-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F4xLOLhKIZkguL8SBXVh5t0BQ8ZsIVTuCwAO3oaFYretMGNT0vB/ab+UAnz7bHNj PgZc2KODJjXlwiuiZEzP5A== 0000007084-96-000017.txt : 19961010 0000007084-96-000017.hdr.sgml : 19961010 ACCESSION NUMBER: 0000007084-96-000017 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960930 DATE AS OF CHANGE: 19961009 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARCHER DANIELS MIDLAND CO CENTRAL INDEX KEY: 0000007084 STANDARD INDUSTRIAL CLASSIFICATION: 2070 IRS NUMBER: 410129150 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00044 FILM NUMBER: 96637449 BUSINESS ADDRESS: STREET 1: 4666 FARIES PKWY CITY: DECATUR STATE: IL ZIP: 62526 BUSINESS PHONE: 2174245200 10-K 1 1996 10K-ANNUAL REPORT PAGE 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________ to ______________ Commission file number 1-44 ARCHER-DANIELS-MIDLAND COMPANY (Exact name of registrant as specified in its charter) Delaware 41-0129150 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 4666 Faries Parkway Box 1470 Decatur, Illinois 62525 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code217-424-5200 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, no par value New York Stock Exchange Chicago Stock Exchange Swiss Exchange Tokyo Stock Exchange Frankfurt Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non- affiliates of the registrant. Common Stock, no par value--$8.7 billion (Based on the closing price of the New York Stock Exchange on August 19, 1996) 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--518,975,939 shares (August 19, 1996) DOCUMENTS INCORPORATED BY REFERENCE Portions of the annual shareholders' report for the year ended June 30, 1996 are incorporated by reference into Parts I, II and IV. Portions of the annual proxy statement for the year ended June 30, 1996 are incorporated by reference into Part III. 1 PAGE 2 PART I Item 1. BUSINESS (a) General Development of Business Archer Daniels Midland Company was incorporated in Delaware in 1923, successor to the Daniels Linseed Co. founded in 1902. During the last five years, the Company has experienced significant growth, spending approximately $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. 2 PAGE 3 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. 3 PAGE 4 Item 1. BUSINESS--Continued Corn Products The Company is engaged in dry milling and wet milling corn operations. Products produced for use by the food and beverage industry include syrup, starch, glucose, dextrose, crystalline dextrose, high fructose sweeteners, crystalline fructose and grits. Corn gluten feed and distillers grains are produced for use as feed ingredients. Ethyl alcohol is produced to beverage grade or for industrial use as ethanol. In gasoline, ethanol increases octane, and is used as an extender and oxygenate. Corn germ, a by-product of the milling process, is further processed as an oilseed. By fermentation of dextrose, the Company produces citric and lactic acids, feed- grade amino acids and vitamins, lactates, sorbitol, 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. 4 PAGE 5 Item 1. BUSINESS--Continued The Company produces spaghetti, noodles, macaroni, and other consumer food products. The Company also produces lettuce, other fresh vegetables and herbs in its hydroponic greenhouse. 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. 5 PAGE 6 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. 6 PAGE 7 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. 7 PAGE 8 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. 8 PAGE 9 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. 9 PAGE 10 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. 10 PAGE 11 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. 49 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. 11 PAGE 12 Item 1. BUSINESS--Continued Jack McDonald Vice President from October 1994. 64 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. 47 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. 54 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. 49 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. 36 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. 12 PAGE 13 Item 2. PROPERTIES (a) Processing Facilities The Company owns, leases, or has a 50% or greater interest in the following processing plants: United States Foreign Total ______________________________________________ Owned 127 47 174 Leased 3 - 3 Joint Venture59 22 81 ___ __ ___ 189 69 258 === == === 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 the finished products. The Company operates thirty-three domestic and seven foreign oilseed crushing plants with a daily processing capacity of approximately 82,000 tons. 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 Canada, England, Germany and the Netherlands. The Company operates four wet corn milling and two dry corn milling plants with a daily grind capacity of approximately 1,600,000 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 Mexico, Bulgaria, Hungary, Slovakia and Turkey. The Company operates twenty-nine domestic wheat and durum flour mills, a domestic bulgur plant, six Canadian flour mills and one flour mill each in Belize and Barbados with a total daily capacity of approximately 346,000 cwt. of flour. The Company also operates three corn flour mills, two milo mills, two pasta plants and two starch and gluten plants. These plants and other related properties are strategically located across North America in California, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Missouri, Nebraska, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Washington, Wisconsin, Canada, Barbados and Belize. The Company also has an interest, through a joint venture, in rice milling plants in Arkansas and Louisiana. 13 PAGE 14 Item 2. PROPERTIES--Continued The Company operates ten domestic oilseed refineries in Illinois, Indiana, Iowa, Georgia, Nebraska, Tennessee and Texas as well as seven foreign refineries in England, Canada, Germany and the Netherlands. The Company has an interest, through a joint venture, in an oilseed refinery in Texas. The Company produces packaged oils in Georgia, Illinois, California and Germany and soy protein specialty products in Illinois and the Netherlands. Lecithin products are produced in Illinois, Iowa, Nebraska, Canada, Germany and the Netherlands. Cotton linter pulp is produced in Tennessee and cottonseed flour is produced in Texas. The Company produces feed and food additives at eight bioproduct plants located in Illinois, North Carolina and Ireland. The Company also operates formula feed, animal health and nutrition and pet food plants in Georgia, Illinois, Iowa, Ohio, Texas, Washington, Canada, England, Ireland, Barbados, Belize, China and Puerto Rico. The Company also has interests, through joint ventures, in formula feed and pet food plants in Alabama, Arkansas, Georgia, Illinois, Iowa, Indiana, Kansas, Michigan, Minnesota, Missouri, Nebraska, Ohio, Pennsylvania, Tennessee, Vermont, Wisconsin, Canada, Puerto Rico and Trinidad. The Company operates five North American barley malting plants located in Illinois, Minnesota, Wisconsin and Canada. The Company operates various other food ingredient plants in Iowa, Kansas, Nebraska, Washington, Germany, England and France. (b) Procurement Facilities The Company operates one hundred sixty-eight domestic terminal, country and river elevators covering the Midwest, West and South Central states, including one hundred five country elevators and sixty-three terminal and river loading facilities including three grain export elevators in Louisiana. Elevators are located in Colorado, Georgia, Illinois, Indiana, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee and Texas. Domestic grain terminals, elevators and processing plants have an aggregate storage capacity of approximately 372,000,000 bushels. The Company has an interest, through a joint venture, in sixteen grain terminals and elevators located in Illinois, Indiana, Kentucky, Maryland, Michigan and Ohio. The Company also operates twelve foreign grain elevators in Barbados, Canada, Ireland and Germany. Thirteen cotton gins are located in Texas and serve the cottonseed crushing plants in that area. 14 PAGE 15 Item 3. LEGAL PROCEEDINGS In 1993, the State of Illinois Environmental Protection Agency brought administrative enforcement proceedings arising out of the Company's failure to obtain permits for certain pollution control equipment at certain of the Company's processing facilities in Illinois. The Company believes it has meritorious defenses. In management's opinion these proceedings will not, either individually or in the aggregate, have a material adverse effect on the Company's financial condition or results