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, 1998
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 - 570,541,122 shares
(April 30, 1998)
1
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PART I - FINANCIAL INFORMATION
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
--------------------------
(In thousands, except
per share amounts)
<S> <C> <C>
Net sales and other operating income $4,280,27
9 $3,414,8
18
Cost of products sold and other
operating costs 3,895,808
3,198,41
1
_________
________
_
Gross Profit 384,471
216,407
Selling, general and administrative 228,119
expenses 119,801
_________
________
_
Earnings From Operations 156,352
96,606
Other expense (49,832)
(3,928)
_________
________
_
Earnings Before Income Taxes 106,520
92,678
Income taxes 36,217
31,511
_________
________
_
Net Earnings $ 70,3 $ 61,16
03 7
========= =========
Average number of shares outstanding 571,575 568,398
Basic and diluted earnings per common $.12 $.10
share
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>
NINE MONTHS ENDED
MARCH 31,
1998 1997
--------------------------
(In thousands, except
per share amounts)
<S> <C> <C>
Net sales and other operating income $12,061,87 $10,260,23
9 1
Cost of products sold and other
operating costs 10,989,881 9,287,361
_________ _________
Gross Profit 1,071,998 972,870
Selling, general and administrative 499,850 545,194
expenses
_________ _________
Earnings From Operations 572,148 427,676
Other income (expense) (57,208) 30,899
_________ _________
Earnings Before Income Taxes 514,940 458,575
Income taxes 174,079 203,914
_________ _________
Net Earnings $ 340,86 $ 254,661
1
========= =========
Average number of shares outstanding 562,278 570,685
Basic and diluted earnings per common $.61
share $.44
Dividends per common share $.148
$.142
</TABLE>
See notes to consolidated financial statements.
3
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
-------------------------
--
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 283,441 $ 397,788
Marketable securities 375,493 330,208
Receivables 1,871,452 1,329,350
Inventories 2,539,487 2,094,092
Prepaid expenses 226,837 132,897
__________ __________
Total Current Assets 5,296,710 4,284,335
Investments and Other Assets
Investments in and advances to 1,405,889 1,102,420
affiliates
Long-term marketable securities 1,186,421 987,665
Other assets 371,252 271,352
__________ __________
2,963,562 2,361,437
Property, Plant and Equipment
Land 143,786 118,898
Buildings 1,718,541 1,448,945
Machinery and equipment 7,592,456 6,841,225
Construction in progress 988,586 765,720
Less allowances for depreciation (5,014,851) (4,466,193)
__________ __________
5,428,518 4,708,595
__________ __________
$13,688,790 $11,354,367
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
------------------------
--
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $1,481,033 $ 604,831
Accounts payable 1,418,605 1,126,313
Accrued expenses 613,127 493,944
Current maturities of long-term debt 31,910 23,667
__________ __________
Total Current Liabilities 3,544,675 2,248,755
Long-term Debt 2,857,786 2,344,949
Deferred Credits
Income taxes 631,878 597,514
Other 139,685 113,020
__________ __________
771,563 710,534
Shareholders' Equity
Common stock 4,488,015 4,192,321
Reinvested earnings 2,026,751 1,857,808
__________ __________
6,514,766 6,050,129
__________ __________
$13,688,790 $11,354,367
========== ==========
</TABLE>
See notes to consolidated financial statements.
5
PAGE 6
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE> NINE MONTHS ENDED
<CAPTION>
MARCH, 31
1998
1997
------------------------
-
(In thousands)
<S> <C> <C>
Operating Activities
Net earnings $ 340,861 $
254,661
Adjustments to reconcile to net cash
provided
by operations
Depreciation and amortization 373,819 325,576
Deferred income taxes 17,365 (18,961)
Amortization of long-term debt discount 24,490 21,407
(Gain)loss on marketable securities
transactions (36,147) (59,549)
Other 656 4,563
Changes in operating assets and
liabilities
Receivables (247,083) (21,122)
Inventories (113,793) (350,611)
Prepaid expenses (80,585) (17,609)
Accounts payable and accrued expenses (34,706) (25,798)
________ ________
Total Operating Activities 244,877 112,557
Investing Activities
Purchases of property, plant and equipment (517,729) (590,476)
Net assets of businesses acquired (359,510) (332,178)
Investments in and advances to affiliates (307,793) (387,909)
Purchases of marketable securities (932,833) (781,811)
Proceeds from sales of marketable 749,096 1,511,89
securities 7
________ ________
Total Investing Activities (1,368,769) (580,477
)
Financing Activities
Long-term debt borrowings 441,464 347,855
Long-term debt payments (18,821) (21,364)
Net borrowings under line of credit 709,790 516,272
agreements
Purchases of treasury stock (42,135) (198,498)
Cash dividends and other (80,753) (78,498)
________ ________
Total Financing Activities 1,009,545 565,767
________ ________
Increase (Decrease) In Cash and Cash (114,347) 97,847
Equivalents
Cash and Cash Equivalents Beginning of 397,788 534,702
Period
________ ________
Cash and Cash Equivalents End of Period $ 283,441 $
632,549
======== =======
Supplemental Cash Flow Information
Noncash Investing and Financing Activities
Common stock issued in purchase $ 298,244 $ -
acquisition
</TABLE>
See notes to consolidated financial statements.
