PAGE 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 - 533,417,633 shares
(April 30, 1997)
1
PAGE 2
PART I - FINANCIAL INFORMATION
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
-----------------------
(In thousands, except
per share amounts)
<S> <C> <C>
Net sales and other operating income $3,465,955 $3,486,665
Cost of products sold and other
operating costs 3,254,675 3,147,794
_________ _________
Gross Profit 211,280 338,871
Selling, general and administrative 114,674 120,959
expenses
_________ _________
Earnings From Operations 96,606 217,912
Other income (expense) (3,928) 29,489
_________ _________
Earnings Before Income Taxes 92,678 247,401
Income taxes 31,511 84,116
_________ _________
Net Earnings $ 61,167 $ 163,285
========= =========
Average number of shares outstanding 541,331 546,852
Net earnings per common share $.11 $.30
Dividends per common share $.05 $.048
</TABLE>
See notes to consolidated financial statements.
2
PAGE 3
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
1997 1996
-----------------------
(In thousands, except
per share amounts)
<S> <C> <C>
Net sales and other operating income $10,403,401 $10,022,461
Cost of products sold and other
operating costs 9,445,739 8,962,407
_________ _________
Gross Profit 957,662 1,060,054
Selling, general and administrative 529,986 348,199
expenses
_________ _________
Earnings From Operations 427,676 711,855
Other income 30,899 125,050
_________ _________
Earnings Before Income Taxes 458,575 836,905
Income taxes 203,914 284,548
_________ _________
Net Earnings $ 254,661 $ 552,357
========= =========
Average number of shares outstanding 543,509 551,505
Net earnings per common share $.47 $1.00
Dividends per common share $.148 $.119
</TABLE>
See notes to consolidated financial statements.
3
PAGE 4
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
-------------------------
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 632,549 $ 534,702
Marketable securities 230,668 820,147
Receivables 1,356,393 1,131,591
Inventories 2,463,801 1,790,636
Prepaid expenses 130,666 107,607
__________ _________
Total Current Assets 4,814,077 4,384,683
Investments and Other Assets
Investments in and advances to 1,043,082 624,305
affiliates
Long-term marketable securities 921,334 1,092,969
Other assets 229,383 233,611
__________ __________
2,193,799 1,950,885
Property, Plant and Equipment
Land 117,553 114,542
Buildings 1,388,802 1,245,662
Machinery and equipment 6,693,832 6,034,979
Construction in progress 798,962 588,711
Less allowances for depreciation (4,372,814) (3,869,593)
__________ _________
4,626,335 4,114,301
___________ ___________
$11,634,211 $10,449,869
========== ===========
</TABLE>
See notes to consolidated financial statements.
4
PAGE 5
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
----------------------
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 765,847 $ -
Accounts payable 1,103,225 993,403
Accrued expenses 612,861 525,626
Current maturities of long-term debt 125,231 114,522
__________ __________
Total Current Liabilities 2,607,164 1,633,551
Long-Term Debt 2,327,931 2,002,979
Deferred Credits
Income taxes 564,340 562,362
Other 110,196 106,165
__________ __________
674,536 668,527
Shareholders' Equity
Common stock 3,702,008 3,869,875
Reinvested earnings 2,322,572 2,274,937
__________ __________
6,024,580 6,144,812
__________ __________
11,634,211 $10,449,869
========== ==========
</TABLE>
See notes to consolidated financial statements.
