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 December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to
_________________________
Commission file number 1-44
ARCHER-DANIELS-MIDLAND COMPANY
(Exact name of registrant as specified in its charter)
Delaware 41-0129150
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
4666 Faries Parkway Box 1470 Decatur, Illinois 62525
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code217-424-5200
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___.
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, no par value--543,277,011 shares
(January 31, 1997)
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PART I - FINANCIAL INFORMATION
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
1996 1995
--------------------------
(In thousands, except
per share amounts)
<S> <C> <C>
Net sales and other operating income $3,548,072 $3,415,05
8
Cost of products sold and other
operating
costs 3,166,754 3,018,206
_________ _________
Gross Profit 381,318 396,852
Selling, general and administrative 108,916 128,519
expenses
_________ _________
Earnings From Operations 272,402 268,333
Other income 15,386 74,046
_________ _________
Earnings Before Income Taxes 287,788 342,379
Income taxes 97,847 116,409
_________ _________
Net Earnings $ 189,941 $ 225,97
0
========= =========
Average number of shares outstanding 544,056 550,350
Net earnings per common share $.35
$.41
Dividends per common share $.05
$.048
</TABLE>
See notes to consolidated financial statements.
2
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION> SIX MONTHS ENDED
DECEMBER 31,
1996 1995
-------------------------
(In thousands, except
per share amounts)
<S> <C> <C>
Net sales and other operating income $6,937,44 $6,535,79
6 6
Cost of products sold and other
operating
costs 6,191,064 5,814,613
_________ _________
Gross Profit 746,382 721,183
Selling, general and administrative
expenses 415,312
227,240
_________ _________
Earnings From Operations 331,070
493,943
Other income 34,827
95,561
_________ _________
Earnings Before Income Taxes 365,897 589,504
Income taxes 172,403
200,432
_________ _________
Net Earnings $ 193,49 $ 389,07
4 2
========= =========
Average number of shares outstanding 544,581 553,800
Net earnings per common share $ $
.36 .70
Dividends per common share $
$.098 .071
</TABLE>
See notes to consolidated financial statements.
3
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1996
--------------------------
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ $
337,254 534,702
Marketable securities 555,902 820,147
Receivables 1,306,209 1,131,591
Inventories 2,199,435 1,790,636
Prepaid expenses 135,778 107,607
_________ __________
_
Total Current Assets 4,534,578 4,384,683
Investments and Other Assets
Investments in and advances to
affiliates 1,008,763 624,305
Long-term marketable securities 958,638 1,092,969
Other assets 217,750 233,611
_________ __________
_
2,185,151 1,950,885
Property, Plant and Equipment
Land 115,627 114,542
Buildings 1,282,737 1,245,662
Machinery and equipment 6,233,236 6,034,979
Construction in progress 699,546 588,711
Less allowances for
depreciation (4,034,270 (3,869,593
) )
_________ __________
_
4,296,876 4,114,301
_________ __________
_
$11,016,6 $10,449,86
05 9
========= ==========
=
</TABLE>
See notes to consolidated financial statements.
4
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1996
--------------------------
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 171,914 $ -
Accounts payable 1,243,561 993,403
Accrued expenses 588,145 525,626
Current maturities of long-term debt 126,957 114,522
__________ __________
Total Current Liabilities 2,130,577 1,633,551
Long-Term Debt 1,984,735 2,002,979
Deferred Credits
Income taxes 564,867 562,362
Other 106,194 106,165
__________ __________
671,061 668,527
Shareholders' Equity
Common stock 3,830,125 3,869,875
Reinvested earnings 2,400,107 2,274,937
__________ __________
6,230,232 6,144,812
__________ __________
$11,016,605 $10,449,869
========== ==========
</TABLE>
See notes to consolidated financial statements.
