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 $3.3 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 its formula feed operations, its rice milling operations, its Mexican wheat flour mills and its masa corn flour business 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 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. 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.Item 1. BUSINESS--Continued
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 domestic 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 R), 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 vegetable patties (Harvest Burgers R). The Company produces and markets a wide range of consumer and institutional health foods based on the Company's various soy protein products. 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.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, monosodium glutamate, nematodes 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 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 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 our other commodity processing operations.
The Company produces bakery products and mixes which are sold to the baking industry.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.
Malt products are produced for use by the food and beverage industries.
The Company raises fish for distribution to consumer food customers.
Hickory Point Bank and Trust Co. furnishes public banking services, except commercial loans, 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 Securities Inc. is a securities broker-dealer registered with the Securities and Exchange Commission and a member of the National Association of Securities Dealers, Inc.
Agrinational Insurance Company, a Vermont subsidiary, acts as a direct insurer and reinsurer of a portion of the Company's domestic and foreign property and casualty insurance risks.
Alfred C. Toepfer International (Germany) and affiliates, of which the Company has a 50% interest, is one of the world's largest, most respected trading companies specializing in processed agricultural products. Toepfer has forty-one 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 corn wet milling and wheat starch production.
The Company, through its partnership with Gold Kist, Inc. and Alimenta Processing Corporation d/b/a Golden Peanut Company, is a major supplier of peanuts to both the domestic and export markets. These peanuts are used in peanut butter, snacks, cereals and many other foods.
The Company, through its partnership with Ag Processing Inc. d/b/a Consolidated Nutrition, is a supplier of premium animal feeds and animal health products.
The Company, through its partnership with Riceland Foods, Inc., is a processor of rice and rice products for institutional and consumer food customers.
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 the combined U.S. corn flour operations of ADM and Gruma. The Company also has a 40% share, through a joint venture with Gruma, of two Mexican-based wheat flour mills.
The Company owns a 48% interest in Heartland Rail Corporation. Heartland's 81% owned affiliate, Iowa Interstate Railroad, operates a regional railroad in Iowa and Illinois.Item 1. BUSINESS--Continued
The Company participates in various joint ventures that operate oilseed crushing facilities, oil refineries and related storage facilities in China and Indonesia.
The percentage of net sales and other operating income by classes of products and services for the last three fiscal years were as follows:
1996 1995 1994 ________________________ Oilseed products 61% 60% 59% Corn products 19 20 20 Wheat and other milled products 12 11 12 Other products and services8 9 9 ___ ___ ___ 100% 100% 100% === === === 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 system and functions as a contract carrier of commodities for its own operations as well as for other companies. The Company owns and leases approximately 2,000 river barges and 27 line-haul towboats.
(ii) Status of new products
The Company continues to expand its business through the development and production of new, value-added products. From dextrose, the Company is currently producing the feed-grade amino acids lysine, threonine and tryptophan and food additives citric acid, monosodium glutamate (MSG), lactic acid, xanthan gum and sorbitol. The Company has entered the vitamin market with the production of riboflavin and vitamin E and is currently expanding production facilities to produce biotin and vitamin C. The Company continues to develop its soy protein meat substitutes, Harvest Burgers R and Harvest Burgers R for Recipes TM and its soy protein powdered non-dairy beverage, Nutribev R. Additionally, the Company is developing and expanding production facilities to produce emulsifiers, distilled monoglycerides, astaxanthan and isoflavones.Item 1. BUSINESS--Continued
(iii) Source and availability of raw materials
Substantially all of the Company's raw materials are agricultural commodities. In any single year, the availability and price of these commodities are subject to wide fluctuations due to unpredictable factors such as weather, plantings, government (domestic and foreign) farm programs and policies, changes in global demand created by population growth and higher standards of living and worldwide production of similar and competitive crops.
(iv) Patents, trademarks and licenses
The Company owns several valuable patents, trademarks and licenses but does not consider its business dependent upon any single or group of patents, trademarks and licenses.
(v) Extent to which business is seasonal
Since the Company is so widely diversified in global agribusiness markets, there are no material seasonal fluctuations in the manufacture, sale and distribution of its products and services. There is a degree of seasonality in the growing season and procurement of the Company's principal raw materials: oilseeds, wheat, corn and other grains. However, the actual physical movement of the millions of bushels of these crops through the Company's storage and processing facilities is reasonably constant throughout the year. The worldwide need for food is not seasonal and is ever expanding as is the world's population.
