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 September 30, 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 code 217-424-5200
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--544,074,528 shares
(October 31, 1996)
1
PAGE 2
PART I - FINANCIAL INFORMATION
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
-------------------------
(In thousands, except
per share amounts)
<S> <C> <C>
Net sales and other operating income $3,389,374 $3,120,738
Cost of products sold and other
operating costs 3,024,310 2,796,407
_________ _________
Gross Profit 365,064 324,331
Selling, general and administrative
expenses 306,396 98,721
_________ _________
Earnings From Operations 58,668 225,610
Other income (expense) 19,441 21,515
_________ _________
Earnings Before Income Taxes 78,109 247,125
Income taxes 74,556 84,023
_________ _________
Net Earnings $ 3,553 $ 163,102
========= =========
Average number of shares outstanding 545,105 557,282
Net earnings per common share $.01 $.29
Dividends per common share $.048 $.023
</TABLE>
See notes to consolidated financial statements.
2
PAGE 3
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
---------------------------
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 452,871 $ 534,702
Marketable securities 930,391 820,147
Receivables 1,187,038 1,131,591
Inventories 1,557,400 1,790,636
Prepaid expenses 102,554 107,607
__________ __________
Total Current Assets 4,230,254 4,384,683
Investments and Other Assets
Investments in and advances to
affiliates 984,497 624,305
Long-term marketable securities 1,108,779 1,092,969
Other assets 248,274 233,611
__________ __________
2,341,550 1,950,885
Property, Plant and Equipment
Land 112,844 114,542
Buildings 1,246,247 1,245,662
Machinery and equipment 6,128,775 6,034,979
Construction in progress 664,116 588,711
Less allowances for depreciation (3,938,840) (3,869,593)
__________ __________
4,213,142 4,114,301
__________ __________
$10,784,946 $10,449,869
========== ==========
</TABLE>
See notes to consolidated financial statements.
3
PAGE 4
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
---------------------------
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 116,965 $ -
Accounts payable 1,105,757 993,403
Accrued expenses 705,086 525,626
Current maturities of long-term debt 128,542 114,522
__________ __________
Total Current Liabilities 2,056,350 1,633,551
Long-Term Debt 1,992,590 2,002,979
Deferred Credits
Income taxes 553,564 562,362
Other 107,196 106,165
__________ __________
660,760 668,527
Shareholders' Equity
Common stock 3,845,980 3,869,875
Reinvested earnings 2,229,266 2,274,937
__________ __________
6,075,246 6,144,812
__________ __________
$10,784,946 $10,449,869
========== ==========
</TABLE>
See notes to consolidated financial statements.
4
PAGE 5
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
-----------------
(In thousands)
<S> <C> <C>
Operating Activities
Net earnings $ 3,553 $163,102
Adjustments to reconcile to net cash
provided by operations
Depreciation and amortization 106,254 96,453
Deferred income taxes 22,751 4,229
Amortization of long-term debt discount 6,875 6,149
(Gain) loss on marketable securities
transactions (30,718) (688)
Other 21,546 (21,625)
Changes in operating assets and liabilities
Receivables (79,361) (78,735)
Inventories 223,700 (127,907)
Prepaid expenses 4,710 (16,806)
Accounts payable and accrued expenses 277,501 201,840
_______ _______
Total Operating Activities 556,811 226,012
Investing Activities
Purchases of property, plant and equipment (227,852) (176,370)
Business acquisitions (10,970) (23,390)
Investments in and advances to affiliates (307,809) (13,864)
Purchases of marketable securities (375,671) (219,351)
Proceeds from sales of marketable securities 236,683 415,838
Other - (1,241)
_______ _______
Total Investing Activities (685,619) (18,378)
Financing Activities
Long-term debt borrowings - 6,305
Long-term debt payments (3,123) (5,103)
Net borrowings under line of credit agreements 116,965 54,193
Purchases of treasury stock (40,989) (46,404)
Cash dividends and other (25,876) (12,390)
_______ _______
Total Financing Activities 46,977 (3,399)
_______ _______
Increase (Decrease) In Cash and Cash (81,831) 204,235
Equivalents
Cash and Cash Equivalents Beginning of Period 534,702 454,593
_______ _______
Cash and Cash Equivalents End of Period $452,871 $658,828
======= =======
</TABLE>
See notes to consolidated financial statements.
5
PAGE 6
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 ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the
year ending June 30, 1997. 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, 1996.