6
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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 nine months ended March 31, 1998 are not
necessarily indicative of the results that may be
expected for the year ending June 30, 1998. For further
information, refer to the consolidated financial
statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended
June 30, 1997.
In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
Number 128 (SFAS 128) "Earnings per Share." This
statement, which is required to be adopted for financial
statements issued for interim and annual periods ended
after December 15, 1997, replaces the previously
reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share
excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is
very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary,
restated to conform to the SFAS 128 requirements.
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards
Number 130 (SFAS 130) "Reporting Comprehensive Income."
This statement, which is required to be adopted for
financial statements issued for annual periods beginning
after December 15, 1997, establishes standards for
reporting and display of comprehensive income and its
components in a full set of general-purpose financial
statements. At that time, ADM will be required to report
total comprehensive income, an amount that will include
net income as well as other comprehensive income. Other
comprehensive income refers to revenues, expenses, gains
and losses that under generally accepted accounting
principles have previously been reported as separate
components of equity in ADM's Consolidated Statements of
Earnings.
7
PAGE 8
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards
Number 131 (SFAS 131) "Disclosures about Segments of an
Enterprise and Related Information." This statement,
which is required to be adopted for financial statements
issued for annual periods beginning after December 15,
1997, establishes standards for the way that public
business enterprises report information about operating
segments in financial reports issued to shareholders.
ADM has not yet determined the financial statement
disclosure impact of SFAS 131.
Certain items in prior year financial statements have
been reclassified to conform to the current year's
presentation.
Note 2. Other Income (expense)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS ENDED
ENDED MARCH 31,
MARCH 31, 1998 1997
1998 1997
________________ _________________
____ ___
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Investment income $ 32,782 $30,045 $ $
86,586 99,260
Interest expense (80,274) (48,502 (208,02 (142,76
) 7) 2)
Gain (loss) on marketable
securities transactions - 11,282 36,150 59,566
Equity in earnings (loss)
of (5,919) 4,853 21,035 16,528
affiliates
Other 3,579 (1,606) 7,048 (1,693)
______ ______ ______ ______
$(49,83 $(3,92 $(57,20 $30,899
2) 8) 8)
====== ====== ====== ======
</TABLE>
Note 3. Per Share Data
All references to share and per share information have
been adjusted for the 5 percent stock dividend paid
September 15, 1997.
8
PAGE 9
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4.Antitrust Investigation and Related Litigation
Federal grand juries in the Northern Districts of Illinois,
California and Georgia, under the direction of the United States
Department of Justice ("DOJ"), have been investigating possible
violations by the Company and others with respect to the sale of
lysine, citric acid and high fructose corn syrup, respectively.
In connection with an agreement with the DOJ, the Company has
paid the United States a fine of $100 million. This agreement
constitutes a global resolution of all matters between the DOJ
and the Company and brings to a close all DOJ investigations of
the Company.
Following public announcement in June 1995 of these
investigations, the Company and certain of its then current
directors and executive officers were named as defendants in a
number of putative class action suits for alleged violations of
federal securities laws on behalf of all purchasers of
securities of the Company during the period between certain
dates in 1992 and 1995. The Company, along with other domestic
and foreign companies, was named as a defendant in a number of
putative class action antitrust suits and other proceedings
involving the sale of lysine, citric acid, and high fructose
corn syrup. The plaintiffs generally request unspecified
compensatory damages, costs, expenses and unspecified relief.
The Company and the individuals named as defendants intend to
vigorously defend these actions and proceedings unless they can
be settled on terms deemed acceptable by the parties. These
matters have resulted and could result in the Company being
subject to monetary damages, other sanctions and expenses.
The Company has made provisions of $48 million in fiscal 1998,
$200 million in fiscal 1997 and $31 million in fiscal 1996 to
cover the fine, litigation settlements related to the federal
lysine class action, federal securities class action, the
federal citric class action and certain state actions filed by
indirect purchasers of lysine, certain actions filed by parties
that opted-out of the class action settlements, certain other
proceedings and the related costs and expenses associated with
the litigation described in the proceeding paragraph. Because of
the early stage of other putative class actions and proceedings,
including those related to high fructose corn syrup, the
ultimate outcome and materiality of these matters cannot
presently be determined. Accordingly, no provision for any
liability that may result therefrom has been made in the
unaudited consolidated financial statements.