(vi) Working capital items
Price variations and availability of grain at harvest often cause wide fluctuations in the Company's inventories and short-term borrowings.
(vii) Dependence on single customer
No material part of the Company's business is dependent upon a single customer or very few customers.Item 1. BUSINESS--Continued
(viii) Amount of backlog
Because of the nature of the Company's business, the backlog of orders at year end is not a significant indication of the Company's activity for the current or upcoming year.
(ix) Business subject to renegotiation
The Company has no business with the government that is subject to renegotiation.
(x) Competitive conditions
Markets for the Company's products are highly price competitive and sensitive to product substitution. No single company competes with the Company in all of its markets; however, a number of large companies compete in one or more markets. Major competitors in one or more markets include, but are not limited to, Cargill, Inc., ConAgra, Inc., CPC International, 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.
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. Research to support sales and development for bakery products is done at a laboratory in Olathe, Kansas.Item 1. BUSINESS--Continued
The amounts spent during the three years ended June 30, 1996, 1995 and 1994 for such technical efforts were approximately $17.1, $16.5 and $20.1 million, respectively. In addition, the Company maintains separate quality control departments which are supervised by research personnel.
(xii)Material effects of capital expenditures for environmental protection
During 1996, $25 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.
(xiii) Number of employees
The number of persons employed by the Company was 14,811 at June 30, 1996.
(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, 1996 and is incorporated herein by reference.Item 1. BUSINESS--Continued
Export sales by classes of products for the last three fiscal years were as follows:
1996 1995 1994 ________________________
Oilseed products 7% 8% 5% Corn products 7 7 6 Wheat and other milled products 1 1 1 Other products and services 1 - - __ __ ___
16% 16% 12% === === ===
(e) Executive Officers
Name Title Age
Dwayne O. Andreas Chairman of the Board of 78 Directors from 1972. Chief Executive Officer.
James R. Randall President from 1975. 71
G. Allen Andreas Vice President from 1988. 53 Counsel to the Executive Committee from September 1994.
Michael D. Andreas Vice Chairman of the Board 47 of Directors from October 1992. Executive Vice President from 1988.
Martin L. Andreas Senior Vice President from 1988.57 Executive Assistant to the Chief Executive.
Charles P. Archer Treasurer from October 1992. 41 Assistant Treasurer from 1988.
Charles T. Bayless Group Vice President from 61 January 1993. Vice President from 1992. President of ADM Processing Division since 1980.Item 1. Business--Continued
Howard E. Buoy Group Vice President from 69 January 1993. Vice President of ADM Processing Division from 1979.
William H. Camp Vice President from April 1993.47 Vice President of ADM Processing Division from 1990 to 1993.
Barrie R. Cox Vice President from January 1996.
President of ADM Food Additives Division from 1994. Vice President of ADM Corn Processing Division from 1990.
Larry H. Cunningham Vice President and President 52 of Protein Specialties Division since July 1993. Formerly President of A. E. Staley Manufacturing Co.
Craig L. Hamlin Group Vice President from 50 October 1994. President of ADM Milling from 1989.
Edward A. Harjehausen Vice President from October 45 1992. Vice President of ADM Corn Processing Division from 1988.
Burnell D Kraft Group Vice President from 65 January 1993. Vice President from 1984. President of ADM/Growmark, Collingwood Grain and Tabor Grain Co. subsidiaries.
Paul L. Krug, Jr. Vice President from 1991 and 52 President of ADM Investor Services. Formerly a Vice President of Continental Grain Company.
John E. Long Vice President from July 1996. 67 President of ADM Research Division from 1992. Various senior research positions from 1975. Item 1. BUSINESS--Continued
Jack McDonald Vice President from October 1994. President of Southern Cotton Oil Division from 1990.
Steven R. Mills Controller from October 1994. 41 Various senior treasury and accounting positions from 1979.
Paul B. Mulhollem Vice President from January 1996. Managing Director of ADM International, Ltd., from 1993. International merchandising positions since 1992. Formerly Group President of Continental Grain Company.