5
PAGE 6
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH, 31
1997 1996
----------------------
(In thousands)
<S> <C> <C>
Operating Activities
Net earnings $ 254,661 $ 552,357
Adjustments to reconcile to net cash
provided by operations
Depreciation and amortization 325,576 288,814
Deferred income taxes (18,961) 62,448
Amortization of long-term debt discount 21,407 18,864
(Gain)loss on marketable securities (59,549) (87,637)
transactions
Other 4,563 (34,023)
Changes in operating assets and liabilities
Receivables (21,122) (178,385)
Inventories (350,611) (643,295)
Prepaid expenses (17,609) 236
Accounts payable and accrued expenses (25,798) 307,195
________ ________
Total Operating Activities 112,557 286,574
Investing Activities
Purchases of property, plant and equipment (590,476) (522,383)
Business acquisitions (332,178) (27,904)
Investments in and advances to affiliates (387,909) (61,147)
Purchases of marketable securities (781,811) (514,610)
Proceeds from sales of marketable securities 1,511,897 1,150,881
Other - (1,241)
________ ________
Total Investing Activities (580,477) 23,596
Financing Activities
Long-term debt borrowings 347,855 15,093
Long-term debt payments (21,364) (15,084)
Net borrowings under line of credit agreements 516,272 89,292
Purchases of treasury stock (198,498) (224,099)
Cash dividends and other (78,498) (59,745)
________ ________
Total Financing Activities 565,767 (194,543)
________ ________
Increase In Cash and Cash Equivalents 97,847 115,627
Cash and Cash Equivalents Beginning of 534,702 454,593
Period
________ ________
Cash and Cash Equivalents End of Period $ 632,549 $ 570,220
======== ========
</TABLE>
See notes to consolidated financial statements.
6
PAGE 7
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.The accompanying unaudited consolidated financial
statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of
management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair
presentation have been included. Operating results for
the quarter and nine months ended March 31, 1997 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.
In February 1997, the Financial Accounting
Standards Board issued Statement No. 128, "Earnings Per
Share." This statement establishes standards for
computing and presenting basic and diluted earnings per
share (EPS) for financial statements issued for periods
ending after December 15, 1997. The adoption of this
statement will not have a material effect on the
Company's reported EPS.
Note 2. Other Income (Expense)
<TABLE>
<CAPTI0N>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
------------- --------------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Investment income $30,045 $38,292 $ 99,260 $117,443
Interest expense (48,502) (44,024) (142,762)(126,657)
Gain (loss) on marketable
securities transactions 11,282 19,929 59,566 87,798
Equity in earnings of 4,853 13,315 16,528 26,658
affiliates
Other (1,606) 1,977 (1,693) 19,808 ----- ------ ------ -------
$(3,928) $29,489 $30,899 $125,050
===== ====== ====== =======
</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.
7
PAGE 8
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 the Northern District of California 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 the Northern District of Georgia 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. Two former executive officers of the Company,
Michael D. Andreas and Terrance S. Wilson, have been indicted
in connection with the lysine investigation.
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 has paid 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.
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, has been 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 class actions and proceedings 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.
8
PAGE 9
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 opted out of this settlement and
numerous state class action antitrust cases involving the
sale of lysine remain pending. A non-class action federal
antitrust suit involving the sale of lysine which was filed
in November 1995 and encaptioned Purina Mills, Inc. et al. v.
Archer-Daniels-Midland Co. was subsequently consolidated with
In Re Amino Acid Lysine Antitrust Litigation and the Company
settled this action, including plaintiffs who opted out of or
objected to the settlement noted above, for an amount deemed
not material. 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. On April 11, 1997, the court granted
final approval of this settlement. 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. On March 3, 1997, the court
preliminarily approved the settlement and the final approval
hearing is set for July 21, 1997. Under the terms of the
settlement agreement, the Company has the right to rescind
the agreement if plaintiffs elect to opt out of the class and
those plaintiffs have combined citric acid purchases from the
Company during the class period that exceed 25% of the
Company's total citric acid sales during such period. Based
on the opt out notices that the Company is aware of to date,
the Company may, at its option, rescind the settlement
agreement on or before May 19, 1997. The Company has also
entered into settlement agreements relating to certain state
actions filed by indirect purchasers of lysine in which,
among other things, the Company has agreed to pay amounts
deemed not material to certain members of the class without
admitting the alleged violations of law.
The Company 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 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 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.
