29
PAGE 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1998
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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, no par value New York Stock Exchange
Chicago Stock Exchange
Swiss Exchange
Tokyo Stock Exchange
Frankfurt Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant.
Common Stock, no par value--$8.7 billion
(Based on the closing price of the New York Stock Exchange on
August 24, 1998)
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Common Stock, no par value--567,619,871 shares
(August 31, 1998)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders' report for the year ended
June 30, 1998 are incorporated by reference into Parts I, II and
IV.
Portions of the annual proxy statement for the year ended June
30, 1998 are incorporated by reference into Part III.
1
PAGE 2
PART I
Item 1. BUSINESS
(a) General Development of Business
Archer Daniels Midland Company was incorporated
in Delaware in 1923, successor to the Daniels
Linseed Co. founded in 1902.
During the last five years, the Company has
experienced significant growth, spending
approximately $4.5 billion for construction of new
plants, expansions of existing plants and the
acquisitions of plants and transportation equipment.
There have been no significant dispositions during
this period. However, during this period, the
Company has disposed of its Supreme Sugar subsidiary
and its British Arkady bakery ingredient business.
In addition, the Company has contributed malting
operations, formula feed operations, rice milling
operations, Mexican wheat flour mills and masa corn
flour operations to various unconsolidated joint
ventures.
(b) Financial Information About Industry Segments
The Company is in one business segment--
procuring, transporting, storing, processing and
merchandising agricultural commodities and products.
(c) Narrative Description of Business
(i)Principal products
produced and principal markets for and methods of
distribution of such products.
The Company is
engaged in the business of procuring,
transporting, storing, processing and
merchandising agricultural commodities and
products. It is one of the world's largest
processors of oilseeds, corn and wheat. The
Company also processes cocoa beans, milo, oats,
barley and peanuts. Other operations include
transporting, merchandising and storing
agricultural commodities and products. These
operations and processes produce products which
have primarily two end uses: food or feed
ingredients. Each commodity processed is in
itself a feed ingredient as are the by-products
produced during the processing of each commodity.
Production processes of all commodities are
capital intensive and similar in nature. These
processes involve grinding, crushing or milling
with further value added through extraction,
refining and fermenting. Generally, each
commodity can be processed by any of these
methods to generate additional value-added
products.
2
PAGE 3
Item 1. BUSINESS-Continued
All commodities and related processed products
share the same network of commodity procurement
facilities, transportation services (including
rail, barge, truck and ocean vessels) and storage
facilities. The geographic areas, customers and
marketing methods are basically the same for all
commodities and their related further processed
products. Feed ingredient products and by-
products are sold to farmers, feed dealers and
livestock producers, all of whom purchase
products from across the entire commodity chain.
Food ingredient products are also sold to one
basic group of customers: food and beverage
processors. Any single customer may purchase
products produced from all commodities, and any
single food or feed product could include
ingredients produced from all commodities
processed.
Oilseed Products
Soybeans, cottonseed,
sunflower seeds, canola, peanuts, flaxseed and
corn germ are processed to provide vegetable oils
and meals principally for the food and feed
industries. Crude vegetable oil is sold "as is"
or is further processed by refining and
hydrogenating into margarine, shortening, salad
oils and other food products. Partially refined
oil is sold for use in chemicals, paints and
other industrial products. Lecithin, an
emulsifier produced in the vegetable oil refining
process, is marketed as a food and feed
ingredient. Natural source Vitamin E, an
antioxidant, and distilled monoglycerides, an
emulsifier, are produced from soybeans and other
oilseeds.
Oilseed meals supply
more than one-half of the high protein
ingredients used in the manufacture of commercial
livestock and poultry feeds. Soybean meal is
further processed into soy flour and grits, used
in both food and industrial products, and into
value-added soy protein products. Textured
vegetable protein (TVP), a soy protein product
developed by the Company, is sold primarily to
the institutional food market and, through
others, to the food consumer market. The Company
also produces a wide range of other edible soy
protein products including isolated soy protein,
soy protein concentrate, soy-based milk products,
soy flours and soy protein meat substitutes
(Harvest Burgers and Harvest Burgers for
Recipes). The Company produces and markets a wide
range of consumer and institutional health foods
based on the Company's various soy protein
products, including soy-derived isoflavones. The
Company produces cottonseed flour which is sold
primarily to the pharmaceutical industry. Cotton
cellulose pulp is manufactured and sold to the
chemical, paper and filter markets.
3
PAGE 4
Item 1. BUSINESS-Continued
Corn Products
The Company is
engaged in dry milling and wet milling corn
operations. Products produced for use by the food
and beverage industry include syrup, starch,
glucose, dextrose, crystalline dextrose, high
fructose sweeteners, crystalline fructose and
grits. Corn gluten feed and distillers grains are
produced for use as feed ingredients. Ethyl
alcohol is produced to beverage grade or for
industrial use as ethanol. In gasoline, ethanol
increases octane and is used as an extender and
oxygenate. Corn germ, a by-product of the milling
process, is further processed as an oilseed.
By fermentation of
dextrose, the Company produces citric and lactic
acids, feed-grade amino acids and vitamins,
lactates, sorbitol, xanthan gum, and food
emulsifiers principally for the food and feed
industries.
Wheat and Other Milled Products
Wheat flour is sold
primarily to large bakeries, durum flour is sold
to pasta manufacturers and bulgur, a gelatinized
wheat food, is sold to both the export and the
domestic food markets. The Company produces wheat
starch and vital wheat gluten for the baking
industry. The Company mills oats into oat bran
and oat flour for institutional and consumer food
customers. The Company also mills milo to produce
industrial flour that is used in the
manufacturing of wall board for the building
industry.
Other Products and Services
The Company buys,
stores and cleans agricultural commodities, such
as oilseeds, corn, wheat, milo, oats and barley,
for resale to other processors worldwide.
The Company grinds cocoa beans and produces cocoa
liquor, cocoa butter, cocoa powder, chocolate and
various compounds for the food processing
industry.
The Company produces
and distributes formula feeds and animal health
and nutrition products to the livestock, dairy
and poultry industries. Many of the feed
ingredients and health and nutrition products are
produced in the Company's other commodity
processing operations.
The Company produces
bakery products and mixes which are sold to the
baking industry.
4
PAGE 5
Item 1. BUSINESS--Continued
The Company produces
spaghetti, noodles, macaroni, and other consumer
food products. The Company also produces lettuce,
other fresh vegetables and herbs in its
hydroponic greenhouse.
The Company processes
and distributes edible beans for use in many
parts of the food industry.
The Company raises
fish for distribution to consumer food customers.
Hickory Point Bank
and Trust Co. furnishes public banking and trust
services, as well as cash management and
securities safekeeping services for the Company.
ADM Investor
Services, Inc. is a registered futures commission
merchant and a clearing member of all principal
commodities exchanges. ADM Investor Services
International, Ltd. specializes in futures,
options and foreign exchange in the European
marketplace.
Agrinational
Insurance Company acts as a direct insurer and
reinsurer of a portion of the Company's domestic
and foreign property and casualty insurance
risks.
The Company owns a
57% interest in Heartland Rail Corporation.
Heartland's 80% owned affiliate, Iowa Interstate
Railroad, operates a regional railroad in Iowa
and Illinois.
Alfred C. Toepfer
International (Germany) and affiliates, in which
the Company has a 50% interest, is one of the
world's largest, most respected trading companies
specializing in agricultural commodities and
processed products. Toepfer has forty-three sales
offices worldwide.
Compagnie
Industrielle et Financiere des Produits Amylaces
SA (Luxembourg) and affiliates, of which the
Company has a 41.5% interest, owns European
agricultural processing plants that are primarily
engaged in wet corn milling and wheat starch
production.
Gruma S.A. de C.V.
(Mexico) and affiliates, of which the Company has
a 22% interest, is the world's largest producer
and marketer of corn flour and tortillas with
operations in the U.S., Mexico and Central
America. Additionally, the Company has a 20%
interest in a joint venture which consists of the
combined U.S. corn flour operations of ADM and
Gruma. The Company also has a 40% share, through
a joint venture with Gruma, in seven Mexican-
based wheat flour mills.
5
PAGE 6
Item 1. BUSINESS-Continued
The Company owns a 30% non-voting equity interest
in Minnesota Corn Processors (MCP). MCP operates
wet corn milling plants in Minnesota and
Nebraska.
The Company formed a strategic alliance with
United Grain Growers of Canada (UGG) which
resulted in the Company having approximately 42%
ownership of UGG. UGG, with more than 175
locations throughout Western Canada, is involved
in grain merchandising, crop input marketing and
distribution, livestock production services and
farm business communications.
Consolidated Nutrition, L.C., a joint venture
between the Company and Ag Processing Inc., is a
supplier of premium animal feeds and animal
health products. The Company has a 50% ownership
interest in this joint venture.
ADM/Countrymark, LLC, a joint venture between the
Company and Countrymark Cooperative Inc.,
operates a grain business in Indiana, Kentucky,
Maryland, Michigan and Ohio. The Company has a
50% ownership interest in this joint venture. The
Company also has a 50% interest in Kalama Export
Company, a joint venture with Con Agra Inc.,
which operates a grain export elevator in
Washington.
The Company owns a 28% interest in Acatos &
Hutchinson, a U.K. based company, that processes
and markets edible oil.
Eaststarch C.V. (Netherlands), of which the
Company has a 50% interest, operates wet corn
milling plants in Bulgaria, Hungary, Slovakia and
Turkey.
Almidones Mexicanos S.A. (Mexico), of which the
Company has a 50% interest, operates a wet corn
milling plant in Mexico.
Golden Peanut Company, a joint venture between
the Company, Gold Kist, Inc. and Alimenta
Processing Corporation, is a major supplier of
peanuts to both the domestic and export markets.
The Company has a 33 1/3% ownership interest in
this joint venture.
ADM-Riceland Partnership, a joint venture between
the Company and Riceland Foods, Inc., is a
processor of rice and rice products for
institutional and consumer food customers. The
Company has a 50% ownership interest in this
joint venture.
The Company owns a 50% interest in Sociedad
Aceitera Oriente, S.A., a Bolivian company that
is in the oilseed crushing, refining and bottling
business.
6
PAGE 7
Item 1. BUSINESS-Continued
International Malting Company, a joint venture
between the Company and the LeSaffre Company,
operates barley malting plants in the United
States, Canada and France. The Company has a 40%
ownership interest in this joint venture.
The Company
participates in various joint ventures that
operate oilseed crushing facilities, oil
refineries and related storage facilities in
China and Indonesia.
The percentage of net
sales and other operating income by classes of
products and services for the last three fiscal
years were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Oilseed products 63% 64% 61%
Corn products 13 16 18
Wheat and other
milled products 9 12 13
Other products and services 15 8 8
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
Methods of Distribution
Since the Company's customers are principally
other manufacturers and processors, its products
are distributed mainly in bulk from processing
plants or storage facilities directly to the
customers' facilities. The Company owns a large
number of trucks and trailers and owns or leases
large numbers of railroad tank cars and hopper
cars to augment those provided by the railroads.
The Company uses the inland waterway systems of
North and South America and functions as a
contract carrier of commodities for its own
operations as well as for other companies. The
Company owns and leases approximately 2,250 river
barges and 53 line-haul towboats.
7
PAGE 8
Item 1. BUSINESS-Continued
(ii) Status of new products
The Company continues
to expand its business through the development
and production of new, value-added products.
These new products include a wide-range of health
and nutrition products known as neutraceuticals
or functional foods. The Company has entered the
vitamin market with the production of riboflavin
and vitamin E and is currently expanding
production facilities to produce vitamin C. The
Company continues to develop its soy protein meat
substitutes, Harvest Burgers and Harvest Burgers
for Recipes, its soy protein powdered non-dairy
beverage, Nutribev, and its non-dairy frozen
dessert, Dairylike. The Company is developing and
expanding production facilities to produce soy-
derived isoflavones, sterols, granular lecithin,
astaxathin, distilled monoglycerides and xanthan
gum. Additionally, the Company is in the early
stages of development of the antioxidants beta-
carotene, oligosaccharides and tocotrienols.
(iii) Source and availability of raw materials
Substantially all of
the Company's raw materials are agricultural
commodities. In any single year, the availability
and price of these 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 worldwide
production of similar and competitive crops.
(iv) Patents, trademarks and licenses
The Company owns
several valuable patents, trademarks and licenses
but does not consider its business dependent upon
any single or group of patents, trademarks and
licenses.
(v) Extent to which business is seasonal
Since the Company is
so widely diversified in global agribusiness
markets, there are no material seasonal
fluctuations in the manufacture, sale and
distribution of its products and services. There
is a degree of seasonality in the growing season
and procurement of the Company's principal raw
materials: oilseeds, wheat, corn and other
grains. However, the actual physical movement of
the millions of bushels of these crops through
the Company's storage and processing facilities
is reasonably constant throughout the year. The
worldwide need for food is not seasonal and is
ever expanding as is the world's population.
8
PAGE 9
Item 1. BUSINESS-Continued
(vi) Working capital items
Price variations and
availability of grain at harvest often cause wide
fluctuations in the Company's inventories and
short-term borrowings.