Brian F. Peterson Vice President from January 1996. President of ADM BioProducts Division from 1995. Various merchandising positions from 1980.
Raymond V. Preiksaitis Vice President - Management 43 Information Systems from 1988.
John G. Reed Vice President from 1982. 66 Chief Executive-Europe from September 1994.
Richard P. Reising Vice President, Secretary and 52 General Counsel from 1991. Secretary and Assistant General Counsel since 1988.
John D. Rice Vice President from 1993. 42 Vice President of ADM Processing Division from 1992. Various merchandising positions from 1988 to 1992.
Kenneth A. Robinson Vice President from January 1996. Vice President of ADM Processing Division from 1985.
Douglas J. Schmalz Vice President and Chief 50 Financial Officer from 1986.
Terrance S. Wilson Group Vice President from 58 January 1993. Officer of ADM Corn Processing Division since 1988.
Stephen H. Yu Vice President from January 1996. Managing Director of ADM Asia-Pacific, Ltd., from 1993. Various merchandising positions with Continental Grain Company from 1986.
Officers of the registrant are elected by the Board of Directors for terms of one year and until their successors are duly elected and qualified.
Lowell W. Andreas and Dwayne O. Andreas, directors of the registrant, are brothers. Michael D. Andreas is the son of Dwayne O. Andreas. G. Allen Andreas and Martin L. Andreas are nephews of Dwayne O. Andreas and Lowell W. Andreas. Charles P. Archer is the son of S. M. Archer, Jr., a director of the registrant.Item 2.
Item 3. LEGAL PROCEEDINGS--Continued
The Company was named as a defendant in at least seventeen putative class action antitrust suits involving the sale of lysine. Six of these actions allege violations of federal antitrust laws, including allegations that certain entities agreed to fix, stabilize and maintain at artificially high levels the price of lysine, and seek injunctions against continued alleged illegal conduct, treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative classes in these cases comprise certain direct purchasers of lysine for certain periods in the 1990s. One such action was filed on August 9, 1995 in the United States District for the Northern District of Illinois and is encaptioned K&L Feeds v. Archer-Daniels-Midland Co., Civil Action No. 95-C-4587. This and other similar actions have been transferred to the United States District Court for the Northern District of Illinois and consolidated as In Re Amino Acid Lysine Antitrust Litigation, MDL No. 1083 and Master File No. 95-7679. On April 4, 1996, the Company executed a settlement agreement with counsel for the plaintiff class in which, among other things, the Company agreed to pay $25 million to members of the class, without admitting the alleged violations of law. This settlement agreement has been approved by the court and certain objectors to the settlement have appealed the final order of approval to the United States Court of Appeals for the Seventh Circuit. The Company also has been named as a defendant in at least one non-class action federal antitrust suit involving the sale of lysine. This action was filed on November 13, 1995 in the United States District Court for the Eastern District of Missouri and is encaptioned Purina Mills, Inc., et al. v Archer-Daniels-Midland Co., Civil Action No. 95-CV-2227. It alleges violations of federal antitrust laws, including allegations that certain entities agreed to fix, stabilize and maintain at artificially high levels the price of lysine, and seeks an injunction against continued alleged illegal conduct, treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The Company also has been named as a defendant in at least six putative class action antitrust suits filed in California state court, at least two putative class action antitrust suits filed in Alabama state court, at least two putative class action antitrust suits filed in Minnesota state court, at least one putative class action antitrust suit filed in Georgia state court and at least one putative class action antitrust suit filed in Tennessee state court involving the sale of lysine. The California actions allege violations of the California antitrust and unfair competition laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of lysine, and seek treble damages of an unspecified amount, attorneys fees and costs, restitution and other unspecified relief. The putative classes in the California actions comprise certain indirect purchasers of lysine in the State of California during certain periods in the 1990s. One such action was filed on September 29, 1995 in the Superior Court of the County of San Diego, California, and is encaptioned Equine Competition Products, Inc. v. Archer-Daniels-Midland Co., Civil Action No. 693014. The Company has entered into an agreement with counsel for the indirect purchasers class in which among other things, the Company agreed to pay $500,000 to members of the class, without admitting the alleged violations of law. This settlement received preliminary court approval on September 20 and will be mailed