26
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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, 1999
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 ____
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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--$7.3 billion
(Based on the closing price of the New York Stock Exchange on
August 23, 1999)
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-580,565,821 shares
(August 31, 1999)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders' report for the year ended
June 30, 1999 are incorporated by reference into Parts I, II and
IV.
Portions of the annual proxy statement for the year ended June
30, 1999 are incorporated by reference into Part III.
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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 $4.6 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.
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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.
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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.
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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 in an aquaculture operation 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
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PAGE 7
and Gruma. The
Company also has a 40% share, through a joint
venture with Gruma, in seven Mexican-based wheat
flour mills.
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PAGE 8
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 173 facilities
located 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.
The Company has a 45% interest in Kalama Export
Company, 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, Romania,
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.
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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, Australia, 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 Company is a
limited partner in various private equity funds
which invest primarily in emerging markets that
have agri-processing potential.
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> <S>
<C> <C> <C>
1999 1998 1997
Oilseed products 59% 63% 64%
Corn products 13 13 16
Wheat and other
milled products 10 9 12
Other products and services 18 15 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 or leases approximately 2,250 river
barges and 52 line-haul towboats.
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PAGE 10
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 nutraceuticals 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 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, international trade
policies, shifts in global demand created by
population growth, changes in standard 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 or
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
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PAGE 11 throughout the year.
The worldwide need for food is not
Item 1. BUSINESS-Continued
seasonal and is ever
expanding as is the world's population.
(vi) Working capital items
Price variations and
availability of grain at harvest often cause
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 with the Company 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.
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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, 1999, 1998 and 1997 for such technical
efforts were approximately $22.0 million, $17.1
million and $12.2 million, respectively.
(xii)Material effects of
capital expenditures for environmental protection
During 1999, $16.2
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.
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PAGE 13
Item 1. BUSINESS-Continued
(xiii) Number of employees
The number of persons
employed by the Company was 23,603 at June 30,
1999.
(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 10 of Notes to
Consolidated Financial Statements" of the annual
shareholders' report for the year ended June 30,
1999 and is incorporated herein by reference.
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Item 1. BUSINESS--Continued
(e) Executive Officers and Certain Significant
Employees
Name Title Age
G. Allen Andreas Chairman of the Board of
Directors 56
from January 1999. Chief
Executive
Officer from July 1997. President
from July 1997 to February 1999.
Counsel to the Executive
Committee
from September 1994 to July 1997.
Vice President from 1988 to July
1997.
Martin L. Andreas Senior Vice President from 1989.60
Assistant to the Chief Executive
from 1989.
Charles P. Archer Treasurer from October 1992. 43
Ronald S. Bandler Assistant Treasurer from January38
1998. Manager of Treasury
Operations
from 1989 to January 1998.
Lewis W. Batchelder Group Vice President from 54
July 1997. Senior Vice President
of ADM/Growmark. Various grain
merchandising positions since
1971.
Charles T. Bayless Executive Vice President from 64
July 1997. Special Assistant to
the Chief Executive Officer from
February 1999. Group Vice
President
from January 1993 to July 1997.
Howard E. Buoy Group Vice President from 73
January 1993.
William H. Camp Group Vice President and
President, 50
South American Oilseed Processing
Division from March 1999. Vice
President from April 1993 to
March
1999.
Mark J. Cheviron Vice President from July 1997.50
Vice President of Corporate
Security and Administrative
Services since May 1997. Director
of Security since 1980.
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PAGE 15
Item 1. BUSINESS-Continued
Larry H. Cunningham Group Vice President and 55
President of ADM Corn Processing
Division from October 1996.
President of ADM Food Additives
Division from October 1998.
Vice President from July 1993 to
October 1996.
Dennis C. Garceau Vice President from April 1999.52
President of ADM Technical
Services
Department. Various senior
engineering
positions from 1969.
Craig L. Hamlin Group Vice President from 53
October 1994. President of
ADM Milling from 1989.
Edward A. Harjehausen Vice President from October49
1992.
Burnell D Kraft Senior Vice President from 68
July 1997. Group Vice President
from January 1993 to July 1997.
President of ADM/Growmark,
ADM/Countrymark and Tabor Grain
Co.
Paul L. Krug, Jr. Vice President from 1991 and 55
President of ADM Investor
Services.
John E. Long Vice President from July 1996.70
President of ADM Research
Division from 1992. Various
senior research positions from
1975.
Claudia M. Madding Executive Assistant to the
Chairman 48
and Chairman Emeritus from
January
1999. Secretary to the Executive
Committee from September 1997.
Executive Assistant to the
Chairman
from July 1997 to January 1999.
Assistant Secretary from 1993.
Administrative Assistant to the
Chairman from 1984 to 1997.
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PAGE 16
Item 1. BUSINESS-Continued
John D. McNamara President from February 1999. 51
Group Vice President and
President of North American
Oilseed Processing Division from
July 1997 to February 1999.
President of ADM Agri-Industries
since 1992.
Steven R. Mills Controller from October 1994. 44
Various senior treasury and
accounting positions from 1979.
Stephen W. Minder Corporate Compliance Officer from
43
July 1997. Various senior
internal
audit positions since 1990.
Paul B. Mulhollem Group Vice President from 50
July 1997. Vice President from
January 1996 to July 1997.
Managing
Director of ADM International,
Ltd.,
from 1993.
Brian F. Peterson Vice President from January 1996.
57
President of ADM Protein
Specialties
Division from February 1999.
President of ADM BioProducts
Division from 1995. Various
merchandising positions from
1980.
Raymond V. Preiksaitis Group Vice President from47
July 1997. Vice President -
Management Information Systems
from 1988 to July 1997.
John G. Reed Vice President from 1982. 69
Richard P. Reising Senior Vice President from July55
1997. Vice President, Secretary
and General Counsel from 1991 to
1997.
John D. Rice Group Vice President and
President, 45
North American Oilseed Processing
Division from February 1999.
Vice President from 1993 to 1999.
President of ADM Food Oils
Division since December 1996.
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PAGE 17
Item 1. BUSINESS-Continued
Scott A. Roberts Assistant Secretary and Assistant
39
General Counsel from July 1997.
Member of the Law Department
since 1985.
Kenneth A. Robinson Vice President from January 1996.
52
Vice President of ADM Processing
Division from 1985.
Douglas J. Schmalz Vice President and Chief 53
Financial Officer from 1986.
Controller from 1985 to 1994.
David J. Smith Vice President, Secretary and 44
General Counsel from July 1997.
Assistant General Counsel from
1995 to 1997. Assistant Secretary
from 1988 to 1997. Member of the
Law
Department since 1981.
Stephen H. Yu Vice President from January 1996.
39
Managing Director of ADM
Asia-Pacific, Ltd., from 1993.
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.
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PAGE 18
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 196 91 287
Leased 2 2 4
Joint Venture 49 28 77
____ ____ ____
247 121 368
=== === ===
</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 material and demand for finished
products.
The Company operates thirty-nine domestic and sixteen
foreign oilseed crushing plants with a daily processing
capacity of approximately 105,000 metric tons (3.9
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,
Romania, 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, one
foreign oat mill, and sixteen foreign flour mills with
a total daily milling capacity of approximately 30,800
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
located in California, Illinois, Indiana, Iowa, Kansas,
Louisiana, Minnesota, Missouri, Nebraska,
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PAGE 19
Item 2. PROPERTIES
New York, North Carolina, Oklahoma, Oregon,
Pennsylvania, Tennessee, Texas, Washington, Wisconsin,
Barbados, Belize, Canada, England and Jamaica. The
Company also has an interest, through a joint venture,
in rice milling plants in Arkansas and Louisiana.
The Company operates sixteen domestic oilseed
refineries in Arkansas, Georgia, Illinois, Indiana,
Iowa, Minnesota, Missouri, Nebraska, North Dakota,
Tennessee and Texas as well as twelve foreign
refineries in Brazil, Canada, Germany, India, the
Netherlands and Poland. 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,
China and Ireland. The Company also operates thirteen
domestic and nine foreign formula feed and animal
health and nutrition plants. The domestic plants are
located in Georgia, Illinois, Indiana, Iowa, 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,
Colorado, 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 and four
foreign edible bean processing facilities located in
California, Colorado, Idaho, Kansas, Michigan,
Minnesota, North Dakota, Wyoming and Canada.
The Company operates various other food and food
ingredient plants in England, France, Germany and
Jamaica.
19
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Item 2. PROPERTIES
Procurement Facilities
The Company operates two hundred twenty-four domestic
terminal, country, and river elevators covering the
major grain producing states, including one hundred
fifty-seven country elevators and sixty-six terminal
and river loading facilities including four grain
export elevators in Louisiana and Maryland. Elevators
are located in Arkansas, Colorado, Georgia, Illinois,
Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland,
Michigan, Minnesota, Missouri, Montana, Nebraska, North
Carolina, North Dakota, Ohio, Oklahoma, South Carolina,
Tennessee and Texas. Domestic grain terminals,
elevators and processing plants have an aggregate
storage capacity of approximately 475 million bushels.
