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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period ________________________ 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 - 557,527,630 shares
(October 31, 1997)
1
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PART I - FINANCIAL INFORMATION
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
--------------------------
(In thousands, except
per share amounts)
<S> <C> <C>
Net sales and other operating income $3,651,30 $3,330,47
2 5
Cost of products sold and other
operating costs 3,326,134 2,960,475
_________ _________
Gross Profit 325,168 370,000
Selling, general and administrative 134,986 311,332
expenses
_________ _________
Earnings From Operations 190,182 58,668
Other income 8,833 19,441
_________ _________
Earnings Before Income Taxes 199,015 78,109
Income taxes 67,665 74,556
_________ _________
Net Earnings $ 131,3 $ 3,553
50
========= =========
Average number of shares outstanding 557,695 572,360
Net earnings per common share $.24 $.01
Dividends per common share $.048 $.046
</TABLE>
See notes to consolidated financial statements.
2
PAGE 3
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER JUNE 30,
30,
1997 1997
------------------------
---
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 144,829 $ 397,788
Marketable securities 448,045 330,208
Receivables 1,553,390 1,329,350
Inventories 2,071,409 2,094,092
Prepaid expenses 156,395 132,897
__________ __________
Total Current Assets 4,374,068 4,284,335
Investments and Other Assets
Investments in and advances to 1,327,325 1,102,420
affiliates
Long-term marketable securities 1,104,476 987,665
Other assets 268,223 271,352
__________ __________
2,700,024 2,361,437
Property, Plant and Equipment
Land 122,257 118,898
Buildings 1,492,703 1,448,945
Machinery and equipment 7,029,320 6,841,225
Construction in progress 871,773 765,720
Less allowances for depreciation (4,567,256) (4,466,193)
__________ __________
4,948,797 4,708,595
__________ __________
$12,022,889 $11,354,367
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER JUNE 30,
30,
1997 1997
------------------------
--
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $1,016,015 $ 604,831
Accounts payable 1,255,368 1,126,313
Accrued expenses 517,998 493,944
Current maturities of long-term debt 27,111 23,667
__________ __________
Total Current Liabilities 2,816,492 2,248,755
Long-term Debt 2,352,468 2,344,949
Deferred Credits
Income taxes 607,491 597,514
Other 113,829 113,020
__________ __________
721,320 710,534
Shareholders' Equity
Common stock 4,180,285 4,192,321
Reinvested earnings 1,952,324 1,857,808
__________ __________
6,132,609 6,050,129
__________ __________
$12,022,889 $11,354,367
========== ==========
</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
1997 1996
------------------------
(In thousands)
<S> <C> <C>
Operating Activities
Net earnings $ 131,350 $ 3,553
Adjustments to reconcile to net cash provided
by operations
Depreciation and amortization 117,539 106,254
Deferred income taxes 4,128 22,751
Amortization of long-term debt discount 7,849 6,875
(Gain)loss on marketable securities (23,698) (30,718)
transactions
Other 6,152 21,546
Changes in operating assets and
liabilities
Receivables (182,327) (79,361)
Inventories 144,598 223,700
Prepaid expenses (23,201) 4,710
Accounts payable and accrued expenses 131,376 277,501
________ ________
Total Operating Activities 313,766 556,811
Investing Activities
Purchases of property, plant and equipment (190,591) (227,852)
Net assets of businesses acquired (209,355) (10,970)
Investments in and advances to affiliates (188,095) (307,809)
Purchases of marketable securities (389,177) (375,671)
Proceeds from sales of marketable securities 188,891 236,683
________ ________
Total Investing Activities (788,327) (685,619)
Financing Activities
Long-term debt payments (3,900) (3,123)
Net borrowings under line of credit 281,509 116,965
agreements
Purchases of treasury stock (30,406) (40,989)
Cash dividends and other (25,601) (25,876)
________ ________
Total Financing Activities 221,602 46,977
________ ________
Decrease In Cash and Cash Equivalents (252,959) (81,831)
Cash and Cash Equivalents Beginning of Period 397,788 534,702
________ ________
Cash and Cash Equivalents End of Period $ 144,829 $ 452,871
======== ========
</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 ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the
year ending June 30, 1998. 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, 1997.
Certain items in prior year financial statements have
been reclassified to conform to the current year's
presentation.
<TABLE>
<CAPTION>
Note 2. Other Income
THREE MONTHS ENDED
SEPTEMBER 30
1997 1996
---------------------
(In thousands)
<S> <C> <C>
Investment income $28,202 $38,867
Interest expense (55,419) (46,127)
Gain on marketable securities
transactions 23,701 30,301
Equity in earnings of affiliates 10,557 (1,991)
Other 1,792 (1,609)
----- ------
$ 8,833 $19,441
===== ======
</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 15, 1997.