to class members for a final hearing on November 21, 1996. The Alabama actions allege violations of the Alabama antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of lysine, and seek an injunction against continued alleged illegal conduct, damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative classes in the Alabama actions comprise certain indirect purchasers of lysine in the State of Alabama during certain periods in the 1990s. One such action was filed on August 17, 1995 in the Circuit Court of DeKalb County, Alabama, and is encaptioned Ashley v. Archer-Daniels-Midland Co., et al., Civil Action No. 95-336. One Minnesota action alleges violations of the Minnesota, Tennessee, Wisconsin, South Dakota, North Dakota, Kansas, Louisiana, Michigan and Maine antitrust laws, including allegations that defendants conspired to maintain the price of lysine at artificially high levels, and seeks treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in this action comprises certain indirect purchasers in the aforementioned states of lysine during the period June 1, 1992 through April 19, 1996. This action was filed on April 10, 1996 in the District Court for Renville County, Minnesota and is encaptioned Big Valley Milling, Inc. v. Archer-Daniels-Midland Co., et al., No. C7-96-260. The other Minnesota action, encaptioned, United Mills v. Archer-Daniels-Midland Co., et al., No. 65-C2-96-215, and filed in the same court, seeks identical relief on behalf of certain indirect purchasers of lysine in all of the aforementioned states except Tennessee. The Georgia action, encaptioned Long v. Archer-Daniels-Midland Co., et al., Civil Action No. E-43829, and filed in Fulton County Superior Court, alleges a restraint of trade in violation of Georgia common law and the Georgia state RICO act. This action includes allegations that the defendants conspired to maintain the price of lysine at artificially high levels and seeks an injunction against continued illegal conduct, treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in the action comprises certain indirect purchasers of lysine in the state of Georgia during the period January 1, 1990 until the present. The Company has moved to dismiss this action. The Tennessee action, encaptioned McCormack Farms v. Archer Daniels Midland Co., et al., Civil Action No. 96C-2190, and filed in Davidson County Circuit Court, alleges a restraint of trade in violation of the Tennessee Trade Practices Act and Tennessee Consumer Protection Act. This action includes allegations that defendants conspired to fix, maintain or stabilize the prices of lysine and seeks an injunction against continued illegal conduct, treble damages of an unspecified amount, attorneys' fees and costs, and other unspecified relief. The putative class in this case comprises certain indirect purchasers of lysine within the State of Tennessee during the period June 10, 1992 through June 10, 1996.Item 3. LEGAL PROCEEDINGS--Continued The Company, along with other companies, has been named as a defendant in at least nine putative class action antitrust suits involving the sale of citric acid. Six of these actions allege violations of federal antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of citric acid, and seek injunctions against continued alleged illegal conduct, treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative classes in these cases comprise certain direct purchasers of citric acid for certain periods in the 1990s. One such action was filed on August 18, 1995, in the United States District Court for the Northern District of California, and is encaptioned 7-Up Bottling Co. of Philadelphia, Inc. v. Archer-Daniels- Midland Co., et al, Civil Action No. 95-2963. Other similar actions have been transferred to this same court and consolidated as In Re Citric Acid Antitrust Litigation, MDL No. 1092, Master File No. C-95-2963FMS. On September 27, 1996 the Company entered into an agreement with counsel for the plaintiff class in which among other things, the Company agreed to pay $35 million to members of the class, without admitting the alleged violations of law. Formal papers seeking court approval of the settlement are expected to be filed soon. The Company, along with other companies, also has been named as a defendant in at least one putative class action antitrust suit filed in Alabama state court involving the sale of citric acid. This action alleges violations of the Alabama antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of citric acid, and seeks an injunction against continued alleged illegal conduct, damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in the Alabama action comprises certain indirect purchasers of citric acid in the State of Alabama from July 1993 until July 1995. This action was filed on July 27, 1995 in the Circuit Court of Walker County, Alabama and is encaptioned Seven Up Bottling Co. of Jasper, Inc. v. Archer-Daniels-Midland Co., et al., Civil Action No. 95- 436. The Company has moved to dismiss this action. The Company, along with other companies, also has been named as