9
PAGE 10
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The case filed in Federal District Court in Illinois has
likewise been dismissed and the Seventh Circuit Court of
Appeals has recently dismissed an appeal.
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 moved to dismiss 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.
10
PAGE 11
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 sale 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 decreased 1 percent for the
quarter to $3.5 billion due primarily to a 1 percent decrease in
volume of products sold. For the nine months, net sales and other
operating income increased $381 million to $10.4 billion due
principally to a 6 percent increase in average selling prices
partially offset by a 2 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 NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
_______________ ______________
(In millions) (In millions)
<S> <C> <C> <C> <C>
Oilseed products $2,244 $2,126 $6,629 $6,055
Corn products 524 647 1,689 1,937
Wheat and other milled 371 416 1,245 1,247
products
Other products and 327 298 840 783
services
----- ----- ------ ------
$3,466 $3,487 $10,403 $10,02
2
===== ===== ====== ======
11
PAGE 12
Sales of oilseed products increased 6 percent for the quarter due
principally to higher sales volumes reflecting strong domestic
protein meal and oil demand. For the nine months, sales of
oilseed products increased 9 percent due primarily to higher
average selling prices reflecting the higher cost of raw
materials. Sales of corn products decreased 19 percent for the
quarter and 13 percent for the nine months due primarily to
decreased sales volumes of fuel alcohol as reduced corn supplies
and the resulting higher cost of corn resulted in the Company
reducing its production of fuel alcohol. Average selling prices
of corn products were up 1 percent for the quarter and 4 percent
for the nine months due to the good demand for the Company's fuel
alcohol and bioproducts, including lysine and threonine. These
average selling price increases were partially offset by lower
average selling prices for the Company's sweetener products as a
result of the start-up of new corn wet milling facilities and the
resulting overcapacity in the market place. Sales of wheat and
other milled products decreased 11 percent for the quarter due to
both decreased average selling prices and decreased sales volumes
reflecting reduced export flour demand and excess milling
capacity in the industry. For the nine months, sales of wheat and
other milled products were virtually unchanged as a 3 percent
increase in average selling prices reflecting the increase in raw
material costs was offset by a 3 percent decrease in sales volume
reflecting reduced demand and excess milling capacity. The
increase in other products and services was due principally from
the sales related to the Company's recently acquired cocoa
business.
Cost of products sold and other operating costs increased $107
million for the quarter to $3.3 billion and increased $483
million for the nine months to $9.4 billion due primarily to
increased average raw material commodity prices, increased energy
costs and costs related to recently acquired operations. These
increases were partially offset by the decrease in volume of
products sold.
Gross profit declined $128 million to $211 million for the
quarter due to the net effect of increased raw material costs
versus higher sales prices and decreased merchandising and
transportation margins. For the nine months, gross profit
declined $102 million to $958 million due to decreased
merchandising and transportation margins, decreased sales volumes
and the net effect of increased raw material costs versus higher
sales prices.
Selling, general and administrative expenses decreased $6 million
to $115 million for the quarter due primarily to decreased legal
and litigation related expenses which were partially offset by $6
million of increases attributable to recently acquired
operations. For the nine months, selling, general and
administrative expense increased $182 million to $530 million due
principally to increased legal and litigation related costs
including the $200 million provision made in the first quarter of
the fiscal year 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 and nine months was
due principally to decreased gains on marketable securities
transactions. To a lesser extent, other income decreased for the
quarter and nine months due to decreased investment income due
to both lower invested funds and lower interest rates, decreased
equity in earnings of affiliates and increased interest expense
due to both lower amounts of interest capitalized on
construction projects and increased levels of borrowing. For the
nine months, the decrease in other income reflects the prior
year's $15 million gain on the sale of the Company's Supreme
Sugar subsidiary.