7
PAGE 8
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4.Antitrust Investigation and Related Litigation
Federal grand juries in the Northern Districts of
Illinois, California and Georgia, under the direction of
the United States Department of Justice ("DOJ"), have
been investigating possible violations by the Company
and others with respect to the sale of lysine, citric
acid and high fructose corn syrup, respectively. In
connection with an agreement with the DOJ, the Company
has paid the United States a fine of $100 million. This
agreement constitutes a global resolution of all matters
between the DOJ and the Company and brings to a close
all DOJ investigations of the Company.
Following public announcement in June 1995 of these
investigations, the Company and certain of its then
current 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, was named as a defendant in a number of
putative class action antitrust suits and other
proceedings 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 actions and proceedings unless they can be
settled on terms deemed acceptable by the parties. These
matters have resulted and could result in the Company
being subject to monetary damages, other sanctions and
expenses.
The Company has made provisions of $200 million in
fiscal 1997 and $31 million in fiscal 1996 to cover the
fine, litigation settlements related to the federal
lysine class action, federal securities class action,
the federal citric class action and certain state
actions filed by indirect purchasers of lysine, and
related costs and expenses associated with the
litigation described in the proceeding paragraph.
Because of the early stage of other putative class
actions and proceedings, including those related to high
fructose corn syrup, the ultimate outcome and
materiality of these matters cannot presently be
determined. Accordingly, no provision for any liability
that may result therefrom has been made in the unaudited
consolidated financial statements.
The Company and its directors have also been named as
defendants in a putative class action suit which 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 1995 Annual Meeting of
Shareholders. This case was dismissed, appealed and has
now been remanded to provide the plaintiffs an
opportunity to replead.
8
PAGE 9
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
OPERATIONS
The Company is in one business segment - procuring,
transporting, storing, processing and merchandising agricultural
commodities and products. 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,
1997 1996
-------------------
(In millions)
<S> <C> <C>
Oilseed products $2,309 $2,106
Corn products 535 549
Wheat and other milled products 387 449
Other products and services 420 226
----- -----
$3,651 $3,330
===== =====
</TABLE>
Net sales and other operating income increased 10 percent for
the quarter to $3.7 billion due primarily to sales attributable
to recently acquired operations. Sales of oilseed products
increased 10 percent for the quarter due principally to higher
sales volumes reflecting strong worldwide vegetable oil demand.
This increase was partially offset by lower average selling
prices reflecting the lower cost of raw materials. Sales of corn
products decreased 2 percent due primarily to lower average
selling prices for both the Company's sweetener products and
fuel alcohol. This decrease was partially offset by increased
sales volumes for both fuel alcohol and sweetener products as
well as by increased average selling prices for lysine. Sales of
wheat and other milled products decreased 14 percent for the
quarter due to decreased average selling prices reflecting the
lower cost of raw materials. The increase in other products and
services was due principally from sales related to the Company's
recently acquired cocoa business.
Cost of products sold and other operating costs increased $366
million for the quarter to $3.3 billion due principally to costs
related to recently acquired operations. To a lesser extent,
costs increased due to higher sales volumes partially offset by
lower average raw material costs.
Gross profit declined $45 million to $325 million for the
quarter due primarily to the net effect of decreased sales
prices versus lower raw material costs and decreased
merchandising and transportation margins. These decreases were
partially offset by increased sales volumes and margins from
recently acquired operations.
9
PAGE 10
Selling, general and administrative expenses decreased $176
million to $135 million due primarily to decreased legal and
litigation related costs of $200 million 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 to the
financial statements). Additionally, selling, general and
administrative costs increased $13 million due to expenses
attributable to recently acquired operations.
The decrease in other income for the quarter was due to
decreased investment income due to lower invested funds,
increased interest expense due to higher borrowing levels and
decreased gains on marketable securities transactions. These
decreases were partially offset by increased equity in earnings
of unconsolidated affiliates.
The decrease in income taxes for the quarter was a result of a
lower effective income tax rate partially offset by higher
pretax earnings. The decrease in the Company's effective income
tax rate to 34 percent for the quarter compared to an effective
rate of 95 percent last year is due primarily to the non-
deductibility for income tax purposes last year of a portion of
the Company's litigation settlements and fines.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company continued to show
substantial liquidity with working capital of $1.6 billion,
including cash and marketable securities of $593 million.
During the quarter, the Company's cash and marketable
securities net of short-term debt decreased $429 million and
working capital decreased $478 million reflecting the Company's
business acquisitions, investments in property, plant and
equipment expansions and investments in affiliates. Capital
resources remained strong as reflected in the Company's net
worth of $6.1 billion. The Company's ratio of long-term debt to
total capital at September 30, 1997 was approximately 26
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 ("DOJ") have been conducting
investigations into possible violations by the Company and
others of federal antitrust laws and related matters with
respect to the sale of lysine, citric acid and high fructose
corn syrup. In connection with an agreement with the DOJ, the
Company has paid the United States a fine of $100 million. This
agreement constitutes a global resolution of all matters between
the DOJ and the Company and brings to a close all DOJ
investigations of the Company. In addition, related civil class
actions and other proceedings 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 settled certain civil federal class
action suits involving lysine, citric acid, and securities, and
certain state actions filed by indirect purchasers of lysine.
