21
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period ________________________ TO
________________________
Commission file number 1-44
ARCHER-DANIELS-MIDLAND COMPANY
(Exact name of registrant as specified in its charter)
Delaware 41-0129150
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
4666 Faries Parkway Box 1470 Decatur, Illinois 62525
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code217-424-5200
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
___.
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Common Stock, no par value - 608,360,045 shares
(October 29, 1999)
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PART I - FINANCIAL INFORMATION
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1999
1998
---------------------
--
(In thousands, except
per share amounts)
<S> <C> <C>
Net sales and other operating income $3,220,98
0 $3,801,4
21
Cost of products sold and other
operating costs 2,948,660
3,507,78
5
_________
________
_
Gross Profit 272,320
293,636
Selling, general and administrative 170,735
expenses 166,816
_________
________
_
Earnings From Operations 101,585
126,820
Other income (expense) (46,899)
51,584
_________
________
_
Earnings Before Income Taxes 54,686
178,404
Income taxes 18,319
61,549
_________
________
_
Net Earnings $ 36,3 $ 116,85
67 5
========= =========
Average number of shares outstanding 611,207 627,016
Basic and diluted earnings per common $.06 $.1
share 9
Dividends per common share $.048 $
.046
</TABLE>
See notes to consolidated financial statements.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER JUNE 30,
30,
1999 1999
-------------------------
--
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 716,712 $ 681,378
Marketable securities 393,487 222,191
Receivables 2,103,530 1,922,163
Inventories 2,833,514 2,732,694
Prepaid expenses 256,926 231,162
___________ ___________
Total Current Assets 6,304,169 5,789,588
Investments and Other Assets
Investments in and advances to 1,578,904 1,484,980
affiliates
Long-term marketable securities 784,076 779,916
Other assets 422,731 408,236
___________ ___________
2,785,711 2,673,132
Property, Plant and Equipment
Land 168,791 163,607
Buildings 2,008,128 1,949,211
Machinery and equipment 8,555,983 8,384,865
Construction in progress 656,301 675,870
Less allowances for depreciation (5,799,205) (5,606,392)
___________ ___________
5,589,998 5,567,161
___________ ___________
$14,679,878 $14,029,881
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER JUNE 30,
30,
1999 1999
------------------------
--
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $1,513,208 $1,241,369
Accounts payable 2,333,822 2,004,396
Accrued expenses 606,876 567,593
Current maturities of long-term debt 27,730 26,907
__________ __________
Total Current Liabilities 4,481,636 3,840,265
Long-term Debt 3,199,868 3,191,883
Deferred Credits
Income taxes 619,613 619,752
Other 138,927 137,341
__________ __________
758,540 757,093
Shareholders' Equity
Common stock 5,043,241 5,081,320
Reinvested earnings 1,426,141 1,419,321
Accumulated other comprehensive income (229,548) (260,001)
__________ __________
6,239,834 6,240,640
__________ __________
$14,679,878 $14,029,881
========== ==========
</TABLE>
See notes to consolidated financial statements.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1999 1998
-------------------------
(In thousands)
<S> <C> <C>
Operating Activities
Net earnings $ 36,367 $ 116,855
Adjustments to reconcile to net cash
provided
by operations
Depreciation and amortization 148,581 139,347
Deferred income taxes 3,132 3,137
Amortization of long-term debt discount 10,261 9,011
(Gain) loss on marketable securities
transactions (5,992) (99,702)
Other 34,772 62,663
Changes in operating assets and
liabilities
Receivables (174,695) (91,482)
Inventories (75,275) (76,793)
Prepaid expenses (25,242) 7,288
Accounts payable and accrued expenses 342,981 381,203
________ ________
Total Operating Activities 294,890 451,527
Investing Activities
Purchases of property, plant and equipment (148,743) (171,517)
Net assets of businesses acquired 104 (48,152)
Investments in and advances to affiliates, (89,651) (65,311)
net
Purchases of marketable securities (341,544) (219,628)
Proceeds from sales of marketable 161,489 517,411
securities
________ ________
Total Investing Activities (418,345) 12,803
Financing Activities
Long-term debt borrowings 1,414 82,651
Long-term debt payments (9,362) (4,608)
Net borrowings (payments) under line of
credit 259,659 (378,821)
agreements
Purchases of treasury stock (63,417) (97,497)
Cash dividends and other (29,505) (28,353)
________ ________
Total Financing Activities 158,789 (426,628)
________ ________
Increase in Cash and Cash Equivalents 35,334 37,702
Cash and Cash Equivalents Beginning of 681,378 346,325
Period
________ ________
Cash and Cash Equivalents End of Period $ 716,712 $ 384,027
======== ========
</TABLE>
See notes to consolidated financial statements.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.Basis of Presentation
The accompanying unaudited consolidated financial
statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of
management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair
presentation have been included. Operating results for
the quarter ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the
year ending June 30, 2000. For further information,
refer to the consolidated financial statements and
footnotes thereto included in the Company's annual
report on Form 10-K for the year ended June 30, 1999.