The decrease in income taxes for both the quarter and the nine
months resulted primarily from lower pretax earnings. For the
nine months, this decrease was partially offset by a higher
effective income tax rate. The increase in the Company's
effective income tax rate to 44 percent for the nine months
compared to an effective rate of 34 percent last year was due
primarily to the non-deductibility for income tax purposes of a
portion of the Company's litigation settlements and fines. The
Company's effective income tax rate of 34 percent for the
quarter was comparable to the same period a year ago.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended March 31, 1997, the Company's cash
and marketable securities net of short-term debt decreased $1.3
billion to $97 million, working capital decreased $544 million
to $2.2 billion and shareholders' equity decreased $120 million
to $6 billion. These decreases reflect investments in property,
plant and equipment expansions, investments in affiliates,
business acquisitions, and purchases of the Company's common
stock. During the quarter, the Company issued $350 million of
7.5 percent debentures due in 2027. The Company's ratio of long-
term liabilities to total capital at March 31, 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 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. Two former executive officers of the Company have been
indicted in connection with the lysine investigation. 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 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 agreed to settle or has settled certain civil
class action suits involving lysine antitrust, citric acid
antitrust and federal securities law litigation. The Company
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 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.
12
PAGE 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
ENVIRONMENTAL MATTERS
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.
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
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 the Northern District of California
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 the Northern District of Georgia has
been investigating possible antitrust
13
PAGE 14
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. Two former executive
officers of the Company, Michael D. Andreas and Terrance S.
Wilson, have been indicted in connection with the lysine
investigation.
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 has paid 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.
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. There is no understanding or agreement as to what
position, if any, Mr. Andreas may return to at the Company.
As part of the agreement, the United States agreed not to
bring further criminal charges against the Company or any
of its subsidiaries or affiliates for any offense committed
prior to the date of the agreement that was undertaken in
furtherance of or in connection with any attempted or
completed antitrust conspiracy involving the sale or
production of any product by the Company's BioProducts
Division, Animal Health and Nutrition Division, Food
Additives Division, or Sweetener Group, or for any alleged
offense which is or was the subject of any pending
investigation of ADM. Although the immunity agreement
excepted any criminal violations of the federal tax law
from its scope, the agreement represented that ADM was not
a subject of the investigation being conducted by the Fraud
Section of the Criminal Division of the Department of
Justice. The government further agreed not to prosecute any
current officer, director, or employee of the Company or
any of its subsidiaries or affiliates (other than Michael
D. Andreas and Terrance S. Wilson) for any of the antitrust
matters set forth above or for any alleged misappropriation
of technology committed prior to the date of the agreement.
The Company also agreed to cooperate with the government's
investigations by: (i) providing non-privileged documents,
information, and other materials; and (ii) securing, using
its best efforts, the cooperation of any current director,
officer, or employee of the Company or its subsidiaries or
affiliates (other than Michael D. Andreas and Terrance S.
Wilson) for service of process, interviews, grand jury
testimony, and trial testimony. The agreement also provided
that if any current officer, director or employee failed to
comply with the cooperation obligations as specified, the
agreement not to prosecute those persons would be void.
The full details of the plea agreement and the Company's
cooperation obligations thereunder are set forth in the
agreement, which is a matter of public record in 96-CR-
00640.
On February 12, 1997 the Company's three Mexican
subsidiaries each received notice that the Mexican Federal
Competition Commission has commenced an investigation in
order to determine if, as a result of the Company's guilty
plea in the United States, violations of the Mexican
Federal Anti-trust Law have been committed relative to the
marketing and sale of lysine in Mexico.
SECURITIES LAWS CLASS ACTION
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 seventeen putative
class action suits filed 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 alleged 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 alleged that the conduct complained of violates
federal securities laws. The plaintiffs requested
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 bore 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). The
three remaining actions, which originally were filed in the
Central District of Illinois, also were consolidated as
part of the E.M. Lawrence Limited Frozen Retirement Trust
Dated September 1, 1992, et al. v. Archer Daniels Midland
Co., et al., action. The Company and the individual
defendants moved to dismiss this consolidated action.