The Company also has interests, through joint ventures,
in seven domestic grain elevators located in Minnesota
and South Dakota. Domestic joint venture grain
terminals and elevators have an aggregate storage
capacity of approximately 5.8 million bushels.
The Company also operates one hundred sixty-four
foreign grain elevators with an aggregate storage
capacity of approximately 136 million bushels,
including four export facilities located in Brazil.
These elevators are located in Argentina, Barbados,
Brazil, Canada, Germany, Paraguay and Uruguay. The
Company also has an interest, through a joint venture,
in fifteen grain elevators in Bolivia with an aggregate
storage capacity of approximately 6.4 million bushels.
Six cotton gins are located in Texas and serve the
cottonseed crushing plants in that area.
20
PAGE 21
Item 3. 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 a
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 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 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.
21
PAGE 22
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 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.
22
PAGE 23
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 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.
23
PAGE 24
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.
LYSINE ACTIONS
The Company, along with other companies, had been named as
a defendant in twenty-two 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 ACTION. 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 plaintiffs seek
C$25,000,000 for violations of the Competition Act,
C$10,000,000 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.
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PAGE 25
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 eleven 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.
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 and that
motion currently is pending before the Alabama Supreme
Court.
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
25
PAGE 26
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 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
26
PAGE 27
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
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
27
PAGE 28
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. On October 29, 1998,
the Company executed a Settlement Agreement with counsel
for the plaintiff class in which, among other things, the
Company agreed to pay $69,600 to the plaintiff class. On
May 28, 1999, the court granted final approval of the
settlement and dismissed the action.
MONOSODIUM GLUTAMATE ACTION
The Company, along with a least one other company, 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 is encaptioned
Fu's Garden Restaurant v. Ajinomoto U.S.A., Inc., et al,
Civil Action No. 304471.
OTHER
The Company has made provisions to cover certain legal
proceedings and related costs and expenses as described in
the notes to the 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
consolidated financial statements.
28
PAGE 29
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,
1999 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, 1999 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, 1999 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, 1999 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, 1999 are incorporated herein by
reference:
Consolidated balance sheets--June 30, 1999 and 1998
Consolidated statements of earnings--Years ended
June 30, 1999, 1998 and 1997
Consolidated statements of shareholders' equity--Years
ended
June 30, 1999, 1998 and 1997
Consolidated statements of cash flows--Years ended
June 30, 1999, 1998 and 1997
Notes to consolidated financial statements--June 30,
1999
Summary of Significant Accounting Policies
Report of Independent Auditors
Quarterly Financial Data (Unaudited)
29
PAGE 30
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 the
Company's annual meeting of Stockholders to be held on
October 21,1999 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 the
Company's annual meeting of Stockholders to be held on
October 21,1999 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" and "Election
of Directors" of the definitive proxy statement for the
Company's annual meeting of Stockholders to be held on
October 21,1999 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 the Company's annual
meeting of Stockholders to be held on October 21,1999
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, 1999, are
incorporated by reference in Item 8, and are also
incorporated herein by reference:
Consolidated balance sheets--June 30, 1999 and 1998
Consolidated statements of earnings--Years ended
June 30, 1999, 1998 and 1997
Consolidated statements of shareholders' equity--
Years ended June 30, 1999, 1998 and 1997
30
PAGE 31
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
` --Continued
Consolidated statements of cash flows--Years ended
June 30, 1999, 1998 and 1997
Notes to consolidated financial
statements--June 30, 1999
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) (i)Composite Certificate of
Incorporation, as amended.
(ii)Bylaws filed on May 14, 1999 as Exhibit 3(ii)
to Form
10Q for the quarter ended March 31, 1999,
are
incorporated herein by reference.
(4) Instruments defining the rights
of security holders, including:
(i)Indenture dated May 1, 1982, between the re
gistrant 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;
(ii)Indenture dated as of March 1, 1984 between
the registrant and The Chase Manhattan Bank,
formerly known as 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;
31
PAGE 32
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
--Continued
(iii)Indenture dated June 1, 1986 between the
registrant and The Chase Manhattan Bank, formerly
known as 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,
the $250,000,000 - 6 7/8% Debentures due December
15, 2097,
the $196,210,000 - 5 7/8% Debentures due November
15, 2010,
and the $300,000,000 - 6 5/8% Debentures due May
1, 2029.
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, each of which is a management
contract or compensation plan or arrangement
required to be filed as an exhibit pursuant to Item
14(c) of Form 10-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.
32
PAGE 33
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).
(vi)Registration Statement No. 333-75073 on For
m S-8 dated March 26, 1999 relating to the ADM
Employee Stock Ownership Plan for Salaried
Employees and the ADM Employee Stock Ownership
Plan for Hourly Employees.
(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, 1999.
33
PAGE 34
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 22, 1999
ARCHER-DANIELS-MIDLAND COMPANY
By: /s/ D. J. Smith
D. J. Smith
Vice President, Secretary
and General Counsel
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on September 22, 1999,
by the following persons on behalf of the Registrant and in
the capacities indicated.
/s/ G. A. Andreas /s/ M. B. Mulroney
G. A. Andreas*, M. B. Mulroney*,
Chief Executive and Director Director
(Principal Executive Officer)
/s/ R. S. Strauss
/s/D. J. Schmalz R. S. Strauss*,
D. J. Schmalz Director
Vice President and
Chief Financial Officer /s/ J. K. Vanier
(Principal Financial Officer) J. K. Vanier*,
Director
/s/S. R. Mills
S. R. Mills /s/ O. G. Webb
Controller O. G. Webb*,
(Controller Director
/s/ D. O. Andreas /s/ A. Young
D. O. Andreas* A. Young*,
Director Director
/s/ J. R. Block /s/ D. J. Smith
J. R. Block*, Attorney-in-Fact
Director
/s/ R. R. Burt
R. R. Burt*,
Director
/s/ Mrs. M. H. Carter
Mrs. M. H. Carter*,
Director
/s/ G. O. Coan
G. O. Coan*,
Director
/s/ F. R. Johnson
F. R. Johnson*,
Director
*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 copies of
which are being filed with the Securities and Exchange
Commission.
34
PAGE 1
MANAGEMENT'S DISCUSSION OF
OPERATIONS AND FINANCIAL CONDITION - JUNE 30, 1999
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> <S> <C> <C>
<C>
1999 1998 1997
(in millions)
Oilseed products $8,494 $10,15 $8,860
2
Corn products 1,855 2,154 2,171
Wheat and other milled 1,378 1,491 1,631
products
Other products
2,556 2,312 1,191
$14,28 $16,10 $13,85
3 9 3
</TABLE>
1999 compared to 1998
Net sales and other operating income decreased 11 percent to
$14.3 billion for 1999 due principally to decreases in average
selling prices of 11 percent and in volumes of products sold of 7
percent. These decreases were partially offset by sales of $852
million attributable to recently acquired operations. Sales of
oilseed products decreased 16 percent to $8.5 billion due
primarily to lower average selling prices reflecting the lower
cost of raw materials. Sales volumes of oilseed products
decreased by 8 percent due to weak demand from Asia and Eastern
Europe for both protein meals and vegetable oils as well as new
domestic industry production capacity more than offsetting good
domestic demand for oilseed products. These decreases were
partially offset by sales attributable to recently acquired
operations. Sales of corn products decreased 14 percent for the
year to $1.9 billion as lower average selling prices for the
Company's alcohol and amino acid products more than offset the
increase in average selling price of the Company's sweetener
products. Low gasoline prices have negatively affected average
sales prices of fuel alcohol. Excess production capacity in the
amino acid industry as well as low protein meal and corn prices
have depressed selling prices of the Company's amino acid
products to historically low levels. Sales volumes of both the
alcohol and sweetener products decreased as excess production
capacity in these industries resulted in difficult market
conditions. Sales of wheat and other milled products decreased 8
percent to $1.4 billion due principally to lower average selling
prices reflecting the lower cost of raw materials. Sales volumes
increased slightly for the year due to sales attributable to
recently acquired operations. The increase in sales of other
products and services was due principally to the sales volumes
attributable to the Company's recently acquired feed and cocoa
businesses as well as increased grain merchandising and
transportation revenues. These increases were partially offset by
lower average
1
PAGE 2
selling prices for cocoa products.
Cost of products sold and other operating costs decreased $1.7
billion to $13.1 billion due primarily to lower average raw
material costs arising from an abundant worldwide supply of
agricultural commodities and decreased sales volumes. These
decreases were partially offset by costs related to recently
acquired operations.
Gross profit decreased $149 million to $1.2 billion in 1999 due
primarily to selling price declines exceeding declines in lower
average raw material costs and to lower volumes of products sold.