The Company and its directors have also been named as defendants
in a putative class action suit which alleges violations of
Delaware state law and seeks invalidation of the election of the
Company's directors on the basis of alleged omissions from the
proxy statement issued by the Company prior to its 1995 Annual
Meeting of Shareholders. This case was dismissed, appealed and
remanded to provide the plaintiffs an opportunity to replead.
The plaintiffs filed an amended complaint on November 21, 1997.
9
PAGE 10
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
OPERATIONS
The Company is in one business segment - procuring,
transporting, storing, processing and merchandising agricultural
commodities and products. A summary of net sales and other
operating income by classes of products and services is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1998 1998
1997 1997
--------------- ---------------
-- --
(In millions) (In millions)
<S> <C> <C> <C> <C>
Oilseed products $2,726 $2,231 $ 7,622 $ 6,596
Corn products 542 502 1,633 1,625
Wheat and other 358 370 1,138 1,242
milled products
Other products and 654 312 1,669 797
services
----- ----- ----- -----
$4,280 $3,415 $12,062 $10,260
===== ===== ====== ======
</TABLE>
Net sales and other operating income increased 25 percent for
the quarter to $4.3 billion and increased 18 percent for the
nine months to $12.1 billion due primarily to sales attributable
to recently acquired operations and to an increase in volumes of
products sold. Sales of oilseed products increased 22 percent
for the quarter and 16 percent for the nine months due
principally to higher sales volumes reflecting strong worldwide
protein meal and vegetable oil demand. Oilseed product sales
also increased due to sales attributable to recently acquired
operations. These increases were partially offset by lower
average selling prices reflecting the lower cost of raw
materials. Sales of corn products increased 8 percent for the
quarter due primarily to increased sales volumes for the
Company's sweetener, alcohol and amino acid products and to
higher average selling prices of sweetener products. These
increases were partially offset by lower average selling prices
of alcohol and amino acid products. Sales of corn products for
the nine months increased slightly as increased sales volumes of
sweetener, alcohol and amino acid products were offset by lower
average selling prices of these same products. Sales of wheat
and other milled products decreased 3 percent for the quarter
and 8 percent for the nine months due principally to lower
average selling prices reflecting the lower cost of raw
materials. These decreases were partially offset by sales
attributable to recently acquired operations. The increases in
other products and services for both the quarter and nine months
were due principally from sales related to the Company's
recently acquired cocoa business, livestock feed business and
dry edible bean business.
Cost of products sold and other operating costs increased $697
million for the quarter to $3.9 billion and increased $1.7
billion for the nine months to $11 billion due principally to
costs related to recently acquired operations and to a lesser
extent higher sales volumes partially offset by lower average
raw material costs.
10
PAGE 11
The $168 million increase in gross profit to $384 million for
the quarter is due primarily to the net effect of lower raw
material costs versus decreased sales prices and to gross
profits of recently acquired operations. The $99 million
increase in gross profit to $1.1 billion for the nine months is
due principally to gross profits of recently acquired operations
and to increased sales volumes. These increases were partially
offset by the net effect of decreased sales prices versus lower
raw material costs.
Selling, general and administrative expenses increased $108
million for the quarter to $228 million due primarily to
increased legal and litigation related costs of $60 million and
to $42 million of expenses attributable to recently acquired
operations. Selling, general and administrative expenses
decreased $45 million for the nine months to $500 million due
principally to decreased legal and litigation related costs of
$140 million (see note 4 to the financial statements). Partially
offsetting this decrease for the nine months was $71 million of
selling, general and administrative expenses attributable to
recently acquired operations.
The decrease in other income for both the quarter and nine
months was due primarily to increased interest expense due to
higher borrowing levels and decreased gains on marketable
securities transactions. For the quarter, the Company also had
decreased equity in earnings of unconsolidated affiliates.
The increase in income taxes for the quarter was due
principally to higher pretax earnings. The Company's effective
income tax rate of 34 percent for the quarter was comparable to
the same period a year ago. The decrease in income taxes for
the nine months was a result of a lower effective tax rate
partially offset by higher pretax earnings. The decrease in the
Company's effective income tax rate to 34 percent for the nine
months compared to an effective tax rate of 44 percent last
year is due primarily to the non-deductibility for income tax
purposes in fiscal 1997 of a portion of the Company's
litigation settlements and fines.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company continued to show substantial
liquidity with working capital of $1.8 billion. The Company's
total cash and marketable securities net of short-term debt was
$364 million. Capital resources remained strong as reflected in
the Company's net worth of $6.5 billion. The Company's ratio of
long-term debt to total capital at March 31, 1998 was
approximately 28 percent.