14
PAGE 15
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 $30 million
to members of the class, without admitting the alleged
violations of law. On April 11, 1997, the court granted
final approval of this settlement and the time for filing
an appeal has expired.
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 action which is encaptioned
Gray & Co. v. Archer Daniels Midland Co., et al, No. 97-69-
AS and was filed in federal court in Oregon, alleges
violations of federal antitrust laws and Oregon and
Michigan state antitrust laws, including allegations that
defendants conspired to fix, raise, maintain and stabilize
the price of corn syrup and high fructose corn syrup, and
seeks treble damages, attorneys' fees and costs of an
unspecified amount. The Company has not yet filed a
responsive pleading.
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 comprise certain direct purchasers of high
fructose corn syrup in the State of California during
certain periods in the 1990s. This action was filed on
October 17, 1995 in Superior Court for the County of
Stanislaus, California and encaptioned Kagome Foods, Inc. v
Archer-Daniels-Midland Co. et al., Civil Action No. 37236.
This action has been removed to federal court and
consolidated with the federal class action litigation
pending in the Central District of Illinois referred to
above. The other five California putative classes comprise
certain indirect purchasers of high fructose corn syrup and
dextrose in the State of California during certain periods
in the 1990s. One such action was filed on July 21, 1995 in
the Superior Court of the County of Los Angeles, California
and is encaptioned Borgeson v. Archer-Daniels-Midland Co.,
et al., Civil Action No. BC131940. This action and the
other four indirect purchases actions have been coordinated
before a single court in Stanislaus County, California
under the caption, Food Additives (HFCS) cases, Master File
No. 39693. The other four actions are encaptioned, Goings
v. Archer Daniels Midland Co., et al., Civil Action No.
750276 (Filed on July 21, 1995, Orange County Superior
Court); Rainbow Acres v. Archer Daniels Midland Co., et
al., Civil Action No. 974271 (Filed on November 22, 1995,
San Francisco County Superior Court); Patane v. Archer
Daniels Midland Co., et al., Civil Action No. 212610 (Filed
on January 17, 1996, Sonoma County Superior Court); and St.
Stan's Brewing Co. v. Archer Daniels Midland Co., et al.,
Civil Action No. 37237 (Filed on October 17, 1995,
Stanislaus County Superior Court).
The 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.
LYSINE CLASS ACTION
The Company, along with other companies, has been named as
a defendant in twenty-one putative class action antitrust
suits involving the sale of lysine.
FEDERAL ACTIONS. 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. These six actions were
transferred to the United States District Court for the
Northern District of Illinois and consolidated under the
caption In Re Amino Acid Lysine Antitrust Litigation, MDL
No. 1083 and Master File No. 95-7679. On April 4,
15
PAGE 16
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.
Several plaintiffs opted out of this settlement. This
settlement agreement was approved by the court and certain
objectors to the settlement appealed the final order of
approval to the United States Court of Appeals for the
Seventh Circuit. That appeal subsequently was dismissed.
The Company, along with other companies also was named as
a defendant in 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 alleged 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. This action was subsequently
consolidated with In Re Amino Acid Lysine Antitrust
Litigation and the Company settled this action, which
included plaintiffs who opted out of or objected to the
settlement noted above, for an amount deemed not material.
The Company, along with other companies, also was named a
defendant in a nationwide federal class action brought on
behalf of consumers of certain poultry products during the
period 1992 through 1996. This action alleged violations
of the federal antitrust laws, including allegations that
the defendants unlawfully fixed the price of lysine, and
requests $300 million in treble damages. On January 17,
1997, the court dismissed the action without prejudice
after plaintiff requested a voluntary dismissal. This
action was encaptioned Silvious v. Archer-Daniels-Midland
Co., et al., No. 96-0128(H) and was filed on November 18,
1996 in federal court in the Western District of Virginia.
