407 8,288,732
_________
__________ _
Gross Profit
1,060,054 1,247,957
Selling, general and
administrative
expenses 348,199 321,129
_________
__________ _
Earnings From Operations
711,855 926,828
Other income (expense)
125,050 (75,285)
_________
__________ _
Earnings Before Income Taxes
836,905 851,543
Income taxes
284,548 281,200
_________
__________ _
$ $
Net Earnings 552,357 570,343
=========
========== =
Average number of shares
outstanding 525,243 541,713
Net earnings per common share
$1.05 $1.05
Dividends per common share $
$.124 .063
</TABLE>
See notes to consolidated financial statements.
3
PAGE 4
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
-------------------------
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ $ 454,593
570,220
Marketable securities 595,684 664,690
Receivables 1,136,636 1,013,562
Inventories 2,102,677 1,473,896
Prepaid expenses 105,515 105,904
_________ __________
__ _
Total Current Assets 4,510,732 3,712,645
Investments and Other Assets
Investments in and advances to
affiliates 545,283 502,698
Long-term marketable securities 1,157,583 1,604,219
Other assets 216,594 175,044
_________ __________
__ _
1,919,460 2,281,961
Property, Plant and Equipment
Land 112,986 113,098
Buildings 1,197,891 1,109,249
Machinery and equipment 5,791,352 5,443,561
Construction in progress 645,065 642,825
Less allowances for (3,774,67
depreciation 6) (3,546,452
)
_________ __________
__ _
3,972,618 3,762,281
_________ __________
__ _
$10,402,8 $9,756,887
10
========= ==========
== =
</TABLE>
See notes to consolidated financial statements.
4
PAGE 5
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
-------------------------
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 87,292 $ -
Accounts payable 870,191 725,046
Accrued expenses 619,728 431,725
Current maturities of long-term debt 16,230 15,614
__________ _________
Total Current Liabilities 1,593,441 1,172,385
Long-Term Debt 2,075,880 2,070,095
Deferred Credits
Income taxes 560,269 538,351
Other 104,433 121,891
__________ _________
664,702 660,242
Shareholders' Equity
Common stock 3,470,867 3,668,977
Reinvested earnings 2,597,920 2,185,188
__________ _________
6,068,787 5,854,165
__________ _________
$10,402,810 $9,756,887
========== =========
</TABLE>
See notes to consolidated financial statements.
5
PAGE 6
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
1996 1995
-----------------------
(In thousands)
<S> <C> <C>
Operating Activities
Net earnings $552,357 $570,343
Adjustments to reconcile to net cash
provided by operations
Depreciation and amortization 288,814 289,951
Deferred income taxes 62,448 22,932
Amortization of long-term debt discount18,864 16,278
Other (121,660) 42,068
Changes in operating assets and liabilities
Receivables (178,385) (62,930)
Inventories (643,295) (340,832)
Prepaid expenses 236 (4,663)
Accounts payable and accrued expenses307,195 177,304
_________ _________
Total Operating Activities 286,574 710,451
Investing Activities
Purchases of property, plant and equipment(522,383)(451,108)
Business acquisitions (27,904) (50,097)
Investments in and advances to affiliates(61,147) (102,078)
Purchases of marketable securities (514,610) (1,749,708)
Proceeds from sales of marketable securities1,150,881 1,723,
421
Other (1,241) -
_________ _________
Total Investing Activities 23,596 (629,570)
Financing Activities
Long-term debt borrowings 15,093 20,922
Long-term debt payments (15,084) (29,553)
Net borrowings under line of credit agreements 89,292 111,020
Purchases of treasury stock (224,099) (9,207)
Cash dividends and other (59,745) (33,047)
_________ _________
Total Financing Activities (194,543) 60,135
_________ _________
Increase (Decrease) In Cash and Cash Equivalents115,627 141,
016
Cash and Cash Equivalents Beginning of Period454,593 316,394
_________ _________
Cash and Cash Equivalents End of Period $ 570,220 $ 457,410
========= ========
</TABLE>
See notes to consolidated financial statements.
6
PAGE 7
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. The accompanying unaudited consolidated financial
statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of
management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair
presentation have been included. Operating results for
the quarter and nine months ended March 31, 1996 are not
necessarily indicative of the results that may be
expected for the year ending June 30, 1996. For further
information, refer to the consolidated financial
statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended
June 30, 1995.