As discussed in Note 4 to the unaudited consolidated financial
statements, various grand juries under the direction of the
United States Department of Justice ("DOJ") have been conducting
investigations into possible violations by the Company and
others of federal antitrust laws and related matters with
respect to the sale of lysine, citric acid and high fructose
corn syrup. In connection with an agreement with the DOJ, the
Company has paid the United States a fine of $100 million. This
agreement constitutes a global resolution of all matters between
the DOJ and the Company and brings to a close all DOJ
investigations of the Company. In addition, related civil class
actions and other proceedings have been filed against the
Company, which could result in the Company being subject to
monetary damages, other sanctions and expenses. As also
discussed in Note 4 to the unaudited consolidated financial
statements, the Company has settled certain civil federal class
action suits involving lysine, citric acid, and securities, and
certain state actions filed by indirect purchasers of lysine.
The Company has made provisions of $279 million to cover such
fines and settlements, certain other proceedings, 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.
11
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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
In 1993, the State of Illinois Environmental Protection
Agency ("IEPA") brought administrative enforcement
proceedings arising out of the Company's alleged failure
to obtain permits for certain pollution control equipment
at certain of the Company's processing facilities in
Illinois. The Company and IEPA have executed a settlement
agreement with respect to one of these proceedings. That
agreement is currently before the Illinois Pollution
Control Board for approval. The Company believes it has
meritorious defenses to the remaining proceeding. In
management's opinion this settlement and the remaining
proceeding will not, either individually or in the
aggregate, have a material adverse effect on the Company's
financial condition or results of operations.
The Company is involved in approximately 35 administrative
and judicial proceedings in which it has been identified
as a potentially responsible party (PRP) under the federal
Superfund law and its state analogs for the study and
clean-up of sites contaminated by material discharged into
the environment. In all of these matters, there are
numerous PRPs. Due to various factors such as the required
level of remediation and participation in the clean-up
effort by others, the Company's future clean-up costs at
these sites cannot be reasonably estimated. However, in
management's opinion these proceedings will not, either
individually or in the aggregate, have a material adverse
effect on the Company's financial condition or results of
operations.
LITIGATION REGARDING ALLEGED ANTICOMPETITIVE PRACTICES
The Company and certain of its current and former officers
and directors are currently defendants in various lawsuits
related to alleged anticompetitive practices by the
Company as described in more detail below. The Company and
the individual defendants named in these actions intend to
vigorously defend the actions unless they can be settled
on terms deemed acceptable to the parties. The Company has
paid and intends to continue to pay the legal expenses of
its current and former officers and directors and to
indemnify these persons with respect to these actions in
accordance with Article X of the Bylaws of the Company.
GOVERNMENTAL INVESTIGATIONS
Federal grand juries in the Northern Districts of Illinois,
California and Georgia, under the direction of the United
States Department of Justice ("DOJ"), have been
investigating possible violations by the Company and others
with respect to the sale of lysine, citric acid and high
fructose corn syrup, respectively. In connection with an
agreement with the DOJ, the Company has paid the United
States a fine of $100 million. This agreement constitutes a
global resolution of all matters between the DOJ and the
Company and brought to a close all DOJ investigations of
the Company.
The Company has received notice that certain foreign
governmental entities were commencing investigations to
determine whether anticompetitive practices occurred in
their jurisdictions. In February 1997, the Company's three
Mexican subsidiaries were notified that the Mexican Federal
Competition Commission commenced an investigation as to
whether the Company's marketing and sale of lysine in
Mexico resulted in violations of that country's federal
antitrust laws. In June 1997, the Company and several of
its European subsidiaries were notified that the Commission
of the European Communities had initiated an investigation
as to possible anticompetitive practices in the amino acid
markets, in particular the lysine market, in the European
Union. In September 1997, the Company received a request
for information from the Commission of the European
Communities with respect to an investigation being
conducted by that Commission into the possible existence of
certain agreements and/or concerted practices in the citric
acid market within the European Union. In December, 1997,
the Company was notified by the Canadian Competition Bureau
that it is among the subjects of a formal inquiry into an
alleged conspiracy to fix prices and sales volumes in the
production, sale and supply of lysine. In management's
opinion, the resolution of the proceedings in Mexico and
Canada will not, either individually or in the aggregate,
have a material adverse effect on the Company's financial
condition or results of operations. However, because of
the early stage of the proceedings of the Commission of the
European Communities, the ultimate outcome and materiality
of these proceedings can not presently be determined. The
Company may become the subject of similar antitrust
investigations conducted by the applicable regulatory
authorities of other countries.
HIGH FRUCTOSE CORN SYRUP ACTIONS
The Company, along with other companies, has been named as
a defendant in thirty-one antitrust suits involving the
sale of high fructose corn syrup. Thirty 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.
12
PAGE 13
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 parties are in the midst of
discovery in this action.
STATE ACTIONS. The Company, along with other companies,
also has been named as a defendant in seven putative
class action antitrust suits filed in California state
court involving the sale of high fructose corn syrup.