of operations. The Company is involved in approximately 24 administrative and judicial proceedings in which it has been identified as a potentially responsible party (PRP) under the federal Superfund law and its state analogs for the study and clean-up of sites contaminated by material discharged into the environment. In all of these matters, there are numerous PRPs. Due to various factors such as the required level of remediation and participation in the clean-up effort by others, the Company's future clean- up costs at these sites cannot be reasonably estimated. However, in management's opinion these proceedings will not, either individually or in the aggregate, have a material adverse effect on the Company's financial condition or results of operations. The Company is the target of an investigation being conducted by a grand jury in the Northern District of Illinois into possible violations of federal antitrust laws and related crimes in the food additives industry. This investigation in Chicago is focused on antitrust violations with respect to lysine. A federal grand jury in San Francisco is investigating antitrust violations with respect to citric acid and a federal grand jury in Atlanta is investigating antitrust violations with respect to high fructose corn syrup. The Company and two of its executive officers - Michael D. Andreas and Terrance S. Wilson - have been informed that they are targets of the lysine investigation and indictments are being considered against them. Following public announcement in June 1995 of the investigation, the Company and certain of its directors and executive officers were named as defendants in at least seventeen putative class action suits on behalf of all purchasers of securities of the Company during the period between certain dates in 1992 and 1995. Fourteen of these suits were consolidated under the name In Re Archer-Daniels-Midland Company Securities Litigation, United States District Court, Northern District of Illinois, Civil Action No. 95-C-3979, and a consolidated complaint was filed on September 22, 1995. The consolidated complaint alleges that the defendants made material misrepresentations and omissions with respect to the Company and its operations and with respect to actions of the Company and its officers regarding antitrust violations, as a result of which market prices of the Company's securities were artificially inflated during the putative class period. The consolidated complaint alleges that the conduct complained of violates federal securities laws. The plaintiffs request unspecified compensatory damages, costs (including attorneys and expert fees), expenses and other unspecified relief on behalf of the putative class. On October 31, 1995, the Court granted the defendants' motion to transfer the consolidated action to the Central District of Illinois (wherein it now bears the caption E. M. Lawrence Limited Frozen Retirement Trust Dated September 1, 1992, et al. v. Archer-Daniels-Midland Co., et al., Case Number 95- 2287) where it was further consolidated with three similar actions also pending in the Central District. The Company and the individual defendants have moved to dismiss this consolidated complaint. 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 $30 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. 15 PAGE 16 Item 3. LEGAL PROCEEDINGS--Continued The Company, along with other companies, has been named as a defendant in at least twenty-nine putative class action antitrust suits involving the sale of high fructose corn syrup. At least twenty-two of those 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. One such action was filed on July 21, 1995 in the United States District Court for the Northern District of Alabama and is encaptioned Golden Eagle, Inc. v. Archer-Daniels-Midland Co., et al., Civil Action No. 95-B-1888-J. This and other similar 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 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 and at least one putative class action antitrust suit filed in Alabama state court involving the sale of high fructose corn syrup. 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 high fructose corn syrup, and seek treble damages of an unspecified amount, attorneys fees and costs, restitution and other unspecified relief. Two of the California putative classes comprise certain direct purchasers of high fructose corn syrup in the State of California during certain periods in the 1990s. One such action was filed on October 17, 1995 in Superior Court for the County of Stanislaus, California and encaptioned St. Stan's Brewing Co. v Archer-Daniels- Midland Co. et al., Civil Action No. 37237. The other four California putative classes comprise certain indirect purchasers of high fructose corn syrup in the State of California during certain periods in the 1990s. One such action was filed on July 21, 1995 in the Superior Court of the County of Los Angeles, California and is encaptioned Borgeson v. Archer- Daniels-Midland Co., et al., Civil Action No. BC131940. 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. 16 PAGE 17 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. 17 PAGE 18 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. 18 PAGE 19 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. 19 PAGE 20 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. 20 PAGE 21 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. 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, 1996 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, 1996 and is incorporated herein by reference. 21 PAGE 22 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, 1996 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, 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.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 "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. 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. 22 PAGE 23 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information responsive to this Item is set forth in "Principal Holders of Voting Securities" of the definitive proxy statement for 1996 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 1996 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, 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, 1996 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. 23 PAGE 24 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. 24 PAGE 25 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. 25 PAGE 26 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. 26 EX-24 2 POWERS OF ATTORNEY PAGE 1 EXHIBIT 24 -- POWERS OF ATTORNEY ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director, Chairman of the Board and Chief Executive (Principal Executive Officer) of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such Chairman of the Board, Chief Executive and Director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /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 director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ L. W. Andreas L. W. Andreas 2 PAGE 3 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ M. D. Andreas M. D. Andreas 3 PAGE 4 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ Martin L. Andreas Martin L. Andreas 4 PAGE 5 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ Ralph Bruce Ralph Bruce 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 such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ Gaylord O. Coan Gaylord O. Coan 6 PAGE 7 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ John H. Daniels John H. Daniels 7 PAGE 8 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ Ray A. Goldberg Ray A. Goldberg 8 PAGE 9 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ F. R. Johnson F. R. Johnson 9 PAGE 10 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ J. R. Randall J. R. Randall 10 PAGE 11 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ Mrs. Nelson A. Rockefeller Mrs. Nelson A. Rockefeller 11 PAGE 12 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ Robert S. Strauss Robert S. Strauss 12 PAGE 13 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ John K. Vanier John K. Vanier 13 PAGE 14 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as such director of said Company to the Form 10-K for the fiscal year ending June 30, 1996, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in- fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 1996. /s/ O. Glenn Webb O. Glenn Webb 14 EX-23 3 CONSENT OF INDEPENDENT AUDITORS PAGE 1 EXHIBIT 23--CONSENT OF INDEPENDENT AUDITORS ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES June 30, 1996 We consent to the incorporation by reference in this Annual Report (Form 10-K) of Archer Daniels Midland Company of our report dated August 1, 1996 included in the 1996 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 August 1, 1996 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, 1996. 