Note 2. Other Income (Expense)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS
ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
-------------------------------------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Investment income $ 38,292 $ 37,933 $117,443 $ 99,869
Interest expense (44,024) (43,594)(126,657)(130,086)
Gain (loss) on marketable
securities transactions 19,929 (17,702) 87,798 (29,643)
Other, including equity in
earnings of affiliates 15,292 (6,907) 46,466 (15,425)
_______ _______ _______ _______
$ 29,489 $ (30,270)$125,050 $(75,285)
======= ======= ======= =======
</TABLE>
Note 3. Per Share Data
All references to share and per share information have
been adjusted for the 5 percent stock dividend paid September
18, 1995.
Note 4. Antitrust Investigation and Related Litigation
The Company, along with a number of other domestic and
foreign companies, is the subject of a grand jury
investigation into possible violations of federal
antitrust laws and possible related crimes in the food
additives industry. The investigation is directed
towards possible price-fixing with respect to lysine,
citric acid and high fructose corn syrup. Neither the
Company nor any director, officer or employee has been
charged in connection with the investigation.
7
PAGE 8
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4. Antitrust Investigation and Related Litigation--
Continued
Following public announcement of the investigation, the
Company and certain of its directors and executive
officers were named as defendants in a number of
putative class actions alleging violations of antitrust
and securities laws relating to the Company's marketing
practices in the food additives industry, specifically
with respect to lysine, citric acid and high fructose
corn syrup. The plaintiffs generally request unspecified
compensatory and punitive damages, costs, expenses and
unspecified relief. The Company and the individuals
named as defendants intend to vigorously defend these
class actions unless they can be settled on terms deemed
acceptable by the parties.
These matters could result in the Company being subject
to monetary damages, fines, penalties and other
sanctions and expenses. The ultimate outcome of the
investigation and the putative class actions cannot
presently be determined. However, as discussed in Item
1 of Part II of this Report, the Company, without
admitting the alleged violations of law, has entered
into a proposed settlement agreement with counsel for
the lysine plaintiff class which is comprised of certain
direct purchasers of lysine for certain periods in the
1990s. This settlement agreement must be approved by the
court. The Company has made a provision related to the
lysine contingency, which amount was not material to its
consolidated financial statements. In the Company's
opinion the ultimate resolution of the lysine
contingency, to the extent not provided for, will not
have a material adverse effect on the Company's
consolidated financial condition or annual results of
operations, but it could be material to the consolidated
operating results of a particular future quarter if
resolved unfavorably. Because of the early stage of the
investigation as it relates to citric acid and high
fructose corn syrup, no provision for any liability that
may result therefrom has been made in the accompanying
consolidated financial statements.
Shareholder derivative actions also have been filed
against certain of the Company's directors and executive
officers and nominally against the Company alleging that
the individuals named as defendants breached their
fiduciary duties to the Company and seeking monetary
damages and other relief on behalf of the Company from
the individuals named as defendants. The Company has
sought or intends to seek dismissal of these derivative
actions on the ground that they cannot be maintained
unless the plaintiffs first brought their complaints to
the Company's Board of Directors, which they did not.
The Company from time to time, in the ordinary course of
business, is named as a defendant in various other
lawsuits. In management's opinion, the gross liability
from such other lawsuits, including environmental
exposure, with or without insurance recoveries is not
considered to be material to the Company's consolidated
financial condition or results of operations.
8
PAGE 9
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
The Company is in one business segment - procuring,
transporting, storing, processing and merchandising agricultural
commodities and products. The availability and price of
agricultural 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 global production of similar and competitive
crops. Generally, changes in the price of agricultural
commodities can be passed through to the price of processed
products. Ethanol is one of a limited few of the Company's
processed products which must be priced to compete with products
produced from other raw materials. The Company follows a policy
of hedging substantially all inventory and related purchase and
sale contracts. In addition, the Company from time to time will
hedge anticipated production, generally not exceeding six months
requirements. These hedges are made to reduce price risk of
market fluctuations and risk of crop failure. The instruments
used are principally readily marketable exchange traded futures
contracts which are designated as hedges. The changes in market
value of such contracts have a high correlation to the price
changes of the hedged commodity. Also, the underlying commodity
can be delivered against such contracts. To obtain a proper
matching of revenue and expense, gains or losses arising from
open and closed hedging transactions are included in inventory
as a cost of the commodities and reflected in the income
statement when the product is sold. Inflation, over time, has an
impact on agricultural commodity prices. The Company's business
is capital intensive and inflation could impact the cost of
capital investment.