(vii) Dependence on single customer
No material part of
the Company's business is dependent upon a single
customer or very few customers.
(viii) Amount of backlog
Because of the nature
of the Company's business, the backlog of orders
at year end is not a significant indication of
the Company's activity for the current or
upcoming year.
(ix) Business subject to renegotiation
The Company has no
business with the government that is subject to
renegotiation.
(x) Competitive conditions
Markets for the
Company's products are highly price competitive
and sensitive to product substitution. No single
company competes with the Company in all of its
markets; however, a number of large companies
compete in one or more markets. Major competitors
in one or more markets include, but are not
limited to, Cargill, Inc., ConAgra, Inc., Corn
Products International, Inc., Eridania Beghin-Say
and Tate & Lyle.
(xi) Research and development expenditures
Practically all of
the Company's technical efforts and expenditures
are concerned with food and feed ingredient
products. Special efforts are being made to find
improvements in food technology to alleviate the
protein malnutrition throughout the world,
utilizing the three largest United States crops:
corn, soybeans and wheat.
9
PAGE 10
Item 1. BUSINESS-Continued
The need to
successfully market new or improved food and feed
ingredients developed in the Company's research
laboratories led to the concept of technical
support. The Company is staffed with technical
representatives who work closely with customers
and potential customers on the development of
food and feed products which incorporate Company-
produced ingredients. These technical
representatives are an adjunct to both the
research and sales functions.
The Company maintains
a research laboratory in Decatur, Illinois where
product and process development activities are
conducted. To develop new bioproducts and to
improve existing bioproducts, new cultures are
developed using classical mutation and genetic
engineering. Protein research is conducted at
facilities in Decatur where meat and dairy pilot
plants support application research. Starch and
amyolitic enzyme research is done at a laboratory
in Clinton, Iowa. Research to support sales and
development for bakery products is done at a
laboratory in Olathe, Kansas. Research to support
sales and development for cocoa and chocolate
products is done in Milwaukee, Wisconsin and the
Netherlands. The Company maintains research
centers in Quincy, Illinois that conduct swine
and cattle feeding trials to test new formula
feed products and to develop improved feeding
efficiencies.
The amounts spent during the three years ended
June 30, 1998, 1997 and 1996 for such technical
efforts were approximately $17.1, $12.2 and $11.5
million, respectively.
(xii)Material effects of
capital expenditures for environmental protection
During 1998, $16
million was spent for equipment, facilities and
programs for pollution control and compliance
with the requirements of various environmental
agencies.
There have been no
material effects upon the earnings and
competitive position of the Company resulting
from compliance with federal, state and local
laws or regulations enacted or adopted relating
to the protection of the environment.
The Company expects
that expenditures for environmental facilities
and programs will continue at approximately the
present rate with no unusual amounts anticipated
for the next two years.
Item 1. BUSINESS-Continued
(xiii) Number of employees
The number of persons
employed by the Company was 23,132 at June 30,
1998.
(d)Financial Information About Foreign and Domestic
Operations and Export Sales
The Company's foreign operations are principally in
developed countries and do not entail any undue or unusual
business risks. Geographic financial information is set forth in
"Note 11 of Notes to Consolidated Financial Statements" of the
annual shareholders' report for the year ended June 30, 1998 and
is incorporated herein by reference.
10
PAGE 11
Item 1. BUSINESS--Continued
(e) Executive Officers and Certain Significant
Employees
Name Title Age
G. Allen Andreas President and Chief Executive 55
Officer from 1997. Counsel to
the Executive Committee from
September 1994. Vice President
from 1988.
Martin L. Andreas Senior Vice President from 1989.59
Assistant to the Chairman.
Charles P. Archer Treasurer from October 1992. 42
Lewis W. Batchelder Group Vice President from 53
July 1997. Senior Vice President
of ADM/Growmark. Various grain
merchandising positions since
1971.
Charles T. Bayless Executive Vice President from 63
July 1997. Group Vice President
from January 1993.
Howard E. Buoy Group Vice President from 72
January 1993.
William H. Camp Vice President from April 1993.49
Mark J. Cheviron Vice President from July 1997.49
Vice President of Corporate
Security and Administrative
Services since May 1997. Director
of Security since 1980.
Larry H. Cunningham Group Vice President and 54
President of ADM Corn Processing
Division from October 1996.
Vice President and President
of Protein Specialties
Division since July 1993.
Craig L. Hamlin Group Vice President from 52
October 1994. President of
ADM Milling from 1989.
Edward A. Harjehausen Vice President from October48
1992.
11
PAGE 12
Item 1. BUSINESS-Continued
James C. Ielase Group Vice President since 57
July 1997. President of Golden
Peanut Company from April 1995
to June 1997. Private investments
from 1992 to April 1995.
Burnell D Kraft Senior Vice President from 67
July 1997. Group Vice President
from January 1993. Vice President
from 1984. President of
ADM/Growmark, Collingwood Grain
and Tabor Grain Co. subsidiaries.
Paul L. Krug, Jr. Vice President from 1991 and 54
President of ADM Investor
Services.
John E. Long Vice President from July 1996.69
President of ADM Research
Division from 1992. Various
senior research positions from
1975.
Claudia M. Madding Secretary to the Executive 47
Committee from September 1997.
Executive Assistant to the
Chairman
since July 1997. Assistant
Secretary
from 1993. Administrative
Assistant
to the Chairman since 1984.
Jack McDonald Vice President from October 1994.
66
President of Southern Cotton Oil
Division from 1990.
John D. McNamara Group Vice President and 50
President of North American
Oilseed Processing Division from
July 1997. President of ADM Agri-
Industries since 1992.
Steven R. Mills Controller from October 1994. 43
Various senior treasury and
accounting positions from 1979.
Stephen W. Minder Corporate Compliance Officer from
42
July 1997. Various senior
internal
audit positions since 1990.
12
PAGE 13
Item 1. BUSINESS-Continued
Paul B. Mulhollem Group Vice President from 49
July 1997. Vice President from
January 1996. Managing Director
of ADM International, Ltd., from
1993.
Brian F. Peterson Vice President from January 1996.
56
President of ADM BioProducts
Division from 1995. Various
merchandising positions from
1980.
Raymond V. Preiksaitis Group Vice President from46
July 1997. Vice President -
Management Information Systems
from 1988.
John G. Reed Vice President from 1982. 68
Richard P. Reising Senior Vice President from July54
1997. Vice President, Secretary
and General Counsel from
1991 to 1997.
John D. Rice Vice President from 1993 and 44
President of ADM Food Oils
Division since December 1996.
Vice President of ADM Processing
Division from 1992.
Scott A. Roberts Assistant Secretary and Assistant
38
General Counsel from July 1997.
Member of the Law Department
since 1985.
Kenneth A. Robinson Vice President from January 1996.
51
Vice President of ADM Processing
Division from 1985.
Douglas J. Schmalz Vice President and Chief 52
Financial Officer from 1986.
Controller from 1986 to 1994.
David J. Smith Vice President, Secretary and 43
General Counsel from July, 1997.
Assistant General Counsel from
1995. Assistant Secretary from
1988 to July 1997. Member of the
Law
Department since 1981.
Item 1. BUSINESS-Continued
Stephen H. Yu Vice President from January 1996.
38
Managing Director of ADM
Asia-Pacific, Ltd., from 1993.
Various merchandising positions
with Continental Grain Company
from 1986.
Officers of the registrant are
elected by the Board of Directors for terms of one
year and until their successors are duly elected and
qualified.
G. Allen Andreas and Martin L. Andreas are nephews o
f Dwayne O. Andreas, a director of the
registrant.
13
PAGE 14
Item 2. PROPERTIES
(a) Processing Facilities
The Company owns, leases, or has a 50% or greater
interest in the following processing plants:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
United Foreign Total
States
Owned 197 77 274
Leased 2 1 3
Joint Venture 48 27 75
____ ________
247 105 352
=== === ===
</TABLE>
The Company's operations are such that most products
are efficiently processed near the source of raw
materials. Consequently, the Company has many
plants located strategically in grain producing
areas. The annual volume processed will vary
depending upon availability of raw materials and
demand for finished products.
The Company operates thirty-nine domestic and
fifteen foreign oilseed crushing plants with a daily
processing capacity of approximately 94,000 metric
tons (3.5 million bushels). The domestic plants are
located in Alabama, Arkansas, Georgia, Illinois,
Indiana, Iowa, Kansas, Louisiana, Minnesota,
Missouri, Mississippi, Nebraska, North Dakota, Ohio,
South Carolina, Tennessee and Texas. The foreign
plants are located in Brazil, Canada, England,
Germany, India, Mexico, the Netherlands and Poland.
The Company also has an interest, through a joint
venture, in an oilseed crushing plant in Bolivia.
The Company operates four wet corn milling and two
dry corn milling plants with a daily grind capacity
of approximately 41,700 metric tons (1.6 million
bushels). These plants and other related
properties, including corn germ extraction and corn
gluten pellet plants, are located in Illinois, Iowa,
New York and North Dakota. The Company also has
interests, through joint ventures, in corn milling
plants in Bulgaria, Hungary, Mexico, Slovakia and
Turkey.
The Company operates twenty-nine domestic wheat and
durum flour mills, a domestic bulgur plant, three
domestic corn flour mills, two domestic milo mills,
and twelve foreign flour mills with a total daily
milling capacity of approximately 30,700 metric tons
(1.1 million bushels). The Company also operates
seven bakery mix and specialty ingredient plants,
two pasta plants, and two starch and gluten plants.
These plants and other related properties are
strategically located across North and Central
America in California, Illinois, Indiana, Iowa,
Item 2. PROPERTIES--continued
Kansas, Louisiana, Minnesota, Missouri, Nebraska,
New York, North Carolina, Oklahoma, Oregon,
Pennsylvania, Tennessee, Texas, Washington,
Wisconsin, Barbados, Belize, Canada and Jamaica.
The Company also has an interest, through a joint
venture, in rice milling plants in Arkansas and
Louisiana.
The Company operates fifteen domestic oilseed
refineries in Arkansas, Georgia, Illinois, Indiana,
Iowa, Minnesota, Nebraska, North Dakota, Tennessee
and Texas as well as ten foreign refineries in
Brazil, Canada, Germany, India and the Netherlands.
The Company also has interests, through joint
ventures, in oilseed refineries in Texas, Bolivia
and England. The Company produces packaged oils in
California, Georgia, Illinois, Brazil and Germany
and has interests, through joint ventures, in
packaged oils plants in Bolivia and England. Soy
protein specialty products are produced in Illinois
and the Netherlands, lecithin products are produced
in Arkansas, Illinois, Iowa, Nebraska, Canada,
Germany and the Netherlands, and Vitamin E is
produced in Illinois. Cotton linter pulp is
produced in Tennessee and cottonseed flour is
produced in Texas.
The Company produces feed and food additives at
seven bioproducts plants located in Illinois, North
Carolina and Ireland. The Company also operates
fifteen domestic and nine foreign formula feed and
animal health and nutrition plants. The domestic
plants are located in Georgia, Illinois, Indiana,
Iowa, Minnesota, Nebraska, Ohio, Texas and
Washington. The foreign plants are located in
Barbados, Belize, Canada, China, Ireland and Puerto
Rico. The Company also has interests, through joint
ventures, in formula feed plants in Arkansas,
Georgia, Illinois, Iowa, Indiana, Kansas, Kentucky,
Michigan, Minnesota, Missouri, Nebraska, Ohio,
Pennsylvania, Tennessee, Wisconsin, Canada, China,
Puerto Rico and Trinidad.
The Company operates five domestic and eleven
foreign chocolate and cocoa bean processing plants.
The domestic plants are located in Georgia,
Massachusetts, New Jersey, North Carolina and
Wisconsin, and the foreign plants are located in
Brazil, Canada, China, England, France, Germany, the
Netherlands, Poland and Singapore.
The Company operates forty-nine domestic edible bean
processing facilities located in California,
Colorado, Idaho, Kansas, Michigan, Minnesota, North
Dakota and Wyoming.
The Company operates various other food and food
ingredient plants in England, France, Germany and
Jamaica.
14
PAGE 15
Item 2. PROPERTIES--continued
Procurement Facilities
The Company operates two hundred domestic terminal,
country, and river elevators covering the major
grain producing states, including one hundred thirty-
seven country elevators and sixty-three terminal and
river loading facilities including three grain
export elevators in Louisiana. Elevators are
located in Arkansas, Colorado, Georgia, Illinois,
Indiana, Iowa, Kansas, Kentucky, Louisiana,
Michigan, Minnesota, Missouri, Montana, Nebraska,
North Carolina, North Dakota, Oklahoma, South
Carolina, Tennessee and Texas. Domestic grain
terminals, elevators and processing plants have an
aggregate storage capacity of approximately
412,000,000 bushels.
The Company also has interests, through joint
ventures, in seventeen domestic grain terminals and
elevators, including two export terminals, one in
the state of Washington and the other in Maryland.
The other joint venture grain terminals and
elevators are located in Indiana, Kentucky,
Michigan, Minnesota, and Ohio. Domestic joint
venture grain terminals and elevators have an
aggregate storage capacity of approximately
62,000,000 bushels.