These decreases were partially offset by gross profit
attributable to recently acquired operations and to increased
grain merchandising and transportation margins.
Selling, general and administrative expenses increased $40
million to $701 million due principally to $78 million of
expenses attributable to recently acquired operations. This
increase was partially offset by a decline in on-going expenses,
primarily legal and litigation related costs.
Other expense of $111 million for 1999 was relatively unchanged
from 1998. Increased interest expense due principally to higher
average borrowing levels and decreased equity in earnings of
unconsolidated affiliates due primarily to lower valuations of
the Company's private equity fund investments were offset by
increased gains on marketable securities transactions.
The decrease in income taxes for 1999 resulted primarily from
lower pretax earnings. The Company's effective income tax rate
for 1999 was 33% compared to an effective rate of 34% for 1998.
In 1999, the Company incurred an extraordinary charge, net of
tax, of $15 million resulting from the repurchase of a portion of
its 7% debentures due May 2011.
1998 compared to 1997
Net sales and other operating income increased $2.3 billion to
$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 impacted 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 was positively impacted 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 the 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
2
PAGE 3
overcapacity in the synthetic amino acid industry. Historically
low gasoline prices have negatively impacted average sales prices
for the Company's fuel alcohol, which have 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.
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 to increased costs related to
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 to increased sales volumes. These increases were
partially offset by the net effect of decreased sales prices
versus lower raw material costs.
Selling, general and administrative expenses decreased $14
million to $661 million due principally to decreased legal and
litigation related costs of $133 million (see note 11 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.
Liquidity and Capital Resources
At June 30, 1999, the Company continued to show substantial
liquidity with working capital of $1.9 billion. Capital resources
remained strong as reflected in the Company's net worth of $6.2
billion. The principal sources of capital during the year were
funds generated from operations, net funds generated from the
sale of marketable securities and funds generated from the
issuance of $300 million of 6.625% debentures due in 2029. The
principal uses of capital during the year were investments in
property, plant and equipment expansions, reduction of short-term
debt and purchases of the Company's common stock. The Company's
ratio of long-term debt to total capital at year-end was
approximately 31%. Annual maturities of long-term debt for the
five years after June 30, 1999 are $27 million, $31 million, $439
million, $274 million and $23 million, respectively.
Commercial paper and commercial bank lines of credit are
available to meet seasonal cash requirements. At June 30, 1999,
the Company had $2.4 billion of short-term bank credit lines.
Both Standard & Poor's and Moody's continue to
3
PAGE 4
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 described in Note 11 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 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 11 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 $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 consolidated financial statements.
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, shifts in global demand created by
population growth and changes in 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.
4
PAGE 5
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 sale 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> <C> <C>
1999 1998
Fair Market Fair Market
Value Risk Value Risk
(in millions)
Highest long position $319 $32 $423 $42
Highest short position 149 15 411 41
Average position long 29 3 (8) 1
(short)
</TABLE>
The increase in fair value of the average position for 1999
compared to 1998 was a result of an increase in the daily net
commodity position partially offset by a decrease in quoted
futures prices for the current year.
Marketable Equity Securities
Marketable equity securities, which are recorded at fair value,
have exposure to price risk. The fair value of marketable equity
securities is based on quoted market prices. Risk is estimated as
the potential loss in fair value resulting from a hypothetical
10% adverse change in quoted market prices. Actual results may
differ.
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
(in millions)
Fair value $743 $1,121
Market risk 74 112
</TABLE>
The decrease in fair value for 1999 compared to 1998 resulted
primarily from disposal of securities.
5
PAGE 6
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 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 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 at June 30, 1999
and June 30, 1998. The potential loss in fair value resulting
from a hypothetical 10% adverse change in quoted foreign currency
exchange rates amounts to $183 million and $175 million for 1999
and 1998, respectively. Actual results may differ.
Interest
The fair value of the Company's long-term debt is estimated
below using quoted market prices, where available, and 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>
1999 1998
(in millions)
Fair value of long-term debt $3,430 $3,359
Excess of fair value over 238 512
carrying value
Market risk 171 165
</TABLE>
The increase in fair value for the current year resulted from
the issuance of long-term debt, which was partially offset by the
effect of an increase in quoted interest rates.
Year 2000 Disclosure
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's internal
business and technical information system year 2000 compliance
issues are substantially remediated. Any remaining remediation is
expected to occur during the third quarter of 1999.
6
PAGE 7
The Company has satisfactorily completed the identification and
review of computer hardware and software suppliers and has
completed the process of verifying year 2000 preparedness of
general business partners, suppliers, vendors and/or service
providers that the Company has identified as critical. At
present, these critical third parties indicate that they expect
to be substantially year 2000 ready.
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 may not be within the Company's reasonable control.
7
PAGE 8
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, shifts in global demand
created by population growth and changes in 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
8
PAGE 9
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 $18.5
billion in 1999, $19.8 billion in 1998, and $18.1 billion in
1997, and such sales include export sales of $ 5.2 billion in
1999, $5.5 billion in 1998 and $5.4 billion in 1997.
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 1999 and payable in September 1999. Basic earnings per
common share is determined by dividing net earnings by the
weighted average number of common shares outstanding.
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.
9
PAGE 10
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
<S> <C> <C>
<C>
Year Ended June 30
1999 1998 1997
(In thousands, except per share
amounts)
Net sales and other operating $14,283,3 $16,108,6 $13,853,2
income 35 30 62
Cost of products sold and other
Operating costs 13,051,30 14,727,67 12,552,71
6 0 8
_________ _________ _________
_ _ _
Gross Profit 1,232,029 1,380,960 1,300,544
Selling, general and
administrative 701,075 660,692 675,103
Expenses
_________ _________ _________
_ _ _
Earnings From Operations 530,954 720,268 625,441
Other income (expense) (111,121) (110,256) 18,964
_________ _________ _________
_ _ _
Earnings Before Income
Taxes and 419,833 610,012 644,405
Extraordinary Loss
Income taxes 138,545 206,403 267,096
_________ _________ _________
_ _ _
Earnings Before
Extraordinary 281,288 403,609 377,309
Loss
Extraordinary loss, net of tax,
on (15,324) - -
debt repurchase
_________ _________ _________
_ _ _
Net Earnings $ 265,964 $ 403,609 $ 377,309
========= ========= =========
= = =
Basic and diluted earnings per
common
Share
Before extraordinary loss $ .45 $ .65 $ .60
Extraordinary loss on debt
repurchase $ (.02) - -
========= ========= =========
= = =
After extraordinary loss $ .43 $ .65 $ .60
Average number of shares 621,613 622,265 626,169
outstanding
========= ========= =========
= = =
</TABLE>
See notes to consolidated financial statements.
10
PAGE 11
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
June 30
Assets 1999 1998
(In thousands)
Current Assets
Cash and cash equivalents $ 681,378 $
346,325
Marketable securities 222,191 379,169
Receivables 1,922,163 1,990,686
Inventories 2,732,694 2,562,650
Prepaid expenses 231,162 172,884
___________ __________
_
Total Current Assets 5,789,588 5,451,714
Investments and Other Assets
Investments in and advances to 1,484,980 1,473,364
affiliates
Long-term marketable securities 779,916 1,168,380
Other assets 408,236 417,372
___________ __________
_
2,673,132 3,059,116
Property, Plant and Equipment
Land 163,607 148,135
Buildings 1,949,211 1,777,146
Machinery and equipment 8,384,865 7,901,309
Construction in progress 675,870 613,792
Less allowances for depreciation (5,606,392) (5,117,678
)
___________ __________
_
5,567,161 5,322,704
___________ __________
_
$14,029,881 $13,833,53
4
=========== ==========
=
</TABLE>
11
PAGE 12
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
<S> <C> <C>
June 30
1999 1998
(In thousands)
Current Liabilities
Short-term debt $ 1,241,369 $ 1,545,276
Accounts payable 2,004,396 1,634,681
Accrued expenses 567,593 516,287
Current maturities of long-term 26,907 21,059
debt
___________ ___________
Total Current Liabilities 3,840,265 3,717,303
Long-Term Debt 3,191,883 2,847,130
Deferred Liabilities
Income taxes 619,752 632,893
Other 137,341 131,296
___________ ___________
757,093 764,189
Shareholders' Equity
Common stock 5,081,320 4,936,649
Reinvested earnings 1,419,321 1,662,563
Accumulated other comprehensive (260,001) (94,300)
income
___________ ___________
6,240,640 6,504,912
___________ ___________
$14,029,881 $13,833,534
=========== ===========
</TABLE>
See notes to consolidated financial statements.