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. ERNST & YOUNG LLP Minneapolis, Minnesota September 30, 1996 1 EX-21 4 SUBSIDIARIES OF THE REGISTRANT PAGE 1 EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT ARCHER DANIELS MIDLAND COMPANY June 30, 1996 Following is a list of the Registrant's subsidiaries showing the percentage of voting securities owned: Organized Under Laws of Ownership ADM Agri-Industries Ltd. Canada 100% ADM Europe BV Netherlands 100 ADM Europoort BV Netherlands 100 ADM/Growmark River System, 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 Germany 100 ADM Ringaskiddy Ireland 100 ADM Transportation Co. Delaware 100 ADMIC Investments NV Netherlands Antilles100 Agrinational Insurance Company Vermont 100 Agrinational Ltd. Cayman Islands 100 Alfred C. Toepfer International (A) Germany 50 American River Transportation Co. Delaware 100 Collingwood Grain, Inc. Kansas 100 Compagnie Industrielle Et Financiere (CIP)(A) Luxembourg 42 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 86 Premiere Agri Technologies Inc. Delaware 100 Tabor Grain Co. Nevada 100 (A) Not included in consolidated financial statements--included on the equity basis. (B) ADM International Ltd. has twenty-one 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 eleven 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 twenty-four domestic subsidiaries and thirty-four international subsidiaries have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary. 1 EX-13 5 ANNUAL REPORT TO SECURITY HOLDERS PAGE 1 Archer Daniels Midland Company MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION - June 30, 1996 The Company is in one business segment - procuring, transporting, storing, processing and merchandising agricultural commodities and products. The availability and price of agricultural commodities are subject to wide fluctuations due to unpredictable factors such as weather, plantings, government (domestic and foreign) farm programs and policies, changes in global demand created by population growth and higher standards of living, and global production of similar and competitive crops. Generally, changes in the price of agricultural commodities can be passed through to the price of processed products. Ethanol is one of a limited few of the Company's processed products which must be priced to compete with products produced from other raw materials. To reduce price risk of market fluctuations, the Company follows a policy of hedging substantially all inventory and related purchase and sales contracts. In addition, the Company from time to time will hedge portions of its anticipated 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. Also, the underlying commodity can be delivered against such contracts. To obtain a proper matching of revenue and expense, gains or losses arising from open and closed hedging transactions are included in inventory as a cost of the commodities and reflected in the income statement when the product is sold. Inflation, over time, has an impact on agricultural commodity prices. The Company's business is capital intensive and inflation could impact the cost of capital investment. OPERATIONS A summary of net sales and other operating income by classes of products and services is as follows: 1996 1995 1994 ________________________________ (In millions) Oilseed products $ 8,125 7,643$ 6,656 Corn products 2,561 2,477 2,294 Wheat and other milled products 1,644 1,384 1,394 Other products 984 1,168 1,030 ________ ________ ________ $ 13,314 $ 12,672 $ 11,374 ======== ======== ======== 1 PAGE 2 1996 compared to 1995 Net sales and other operating income increased $642 million to a record high $13.3 billion for 1996 due principally to a 7% increase in average selling prices. This increase was partially offset by the decrease due to the sale of the Company's Supreme Sugar subsidiary and British Arkady bakery ingredient business and the contribution of the Company's formula feed operation to an unconsolidated subsidiary. Sales of oilseed products increased 6% to $8.1 billion due primarily to higher average selling prices reflecting relatively strong demand for protein meal in the domestic market and the higher cost of raw materials. Sales volumes of oilseed products were up slightly for the year as the aforementioned meal demand more than offset the weaker export vegetable oil demand. Sales of corn products increased 3% to $2.6 billion due primarily to increased sales volumes resulting from good demand for the Company's fuel, beverage and industrial alcohol as well as for various bioproducts, including citric acid, lysine and MSG. These volume increases were partially offset by lower average selling prices and lower sales volumes for the Company's sweetener products. Sales of wheat and other milled products increased 19% to $1.6 billion due principally to increased average selling prices reflecting the higher costs of raw materials. These increased average selling prices were partially offset by decreased sales volumes reflecting reduced export flour demand. The decrease in sales of other products and services for the year was due principally to the sale of the Company's Supreme Sugar subsidiary and British Arkady bakery ingredient business as well as the contribution of the Company's formula feed operation to an unconsolidated joint venture. These decreases were partially offset by increased merchandising and transporting revenues. Cost of products sold and other operating costs increased $920 million to $11.9 billion due primarily to a 16% increase in average raw material commodity prices partially offset by cost attributable to recently divested operations. The $278 million decrease in gross profit to $1.4 billion in 1996 resulted primarily from a $244 million decrease due to the net effect of higher raw material commodity prices versus increased average selling prices and to a lesser extent gross profit attributable to recently divested operations. Selling, general and administrative expenses increased $21 million to $450 million in 1996 due primarily to an increase in legal and litigation related expenses which were partially offset by $29 million of expenses attributable to recently divested operations and by an $8 million decrease in bad debt expense. The increase in other income for 1996 was due principally to increased gains on marketable securities transactions and, to a lesser extent, increased equity in earnings of unconsolidated affiliates. Other income for 1996 included a $15 million gain on the sale of the Company's Supreme Sugar subsidiary. 2 PAGE 3 The decrease in income taxes for 1996 was the result of lower pretax earnings partially offset by a higher effective income tax rate. The Company's effective income tax rate for 1996 was 34% compared to an effective rate of 33% for 1995. 1995 compared to 1994 Net sales and other operating income for 1995 increased $1.3 billion to $12.7 billion. The increase is primarily due to a 9% increase in volume and to a lesser extent a 2% increase in average selling prices. Sales of oilseed products increased 15% to $7.6 billion due primarily to increased volume as strong export demand for vegetable oils and good domestic demand for meal products contributed to favorable oilseed processing market conditions. Sales of corn products increased 8% to $2.5 billion due primarily to increased average selling prices resulting from strong demand from the food and beverage industry for sweetener products and increased demand for ethanol. Sales of wheat and other milled products were at levels comparable to last year as sales attributable to acquired companies were offset by the Company's contribution of its rice milling operations to a joint venture in 1995. The increase in sales of other products is due primarily to feed operations acquired in 1994, a portion of which were contributed to a joint venture in 1995. Cost of products sold and other operating costs increased $793 million to $11 billion in 1995 due primarily to the 9% increase in volumes partially offset by declines in average raw material commodity prices. The combined effect of increased sales volumes, higher average selling prices and lower raw material commodity prices resulted in gross profits increasing $505 million to $1.6 billion in 1995. Approximately $360 million of the increase can be attributed to improved gross profits resulting from the net price effect of higher average selling prices and lower average raw material commodity prices. The remaining increase is due primarily to sales volume increases. Selling, general