Note 2.New Accounting Standards
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, 2000, establishes standards for
recognition and measurement of derivatives and hedging
activities. The Company has not yet determined the
financial statement impact of SFAS 133.
Note 3. Per Share Data
All references to share and per share information have
been adjusted for the 5 percent stock dividend paid
September 20, 1999.
Note 4.Comprehensive Income
Comprehensive income (net income plus other
comprehensive income) was $67 million and $17 million
for the quarter ended September 30, 1999 and 1998,
respectively.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Note 5. Other Income (Expense)
THREE MONTHS ENDED
SEPTEMBER 30,
1999 1998
__________________
(In thousands)
<S> <C> <C>
Investment income $ 30,847 $ 29,137
Interest expense (85,439) (80,027)
Net gain on marketable securities 5,992 99,713
transactions
Equity in earnings (losses) of affiliates (160) 3,842
Other 1,861 (1,081)
______ ______
$(46,899) $ 51,584
====== ======
</TABLE>
Note 6.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 fines 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 juries in the
Northern Districts of Illinois (lysine) and Georgia (high
fructose corn syrup) have been closed.
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, sodium gluconate, monosodium glutamate and
high fructose corn syrup. These actions and proceedings
generally involve claims for unspecified compensatory damages,
fines, costs, expenses and unspecified relief. The Company
intends 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 $21 million in fiscal 1999,
$48 million in fiscal 1998 and $200 million in fiscal 1997 to
cover the fines, litigation settlements related to the federal
lysine class action, federal securities class action, the
federal citric class action, the federal sodium gluconate 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 above.
Because of the early stage of other putative class actions and
proceedings, including those related to high fructose corn
syrup, the ultimate outcome and materiality of these matters
cannot presently be determined. Accordingly, no provision for
any liability that may result therefrom has been made in the
unaudited consolidated financial statements.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
OPERATIONS
The Company is in one business segment - procuring,
transporting, storing, processing and merchandising agricultural
commodities and products. A summary of net sales and other
operating income by classes of products and services is as
follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
(in millions)
<S> <C> <C>
Oilseed products $1,827 $2,325
Corn products 460 513
Wheat and other milled products 361 361
Other products and services 573 602
----- -----
$3,221 $3,801
====== ======
</TABLE>
Net sales and other operating income decreased 15 percent for
the quarter to $3.2 billion due principally to a decrease in
average selling prices of 18 percent. This decrease was
partially offset by $49 million of sales attributable to
recently acquired operations. Sales of oilseed products
decreased 21 percent for the quarter to $1.8 billion due
primarily to lower average selling prices reflecting the lower
cost of raw materials. Sales volumes of oilseed products
increased by 2 percent due to improved domestic demand for
protein meals. Sales of corn products decreased 10 percent for
the quarter due principally to decreases in sales volumes as
excess industry production capacities of sweetener, alcohol,
citric acid and amino acid products resulted in difficult market
conditions. Excess production capacity in the amino acid
industry as well as low protein meal and corn prices continue to
depress selling prices of the Company's amino acid products.
Sales of wheat and other milled products for the quarter were at
the same level as a year ago as a slight increase in average
selling prices offset a slight decrease in sales volumes. The
decrease in sales of other products and services was due
principally to decreased sales volumes of the Company's cocoa
and formula feed products and to lower average selling prices of
cocoa products. These decreases were partially offset by
increased grain merchandising and transportation revenues.
Cost of products sold and other operating costs decreased $559
million to $2.9 billion due primarily to lower average raw
material costs arising from an abundant world-wide supply of
agricultural commodities.
Gross profit decreased $21 million to $272 million for the
quarter due principally to selling price declines exceeding
declines in lower average raw material costs. These decreases
were partially offset by gross profit attributable to increased
grain merchandising and transportation margins.
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Selling, general and administrative expenses increased $4
million to $170 million due primarily to $5 million of expenses
attributable to recently acquired operations.