The Company made provisions of $231 million in prior years to
cover such fines and settlements and related costs and expenses.
Because of the early stage of other putative class actions and
proceedings, including those related to high fructose corn
syrup, the ultimate outcome and materiality of these matters
cannot presently be determined. Accordingly, no provision for
any liability that may result therefrom has been made in the
unaudited consolidated financial statements.
10
PAGE 11
PART II - OTHER INFORMATION
Item 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
In 1993, the State of Illinois Environmental Protection
Agency ("IEPA") brought administrative enforcement
proceedings arising out of the Company's alleged failure
to obtain permits for certain pollution control equipment
at certain of the Company's processing facilities in
Illinois. The Company and IEPA have executed a settlement
agreement with respect to one of these proceedings. That
agreement is currently before the Illinois Pollution
Control Board for approval. The Company believes it has
meritorious defenses to the remaining proceeding. In
management's opinion this settlement and the remaining
proceeding will not, either individually or in the
aggregate, have a material adverse effect on the Company's
financial condition or results of operations.
The Company is involved in approximately 35 administrative
and judicial proceedings in which it has been identified
as a potentially responsible party (PRP) under the federal
Superfund law and its state analogs for the study and
clean-up of sites contaminated by material discharged into
the environment. In all of these matters, there are
numerous PRPs. Due to various factors such as the required
level of remediation and participation in the clean-up
effort by others, the Company's future clean-up costs at
these sites cannot be reasonably estimated. However, in
management's opinion these proceedings will not, either
individually or in the aggregate, have a material adverse
effect on the Company's financial condition or results of
operations.
LITIGATION REGARDING ALLEGED ANTICOMPETITIVE PRACTICES
The Company and certain of its current and former officers
and directors are currently defendants in various lawsuits
related to alleged anticompetitive practices by the
Company as described in more detail below. The Company and
the individual defendants named in these actions intend to
vigorously defend the actions unless they can be settled
on terms deemed acceptable to the parties. The Company has
paid and intends to continue to pay the legal expenses of
its current and former officers and directors and to
indemnify these persons with respect to these actions in
accordance with Article X of the Bylaws of the Company.
GOVERNMENTAL INVESTIGATIONS
Federal grand juries in the Northern Districts of Illinois,
California and Georgia, under the direction of the United
States Department of Justice ("DOJ"), have been
investigating possible violations by the Company and others
with respect to the sale of lysine, citric acid and high
fructose corn syrup, respectively. In connection with an
agreement with the DOJ, the Company has paid the United
States a fine of $100 million. This agreement constitutes a
global resolution of all matters between the DOJ and the
Company and brought to a close all DOJ investigations of
the Company.
The Company received notice that certain foreign
governmental entities were commencing investigations to
determine whether anticompetitive practices occurred in
their jurisdictions. In February 1997, the Company's three
Mexican subsidiaries were notified that the Mexican
Federal Competition Commission commenced an investigation
as to whether the Company's marketing and sale of lysine
in Mexico resulted in violations of that country's federal
antitrust laws. In June 1997, the Company and several of
its European subsidiaries were notified that the
Commission of the European Communities initiated an
investigation as to their possible anticompetitive
practices in the amino acid markets, in particular the
lysine market, in the European Union. In September 1997,
the Company received a request for information from the
Commission of the European Communities with respect to an
investigation being conducted by that Commission into the
possible existence of certain agreements and/or concerted
practices in the citric acid market within the European
Union. Each of these investigations is in the early stages
and, accordingly, their ultimate outcome and materiality
cannot presently be determined.
HIGH FRUCTOSE CORN SYRUP ACTIONS
The Company, along with other companies, has been named as
a defendant in thirty antitrust suits involving the sale
of high fructose corn syrup. Twenty-nine of these actions
have been brought as putative class actions.
FEDERAL ACTIONS. Twenty-two of these putative class
actions allege violations of federal antitrust laws,
including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of high fructose corn syrup, and seek injunctions
against continued alleged illegal conduct, treble damages
of an unspecified amount, attorneys fees and costs, and
other unspecified relief. The putative classes in these
cases comprise certain direct purchasers of high fructose
corn syrup during certain periods in the 1990s. These
twenty-two actions have been transferred to the United
States District Court for the Central District of Illinois
and consolidated under the caption In Re High Fructose
Corn Syrup Antitrust Litigation, MDL No. 1087 and Master
File No. 95-1477. The parties are in the midst of
discovery in this action.