The Company also operates one hundred thirty-four
foreign grain elevators with an aggregate storage
capacity of approximately 89,000,000 bushels,
including three export facilities located in Brazil.
These elevators are located in Barbados, Brazil,
Canada, Germany, Ireland and Paraguay. The Company
also has an interest, through a joint venture, in
fourteen grain elevators in Bolivia with an
aggregate storage capacity of approximately
7,000,000 bushels.
Eleven cotton gins are located in Texas and serve
the cottonseed crushing plants in that area.
15
PAGE 16
Item 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
In 1993, the State of Illinois Environmental Protection
Agency ("IEPA") brought administrative enforcement
proceedings arising out of the Company's alleged failure
to obtain permits for certain pollution control equipment
at certain of the Company's processing facilities in
Illinois. The Company and IEPA have executed a settlement
agreement with respect to one of these proceedings. That
agreement is currently before the Illinois Pollution
Control Board for approval. The Company believes it has
meritorious defenses to the remaining proceeding. In
management's opinion this settlement and the remaining
proceeding will not, either individually or in the
aggregate, have a material adverse effect on the Company's
financial condition or results of operations.
The Company is involved in approximately 35 administrative
and judicial proceedings in which it has been identified
as a potentially responsible party (PRP) under the federal
Superfund law and its state analogs for the study and
clean-up of sites contaminated by material discharged into
the environment. In all of these matters, there are
numerous PRPs. Due to various factors such as the required
level of remediation and participation in the clean-up
effort by others, the Company's future clean-up costs at
these sites cannot be reasonably estimated. However, in
management's opinion these proceedings will not, either
individually or in the aggregate, have a material adverse
effect on the Company's financial condition or results of
operations.
LITIGATION REGARDING ALLEGED ANTICOMPETITIVE PRACTICES
The Company and certain of its current and former officers
and directors are currently defendants in various lawsuits
related to alleged anticompetitive practices by the
Company as described in more detail below. The Company and
the individual defendants named in these actions intend to
vigorously defend the actions unless they can be settled
on terms deemed acceptable to the parties. The Company has
paid and intends to continue to pay the legal expenses of
its current and former officers and directors and to
indemnify these persons with respect to these actions in
accordance with Article X of the Bylaws of the Company.
GOVERNMENTAL INVESTIGATIONS
Federal grand juries in the Northern Districts of Illinois,
California and Georgia, under the direction of the United
States Department of Justice ("DOJ"), have been
investigating possible violations by the Company and others
with respect to the sale of lysine, citric acid and high
fructose corn syrup, respectively. In connection with an
agreement with the DOJ, in fiscal 1997 the Company 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 federal grand jury in
the Northern District of Illinois (lysine) has been closed.
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. On June 22, 1998 the Mexican Federal
Competition Commission issued resolutions concluding its
investigation relative to the Company's subsidiaries and
imposing a fine in the approximate amount of $125,000. 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 connection with
an agreement with the Canadian Competition Bureau and the
Attorney General of Canada, the Company paid a fine in the
approximate amount of $11 million. This agreement
constitutes a global resolution of all matters between the
Canadian Competition Bureau and the Company. The ultimate
outcome and materiality of the proceedings of the
Commission of the European Communities 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.
16
PAGE 17
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.
17
PAGE 18
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 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. These two putative 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 putative classes in these 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. Subsequently, the plaintiff has
amended his complaint to add approximately 187 plaintiffs.
On May 7, 1998, the Company moved for summary judgment as
to the original named plaintiff's claim. That motion is
pending. 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.
18
PAGE 19
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 the actions specifically
described below, all such suits have been settled or
dismissed.
STATE ACTIONS. The Company, along with other companies,
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 Cases II California Indirect Purchaser
Citric Acid Antitrust Litigation, Coordination Proceeding
No. 3265. On June 18, 1998, the Company executed a
settlement agreement with counsel for the plaintiff class
in which, among other things, the Company agreed to pay
$1,053,366 to the plaintiff class. The settlement has
received final court approval. 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,
19
PAGE 20
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. On
June 26, 1998, the Company executed a settlement agreement
with counsel for the plaintiff class in which, among other
things, the Company agreed to pay $1,831,634 to the
plaintiff class. This settlement has received preliminary
court approval and a final approval hearing will be on
November 20, 1998.
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID STATE CLASS ACTIONS
The Company, along with other companies, has been named as
a defendant in five 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 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.
20
PAGE 21
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. The
parties are in the midst of discovery in this action.
21
PAGE 22
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 individual director defendants and the Company recently
filed oppositions to the petition for certiorari. The
parties will jointly seek dismissal of the Delaware actions
with prejudice once the federal action is concluded.
22
PAGE 23
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. On June 16, 1998, the Company executed a
Stipulation and Agreement of Compromise and Settlement
with counsel for the plaintiff class in which, among other
things, the Company agreed to pay no more than $500,000 in
attorneys' fees to plaintiffs, as determined by the court,
and agreed to certain changes in the rules governing the
conduct of shareholder meetings. Final approval of the
settlement was granted on August 5, 1998 and the court
awarded $300,000 in attorneys' fees to plaintiffs.
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.
23
PAGE 24
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information responsive to this Item is set forth in
"Common Stock Market Prices and Dividends" of the
annual shareholders' report for the year ended June 30,
1998 and is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
Information responsive to this Item is set forth in the
"Ten-Year Summary of Operating, Financial and Other
Data" of the annual shareholders' report for the year
ended June 30, 1998 and is incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information responsive to this Item is set forth in
"Management's Discussion of Operations and Financial
Condition" of the annual shareholders' report for the
year ended June 30, 1998 and is incorporated herein by
reference.
Item 7A.QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Information responsive to this Item is set forth in
"Management's Discussion of Operations and Financial
Condition" of the annual shareholders' report for the
year ended June 30, 1998 and is incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and supplementary
data included in the annual shareholders' report for
the year ended June 30, 1998 are incorporated herein by
reference:
Consolidated balance sheets--June 30, 1998 and 1997
Consolidated statements of earnings--Years ended
June 30, 1998, 1997 and 1996
Consolidated statements of shareholders' equity--Years
ended
June 30, 1998, 1997 and 1996
Consolidated statements of cash flows--Years ended
June 30, 1998, 1997 and 1996
Notes to consolidated financial statements--June 30,
1998
Summary of Significant Accounting Policies
Report of Independent Auditors
Quarterly Financial Data (Unaudited)
24
PAGE 25
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to directors and executive
officers is set forth in "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting
Compliance" of the definitive proxy statement for 1998
and is incorporated herein by reference. Certain
information with respect to executive officers is
included in Item 1(e) of this report.
Item 11. EXECUTIVE COMPENSATION
Information responsive to this Item is set forth in
"Executive Compensation" and "Compensation Committee
Report" of the definitive proxy statement for 1998 and
is incorporated herein by reference.
Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information responsive to this Item is set forth in
"Principal Holders of Voting Securities" of the
definitive proxy statement for 1998 and is incorporated
herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information responsive to this Item is set forth in
"Certain Relationships and Related Transactions" of the
definitive proxy statement for 1998 and is incorporated
herein by reference.
PART IV
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) The following consolidated
financial statements and other financial data of
the registrant and its subsidiaries, included in
the annual report of the registrant to its
shareholders for the year ended June 30, 1998, are
incorporated by reference in Item 8, and are also
incorporated herein by reference:
Consolidated balance sheets--June 30, 1998 and 1997
Consolidated statements of earnings--Years ended
June 30, 1998, 1997 and 1996
Consolidated statements of shareholders' equity--
Years ended June 30, 1998, 1997 and 1996
25
PAGE 26
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
` --Continued
Consolidated statements of cash flows--Years ended
June 30, 1998, 1997 and 1996
Notes to consolidated financial
statements--June 30, 1998
Summary of Significant Accounting Policies
Quarterly Financial Data (Unaudited)
(a)(2) Schedules are not applicable and
therefore not included in this report.
Financial statements of affiliates accounted for
by the equity method have been omitted because
they do not, considered individually, constitute
significant subsidiaries.
(a)(3) LIST OF EXHIBITS
(3) 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.
(4) Instruments defining the rights
of security holders, including:
(i)Indenture dated May 15, 1981, between the r
egistrant and Morgan Guaranty Trust Company of
New York, as Trustee (incorporated by reference
to Exhibit 4(b) to Amendment No. 1 to
Registration Statement No. 2-71862), relating
to the $250,000,000 - 7% Debentures due May 15,
2011;
(ii)Indenture dated May 1, 1982, between the r
egistrant and Morgan Guaranty Trust Company of
New York, as Trustee (incorporated by reference
to Exhibit 4(c) to Registration Statement No. 2-
77368), relating to the $400,000,000 Zero
Coupon Debentures due May 1, 2002;
(iii)Indenture dated as of March 1, 1984 betwe
en the registrant and Chemical Bank, as Trustee
(incorporated by reference to Exhibit 4 to the
registrant's Current Report on Form 8-K dated
August 3, 1984 (File No. 1-44)), as
supplemented by the Supplemental Indenture
dated as of January 9, 1986, between the
registrant and Chemical Bank, as Trustee
(incorporated by reference to Exhibit 4 to the
registrant's Current Report on Form 8-K dated
January 9, 1986 (File No. 1-44)), relating to
the $100,000,000 - 10 1/4% Debentures due
January 15, 2006;
26
PAGE 27
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
--Continued
(iv)Indenture dated June 1, 1986 between the r
egistrant and Chemical Bank, (as successor to
Manufacturers Hanover Trust Company), as Trustee
(incorporated by reference to Exhibit 4(a) to
Registration Statement No. 33-6721), and
Supplemental Indenture dated as of August 1, 1989
between the registrant and Chemical Bank (as
successor to Manufacturers Hanover Trust
Company), as Trustee (incorporated by reference
to Exhibit 4(c) to Post-Effective Amendment No. 3
to Registration
Statement No. 33-6721), relating to
the $300,000,000 - 8 7/8% Debentures due April
15, 2011,
the $300,000,000 - 8 3/8% Debentures due April
15, 2017, the $300,000,000 - 8 1/8% Debentures
due June 1, 2012,
the $250,000,000 - 6 1/4% Notes due May 15,
2003,
the $250,000,000 - 7 1/8% Debentures due March
1, 2013,
the $350,000,000 - 7 1/2% Debentures due March
15, 2027, the $200,000,000 - 6 3/4% Debentures
due December 15, 2027, and the $250,000,000 - 6
7/8% Debentures due
December 15, 2097.
Copies of constituent instruments defining
rights of holders of long-term debt of the
Company and
Subsidiaries, other than the Indentures
specified herein, are not filed herewith,
pursuant to Instruction (b)(4) (iii)(A) to Item
601 of Regulation S-K, because the total amount
of securities authorized under any such
instrument does not exceed 10% of the total
assets of the Company and Subsidiaries on a
consolidated basis. The registrant
hereby agrees that it will, upon request by the
Commission, furnish to the Commission a copy of
each such instrument.
(10)
Material Contracts--Copies of the Company's stock
option
and stock unit plans and its savings and investment
plans, pursuant to Instruction (10)(iii)(A) to Item
601 of
Regulation S-K, are incorporated herein by
reference as follows:
(i)Registration Statement No. 2-91811 on Form S-8
dated June 22, 1984 (definitive Prospectus dated
July 16, 1984) relating to the Archer Daniels
Midland 1982 Incentive
Stock Option Plan.
(ii)Registration Statement No. 33-49409 on Form S-
8 dated
March 15, 1993 relating to the Archer Daniels M
idland
1991 Incentive Stock Option Plan and Archer Dan
iels
Midland Company Savings and Investment Plan.
27
PAGE 28
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
--Continued
(iii)Registration Statement No. 333-39605 on Fo
rm S-8 dated November 5, 1997 relating to the
ADM Savings and Investment Plan for Salaried
Employees and the ADM Savings and Investment
Plan for Hourly Employees.
(iv)Registration Statement No. 333-51381 on For
m S-8 dated April 30, 1998 relating to the
Archer-Daniels-Midland Company 1996 Stock
Option Plan.
(v)The Archer-Daniels-Midland Company Stock Uni
t Plan for Nonemployee Directors (incorporated
by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997).
(13)Portions of annual report to
shareholders incorporated by reference
(21)Subsidiaries of the registra
nt
(23)Consent of independent audit
ors
(24) Powers of attorney
(27) Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K was not filed during the quarter ended
June 30, 1998.
28
PAGE 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: September 24, 1998
ARCHER-DANIELS-MIDLAND COMPANY
/s/ D. J. Smith /s/ D. J. Schmalz /s/ S. R. Mills
D. J. Smith D. J. Schmalz S. R. Mills
Vice President, Secretary Vice President
and Controller
and General Counsel Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on September 24, 1998,
by the following persons on behalf of the Registrant and in
the capacities indicated.