5
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
1996 1995
-----------------------
(In thousands)
<S> <C>
<C>
Operating Activities
Net earnings $ $
193,494 389,072
Adjustments to reconcile to net cash
provided by operations
Depreciation and amortization 215,135 194,407
Deferred income taxes (24,350) 58,938
Amortization of long-term debt discount 14,056 12,434
(Gain) loss on marketable securities
transactions (48,272) (67,811)
Other 14,177 (27,206)
Changes in operating assets and
liabilities
Receivables (159,998) (92,723)
Inventories (405,795) (891,458)
Prepaid expenses (28,496) (7,167)
Accounts payable and accrued expenses 355,598 433,713
________ ________
Total Operating Activities 125,549 2,199
Investing Activities
Purchases of property, plant and equipment (400,249) (354,510)
Business acquisitions (44,091) (26,120)
Investments in and advances to affiliates (334,164) (56,482)
Purchases of marketable securities (688,349) (279,702)
Proceeds from sales of marketable 1,105,500 965,659
securities
Other - (1,241)
________ ________
_
Total Investing Activities (361,353) 247,604
Financing Activities
Long-term debt borrowings - 6,305
Long-term debt payments (18,024) (8,434)
Net borrowings under line of credit 171,914 296,336
agreements
Purchases of treasury stock (63,212) (187,948)
Cash dividends and other (52,322) (36,752)
________ ________
_
Total Financing Activities 38,356 69,507
________ ________
_
Increase (Decrease) In Cash and Cash
Equivalents (197,448) 319,310
Cash and Cash Equivalents Beginning of 534,702 454,593
Period
________ ________
_
Cash and Cash Equivalents End of Period $ $
337,254 773,903
======== ========
=
</TABLE>
See notes to consolidated financial statements.
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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 six months ended December 31, 1996 are
not necessarily indicative of the results that may be
expected for the year ending June 30, 1997. For further
information, refer to the consolidated financial
statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended
June 30, 1996.
Note 2. Other Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
-------------------------------------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Investment income $ 30,348 $ 37,328 $ 69,215 $ 79,151
Interest expense (48,133) (42,556) (94,260)(82,633)
Gain on marketable
securities transactions17,983 67,181 48,284 67,869
Equity in earnings of
affiliates 13,666 8,936 11,675 13,343
Other 1,522 3,157 (87) 17,831
______ ______ ______ ______
$ 15,386 $ 74,046 $34,827 $95,561
====== ====== ====== ======
</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.
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 directors
and executive officers were named as defendants in a
number of putative class action suits for alleged
violations of federal securities laws on behalf of all
purchasers of securities of the Company during the
period between certain dates in 1992 and 1995. The
Company along with other domestic and foreign companies,
has been named as a defendant in a number of putative
class action antitrust suits involving the sale of
lysine, citric acid, and high fructose corn syrup. The
plaintiffs generally request unspecified compensatory
damages, costs, expenses and unspecified relief. The
Company and the individuals named as defendants intend
to vigorously defend these class actions unless they can
be settled on terms deemed acceptable by the parties.
These matters have resulted, as discussed below, and
could result in the Company being subject to monetary
damages, other sanctions and expenses.
On July 20, 1996, Federal District Court Judge Milton
Shadur approved a settlement in the federal lysine class
action antitrust suit filed in the Northern District of
Illinois (consolidated as In Re Amino Acid Lysine
Antitrust Litigation MDL No. 1083) and the Company has
paid $25 million in full settlement thereof without
admitting the alleged violations of law. Several
plaintiffs 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 recently 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
7
PAGE 8
the alleged violations of law. The court has
preliminary approved the 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.
Formal papers seeking court approval of the settlement
recently have been filed. 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, including those related to high fructose
corn syrup, the ultimate outcome of these matters cannot
presently be determined. Accordingly, no provision for
any liability that may result therefrom has been made in
the 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. The case
filed in Federal District Court in Illinois has likewise
been dismissed and has been appealed to the Seventh
Circuit Court of Appeals. The Company and the
individuals named as defendants intend to vigorously
defend these actions.
Shareholder derivative actions also have been filed
against certain of the Company's directors and executive
officers and nominally against the Company alleging that
the individuals named as defendants breached their
fiduciary duties to the Company and seeking monetary
damages and other relief on behalf of the Company from
the individuals named as defendants. The Company has
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.