STATE ACTIONS. The Company also has been named as a
defendant, along with other companies, in six putative
class action antitrust suits filed in California state
court, two putative class action antitrust suits and one
non-class action suit filed in Alabama state court, two
putative class action antitrust suits filed in Minnesota
state court, one putative class action antitrust suit filed
in Georgia state court, one putative class action antitrust
suit filed in Tennessee state court and two putative
class action antitrust suits 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. These six actions were consolidated before the
Superior Court for San Francisco County under the caption
Feedstuffs Processing Co. v. Archer Daniels Midland Co, et
al., Case No. 974597. The Company entered into an
agreement with plaintiffs' counsel in these California
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
has received final court approval. 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. One Minnesota action
alleges violations of certain laws of the states of
Minnesota, Tennessee, Wisconsin, South Dakota, North
Dakota, Kansas, Louisiana, Michigan, Maine, Arizona,
Florida, Mississippi, New Mexico, North Carolina and West
Virginia, and the District of Columbia, 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. On September 30, 1996, the Company moved to dismiss
the non-Minnesota claims in the two Minnesota actions and
moved for summary judgment on all claims in these actions.
That motion is currently pending. On February 5, 1997, the
Company entered into an agreement with plaintiffs' counsel
in the Minnesota actions, in which among other things, the
Company agreed to pay $1 million to certain members of the
putative classes, without admitting the alleged violations
of law.
16
PAGE 17
This settlement received preliminary court approval and a
final approval hearing is set for July 1997. 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. On December 19, 1996, the Court granted the
Company's motion 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 Company has not yet filed
a responsive pleading. The Michigan actions allege 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 classes in these cases comprise certain
indirect purchasers of lysine within the State of Michigan
during certain periods in the 1990s. One such 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. The second action, encaptioned Bacon Acres v.
Archer Daniels Midland Co., et al., No P23920, was filed on
September 24, 1996 in the Circuit Court for the County of
Washtenaw, Michigan. On April 25, 1997, plaintiffs
voluntarily dismissed this action.
CITRIC ACID CLASS ACTIONS
The Company, along with other companies, has been named as
a defendant in eleven putative class action antitrust
suits involving the sale of citric acid.
FEDERAL ACTIONS. Seven 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. These six actions
have been 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 a final approval
hearing is set for July 11, 1997 Under the terms of the
settlement agreement, the Company has the right to rescind
the agreement if plaintiffs elect to opt out of the class
and those plaintiffs have combined citric acid purchases
from the Company during the class period that exceed 25% of
the Company's total citric acid sales during such period.
Based on the opt out notices that the Company is aware of
to date, the Company may, at its option, rescind the
settlement agreement on or before May 19, 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 has not yet filed a responsive pleading in this
action.
STATE ACTIONS. The Company, along with other companies,
also has been named as a defendant in one putative class
action antitrust suit filed in Alabama state court
involving the sale of citric acid. This action alleges
violations of the Alabama antitrust laws, including
allegations that the defendants agreed to fix, stabilize
and maintain at artificially high levels the prices of
citric acid, and seeks an injunction against continued
alleged illegal conduct, damages of an unspecified amount,
attorneys fees and costs, and other unspecified relief. The
putative class in the Alabama action comprises certain
indirect purchasers of citric acid in the State of Alabama
from July 1993 until July 1995. This action was filed on
July 27, 1995 in the Circuit Court of Walker County,
Alabama and is encaptioned Seven Up Bottling Co. of Jasper,
Inc. v. Archer-Daniels-Midland Co., et al., Civil Action
No. 95-436. The Company currently is seeking appellate
review of the denial of its motion to dismiss this action.
The Company, along with other companies, also has been
named as a defendant in two putative class action antitrust
suits filed in California state court involving the sale of
citric acid. These actions allege violations of the
California antitrust and unfair competition laws, including
allegations that the defendants conspired to fix, maintain
or stabilize the price of citric acid, and seek injunctions
against continued illegal conduct, treble damages of an
unspecified amount, attorneys fees and costs, and other
unspecified
17
PAGE 18
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.