OPERATIONS
Net sales and other operating income increased $187 million to
$3.5 billion for the quarter due principally to a 6 percent
increase in volume of products sold which was partially offset
by a 1 percent decrease in average selling prices. For the nine
months, net sales and other operating income increased $486
million to $10 billion due primarily to a 4 percent increase in
average selling prices and a two percent increase in volume of
products sold. The increases for both the quarter and nine
months were partially offset by the decrease due to the sale of
the Company's Supreme Sugar subsidiary and British Arkady bakery
ingredient business and the contribution of the Company's
formula feed operation to an unconsolidated joint venture. A
summary of net sales and other operating income by classes of
products and services is as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
_______________ ______________
___ ___
(In millions) (In millions)
<S> <C> <C> <C> <C>
Oilseed products $ 2,126 $ 2,10 $ 6,055 $ 5,706
7
Corn products 647 568 1,937 1,850
Wheat and other milled 416 340 1,247 1,053
products
Other products and 298 285 783 928
services
______ ______ ______ ______
$ 3,487 $ 3,30 $10,022 $ 9,537
0
====== ====== ====== ======
</TABLE>
Sales of oilseed products increased 1 percent for the quarter
and 6 percent for the nine months due primarily to an increased
volume of products sold reflecting the strong demand for protein
meal in the domestic market. For the quarter, this volume
increase was partially offset by a decrease in average selling
prices due principally to weaker export vegetable oil demand and
to an increased supply of vegetable oils worldwide. For the nine
months, average oilseed product selling prices increased as
higher prices for protein meal more than offset lower vegetable
oil prices. Sales of corn products increased 14 percent to $647
million for the quarter and 5 percent to $1.9 billion for the
nine months due primarily to increased sales volumes resulting
from strong demand for fuel, beverage and industrial alcohol as
well as for various bioproducts, including citric acid, lysine,
and MSG. These volume increases were partially offset by lower
average selling prices for the Company's sweetener and fuel
alcohol products. Sales of wheat and other milled products
increased 22 percent for the quarter and 18 percent for the nine
months due principally to increased average selling prices
reflecting the higher cost of raw materials. These average
selling price increases were partially offset by decreased sales
volumes reflecting reduced export flour demand. The increase in
sales of other products and services for the quarter resulted
primarily from increased merchandising and transporting
activities. The decrease in sales of other products and services
for the nine months was due principally to the sale of the
Company's Supreme Sugar subsidiary and British Arkady bakery
ingredient business as well as the contribution of the Company's
formula feed operation to an unconsolidated joint venture.
Cost of products sold and other operating costs increased $274
million to $3.1 billion for the quarter and increased $674
million to $9 billion for the nine months due primarily to
increases in raw material commodity prices of 17 percent and 13
percent, respectively.
The $87 million decrease in gross profit for the quarter
resulted primarily from a $101 million decrease due to the net
effect of higher raw material commodity prices versus increased
average selling prices. This decrease was partially offset by a
$19 million increase in gross profit due to higher sales
volumes. The $188 million decrease in gross profit for the nine
months can be attributed primarily to a $180 million decrease
due to the net effect of higher raw material commodity prices
versus increased average selling prices and to a $30 million
decrease due to divested operations. The effect of commodity
price increases on Last-In, First-Out (LIFO) inventory
valuations resulted in an increase in LIFO inventory valuation
reserves and a reduction in gross profits of $28 million for the
quarter and $100 million for the nine months ended March 31,
1996. For the quarter and nine months ended March 31, 1995, the
effect of commodity price decreases on LIFO inventory valuations
resulted in a decrease in LIFO inventory valuation reserves and
an increase in gross profits of $3 million and $12 million,
respectively. LIFO inventory valuations reserves at March 31,
1996 were $151 million compared to $62 million at March 31,
1995.