<TABLE>
<CAPTION>
<S> <C>
/s/ G. A. Andreas
G. A. Andreas*,
Chief Executive and Director
(Principal Executive Officer)
/s/ D. O. Andreas /s/ M. B. Mulroney
D. O. Andreas*, M. B. Mulroney*,
Chairman of the Board of Director
Directors
/s/ J. R. Block /s/ R. S. Strauss
J. R. Block*, R. S. Strauss*,
Director Director
/s/ R. R. Burt /s/ J. K. Vanier
R. R. Burt*, J. K. Vanier*,
Director Director
/s/ Mrs. M. H. Carter /s/ O. G. Webb
Mrs. M. H. Carter*, O. G. Webb*,
Director Director
/s/ G. O. Coan /s/ A. Young
G. O. Coan*, A. Young*,
Director Director
/s/ F. R. Johnson /s/ D. J. Smith
F. R. Johnson*, Attorney-in-Fact
Director
</TABLE>
*Powers of Attorney authorizing R. P. Reising, D. J. Schmalz and
D. J. Smith and each of them, to sign the Form 10-K on behalf of
the above-named officers and directors of the Company are being
filed with the Securities and Exchange Commission.
29
PAGE 1
EXHIBIT 24 -- POWERS OF ATTORNEY
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
Director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware
corporation, does hereby make, constitute and appoint D. J.
SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with
power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such Chairman of the Board, Chief
Executive and Director of said Company to the Form 10-K for the
fiscal year ending June 30, 1998, and all amendments thereto, to
be filed by said Company with the Securities and Exchange
Commission, Washington, D.C., and to file the same, with all
exhibits thereto and other supporting documents, with said
Commission, granting unto said attorneys-in-fact, and each of
them, full power and authority to do and perform any and all
acts necessary or incidental to the performance and execution of
the powers therein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 17th day of September, 1998.
/s/ D. O. ANDREAS
D. O. Andreas
1
PAGE 2
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned,
the President and Chief Executive Officer (Principal Executive
Officer) and a director of ARCHER-DANIELS-MIDLAND COMPANY, a
Delaware corporation, does hereby make, constitute and appoint
D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any
one of them, the undersigned's true and lawful attorneys-in-
fact, with power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such director of said Company to the Form
10-K for the fiscal year ending June 30, 1998, and all
amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., and to
file the same, with all exhibits thereto and other supporting
documents, with said Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and
perform any and all acts necessary or incidental to the
performance and execution of the powers therein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 18th day of September, 1998.
/s/ G. ALLEN ANDREAS
G. ALLEN ANDREAS
2
PAGE 3
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware
corporation, does hereby make, constitute and appoint D. J.
SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with
power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such director of said Company to the Form
10-K for the fiscal year ending June 30, 1998, and all
amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., and to
file the same, with all exhibits thereto and other supporting
documents, with said Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and
perform any and all acts necessary or incidental to the
performance and execution of the powers therein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 20th day of September, 1998.
/s/J. R. BLOCK
J. R. BLOCK
3
PAGE 4
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware
corporation, does hereby make, constitute and appoint D. J.
SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with
power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such director of said Company to the Form
10-K for the fiscal year ending June 30, 1998, and all
amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., and to
file the same, with all exhibits thereto and other supporting
documents, with said Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and
perform any and all acts necessary or incidental to the
performance and execution of the powers therein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 21st day of September, 1998.
/s/ RICHARD BURT
RICHARD BURT
4
PAGE 5
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware
corporation, does hereby make, constitute and appoint D. J.
SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with
power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such director of said Company to the Form
10-K for the fiscal year ending June 30, 1998, and all
amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., and to
file the same, with all exhibits thereto and other supporting
documents, with said Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and
perform any and all acts necessary or incidental to the
performance and execution of the powers therein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 18th day of September, 1998.
/s/M. H. CARTER
M. H. CARTER
5
PAGE 8
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware
corporation, does hereby make, constitute and appoint D. J.
SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with
power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such director of said Company to the Form
10-K for the fiscal year ending June 30, 1998, and all
amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., and to
file the same, with all exhibits thereto and other supporting
documents, with said Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and
perform any and all acts necessary or incidental to the
performance and execution of the powers therein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 18th day of September, 1998.
/s/G. O. COAN
G. O. COAN
6
PAGE 7
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware
corporation, does hereby make, constitute and appoint D. J.
SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with
power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such director of said Company to the Form
10-K for the fiscal year ending June 30, 1998, and all
amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., and to
file the same, with all exhibits thereto and other supporting
documents, with said Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and
perform any and all acts necessary or incidental to the
performance and execution of the powers therein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 21st day of September, 1998.
/s/ F. ROSS JOHNSON
F. ROSS JOHNSON
7
PAGE 8
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware
corporation, does hereby make, constitute and appoint D. J.
SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with
power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such director of said Company to the Form
10-K for the fiscal year ending June 30, 1998, and all
amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., and to
file the same, with all exhibits thereto and other supporting
documents, with said Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and
perform any and all acts necessary or incidental to the
performance and execution of the powers therein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 21st day of September, 1998.
/s/ M. BRIAN MULRONEY
M. BRIAN MULRONEY
8
PAGE 9
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware
corporation, does hereby make, constitute and appoint D. J.
SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with
power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such director of said Company to the Form
10-K for the fiscal year ending June 30, 1998, and all
amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., and to
file the same, with all exhibits thereto and other supporting
documents, with said Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and
perform any and all acts necessary or incidental to the
performance and execution of the powers therein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 21st day of September, 1998.
/s/R. S. STRAUSS
R. S. STRAUSS
9
PAGE 10
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware
corporation, does hereby make, constitute and appoint D. J.
SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with
power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such director of said Company to the Form
10-K for the fiscal year ending June 30, 1998, and all
amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., and to
file the same, with all exhibits thereto and other supporting
documents, with said Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and
perform any and all acts necessary or incidental to the
performance and execution of the powers therein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 18th day of September, 1998.
/s/ J. K. VANIER
J. K. VANIER
10
PAGE 11
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware
corporation, does hereby make, constitute and appoint D. J.
SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with
power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such director of said Company to the Form
10-K for the fiscal year ending June 30, 1998, and all
amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., and to
file the same, with all exhibits thereto and other supporting
documents, with said Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and
perform any and all acts necessary or incidental to the
performance and execution of the powers therein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 22nd day of September, 1998.
/s/ O. G. WEBB
O. G. WEBB
11
PAGE 12
ARCHER-DANIELS-MIDLAND COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware
corporation, does hereby make, constitute and appoint D. J.
SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of
them, the undersigned's true and lawful attorneys-in-fact, with
power of substitution, for the undersigned and in the
undersigned's name, place and stead, to sign and affix the
undersigned's name as such director of said Company to the Form
10-K for the fiscal year ending June 30, 1998, and all
amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C., and to
file the same, with all exhibits thereto and other supporting
documents, with said Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and
perform any and all acts necessary or incidental to the
performance and execution of the powers therein expressly
granted.
IN WITNESS WHEREOF, the undersigned has hereunto set
the undersigned's hand this 21st day of September, 1998.
/s/ ANDREW YOUNG
ANDREW YOUNG
12
PAGE 1
EXHIBIT 23--CONSENT OF INDEPENDENT AUDITORS
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
We consent to the incorporation by reference in this Annual
Report (Form
10-K) of Archer Daniels Midland Company of our report dated July
31, 1998 included in the 1998 Annual Report to Shareholders of
Archer Daniels Midland Company.
We also consent to the incorporation by reference in the
following Registration Statements of our report dated July 31,
1998, with respect to the consolidated financial statements of
Archer Daniels Midland Company incorporated herein by reference
in this Annual Report (Form 10-K) for the year ended June 30,
1998.
Registration Statement No. 2-91811 on Form S-8 dated June 22,
1984 (definitive Prospectus dated July 16, 1984) relating to
the Archer Daniels Midland Company 1982 Incentive Stock
Option Plan.
Registration Statement No. 33-49409 on Form S-8 dated March
15, 1993 relating to the Archer Daniels Midland 1991
Incentive Stock Option Plan and Archer Daniels Midland
Company Savings and Investment Plan.
Registration Statement No. 33-50879 on Form S-3 dated
November 1, 1993 relating to Debt Securities and Warrants to
purchase Debt Securities of Archer Daniels Midland Company.
Registration Statement No. 33-55301 on Form S-3 dated August
31, 1994 as amended by Amendment No. 1 dated October 7, 1994
(definitive Prospectus dated October 11, 1994) relating to
secondary offering of the Common Stock of Archer Daniels
Midland Company.
Registration Statement No. 33-56223 on Form S-3 dated October
28, 1994 as amended by Amendment No. 1 dated December 27,
1994 (definitive Prospectus dated December 30, 1994) relating
to secondary offering of the Common Stock of Archer Daniels
Midland Company.
Registration Statement No. 33-58387 on Form S-8 dated April
3, 1995 relating to the ADM Savings and Investment Plan for
Salaried Employees and the ADM Savings and Investment Plan
for Hourly Employees.
Registration Statement No. 333-13233 on Form S-3 dated
October 1, 1996 as amended by Amendment No. 1 dated November
8, 1996, Amendment No. 2 dated March 20, 1997 and Amendment
No. 3 dated March 31, 1997 (definitive Prospectus dated April
1, 1997) relating to secondary offering of the Common Stock
of Archer Daniels Midland Company.
Registration Statement No. 333-30137 on Form S-3 dated June
26, 1997 relating to Debt Securities and Warrants to purchase
Debt Securities of Archer Daniels Midland Company.
Registration Statement No. 333-31623 on Form S-3 dated July
18, 1997 as amended by Amendment No. 1 dated July 29, 1997,
(definitive Prospectus dated August 5, 1997) relating to
secondary offering of the Common Stock of Archer Daniels
Midland Company.
Registration Statement No. 333-39605 on Form S-8 dated
November 5, 1997 relating to the ADM Savings and Investment
Plan for Salaried Employees and the ADM Savings and
Investment Plan for Hourly Employees.
Registration Statement No. 333-48903 on Form S-3 dated March
30, 1998 relating to Debt Securities and Warrants to purchase
Debt Securities of Archer Daniels Midland Company.
Registration Statement No. 333-51381 on Form S-8 dated April
29, 1998 relating to the Archer Daniels Midland Company 1996
Stock Option Plan.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Minneapolis, Minnesota
September 24, 1998
1
PAGE 1
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT
ARCHER DANIELS MIDLAND COMPANY
June 30, 1998
Following is a list of the Registrant's subsidiaries showing the
percentage of voting securities owned:
<TABLE>
<CAPTION>
<S> <C> <C>
Organized Under
Laws of Ownershi
p
ADM Agri-Industries Ltd. Canada 100%
ADM Europe BV Netherlands 100
ADM Europoort BV Netherlands 100
ADM/Growmark River Systems, Inc. Delaware 100
ADM Beteiligungs GmbH Germany 100
ADM International Ltd. (B) England 100
ADM Investor Services, Inc. Delaware 100
ADM Ireland Holdings Ltd. Ireland 100
ADM Milling Co. Minnesota 100
ADM Oelmuhlen GmbH & Co. KG Germany 100
ADM Ringaskiddy Ireland 100
ADM Transportation Co. Delaware 100
ADMIC Investments NV Netherlands 100
Antilles
Agrinational Insurance Company Vermont 100
Agrinational Ltd. Cayman Islands 100
Alfred C. Toepfer International (A) Germany 50
American River Transportation Co. Delaware 100
Ardanco, Inc. Guam 100
Collingwood Grain, Inc. Kansas 100
Compagnie Industrielle Et Financiere Luxembourg 42
(CIP)(A)
Consolidated Nutrition, L.C. (A) Iowa 50
Erith Oil Works Ltd. England 100
Fleischmann Malting Company, Inc. Delaware 100
Gruma S.A. de C.V. (A) Mexico 22
Hickory Point Bank & Trust Co. Illinois 100
Midland Stars, Inc. Delaware 100
Oelmuhle Hamburg AG (C) Germany 95
Premiere Agri Technologies Inc. Delaware 100
Tabor Grain Co. Nevada 100
(A) Not included in consolidated financial statements--included
on the equity basis.
(B) ADM International Ltd. has twenty-five subsidiary companies
whose names have been omitted because, considered in the
aggregate as a single subsidiary, they would not constitute a
significant subsidiary.
(C) Oelmuhle Hamburg AG has twelve subsidiaries whose names have
been omitted because, considered in the aggregate as a single
subsidiary, they would not constitute a significant subsidiary.
The names of forty-four domestic subsidiaries and ninety-two
international subsidiaries have been omitted because, considered
in the aggregate as a single subsidiary, they would not
constitute a significant subsidiary.