Note 2. Other Income (Expense)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
-------------------
(In thousands)
<S> <C> <C>
Investment income $ 38,867 $ 41,823
Interest expense (46,127) (40,077)
Gain (loss) on marketable
securities transactions 30,301 688
Equity in earnings (loss) of affiliates (1,991) 4,407
Other (1,609) 14,674
_______ _______
$ 19,441 $ 21,515
======= ======
</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 16, 1996.
6
PAGE 7
Note 4. Antitrust Investigation and Related Litigation
A federal grand jury in the Northern District of
Illinois has been conducting an investigation into
possible violations by the Company of federal antitrust
laws and related matters with respect to the sale of
lysine, an amino acid feed additive used in poultry and
swine feed. A federal grand jury in San Francisco has
been investigating possible antitrust violations by the
Company with respect to the sale of citric acid, an
organic acid used in various foods, beverages and other
products. A federal grand jury in Atlanta has been
investigating possible antitrust violations by the
Company with respect to the sale of the Company's high
fructose corn syrup product line. Each of these
investigations has been under the direction of the
United States Department of Justice. The Company has
been informed that two of its former executive officers,
Michael D. Andreas and Terrance S. Wilson, are also
targets of the lysine investigation in Chicago and that
indictments are being considered against them.
On October 15, 1996, the Company pled guilty to a two
count information in the Northern District of Illinois
pursuant to an agreement with the Department of Justice.
This information states that the Company engaged in
anticompetitive conduct in connection with the sale of
lysine and citric acid. In connection with its
agreement the Company will pay the United States a fine
of $70 million with respect to lysine and $30 million
with respect to citric acid. This agreement constitutes
a global resolution of all matters between the United
States Department of Justice and the Company and brings
to a close all Department of Justice investigations of
the Company, including the federal grand jury's
investigation with respect to high fructose corn syrup
in Atlanta.
Following public announcement in June 1995 of these
investigations, the Company and certain of its directors
and executive officers were named as defendants in a
number of putative class action suits for alleged
violations of federal securities laws on behalf of all
purchasers of securities of the Company during the
period between certain dates in 1992 and 1995. The
Company along with other domestic and foreign companies,
has been named as a defendant in a number of putative
class action antitrust suits involving the sale of
lysine, citric acid, and high fructose corn syrup. The
plaintiffs generally request unspecified compensatory
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 have resulted, as discussed below, and
could result in the Company being subject to monetary
damages, other sanctions and expenses.
On July 20, 1996, Federal District Court Judge Milton
Shadur approved a settlement in the federal lysine class
action antitrust suit filed in the Northern District of
Illinois (consolidated as In Re Amino Acid Lysine
antitrust Litigation MDL No. 1083) and the Company has
paid $25 million in full settlement thereof without
admitting the alleged violations of law. Several
plaintiffs have opted out of this settlement and
numerous state class action antitrust cases involving
the sale of lysine remain pending. On September 27,
1996, the Company entered into an agreement with counsel
for the plaintiff class in the consolidated federal
securities class action suit pending in the Central
District of Illinois (G.M. Lawrence Limited Frozen
Retirement Trust Dated September 1, 1992, et al. v.
Archer-Daniels-Midland Co., et al., Case Number 95-2287)
in which among other things, the Company agreed to pay
$30 million to members of the class without admitting
the alleged violations of law. Formal papers seeking
court approval of the settlement are expected to be
filed soon. On September 27, 1996, the Company entered
into an agreement with counsel for the plaintiff class
in the consolidated federal citric acid class action
antitrust suit filed in the Northern District of
California (consolidated as In Re Citric Acid Antitrust
Litigation, MDL No. 1092, Marten File No. C-95-2963
(FMS)) in which among other things, the Company agreed
to pay $35 million to members of the class without
admitting the alleged violations of law. Formal papers
seeking court approval of the settlement are expected to
be filed soon. The Company has also entered into an
agreement with plaintiffs' counsel in the various
actions filed in California by indirect purchasers of
lysine in which among other things, the Company has
agreed to pay $500,000 to certain members of the class
without admitting the alleged violations of law. This
settlement received preliminary court approval on
September 20, 1996 and the final approval hearing for
the proposed settlement will take place on November 21,
1996.