12
PAGE 13
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C>
<C>
Year Ended June 30
1999 1998 1997
(In thousands)
Operating Activities
Net earnings $ 265,964 $ 403,609 $ 377,309
Adjustments to reconcile to net cash
Provided by operations
Depreciation and amortization 584,965 526,813 446,412
Deferred income taxes 49,676 28,659 (12,235)
Amortization of long-term debt 37,216 33,297 29,094
discount
(Gain)loss on marketable securities
transactions (101,780) (36,303) (59,549)
Extraordinary loss on debt 15,324 - -
repurchase
Other 95,456 39,292 (40,758)
Changes in operating assets and
liabilities
Receivables 56,946 (294,407) (23,225)
Inventories (79,811) (150,509) 23,046
Prepaid expenses (63,294) (27,275) (18,760)
Accounts payable and accrued 359,185 90,203 (110,653)
expenses
_________ _________ _________
Total Operating Activities 1,219,847 613,379 610,681
Investing Activities
Purchases of property, plant and (671,471) (702,683) (779,508)
equipment
Net assets of businesses acquired (136,021) (370,561) (429,940)
Investments in and advances to (117,371) (366,968) (416,861)
affiliates, net
Purchases of marketable securities (635,562) (1,202,66 (966,203)
2)
Proceeds from sales of marketable 1,139,466 1,007,373 1,607,631
securities
_________ _________ _________
Total Investing Activities (420,959) (1,635,50 (984,881)
1)
Financing Activities
Long-term debt borrowings 383,735 441,464 348,695
Long-term debt payments (88,785) (55,972) (115,853)
Net borrowings (payments) under line
of credit (338,109) 774,033 421,046
Agreements
Purchases of treasury stock (313,829) (81,154) (312,525)
Cash dividends and other (106,847) (107,712) (104,077)
_________ _________ _________
Total Financing Activities (463,835) 970,659 237,286
_________ _________ _________
Increase (Decrease) In Cash And
Cash 335,053 (51,463) (136,914)
Equivalents
Cash And Cash Equivalents Beginning Of 346,325 397,788 534,702
Year
_________ _________ _________
Cash And Cash Equivalents End Of $681,378 $ 346,325 $ 397,788
Year
========= ========= =========
Supplemental Cash Flow Information
Noncash Investing and Financing
Activities
Common stock issued in purchase $ - $ 298,244 $ -
acquisition
</TABLE>
See notes to consolidated financial statements.
13
PAGE 14
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Shareholders' Equity
Accumulated Other
Comprehensive
Income
Unreali
Common Stock zed
Foreign Net Total
Reinves Currency Gains Shareholde
ted Translat on rs'
Earning ion Marketa Equity
s ble
Securit
ies
Shares Amount
(In thousands)
Balance July 1, 545,82 $3,869, $2,169, $ $139,69 $6,144,812
1996 1 875 281 (34,041 7
)
Comprehensive
income
Net earnings 377,309
Foreign currency
Translation (73,393
)
Change in
unrealized
Net gains on (19,199
Marketable )
securities
Total
comprehensive 284,717
income
Cash dividends paid-
$.17 (106,99 (106,990)
per share 0)
5% stock dividend 26,565 594,590 (594,59 -
0)
Treasury stock (16,70 (312,52 (312,525)
purchases 7) 5)
Other 2,195 40,381 (266) 40,115
______ _______ _______ _______ _______ _________
__ __ __ __ __
Balance June 30, 557,87 4,192,3 1,844,7 (107,43 120,498 6,050,129
1997 4 21 44 4)
Comprehensive
income
Net earnings 403,609
Foreign currency
Translation (108,55
1)
Change in
unrealized
Net gains on 1,187
Marketable
securities
Total
comprehensive 296,245
income
Cash dividends paid-
$.18 per share (111,55 (111,551)
1)
5% stock dividend 28,534 473,948 (473,94 -
8)
Treasury stock (3,767 (81,154 (81,154)
purchases ) )
Common stock issued
in 13,953 298,244 298,244
Purchase
acquisition
Other 2,627 53,290 (291) 52,999
______ _______ _______ _______ _______ _________
__ __ __ __ __
Balance June 30, 599,22 4,936,6 1,662,5 (215,98 121,685 6,504,912
1998 1 49 63 5)
Comprehensive
income
Net earnings 265,964
Foreign currency
Translation (83,842
)
Change in
unrealized
Net gains on (81,859
Marketable )
securities
Total
comprehensive 100,263
income
Cash dividends paid-
$.19 per share (117,08 (117,089)
9)
5% stock dividend 29,180 391,889 (391,88 -
9)
Treasury stock (19,86 (313,82 (313,829)
purchases 7) 9)
Other 4,261 66,611 (228) 66,383
______ _______ _______ _______ _______ _________
__ __ __ __ __
Balance June 30, 612,79 $5,081, $1,419, $(299,8 $ $6,240,640
1999 5 320 321 27) 39,826
====== ======= ======= ======= ======= ==========
== === === == ==
</TABLE>
See notes to consolidated financial statements.
14
PAGE 15
<TABLE>
<CAPTION>
Notes to Consolidated Financial Statements
Note 1-Marketable Securities and Cash Equivalents
<S> <C> <C> <C> <C>
Unrealiz Unrealiz Fair
ed ed
Cost Gains Losses Value
(In thousands)
1999
United States government
Obligations
Maturity less than 1 $ $ 260 $ 279 $
year 405,723 405,704
Maturity 1 year to 5 35,392 - 298 35,094
years
Other debt securities
Maturity less than 1 238,827 75 2 238,900
year
Equity securities 705,156 103,762 65,808 743,110
_________ ________ _______ _________
_ _ _
$1,385,09 $104,097 $ 66,387 $1,422,80
8 8
========= ======== ======== =========
= =
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
========= ======== ======== =========
= =
</TABLE>
15
PAGE 16
<TABLE>
<CAPTION>
<S> <C> <C>
Note 2-Inventories
1999 1998
(In thousands)
LIFO inventories
FIFO value $ 367,902 $ 412,086
LIFO valuation reserve (1,360) (45,517)
__________ __________
LIFO carrying value 366,542 366,569
FIFO inventories, including
Hedging procedure method 2,366,152 2,196,081
__________ __________
$2,732,694 $2,562,650
========== ==========
</TABLE>
16
PAGE 17
Note 3-Investments in and Advances to Affiliates
The Company has 84 unconsolidated affiliates, located in North
and South America, Africa, Europe, and Asia, accounted for under
the equity method. The following table summarizes the balance
sheets as of June 30, 1999 and 1998, and the statements of
earnings for the three years ended June 30, 1999 of the Company's
unconsolidated affiliates:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
(In thousands)
Current assets $3,359,596 $3,510,436
Non-current assets 6,155,709 4,937,077
Current liabilities 2,241,739 1,841,687
Non-current liabilities 1,695,557 1,756,864
Minority interests 309,712 267,666
Net sales 14,605,815 13,651,086 $12,653,544
Gross profit 1,124,363 1,161,673 839,436
Net income (loss) (2,630) 216,178 233,543
</TABLE>
The Company's investment in unconsolidated affiliates exceeds the
underlying equity in net assets by $138 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 $356 million have a market value of $204 million based
on quoted market prices and exchange rates at June 30, 1999.
17
PAGE 18
<TABLE>
<CAPTION>
Note 4-Debt and Financing Arrangements
<S> <C> <C>
1999 1998
(In thousands)
7.5% Debentures $350 million
face amount, due in 2027 $ 347,903 $ 347,881
6.625% Debentures $300 million
face amount, due in 2029 298,563 -
8.875% Debentures $300 million
face amount, due in 2011 298,467 298,396
8.125% Debentures $300 million
face amount, due in 2012 298,224 298,148
8.375% Debentures $300 million
face amount, due in 2017 294,530 294,403
Zero Coupon Debt $400 million
face amount, due in 2002 274,198 239,943
6.25% Notes $250 million
face amount, due in 2003 249,513 249,430
7.125% Debentures $250 million
face amount, due in 2013 249,460 249,438
6.95% Debentures $250 million
face amount, due in 2097 246,095 246,066
6.75% Debentures $200 million
face amount, due in 2027 195,572 195,469
5.87% Debentures $196 million
face amount, due in 2010 105,520 -
10.25% Debentures $100 million
face amount, due in 2006 99,035 98,936
7% Debentures $250 million
face amount - 134,272
Industrial Revenue Bonds at
Various rates from 5.30% to 13.25%
and due in varying amounts to 2011 67,168 69,016
Other 194,542 146,791
__________ __________
Total long-term debt 3,218,790 2,868,189
Less current maturities (26,907) (21,059)
__________ __________
$3,191,883 $2,847,130
========== ==========
</TABLE>
18
PAGE 19
In 1999, the Company incurred a pre-tax extraordinary charge of
$24 million resulting from the repurchase of a portion of its 7%
debentures due in 2011. The remaining 7% debentures were
exchanged for 5.87% debentures due in 2010.
At June 30, 1999, the fair value of the Company's long-term debt
exceeded the carrying value by $238 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 Zero Coupon Debt is
being amortized at 13.80%. Accelerated amortization of the
discount for tax purposes has the effect of lowering the actual
rate of interest to be paid over the remaining life of the issue
to approximately 5.07%.