and administrative expenses increased $58 million to $429 million in 1995 due principally to general cost increases in support of the increased sales volumes, a $12 million increase in bad debt expense and a $6 million increase in charitable contribution expense. The decrease in other income for 1995 resulted primarily from losses on marketable securities transactions and decreased equity in earnings of unconsolidated affiliates. These decreases were partially offset by increased investment income, due to both higher levels of invested funds and higher interest rates, and by the $43 million gain on the sale of the Company's British Arkady bakery ingredient business. Excluding the effect in 1994 of the increase in the statutory federal income tax rate from 34% to 35%, which resulted in additional income tax accruals and a non-recurring income tax charge of $14 million, the Company's 1995 effective tax rate of 33% approximates the 1994 effective rate. 3 PAGE 4 LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, the Company continued to show substantial liquidity with working capital of $2.8 billion, including cash and marketable securities of $1.4 billion. Working capital also includes inventory with a replacement cost in excess of its LIFO carrying value of approximately $191 million. The cash and marketable securities, consisting principally of United States government obligations, are available for working capital, future expansion and stock repurchase plans. Capital resources were strengthened as shown by the increase in net worth to $6.1 billion. The principal source of capital during the year was funds generated from operations. The Company's ratio of long- term debt to total capital at year end was approximately 23%. Annual maturities of long-term debt range from $13 million to $34 million during the next five years except for 1997 when $115 million is due. Commercial paper and commercial bank lines of credit are available to meet seasonal cash requirements. At June 30, 1996, the Company had $370 million of unused short-term bank credit lines. Both Standard & Poor's and Moody's continue to assign their highest ratings to the Company's commercial paper and to rate the Company's long-term debt as AA- and Aa2, respectively. In addition to the cash flow generated from operations, the Company has access to equity and debt capital through numerous alternatives from public and private sources in the domestic and international markets. As discussed in Note 11 to the consolidated financial statements, the Company, along with a number of other domestic and foreign companies, is the subject of grand jury investigation into possible violations of federal antitrust laws and related crimes in the food additives industry. Neither the Company nor any director, officer or employee has been charged in connection with the investigations. The Company and two of its executive officers have been informed that they are targets of the lysine investigation and indictments are being considered against them. In addition, related civil class action suits for alleged violations of federal securities and antitrust laws are pending. The ultimate outcome of the investigations and the putative class actions cannot presently be determined. However, the Company, without admitting the alleged violations of the law, has paid $25 million in full settlement of the federal lysine class action antitrust suit filed in the Northern District of Illinois. Several plaintiffs have opted out of this settlement and numerous state class action antitrust cases involving the sale of lysine remain pending. In the Company's opinion the ultimate resolution of the lysine contingency, to the extent not provided for, will not have a material adverse effect on the Company's consolidated financial condition or annual results of operations, but it could be material to the consolidated operating results of a particular future quarter if resolved unfavorably. Because of the early stage of the other investigations and putative class actions, the ultimate outcome of these matters cannot presently be determined and accordingly no provision for any liability that may result therefrom has been made in the accompanying consolidated financial statements. 4 PAGE 5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Company is in one business segment - procuring, transporting, storing, processing, and merchandising agricultural commodities and products. The availability and price of agricultural commodities are subject to wide fluctuations due to unpredictable factors such as weather, plantings, government (domestic and foreign) farm programs and policies, changes in global demand created by population growth and higher standards of living, and global production of similar and competitive crops. Generally, changes in the price of agricultural commodities can be passed through to the price of processed products. Ethanol is one of a limited few of the Company's processed products which must be priced to compete with products produced from other raw materials. 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 the amount 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 of market fluctuations, the Company follows a policy of hedging substantially all inventory and related purchase and sales contracts. In addition, the Company from time to time will hedge portions of its anticipated production requirements. The instruments used are readily marketable exchange traded futures contracts which are designated as hedges. The changes in market value of such contracts have a high correlation to the price changes of the hedged commodity. Also, the underlying commodity can be delivered against such contracts. To obtain a proper matching of revenue and expense, gains or losses arising from open and closed hedging transactions are included in inventory 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 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 20 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. Gross sales of the Company, including the total sales value of grain merchandised, were $18.1 billion in 1996, $15.9 billion in 1995, and $14.1 billion in 1994, and include export sales of $5.7 billion in 1996, $4.2 billion in 1995 and $3.2 billion in 1994. Per Share Data Share and per share information have been adjusted to give effect to the 50% stock dividend in the form of a three-for-two stock split paid in December 1994 and to the 5% stock dividends in the three years ended June 30, 1996, including the 5% stock dividend declared in July 1996 and payable in September 1996. Net earnings per common share is determined by dividing net earnings by the weighted average number of common shares outstanding. The impact of common stock equivalents is not material. New Accounting Standards In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards Number 121 (SFAS 121) "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Management believes that the adoption of SFAS 121 in fiscal 1997 will not have a material adverse effect on the Company's consolidated financial statements. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards Number 123 (SFAS 123) "Accounting for Stock-Based Compensation." SFAS 123 allows companies to choose whether to account for stock-based compensation under the current method as prescribed in Accounting Principles Board Opinion Number 25 (APB 25) or use the fair value method described in SFAS 123. The Company plans to continue to follow the accounting measurement provisions of APB 25 and believes the impact of implementing the disclosure provisions of SFAS 123 will not be material to its consolidated financial statements. 5 PAGE 6 CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended June 30 _________________________________ 1996 1995 1994 _________________________________ (In thousands, except per share amounts) Net sales and other operating income$ 13,314,049$12,671,868$11 ,374,372 Cost of products sold and other operating costs 11,949,61111,029,38410,236,737 ______________________________ Gross Profit 1,364,438 1,642,484 1,137,635 Selling, general and administrative expenses 450,010 429,358 371,237 ______________________________ Earnings From Operations 914,428 1,213,126 766,398 Other income (expense) 139,985 (31,603) (28,095) ______________________________ Earnings Before Income Taxes 1,054,413 1,181,523 738,303 Income taxes 358,501 385,608 254,234 ______________________________ Net Earnings 695,912 795,915 484,069 ========== ==================== Net earnings per common share $ 1.27$ 1.40$ .84 ============================== Average number of shares outstanding550,045 567,751 573,626 ============================== See notes to consolidated financial statements.