The decrease in other income for the quarter was due principally
to decreased gains on marketable securities transactions.
The decrease in income taxes for the quarter resulted primarily
from lower pretax earnings. The Company's effective income tax
rate for the quarter was 33.5% compared to an effective rate of
34.5% for the comparable period of a year ago.
Liquidity and Capital Resources
At September 30, 1999, the Company continued to show substantial
liquidity with working capital of $1.8 billion. Capital
resources remained strong as reflected in the Company's net
worth of $6.2 billion. The Company's ratio of long-term debt to
total capital at September 30, 1999 was approximately 31%.
As described in Note 6 to the unaudited 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 fines 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 described in Note 6 to the unaudited consolidated financial
statements, the Company has settled certain civil federal class
action suits involving lysine, citric acid, sodium gluconate,
and securities, and certain state actions filed by indirect
purchasers of lysine. The Company has made provisions of $21
million in fiscal 1999, $48 million in fiscal 1998 and $200
million in fiscal 1997 to cover the fines, 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
above. Because of the early stage of other putative class
actions and proceedings, including those related to high
fructose corn syrup, the ultimate outcome and materiality of
these matters cannot presently be determined. Accordingly, no
provision for any liability that may result therefrom has been
made in the unaudited consolidated financial statements.
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
substantially complete with respect to required software
changes, tests, and migration to the production environment.
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The Company has satisfactorily completed the identification and
review of computer hardware and software suppliers and has
verified the year 2000 preparedness of general business
partners, suppliers, vendors, and/or service providers that the
Company has identified as critical.
Cost
The total historical and 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 are not within the Company's reasonable control.
The Company has built-in contingencies considering its
multiplant/
multilocation environment and is finalizing its contingency plan
which includes, but is not limited to, the use of alternative
suppliers or service providers. The Company also plans to have
centralized support staff available on and around January 1,
2000 in order to expedite and coordinate any emergencies that
may arise at any Company facilities.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
There were no material changes during the quarter ended
September 30, 1999.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
In 1993, the State of Illinois Environmental Protection
Agency ("Illinois EPA") brought administrative enforcement
proceedings arising out of the Company's alleged failure to
obtain proper permits for certain pollution control
equipment at one of the Company's processing facilities in
Illinois. The Company and Illinois EPA executed an
agreement which is currently before the Illinois Pollution
Control Board for approval. In June 1999, the United
States Environmental Protection Agency issued a Notice of
Violations involving matters covered under the pending
State settlement. In 1998, the Illinois EPA filed an
administrative enforcement proceeding arising out of
certain alleged permit exceedances relating to one of the
Company's production facilities located in Illinois. Also
in 1998, the Company voluntarily reported to the Illinois
EPA certain permit exceedances relating to another Illinois
production facility operated by the Company. Also in 1998,
the State of Illinois filed a civil administrative action
alleging violations of the Illinois Environmental
Protection Act, and regulations promulgated thereunder,
arising from a one time release of denatured ethanol at one
of its Illinois distribution facilities. In
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management's opinion the settlements and the remaining
proceedings, all seeking compliance with applicable
environmental permits and regulations, will not, either
individually or in the aggregate, have a material adverse
affect on the Company's financial condition or results of
operations.
The Company is involved in approximately 30 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 affect on the
Company's financial condition or results of operations.
LITIGATION REGARDING ALLEGED ANTICOMPETITIVE PRACTICES
The Company is currently a defendant in various lawsuits
related to alleged anticompetitive practices by the
Company as described in more detail below. The Company
intends to vigorously defend the actions unless they can
be settled on terms deemed acceptable to the parties.
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 fines 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 juries in
the Northern Districts of Illinois (lysine) and Georgia
(high fructose corn syrup) have been closed.
The Company has received notice that certain foreign
governmental entities were commencing investigations to
determine whether anticompetitive practices occurred in
their jurisdictions. Except for the investigations being
conducted by the Commission of the European Communities and
the Mexican Federal Competition Commission as described
below, all such matters have been resolved as previously
reported. 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. On October 29, 1998, the Commission of the European
Communities initiated formal proceedings against the
Company and others and adopted a Statement of Objections.
The reply of the Company was filed on February 1, 1999 and
the hearing was held on March 1, 1999. On August 8, 1999,
the Commission of the European Communities adopted a
supplementary Statement of Objections expanding the period
of involvement as to certain other companies. In September
1997, the
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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 in the European Union.