The aggregate maturities for long-term debt for the five years
after June 30, 1999 are 27 million, $31 million, $439 million,
$274 million, and $23 million, respectively.
At June 30, 1999, the Company had lines of credit totaling $2.4
billion. The weighted average interest rates on short-term
borrowings outstanding at June 30, 1999 and 1998 were 4.71% and
5.16%, respectively.
19
PAGE 20
Note 5-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, 1999 and 1998, the
Company had approximately 22.5 million and 6.1 million common
shares, respectively, in treasury. Treasury stock is recorded at
cost, $337 million at June 30, 1999, as a reduction of common
stock.
As of July 1, 1998, the Company adopted Statement of Financial
Accounting Standards Number 130 (SFAS 130) "Reporting
Comprehensive Income." SFAS 130 establishes standards for the
reporting and display of comprehensive income and its components.
SFAS 130 requires foreign currency translation adjustments and
unrealized gains or losses on the Company's available-for-sale
marketable securities to be included in "other comprehensive
income." Prior to the adoption of SFAS 130, the Company reported
such adjustments and unrealized gains or losses as components of
reinvested earnings. Amounts in prior year financial statements
have been reclassified to conform to SFAS 130.
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, 1999, there were 2.3 million shares
available for future grant. Stock option activity during the
years 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, 3,852 $12.23
1996
Granted 1,335 15.10
Exercised (308) 11.75
Cancelled (116) 12.41
______
Shares under option at June 30, 4,763 13.06
1997
Granted 36 20.13
Exercised (533) 11.97
Cancelled (67) 14.44
______
Shares under option at June 30, 4,199 13.24
1998
Granted 2,284 14.93
Exercised (1,225) 11.54
Cancelled (205) 12.20
______
Shares under option at June 30, 5,053 14.46
1999
======
Shares exercisable at June 30, 1,371 13.77
1999
Shares exercisable at June 30, 2,221 12.32
1998
Shares exercisable at June 30, 1,782 11.93
1997
</TABLE>
20
PAGE 21
At June 30, 1999 the range of exercise prices and weighted
average remaining contractual life of outstanding options was
$10.84 - $20.49 and five 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 1999 net earnings would have
been impacted by approximately one half of one percent. 1998 and
1997 net earnings would have been affected by less than one
quarter of one percent. The Company's 1999, 1998 and 1997
earnings per share would have been affected by approximately one
quarter of one percent.
The weighted average fair value of options granted during 1999,
1998 and 1997 are $4.62, $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% and risk free interest rate of 6%.
Expected volatility was assumed of .3% in 1999 and .2% in 1998
and 1997. Expected option life was assumed to be five years in
1999, four years in 1998 and six years in 1997.
21
PAGE 22
<TABLE>
<CAPTION>
Note 6-Other Income (Expense)
<S> <C> <C> <C>
1999 1998 1997
(In thousands)
Investment income $ 118,720 $ 123,729 $ 121,991
Interest expense (326,207) (293,220) (197,214)
Net gain on marketable
Securities transactions 101,319 36,544 59,810
Equity in earnings
(losses)
of affiliates (4,273) 20,364 35,243
Other (680) 2,327 (866)
__________ __________ __________
$ (111,121) $ (110,256) $ 18,964
========== ========== ==========
</TABLE>
Interest expense is net of interest capitalized of $26 million,
$37 million and $41 million in 1999, 1998 and 1997, respectively.
The Company made interest payments of $299 million, $295 million
and $198 million in 1999, 1998 and 1997, respectively.
Realized gains on sales of available-for-sale marketable
securities totaled $102 million, $37 million and $63 million in
1999, 1998 and 1997, respectively. Realized losses totaled $1
million and $3 million in 1999 and 1997, respectively.
22
PAGE 23
Note 7-Income Taxes
For financial reporting purposes, earnings before income taxes
and extraordinary loss includes the following components:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
(In thousands)
United States $ 327,489 $ 458,184 $ 563,086
Foreign 92,344 151,828 81,319
_________ _________ _________
$ 419,833 $ 610,012 $ 644,405
========= ========= =========
</TABLE>
Significant components of income taxes are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1999 1998 1997
(In thousands)
Current
$ $ $ 216,641
Federal 74,040 111,152
State 12,787 20,879 29,440
27,968 54,724 27,352
Foreign
Deferred
25,085 14,474 (5,357)
Federal
State 674 1,451 (2,910)
(2,009) 3,723 1,930
Foreign
_________ _________ _________
$ 138,545 $ 206,403 $ 267,096
========= ========= =========
</TABLE>
Significant components of the Company's deferred tax liabilities
and assets are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
(In thousands)
Deferred tax liabilities
Depreciation $ 527,833 $ 484,336
Unrealized gain (loss) on
marketable (2,117) 60,820
Securities
Bond discount amortization 58,286 52,645
Other 85,285 86,161
_________ _________
669,287 683,962
Deferred tax assets
Postretirement benefits 32,786 31,073
Other 107,771 81,431
_________ _________
140,557 112,504
_________ _________
Net deferred tax liabilities 528,730 571,458
Current net deferred tax assets
included
in prepaid expenses 91,022 61,435
_________ _________
Non-current net deferred
tax liabilities $ 619,752 $ 632,893
========= =========
</TABLE>
Reconciliation of the statutory federal income tax rate to the
Company's effective tax rate on earnings before extraordinary
loss is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
Statutory rate 35.0% 35.0% 35.0%
Foreign sales corporation (4.5) (4.7) (3.4)
State income taxes, net of
Federal tax benefit 2.2 2.4 2.7
Indefinitely invested earnings
of (1.8) 0.7 (0.9)
Foreign affiliates
Litigation settlements and - 1.4 7.5
fines
Other 2.1 (1.0) 0.5
______ ______ ______
Effective rate 33.0% 33.8% 41.4%
====== ====== ======
</TABLE>
The Company made income tax payments of $111 million, $225
million and $312 million in 1999, 1998 and 1997, respectively.
Undistributed earnings of the Company's foreign subsidiaries
amounting to approximately $544 million at June 30, 1999, 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.
23
PAGE 24
Note 8-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 1999, 1998 and 1997 was $86 million, $82 million and $69
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)
2000 $ 37,688
2001 22,090
2002 13,803
2003 13,908
2004 11,021
Thereafter 76,574
_________
Total minimum lease payments $ 175,084
=========
</TABLE>
24
PAGE 25
Note 9-Employee Benefit Plans
The Company provides substantially all employees with pension benefits. The
Company also provides substantially all domestic employees with
postretirement health care and life insurance benefits. It is the Company's
policy to fund pension costs as required by applicable laws and
regulations. In addition, the Company has savings and investment plans
available to eligible employees with one year of service. Total retirement
plan expense includes the following components:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
<C>
Pension Benefits Postretirement Benefits
1999 1998 1997 1999 1998 1997
(In thousands) (In thousands)
Defined benefit plans:
Service cost (benefits
Earned during the $23,23 $22,55 $18,92 $ $4,139 $3,303
period) 9 9 8 4,355
Interest cost 37,903 33,658 29,557 4,284 4,403 3,843
Expected return on plan
Assets (43,84 (37,15 (32,22 - - -
4) 9) 2)
Actuarial loss (gain) 969 (53) 401 (769) (663) (820)
Net amortization 40 (951) (1,110 (111) (111) (111)
)
______ ______ ______ ______ ______ ______
_ _ _ _ _ _
Net periodic pension
expense 18,307 18,054 15,554 7,759 7,768 6,215
Defined contribution plans 17,775 15,497 10,247
______ ______ ______ ______ ______ ______
_ _ _ _ _ _
Total retirement plan
Expense $36,08 $33,55 $25,80 $ $ $
2 1 1 7,759 7,768 6,215
====== ====== ====== ====== ====== ======
= = = = = =
</TABLE>
<TABLE>
<CAPTION>
The following tables set forth changes in the benefit obligation and the
fair value of plan assets:
<S> <C> <C> <C> <C>
Pension Benefits Postretirement
Benefits
1999 1998 1999 1998
(In thousands) (In thousands)
Benefit obligation, $638,00 $458,148 $ 61,190 $ 58,710
beginning 6
Service cost 23,239 22,559 4,355 4,139
Interest cost 37,903 33,658 4,284 4,403
Actuarial loss (gain) (6,581) 35,373 8,288 (3,241)
Benefits paid (23,961 (21,769) (2,851) (2,815)
)
Plan Amendments 35,254 17,442 - -
Acquisitions/divestitures, - 98,683 6,065 -
net
Foreign currency effects (7,202) (6,088) (1) (6)
_______ _______ _______ _______
Benefit obligation, ending $696,65 $638,006 $ 81,330 $ 61,190
8
======= ======== ======== ========
=
Fair value of plan assets,
Beginning $613,51 $431,673 $ - $ -
6
Actual return on plan 15,685 100,521 - -
assets
Employer contributions 20,378 16,475 2,851 2,815
Benefits paid (23,961 (21,769) (2,851) (2,815)
)
Acquisitions/divestitures, - 95,243 - -
net
Foreign currency effects (9,641) (8,627) - -
_______ _______ _______ _______
Fair value of plan assets,
Ending $615,97 $613,516 $ - $ -
7
======= ======== ======== ========
=
Funded Status $(80,68 $(24,490 $(81,330 $(61,190
1) ) ) )
Unamortized transition (14,729 (17,631) - -
amount )
Unrecognized net loss 40,146 15,936 (13,971) (23,028)
(gain)
Unrecognized prior service 59,600 26,926 4,779 (1,397)
costs
Adjustment for fourth
quarter 491 1,434 - -
Contributions
_______ _______ _______ _______
Pension asset (liability)
Recognized in the balance
Sheet $ $ 2,175 $(90,522 $(85,615
4,827 ) )
======= ======== ======== ========
=
</TABLE>
At June 30, 1999 and 1998, a prepaid pension benefit cost of $57 million
and $49 million, respectively, and an accrued pension benefit liability of
$83 million and $71 million, respectively, were recognized in the
consolidated balance sheet. For postretirement benefit plans, an accrued
benefit liability of $91 million and $86 million was recognized at June 30,
1999 and 1998, respectively.