The Company has made a $200 million provision in the
quarter ended September 30, 1996 to cover the fines,
litigation settlements and related costs and expenses
described above. Such provision is reflected in the
Company's first quarter selling, general and
administrative expenses. Because of the early stage of
the other putative class actions, including those
related to high fructose corn syrup, the ultimate
outcome 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.
The Company and its directors also have been named as
defendants in two putative class action suits, one of
which alleges violations of Delaware state law and a
similar case in District Court in Illinois which alleges
violations of federal securities laws. Both cases seek
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 1995 Annual
Meeting of Shareholders. The case relating to
violations of Delaware law has been dismissed and is now
on appeal in the Supreme Court of Delaware. The case
filed in Federal District Court in Illinois has likewise
been dismissed and has been appealed to the Seventh
Circuit Court of Appeals. The Company and the
individuals named as defendants intend to vigorously
defend these actions.
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 the Company'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.
7
PAGE 8
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. To reduce the
price risk of market fluctuations, the Company follows a policy
of hedging substantially all inventory and related purchase and
sales contracts. In addition, the Company from time to time
will hedge portions of its anticipated production requirements.
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 $269 million to
$3.4 billion for the quarter from $3.1 billion last year due
primarily to a 13 percent increase in average selling prices.
This increase was partially offset by a 4 percent decrease in
volume of products sold. A summary of net sales and other
operating income by classes of products and services is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
____________________
(In millions)
<S> <C> <C>
Oilseed products $2,109 $1,856
Corn products 569 616
Wheat and other milled products 450 403
Other products and services 261 246
$3,389 $3,121
====== ======
</TABLE>
Sales of oilseed products increased 14 percent for the quarter
due principally to higher average selling prices reflecting the
higher cost of raw materials. Sales volumes of oilseed products
declined 2 percent for the quarter due to a tight supply of raw
materials and less favorable market conditions. Sales of corn
products decreased 8 percent to $569 million for the quarter
due primarily to decreased sales volumes as reduced corn
supplies and the corresponding higher cost of corn resulted in
the Company reducing its grind during the quarter. Average
selling prices of corn products were up 6 percent due to the
good demand for the Company's fuel, beverage and industrial
alcohol as well as for the Company's bioproducts, including
lysine, threonine and MSG. Sales of wheat and other milled
products increased 12 percent for the quarter due principally
to increased average selling prices reflecting the higher cost
of raw materials. This average selling price increase was
partially offset by decreased sales volume reflecting reduced
export flour demand and increased production capacity in the
industry. The increase in sales of other products and services
for the quarter resulted primarily from increased merchandising
activities.
Cost of products sold and other operating costs increased $228
million to $3 billion due primarily to the increase in average
raw material commodity prices partially offset by the 4 percent
decrease in volume of products sold.
The $41 million increase in gross profit to $365 million for
the quarter resulted primarily from a $30 million increase due
to the net effect of higher average selling prices versus
increased raw material costs and a $24 million increase in
other operating revenue. These increases were partially offset
by a $13 million decrease in gross profit due to lower sales
volumes.
Selling, general and administrative expenses increased $208
million to $307 million for the quarter due primarily to
increased legal and litigation related costs including the $200
million provision related to fines and litigation settlements
arising out of the United States Department of Justice
antitrust investigation of the Company's lysine and citric acid
products as well as a securities suit brought by shareholders
(See note 4).
The decrease in other income for the quarter was due to
decreased investment income due to both lower interest rates
and lower invested funds, increased interest expense due to
higher borrowing levels, decreased equity in earnings of
unconsolidated affiliates, and a decrease due to the prior
year's $15 million gain on the sale of the Company's Supreme
Sugar subsidiary. These decreases were partially offset by
increased gains on marketable securities transactions.
The decrease in income taxes for the quarter was a result of
lower pretax earnings offset by a higher effective income tax
rate. The increase in the Company's effective income tax rate
to 95 percent for the quarter compared to an effective rate of
34 percent last year is due primarily to the non-deductibility
for income tax purposes of a portion of the Company's fines and
litigation settlements.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company continued to show
substantial liquidity with working capital of $2.2 billion,
including cash and marketable securities net of short-term debt
of $1.3 billion. Capital resources remained strong as the
Company's net worth at quarter-end was $6.1 billion. The
Company's ratio of long-term liabilities to total capital at
September 30, 1996 was approximately 23 percent.