In November 1998, a European subsidiary of 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 sodium gluconate market in the European Union. On
February 11, 1999 a Mexican subsidiary of the Company was
notified that the Mexican Federal Competition Commission
had initiated an investigation as to possible
anticompetitive practices in the citric acid market in
Mexico. The ultimate outcome and materiality of the
proceedings of the Commission of the European Communities
cannot 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 currently appealing
certain discovery rulings to the United States Court of
Appeals for the Seventh Circuit.
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. This action was transferred for
pretrial proceedings to the United States District Court
for the Central District of Illinois.
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
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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.
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.
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LYSINE ACTIONS
The Company, along with other companies, had been named as
a defendant in twenty-three 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.
CANADIAN ACTIONS. The Company, along with other companies,
has been named as a defendant in one putative class action
antitrust suit filed in Ontario Court (General Division) in
which the plaintiffs allege the defendants reached
agreements with one another as to the price at which each
of them would sell lysine to customers in Ontario and as to
the total volume of lysine that each company would supply
in Ontario in violation of Sections 45 (1)(c) and
61(1)(b)of the Competition Act. The putative class is
comprised of certain indirect purchasers in Ontario during
the period from June 1, 1992 to June 27, 1995. The
plaintiffs seek C$25 million for violations of the
Competition Act, C$10 million in punitive, exemplary and
aggravated damages, interest and costs of the action. This
action was served upon the Company on June 11, 1999 and is
encaptioned Rein Minnema and Minnema Farms Ltd. v. Archer-
Daniels-Midland Company, et al., Court File No. G23495-99.
The Company, along with other companies, has been named as
a respondent in a motion seeking authorization to institute
a class action filed in Superior Court in the Province of
Quebec, District of Montreal, in which the applicants
allege the respondents conspired, combined, agreed or
arranged to prevent or lessen, unduly, competition with
respect to the sale of lysine in Canada in violation of
Section 45(1)(c) of the Competition Act. The putative
class is comprised of certain indirect purchases in Quebec
after June, 1992. The applicants seek at least
C$4,460,000, costs of investigation, attorneys' fees and
interest. This motion is encaptioned Option Consommateurs,
et al v. Archer-Daniels-Midland Company, et al., Court No.
500-06-000089-991.
STATE ACTION. The Company has been named as a defendant,
along with other companies, in one putative class action
antitrust suit alleging 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 seeking an injunction
against continued alleged illegal conduct, damages of an
unspecified amount, attorneys fees and costs, and other
unspecified relief. The putative class in this action
comprises certain indirect purchasers of lysine in the
State of Alabama during certain periods in the 1990s. This
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 amended his complaint to add approximately 300
individual plaintiffs.
CITRIC ACID ACTIONS
The Company, along with other companies, had been named as
a defendant in fourteen putative class action antitrust
suits and two non-class action antitrust suits involving
the sale of citric acid. Except for the action specifically
described below, all such suits have been settled or
dismissed.
14
PAGE 15
CITRIC
CANADIAN ACTIONS. The Company, along with other
companies, has been named as a defendant in two actions
filed pursuant to the Class Proceedings Act, 1992, in
which the plaintiffs allege that the defendants violated
the Competition Act with respect to the sale of citric
acid in Canada. One of these actions was filed in the
Superior Court of Justice, in Newmarket, Ontario, and
encaptioned Ashworth v. Archer-Daniels-Midland Company ,
et al., Court file No. 53510/99. The putative class is
comprised of certain indirect purchasers in Ontario during
the period from July 1, 1991 to June 27, 1995. The
plaintiffs in this action seek general damages in the
amount of C$30 million and punitive and exemplary damages
in the amount of C$30 million, interest, costs and fees.
The other action was filed in the Superior Court of
Justice in London, Ontario, and encaptioned Fairlee Fruit
Juice Limited v. Archer-Daniels-Midland Company, et al.,
Court File No. 32562/99. The plaintiffs in this action
seek general damages in the amount of C$300 million ,
punitive and exemplary damages in the amount of C$20
million, interest, costs and fees. The Company, along
with other companies, has been named as a respondent in a
motion seeking authorization to institute a class action
filed in Superior Court in the Province of Quebec,
District of Montreal, in which the applicants allege the
respondents comprised, combined, agreed or arranged to
prevent or lessen, unduly, competition with respect to the
sale of citric acid in Canada in violation of Section
45(1)(c) of the Competition Act. The putative class in
comprised of certain indirect purchasers in Quebec since
July, 1991. The applicants seek C$3,115,000, the costs
of investigation, attorneys' fees and interest. This
motion is encaptioned Option Consommateurs, et al. v.