On January 14, 1997, the Company, along with other
companies, was named a defendant in a non-class action
antitrust suit involving the sale of high fructose corn
syrup and corn syrup. This actions which is encaptioned
Gray & Co. v. Archer Daniels Midland Co., et al, No. 97-69-
AS, and was filed in federal court in Oregon, alleges
violations of federal antitrust laws and Oregon and
Michigan state antitrust laws, including allegations that
defendants conspired to fix, raise, maintain and stabilize
the price of corn syrup and high fructose corn syrup, and
seeks treble damages, attorneys' fees and costs of an
unspecified amount. The parties are in the midst of
discovery in this action.
STATE ACTIONS. The Company, along with other companies,
also has been named as a defendant in six putative class
action antitrust suits filed in California state court
involving the sale of high fructose corn syrup. These
California actions allege violations of the California
antitrust and unfair competition laws, including
allegations that the defendants agreed to fix, stabilize
and maintain at artificially high levels the prices of
high fructose corn syrup, and seek treble damages of an
unspecified amount, attorneys fees and costs, restitution
and other unspecified relief. One of the California
putative classes comprises certain direct purchasers of
high fructose corn syrup in the State of California during
certain periods in the 1990s. This action was filed on
October 17, 1995 in Superior Court for the County of
Stanislaus, California and encaptioned Kagome Foods, Inc.
v Archer-Daniels-Midland Co. et al., Civil Action No.
37236. This action has been removed to federal court and
consolidated with the federal class action litigation
pending in the Central District of Illinois referred to
above. The other five California putative classes comprise
certain indirect purchasers of high fructose corn syrup
and dextrose in the State of California during certain
periods in the 1990s. One such action was filed on July
21, 1995 in the Superior Court of the County of Los
Angeles, California and is encaptioned Borgeson v. Archer-
Daniels-Midland Co., et al., Civil Action No. BC131940.
This action and the other four indirect purchaser actions
have been coordinated before a single court in Stanislaus
County, California under the caption, Food Additives
(HFCS) cases, Master File No. 39693. The other four
actions are encaptioned, Goings v. Archer Daniels Midland
Co., et al., Civil Action No. 750276 (Filed on July 21,
1995, Orange County Superior Court); Rainbow Acres v.
Archer Daniels Midland Co., et al., Civil Action No.
974271 (Filed on November 22, 1995, San Francisco County
Superior Court); Patane v. Archer Daniels Midland Co., et
al., Civil Action No. 212610 (Filed on January 17, 1996,
Sonoma County Superior Court); and St. Stan's Brewing Co.
v. Archer Daniels Midland Co., et al., Civil Action No.
37237 (Filed on October 17, 1995, Stanislaus County
Superior Court). The parties are in the midst of discovery
in this action.
The Company, along with other companies, also has been
named a defendant in a putative class action antitrust
suit filed in Alabama state court. The Alabama action
alleges violations of the Alabama, Michigan and Minnesota
antitrust laws, including allegations that defendants
agreed to fix, stabilize and maintain at artificially high
levels the prices of high fructose corn syrup, and seeks
an injunction against continued illegal conduct, damages
of an unspecified amount, attorneys fees and costs, and
other unspecified relief. The putative class in the
Alabama action comprises certain indirect purchasers in
Alabama, Michigan and Minnesota during the period March
18, 1994 to March 18, 1996. This action was filed on March
18, 1996 in the Circuit Court of Coosa County, Alabama,
and is encaptioned Caldwell v. Archer-Daniels-Midland Co.,
et al., Civil Action No. 96-17. On April 23, 1997, the
court granted the defendants' motion to sever and dismiss
the non-Alabama claims. The remaining parties are in the
midst of discovery in this action.
11
PAGE 12
LYSINE ACTIONS
The Company, along with other companies, had been named as
a defendant in twenty-one putative class action antitrust
suits involving the sale of lysine. Except for several
plaintiffs that opted out of the federal class action
settlement and the actions specifically described below,
all such suits have been settled, dismissed or withdrawn.