a defendant in at least two putative class action antitrust suits filed in California state court involving the sale of citric acid. These actions allege violations of the California antitrust and unfair competition laws, including allegations that the defendants conspired to fix, maintain or stabilize the price of citric acid, and seek injunctions against continued illegal conduct, treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative classes in these cases comprise certain indirect purchasers of citric acid within the State of California during certain periods in the 1990s. One such action was filed on June 12, 1996 in the Superior Court of the County of Los Angeles, California and is encaptioned Bianco v. Archer Daniels Midland Co., et al., Civil Action No. 978912.Item 3. LEGAL PROCEEDINGS--Continued
The Company, along with other companies, has been named as a defendant in at least six putative class action antitrust suits involving the sale of both high fructose corn syrup and citric acid. Two of these actions allege violations of the California antitrust and unfair competition laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seek treble damages of an unspecified amount, attorneys fees and costs, restitution and other unspecified relief. The putative class in one of these California cases comprises certain direct purchasers of high fructose corn syrup and citric acid in the State of California during the period January 1, 1992 until at least October 1995. This action was filed on October 11, 1995 in the Superior Court of Stanislaus County, California and is entitled Gangi Bros. Packing Co. v. Archer-Daniels- Midland Co., et al., Civil Action No. 37217. The putative class in the other California case comprises certain indirect purchasers of high fructose corn syrup and citric acid in the state of California during the period October 12, 1991 until November 20, 1995. This action was filed on November 20, 1995 in the Superior Court of San Francisco County and is encaptioned MCFH, Inc. v. Archer-Daniels-Midland Co., et al., Civil Action No. 974120. The 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 alleges violations of the West Virginia antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in the West Virginia action comprises certain entities within the State of West Virginia that purchased products containing high fructose corn syrup and/or citric acid for resale from at least 1992 until 1994. This action was filed on October 26, 1995, in the Circuit Court for Boone County, West Virginia, and is encaptioned Freda's v. Archer-Daniels-Midland Co., et al., Civil Action No. 95- C-125. The Company, along with other companies, also has been named as defendant in at least one putative class action antitrust suit filed in Michigan state court involving the sale of high fructose corn syrup and citric acid. This action alleges violations of the Michigan antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in the Michigan action comprises certain persons within the State of Michigan that purchased products containing high fructose corn syrup and/or citric acid during the period January 1992 through February 26, 1996. This action was filed on February 26, 1996 in the Circuit Court for Ingham County, Michigan, and is encaptioned Wilcox v. Archer-Daniels-Midland Co., et al., Civil Action No. 96-82473-CF. The Company, along with other companies, also has been named as a defendant in at least one putative class action antitrust suit filed in the Superior Court for the District of Columbia involving the sale of high fructose corn syrup and citric acid. This action alleges violations of the District of Columbia antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in the District of Columbia action comprises certain persons within the District of Columbia that purchased products containing high fructose corn syrup and/or citric acid during the period January 1, 1992 through December 31, 1994. This action was filed on April 12, 1996 in the Superior Court for the District of Columbia, and is encaptioned Holder v. Archer-Daniels-Midland Co., et al., Civil Action No. 96-2975. The Company, along with other companies, has been named as a defendant in at least one putative class action antitrust suit filed in Kansas state court involving the sale of high fructose corn syrup and citric acid. This action alleges violations of the Kansas antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, court costs and other unspecified relief. The putative class in the Kansas action comprises certain persons within the State of Kansas that purchased products containing high fructose corn syrup and/or citric acid during at least the period January 1, 1992 through December 31, 1994. This action was filed on May 7, 1996 in the District Court of Wyandotte County, Kansas and is encaptioned Waugh v. Archer-Daniels-Midland Co., et al., Case No. 96-C-2029.Item 3. LEGAL PROCEEDINGS--Continued
The Company, along with other companies, also has been named as a defendant in at least 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.