8
PAGE 9
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
The Company is in one business segment - procuring,
transporting, storing, processing and merchandising agricultural
commodities and products. The availability and price of
agricultural commodities are subject to wide fluctuations due to
unpredictable factors such as: weather; plantings; government
(domestic and foreign) farm programs and policies; changes in
global demand created by population growth and higher standards
of living; and global production of similar and competitive
crops. Generally, changes in the price of agricultural
commodities can be passed through to the price of processed
products. Ethanol is one of a limited few of the Company's
processed products which must be priced to compete with products
produced from other raw materials. 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 increased $133 million to
$3.5 billion for the quarter and increased $401 million to $6.9
billion for the six months due primarily to increases in average
selling prices of 5 percent and 9 percent, respectively. These
increases were partially offset by decreases in volume of
products sold of 1 percent for the quarter and 3 percent for the
six months. A summary of net sales and other operating income by
classes of products and services is as follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
_______________ ______________
___ ___
(In millions) (In millions)
<S> <C> <C> <C> <C>
Oilseed products $ 2,276 $ 2,07 $ 4,385 $ 3,929
3
Corn products 596 674 1,165 1,290
Wheat and other milled 424 429 874 831
products
Other products and 252 239 513 486
services
______ ______ ______ ______
$ 3,548 $ 3,41 $ 6,937 $ 6,536
5
====== ====== ====== ======
</TABLE>
9
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Sales of oilseed products increased 10 percent for the quarter
and 12 percent for the six months due principally to higher
average selling prices reflecting the higher cost of raw
materials. Sales volumes of oilseed products were 4 percent
higher for the quarter and 1 percent higher for the six months
reflecting relatively strong protein meal demand from both the
domestic and export markets. Sales of corn products decreased
12 percent for the quarter and 10 percent for the six 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 grind. Average selling
prices of corn products were up 6 percent for both the quarter
and six month periods due to the good demand for the Company's
fuel, beverage and industrial alcohol as well as for the
Company's bioproducts, including lysine, threonine and MSG.
Sales of wheat and other milled products decreased 1 percent
for the quarter due principally to decreased sales volumes
reflecting reduced export flour demand and increased
production capacity in the industry. For the six month period,
sales of wheat and other milled products increased 5 percent
due principally to increased average selling prices reflecting
the higher cost of raw materials. This average selling price
increase was partially offset by decreased sales volumes.
Cost of products sold and other operating costs increased $149
million for the quarter to $3.2 billion and increased $376
million for the six months to $6.2 billion due primarily to
increased average raw material commodity prices and increased
energy costs. These price increases were partially offset by
the decrease in volume of product sold.
Gross profit declined $15 million to $381 million for the
quarter as lower merchandising margins combined with the
negative effect of increased energy costs on processing and
transportation margins more than offset the effect of higher
average selling prices versus increased raw material prices.
For the six months gross profit increased $25 million to $746
million due primarily to the effect of higher selling prices
versus increased raw material commodity prices partially
offset by decreased sales volumes, lower merchandising margins
and the negative effect of increased energy costs on
processing and transportation margins.
Selling, general and administrative expenses decreased $20
million to $109 million for the quarter due primarily to
decreased legal and litigation related expenses. For the six
months, selling, general and administrative expense increased
$188 million to $415 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 six months
was due principally to decreased gains on marketable
securities transactions. To a lesser extent, other income
decreased for the quarter and six months due to decreased
investment income due to both lower interest rates and lower
invested funds and increased interest expense due primarily to
lower amounts of interest capitalized on construction
projects. For the six months, the decrease in other income
reflects the prior year's $15 million gain on the sale of the
Company's Supreme Sugar subsidiary.
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PAGE 11
The decrease in income taxes for both the quarter and six
months resulted primarily from lower pretax earnings. For the
six months, this decrease was partially offset by a higher
effective income tax rate. The increase in the Company's
effective income tax rate to 47 percent for the six 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
At December 31, 1996, the Company continued to show
substantial liquidity with working capital of $2.4 billion,
including cash and marketable securities net of short-term
debt of $721 million. Capital resources remained strong as the
Company's net worth at quarter-end was $6.2 billion. The
Company's ratio of long-term liabilities to total capital at
December 31, 1996 was approximately 22 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 have been
filed against the Company which could result in the Company
being subject to monetary damages, other sanctions and
expenses. As also discussed in note 4 to the unaudited
consolidated financial statements, the Company has agreed to
settle certain civil class action suits involving lysine
antitrust, citric acid antitrust and federal securities law
litigation. The Company 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, including
those related to high fructose corn syrup, the ultimate
outcome of these matters cannot presently be determined.
Accordingly, no provision for any liability that may result
therefrom has been made in the unaudited consolidated
financial statements.