As discussed in note 4 to the unaudited consolidated financial
statements, various grand juries under the direction of the
United States Department of Justice have been conducting
investigations into possible violations by the Company of
federal antitrust laws and related matters with respect to the
sale of lysine, citric acid and high fructose corn syrup
product lines. The Company has been informed that two of its
former executive officers are also targets of the lysine
investigation and that indictments are being considered against
them. On October 15, 1996, the Company pled guilty to engaging
in anticompetitive conduct in connection with the sale of
lysine and citric acid and agreed to pay the United States $100
million in fines. The agreement brings to a close all
Department of Justice investigations against the Company,
including the investigation with respect to high fructose corn
syrup. In addition, related civil class actions have been
filed against the Company which could result in the Company
being subject to monetary damages, other sanctions and
expenses. As also discussed in note 4 to the unaudited
consolidated financial statements, the Company has agreed to
settle certain civil class action suits involving lysine
antitrust, citric acid antitrust and federal securities law
litigation. The Company has made a $200 million provision in
the quarter ended September 30, 1996 sufficient to cover such
fines and settlements and related costs and expenses. Because
of the early stage of the other putative class actions,
including those related to high fructose corn syrup, the
ultimate outcome 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.
8
PAGE 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In 1993, the State of Illinois Environmental Protection
Agency brought administrative enforcement proceedings
arising out of the Company's failure to obtain permits
for certain pollution control equipment at certain of
the Company's processing facilities in Illinois. The
Company believes it has meritorious defenses. 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.
The Company is involved in approximately 24
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.
A federal grand jury in the Northern District of
Illinois has been conducting an investigation into
possible violations by the Company of federal antitrust
laws and related matters with respect to the sale of
lysine, an amino acid feed additive used in poultry and
swine feed. A federal grand jury in San Francisco has
been investigating possible antitrust violations by the
Company with respect to the sale of citric acid, an
organic acid used in various foods, beverages and other
products. A federal grand jury in Atlanta has been
investigating possible antitrust violations by the
Company with respect to the sale of the Company's high
fructose corn syrup product line. Each of these
investigations has been under the direction of the
United States Department of Justice. The Company has
been informed that two of its former executive
officers, Michael D. Andreas and Terrance S. Wilson,
are also targets of the lysine investigation in Chicago
and that indictments are being considered against them.
On October 15, 1996, the Company pled guilty to a two
count information in the Northern District of Illinois
pursuant to an agreement with the Department of
Justice. This information states that the Company
engaged in anticompetitive conduct in connection with
the sale of lysine and citric acid. In connection with
its agreement the Company will pay the United States a
fine of $70 million with respect to lysine and $30
million with respect to citric acid. This agreement
constitutes a global resolution of all matters between
the United States Department of Justice and the Company
and brings to a close all Department of Justice
investigations of the Company, including the federal
grand jury's investigation with respect to high
fructose corn syrup in Atlanta.
The Company's agreement with the Department of Justice
further obligates the Company to cooperate with the
government's continued investigation with respect to
possible violations by others of federal antitrust laws
and related matters in the food additives industry.
Under the agreement, the Department of Justice agrees
not to bring any action against any director, officer
or employee of the Company (or its subsidiaries or
affiliates), other than Michael D. Andreas and Terrance
S. Wilson, involving the sale or production of any
product sold or produced by the Company's BioProducts
Division, Animal Health and Nutrition Division, Food
Additives Division, or Sweetener Group or for any
action which was or is the subject of pending
investigations in the Central District of Illinois and
the Southern District of Alabama. Mr. Andreas, who no
longer serves as an officer of the Company, requested
and was granted a temporary administrative leave from
the Company. Mr. Wilson has retired from the Company
for medical reasons.
Following public announcement in June 1995 of the
government's antitrust investigation, the Company and
certain of its then current 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, et al. v. Archer-Daniels-Midland Co., et al.,
Case Number 95-2287) where it was further consolidated
with three similar actions also pending in the Central
District. The Company and the individual defendants
have moved to dismiss this consolidated complaint. On
September 27, 1996 the Company entered into an
agreement with counsel for the plaintiff class in which
among other things, the Company
9
PAGE 10
Item 1. Legal Proceedings--Continued
agreed to pay $30 million to members of the class,
without admitting the alleged violations of law.
Formal papers seeking court approval of the settlement
are expected to be filed soon.
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 those
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-B-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 antitrust suit 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 of 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.