6 PAGE 7 CONSOLIDATED BALANCE SHEETS
June 30 __________________________________ 1996 1995 __________________________________ Assets (In thousands) Current Assets Cash and cash equivalents $ 534,702 $ 454,593 Marketable securities 820,147 664,690 Receivables 1,131,591 1,013,562 Inventories 1,790,636 1,473,896 Prepaid expenses 107,607 105,904 __________ Total Current Assets 4,384,683 3,712,645 Investments and Other Assets Investments in and advances to affiliates 624,305 502,698 Long-term marketable securities1,092,969 1,604,219 Other assets 233,611 175,044 __________ __________ 1,950,885 2,281,961 Property, Plant and Equipment Land 114,542 113,098 Buildings 1,245,662 1,109,249 Machinery and equipment 6,034,979 5,443,561 Construction in progress 588,711 642,825 Less allowances for depreciation(3,869,593) (3,546,452) __________ __________ 4,114,301 3,762,281 __________ __________ $10,449,869 $9,756,887 =========== ==========
7 PAGE 8 CONSOLIDATED BALANCE SHEETS
June 30 _________________________________ 1996 1995 _________________________________ (In thousands) Liabilities and Shareholders' Equity Current Liabilities Accounts payable $ 993,403 $ 725,046 Accrued expenses 525,626 431,725 Current maturities of long-term debt114,522 15,614 __________ __________ Total Current Liabilities 1,633,551 1,172,385 Long-Term Debt 2,002,979 2,070,095 Deferred Credits Income taxes 562,362 538,351 Other 106,165 121,891 __________ __________ 668,527 660,242 Shareholders' Equity Common stock 3,869,875 3,668,977 Reinvested earnings 2,274,937 2,185,188 __________ __________ 6,144,812 5,854,165 __________ __________ $10,449,869 $9,756,887 =========== ========== See notes to consolidated financial statements.
8 PAGE 9 CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30 1996 1995 1994 (In thousands) Operating Activities Net earnings $ 695,912$ 795,915$ 484,069 Adjustments to reconcile to net cash provided by operations Depreciation and amortization 393,605 384,872 354,463 Deferred income taxes 72,673 25,421 22,009 Amortization of long-term debt discount25,58421,908 19,613 (Gain) loss on marketable securities transactions (109,359) 27,633 (25,785) Other (33,243) 8,432 2,555 Changes in operating assets and liabilities Receivables (183,569) (82,203) (114,741) Inventories (320,529) (41,561) (172,649) Prepaid expenses (1,683) 5,219 (13,450) Accounts payable and accrued expenses314,49445,611 74,287 _________ ________ ________ Total Operating Activities 853,885 1,191,247 630,371 Investing Activities Purchases of property, plant and equipment(754,268) (558,604) (514,364) Business acquisitions (28,612) (55,126) (257,731) Investments in and advances to affiliates(110,615)(122,565)16, 506 Purchases of marketable securities(816,401)(2,017,619)(2,136,5 53) Proceeds from sales of marketable securities 1,260,710 1,940,370 2,643,368 _________ _________ _________ Total Investing Activities (449,186) (813,544) (248,774) Financing Activities Long-term debt borrowings 42,066 17,626 12,001 Long-term debt payments (22,233) (32,304) (76,133) Purchases of treasury stock (259,980) (179,613) (355,226) Cash dividends and other (84,443) (45,213) (32,328) _________ _________ _________ Total Financing Activities (324,590) (239,504) (451,686) _________ _________ _________ Increase (Decrease) In Cash And Cash Equivalents 80,109 138,199 (70,089) Cash And Cash Equivalents Beginning Of Period 454,593 316,394 386,483 __________ _________ _________ Cash And Cash Equivalents End Of Period$534,702$ 454,593$ 316 ,394 ========== ========= ========= See notes to consolidated financial statements.
9 PAGE 10 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock ___________________________________ Reinvested Shares Amount Earnings ___________________________________ (In thousands) Balance July 1, 1993 $ 342,299 $3,366,622$ 1,516,629 Net earnings - - 484,069 Cash dividends - $.06 per share - - (32,586) 5% stock dividend 16,364 381,707 (381,707) Treasury stock purchases (15,597) (355,226) - Foreign currency translation - - 43,363 Other 573 22,852 (302) _______ __________ __________ Balance June 30, 1994 343,639 3,415,955 1,629,466 Net earnings - - 795,915 Cash dividends - $.08 per share - - (46,825) 3-for-2 stock split 172,030 - - 5% stock dividend 25,358 406,019 (406,019) Treasury stock purchases (9,756) (179,613) - Foreign currency translation - - 66,005 Unrealized net gains on marketable securities - - 147,118 Other 1,253 26,616 (472) _______ __________ __________ Balance June 30, 1995 532,524 3,668,977 2,185,188 Net earnings - - 695,912 Cash dividends - $.17 per share - - (90,860) 5% stock dividend 25,991 411,542 (411,542) Treasury stock purchases (15,632) (259,980) - Foreign currency translation - - (96,101) Change in unrealized net gains on marketable securities - - (7,421) Other 2,938 49,336 (239) _______ _________ _________ Balance June 30, 1996 545,821 $3,869,875 $2,274,937 ======= ========== ========== See notes to consolidated financial statements.