These California actions allege violations of the
California antitrust and unfair competition laws,
including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of high fructose corn syrup, and seek treble
damages of an unspecified amount, attorneys fees and
costs, restitution and other unspecified relief. One of
the California putative classes comprises certain direct
purchasers of high fructose corn syrup in the State of
California during certain periods in the 1990s. This
action was filed on October 17, 1995 in Superior Court for
the County of Stanislaus, California and encaptioned
Kagome Foods, Inc. v Archer-Daniels-Midland Co. et al.,
Civil Action No. 37236. This action has been removed to
federal court and consolidated with the federal class
action litigation pending in the Central District of
Illinois referred to above. The other six 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 four other indirect
purchaser actions have been coordinated before a single
court in Stanislaus County, California under the caption,
Food Additives (HFCS) cases, Master File No. 39693. The
other four actions are encaptioned, Goings v. Archer
Daniels Midland Co., et al., Civil Action No. 750276
(Filed on July 21, 1995, Orange County Superior Court);
Rainbow Acres v. Archer Daniels Midland Co., et al., Civil
Action No. 974271 (Filed on November 22, 1995, San
Francisco County Superior Court); Patane v. Archer Daniels
Midland Co., et al., Civil Action No. 212610 (Filed on
January 17, 1996, Sonoma County Superior Court); and St.
Stan's Brewing Co. v. Archer Daniels Midland Co., et al.,
Civil Action No. 37237 (Filed on October 17, 1995,
Stanislaus County Superior Court). On October 8, 1997,
Varni Brothers Corp. filed a complaint in intervention
with respect to the coordinated action pending in
Stanislaus County Superior Court, asserting the same
claims as those advanced in the consolidated class action.
The parties are in the midst of discovery in the
coordinated action.
13
PAGE 14
The Company, along with other companies, also has been
named a defendant in a putative class action antitrust
suit filed in Alabama state court. The Alabama action
alleges violations of the Alabama, Michigan and Minnesota
antitrust laws, including allegations that defendants
agreed to fix, stabilize and maintain at artificially high
levels the prices of high fructose corn syrup, and seeks
an injunction against continued illegal conduct, damages
of an unspecified amount, attorneys fees and costs, and
other unspecified relief. The putative class in the
Alabama action comprises certain indirect purchasers in
Alabama, Michigan and Minnesota during the period March
18, 1994 to March 18, 1996. This action was filed on March
18, 1996 in the Circuit Court of Coosa County, Alabama,
and is encaptioned Caldwell v. Archer-Daniels-Midland Co.,
et al., Civil Action No. 96-17. On April 23, 1997, the
court granted the defendants' motion to sever and dismiss
the non-Alabama claims. The remaining parties are in the
midst of discovery in this action.
LYSINE ACTIONS
The Company, along with other companies, had been named as
a defendant in twenty-one putative class action antitrust
suits involving the sale of lysine. Except for several
plaintiffs that opted out of the federal class action
settlement and the actions specifically described below,
all such suits have been settled, dismissed or withdrawn.
STATE ACTIONS. The Company has been named as a defendant,
along with other companies, in two putative class action
antitrust suits and one non-class action suit filed in
Alabama state court, one putative class action antitrust
suit filed in Tennessee state court and one putative class
action antitrust suit filed in Michigan state court
involving the sale of lysine. The two putative Alabama
class actions allege violations of the Alabama antitrust
laws, including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels
the prices of lysine, and seek an injunction against
continued alleged illegal conduct, damages of an
unspecified amount, attorneys fees and costs, and other
unspecified relief. The two putative classes in the
Alabama actions comprise certain indirect purchasers of
lysine in the State of Alabama during certain periods in
the 1990s. One such action was filed on August 17, 1995 in
the Circuit Court of DeKalb County, Alabama, and is
encaptioned Ashley v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 95-336. On March 13, 1998, the court
denied plaintiff's motion for class certification. The
other Alabama action, encaptioned Bailey v. Archer Daniels
Midland Co., et al., Civil Action No. 95-165, and filed on
December 11, 1995 in the Circuit Court of Tallapoosa
County, has been placed on the court's administrative
docket pending the outcome of the Ashley action. The non-
class action, encaptioned Kent v. Archer Daniels Midland
Co., et al, No. CV 9701108, and filed on February 21, 1997
in the Circuit Court of Jefferson County, Alabama,
includes allegations that are similar to these contained
in the putative class actions and seeks monetary relief in
the amount of $670,000, injunctive relief against alleged
illegal conduct, attorneys fees and costs, punitive
damages and other unspecified relief. This action was
removed to federal court in the Northern District of
Alabama and dismissed on December 15, 1997 pursuant to a
settlement agreement that did not result in the Company
paying plaintiff any consideration. 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. On February 23, 1998, the
court issued a notice advising the parties that the case
would be dismissed unless the court received a motion to
set the case for trial or special permission was otherwise
obtained from the court within 30 days. No motion was
filed and special permission was not obtained. The
Michigan action alleges a restraint of trade in violation
of the Michigan Antitrust Reform Act and include
allegations that defendants conspired to fix, raise,
maintain and stabilize the price of lysine and seeks an
injunction against continued illegal conduct, treble
damages of an unspecified amount, attorneys' fees and
costs, and other unspecified relief. The putative class in
this case comprises certain indirect purchasers of lysine
within the State of Michigan during certain periods in the
1990s. This action, encaptioned Michigan Pork Producers
Assn, et al. v. Archer Daniels Midland Co., et al., No.