Also following the public announcement of the grand jury investigation in June 1995, three shareholder derivative suits were filed against certain of the Company's directors and executive officers and nominally against the Company in the United States District Court for the Northern District of Illinois and at least fourteen similar shareholder derivative suits were filed in the Delaware Court of Chancery. The derivative suits filed in federal court in Illinois were consolidated under the name Felzen, et al. v. Andreas, et al., Civil Action No. 95-C-4006, 95-C-4535, and a consolidated amended derivative complaint was filed on September 29, 1995. This complaint names all current directors of the Company (except Mr. Coan) and one former director as defendants and names the Company as a nominal defendant. It alleges breach of fiduciary duty, waste of corporate assets, abuse of control and gross mismanagement, based on the antitrust allegations described above as well as other alleged wrongdoing. On October 31, 1995, the Court granted the defendants' motion to transfer the Illinois consolidated derivative action to the Central District of Illinois, wherein it now bears the case number 95-2279. On April 26, 1996, the court dismissed the suit without prejudice and permitted the plaintiffs twenty-one days to refile it. The plaintiffs refiled the complaint on May 17, 1996. The defendants again moved to dismiss the complaint on June 7, 1996.Item 3. LEGAL PROCEEDINGS--Continued
The Company and its directors also have been named as defendants in a putative class action suit encaptioned Loudon v. Archer-Daniels-Midland Co., et al., Civil Action No. 14638, filed in the Delaware Court of Chancery on October 20, 1995. This action alleges violations of Delaware state law and seeks invalidation of the election of the Company's directors on the basis of alleged omissions from the proxy statement issued by the Company prior to its October 19, 1995 annual meeting. The Court of Chancery dismissed this action on February 20, 1996, and the case is now on appeal in the Supreme Court of Delaware. The Company and its directors also have been named as defendants in a similar suit filed on November 1, 1995 in the United States District Court for the Central District of Illinois, and encaptioned Buckley v. Archer-Daniels- Midland Co., et al., Civil Action No. 95-C-2269, alleging violations of analogous provisions of federal securities law. The defendants moved to dismiss this action. The Court granted the motion to dismiss on June 6, 1996, and the case is now on appeal.
The Company and the individual defendants named in the actions described above intend to vigorously defend them unless they can be settled on terms deemed acceptable to the parties.
The Company from time to time, in the ordinary course of business, is named as a defendant in various other lawsuits. In management's opinion, the gross liability from such other lawsuits, including environmental exposure, with or without insurance recoveries is not considered to be material to the Company's financial condition or results of operations.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5.
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, 1996 and is incorporated herein by reference.
Item 6.
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, 1996 and is incorporated herein by reference.Item 7.
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, 1996 are incorporated herein by reference:
Consolidated balance sheets--June 30, 1996 and 1995 Consolidated statements of earnings--Years ended June 30, 1996, 1995 and 1994 Consolidated statements of shareholders' equity--Years ended June 30, 1996, 1995 and 1994 Consolidated statements of cash flows--Years ended June 30, 1996, 1995 and 1994 Notes to consolidated financial statements--June 30, 1996 Summary of Significant Accounting Policies Report of Independent Auditors Quarterly Financial Data (Unaudited)
Recent Developments: See Item 3 of this Form 10-K report for an update of recent developments related to the antitrust investigation and related litigation including the Company's agreement to settle a consolidated securities class action lawsuit for $30 million and a class action lawsuit involving the sale of citric acid for $35 million.
Item 9.
Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10.
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 "Rule 405 Disclosure" of the definitive proxy statement for 1996 and is incorporated herein by reference. Certain information with respect to executive officers is included in Item 1 (e) of this report.
Item 11.
Item 11. EXECUTIVE COMPENSATION
Information responsive to this Item is set forth in "Executive Compensation" and "Salary and Stock Option Committee's Report" of the definitive proxy statement for 1996 and is incorporated herein by reference.Item 12.
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 1996 and is incorporated herein by reference.
PART IV
Item 14.
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, 1996, are incorporated by reference in Item 8, and are also incorporated herein by reference:
Consolidated balance sheets--June 30, 1996 and 1995
Consolidated statements of earnings--Years ended June 30, 1996, 1995 and 1994
Consolidated statements of shareholders' equity-- Years ended June 30, 1996, 1995 and 1994
Consolidated statements of cash flows--Years ended June 30, 1996, 1995 and 1994
Notes to consolidated financial statements--June 30,
Summary of Significant Accounting Policies
Quarterly Financial Data (Unaudited)
(a)(2) Schedules are not applicable and therefore not included in this report.