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID STATE CLASS ACTIONS
The Company, along with other companies, has been named as
a defendant in six putative class action antitrust suits
involving the sale of both high fructose corn syrup and
citric acid. Two of these actions allege violations of the
California antitrust and unfair competition laws, including
allegations that the defendants agreed to fix, stabilize
and maintain at artificially high levels the prices of high
fructose corn syrup and citric acid, and seek treble
damages of an unspecified amount, attorneys fees and costs,
restitution and other unspecified relief. The putative
class in one of these California cases comprises certain
direct purchasers of high fructose corn syrup and citric
acid in the State of California during the period January
1, 1992 until at least October 1995. This action was filed
on October 11, 1995 in the Superior Court of Stanislaus
County, California and is entitled Gangi Bros. Packing Co.
v. Archer-Daniels-Midland Co., et al., Civil Action No.
37217. The putative class in the other California case
comprises certain indirect purchasers of high fructose corn
syrup and citric acid in the state of California during the
period October 12, 1991 until November 20, 1995. This
action was filed on November 20, 1995 in the Superior Court
of San Francisco County and is encaptioned MCFH, Inc. v.
Archer-Daniels-Midland Co., et al., Civil Action No.
974120. The California Judicial Council has bifurcated the
citric acid and high fructose corn syrup claims in these
actions and coordinated them with other actions in San
Francisco County Superior Court and Stanislaus County
Superior Court. The Company, along with other companies,
also has been named as a defendant in at least one putative
class action antitrust suit filed in West Virginia state
court involving the sale of high fructose corn syrup and
citric acid. This action also alleges violations of the
West Virginia antitrust laws, including allegations that
the defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose corn
syrup and citric acid, and seeks treble damages of an
unspecified amount, attorneys fees and costs, and other
unspecified relief. The putative class in the West Virginia
action comprises certain entities within the State of West
Virginia that purchased products containing high fructose
corn syrup and/or citric acid for resale from at least 1992
until 1994. This action was filed on October 26, 1995, in
the Circuit Court for Boone County, West Virginia, and is
encaptioned Freda's v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 95-C-125. The parties are in the midst of
discovery in this action. The Company, along with other
companies, also has been named as defendant in a putative
class action antitrust suit filed in Michigan state court
involving the sale of high fructose corn syrup and citric
acid. This action alleges violations of the Michigan
antitrust laws, including allegations that the defendants
agreed to fix, stabilize and maintain at artificially high
levels the prices of high fructose corn syrup and citric
acid, and seeks treble damages of an unspecified amount,
attorneys fees and costs, and other unspecified relief. The
putative class in the Michigan action comprises certain
persons within the State of Michigan that purchased
products containing high fructose corn syrup and/or citric
acid during the period January 1993 through June 27,
1995. This action was filed on February 26, 1996 in the
Circuit Court for Ingham County, Michigan, and is
encaptioned Wilcox v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 96-82473-CP. The parties are in the midst
of discovery in this action. The Company, along with other
companies, also has been named as a defendant in a
putative class action antitrust suit filed in the Superior
Court for the District of Columbia involving the sale of
high fructose corn syrup and citric acid. This action
alleges violations of the District of Columbia antitrust
laws, including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels the
prices of high fructose corn syrup and citric acid, and
seeks treble damages of an unspecified amount, attorneys
fees and costs, and other unspecified relief. The putative
class in the District of Columbia action comprises certain
persons within the District of Columbia that purchased
products containing high fructose corn syrup and/or citric
acid during the period January 1, 1992 through December 31,
1994. This action was filed on April 12, 1996 in the
Superior Court for the District of Columbia, and is
encaptioned Holder v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 96-2975. The parties are in the midst of
discovery in this action. The Company, along with other
companies, has been named as a defendant in 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
18
PAGE 19
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.