Archer-Daniels-Midland-Company, et al., Court No.500-06-
000094-991.
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. On June 25, 1999, the Alabama Supreme Court reversed
the lower court's denial of defendants' motion to dismiss,
and held that the Alabama antitrust laws apply only to
intrastate commerce. Plaintiff subsequently filed a
motion for reconsideration of this decision. On October
22, 1999, the Alabama Supreme Court denied plaintiff's
request for reconsideration.
15
PAGE 16
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID STATE CLASS ACTIONS
The Company, along with other companies, has been named as
a defendant in 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. As noted in prior
filings, the Company accepted a settlement agreement with
counsel for the citric acid plaintiff class. This
settlement received final court approval and the case was
dismissed on September 30, 1998. 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
16
PAGE 17
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. On November 13, 1998, plaintiff's motion for class
certification was granted. 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.
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
17
PAGE 18
with other actions in San Francisco County Superior Court
and Stanislaus County Superior Court.
MONOSODIUM GLUTAMATE ACTIONS
The Company, along with other companies, has been named as
a defendant in four putative class action antitrust suits
involving the sale of monosodium glutamate and/or other
flavor enhancers.
FEDERAL ACTIONS. Three 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 price of
monosodium glutamate, disodium inosinate and disodium
guanylate, 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 certaim direct purchasers of
monosodium glutamate, disodium inosinate and/or disodium
guanylate during the period 1994 to the present. The
Company has never produced or sold disodium inosinate or
disodium guanylate. One such action was filed on October
27, 1999 in the United States District Court for the
Northern District of California and is encaptioned Thorp,
Inc. v. Archer-Daniels-Midland Company, et al., NoC99 4752
(VRW). The second action was filed on October 27, 1999 in
the United States District Court for the Northern District
of California and is encaptioned Premium Ingredients, Ltd.
v. Archer-Daniels-Midland Co., et al., No. C 99 4742(MJJ).
The third action was filed on October 28, 1999 in the
United States District Court for the Northern District of
California and is encaptioned Felbro Food Products v.
Archer-Daniels-Midland Company, et al., No.C99 4761(MJJ).
STATE ACTION. The Company, along with at least one other
company, also has been named as a defendant in one
putative class action antitrust suit filed in California
state court involving the sale of monosodium glutamate.
This action alleges violations of California antitrust and
unfair competition laws, including allegations that the
defendants agreed to fix, stabilize and maintain at
artificially high levels the price of monosodium
glutamate, and seeks treble damages of an unspecified
amount, restitution, attorneys' fees and costs, and other
unspecified relief. The putative class in this action
comprises certain indirect purchasers of monosodium
glutamate in the State of California from January 1, 1993
until July 1999. This action originally was filed on June
25, 1999 in the Superior Court of San Francisco County and
in encaptioned Fu's Garden Restaurant v. Archer-Daniels-
Midland Company, et al., Civil Action No. 304471.
18
PAGE 19
OTHER
The Company has made provisions to cover certain legal
proceedings and related costs and expenses as described in
the notes to the unaudited consolidated financial
statements and management's discussion of operations and
financial condition. 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 unaudited consolidated financial statements.
Item 2. Changes in Securities
In July, 1999, the Board of Directors declared a 5
percent stock dividend which was paid on September 20,
1999, to shareholders of record on August 23, 1999.
Item 6. Exhibits and Reports on Form 8-K
a)Exhibits
(3)(i) Articles of Incorporation
Composite Certificate of Incorporation, as
amended, filed on September 22, 1999 as Exhibit
(3)(i) to Form 10K for the year ended June 30,
1999, is incorporated herein by reference.
(3)(ii)Bylaws, as amended and restated, filed on May
14, 1999 as
Exhibit (3)(ii) to Form 10Q for the quarter
ended March 31, 1999, are incorporated herein by
reference.
(27) Financial Data Schedules
b)A Form 8-K was not filed during the quarter ended
September 30,
1999.
19
PAGE 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ARCHER-DANIELS-MIDLAND COMPANY
/s/ D. J. Schmalz
D. J. Schmalz
Vice President
and Chief Financial Officer
/s/ D. J. Smith
D. J. Smith
Vice President, Secretary and
General Counsel
Dated: November 12, 1999
20
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