906-10696-CZ, was filed on September 25, 1996 in Kent
County Circuit Court. On March 6, 1998, the court
dismissed this case with prejudice pursuant to a
stipulation by the parties.
14
PAGE 15
CITRIC ACID ACTIONS
The Company, along with other companies, had been named as
a defendant in eleven putative class action antitrust suits
and two non-class action antitrust suits involving the sale
of citric acid. Except for several plaintiffs that opted
out of the federal class action settlement and the actions
specifically described below, all such suits have been
settled or dismissed.
FEDERAL ACTION. The Company, along with other companies,
was named as a defendant in a non-class action federal
antitrust suit involving the sale of citric acid filed on
June 9, 1997 in the United States District Court for the
Northern District of California, encaptioned The Proctor &
Gamble Manufacturing Co., et al. v. Archer-Daniels-Midland
Company, et al., Civil Action No. 97-2155 (VRW). This
action alleged violations of federal antitrust laws,
including allegations that defendants agreed to fix, raise
and maintain the price of citric acid, and seek an
injunction against continued alleged illegal conduct,
treble damages of an unspecified amount, attorney's fees
and costs, and other unspecified relief. This action was
brought by entities that opted-out of a previously settled
federal class action. On February 27, 1998, the parties
executed a settlement agreement in which the Company agreed
to pay $36 million to the plaintiffs. The court dismissed
this action on March 5, 1998.
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 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.
15
PAGE 16
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID STATE CLASS ACTIONS
The Company, along with other companies, has been named as
a defendant in six putative class action antitrust suits
involving the sale of both high fructose corn syrup and
citric acid. Two of these actions allege violations of the
California antitrust and unfair competition laws,
including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of high fructose corn syrup and citric acid, and
seek treble damages of an unspecified amount, attorneys
fees and costs, restitution and other unspecified relief.
The putative class in one of these California cases
comprises certain direct purchasers of high fructose corn
syrup and citric acid in the State of California during
the period January 1, 1992 until at least October 1995.
This action was filed on October 11, 1995 in the Superior
Court of Stanislaus County, California and is entitled
Gangi Bros. Packing Co. v. Archer-Daniels-Midland Co., et
al., Civil Action No. 37217. The putative class in the
other California case comprises certain indirect
purchasers of high fructose corn syrup and citric acid in
the state of California during the period October 12, 1991
until November 20, 1995. This action was filed on November
20, 1995 in the Superior Court of San Francisco County and
is encaptioned MCFH, Inc. v. Archer-Daniels-Midland Co.,
et al., Civil Action No. 974120. The California Judicial
Council has bifurcated the citric acid and high fructose
corn syrup claims in these actions and coordinated them
with other actions in San Francisco County Superior Court
and Stanislaus County Superior Court. The Company, along
with other companies, also has been named as a defendant
in at least one putative class action antitrust suit filed
in West Virginia state court involving the sale of high
fructose corn syrup and citric acid. This action also
alleges violations of the West Virginia antitrust laws,
including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of high fructose corn syrup and citric acid, and
seeks treble damages of an unspecified amount, attorneys
fees and costs, and other unspecified relief. The putative
class in the West Virginia action comprises certain
entities within the State of West Virginia that purchased
products containing high fructose corn syrup and/or citric
acid for resale from at least 1992 until 1994. This action
was filed on October 26, 1995, in the Circuit Court for
Boone County, West Virginia, and is encaptioned Freda's v.
Archer-Daniels-Midland Co., et al., Civil Action No. 95-C-
125. The Company, along with other companies, also has
been named as defendant in a putative class action
antitrust suit filed in Michigan state court involving the
sale of high fructose corn syrup and citric acid. This
action alleges violations of the Michigan antitrust laws,
including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of high fructose corn syrup and citric acid, and
seeks treble damages of an unspecified amount, attorneys
fees and costs, and other unspecified relief. The putative
class in the Michigan action comprises certain persons
within the State of Michigan that purchased products
containing high fructose corn syrup and/or citric acid
during the period January 1993 through June 27, 1995. This
action was filed on February 26, 1996 in the Circuit Court
for Ingham County, Michigan, and is encaptioned Wilcox v.