Selling, general and administrative expenses increased $22
million to $121 million for the quarter and increased $27
million to $348 million for the nine months due primarily to an
increase in legal and litigation related expenses which were
partially offset by expenses attributable to recently divested
operations.
9
PAGE 10
The increase in other income for the quarter and nine months was
due principally to increased gains on marketable securities
transactions and, to a lesser extent, increased equity in
earnings of unconsolidated affiliates. For the nine months, the
increase in other income also included increased investment
income due primarily to higher interest rates and a $15 million
gain on the sale of the Company's Supreme Sugar subsidiary.
The decrease in income taxes for the quarter was a result of
lower pretax earnings. The increase in income taxes for the nine
months was due to a higher effective income tax rate which was
partially offset by lower pretax earnings. The Company's
effective income tax rate of 34 percent for both the quarter and
nine months compared to effective rates of 34 percent and 33
percent for the comparable periods of a year ago.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended March 31, 1996, the Company
continued to show substantial liquidity as working capital
increased $377 million to $2.9 billion. Capital resources were
strengthened by a $215 million increase in net worth to $6.1
billion. This increase in net worth was net of treasury stock
repurchases of $224 million for the nine months. The Company's
ratio of long-term liabilities to total capital at March 31,
1996 was approximately 24 percent.
As discussed in Note 4 to the unaudited consolidated financial
statements, the Company, along with a number of other domestic
and foreign companies, is the subject of a grand jury
investigation into possible violations of federal antitrust laws
and possible related crimes in the food additives industry.
Neither the Company nor any director, officer or employee has
been charged in connection with the investigation. In addition,
related civil class actions are pending. These matters could
result in the Company being subject to monetary damages, fines,
penalties and other sanctions and expenses. The ultimate
outcome of the investigation and the putative class actions
cannot presently be determined. However, as discussed in Item 1
of Part II of this Report, the Company, without admitting the
alleged violations of law, has entered into a proposed
settlement agreement with counsel for the lysine plaintiff class
which is comprised of certain direct purchasers of lysine for
certain periods in the 1990s. This settlement agreement must be
approved by the court. The Company has made a provision related
to the lysine contingency, which amount was not material to its
consolidated financial statements. In the Company's opinion the
ultimate resolution of the lysine contingency, to the extent not
provided for, will not have a material adverse effect on the
Company's consolidated financial condition or annual results of
operations, but it could be material to the consolidated
operating results of a particular future quarter if resolved
unfavorably. Because of the early stage of the investigation as
it relates to citric acid and high fructose corn syrup, no
provision for any liability that may result therefrom has been
made in the accompanying unaudited consolidated financial
statements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company, along with a number of other domestic and
foreign companies, is the subject of an investigation
being conducted by a grand jury in the Northern
District of Illinois in Chicago, into possible
violations of federal antitrust laws and possible
related crimes in the food additives industry. This
investigation is directed towards possible price-
fixing with respect to lysine, citric acid, and high
fructose corn syrup. Federal grand juries in other
jurisdictions also may have been convened to
investigate certain of these matters. Neither the
Company nor any director, officer or employee of the
Company has been charged in connection with this
investigation.
10
PAGE 11
Following public announcement in June 1995 of the
investigation, the Company and certain of its
directors and executive officers were named as
defendants in at least seventeen putative class action
suits on behalf of all purchasers of securities of the
Company during the period between certain dates in
1992 and 1995. Fourteen of these suits were
consolidated under the name In Re Archer-Daniels-
Midland Company Securities Litigation, United States
District Court, Northern District of Illinois, Civil
Action No. 95-C-3979, and a consolidated complaint was
filed on September 22, 1995. The consolidated
complaint alleges that the defendants made material
misrepresentations and omissions with respect to the
Company and its operations and with respect to actions
of the Company and its officers regarding antitrust
violations, as a result of which market prices of the
Company's securities were artificially inflated during
the putative class period. The consolidated complaint
alleges that the conduct complained of violates
federal securities laws. The plaintiffs request
unspecified compensatory damages, costs (including
attorneys and expert fees), expenses and other
unspecified relief on behalf of the putative class.