1
</TABLE>
EXHIBIT 13
PAGE 1
MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL
CONDITION - JUNE 30, 1998
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:
1998 compared to 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
(in millions)
Oilseed products $10,15 $ 8,860 $
2 8,027
Corn products 2,154 2,171 2,431
Wheat and other milled 1,491 1,631 1,662
products
Other products 1,191 1,120
2,312
$16,10 $13,853 $13,240
9
</TABLE>
Net sales and other operating income increased $2.3 billion
to a record high $16.1 billion for 1998 due primarily to sales
attributable to recently acquired operations and to a 13 percent
increase in volumes of products sold. These increases were
partially offset by an 8 percent decrease in average selling
prices. Sales of oilseed products increased 15 percent to $10.2
billion due principally to higher sales volumes reflecting
strong worldwide protein meal demand and good oil demand in
North America and Europe. Asian economic volatility has
negatively affected oil demand from this region. Oilseed product
sales also increased approximately 6 percent from 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 for the
year decreased 1 percent to $2.2 billion as lower average
selling prices for the Company's sweetener, alcohol and amino
acid products more than offset the increased sales volumes of
these same products. Sweetener sales volume has been positively
affected by good demand from both the U. S. and Mexican soft
drink industry. The lower average selling prices of the
sweetener products result principally from production
overcapacity in the industry. The lower average selling prices
for amino acid products reflect the effect of low protein prices
on synthetic amino acids. Additionally, poor feed business
conditions in Southeast Asia have caused a supply/demand
imbalance and a resulting production overcapacity in the
synthetic amino acid industry. Low gasoline prices negatively
impacted average sales prices for the Company's fuel alcohol,
which has had good demand and corresponding volume growth. Sales
of wheat and other milled products decreased 9 percent to $1.5
billion 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 increase in other products and services was due
primarily to the sales related to the Company's recently
acquired cocoa and feed businesses.
1
PAGE 2
Cost of products sold and other operating costs increased
$2.2 billion to $14.7 billion due principally to costs related
to recently acquired operations and increased sales volumes.
These increases were partially offset by lower average raw
material costs.
The $80 million increase in gross profit to $1.4 billion in
1998 is due primarily to gross profits of recently acquired
operations and 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 decreased $14
million to $661 million due principally to decreased legal and
litigation related costs of $133 million (see note 12 to the
financial statements). Partially offsetting this decrease was
$108 million of selling, general and administrative expenses
attributable to recently acquired
operations.
The decrease in other income for 1998 was due principally
to increased interest expense due to both higher short-term and
long-term borrowing levels. Additionally, the Company had
decreased gains on marketable securities transactions and
decreased equity in earnings of unconsolidated affiliates.
The decrease in income taxes for 1998 was due primarily to
a lower effective income tax rate. The decrease in the Company's
effective tax rate to 34% for the year compared to an effective
rate of 41% last year was due principally to the non-
deductibility for income tax purposes in 1997 of a portion of
the Company's litigation settlements and fines.
1997 compared to 1996
Net sales and other operating income increased $613 million
to $13.9 billion for 1997 due principally to a 4% increase in
average selling prices and to a lesser extent sales attributable
to recently acquired operations. Sales of oilseed products
increased 10% to $8.9 billion due primarily to higher average
selling prices reflecting relatively strong demand for protein
meal in the domestic market and the higher cost of raw
materials. Sales volumes of oilseed products were up for the
year due principally to improved export vegetable oil demand.
Sales of corn products decreased 11% to $2.2 billion due
primarily to decreased sales volumes of fuel alcohol as reduced
corn supplies and the resulting higher cost of corn resulted in
the Company reducing its production of fuel alcohol. Average
selling prices of corn products were up 3% for the year due to
the good demand for the Company's fuel alcohol and bioproducts,
including lysine and threonine. These average selling price
increases were partially offset by lower average selling prices
for the Company's sweetener products as a result of the start-up
of new corn wet milling facilities in the industry and the
resulting overcapacity in the marketplace. Sales of wheat and
other milled products decreased 2% to $1.6 billion due to both
decreased volumes of products sold and to lower average selling
prices reflecting excess milling capacity in the industry. This
volume decrease was partially offset by sales related to
recently acquired operations in Canada and the Caribbean. The
increase in other products and services was due principally to
the sales related to the Company's recently acquired cocoa
business partially offset by lower merchandising and
transportation revenues.
Cost of products sold and other operating costs increased
$700 million to $12.6 billion due principally to a 5% increase
in average raw material commodity prices and to costs
attributable to recently acquired operations.
The $86 million decrease in gross profit to $1.3 billion
resulted primarily from decreased merchandising and
transportation margins and the net effect of increased raw
material costs versus higher sales prices. These decreases were
partially offset by gross profit attributable to recently
acquired operations.
Selling, general and administrative expenses increased $202
million to $675 million due primarily to increased legal and
litigation related costs of $171 million including provisions
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 12 to the
financial statements). Additionally, selling, general and
administrative expenses increased $26 million due to expenses
attributable to recently acquired operations.
The decrease in other income for 1997 was due principally
to decreased gains on marketable securities transactions,
decreased investment income due to both lower invested funds and
lower interest rates, increased interest expense due primarily
to increased levels of borrowings, and a decrease in other
income as 1996 results included a $15 million gain on the sale
of the Company's Supreme Sugar subsidiary.
The decrease in income taxes for 1997 resulted primarily
from lower pretax earnings. The increase in the Company's
effective income tax rate to 41% for the year compared to an
effective rate of 34% last year was due principally to the non-
deductibility for income tax purposes of a portion of the
Company's litigation settlements and fines.
2
PAGE 3
Liquidity and Capital Resources
At June 30, 1998, the Company continued to show substantial
liquidity with working capital of $1.7 billion. Working capital
includes inventory with a replacement cost in excess of its LIFO
carrying value of approximately $46 million. During 1998, the
Company's cash and marketable securities net of short-term debt
decreased $762 million and working capital decreased $301
million reflecting the Company's investments in property, plant
and equipment expansions, investments in affiliates, and
business acquisitions. Capital resources remained strong as
reflected in the Company's net worth of $6.5 billion. The
principal sources of capital during the year were funds
generated from operations and funds generated from the issuance
of $200 million of 6.75% debentures due in 2027, $250 million of
6.95% debentures due in 2097 and $298 million of common stock
issued in a business acquisition. The Company's ratio of long-
term debt to total capital at year end was approximately 28%.
Annual maturities of long-term debt for the five years after
June 30, 1998 are $21 million, $21 million, $33 million, $434
million and $266 million, respectively.
Commercial paper and commercial bank lines of credit are
available to meet seasonal cash requirements. At June 30, 1998,
the Company had $1.9 billion of short-term bank credit lines.
Both Standard & Poor's and Moody's continue to assign their
highest ratings to the Company's commercial paper and to rate
the Company's long-term debt as AA- and Aa3, respectively. In
addition to the cash flow generated from operations, the Company
has access to equity and debt capital through numerous
alternatives from public and private sources in the domestic and
international markets.
As discussed in Note 12 to the consolidated financial
statements, various grand juries 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. In connection with an agreement with the DOJ in
fiscal 1997, the Company 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 12 to the 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 $48 million in fiscal 1998,
$200 million in fiscal 1997 and $31 million in fiscal 1996 to
cover such fines and settlements and related costs and expenses.
Because of the early stage of other putative class actions and
proceedings, including those related to high fructose corn
syrup, the ultimate outcome and materiality of these matters
cannot presently be determined. Accordingly, no provision for
any liability that may result therefrom has been made in the
consolidated financial statements.
3
PAGE 4
Market Risk Sensitive Instruments and Positions
The market risk inherent in the Company's market risk
sensitive instruments and positions is the potential loss
arising from adverse changes in commodity prices, marketable
equity security prices, foreign currency exchange rates, and
interest rates as discussed below.
Commodities
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. To reduce price
risk caused by market fluctuations, the Company generally
follows a policy of hedging its inventories and related purchase
and sale contracts. In addition, the Company from time to time
will hedge portions of its 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. To
obtain a proper matching of revenue and expense, gains or losses
arising from open and closed hedging transactions are included
in inventories as a cost of the commodities and reflected in the
statement of earnings when the product is sold.
A sensitivity analysis has been prepared to estimate the
Company's exposure to market risk of its commodity position. The
Company's daily net commodity position consists of inventories,
related purchase and sales contracts, and exchange traded
contracts, including those to hedge portions of production
requirements. The fair value of such position is a summation of
the fair values calculated for each commodity by valuing each
net position at quoted futures prices. Market risk is estimated
as the potential loss in fair value resulting from a
hypothetical 10% adverse change in such prices. The results of
this analysis, which may differ from actual results, are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 Fair Value Market
Risk
(in millions)
Highest long position $423 $42
Highest short position 411 41
Average position long (8) 1
(short)
1997 Fair Value Market
Risk
(in millions)
Highest long position $468 $47
Highest short position 314 31
Average position long 123 12
(short)
</TABLE>
The decrease in fair value of the average position for 1998
compared to 1997 was a result of both a decrease in the daily
net commodity position and a decrease in quoted futures prices
for the current year.
Marketable Equity Securities
Marketable equity securities, which are recorded at a fair
value and include net unrealized gains, have exposure to price
risk. This risk is estimated as the potential loss in fair value
resulting from a hypothetical 10% adverse change in prices
quoted by stock exchanges. Actual results may differ.
4
PAGE 5
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
(in millions)
Fair value $1,121 $911
Net unrealized 182 183
gains
Market risk 112 91
</TABLE>
The increase in fair value for 1998 over 1997 primarily resulted
from additional purchases of securities.
Currencies
In order to reduce the risk of foreign currency exchange
rate fluctuations, the Company follows a policy of hedging
substantially all transactions, except for amounts the Company
considers permanently invested as described below, denominated
in a currency other than the functional currencies applicable to
each of its various entities. The instruments used for hedging
are readily marketable exchange traded futures contracts and
forward contracts with banks. The changes in market value of
such contracts have a high correlation to the price changes in
the currency of the related hedged transactions. The potential
loss in fair value for such net currency position resulting from
a hypothetical 10% adverse change in foreign currency exchange
rates is not material.
The amount the Company considers permanently invested in
foreign subsidiaries and affiliates and translated into dollars
using the year end exchange rate is $1.8 billion and $1.7
billion at June 30, 1998 and June 30, 1997, respectively. The
potential loss in fair value resulting from a hypothetical 10%
adverse change in quoted foreign currency exchange rates amounts
to $175 million and $167 million for 1998 and 1997,
respectively. Actual results may differ.
Interest
The fair value of the Company's long-term debt is estimated
using quoted market prices or discounted future cash flows based
on the Company's current incremental borrowing rates for similar
types of borrowing arrangements. Such fair value exceeded the
long-term debt carrying value. Market risk is estimated as the
potential increase in fair value resulting from a hypothetical
one-half percent decrease in interest rates.
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
(in millions)
Fair value of long-term debt $3,359 $2,681
Excess of fair value over carrying 512 336
value
Market risk 165 107
</TABLE>
The increase in fair value for the current year resulted from
both the issuance of long-term debt and a general decline in
quoted interest rates.
Year 2000 Issues
Readiness
The Company's centralized corporate business and technical
information systems have been fully assessed as to year 2000
compliance and functionality. Presently, these systems are
nearly complete with respect to required software changes,
tests, and migration to the production environment. The Company
anticipates that internal business and technical information
system year 2000 compliance issues will be substantially
remediated by the end of calendar year 1998.
The Company has satisfactorily completed the identification
and review of computer hardware and software suppliers and is in
the process of verifying year 2000 preparedness of general
business partners, suppliers, vendors, and/or service providers
that the Company has identified as critical.
Cost
The total historical or anticipated remaining costs for
year 2000 remediation activity are not material.
Risks and Contingency Plans
Considering the substantial progress made to date, the
Company does not anticipate delays in finalizing internal year
2000 remediation within remaining time schedules. However, third
parties having a material relationship with the Company may be a
potential risk based on their individual year 2000 preparedness
which may not be within the Company's reasonable control. The
Company is in the process of identifying, reviewing, and logging
the year 2000 preparedness of critical third parties.
Anticipated completion of this review is calendar 1998 year-
end. Pending the results of that review, the Company will then
determine what course of action and contingencies will need to
be made.
5
PAGE 6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
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.
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and all majority-owned subsidiaries. Investments in
affiliates are carried at cost plus equity in undistributed
earnings since acquisition.
Use of Estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect amounts reported in its consolidated financial statements
and accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less at the time of purchase to be
cash equivalents.
Marketable Securities
The Company classifies all of its marketable securities as
available-for-sale. Available-for-sale securities are carried at
fair value, with the unrealized gains and losses, net of income
taxes, reported as a component of shareholders' equity.
Inventories
Inventories, consisting primarily of merchandisable agricultural
commodities and related value-added products, are carried at
cost, which is not in excess of market prices. Inventory cost
methods include the last-in, first-out (LIFO) method, the first-
in, first-out (FIFO) method and the hedging procedure method.
The hedging procedure method approximates FIFO cost.
To reduce price risk caused by market fluctuations, the Company
generally follows a policy of hedging its inventories and
related purchase and sale contracts. In addition, the Company
from time to time will hedge portions of its production
requirements. The instruments used are 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 inventories as a cost of the
commodities and reflected in the statement of earnings when the
product is sold.
Property, Plant and Equipment
Property, plant, and equipment are recorded at cost. The Company
generally uses the straight line method in computing
depreciation for financial reporting purposes and generally uses
accelerated methods for income tax purposes. The annual
provisions for depreciation have been computed principally in
accordance with the following ranges of asset lives:
buildings-10 to 50 years; machinery and equipment-3 to 30 years.