The following table sets for the principal assumptions used in developing
the benefit obligation and the net periodic pension expense:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pension Benefits Postretirement
Benefits
1999 1998 1999 1998
Discount Rate 7.0% 7.0% 7.0% 7.0%
Expected return on plan 8.9% 8.9% N/A N/A
assets
Rate of compensation 4.5% 4.5% N/A N/A
increase
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the U.S. retirement plans with accumulated
benefits obligations in excess of plan assets were $539 million, $455
million and $386 million, respectively as of June 30, 1999, and $473
million, $323 million and $384 million, respectively, as of June 30, 1998.
For measurement purposes, an 8.3% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 2000. The rate was
assumed to decrease gradually to 5.5% for 2004 and remain at that level
thereafter.
Assumed health care cost trend rates have a significant impact on the
amounts reported for the health care plans. A 1% change in assumed health
care cost trend rates would have the following effect:
<TABLE>
<CAPTION>
<S> <C> <C>
1% Increase 1% Decrease
(In thousands)
Effect on total of service and
interest cost $1,091 $(1,011)
Components
Effect on accumulated postretirement
benefit $6,655 $(6,261)
Obligations
</TABLE>
25
PAGE 26
Note 10-Segment and Geographic Information
As of July 1, 1998, the Company adopted Statement of Financial
Accounting Standards Number 131 (SFAS 131) "Disclosures about
Segments of an Enterprise and Related Information." SFAS 131
establishes standards for the way public business enterprises
report information about operating segments in financial reports
issued to shareholders. Based on the Company's organizational
structure and the manner in which performance is assessed and
operating decisions are made, the Company operates as one
business segment - procuring, transporting, storing, processing
and merchandising agricultural commodities and products.
Information about the Company's operations by geographic areas is
as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
(In millions)
Net sales and other
Operating income:
United States $9,288 $10,784 $ 9,773
Germany 1,795 1,889 1,479
Other foreign 3,200 3,436 2,601
_______ _______ _______
$14,283 $16,109 $13,853
======= ======= =======
Long-lived assets
United States $ 4,525 $ 4,350 $ 3,936
Germany 196 206 191
Other foreign 987 924 628
_______ _______ _______
$ 5,708 $ 5,480 $ 4,755
======= ======= =======
</TABLE>
Information about the Company's revenues by classes of products
and services is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
(In millions)
Oilseed products $ 8,494 $10,152 $ 8,860
Corn products 1,855 2,154 2,171
Wheat and other milled 1,378 1,491 1,631
products
Other products and services 2,556 2,312 1,191
_______ _______ _______
$14,283 $16,109 $13,853
======= ======= =======
</TABLE>
26
PAGE 27
Note 11-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 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 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 consolidated financial statements.
27
PAGE 28
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,
1999 and 1998, and the related consolidated statements of
earnings, shareholders' equity and cash flows for each of the
three years in the period ended June 30, 1999. 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, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended June 30, 1999, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
St. Louis, Missouri
July 30, 1999
28
PAGE 29
<TABLE>
<CAPTION>
Quarterly Financial Data (Unaudited)
<S> <C> <C> <C> <C> <C>
Quarter
First Second Third Fourth Total
(In thousands, except per share amounts)
Fiscal 1999
Net sales $3,801,42 $3,911,53 $3,378,12 $3,192,24 $14,283,3
1 9 6 9 35
Gross profit 293,636 421,330 238,923 278,140 1,232,029
Earnings before
extraordinary
loss 116,855 110,434 11,742 42,257 281,288
Per common 0.19 0.17 0.02 0.07 0.45
share
Net earnings 116,855 95,110 11,742 42,257 265,964
Per common 0.19 0.15 0.02 0.07 0.43
share
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 0.21 0.23 0.11 0.10 0.65
share
</TABLE>
During the second quarter of the year ended June 30, 1999, the Company
incurred an extraordinary charge, net of tax, of $15 million or $.02 per
share resulting from the repurchase of a portion of its 7% debentures due
May 2011.
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 $.06 per share
for fines and litigation settlements arising principally out of the United
States Department of Justice investigation of the Company's lysine and
citric acid products as well as resolution of a securities suit brought by
shareholders.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C.
Cash
Market Price Dividends
High Low Per Share
Fiscal 1999 - Quarter Ended
June 30 $15 15/16 $12 7/8 $0.048
March 31 16 1/4 13 3/4 0.048
December 31 18 7/16 15 `0.048
September 30 18 14 1/8 0.046
Fiscal 1998-Quarter Ended
June 30 20 5/8 16 3/4 0.046
March 31 21 7/16 18 13/16 0.046
December 31 22 3/16 16 5/16 0.046
September 30 22 5/16 18 7/16 0.043
</TABLE>
The number of shareholders of the Company's common stock at June 30, 1999
was 31,764. 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.
29
PAGE 30
<TABLE>
<CAPTION>
Archer Daniels Midland Company
TEN-YEAR SUMMARY
Operating, Financial and Other Data (Dollars in thousands, except per share
data)
<S> <C> <C. <C>
1999 1998 1997
Operating
Net sales and other operating income $14,283,335 $16,108,630 $13,853,262
Depreciation and amortization 584,965 526,813 446,412
Net earnings 265,964 403,609 377,309
Per common share .43 .65 .60
Cash dividends 117,089 111,551 106,990
Per common share .19 .18 .17
Financial
Working capital $1,949,323 $1,734,411 $2,035,580
Per common share 3.18 2.76 3.31
Current ratio 1.5 1.5 1.9
Inventories 2,732,694 2,562,650 2,094,092
Net property, plant and equipment 5,567,161 5,322,704 4,708,595
Gross additions to property, plant
And equipment 825,676 1,228,553 1,127,360
Total assets 14,029,881 13,833,534 11,354,367
Long-term debt 3,191,883 2,847,130 2,344,949
Shareholders' equity 6,240,640 6,504,912 6,050,129
Per common share 10.18 10.34 9.84
Other
Weighted average shares outstanding (000's) 621,613 622,265 626,169
Number of shareholders 31,764 32,539 33,834
Number of employees 23,603 23,132 17,160
</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
1999.
Net earnings for 1999 include an extraordinary charge of $15 million or $.02 per
share from the repurchase of debt.
Net earnings for 1993 includes a net 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.
30
PAGE 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990
$13,239,8 $12,555,4 $11,158,4 $9,578,37 $9,026,17 $8,271,5 $7,551,9
39 03 79 0 7 88 72
393,605 384,872 354,463 328,549 293,729 261,367 248,113
695,912 795,915 484,069 567,527 503,757 466,678 483,522
1.09 1.21 .73 .82 .73 .67 .70
90,860 46,825 32,586 32,266 30,789 29,527 25,976
.14 .07 .05 .05 .04 .04 .04
$ $2,540,26 $2,783,81 $2,961,50 $2,276,56 $1,674,7 $1,627,4
2,751,132 0 7 3 4 35 59
4.35 3.92 4.23 4.30 3.30 2.43 2.35
2.7 3.2 3.5 4.1 3.4 3.0 3.4
1,790,636 1,473,896 1,422,147 1,131,787 1,025,030 917,495 771,233
4,114,301 3,762,281 3,538,575 3,214,834 3,060,096 2,695,62 2,131,80
5 7
801,426 657,915 682,485 572,022 614,844 911,586 550,851
10,449,86 9,756,887 8,746,853 8,404,111 7,524,530 6,260,60 5,450,01
9 7 0
2,002,979 2,070,095 2,021,417 2,039,143 1,562,491 980,273 750,901
6,144,812 5,854,165 5,045,421 4,883,251 4,492,353 3,922,29 3,573,22
5 8
9.72 9.04 7.67 7.10 6.52 5.69 5.15
636,745 657,243 664,044 689,028 690,871 693,264 690,837
35,431 34,385 33,940 33,654 32,277 28,981 26,076
14,811 14,833 16,013 14,168 13,524 13,049 11,861
</TABLE>
31
PAGE 1
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT
ARCHER DANIELS MIDLAND COMPANY
June 30, 1999
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
</TABLE>
(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-two domestic subsidiaries and ninety-five
international subsidiaries have been omitted because, considered
in the aggregate as a single subsidiary, they would not
constitute a significant subsidiary.