Archer-Daniels-Midland Co., et al., Civil Action No. 96-
82473-CP. On February 4, 1998, the court dismissed this
action as to the named plaintiff for lack of prosecution.
On September 29, 1997, the court denied the plaintiff's
motion for class certification. The Company, along with
other companies, also has been named as a defendant in a
putative class action antitrust suit filed in the Superior
Court for the District of Columbia involving the sale of
high fructose corn syrup and citric acid. This action
alleges violations of the District of Columbia antitrust
laws, including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels
the prices of high fructose corn syrup and citric acid,
and seeks treble damages of an unspecified amount,
attorneys fees and costs, and other unspecified relief.
The putative class in the District of Columbia action
comprises certain persons within the District of Columbia
that purchased products containing high fructose corn
syrup and/or citric acid during the period January 1, 1992
through December 31, 1994. This action was filed on April
12, 1996 in the Superior Court for the District of
Columbia, and is encaptioned Holder v. Archer-Daniels-
Midland Co., et al., Civil Action No. 96-2975. Plaintiff's
motion for class certification is currently pending. The
Company, along with other companies, has been named as a
defendant in a putative class action antitrust suit filed
in Kansas state court involving the sale of high fructose
corn syrup and citric acid. This action alleges violations
of the Kansas antitrust laws, including allegations that
the defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose corn
syrup and citric acid, and seeks treble damages of an
unspecified amount, court costs and other unspecified
relief. The putative class in the Kansas action comprises
certain persons within the State of Kansas that purchased
products containing high fructose corn syrup and/or citric
acid during at least the period January 1, 1992 through
December 31, 1994. This action was filed on May 7, 1996 in
the District Court of Wyandotte County, Kansas and is
encaptioned Waugh v. Archer-Daniels-Midland Co., et al.,
Case No. 96-C-2029. Plaintiff's motion for class
certification is currently pending.
16
PAGE 17
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID/LYSINE STATE CLASS
ACTIONS
The Company, along with other companies, has been named as
a defendant in six putative class action antitrust suits
filed in California state court involving the sale of high
fructose corn syrup, citric acid and/or lysine. These
actions allege violations of the California antitrust and
unfair competition laws, including allegations that the
defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose corn
syrup, citric acid and/or lysine, and seek treble damages
of an unspecified amount, attorneys fees and costs,
restitution and other unspecified relief. One of the
putative classes comprises certain direct purchasers of
high fructose corn syrup, citric acid and/or lysine in the
State of California during a certain period in the 1990s.
This action was filed on December 18, 1995 in the Superior
Court for Stanislaus County, California and is encaptioned
Nu Laid Foods, Inc. v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 39693. The other five putative classes
comprise certain indirect purchasers of high fructose corn
syrup, citric acid and/or lysine in the State of
California during certain periods in the 1990s. One such
action was filed on December 14, 1995 in the Superior
Court for Stanislaus County, California and is encaptioned
Batson v. Archer-Daniels-Midland Co., et al., Civil Action
No. 39680. The other actions are encaptioned Nu Laid
Foods, Inc. v. Archer Daniels Midland Co., et al., No
39693 (Filed on December 18, 1995 Stanislaus County
Superior Court); Abbott v. Archer Daniels Midland Co., et
al., No. 41014 (Filed on December 21, 1995, Stanislaus
County Superior Court); Noldin v. Archer Daniels Midland
Co., et al., No. 41015 (Filed on December 21, 1995,
Stanislaus County Superior Court); Guzman v. Archer
Daniels Midland Co., et al., No. 41013 (Filed on December
21, 1995, Stanislaus County Superior Court) and Ricci v.
Archer Daniels Midland Co., et al., No. 96-AS-00383 (Filed
on February 6, 1996, Sacramento County Superior Court). As
noted in prior filings, the plaintiffs in these actions
and the lysine defendants have executed a settlement
agreement that has been approved by the court and the
California Judicial Council has bifurcated the citric acid
and high fructose corn syrup claims and coordinated them
with other actions in San Francisco County Superior Court
and Stanislaus County Superior Court.
SODIUM GLUCONATE ACTIONS
The Company, along with other companies, has been named as
a defendant in three federal antitrust class actions
involving the sale of sodium gluconate. These actions
allege violations of federal antitrust laws, including
allegations that the defendants agreed to fix, raise and
maintain at artificially high levels the prices of sodium
gluconate, and seek various relief, including 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
sodium gluconate during periods in the 1990s. One such
action was filed on December 2, 1997, in the United States
District Court for the Northern District of California and
is encaptioned Chemical Distribution, Inc, v. Akzo Nobel
Chemicals BV, et al., No. C -97-4141 (CW). The second
action was filed on December 31, 1997, in the United
States District Court for the District of Massachusetts
and is encaptioned Stetson Chemicals, Inc. v. Akzo Nobel
Chemicals BV, 97-CV-1285 RCL. The third action, which was
amended on February 12, 1998 to name the Company as a
defendant, was filed in the United States District Court
for the Northern District of Illinois. On April 9, 1998,
the Judicial Panel on Multidistrict Litigation transferred
all three sodium gluconate actions to the United States
District Court for the Northern District of California for
coordinated or consolidated pretrial proceedings.