On October 31, 1995, the Court granted the defendants'
motion to transfer the consolidated action to the
Central District of Illinois (wherein it now bears the
caption E. M. Lawrence Limited Frozen Retirement Trust
Dated September 1, 1992 v. Archer-Daniels-Midland Co.,
et al., and Case Number 95-2287) where at least three
similar actions are also pending. The Company and the
individual defendants have moved to dismiss this
consolidated complaint.
The Company, along with other companies, has been
named as a defendant in at least twenty-nine putative
class action antitrust suits involving the sale of
high fructose corn syrup. At least twenty-two of these
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. One such action
was filed on July 21, 1995 in the United States
District Court for the Northern District of Alabama
and is encaptioned Golden Eagle, Inc. v. Archer-
Daniels-Midland Co., et al., Civil Action No. 95-D-
1888-J. This and other similar 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 Company, along with other companies,
also has been named as a defendant in at least six
putative class action antitrust suits filed in
California state court and at least one putative class
action filed in Alabama state court involving the
sale of high fructose corn syrup. The 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. Two of the
California putative classes comprise certain direct
purchasers of high fructose corn syrup in the State of
California during certain periods in the 1990s. One
such action was filed on October 17, 1995 in Superior
Court for the County Stanislaus, California and
encaptioned St. Stan's Brewing Co. v. Archer-Daniels-
Midland Co., et al., Civil Action No. 37237. The
other four California putative classes comprise
certain indirect purchasers of high fructose corn
syrup 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. 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.
11
PAGE 12
The Company is currently a named defendant in at
least fifteen putative class action antitrust suits
involving the sale of lysine. Six of these actions
allege violations of federal antitrust laws, including
allegations that certain entities agreed to fix,
stabilize and maintain at artificially high levels the
prices of lysine, 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
lysine for certain periods in the 1990s. One such
action was filed on August 9, 1995 in the United
States District for the Northern District of Illinois
and is encaptioned K&L Feeds v. Archer-Daniels-Midland
Co., Civil Action No. 95-C-4587. This and other
similar actions have been transferred to the United
States District Court for the Northern District of
Illinois and consolidated as In Re Amino Acid Lysine
Antitrust Litigation, MDL No. 1083 and Master File No.
95-7679. On April 4, 1996, the Company executed a
settlement agreement with counsel for the plaintiff
class in which, among other things, the Company agreed
to pay $25 million to members of the class, without
admitting the alleged violations of law. This
settlement agreement must be approved by the court.
The Company and plaintiff's counsel have requested
from the court preliminary approval of the settlement,
and permission to send notice of the settlement to
class members. The Company also has been named as a
defendant in at least one non-class action federal
antitrust suit involving the sale of lysine. This
action was filed on November 13, 1995 in the United
States District Court for the Eastern District of
Missouri and is encaptioned Purina Mills, Inc., et
al. v. Archer-Daniels-Midland Co., Civil Action No. 95-
CV-2227. It alleges violations of federal antitrust
laws, including allegations that certain entities
agreed to fix, stabilize and maintain at artificially
high levels the price of lysine, and seeks an
injunction against continued alleged illegal conduct,
treble damages of an unspecified amount, attorneys
fees and costs, and other unspecified relief. The
Company also has been named as a defendant in at least
four putative class action antitrust suits filed in
California state court, at least two putative class
action antitrust suits filed in Alabama state court,
at least two putative class action antitrust suits
filed in Minnesota state court, and at least one
putative class action antitrust suit filed in Georgia
state court involving the sale of lysine. The
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 lysine, and seek treble damages of an
unspecified amount, attorneys fees and costs,
restitution and other unspecified relief. The
putative classes in the California actions comprise
certain indirect purchasers of lysine in the State of
California during certain periods in the 1990s. One
such action was filed on September 29, 1995 in the
Superior Court of the County of San Diego, California,
and is encaptioned Equine Competition Products, Inc.
v. Archer-Daniels-Midland Co., Civil Action No.