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 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 will pay the United States a fine of $70
million with respect to lysine and $30 million with
respect to citric acid. This agreement constitutes a
global resolution of all matters between the United
States Department of Justice and the Company and brings
to a close all Department of Justice
11
PAGE 12
Item 1. Legal Proceedings--Continued
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
12
PAGE 13
Item 1. Legal Proceedings--Continued
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
alleges that the defendants made material
misrepresentations and omissions with respect to the
Company and its operations and with respect to actions of
the Company and its officers regarding antitrust
violations, as a result of which market prices of the
Company's securities were artificially inflated during
the putative class period. The consolidated complaint
alleges that the conduct complained of violates federal
securities laws. The plaintiffs request unspecified
compensatory damages, costs (including attorneys and
expert fees), expenses and other unspecified relief on
behalf of the putative class. On October 31, 1995, the
Court granted the defendants' motion to transfer the
consolidated action to the Central District of Illinois
(wherein it now bears the caption E. M. Lawrence Limited
Frozen Retirement Trust Dated September 1, 1992, et al.
v. Archer-Daniels-Midland Co., et al., Case Number 95-
2287). The three remaining actions, which originally
were filed in the Central District of Illinois, also have
been 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. 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. The
court has preliminary approved the settlement. Notice is
being sent to members of the plaintiff class at this
time, and a final approval hearing has been scheduled for
April 11, 1997.
13
PAGE 14
Item 1. Legal Proceedings--Continued
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 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 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. 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 22, 1996, defendants moved to sever the non-Alabama
claims and have them dismissed. This motion is still
pending.
14
PAGE 15
Item 1. Legal Proceedings--Continued
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, 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 alleges violations of
federal antitrust laws, including allegations that
certain entities agreed to fix, stabilize and maintain at
artificially high levels the price of lysine, and seeks
an injunction against continued alleged illegal conduct,
treble damages of an unspecified amount, attorneys fees
and costs, and other unspecified relief. This action was
subsequently consolidated with In Re Amino Acid Lysine
Antitrust Litigation and the Company recently settled
this action, including 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 has been
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 alleges 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 is 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.
15
PAGE 16
Item 1. Legal Proceedings--Continued
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 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 has 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 Alabama actions allege
violations of the Alabama antitrust laws, including
allegations that the defendants agreed to fix, stabilize
and maintain at artificially high levels the prices of
lysine, and seek an injunction against continued alleged
illegal conduct, damages of an unspecified amount,
attorneys fees and costs, and other unspecified relief.
The putative classes in the Alabama actions comprise
certain indirect purchasers of lysine in the State of
Alabama during certain periods in the 1990s. One such
action was filed on August 17, 1995 in the Circuit Court
of DeKalb County, Alabama, and is encaptioned Ashley v.
Archer-Daniels-Midland Co., et al., Civil Action No. 95-
336. 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. 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.
The parties are in the process of obtaining court
approval of this agreement. 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 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. The Company has not yet filed a
responsive pleading in either action.
16
PAGE 17
Item 1. Legal Proceedings--Continued
CITRIC ACID CLASS ACTIONS
The Company, along with other companies, has been named
as a defendant in ten putative class action antitrust
suits involving the sale of citric acid.
FEDERAL ACTIONS. Six of these actions allege
violations of federal antitrust laws, including
allegations that the defendants agreed to fix, stabilize
and maintain at artificially high levels the prices of
citric acid, and seek injunctions against continued
alleged illegal conduct, treble damages of an unspecified
amount, attorneys fees and costs, and other unspecified
relief. The putative classes in these cases comprise
certain direct purchasers of citric acid for certain
periods in the 1990s. 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. Formal papers seeking court approval
of the settlement recently have been filed.
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. 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.[]
17
PAGE 18
Item 1. Legal Proceedings --Continued
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 1992 through
February 26, 1996. This action was filed on February 26,
1996 in the Circuit Court for Ingham County, Michigan,
and is encaptioned Wilcox v. Archer-Daniels-Midland Co.,
et al., Civil Action No. 96-82473-CP. The 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
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.
18
PAGE 19
Item 1. Legal Proceedings--Continued
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.
19
PAGE 20
Item 1. Legal Proceedings--Continued
DELAWARE STATE LAW/FEDERAL SECURITIES LAWS ACTIONS
The Company and its directors also have been named as
defendants in a putative class action suit encaptioned
Loudon v. Archer-Daniels-Midland Co., et al., Civil
Action No. 14638, filed in the Delaware Court of Chancery
on October 20, 1995. This action alleges violations of
Delaware state law and seeks invalidation of the 1995
election of the Company's directors on the basis of
alleged omissions from the proxy statement issued by the
Company prior to its October 19, 1995 annual meeting 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
its directors also have been named as defendants in a
similar suit filed on November 1, 1995 in the United
States District Court for the Central District of
Illinois, and encaptioned Buckley v. Archer-Daniels-
Midland Co., et al., Civil Action No. 95-C-2269, alleging
violations of analogous provisions of federal securities
law. The defendants moved to dismiss this action. The
Court granted the motion to dismiss on June 6, 1996, and
the case is now on appeal.