STATE ACTIONS. The Company has been named as a defendant,
along with other companies, in two putative class action
antitrust suits and one non-class action suit filed in
Alabama state court, one putative class action antitrust
suit filed in Tennessee state court and one putative class
action antitrust suit filed in Michigan state court
involving the sale of lysine. The two putative Alabama
class actions allege violations of the Alabama antitrust
laws, including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels
the prices of lysine, and seek an injunction against
continued alleged illegal conduct, damages of an
unspecified amount, attorneys fees and costs, and other
unspecified relief. The two putative classes in the
Alabama actions comprise certain indirect purchasers of
lysine in the State of Alabama during certain periods in
the 1990s. One such action was filed on August 17, 1995 in
the Circuit Court of DeKalb County, Alabama, and is
encaptioned Ashley v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 95-336. The parties are in the midst of
discovery in this action. The other Alabama action,
encaptioned Bailey v. Archer Daniels Midland Co., et al.,
Civil Action No. 95-165, and filed on December 11, 1995 in
the Circuit Court of Tallapoosa County, has been placed on
the court's administrative docket pending the outcome of
the Ashley action. The non-class action, encaptioned Kent
v. Archer Daniels Midland Co., et al, No. CV 9701108, and
filed on February 21, 1997 in the Circuit Court of
Jefferson County, Alabama, includes allegations that are
similar to these contained in the putative class actions
and seeks monetary relief in the amount of $670,000,
injunctive relief against alleged illegal conduct,
attorneys fees and costs, punitive damages and other
unspecified relief. This action has been removed to
federal court in the Northern District of Alabama. The
Tennessee action, encaptioned McCormack Farms v. Archer
Daniels Midland Co., et al., Civil Action No. 96C-2190,
and filed on June 11, 1996 in Davidson County Circuit
Court, alleges a restraint of trade in violation of the
Tennessee Trade Practices Act and Tennessee Consumer
Protection Act. This action includes allegations that
defendants conspired to fix, maintain or stabilize the
prices of lysine and seeks an injunction against continued
illegal conduct, treble damages of an unspecified amount,
attorneys' fees and costs, and other unspecified relief.
The putative class in this case comprises certain indirect
purchasers of lysine within the State of Tennessee during
the period June 10, 1992 through June 10, 1996. The
Company has not yet filed a responsive pleading. The
Michigan action alleges a restraint of trade in violation
of the Michigan Antitrust Reform Act and include
allegations that defendants conspired to fix, raise,
maintain and stabilize the price of lysine and seeks an
injunction against continued illegal conduct, treble
damages of an unspecified amount, attorneys' fees and
costs, and other unspecified relief. The putative class in
this case comprises certain indirect purchasers of lysine
within the State of Michigan during certain periods in the
1990s. This action, encaptioned Michigan Pork Producers
Assn, et al. v. Archer Daniels Midland Co., et al., No.
906-10696-CZ, was filed on September 25, 1996 in Kent
County Circuit Court. The Company has not yet filed a
responsive pleading in either action.
12
PAGE 13
CITRIC ACID ACTIONS
The Company, along with other companies, had been named as
a defendant in eleven putative class action antitrust suits
and two non-class action antitrust suits involving the sale
of citric acid. Except for several plaintiffs that opted
out of the federal class action settlement and the actions
specifically described below, all such suits have been
settled or dismissed.
FEDERAL ACTIONS. Seven of these actions alleged
violations of federal antitrust laws, including allegations
that the defendants agreed to fix, stabilize and maintain
at artificially high levels the prices of citric acid, and
sought injunctions against continued alleged illegal
conduct, treble damages of an unspecified amount, attorneys
fees and costs, and other unspecified relief. The putative
classes in these cases comprise certain direct purchasers
of citric acid for certain periods in the 1990s. These six
actions were transferred to the United States District
Court for the Northern District of California and
consolidated as In Re Citric Acid Antitrust Litigation, MDL
No. 1092, Master File No. C-95-2963(FMS). On September 27,
1996 the Company entered into an agreement with counsel for
the plaintiff class in this consolidated action in which
among other things, the Company agreed to pay $35 million
to members of the class, without admitting the alleged
violations of law. On March 3, 1997, the court
preliminarily approved the settlement and final approval
was granted on July 23, 1997. On February 4, 1997, a class
action complaint, encaptioned Galavan Supplements Ltd. v.
Archer Daniels Midland Co., et al., No. 97-0704 JGD (VAPx),
was filed in the United States District Court for the
Central District of California. The Company, along with
other companies, was named a defendant in this putative
class action brought on behalf of a class consisting of all
persons and entities outside of the United States who
purchased citric acid directly from any defendants through
their foreign facilities during the time period July 1,
1991 through June 30, 1995. This action alleges violations
of the federal antitrust laws, including allegations that
the defendants conspired to fix, maintain and stabilize the
price of citric acid and to allocate amongst themselves
their major citric acid customers, accounts and market
shares on a worldwide basis. The Company, along with other
defendants, has moved to dismiss this action. The Company,
along with other companies, also has been named as a
defendant in two non-class action federal antitrust suits
involving the sale of citric acid. One action was filed on
June 9, 1997 in the United States District Court for the
Northern District of California and is encaptioned The
Proctor & Gamble Manufacturing Co., et al. v. Archer-
Daniels-Midland Company, et al., Civil Action No. 97-2155
(VRW). The other action was filed on June 26, 1997 in the
United States District Court for the Northern District of
California and is encaptioned Conopco, Inc., et al. v.
Archer-Daniels-Midland Company, et al., Civil Action No. 97-
2407 (MMC). Both actions allege violations of federal
antitrust laws, including allegations that defendants
agreed to fix, raise and maintain the price of citric acid,
and seek an injunction against continued alleged illegal
conduct, treble damages of an unspecified amount,
attorney's fees and costs, and other unspecified relief.