SHAREHOLDER DERIVATIVE ACTIONS
Following the public announcement of the grand jury
investigations in June 1995 discussed above, three
shareholder derivative suits were filed against certain of
the Company's then current directors and executive officers
and nominally against the Company in the United States
District Court for the Northern District of Illinois and
fourteen similar shareholder derivative suits were filed in
the Delaware Court of Chancery. The derivative suits filed
in federal court in Illinois were consolidated under the
name Felzen, et al. v. Andreas, et al., Civil Action No. 95-
C-4006, 95-C-4535, and a consolidated amended derivative
complaint was filed on September 29, 1995. This complaint
names all then current directors of the Company (except Mr.
Coan) and one former director as defendants and names the
Company as a nominal defendant. It alleges breach of
fiduciary duty, waste of corporate assets, abuse of control
and gross mismanagement, based on the antitrust allegations
described above, as well as other alleged wrongdoing. On
October 31, 1995, the Court granted the defendants' motion
to transfer the Illinois consolidated derivative action to
the Central District of Illinois, wherein it now bears the
case number 95-2279. On April 26, 1996, the court dismissed
the suit without prejudice and permitted the plaintiffs
twenty-one days to refile it. The plaintiffs refiled the
complaint on May 17, 1996. The defendants again moved to
dismiss the complaint on June 1, 1996. Plaintiffs have
supplemented the complaint to include the antitrust
settlements and guilty plea described above. The fourteen
shareholder derivative suits filed in the Delaware Court of
Chancery have been consolidated as In Re Archer Daniels
Midland Derivative Litigation, Consolidated No. 14403. An
amended and consolidated complaint was filed on November
19, 1996. ADM moved to dismiss the complaint on December
12, 1996. On May 29, 1997, the Company executed a
Memorandum of Understanding with counsel for both the
Illinois and Delaware shareholder derivative plaintiffs.
This Memorandum of Understanding provides for, among other
things, $8 million to be paid by or on behalf of certain
defendants in these actions to the Company and certain
changes in the structure and policies of the Company's
Board of Directors. On May 30, 1997, the United States
District Court for the Central District of Illinois
preliminarily approved this settlement and on July 7, 1997
final approval was granted. Certain entities appealed the
final settlement approval order to the United States Court
of Appeals for the Seventh Circuit. On January 21, 1998 the
Court of Appeals dismissed the appeal. On April 21, 1998, a
petition for writ of certiorari before the United States
Supreme Court was filed with respect to the dismissal by
the United States Court of Appeals for the Seventh Circuit.
The parties will jointly seek dismissal of the Delaware
actions with prejudice once the federal action is
concluded.
17
PAGE 18
DELAWARE STATE LAW ACTION
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 and damages on the basis of alleged omissions
from the proxy statement issued by the Company prior to
its October 19, 1995 annual meeting of shareholders. The
Delaware Court of Chancery dismissed this action on
February 20, 1996. On September 17, 1997, the Supreme
Court of Delaware affirmed the lower court's judgment and
remanded the case to provide the plaintiffs an opportunity
to replead. The revised complaint was filed on November
21, 1997.
OTHER
As described in the notes to the unaudited consolidated
financial statements and management's discussion of
operations and financial condition, the Company has made
provisions to cover assessed fines, litigation settlements
and related costs and expenses described above. However,
because of the early stage of other putative class actions
and proceedings described above, including those related to
high fructose corn syrup, the ultimate outcome and
materiality of these matters cannot presently be
determined. Accordingly, no provision for any liability
that may result therefrom has been made in the consolidated
financial statements.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(3) Articles of Incorporation and Bylaws
Composite Certificate of Incorporation and
Bylaws filed on November 7, 1986 as Exhibits
3(a) and 3(b), respectively, to Post Effective
amendment No. 1 to Registration Statement on
Form S-3, Registration No. 33-6721, are
incorporated herein by reference.
(27) Financial Data Schedules
b) Reports on Form 8-K
A Form 8-K was not filed during the quarter ended
March 31,
1998.
18
PAGE 19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ARCHER-DANIELS-MIDLAND COMPANY
/s/ D. J. Schmalz
D. J. Schmalz
Vice President
and Chief Financial Officer
/s/ D. J. Smith
D. J. Smith
Vice President, Secretary and
General Counsel
Dated: May 15, 1998
19
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