Net Sales
The Company follows a policy of recognizing sales at the time of
product shipment. Net margins from grain merchandised, rather
than the total sales value thereof, are included in net sales in
the consolidated statements of earnings. Sales of the Company,
including the sales value of grain merchandised, were $19.8
billion in 1998, $18.1 billion in 1997, and $18.0 billion in
1996, and such sales include export sales of $5.5 billion in
1998, $5.4 billion in 1997, and $5.7 billion in 1996.
Per Share Data
Share and per share information have been adjusted to give
effect to all stock dividends, including the 5% stock dividend
declared in July 1998 and payable in September 1998. Basic
earnings per common share is determined by dividing net earnings
by the weighted average number of common shares outstanding.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards Number 128
(SFAS 128) "Earnings Per Share." This statement, which was
required to be adopted for financial statements issued for
interim and annual periods ended after December 15, 1997,
replaced 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 SFAS 128
requirements.
New Accounting Standards
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, the Company 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 the
Company's consolidated financial statements.
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. The
Company has not yet determined the financial statement impact of
SFAS 131.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Number 133 (SFAS
133) "Accounting for Derivative Instruments and Hedging
Activities." This statement, which is required to be adopted for
annual periods beginning after June 15, 1999, establishes
standards for recognition and measurement of derivatives and
hedging activities. The Company has not yet determined the
financial statement impact of SFAS 133.
6
PAGE 7
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended June 30
1998 1997 1996
(In thousands, except per share
amounts)
Net sales and other operating $16,108,6 $13,853,2 $13,239,83
income 30 62 9
Cost of products sold and other
operating costs 14,727,67 12,552,71 11,853,07
0 8 0
_________ _________ _________
_ _ _
Gross Profit 1,380,960 1,300,544 1,386,769
Selling, general and
administrative 660,692 675,103 473,294
expenses
_________ _________ _________
_ _ _
Earnings From Operations 720,268 625,441 913,475
Other income (expense) (110,256) 18,964 140,938
_________ _________ _________
_ _ _
Earnings Before Income 610,012 644,405 1,054,413
Taxes
Income taxes 206,403 267,096 358,501
_________ _________ _________
_ _ _
Net Earnings $ 403,609 $ 377,309 $ 695,912
========= ========= =========
Basic and diluted earnings per
common $ .68 $ .63 $ 1.15
share
========= ========= =========
Average number of shares 592,634 596,352 606,424
outstanding
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
7
PAGE 8
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
June 30
Assets 1998 1997
(In thousands)
Current Assets
Cash and cash equivalents $ 346,325 $ 397,788
Marketable securities 379,169 330,208
Receivables 1,990,686 1,329,350
Inventories 2,562,650 2,094,092
Prepaid expenses 172,884 132,897
___________ ___________
Total Current Assets 5,451,714 4,284,335
Investments and Other Assets
Investments in and advances to 1,473,364 1,102,420
affiliates
Long-term marketable securities 1,168,380 987,665
Other assets 417,372 271,352
___________ ___________
3,059,116 2,361,437
Property, Plant and Equipment
Land 148,135 118,898
Buildings 1,777,146 1,448,945
Machinery and equipment 7,901,309 6,841,225
Construction in progress 613,792 765,720
Less allowances for depreciation (5,117,678) (4,466,193)
___________ ___________
5,322,704 4,708,595
___________ ___________
$13,833,534 $11,354,367
=========== ==========
</TABLE>
8
PAGE 9
Liabilities and Shareholders' Equity
<TABLE>
<CAPTION>
<S> <C> <C>
June 30
1998 1997
(In thousands)
Current Liabilities
Short-term debt $ 1,545,276 $ 604,831
Accounts payable 1,634,681 1,126,313
Accrued expenses 516,287 493,944
Current maturities of long-term 21,059 23,667
debt
___________ ___________
Total Current Liabilities 3,717,303 2,248,755
Long-Term Debt 2,847,130 2,344,949
Deferred Liabilities
Income taxes 632,893 597,514
Other 131,296 113,020
___________ ___________
764,189 710,534
Shareholders' Equity
Common stock 4,936,649 4,192,321
Reinvested earnings 1,568,263 1,857,808
___________ ___________
6,504,912 6,050,129
___________ ___________
$13,833,534 $11,354,367
=========== ===========
</TABLE>
See notes to consolidated financial statements.
9
PAGE 10
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C>
<C>
Year Ended June 30
1998 1997 1996
(In thousands)
Operating Activities
Net earnings $ 403,609 $ $
377,309 695,912
Adjustments to reconcile to net cash
provided by operations
Depreciation and amortization 526,813 446,412 393,605
Deferred income taxes 28,659 (12,235 72,673
)
Amortization of long-term debt 33,297 29,094 25,584
discount
Gain on marketable securities (36,303) (59,549 (109,35
transactions ) 9)
Other 39,292 (40,758 (33,243
) )
Changes in operating assets and
liabilities
Receivables (294,407) (23,225 (183,56
) 9)
Inventories (150,509) 23,046 (320,52
9)
Prepaid expenses (27,275) (18,760 (1,683)
)
Accounts payable and accrued 90,203 (110,65 314,494
expenses 3)
_________ _______ _______
__ __
Total Operating Activities 613,379 610,681 853,885
Investing Activities
Purchases of property, plant and (702,683) (779,50 (754,26
equipment 8) 8)
Net assets of businesses acquired (370,561) (429,94 (28,612
0) )
Investments in and advances to (366,968) (416,86 (110,61
affiliates 1) 5)
Purchases of marketable securities (1,202,66 (966,20 (816,40
2) 3) 1)
Proceeds from sales of marketable 1,007,373 1,607,6 1,260,7
securities 31 10
_________ _______ _______
__ __
Total Investing Activities (1,635,50 (984,88 (449,18
1) 1) 6)
Financing Activities
Long-term debt borrowings 441,464 348,695 42,066
Long-term debt payments (55,972) (115,85 (22,233
3) )
Net borrowings under line of credit 774,033 421,046 -
agreements
Purchases of treasury stock (81,154) (312,52 (259,98
5) 0)
Cash dividends and other (107,712) (104,07 (84,443
7) )
_________ _______ _______
__ __
Total Financing Activities 970,659 237,286 (324,59
0)
_________ _______ _______
__ __
Increase (Decrease) In Cash And
Cash
Equivalents (51,463) (136,91 80,109
4)
Cash And Cash Equivalents Beginning Of 397,788 534,702 454,593
Period
_________ _______ _______
__ __
Cash And Cash Equivalents End Of $ 346,325 $ $
Period 397,788 534,702
========= ======= =======
== ==
Supplemental Cash Flow Information
Noncash Investing and Financing
Activities
Common stock issued in purchase $ 298,244 $ - $ -
acquisition
See notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity
Common Stock
Reinvest
Shares Amount ed
Earnings
(In thousands)
Balance July 1, 1995 532,524 $3,668,97 $2,185,1
7 88
Net earnings - - 695,912
Cash dividends paid-$.15 per share - - (90,860)
5% stock dividend 25,991 411,542 (411,542
)
Treasury stock purchases (15,632) (259,980) -
Foreign currency translation - - (96,101)
Change in unrealized net gains on
marketable securities - - (7,421)
Other 2,938 49,336 (239)
_______ _________ ________
_ __
Balance June 30, 1996 545,821 3,869,875 2,274,93
7
Net earnings - - 377,309
Cash dividends paid-$.18 per share - - (106,990
)
5% stock dividend 26,565 594,590 (594,590
)
Treasury stock purchases (16,707) (312,525) -
Foreign currency translation - - (73,393)
Change in unrealized net gains on
marketable securities - - (19,199)
Other 2,195 40,381 (266)
_______ _________ ________
_ __
Balance June 30, 1997 557,874 4,192,321 1,857,80
8
Net earnings - - 403,609
Cash dividends paid-$.19 per share - - (111,551
)
5% stock dividend 28,534 473,948 (473,948
)
Treasury stock purchases (3,767) (81,154) -
Common stock issued in purchase 13,953 298,244 -
acquisition
Foreign currency translation - - (108,551
)
Change in unrealized net gains on
marketable securities - - 1,187
Other 2,627 53,290 (291)
_______ _________ ________
_ __
Balance June 30, 1998 599,221 $4,936,64 $1,568,2
9 63
======= ========= ========
= ==
</TABLE>
See notes to consolidated financial statements.
10
PAGE 11
Notes to Consolidated Financial Statements
Note 1-Marketable Securities and Cash Equivalents
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Unrealiz Unrealiz Fair
ed ed
Cost Gains Losses Value
(In thousands)
1998
United States government
obligations
Maturity less than 1 $ $ 255 $ 43 $
year 430,724 430,936
Maturity 1 year to 5 45,423 266 - 45,689
years
Other debt securities
Maturity less than 1 93,024 - 1 93,023
year
Equity securities 938,849 243,231 61,203 1,120,877
_________ ________ _______ _________
_ _ _
$1,508,02 $243,752 $ 61,247 $1,690,52
0 5
========= ======== ======== =========
= =
Unrealiz Unrealiz Fair
ed ed
Cost Gains Losses Value
(In thousands)
1997
United States government
obligations
Maturity less than 1 $ $ $ $
year 455,657 66 19 455,704
Maturity 1 year to 5 74,332 70 108 74,294
years
Other debt securities
Maturity less than 1 157,588 435 - 158,023
year
Equity securities 728,448 186,551 3,540 911,459
_________ ________ _______ _________
_ _ _ _
$1,416,02 $ $ $1,599,48
5 187,122 3,667 0
========= ======== ======== =========
= = =
</TABLE>
11
PAGE 12
<TABLE>
<CAPTION>
<S> <C> <C>
Note 2-Inventories
1998 1997
(In thousands)
LIFO inventories
FIFO value $ 412,086 $ 521,277
LIFO valuation reserve (45,517) (44,811)
__________ __________
LIFO carrying value 366,569 476,466
FIFO inventories, including
hedging procedure method 2,196,081 1,617,626
__________ __________
$2,562,650 $2,094,092
========== ==========
Note 3-Accrued Expenses
1998 1997
(In thousands)
Payroll and employee benefits $ 149,601 $ 128,205
Income taxes 62,138 99,744
Other 304,548 265,995
__________ __________
$ 516,287 $ 493,944
========== ==========
</TABLE>
12
PAGE 13
Note 4-Investments in and Advances to Affiliates
The Company has 80 unconsolidated affiliates, primarily located
in North and South America, Europe, and Asia, accounted for
under the equity method. The following table summarizes the
balance sheets as of June 30, 1998 and 1997, and the statements
of earnings for the three years ended June 30, 1998 of the
Company's unconsolidated affiliates:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
(In thousands)
Current assets $ 3,510,436 $ 2,796,698 $ -
Non-current assets 4,937,077 3,295,371 -
Current liabilities 1,841,687 1,419,183 -
Non-current liabilities 1,756,864 1,193,114 -
Minority interests 267,666 247,747 -
Net sales 13,651,086 12,653,544 10,270,952
Gross profit 1,161,673 839,436 317,435
Net income (loss) 216,178 233,543 (14,505)
</TABLE>
The increase in summarized balance sheets and statements of
earnings of the Company's unconsolidated affiliates in 1998 and
1997 is primarily due to the inclusion of new affiliates and the
growth of the Company's existing affiliates. The Company's
investment in unconsolidated affiliates exceeds the underlying
equity in net assets by $146 million, which amount is being
amortized on a straight-line basis over 10 to 40 years.
Three foreign affiliates for which the Company has a carrying
value of $375 million have a market value of $271 million based
on quoted market prices and exchange rates at June 30, 1998.
13
PAGE 14
Note 5-Debt and Financing Arrangements
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
(In thousands)
7.5% Debentures $350 million
face amount, due in 2027 $ 347,881 $ 347,860
8.875% Debentures $300 million
face amount, due in 2011 298,396 298,331
8.125% Debentures $300 million
face amount, due in 2012 298,148 298,079
8.375% Debentures $300 million
face amount, due in 2017 294,403 294,285
7.125% Debentures $250 million
face amount, due in 2013 249,438 249,416
6.25% Notes $250 million
face amount, due in 2003 249,430 249,353
6.95% Debentures $250 million
face amount, due in 2097 246,066 -
Zero Coupon Debt $400 million
face amount, due in 2002 239,943 209,967
6.75% Debentures $200 million
face amount, due in 2027 195,469 -
7% Debentures $250 million
face amount, due in 2011 134,272 131,486
10.25% Debentures $100 million
face amount, due in 2006 98,936 98,847
Industrial Revenue Bonds at
various rates from 5.30% to 13.25%
and due in varying amounts
to 2011 69,016 74,571
Other 146,791 116,421
__________ __________
Total long-term debt 2,868,189 2,368,616
Less current maturities (21,059) (23,667)
__________ __________
$2,847,130 $2,344,949
========== ==========
</TABLE>
At June 30, 1998, the fair value of the Company's long-term debt
exceeded the carrying value by $512 million, as estimated by
using quoted market prices or discounted future cash flows based
on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.
Unamortized original issue discounts on the 7% Debentures and
Zero Coupon Debt issues are being amortized at 15.35% and
13.80%, respectively. Accelerated amortization of the discounts
for tax purposes has the effect of lowering the actual rate of
interest to be paid over the remaining lives of the issues to
approximately 10.19% and 5.21%, respectively.