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID/LYSINE STATE CLASS
ACTIONS
The Company, along with other companies, has been named as
a defendant in six putative class action antitrust suits
filed in California state court involving the sale of high
fructose corn syrup, citric acid and/or lysine. These
actions allege violations of the California antitrust and
unfair competition laws, including allegations that the
defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose corn
syrup, citric acid and/or lysine, and seek treble damages
of an unspecified amount, attorneys fees and costs,
restitution and other unspecified relief. One of the
putative classes comprises certain direct purchasers of
high fructose corn syrup, citric acid and/or lysine in the
State of California during a certain period in the 1990s.
This action was filed on December 18, 1995 in the Superior
Court for Stanislaus County, California and is encaptioned
Nu Laid Foods, Inc. v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 39693. The other five putative classes
comprise certain indirect purchasers of high fructose corn
syrup, citric acid and/or lysine in the State of California
during certain periods in the 1990s. One such action was
filed on December 14, 1995 in the Superior Court for
Stanislaus County, California and is encaptioned Batson v.
Archer-Daniels-Midland Co., et al., Civil Action No. 39680.
The other actions are encaptioned Nu Laid Foods, Inc. v.
Archer Daniels Midland Co., et al., No 39693 (Filed on
December 18, 1995 Stanislaus County Superior Court); Abbott
v. Archer Daniels Midland Co., et al., No. 41014 (Filed on
December 21, 1995, Stanislaus County Superior Court);
Noldin v. Archer Daniels Midland Co., et al., No. 41015
(Filed on December 21, 1995, Stanislaus County Superior
Court); Guzman v. Archer Daniels Midland Co., et al., No.
41013 (Filed on December 21, 1995, Stanislaus County
Superior Court) and Ricci v. Archer Daniels Midland Co., et
al., No. 96-AS-00383 (Filed on February 6, 1996,
Sacramento County Superior Court). As noted above, the
plaintiffs in these actions and the lysine defendants have
executed a settlement agreement that has been approved by
the court and the California Judicial Council has
bifurcated the citric acid and high fructose corn syrup
claims and coordinated them with other actions in San
Francisco County Superior Court and Stanislaus County
Superior Court.
SHAREHOLDER DERIVATIVE ACTIONS
Following the public announcement of the grand jury
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 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. That motion is currently
pending. 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. That motion is
currently pending.
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, and
the case is now on appeal in the Supreme Court of Delaware.
The Company and certain of its current and former
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 Court of
Appeals for the Seventh Circuit recently dismissed an
appeal of the lower court's dismissal on the grounds that
the appeal had been rendered moot by the 1996 board
election.
As described in the notes to financial statements and
management's discussion of operations in prior Form 10-Q's,
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 6. Exhibits and Reports on Form 8-K
a) A Form 8-K was not filed during the
quarter ended March 31, 1997.
19
PAGE 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ARCHER-DANIELS-MIDLAND COMPANY
/s/ D. J. Schmalz
D. J. Schmalz
Vice President
and Chief Financial Officer
/s/ R. P. Reising
R. P. Reising
Vice President, Secretary and
General Counsel
Dated: May 15, 1997
20
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 632,549
<SECURITIES> 230,668
<RECEIVABLES> 1,356,393
<ALLOWANCES> 0
<INVENTORY> 2,463,801
<CURRENT-ASSETS> 4,814,077
<PP&E> 8,999,149
<DEPRECIATION> 4,372,814
<TOTAL-ASSETS> 11,634,211
<CURRENT-LIABILITIES> 2,607,164
<BONDS> 2,327,931
0
0
<COMMON> 3,702,008
<OTHER-SE> 2,322,572
<TOTAL-LIABILITY-AND-EQUITY> 11,634,211
<SALES> 10,403,401
<TOTAL-REVENUES> 10,403,401
<CGS> 9,445,739
<TOTAL-COSTS> 9,445,739
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142,762
<INCOME-PRETAX> 458,575
<INCOME-TAX> 203,914
<INCOME-CONTINUING> 254,661
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 254,661
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