Financial statements of affiliates accounted for by the equity method have been omitted because they do not, considered individually, constitute significant subsidiaries.
(a)(3) LIST OF EXHIBITS
(3)Composite Certificate of Incorporation and Bylaws filed on November 7, 1986 as Exhibits 3(a) and 3(b), respectively, to Post Effective Amendment No. 1 to Registration Statement on Form S-3, Registration No. 33-6721, are incorporated herein by reference.Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K --Continued
(4)Instruments defining the rights of security holders, including:
(i) Indenture dated May 15, 1981, between the registrant and Morgan Guaranty Trust Company of New York, as Trustee (incorporated by reference to Exhibit 4(b) to Amendment No. 1 to Registration Statement No. 2-71862), relating to the $250,000,000 - 7% Debentures due May 15, 2011;
(ii) Indenture dated May 1, 1982, between the registrant and Morgan Guaranty Trust Company of New York, as Trustee (incorporated by reference to Exhibit 4(c) to Registration Statement No. 2- 77368), relating to the $400,000,000 Zero Coupon Debentures due May 1, 2002;
(iii) Indenture dated as of March 1, 1984 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 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;
(iv) Indenture dated June 1, 1986 between the registrant and Chemical Bank, (as successor to Manufacturers Hanover Trust Company), as Trustee (incorporated by reference to Exhibit 4(a) to Registration Statement No. 33-6721), and Supplemental Indenture dated as of August 1, 1989 between the registrant and Chemical Bank (as successor to Manufacturers Hanover Trust Company), as Trustee (incorporated by reference to Exhibit 4(c) to Post-Effective Amendment No. 3 to Registration Statement No. 33-6721), relating to the $300,000,000 - 8 7/8% Debentures due April 15, 2011, the $300,000,000 - 8 3/8% Debentures due April 15, 2017, the $300,000,000 - 8 1/8% Debentures due June 1, 2012, the $250,000,000 - 6 1/4% Notes due May 15, 2003, and the $250,000,000 - 7 1/8% Debentures due March 1, 2013.Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K --Continued 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 plans and its savings and investment plans, pursuant to Instruction (10)(iii)(A) to Item 601 of Regulation S-K, are incorporated herein by reference as follows:
(i) Registration Statement No. 2-91811 on Form S-8 dated June 22, 1984 (definitive Prospectus dated July 16, 1984) relating to the Archer Daniels Midland 1982 Incentive Stock Option Plan.
(ii) Registration Statement No. 33-49409 on Form S-8 dated March 15, 1993 relating to the Archer Daniels Midland 1991 Incentive Stock Option Plan and Archer Daniels Midland Company Savings and Investment Plan.
(iii) 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.
(13) Portions of annual report to shareholders incorporated by reference
(21) Subsidiaries of the registrant
(23) Consent of independent auditors
(24) Powers of attorney
(27) Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K was filed on April 16, 1996 to report information pertaining to the Company's participation in an agreement to settle the federal class action lawsuits filed against several companies involving the sale of lysine. 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 30, 1996
ARCHER-DANIELS-MIDLAND COMPANY
/s/ R. P. Reising R. P. Reising Vice President, Secretary and General Counsel
/s/ D. J. Schmalz D. J. Schmalz Vice President and Chief Financial Officer
/s/ S. R. Mills S. R. Mills Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on September 30, 1996, by the following persons on behalf of the Registrant and in the capacities indicated.
D. O. Andreas*, Chairman of the Board, Chief Executive and Director (Principal Executive Officer) L. W. Andreas*, Director M. D. Andreas*, Director M. L. Andreas*, Director Ralph Bruce*, Director G. O. Coan*, Director J. H. Daniels*, Director R. A. Goldberg*, Director F. R. Johnson*, Director J. R. Randall*, Director Mrs. N. A. Rockefeller*, Director R. S. Strauss*, Director J. K. Vanier*, Director O. G. Webb*, Director
D. J. Smith Attorney-in-Fact
*Powers of Attorney authorizing R. P. Reising, D. J. Schmalz and D. J. Smith and each of them, to sign the Form 10-K on behalf of the above-named officers and directors of the Company are being filed with the Securities and Exchange Commission.