The aggregate maturities for long-term debt for the five years
after June 30, 1998 are $21 million, $21 million, $33 million,
$434 million, and $266 million, respectively.
At June 30, 1998 the Company had lines of credit totaling $1.9
billion. The weighted average interest rates on short-term
borrowings outstanding at June 30, 1998 and 1997 were 5.16% and
4.81%, respectively.
14
PAGE 15
Note 6-Shareholders' Equity
The Company has authorized 800 million shares of common stock
and 500,000 shares of preferred stock, both without par value.
No preferred stock has been issued. At June 30, 1998 and 1997,
the Company had approximately 5.9 million and 20.7 million
common shares, respectively, in treasury. Treasury stock is
recorded at cost, $102 million at June 30, 1998, as a reduction
of common stock.
Cumulative foreign currency translation losses of $216 million
and unrealized gains on securities of $122 million at June 30,
1998, net of applicable taxes, are included as components of
reinvested earnings.
Stock option plans provide for the granting of options to
employees to purchase common stock of the Company at market
value on the date of grant. Options expire five to ten years
after the date of grant. At June 30, 1998, there were 4,186,540
shares available for future grant. Stock option activity during
the periods indicated is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Weighted
Average
Number Exercise
Price
of Shares Per Share
(In
thousands)
Shares under option at June 30, 5,008 $12.17
1995
Exercised (879) 9.17
Cancelled (461) 12.58
______
Shares under option at June 30, 3,668 12.84
1996
Granted 1,272 15.86
Exercised (293) 12.34
Cancelled (110) 13.03
______
Shares under option at June 30, 4,537 13.71
1997
Granted 35 21.14
Exercised (508) 12.57
Cancelled (65) 15.16
______
Shares under option at June 30, 3,999 $13.90
1998
======
Shares exercisable at June 30, 2,115 12.93
1998
Shares exercisable at June 30, 1,697 12.53
1997
Shares exercisable at June 30, 1,256 12.40
1996
</TABLE>
At June 30, 1998 the range of exercise prices and weighted
average remaining contractual life of outstanding options was
$11.35-$21.52 and four years, respectively.
The Company accounts for its stock option plans in accordance
with Accounting Principles Board (APB) Opinion Number 25
"Accounting for Stock Issued to Employees." Under APB 25
compensation expense is recognized if the exercise price of the
employee stock option is less than the market price on the grant
date. Statement of Financial Accounting Standards Number 123
"Accounting for Stock-Based Compensation" requires the fair
value of options granted and the pro forma impact on earnings
and earnings per share be disclosed when material. Had
compensation expense for stock options been determined based on
the fair value of options granted, the Company's 1998 and 1997
net earnings and earnings per share would have been affected by
less than one quarter of one percent.
The weighted average fair value of options granted during 1998
and 1997 are $5.88 and $5.71, respectively. The fair value of
each option grant is estimated as of the date of grant using the
Black-Scholes single option pricing model for pro forma footnote
purposes with the following assumptions used for all years:
dividend yield of 1%, risk free interest rate of 6%, and
expected volatility of .2%. Expected option life was assumed to
be four years in 1998 and six years in 1997.
Note 7-Other Income (Expense)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
(In thousands)
Investment income $ 123,729 $ 121,991 $ 150,446
Interest expense (293,220) (197,214) (170,089)
Gain on marketable
securities transactions 36,544 59,810 109,359
Equity in earnings
of affiliates 20,364 35,243 31,780
Other 2,327 (866) 19,442
__________ __________ __________
$ (110,256) $ 18,964 $ 140,938
========== ========== ==========
</TABLE>
Interest expense is net of interest capitalized of $37 million,
$41 million, and $43 million in 1998, 1997, and 1996,
respectively.
The Company made interest payments of $295 million, $198
million, and $188 million in 1998, 1997, and 1996, respectively.
The realized gains on sales of available-for-sale marketable
securities totaled $37 million, $63 million, and $109 million in
1998, 1997, and 1996, respectively. The realized losses totaled
$3 million in 1997.
Note 8-Income Taxes
For financial reporting purposes, earnings before income taxes
includes the following components:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
(In thousands)
United States $ 458,184 $ 563,086 $
907,376
Foreign 151,828 81,319 147,037
_________ _________ _________
_
$ 610,012 $ 644,405 $1,054,41
3
========= ========= =========
=
</TABLE>
15
PAGE 16
Significant components of income taxes are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
(In thousands)
Current
$ $ 216,641 $ 207,166
Federal 111,152
State 20,879 29,440 29,604
54,724 27,352 46,646
Foreign
Deferred
14,474 (5,357) 69,253
Federal
State 1,451 (2,910) 6,467
3,723 1,930 (635)
Foreign
_________ _________ _________
$ 206,403 $ 267,096 $ 358,501
========= ========= =========
Significant components of the Company's deferred tax liabilities
and assets are as follows:
1998 1997
(In thousands)
Deferred tax liabilities
Depreciation $ 484,336 $ 446,083
Unrealized gain on marketable
securities 60,820 62,957
Bond discount amortization 52,645 56,312
Other 86,161 76,992
_________ _________
683,962 642,344
Deferred tax assets
Postretirement benefits 31,073 29,318
Other 81,431 64,186
_________ _________
112,504 93,504
_________ _________
Net deferred tax liabilities 571,458 548,840
Current net deferred tax assets
included
in prepaid expenses 61,435 48,674
_________ _________
Non-current net deferred
tax liabilities $ 632,893 $ 597,514
========= =========
16
PAGE 17
Reconciliation of the statutory federal income tax rate to the
Company's effective tax rate is as follows:
1998 1997 1996
Statutory rate 35.0% 35.0% 35.0%
Foreign sales corporation (4.7) (3.4) (2.4)
State income taxes, net of
federal tax benefit 2.4 2.7 2.2
Litigation settlements and 1.4 7.5 -
fines
Other (0.3) (0.4) (0.8)
______ ______ ______
Effective rate 33.8% 41.4% 34.0%
====== ====== ======
</TABLE>
The Company made income tax payments of $225 million, $312
million, and $268 million in 1998, 1997, and 1996, respectively.
Undistributed earnings of the Company's foreign subsidiaries
amounting to approximately $529 million at June 30, 1998, are
considered to be permanently reinvested and, accordingly, no
provision for U.S. income taxes has been provided thereon. It is
not practicable to determine the deferred tax liability for
temporary differences related to these undistributed earnings.
Note 9-Leases
The Company leases manufacturing and warehouse facilities, real
estate, transportation, and other equipment under operating
leases which expire at various dates through the year 2026. Rent
expense for 1998, 1997, and 1996 was $82 million, $69 million,
and $73 million, respectively. Future minimum rental payments
for non-cancellable operating leases with initial or remaining
terms in excess of one year are as follows:
<TABLE>
<CAPTION>
<S> <C>
Fiscal years (In thousands)
1999 $ 37,557
2000 23,879
2001 16,069
2002 13,332
2003 14,929
Thereafter 96,928
_________
Total minimum lease payments $ 202,694
=========
</TABLE>
17
PAGE 18
Note 10-Employee Benefit Plans
The Company has noncontributory and trusteed pension plans
covering substantially all employees. It is the Company's policy
to fund pension costs as required by federal laws and
regulations. At June 30, 1998, the plans had assets at fair
value of $614 million and projected benefit obligations of $638
million based on a discount rate of 7%. Pension expense is not
material.
The Company has postretirement health care and life insurance
plans covering substantially all employees. The fully accrued
accumulated postretirement benefit obligations (APBO) for the
unfunded plans at June 30, 1998 were $61 million, based on a
discount rate of 7% and an assumed health care cost trend rate
of 9% for 1999 gradually decreasing to 5.5% by 2004. Expense of
these plans is not material. A 1% increase in the health care
cost trend rate assumption would not have had a material impact
on the APBO or expense for the year.
In addition, the Company has savings and investment plans
available to eligible employees with one year of service.
Employees may contribute up to 10% of their salaries, not to
exceed $10,000. The Company matches these contributions, at
various levels.
Note 11-Geographic Information
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
(In millions)
Net sales and other
operating income:
United States $10,784 $ 9,773 $ 9,661
Europe 3,869 3,039 2,753
Other foreign 1,456 1,041 826
_______ _______ _______
$16,109 $13,853 $13,240
======= ======= =======
Sales or transfers between
geographic areas:
United States $ 339 $ 354 $ 282
Europe 47 51 108
Other foreign 228 146 133
_______ _______ _______
$ 614 $ 551 $ 523
======= ======= =======
Earnings from operations:
United States $ 552 $ 550 $ 805
Europe 111 46 69
Other foreign 57 29 39
_______ _______ _______
$ 720 $ 625 $ 913
======= ======= =======
Identifiable assets:
United States $ 7,885 $ 6,663 $ 6,025
Europe 1,537 1,288 929
Other foreign 1,050 585 418
_______ _______ _______
$10,472 $ 8,536 $ 7,372
======= ======= =======
</TABLE>
Earnings from operations represent earnings before other income
(expense) and income taxes.
Sales or transfers between geographic areas are made at
established transfer prices.
Identifiable assets exclude cash and cash equivalents,
marketable securities and investments in and advances to
affiliates. At June 30, 1998, approximately $1.4 billion of the
Company's cash and cash equivalents, marketable securities and
investments in affiliates were foreign assets, of which $681
million were in Europe.
Note 12-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 in fiscal 1997, the
Company 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. The federal grand jury in the
Northern District of Illinois (lysine) has been closed.
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 preceding 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
consolidated financial statements.
18
PAGE 19
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Archer Daniels Midland Company
Decatur, Illinois
We have audited the accompanying consolidated balance
sheets of Archer Daniels Midland Company and subsidiaries as of
June 30, 1998 and 1997, and the related consolidated statements
of earnings, shareholders' equity and cash flows for each of the
three years in the period ended June 30, 1998. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Archer Daniels Midland Company and its
subsidiaries at June 30, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended June 30, 1998, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
July 31, 1998
19
PAGE 20
Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Quarter
First Second Third Fourth Total
(In thousands, except per share amounts)
Fiscal 1998
Net sales $3,651,30 $4,130,29 $4,280,27 $4,046,75 $16,108,6
2 8 9 1 30
Gross profit 325,168 362,359 384,471 308,962 1,380,960
Net earnings 131,350 139,208 70,303 62,748 403,609
Per common 0.22 0.24 0.12 0.10 0.68
share
Fiscal 1997
Net sales $3,330,47 $3,514,93 $3,414,81 $3,593,03 $13,853,2
5 8 8 1 62
Gross profit 370,000 386,463 216,407 327,674 1,300,544
Net earnings 3,553 189,941 61,167 122,648 377,309
Per common 0.01 0.31 0.10 0.21 0.63
share
Net earnings for the three months ended March 31, 1998 and the
year ended June 30, 1998 include an after-tax charge of $40
million or $.07 per share for fines and litigation settlements.
Net earnings for the three months ended September 30, 1996 and
the year ended June 30, 1997 include an after-tax charge of $177
million or $.30 per share for fines and litigation settlements.
Common Stock Market Prices and Dividends
The Company's common stock is listed and traded on the New York
Stock Exchange, Chicago Stock Exchange, Tokyo Stock Exchange,
Frankfurt Stock Exchange, and the Swiss Exchange. The following
table sets forth, for the periods indicated, the high and low
market prices of the common stock and common stock cash
dividends.
Cash
Market Price Dividends
High Low Per Share
Fiscal 1998-Quarter Ended
June 30 21 11/16 17 5/8 0.048
March 31 22 1/2 19 3/4 0.048
December 31 23 1/4 17 1/8 0.048
September 30 23 7/16 19 5/16 0.046
Fiscal 1997-Quarter Ended
June 30 21 13/16 15 1/2 0.046
March 31 20 13/16 15 11/16 0.046
December 31 20 15/16 17 1/4 0.046
September 30 17 1/2 14 3/16 0.043
The number of shareholders of the Company's common stock at June
30, 1998 was 32,539. The Company expects to continue its policy
of paying regular cash dividends, although there is no assurance
as to future dividends because they are dependent on future
earnings, capital requirements and financial condition.