These actions, which have been brought by entities that
opted out of the federal class action, have been
coordinated with In Re Citric Acid Antitrust Litigation
that also is pending in the United States District Court
for the Northern District of California. The Company and
the plaintiffs in Conopco have settled this action, the
terms of which provide for consideration to be paid by the
Company in the form of cash and product in amounts not
deemed material. The parties are in the midst of discovery
in the remaining action.
13
PAGE 14
STATE ACTIONS. The Company, along with other companies,
also has been named as a defendant in one putative class
action antitrust suit filed in Alabama state court
involving the sale of citric acid. This action alleges
violations of the Alabama antitrust laws, including
allegations that the defendants agreed to fix, stabilize
and maintain at artificially high levels the prices of
citric acid, and seeks an injunction against continued
alleged illegal conduct, damages of an unspecified amount,
attorneys fees and costs, and other unspecified relief.
The putative class in the Alabama action comprises certain
indirect purchasers of citric acid in the State of Alabama
from July 1993 until July 1995. This action was filed on
July 27, 1995 in the Circuit Court of Walker County,
Alabama and is encaptioned Seven Up Bottling Co. of
Jasper, Inc. v. Archer-Daniels-Midland Co., et al., Civil
Action No. 95-436. The Company currently is seeking
appellate review of the denial of its motion to dismiss
this action. The Company, along with other companies, also
has been named as a defendant in two putative class
action antitrust suits filed in California state court
involving the sale of citric acid. These actions allege
violations of the California antitrust and unfair
competition laws, including allegations that the
defendants conspired to fix, maintain or stabilize the
price of citric acid, and seek injunctions against
continued illegal conduct, treble damages of an
unspecified amount, attorneys fees and costs, and other
unspecified relief. The putative classes in these cases
comprise certain indirect purchasers of citric acid within
the State of California during certain periods in the
1990s. One such action was filed on June 12, 1996 in the
Superior Court of the County of San Francisco, California
and is encaptioned Bianco v. Archer Daniels Midland Co.,
et al., Civil Action No. 978912. The second action was
filed on June 28, 1996 in San Francisco County Superior
Court and is encaptioned Wignall v. Archer Daniels Midland
Co., et al., Civil Action No. 979360. These actions
recently have been coordinated before a single court in
San Francisco, County, California under the caption, Food
Additives (Lysine/Citric Acid) cases, Coordination
Proceeding No. 3265. The Company, along with other
companies, also has been named as a defendant in one
putative class action antitrust suit filed in Wisconsin
state court involving the sale of citric acid. This action
alleges violations of the laws of Wisconsin, Minnesota,
Alabama, Arizona, California, District of Columbia,
Florida, Tennessee, West Virginia, Mississippi, New
Mexico, North Carolina, South Dakota, North Dakota,
Kansas, Louisiana, Michigan and Maine, including
allegations that defendants conspired to maintain the
price of citric acid at artificially high levels and seeks
injunctive relief, treble damages of an unspecified
amount, attorneys fees and costs and other unspecified
relief. The putative class in this case comprises certain
indirect purchasers of citric acid in the above referenced
states during the period July 1, 1991 through June 27,
1995. This action was filed on December 20, 1996 in the
Circuit Court for Milwaukee County, Wisconsin and is
encaptioned Raz, et al. v. Archer-Daniels-Midland Co., et
al., No. 96-CV-9729.
14
PAGE 15
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID STATE CLASS ACTIONS
The Company, along with other companies, has been named as
a defendant in six putative class action antitrust suits
involving the sale of both high fructose corn syrup and
citric acid. Two of these actions allege violations of the
California antitrust and unfair competition laws,
including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of high fructose corn syrup and citric acid, and
seek treble damages of an unspecified amount, attorneys
fees and costs, restitution and other unspecified relief.
The putative class in one of these California cases
comprises certain direct purchasers of high fructose corn
syrup and citric acid in the State of California during
the period January 1, 1992 until at least October 1995.
This action was filed on October 11, 1995 in the Superior
Court of Stanislaus County, California and is entitled
Gangi Bros. Packing Co. v. Archer-Daniels-Midland Co., et
al., Civil Action No. 37217. The putative class in the
other California case comprises certain indirect
purchasers of high fructose corn syrup and citric acid in
the state of California during the period October 12, 1991
until November 20, 1995. This action was filed on November
20, 1995 in the Superior Court of San Francisco County and
is encaptioned MCFH, Inc. v. Archer-Daniels-Midland Co.,
et al., Civil Action No. 974120. The California Judicial
Council has bifurcated the citric acid and high fructose
corn syrup claims in these actions and coordinated them
with other actions in San Francisco County Superior Court
and Stanislaus County Superior Court. The Company, along
with other companies, also has been named as a defendant
in at least one putative class action antitrust suit filed
in West Virginia state court involving the sale of high
fructose corn syrup and citric acid. This action also
alleges violations of the West Virginia antitrust laws,
including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of high fructose corn syrup and citric acid, and
seeks treble damages of an unspecified amount, attorneys
fees and costs, and other unspecified relief. The putative
class in the West Virginia action comprises certain
entities within the State of West Virginia that purchased
products containing high fructose corn syrup and/or citric
acid for resale from at least 1992 until 1994. This action
was filed on October 26, 1995, in the Circuit Court for
Boone County, West Virginia, and is encaptioned Freda's v.