10 PAGE 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1-Marketable Securities
Unrealize Unrealiz Fair d ed Cost Gains Losses Value _________________________________________________________ (In thousands) 1996 United States government obligations Maturity less than 1 $1,184,2 $ 4,027 $ $1,188,0 year 16 235 08 Maturity 1 year to 5 19,026 - 201 18,825 years Other debt securities Maturity less than 1 148,345 716 - 149,061 year Maturity 1 year to 5 58,962 1,813 - 60,775 years Equity securities 804,052 212,906 5,602 1,011,35 6 ________ _________ ________ ________ __ _ __ __ $2,214,6 $219,462 $ 6,038 $2,428,0 01 25 ======== ========= ======== ======== == = == == Unrealize Unrealiz Fair d ed Cost Gains Losses Value _________________________________________________________ (In thousands) 1995 United States government obligations Maturity less than 1 $1,057,1 $ $ $1,057,6 year 89 731 281 39 Maturity 1 year to 5 453,276 9,719 - 462,995 years Other debt securities Maturity less than 1 59,319 - 61 59,258 year Maturity 1 year to 5 174,811 2,441 - 177,252 years Equity securities 751,344 217,014 6,495 961,863 ________ _________ ________ ________ __ _ __ __ $2,495,9 $ $ $2,719,0 39 229,905 6,837 07 ======== ========= ======== ======== == = == ==
11 PAGE 12 Note 2-Inventories
1996 1995 (In thousands) LIFO inventories FIFO value $ 705,814 $ 416,804 LIFO valuation reserve (190,641) (56,036) __________ __________ LIFO carrying value 515,173 360,768 FIFO inventories, including hedging procedure method 1,275,463 1,113,128 __________ __________ $1,790,636 $1,473,896 ========== ========== Note 3-Accrued Expenses 1996 1995 (In thousands) Income taxes $ 175,603 $ 109,323 Payroll and employee benefits 117,211 111,452 Insurance loss reserves 78,611 76,987 Other 154,201 133,963 __________ __________ $ 525,626 $ 431,725 ========== ==========
12 PAGE 13 Note 4-Long-Term Debt and Financing Arrangements
1996 1995 _____________________ (In thousands) 8.875% Debentures $300 million face amount, due in 2011 $ 298,271 $ 298,216 8.125% Debentures $300 million face amount, due in 2012 298,015 297,955 8.375% Debentures $300 million face amount, due in 2017 294,178 294,079 7.125% Debentures $250 million face amount, due in 2013 249,397 249,378 6.25% Notes $250 million face amount, due in 2003 249,280 248,998 Zero Coupon Debt $400 million face amount, due in 2002 183,736 160,855 7% Debentures $250 million face amount, due in 2011 129,083 127,017 10.25% Debentures $100 million face amount, due in 2006 98,767 98,693 6% Bonds 150 million Deutsche Mark face amount, due in June 1997 98,370 108,424 Industrial Revenue Bonds at various rates from 5.30% to 13.25% and due in varying amounts to 2011 76,498 78,253 Other 141,906 123,841 __________ __________ Total long-term debt 2,117,501 2,085,709 Less current maturities (114,522) (15,614) __________ __________ $2,002,979 $2,070,095 ========== ==========
13 PAGE 14 At June 30, 1996, the fair value of the Company's long-term debt exceeded the carrying value by $298 million, as estimated by using quoted market prices or discounted future cash flows based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Unamortized original issue discounts on the 7% Debentures and Zero Coupon Debt issues are being amortized at 15.35% and 13.80%, respectively. Accelerated amortization of the discounts for tax purposes has the effect of lowering the actual rate of interest to be paid over the remaining lives of the issues to approximately 10.48% and 5.52%, respectively. The aggregate maturities for long-term debt for the five years after June 30, 1996 are $115 million, $34 million, $18 million, $13 million and $19 million, respectively. At June 30, 1996 the Company had unused lines of credit totaling $370 million. 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, 1996 and 1995, the Company had approximately 31.8 million and 35.2 million common shares, respectively, in treasury. Treasury stock is recorded at cost, $495 million at June 30, 1996, as a reduction of common stock. 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, 1996 options for 3,327,393 shares at prices ranging from $11.60 to $18.26 per share were outstanding, of which 1,139,031 shares were exercisable. There were 623,726 shares available for future grant at June 30, 1996. Cumulative foreign currency translation losses of $34 million and unrealized gains on securities of $140 million at June 30, 1996, net of applicable taxes, are included as components of reinvested earnings. 14 PAGE 15 Note 6-Other Income (Expense)
1996 1995 1994 ________________________________ (In thousands) Investment income $ $ $ 150,446 147,133 100,706 Interest expense (170,089 (170,886 (173,429 ) ) )) Gain (loss) on marketable securities transactions 109,359 (27,633) 25,785 Equity in earnings of 31,780 (19,801) 24,230 affiliates Other 18,489 39,584 (5,387) ________ ________ ________ __ __ __ $ $ $ 139,985 (31,603) (28,095) ======== ======== ======== == == ==
Interest expense is net of interest capitalized of $43 million, $32 million and $26 million in 1996, 1995 and 1994, respectively. The Company made interest payments of $188 million, $181 million and $180 million in 1996, 1995 and 1994 respectively. The realized gains on sales of available-for-sale marketable securities totaled $109 million, $18 million and $36 million in 1996, 1995 and 1994, respectively. The realized losses totaled $46 million and $10 million in 1995 and 1994, respectively. 15 PAGE 16 Note 7-Income Taxes For financial reporting purposes, earnings before income taxes includes the following components:
1996 1995 1994 ________________________________ (In thousands) United States $ $1,022,2 $ 907,376 45 662,709 Foreign 147,037 159,278 75,594 ________ ________ ________ __ __ _ $1,054,4 $1,181,5 $ 13 23 738,303 ======== ======== ======== == == =
Significant components of income taxes are as follows:
1996 1995 1994 _______________________________________ (In thousands) Current Federal $ $271,702 $202,708 207,166 State 29,604 38,768 30,969 Foreign 46,646 42,085 14,460 Deferred Federal 69,253 30,191 4,102 State 6,467 2,108 (3,036) Foreign (635) 754 5,031 _________ _________ _________ _ $ $ 385,608 $254,234 358,501 ========= ========= ========= =
Significant components of the Company's deferred tax liabilities and assets are as follows:
1996 1995 __________________________ (In thousands) Deferred tax liabilities Depreciation $413,792 $386,883 Unrealized gain on marketable 73,727 75,978 securities Bond discount amortization 60,659 62,941 Other 66,812 62,036 ________ ________ 614,990 587,838 Deferred tax assets Postretirement benefits 27,822 26,274 Other 76,337 79,829 ________ ________ 104,159 106,103 ________ ________ Net deferred tax liabilities 510,831 481,735 Current net deferred tax assets included in prepaid expenses 51,531 56,616 ________ ________ Non-current net deferred tax $562,362 538,351 liabilities ======== ========