</TABLE>
20
PAGE 21
Ten Year Summary
Operating, Financial and Other Data (Dollars in thousands, except per share
data)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
Operating
Net sales and other operating income $16,108,6 $13,853,2 $13,239,8
30 62 39
Depreciation and amortization 526,813 446,412 393,605
Net earnings 403,609 377,309 695,912
Per common share .68 .63 1.15
Cash dividends 111,551 106,990 90,860
Per common share .19 .18 .15
Financial
Working capital $ $ $
1,734,411 2,035,580 2,751,132
Per common share 2.89 3.48 4.57
Current ratio 1.5 1.9 2.7
Inventories 2,562,650 2,094,092 1,790,636
Net property, plant and equipment 5,322,704 4,708,595 4,114,301
Gross additions to property, plant and 1,228,553 1,127,360 801,426
equipment
Total assets 13,833,53 11,354,36 10,449,86
4 7 9
Long-term debt 2,847,130 2,344,949 2,002,979
Shareholders' equity 6,504,912 6,050,129 6,144,812
Per common share 10.86 10.33 10.21
Other
Weighted average shares outstanding (000's) 592,634 596,352 606,424
Number of shareholders 32,539 33,834 35,431
Number of employees 23,132 17,160 14,811
21
PAGE 22
1995 1994 1993 1992 1991 1990 1989
$12,555,4 $11,158,4 $9,578,37 $9,026,17 $8,271,58 $7,551,97 $7,729,62
03 79 0 7 8 2 0
384,872 354,463 328,549 293,729 261,367 248,113 220,538
795,915 484,069 567,527 503,757 466,678 483,522 424,673
1.27 .77 .86 .77 .71 .73 .65
46,825 32,586 32,266 30,789 29,527 25,976 17,271
.07 .05 .05 .05 .04 .04 .03
$2,540,26 $ $2,961,50 $2,276,56 $1,674,73 $1,627,45 $1,487,15
0 2,783,817 3 4 5 9 1
4.12 4.44 4.52 3.47 2.55 2.46 2.27
3.2 3.5 4.1 3.4 3.0 3.4 3.4
1,473,896 1,422,147 1,131,787 1,025,030 917,495 771,233 694,998
3,762,281 3,538,575 3,214,834 3,060,096 2,695,625 2,131,807 1,832,258
657,915 682,485 572,022 614,844 911,586 550,851 405,888
9,756,887 8,746,853 8,404,111 7,524,530 6,260,607 5,450,010 4,728,308
2,070,095 2,021,417 2,039,143 1,562,491 980,273 750,901 690,052
5,854,165 5,045,421 4,883,251 4,492,353 3,922,295 3,573,228 3,033,503
9.50 8.05 7.45 6.85 5.98 5.41 4.64
625,946 632,422 656,217 657,973 660,251 657,940 651,808
34,385 33,940 33,654 32,277 28,981 26,076 20,382
14,833 16,013 14,168 13,524 13,049 11,861 10,214
</TABLE>
Share and per share data have been adjusted for three-for-two stock splits in
December 1989 and December 1994, and annual 5% stock dividends through September
1998.
Net earnings for 1998, 1997, and 1996 include charges of $40 million ($.07 per
share), $177 million ($.30 per share) and $19 million ($.03 per share),
respectively, for fines and litigation settlements.
Net earnings for 1993 includes a credit of $68 million or $.10 per share and a
charge of $35 million or $.05 per share for the cumulative effects of changes in
accounting for income taxes and postretirement benefits, respectively.
22
PAGE 23
Directors
+Dwayne O. Andreas
Chairman of the Board
*Gaylord O. Coan
Vice Chairman of the Board
President, Chief Executive Officer
Gold Kist Inc.
*G. Allen Andreas
President and Chief Executive Officer
Shreve M. Archer, Jr.
Private Investments
John R. Block
Food Distributors International
Richard R. Burt
IEP Advisors, Inc.
*Mollie Hale Carter
Star A Inc.
F. Ross Johnson
Chairman and Chief Executive
Officer, RJM Group, Inc.
M. Brian Mulroney
Senior Partner
Ogilvy Renault
(a law firm)
*Robert S. Strauss
Partner
Akin, Gump, Strauss, Hauer & Feld
(a law firm)
John K. Vanier
Chief Executive Officer, Western Star
Ag. Resources, Inc.
O. Glenn Webb
Chairman of the Board
and President, GROWMARK, Inc.
Andrew Young
GoodWorks International
Audit Committee
Gaylord O. Coan
Chairman
John R. Block
Richard R. Burt
Mollie Hale Carter
Andrew Young
23
PAGE 24
Public Policy Committee
M. Brian Mulroney
Chairman
Shreve M. Archer, Jr.
John R. Block
Richard R. Burt
O. Glenn Webb
Andrew Young
Nominating Committee
Mollie Hale Carter
Chairman
Richard R. Burt
Gaylord O. Coan
Andrew Young
+Ex officio member of all committees
*Executive Committee
Corporate Officers
G. Allen Andreas
President and
Chief Executive Officer
Charles T. Bayless
Executive Vice President
Martin L. Andreas
Senior Vice President and
Assistant to the Chairman
Douglas J. Schmalz
Vice President
and Chief Financial Officer
Charles P. Archer
Treasurer
Steven R. Mills
Controller
Burnell D Kraft
Senior Vice President
*Richard P. Reising
Senior Vice President
Lewis W. Batchelder
Group Vice President
Howard E. Buoy
Group Vice President
Larry H. Cunningham
Group Vice President
Craig L. Hamlin
Group Vice President
James C. Ielase
Group Vice President
John D. McNamara
Group Vice President
Paul B. Mulhollem
Group Vice President
Raymond V. Preiksaitis
Group Vice President
David J. Smith
Vice President, Secretary
and General Counsel
Scott A. Roberts
Assistant Secretary and
Assistant General Counsel
+Claudia M. Madding
Executive Assistant to the Chairman
and Assistant Secretary
Stephen W. Minder
Corporate Compliance Officer
William H. Camp
Vice President
Mark J. Cheviron
Vice President
Edward A. Harjehausen
Vice President
Paul L. Krug, Jr.
Vice President
John E. Long
Vice President
Jack McDonald
Vice President
Brian F. Peterson
Vice President
John G. Reed, Jr.
Vice President
John D. Rice
Vice President
Kenneth A. Robinson
Vice President
Stephen Yu
Vice President
*Secretary to the Board of Directors
+Secretary to the Executive Committee
24
PAGE 25
Officers of Subsidiaries and Divisions
ADM Agri Industries
John McNamara, President
Gregory W. Webb, Vice President
ADM Animal Health
and Nutrition Division
Steven E. Dale, Vice President/
General Manager
James Krug, Vice President
ADM Asia Pacific
Stephen Yu, Managing Director
Matthew J. Morgenroth, Operations
Manager
ADM Australia (Pty) Ltd.
Ern T. Newton, President
ADM BioProducts Division
Brian F. Peterson, President
John Hanson, Vice President
Daniel E. Larson, Vice President
Ern T. Newton, Vice President
ADM Cocoa Division
Hans Leijdekker, President
Alan C. Girard, Vice President
ADM/COUNTRYMARK
John Ade, General Manager
ADM Corn Processing Division
Larry H. Cunningham, President
Norbert W. Cremers, Vice President
Edward A. Harjehausen,
Vice President
J. Robert Heard, Vice President
Craig Fischer, Vice President
ADM Europoort B.V.
Wim Groenenboom, Managing
Director
ADM Export Company
Elnathan Anderson, Vice President
ADM Exportadora e Importadora
S. A.
Paulo Roberto Moreira Garcez,
President
Ingomar Julio Heinz Kalder,
Vice President
25
PAGE 26
ADM Far East Ltd.
Shuji Tani, President
ADM Food Additives Division
Barrie R. Cox, President
Roger Dawson, Vice President
Tom Fox, Vice President
Norma Maddio, Vice President
ADM Food Oils Division
John D. Rice, President
Edward J. Campbell,
Vice President
Gordon D. Gregory, Vice President
Lewis G. Jacobs, Vice President
Patrick S. Laegeler, Vice President
Doug C. Millar, Vice President
ADM/GROWMARK
O. Glenn Webb, Chairman
Burnell D Kraft, President
Lewis W. Batchelder, Senior
Vice President
Marvin R. Rau, Senior Vice President
Warren Duffy, Vice President
Kim Ekena, Vice President
Mark Kolkhorst, Vice President
John L. McClenathan, Vice President
Gregory C. Muench, Vice President
David Ragan, Vice President
James F. Voigt, Vice President
ADM Ingredients Ltd.
Barrie R. Cox, President
Robert Hobson, Senior Vice President
Tony Miles-Prouten, Vice President
Roger Dawson, Vice President
ADM International Ltd.
Paul B. Mulhollem, Managing
Director
Dirk Bok, Senior Vice President
Robert Hobson, Senior Vice President
and CFO
Sig Peterson, Vice President
Hidde Van der Wal, Vice President
ADM Investor Services, Inc.
Paul L. Krug, Jr., President
Richard W. Dodson, Senior Vice
President
John D. Coffin, Vice President
Keith A. Jones, Vice President
Jeffery B. Lelliott, Vice President
26
PAGE 27
ADM Milling Co.
Craig L. Hamlin, President
James C. Brainard, Vice President
Anthony A. Degnan, Vice President
Michael M. Marsh, Vice President
Roy L. Robinson, Vice President
Daniel L. Wells, Vice President
J. Robert Woolery, Vice President
Arkady Products
Gerard A. Degnan, President
Bruce E. Criss, Vice President
Fred C. Livermore, Vice President
ADM North American Oilseed
Processing Division
John D. McNamara, President
Dennis Garceau, Vice President
Craig Huss, Vice President
Gary Berry, Vice President
ADM Protein Specialties Division
Larry H. Cunningham, President
Peter Fitch, Managing Director,
Haldane Foods
Daun R. Henze, Vice President
John C. Painter, Vice President
Patricia S. Schroder, Vice President
John I. Wainright, Vice President
ADM Research Division
John E. Long, President
Thomas P. Binder, Vice President
ADM Trucking
W. H. Camp, President
William Patterson, Vice President
Agrinational Insurance Company
Richard P. Reising, President
Agri-Sales Inc.
Wendell Schwarz, President
American River Transportation Co.
Craig A. Fischer, President
Royce Wilken, Vice President
Gene Senesac, Vice President
Archer Daniels Midland
Shipping Co.
Gail F. Patterson, President
Dirk Bok, Vice President
Shuji Tani, Vice President
27
PAGE 28
Benson-Quinn Company
Lawrence Neumann, President
Paul D. Savre, Executive Vice
President and CFO
Lewis W. Batchelder, Vice President
Ronald A. Dinga, Vice President
Kevin A. Keiser, Vice President
Randal L. Narloch, Vice President
Collingwood Grain, Inc.
G. Lowell Downey, President
John Bair, Vice President
Peter Goetzmann, Vice President
Roy Space, Vice President
Randy Whisenhunt, Vice President
Demeter, Inc.
Burnell D Kraft, President
Kenneth E. Klemme, Vice President
Brian Schwalbe, Vice President
Gooch Foods, Inc.
Timothy O. Malm, President
Brent T. Braun, Vice President
Peter J. Kolb, Vice President
Robert M. Ryan, Vice President
Hickory Point Bank and Trust
Dale P. Arnold, President
Michael Gibson, Senior Vice
President
June A. McCormick, Vice President
Kirk A. Myers, Vice President
Eugene Pride, Vice President
Deborah Warren, Vice President
MoorMan's Inc.
Mike Foster, President
Fred Gutzmann, Vice President
Dave Holzgraefe, Vice President
Rail Transportation Division
William H. Camp, President
Randall Neumeyer, Vice President
Southern Cellulose Products, Inc.
Jack McDonald, President
Southern Cotton Oil Company
Jack McDonald, President
Tabor Grain Co.
Burnell D Kraft, President
Marvin R. Rau, Vice President
Brian Schwalbe, Vice President
Kenneth Klemme, Vice President
Stock Exchanges Archer Daniels Midland Company Common Stock
is listed and traded on the
New York Stock Exchange, Chicago Stock Exchange, Tokyo Stock
Exchange, Frankfurt Stock Exchange and the Swiss Exchange.
Transfer Agent and Registrar Harris Trust and Savings Bank,
Corporate Trust Department, 311 West Monroe,
P.O. Box A-3504, Chicago, Illinois 60690
800/824-6309, 312/461-6001
Notice of Annual Meeting The Annual Meeting of Shareholders of
the Company will be held at the James R. Randall Research Center
(formerly ADM Lakeview Office), 1001 Brush College Road in
Decatur, Illinois at 10:00 a.m. on October 22, 1998. Proxies
will be requested by Management on or about September 16, 1998,
at which time a Proxy Statement and Form of Proxy will be sent
to Shareholders.
Independent Auditors Ernst & Young LLP, Minneapolis,
Minnesota
Mailing Address Archer Daniels Midland Company
P. O. Box 1470
Decatur, Illinois 62525
Internet http://www.admworld.com
Copies of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K will be available to
Shareholders without charge, during a reasonable period of time,
upon written request to the Corporate Relations Department.
Archer Daniels Midland Company is an equal opportunity
employer.
28
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 346,325
<SECURITIES> 379,169
<RECEIVABLES> 1,990,686
<ALLOWANCES> 0
<INVENTORY> 2,562,650
<CURRENT-ASSETS> 5,451,714
<PP&E> 10,440,382
<DEPRECIATION> 5,117,678
<TOTAL-ASSETS> 13,833,534
<CURRENT-LIABILITIES> 3,717,303
<BONDS> 2,847,130
0
0
<COMMON> 4,936,649
<OTHER-SE> 1,568,263
<TOTAL-LIABILITY-AND-EQUITY> 13,833,534
<SALES> 16,108,630
<TOTAL-REVENUES> 16,108,630
<CGS> 14,727,670
<TOTAL-COSTS> 14,727,670
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 293,220
<INCOME-PRETAX> 610,012
<INCOME-TAX> 206,403
<INCOME-CONTINUING> 403,609
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 403,609
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