693014. The Alabama 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 the Alabama actions comprise
certain indirect purchasers of lysine 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. One
Minnesota action alleges violations of the Minnesota,
Tennessee, Wisconsin South Dakota, North Dakota,
Kansas, Louisiana, Michigan and Maine antitrust laws,
including allegations that defendants conspired to
maintain the price of lysine at artificially high
levels, and seeks treble damages of an unspecified
amount, attorneys fees and costs and other unspecified
relief. The putative class in this action comprises
certain indirect purchasers in the aforementioned
states of lysine during the period June 1, 1992
through April 10, 1996. This action was filed on
April 10, 1996 in the District Court for Renville
County, Minnesota and is encaptioned Big Valley
Milling, Inc. v. Archer-Daniels-Midland Co., et al.,
No. C7-96-260. The other Minnesota action,
encaptioned United Mills v. Archer-Daniels-Midland
Co., et al., No. 65-C2-96-215, seeks identical relief
on behalf of certain indirect purchasers of lysine in
all of the aforementioned states except Tennessee. The
Georgia action, encaptioned Long v. Archer-Daniels-
Midland Co., et al., Civil Action No. E-43829, and
originally filed in Fulton County Superior Court,
alleges a restraint of trade in violation of Georgia
common law and the Georgia state RICO Act. This
action includes allegations that the defendants
conspired to maintain the price of lysine at
artificially high levels 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 the
action comprises certain indirect purchasers of lysine
during the period January 1, 1990 until the present.
The Company has moved to dismiss the complaint and
plaintiff has opposed this action and filed an amended
complaint.
12
PAGE 13
The Company, along with other companies, has been
named as a defendant in at least seven putative class
action antitrust suits involving the sale of citric
acid. Six of these 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 citric acid,
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 citric acid for certain
periods in the 1990s. One such action was filed on
August 18, 1995, in the United States District Court
for the Northern District of California, and is
encaptioned 7-Up Bottling Co. of Philadelphia, Inc. v.
Archer-Daniels-Midland Co. et al., Civil Action No. 95-
2963. Other similar actions have been transferred to
this same court and consolidated as In Re Citric Acid
Antitrust Litigation, MDL No. 1092, Master File No. C-
95-2963FMS. The Company, along with other companies,
also has been named as a defendant in at least 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 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, along with other companies, has been
named as a defendant in at least 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 Company Co., et al., Civil Action No. 974120.
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 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 at least one 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 1992 through February 26,
1996. 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 Company, along
with other companies, also has been named as a
defendant in at least one 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
Company, along with other companies, also has been
named as a defendant in at least one 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
13
PAGE 14
The Company, along with other companies, has been
named as a defendant in at least six putative class
action antitrust suits 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 the County Stanislaus, 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
the County Stanislaus, California and is encaptioned
Batson v. Archer-Daniels-Midland Co., et al., Civil
Action No. 39680.
Also following the public announcement of the
grand jury investigation in June 1995, three
shareholder derivative suits were filed against
certain of the Company's directors and executive
officers and nominally against the Company in the
United States District Court for the Northern District
of Illinois and at least 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 Nos. 95-C-4006,
95-C-4535, and a consolidated amended derivative
complaint was filed on September 29, 1995. This
complaint names all current directors of the Company
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 Company and its directors also have been
named as defendants in a putative class action suit
encaptioned Loudon v. Archer-Daniels-Midland Company,
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 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. The Court of
Chancery dismissed this action on February 20, 1996,
and the case is now on appeal in the Supreme Court of
Delaware. The Company and its directors also have been
named as defendants in a similar suit filed on
November 1, 1995 in the United States District Court
for the Central District of Illinois, encaptioned
Buckley v. Archer-Daniels-Midland Company, et al.,
Civil Action No. 95-C-2269, alleging violations of
analogous provisions of federal securities law. The
defendants have moved to dismiss this action.
The Company and the individual defendants named
in the actions described above intend to vigorously
defend them unless they can be settled on terms deemed
acceptable to the parties.
The antitrust investigation and related
litigation is also discussed in Note 4 to the
unaudited consolidated financial statements and in
management's discussion of operations and financial
condition.
Reference is made to Item 3 to the Company's
Annual Report on Form 10-K for the year ended June 30,
1995 for a discussion of additional legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
a) A Form 8-K was not filed during the
quarter ended March 31, 1996.
14
PAGE 15
SIGNATURES
Pursuant to the requirements of the Securities Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ARCHER-DANIELS-MIDLAND
COMPANY
/s/ D. J. Schmalz
D. J. Schmalz
Vice President
and Chief Financial Officer
/s/ R. P. Reising
R. P. Reising
Vice President, Secretary and
General Counsel
Dated: May 15, 1996
15
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