10
PAGE 11
Item 1. Legal Proceedings--Continued
The Company was named as a defendant in at least twenty
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 price 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 has been approved by the court and
certain objectors to the settlement have appealed the
final order of approval to the United States Court of
Appeals for the Seventh Circuit. 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 six 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, at least one putative class
action antitrust suit filed in Georgia state court, at
least one putative class action antitrust suit filed in
Tennessee state court and at least one putative class
action antitrust suit filed in Michigan 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 Company has entered into an agreement with
plaintiffs' counsel in the various California indirect
purchaser actions, in which among other things, the
Company agreed to pay $500,000 to certain members of
the class, without admitting the alleged violations of
law. This settlement received preliminary court
approval on September 20 and final approval hearing on
the proposed settlement will take place on November 21,
1996. 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 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. 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 19, 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, and filed in the same court, 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 filed on December 13,
1995 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, punitive
damages attorneys fees and costs, and other unspecified
relief. The putative class in the action comprises
certain indirect purchasers of lysine in the state of
Georgia during the period January 1, 1990 until the
present. The Company has moved to dismiss this action.
The Tennessee action, encaptioned McCormack Farms v.
Archer Daniels Midland Co., et al., Civil Action No.
96C-2190, and filed on June 11, 1996 in Davidson County
Circuit Court, alleges a restraint of trade in
violation of the Tennessee Trade Practices Act and
Tennessee Consumer Protection Act. This action includes
allegations that defendants conspired to fix, maintain
or stabilize the prices of lysine and seeks an
injunction against continued illegal conduct, treble
damages of an unspecified amount, attorneys' fees and
costs, and other unspecified relief. The putative class
in this case comprises certain indirect purchasers of
lysine within the State of Tennessee during the period
June 10, 1992 through June 10, 1996. The Michigan
action, encaptioned Michigan Pork Producers Assn, et
al. v. Archer Daniels Midland Co., et al., No. 906-
10696-CZ, and filed on September 25, 1996 in Kent
County Circuit Court, alleges a restraint of trade in
violation of the Michigan Antitrust Reform Act. This
action includes allegations that defendants conspired
to fix, raise, maintain and stabilize the price of
lysine and seeks an injunction against continued
illegal conduct, treble damages of an unspecified
amount, attorneys' fees and costs, and other
unspecified relief. The putative class in this case
comprises certain indirect purchasers of lysine within
the State of Michigan during the period July 1, 1991
through September 25, 1996.
11
PAGE 12
Item 1. Legal Proceedings--Continued
The Company, along with other companies, has been named
as a defendant in at least nine 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-
2963(FMS). On September 27, 1996 the Company entered
into an agreement with counsel for the plaintiff class
in which among other things, the Company agreed to pay
$35 million to members of the class, without admitting
the alleged violations of law. Formal papers seeking
court approval of the settlement are expected to be
filed soon. 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 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 has moved to
dismiss this action. The Company, along with other
companies, also has been named as a defendant in at
least 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 Los Angeles, California and is
encaptioned Bianco v. Archer Daniels Midland Co., et
al., Civil Action No. 978912.
12
PAGE 13
Item 1. Legal Proceedings --Continued
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 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 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, 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
Item 1. Legal Proceedings--Continued
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
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.
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 then current 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 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 7, 1996.
14
PAGE 15
Item 1. Legal Proceedings--Continued
The Company and its directors also have been named as
defendants in a putative class action suit encaptioned
Loudon v. Archer-Daniels-Midland Co., et al., Civil
Action No. 14638, filed in the Delaware Court of
Chancery on October 20, 1995. This action alleges
violations of Delaware state law and seeks invalidation
of the 1995 election of the Company's directors on the
basis of alleged omissions from the proxy statement
issued by the Company prior to its October 19, 1995
annual meeting. 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, and encaptioned Buckley v. Archer-Daniels-
Midland Co., et al., Civil Action No. 95-C-2269,
alleging violations of analogous provisions of federal
securities law. The defendants moved to dismiss this
action. The Court granted the motion to dismiss on June
6, 1996, and the case is now on appeal.
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 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 financial
condition or results of operations.
Item 2. Changes in Securities
a) In July, 1996, the Board of Directors
declared a 5 percent stock dividend which was paid on
September 16, 1996, to shareholders of record on
August 19, 1996.
Item 6. Exhibits and Reports on Form 8-K
a) A Form 8-K was not filed during the quarter
ended September 30, 1996.
15
PAGE 16
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: November 13, 1996
16
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