1
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
30, 1999 included in the 1999 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 30,
1999, 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,
1999.
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.
1
PAGE 2
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.
Registration Statement No. 333-68339 on Form S-3 dated
December 3, 1998 as amended by Amendment No. 1 dated December
10, 1998 relating to secondary offering of the common stock
of Archer Daniels Midland Company.
Registration Statement No. 333-75073 on Form S-8 dated March
26, 1999 relating to the ADM Employee Stock Ownership Plan
for Salaried Employees and the ADM Employee Stock Ownership
Plan for Hourly Employees.
ERNST & YOUNG LLP
St. Louis, Missouri
September 22, 1999
2
PAGE 1
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 a director of said Company to the Form 10-
K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/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 Chief Executive Officer (Principal Executive Officer) and
Chairman of the Board of Directors 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 the Chief Executive
Officer and Chairman of the Board of Directors of said Company
to the Form 10-K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/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 a director of said Company to the Form 10-
K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/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 a director of said Company to the Form 10-
K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/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 a director of said Company to the Form 10-
K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/s/ M. H. CARTER
M. H. CARTER
5
PAGE 6
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 a director of said Company to the Form 10-
K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/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 a director of said Company to the Form 10-
K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/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 a director of said Company to the Form 10-
K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/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 a director of said Company to the Form 10-
K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/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 a director of said Company to the Form 10-
K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/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 a director of said Company to the Form 10-
K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/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 a director of said Company to the Form 10-
K for the fiscal year ended June 30, 1999, 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 16th day of September, 1999.
/s/ANDREW YOUNG
ANDREW YOUNG
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 681,378
<SECURITIES> 222,191
<RECEIVABLES> 1,922,163
<ALLOWANCES> 0
<INVENTORY> 2,732,694
<CURRENT-ASSETS> 5,789,588
<PP&E> 11,173,553
<DEPRECIATION> 5,606,392
<TOTAL-ASSETS> 14,029,881
<CURRENT-LIABILITIES> 3,840,265
<BONDS> 3,191,883
0
0
<COMMON> 5,081,320
<OTHER-SE> 1,159,320
<TOTAL-LIABILITY-AND-EQUITY> 14,029,881
<SALES> 14,283,335
<TOTAL-REVENUES> 14,283,335
<CGS> 13,051,306
<TOTAL-COSTS> 13,051,306
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 326,207
<INCOME-PRETAX> 419,833
<INCOME-TAX> 138,545
<INCOME-CONTINUING> 281,288
<DISCONTINUED> 0
<EXTRAORDINARY> (15,324)
<CHANGES> 0
<NET-INCOME> 265,964
<EPS-BASIC> .43
<EPS-DILUTED> .43
</TABLE>
PAGE 1
COMPOSITE
CERTIFICATE OF INCORPORATION
of
ARCHER-DANIELS-MIDLAND COMPANY
(giving effect to all amendments through October 15, 1992)
First: The name of the Corporation is
ARCHER-DANIELS-MIDLAND COMPANY
Second: The principal office of the Corporation in the State of
Delaware is located at 1209 Orange Street, in the City of
Wilmington, County of New Castle and State of Delaware, and the
name and address of its resident agent is The Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware 19801.
Third: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
Fourth: The total number of shares of all classes which the
Corporation shall have authority to issue is 800,500,000,
consisting of 800,000,000 shares of Common Stock and 500,000
shares of Preferred Stock, all without par value.
The designations and the voting powers, preferences and relative
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, of the
Preferred Stock and the Common Stock which are fixed by the
Certificate of Incorporation and the express grant of authority to
the Board of Directors of the Corporation (hereinafter referred to
as the Board of Directors) to fix by resolution or resolutions the
designations and the voting powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, of the
Preferred Stock which are not fixed by the Certificate of
Incorporation, are as follows:
(1) The Preferred Stock may be issued at any time or from time to
time in any amount, provided not more than 500,000 shares thereof
shall be outstanding at any one time, as Preferred Stock of one or
more series, as hereinafter provided. Each share of any one series
of Preferred Stock shall be alike in every particular except as to
the date from which dividends thereon shall be cumulative, each
series thereof shall be distinctly designated by letter or
descriptive words, and all series of Preferred Stock shall rank
equally and be identical in all respects except as permitted by
the provisions of Section 2 of this Article Fourth. Shares of
Preferred Stock shall be issued as fully paid and nonassessable
shares.
(2) Authority is hereby expressly granted to and vested in the
Board of Directors at any time or from time to time to issue the
Preferred Stock as Preferred Stock of any series, and in
connection with the creation of each such series, to fix by
resolution or resolutions providing for the issue of shares
thereof the designations and the voting powers, preferences and
relative, participating, option or other special rights, and the
qualifications, limitations or restrictions thereof, of such
series so far as not inconsistent with the provisions of this
Article Fourth applicable to all series of Preferred
1
PAGE 2
Stock, and to the full extent now or hereafter permitted by the
laws of the State of Delaware, in respect of the matters set forth
in the following subdivisions (a) and (g) inclusive:
(a) The distinctive designation of such series and the number of
shares which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of
Directors in creating such series) or decreased (but not below the
number of shares thereof then outstanding) from time to time by
like action of the Board of Directors;
(b) The rate or rates at which shares of such series shall be
entitled to receive dividends, the conditions and limitations upon
the payment, and the preferences, of such dividends, whether such
dividends shall be cumulative and, if cumulative, the date or
dates from which such dividends shall accumulate, and the dates
upon which such dividends, if declared, shall be payable;
(c) The rights of the Corporation at its option to redeem shares
of such series, the manner of selecting shares for redemption, the
redemption price or prices, and the manner of redemption and the
effect thereof;
(d) The amount payable on shares of such series in the event of
any liquidation, dissolution or winding up of the affairs of the
Corporation which amount may vary depending upon whether such
liquidation, dissolution or winding up is voluntary or
involuntary;
(e) The obligation, if any, of the Corporation to maintain a
purchase, retirement or sinking fund for shares of such series, or
to redeem shares or such series and the provisions with respect
thereto;
(f) The rights, if any, of the holders of shares of such series to
convert such shares into shares of stock of the Corporation of any
class or of any series of any class and the terms and conditions
of such conversion; and
(g) The voting rights, if any, and any other preferences, and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof.
(3) The voting powers, preferences and rights, and the
qualifications, limitations and restrictions thereof, applicable
to the Common Stock and to the Preferred Stock of all series,
except as set forth in Article Fifth hereof, are as follows:
(a) The holders of shares of Preferred Stock of each series shall
be entitled to such cash dividends, but only when and as declared
by the Board of Directors out of funds legally available therefor,
as they may be entitled to in accordance with the resolution or
resolutions adopted by the Board of Directors providing for the
issuance of such series; and
(b) So long as there shall be outstanding any shares of Preferred
Stock of any series entitled to cumulative dividends pursuant to
the resolution or resolutions providing for the issuance of such
series, no dividend, whether in cash or property, shall be paid or
declared, nor shall any distribution be made, on Common Stock, nor
shall any shares of Common Stock be purchased, redeemed, or
otherwise acquired for value by the Corporation, unless the full
cumulative
2
PAGE 3
dividends on the Preferred Stock of all series entitled to
cumulative dividends for all past quarterly dividend periods and
for the then current quarterly dividend period shall have been
paid or declared and a sum sufficient for the payment thereof set
apart. The foregoing provisions of this subdivision (b) shall not,
however, apply to a dividend payable in Common Stock or to the
acquisition of shares of Common Stock in exchange for, or through
application of the proceeds of the sale of, shares of Common
Stock.
Subject to the foregoing and to any further limitations prescribed
in accordance with the provisions of Section 2 of this Article
Fourth, the Board of Directors may declare, out of any funds
legally available therefor, dividends upon the then outstanding
shares of Common Stock, and shares of Preferred Stock of any
series shall not be entitled to share therein.