Archer-Daniels-Midland Co., et al., Civil Action No. 95-C-
125. The Company, along with other companies, also has
been named as defendant in a putative class action
antitrust suit filed in Michigan state court involving the
sale of high fructose corn syrup and citric acid. This
action alleges violations of the Michigan antitrust laws,
including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of high fructose corn syrup and citric acid, and
seeks treble damages of an unspecified amount, attorneys
fees and costs, and other unspecified relief. The putative
class in the Michigan action comprises certain persons
within the State of Michigan that purchased products
containing high fructose corn syrup and/or citric acid
during the period January 1993 through June 27, 1995. This
action was filed on February 26, 1996 in the Circuit Court
for Ingham County, Michigan, and is encaptioned Wilcox v.
Archer-Daniels-Midland Co., et al., Civil Action No. 96-
82473-CP. The parties are in the midst of discovery in
this action. On September 29, 1997, the court denied the
plaintiff's motion for class certification. The Company,
along with other companies, also has been named as a
defendant in a putative class action antitrust suit filed
in the Superior Court for the District of Columbia
involving the sale of high fructose corn syrup and citric
acid. This action alleges violations of the District of
Columbia antitrust laws, including allegations that the
defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose corn
syrup and citric acid, and seeks treble damages of an
unspecified amount, attorneys fees and costs, and other
unspecified relief. The putative class in the District of
Columbia action comprises certain persons within the
District of Columbia that purchased products containing
high fructose corn syrup and/or citric acid during the
period January 1, 1992 through December 31, 1994. This
action was filed on April 12, 1996 in the Superior Court
for the District of Columbia, and is encaptioned Holder v.
Archer-Daniels-Midland Co., et al., Civil Action No. 96-
2975. The parties are in the midst of discovery in this
action. The Company, along with other companies, has been
named as a defendant in a putative class action antitrust
suit filed in Kansas state court involving the sale of
high fructose corn syrup and citric acid. This action
alleges violations of the Kansas antitrust laws, including
allegations that the defendants agreed to fix, stabilize
and maintain at artificially high levels the prices of
high fructose corn syrup and citric acid, and seeks treble
damages of an unspecified amount, court costs and other
unspecified relief. The putative class in the Kansas
action comprises certain persons within the State of
Kansas that purchased products containing high fructose
corn syrup and/or citric acid during at least the period
January 1, 1992 through December 31, 1994. This action was
filed on May 7, 1996 in the District Court of Wyandotte
County, Kansas and is encaptioned Waugh v. Archer-Daniels-
Midland Co., et al., Case No. 96-C-2029. The parties are
in the midst of discovery in this action.
15
PAGE 16
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID/LYSINE STATE CLASS
ACTIONS
The Company, along with other companies, has been named as
a defendant in six putative class action antitrust suits
filed in California state court involving the sale of high
fructose corn syrup, citric acid and/or lysine. These
actions allege violations of the California antitrust and
unfair competition laws, including allegations that the
defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose corn
syrup, citric acid and/or lysine, and seek treble damages
of an unspecified amount, attorneys fees and costs,
restitution and other unspecified relief. One of the
putative classes comprises certain direct purchasers of
high fructose corn syrup, citric acid and/or lysine in the
State of California during a certain period in the 1990s.
This action was filed on December 18, 1995 in the Superior
Court for Stanislaus County, California and is encaptioned
Nu Laid Foods, Inc. v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 39693. The other five putative classes
comprise certain indirect purchasers of high fructose corn
syrup, citric acid and/or lysine in the State of
California during certain periods in the 1990s. One such
action was filed on December 14, 1995 in the Superior
Court for Stanislaus County, California and is encaptioned
Batson v. Archer-Daniels-Midland Co., et al., Civil Action
No. 39680. The other actions are encaptioned Nu Laid
Foods, Inc. v. Archer Daniels Midland Co., et al., No
39693 (Filed on December 18, 1995 Stanislaus County
Superior Court); Abbott v. Archer Daniels Midland Co., et
al., No. 41014 (Filed on December 21, 1995, Stanislaus
County Superior Court); Noldin v. Archer Daniels Midland
Co., et al., No. 41015 (Filed on December 21, 1995,
Stanislaus County Superior Court); Guzman v. Archer
Daniels Midland Co., et al., No. 41013 (Filed on December
21, 1995, Stanislaus County Superior Court) and Ricci v.