16 PAGE 17 Reconciliation of the statutory federal income tax rate to the Company's effective tax rate is as follows:
1996 1995 1994 _____ ____ _____ Statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit 2.2 2.3 2.3 Foreign sales corporation (2.4) (1.8) (2.7) Federal tax rate increase - - (1.8) Other (0.8) (2.9) (2.0) ____ ____ ____ Effective rate 34.0 % 32.6% 34.4% ==== ==== ====
The Company made income tax payments of $268 million, $354 million and $250 million in 1996, 1995 and 1994, respectively. In 1994, the federal income tax rate increase resulted in additional income tax accruals and a non-recurring income tax charge of $14 million, or $.02 per share. Undistributed earnings of the Company's foreign subsidiaries amounting to approximately $400 million at June 30, 1996, are considered to be indefinitely reinvested and, accordingly, no provision for U. S. income taxes has been provided thereon. It is not practicable to determine the deferred tax liability for temporary differences related to these undistributed earnings. Note 8-Leases The Company has noncancellable operating leases with total future rental commitments of $146 million, which range from $7 million to $26 million during each of the next five years, and expire on various dates through 2026. Rent expense for 1996, 1995 and 1994 was $73 million, $73 million and $69 million, respectively. Note 9-Employee Benefit Plans The Company has noncontributory and trusteed pension plans covering substantially all employees. It is the Company's policy to fund pension costs as required by the Employee Retirement Income Security Act. At June 30, 1996, the plans had assets at fair value of $295 million and projected benefit obligations of $352 million based on a discount rate of 7.5%. Pension expense is not material. The Company has postretirement health care and life insurance plans covering substantially all employees. The accumulated postretirement benefit obligations (APBO) for the unfunded plans at June 30, 1996, were $76 million, based on a discount rate of 7.5% and an assumed health care cost trend rate of 10.4% for 1997 gradually decreasing to 5.5% by 2004. Expense of these plans is not material. A 1% increase in the health care cost trend rate assumption would not have had a material impact on the APBO or expense for the year. In addition, the Company has savings and investment plans available to eligible employees with one year of service. Employees may contribute up to 6% of their salaries, not to exceed $9,000. The Company matches these contributions, at various levels, to a maximum of $6,000. 17 PAGE 18 Note 10-Geographic Information
Net Sales and Other Earnings Operating From Identifiable Income Operations Assets _________ __________ ____________ (In millions) 1996 United States $ 9,733 $806 $6,025 Foreign 3,581 108 1,347 _______ ____ ______ $13,314 $914 $7,372 ======= ==== ====== 1995 United States $ 9,177 $1,089 $5,350 Foreign 3,495 124 1,181 _______ ______ ______ $12,672 $1,213 $6,531 ======= ====== ====== 1994 United States $ 8,365 $704 $5,140 Foreign 3,009 62 1,083 _______ ____ ______ $11,374 $766 $6,223 ======= ==== ======
Earnings from operations represent earnings before other income and income taxes. Identifiable assets exclude cash and cash equivalents, marketable securities and investments in and advances to affiliates. At June 30, 1996, approximately $900 million of the Company's cash and cash equivalents, marketable securities, and investments in and advances to affiliates were foreign assets. 18 PAGE 19 Note 11-Antitrust Investigation and Related Litigation The Company, along with a number of other domestic and foreign companies, is the subject of an investigation being conducted by a grand jury in the Northern District of Illinois into possible violations of federal antitrust laws and related crimes in the food additives industry. The investigation in Chicago is directed towards possible price fixing with respect to lysine. A federal grand jury in San Francisco is investigating possible price fixing with respect to citric acid and a federal grand jury in Atlanta is investigating possible price fixing with respect to high fructose corn syrup. Neither the Company nor any director, officer or employee of the Company has been charged in connection with these investigations. The Company and two of its executive officers have been informed that they are targets of the lysine investigation and indictments are being considered against them. Following public announcement in June 1995 of these investigations, the Company and certain of its directors and executive officers were named as defendants in a number of putative class action suits for alleged violations of federal securities laws on behalf of all purchasers of securities of the Company during the period between certain dates in 1992 and 1995. The Company along with other domestic and foreign companies, has been named as a defendant in a number of putative class action antitrust suits involving the sale of lysine, citric acid, and high fructose corn syrup. The plaintiffs generally request unspecified compensatory damages, costs, expenses and unspecified relief. The Company and the individuals named as defendants intend to vigorously defend these class actions unless they can be settled on terms deemed acceptable by the parties. These matters could result in the Company being subject to monetary damages, fines, penalties and other sanctions and expenses. On July 20, 1996, Federal District Court Judge Milton Shadur approved a settlement in the federal lysine class action antitrust suit filed in the Northern District of Illinois (consolidated as In Re Amino Acid Lysine Antitrust Litigation MDL No. 1083) and the Company has paid $25 million in full settlement thereof without admitting the alleged violations of law. Several plaintiffs have opted out of this settlement and numerous state class action antitrust cases involving the sale of lysine remain pending. In fiscal year 1996, the Company made provisions sufficient to cover the amount of such settlement and related costs and expenses in its consolidated financial statements which amount is not material. In the Company's opinion the ultimate resolution of the lysine contingency, to the extent not provided for, will not have a material adverse effect on the Company's consolidated financial condition or annual results of operations, but it could be material to the consolidated operating results of a particular future quarter if resolved unfavorably. Because of the early stage of the other investigations and putative class actions, the ultimate outcome of these matters cannot presently be determined. Accordingly, no provision for any liability that may result therefrom has been named in the accompanying consolidated financial statements. 