(c) In the event of any liquidation or dissolution or winding up
of the Corporation, the holders of the Preferred Stock of each
series shall be entitled to receive, out of the assets of the
Corporation available for distribution to its stockholders, before
any distribution of assets shall be made to the holders of Common
Stock, payment of the amount per share provided for in the
resolution or resolutions adopted by the Board of Directors
providing for the issuance of such series; and the holders of the
Common Stock shall be entitled, to the exclusion of the holders of
the Preferred Stock of any and all series, to share ratably in all
the assets of the Corporation then remaining in accordance with
their respective rights and preferences. If upon any liquidation
or dissolution or winding up of the Corporation the assets
available for distribution shall be insufficient to pay the
holders of all outstanding shares of Preferred Stock the full
amounts to which they respectively shall be entitled, the holders
of shares of Preferred Stock of all series shall share ratably in
any distribution of assets according to the respective amounts
which would be payable in respect of the shares held by them upon
such distribution if all amounts payable in respect of the
Preferred Stock of all series were paid in full. Neither the
statutory merger nor consolidation of the Corporation into or with
any other corporation, nor the statutory merger or consolidation
of any other corporation into or with the Corporation, nor a sale,
transfer or lease of all or any part of the assets of the
Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this
subdivision (c).
(d) Except as provided in the resolution or resolutions providing
for the issue of any series of Preferred Stock, the exclusive
voting power for all purposes shall be vested in the holders of
Common Stock, each holder of Common Stock being entitled to one
vote for each share of Common Stock held by him.
(4) Shares of Preferred Stock and Common Stock may be issued by
the Corporation from time to time for such consideration as may be
fixed from time to time by the Board of Directors. Shares for
which the consideration so fixed shall have been paid or delivered
shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon; and the holder of such shares
shall not be liable for any further payments in respect of such
shares.
(5) The amount of capital stock with which the Corporation will
commence business is One Thousand Dollars ($1,000). The
Corporation will also commence business with an original or paid
in surplus of not less than One Million Five Hundred Thousand
Dollars ($1,500,000).
3
PAGE 4
Fifth: No holder of Preferred Stock or Common Stock shall be
entitled as such, as a matter of right, to subscribe for or
purchase any part of any new or additional issues of shares of any
class whatsoever or of any securities convertible into or
exchangeable for any shares of any class whatsoever, whether now
or hereafter authorized and whether issued for cash or other
consideration.
Sixth: The names and places of residence of each of the original
subscribers to the capital stock of the Corporation and the number
of shares subscribed for by each are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares
Name Residence Common
Frank C. Taylor 37 Wall Str., New York 14
H. B. Holland 37 Wall Str., New York 13
Robert A. MacLean 37 Wall Str., New York 13
</TABLE>
Seventh: The Corporation is to have perpetual existence.
Eighth: The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatever.
Ninth: The Board of Directors shall consist of the number (never
less than three) provided for in the Bylaws and the number may be
increased or decreased and any vacancies filled, as therein
provided. It shall not be necessary to be a stockholder in order
to be a director.
Tenth: In furtherance, and not in limitation, of the powers
conferred by statute, the Board of Directors of the Corporation
are expressly authorized:
To make, alter, amend and rescind the Bylaws of the Corporation,
but any Bylaws, so made, altered or amended by the Board of
Directors may be altered, amended and rescinded either by the
directors or the stockholders of the Corporation.
To fix and change, from time to time, the amount that shall be
reserved as working capital.
To determine, from time to time, whether and to what extent, and
at what time and places, and under what conditions and
regulations, the accounts and books of the Corporation (other than
the stock ledger) or any of them shall be open to inspection of
the stockholders; and no stockholder shall have any right to
inspect any account, book or document of the Corporation, except
as conferred by statute, unless authorized by a resolution of the
stockholders or the Board of Directors of the Corporation.
To remove at any time any officer elected or appointed by the
Board of Directors, but only by the affirmative vote of a majority
of the then Board of Directors, and to remove any other officer or
employee of the Corporation or to confer such power on any
committee or officer. Any removal may be for cause or without
cause.
4
PAGE 5
To designate from their number by vote of a majority of the entire
Board of Directors in accordance with law, an Executive Committee
of not less than three members, who, to the extent provided in the
Bylaws or the resolution of the Board of Directors so designating
them, shall have and exercise the powers of the Board of Directors
in the management of the business and affairs of the Corporation
during the intervals between the meetings of the Board of
Directors and shall have power to authorize the seal of the
Corporation to be affixed to all papers which may require it. The
Board may also appoint from their number such other committees as
they may deem judicious and to such extent as shall be provided by
resolution of the Board of Directors or in the Bylaws may delegate
to such committees all or any of the powers of the Board of
Directors which may be lawfully delegated. The Board of Directors
may fill vacancies in any committee appointed by it.
The stockholders having voting power of the Corporation may in its
Bylaws confer powers additional to the foregoing (not, however,
inconsistent with law) upon the Board of Directors, in addition to
the powers and authorities expressly conferred upon them by the
statutes of the State of Delaware.
Eleventh: The stockholders may hold their meetings, annual or
special, within or without the State of Delaware, if the Bylaws so
provide; and the Board of Directors or any committee thereof may
hold any or all of their meetings within or without the State of
Delaware at such places as the Board of Directors or the
Committee, as the case may be, may designate.
The Corporation may have one or more offices in addition to the
principal office in the State of Delaware and may keep its books
(except when otherwise expressly provided by law) outside the
State of Delaware at such places as may be, from time to time,
designated by the Board of Directors.
Twelfth: No contract or other transaction of the Corporation shall
be affected by the fact that any of the directors of the
Corporation are in any wise interested in or connected with any
other party to such contract or transaction or are themselves
parties to such contract or transaction, provided that at the
meeting of the Board of Directors authorizing or confirming such
contract or transaction there shall be present a quorum of
directors not so interested or connected and such contract or
transaction shall be approved by a majority of such quorum, which
majority shall consist of directors not so interested or
connected. Any contract, transaction or act of the Corporation or
of the Board of Directors or of the Executive Committee which
shall be ratified by a majority in interest of a quorum of the
stockholders of the Corporation having voting power at any annual
meeting or any special meeting called for such purpose shall be as
valid and as binding as though ratified by every stockholder of
the Corporation.
Thirteenth: The Corporation reserves the right (1) to create one
or more classes of stock with such designations, preferences,
redemption or dividend provisions and voting powers, or
restrictions or qualifications thereof, as shall be stated and
expressed in any certificate amendatory hereof, duly authorized,
executed and filed in the manner now or hereafter prescribed by
statutes of the State of Delaware, and (2) to amend, alter, change
or repeal any provision contained in this Certificate of
Incorporation, or any amendment thereof, in the manner now or
hereafter prescribed by the statutes of the State of Delaware, and
all rights of the stockholders of the Corporation, except as
aforesaid, are granted subject to these reservations.
5
PAGE 6
Fourteenth: A director of the Corporation shall have no personal
liability to the Corporation or its stockholders for monetary
damages for breach of his fiduciary duty as a director; provided,
however, this Article shall not eliminate or limit the liability
of a director (1) for any breach of the director's duty of loyalty
to the Corporation or its stockholders; (2) for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law; (3) for the unlawful payment of
dividends or unlawful stock repurchases under Section 174 of the
General Corporation Law of the State of Delaware; or (4) for any
transaction from which the director derived an improper personal
benefit. This Article shall not eliminate or limit the liability
of a director for any act or omission occurring prior to the
effective date of this Article.
We, the undersigned, being each of the original subscribers to
the capital stock of the Corporation hereinbefore named for the
purpose of forming a corporation to do business both within and
without the State of Delaware,
and in pursuance of an Act of the Legislature of the State of
Delaware entitled "An Act Providing a General Corporation Law"
(approved March 10, 1899), being Chapter 65 of the Revised Code of
Delaware, and the acts amendatory thereof and supplemental
thereto, do make and file this certificate, hereby declaring and
certifying that the facts herein stated are true, and do
respectively agree to take the number of shares of stock
hereinbefore set forth and accordingly have hereunto set our hands
and seals this first day of May, 1923.
Frank C. Taylor (L.S.)
H. B. Holland (L.S.)
Robert A. MacLean (L.S.)
In the Presence of:
ALLEN E. MOORE
COUNTY OF NEW YORK ) ss:
STATE OF NEW YORK )
BE IT REMEMBERED, that on this first day of May, 1923,
personally came before me, Allen E. Moore, a Notary Public for the
State of New York, Frank C. Taylor, H. B. Holland and Robert A.
MacLean, parties to the foregoing Certificate of Incorporation,
known to me personally to be such, and severally acknowledged the
said certificate to be the act and deed of the signers
respectively and that the facts therein stated are truly set
forth.
GIVEN under my hand and seal of office the day and year aforesaid.
ALLEN E. MOORE ALLEN E. MOORE
NOTARY PUBLIC Notary Public, Richmond
RICHMOND COUNTY County
Certificate Filed in New York County
No. 800
Kings County No. 147
Register New York County No. 4080A
Register Kings County No. 4294
Certificate Filed in Dutchess County
My Commission Expires March 30, 1924
6