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 described above,
including those related to high fructose corn syrup, the
ultimate outcome of these matters cannot presently be
determined. Accordingly, no provision for any liability
that may result therefrom has been made in the
consolidated financial statements.
Item 4. Submission of matters to a vote of Security
Holders:
The Annual Meeting of Shareholders was held on October
17, 1996. Proxies for the Annual Meeting were solicited
pursuant to Regulation 14. There was no solicitation in
opposition to the Board of Director nominees as listed in
the proxy statement and all of such nominees were elected
as follows:
20
PAGE 21
<TABLE>
<CAPTION>
Nominee Shares Cast Shares
For Withheld
<S> <C> <C>
D. O. Andreas 403,996,052 48,693,195
G. O. Coan 405,231,972 47,457,275
L. W. Andreas 403,308,001 49,381,246
S. M. Archer, Jr. 403,949,593 48,739,654
J. K. Vanier 405,020,884 47,668,363
R. R. Burt 409,209,821 43,479,426
O. G. Webb 404,908,866 47,780,381
F. R. Johnson 407,471,039 45,218,208
R. S. Strauss 404,348,243 48,341,004
M. B. Mulroney 404,638,775 48,050,472
J. R. Block 409,166,611 43,522,636
M. H. Carter 405,769,429 46,919,818
There were no abstentions or broker non-votes regarding the
election of directors.
The shareholder proposal relative to the Adoption of an
Incentive Stock Option Plan was ratified as follows:
For Against Abstain
316,897,743 133,112,790 2,678,714
The shareholder proposal relative to the Adoption of a Stock
Unit Plan for Nonemployee Directors was ratified as follows:
For Against Abstain
428,385,363 21,489,262 2,814,622
The appointment by the Board of Directors of Ernst & Young LLP
as Independent Accountants to audit the accounts of the
Company for the fiscal year ending June 30, 1997 was ratified
as follows:
For Against Abstain
448,865,995 2,811,267 1,011,985
The shareholder proposal relative to the Adoption of
Stockholder's Proposal No. 1 (Board Diversity) was defeated as
follows:
For Against Abstain
68,968,589 291,887,583 13,698,419
The shareholder proposal relative to the Adoption of
Stockholder's Proposal No. 2 (Cumulative Voting) was defeated
as follows:
For Against Abstain
91,366,745 275,195,548 7,992,298
The shareholder proposal relative to the Adoption of
Stockholder's Proposal No. 3 (Confidential Voting) was
defeated as follows:
For Against Abstain
167,623,514 199,840,343 7,090,734
The shareholder proposal relative to the Adoption of
Stockholder's Proposal No. 4 (Independent Board) was defeated
as follows:
For Against Abstain
153,320,313 215,348,980 5,885,298
The shareholder proposal relative to the Adoption of
Stockholder's Proposal No. 5 (Director Liability) was defeated
as follows:
For Against Abstain
44,913,954 314,568,679 15,071,958
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
a) Notice of annual meeting and proxy statement dated
September 26, 1996 incorporated as an exhibit herein by
reference.
b) A Form 8-K was not filed during the quarter ended December
31, 1996.
21
PAGE 22
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: February 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 337,254
<SECURITIES> 555,902
<RECEIVABLES> 1,306,209
<ALLOWANCES> 0
<INVENTORY> 2,199,435
<CURRENT-ASSETS> 4,534,578
<PP&E> 8,331,146
<DEPRECIATION> 4,034,270
<TOTAL-ASSETS> 11,016,605
<CURRENT-LIABILITIES> 2,130,577
<BONDS> 1,984,735
0
0
<COMMON> 3,830,125
<OTHER-SE> 2,400,107
<TOTAL-LIABILITY-AND-EQUITY> 11,016,605
<SALES> 6,937,446
<TOTAL-REVENUES> 6,937,446
<CGS> 6,191,064
<TOTAL-COSTS> 6,191,064
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,260
<INCOME-PRETAX> 365,897
<INCOME-TAX> 172,403
<INCOME-CONTINUING> 193,494
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 193,494
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