Archer Daniels Midland Co., et al., No. 96-AS-00383 (Filed
on February 6, 1996, Sacramento County Superior Court). As
noted in prior filings, the plaintiffs in these actions
and the lysine defendants have executed a settlement
agreement that has been approved by the court and the
California Judicial Council has bifurcated the citric acid
and high fructose corn syrup claims and coordinated them
with other actions in San Francisco County Superior Court
and Stanislaus County Superior Court.
SHAREHOLDER DERIVATIVE ACTIONS
Following the public announcement of the grand jury
investigations in June 1995 discussed above, three
shareholder derivative suits were filed against certain of
the Company's then current directors and executive officers
and nominally against the Company in the United States
District Court for the Northern District of Illinois and
fourteen similar shareholder derivative suits were filed in
the Delaware Court of Chancery. The derivative suits filed
in federal court in Illinois were consolidated under the
name Felzen, et al. v. Andreas, et al., Civil Action No. 95-
C-4006, 95-C-4535, and a consolidated amended derivative
complaint was filed on September 29, 1995. This complaint
names all then current directors of the Company (except Mr.
Coan) and one former director as defendants and names the
Company as a nominal defendant. It alleges breach of
fiduciary duty, waste of corporate assets, abuse of control
and gross mismanagement, based on the antitrust allegations
described above, as well as other alleged wrongdoing. On
October 31, 1995, the Court granted the defendants' motion
to transfer the Illinois consolidated derivative action to
the Central District of Illinois, wherein it now bears the
case number 95-2279. On April 26, 1996, the court dismissed
the suit without prejudice and permitted the plaintiffs
twenty-one days to refile it. The plaintiffs refiled the
complaint on May 17, 1996. The defendants again moved to
dismiss the complaint on June 1, 1996. Plaintiffs have
supplemented the complaint to include the antitrust
settlements and guilty plea described above. The fourteen
shareholder derivative suits filed in the Delaware Court of
Chancery have been consolidated as In Re Archer Daniels
Midland Derivative Litigation, Consolidated No. 14403. An
amended and consolidated complaint was filed on November
19, 1996. ADM moved to dismiss the complaint on December
12, 1996. On May 29, 1997, the Company executed a
Memorandum of Understanding with counsel for both the
Illinois and Delaware shareholder derivative plaintiffs.
This Memorandum of Understanding provides for, among other
things, $8 million to be paid by or on behalf of certain
defendants in these actions to the Company and certain
changes in the structure and policies of the Company's
Board of Directors. On May 30, 1997, the United States
District Court for the Central District of Illinois
preliminarily approved this settlement and on July 7, 1997
final approval was granted. Certain entities appealed the
final settlement approval order to the United States Court
of Appeals for the Seventh Circuit and that appeal is
pending. Provided the order approving the Memorandum of
Understanding is affirmed, the parties have agreed to
jointly seek dismissal of the Delaware actions with
prejudice.
16
PAGE 17
DELAWARE STATE LAW/FEDERAL SECURITIES LAWS ACTIONS
The Company and certain of its current and former
directors also have been named as defendants in a putative
class action suit encaptioned Loudon v. Archer-Daniels-
Midland Co., et al., Civil Action No. 14638, filed in the
Delaware Court of Chancery on October 20, 1995. This
action alleges violations of Delaware state law and seeks
invalidation of the 1995 election of the Company's
directors on the basis of alleged omissions from the proxy
statement issued by the Company prior to its October 19,
1995 annual meeting of shareholders. The Delaware Court of
Chancery dismissed this action on February 20, 1996. On
September 17, 1997, the Supreme Court of Delaware affirmed
the lower court's judgment and remanded the case to
provide the plaintiff's an opportunity to replead. The
revised complaint must be filed on or before November 21,
1997.
OTHER
As described in the notes to the unaudited consolidated
financial statements and management's discussion of
operations and financial condition, the Company has made
provisions to cover assessed fines, litigation settlements
and related costs and expenses described above. However,
because of the early stage of other putative class actions
and proceedings described above, including those related
to high fructose corn syrup, the ultimate outcome and
materiality of these matters cannot presently be
determined. Accordingly, no provision for any liability
that may result therefrom has been made in the
consolidated financial statements.
Item 2. Changes in Securities
a) In July, 1997, the Board of
Directors declared a 5 percent stock
dividend which was paid on September 15, 1997, to
shareholders of record on August 18, 1997.
Item 6. Exhibits and Reports on Form 8-K
a) A Form 8-K was not filed during the
quarter ended September 30, 1997.
17
PAGE 18
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/ D. J. Smith
D. J. Smith
Vice President, Secretary and
General Counsel
Dated: November 7, 1997
18
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