19 PAGE 20 The Company and its directors also have been named as defendants in two putative class action suits, one of which alleges violations of Delaware state law and a similar case in District Court in Illinois which alleges violations of federal securities laws. Both cases seek invalidation of the election of the Company's directors on the basis of alleged omissions from the proxy statement issued by the Company prior to its 1995 Annual Meeting of Shareholders. The case relating to violations of Delaware law has been dismissed and is now on appeal in the Supreme Court of Delaware. The case filed in Federal District Court in Illinois has likewise been dismissed and has been appealed to the Seventh Circuit Court of Appeals. The Company and the individuals named as defendants intend to vigorously defend these actions. Shareholder derivative actions also have been filed against certain of the Company's directors and executive officers and nominally against the Company alleging that the individuals named as defendants breached their fiduciary duties to the Company and seeking monetary damages and other relief on behalf of the Company from the individuals named as defendants. The Company has sought or intends to seek dismissal of these derivative actions on the ground that they cannot be maintained unless the plaintiffs first brought their complaints to the Company's Board of Directors, which they did not. The Company from time to time, in the ordinary course of business, is named as a defendant in various other lawsuits. In the Company'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 consolidated financial condition or results of operations. 20 PAGE 21 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, 1996 and 1995, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three years in the period ended June 30, 1996. 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, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 1996, in conformity with generally accepted accounting principles. ERNST & YOUNG, LLP Minneapolis, Minnesota August 1, 1996 21 PAGE 22 QUARTERLY FINANCIAL DATA (Unaudited)
Quarter ___________________________________________________________ First Second Third Fourth Total ___________________________________________________________ (In thousands, except per share amounts) Fiscal 1996 Net sales $3,120,738$3,415,058$3,486,665$3,291,588$13,314,049 Gross profit 324,331 396,852 338,871 304,384 1,364,438 Net earnings 163,102 225,970 163,285 143,555 695,912 Per common share .29 .41 .30 .27 1.27 Fiscal 1995 Net sales $3,015,223$3,221,804$3,299,662$3,135,179$12,671,868 Gross profit 344,819 477,625 425,513 394,527 1,642,484 Net earnings 154,544 220,098 195,701 225,572 795,915 Per common share .27 .39 .34 .40 1.40
Results for the fourth quarter of fiscal 1995 included a $36 million, or $.06 per share, after tax gain from the sale of the Company's British Arkady bakery ingredient business. 22 PAGE 23 COMMON STOCK MARKET PRICES AND DIVIDENDS The Company's common stock is listed and traded on the New York Stock Exchange, Chicago Stock Exchange, Tokyo Stock Exchange, Frankfurt Stock Exchange and the Swiss Exchange. The following table sets forth, for the periods indicated, the high and low market prices of the common stock and common stock cash dividends.
Cash Market Price Dividends High Low Per Share Fiscal 1996--Quarter Ended June 30 19 1/4 17 0.048 March 31 18 3/4 16 0.048 December 31 17 1/2 14 1/8 0.048 September 30 17 1/4 13 5/8 0.023 Fiscal 1995--Quarter Ended June 30 18 16 3/8 0.023 March 31 19 16 1/2 0.023 December 31 19 1/8 15 0.023 September 30 15 7/8 13 1/2 0.014
The number of shareholders of the Company's common stock at June 30, 1996 was 35,431. 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. 23 PAGE 24 TEN-YEAR SUMMARY Operating, Financial and Other Data (Dollars in thousands, except per share data)
1996 1995 1994 Operating Net sales and other operating income $13,314,049 $12,671,868 $11,374,372 Depreciation and amortization 393,605 384,872 354,463 Net earnings 695,912 795,915 484,069 Per common share 1.27 1.47 .84 Cash dividends 90,860 46,825 32,586 Per common share .17 .08 .06 Financial Working capital $ 2,751,132 $2,540,260 $2,783,817 Per common share 5.04 4.54 4.90 Current ratio 2.7 3.2 3.5 Inventories 1,790,636 1,473,896 1,422,147 Net property, plant and equipment 4,114,301 3,762,281 3,538,575 Gross additions to property, plant and equipment 801,426 657,915 682,485 Total assets 10,449,869 9,756,887 8,746,853 Long-term debt 2,002,979 2,070,095 2,021,417 Shareholders' equity 6,144,812 5,854,165 5,045,421 Per common share 11.26 10.47 8.88 Other Weighted average shares outstanding (000's) 550,045 567,751 573,626 Number of shareholders 35,431 34,385 33,940 Number of employees 14,811 14,833 16,013
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 1996. Net earnings for 1993 includes a credit of $68 million or $.11 per share and a charge of $35 million or $.06 per share for the cumulative effects of changes in accounting for income taxes and postretirement benefits, respectively. 24 PAGE 25
1993 1992 1991 1990 1989 1988 1987 9,811,362 $9,231,50 $8,468,1 $7,751,3 $7,928,8 $6,798,3 $5,774,6 2 98 41 36 94 21 328,549 293,729 261,367 248,113 220,538 183,952 155,899 567,527 503,757 466,678 483,522 424,673 353,058 265,355 .95 .84 .78 .81 .72 .59 .44 32,266 30,789 29,527 25,976 17,271 17,095 16,189 .05 .05 .05 .04 .03 .03 .03 $2,961,50 $2,276,56 $1,674,7 $1,627,4 $1,487,1 $1,408,6 $1,252,4 3 4 35 59 51 64 06 4.98 3.82 2.81 2.72 2.51 2.39 2.08 4.1 3.4 3.0 3.4 3.4 3.0 3.5 1,131,787 1,025,030 917,495 771,233 694,998 773,702 784,338 3,214,834 3,060,096 2,695,62 2,131,80 1,832,25 1,661,22 1,478,45 5 7 8 0 8 572,022 614,844 911,586 550,851 405,888 370,295 314,730 8,404,111 7,524,530 6,260,60 5,450,01 4,728,30 4,397,56 3,862,09 7 0 8 4 1 2,039,143 1,562,491 980,273 750,901 690,052 692,878 657,465 4,883,251 4,492,353 3,922,29 3,573,22 3,033,50 2,630,52 2,367,67 5 8 3 9 3 8.22 7.55 6.59 5.97 5.11 4.46 3.93 595,208 596,801 598,867 596,771 591,209 601,496 600,734 33,654 32,277 28,981 26,076 20,382 18,491 17,199 14,168 13,524 13,049 11,861 10,214 9,631 10,573
25 EX-27 6 FINANCIAL DATA SCHEDULE
5 12-MOS JUN-30-1996 JUN-30-1996 534,702 820,147 1,131,591 0 1,790,636 4,384,683 7,983,894 3,869,593 10,449,869 1,633,551 2,002,979 0 0 3,869,875 2,274,937 10,449,869 13,314,049 13,314,049 11,949,611 11,949,611 0 0 170,089 1,054,413 358,501 695,912 0 0 0 695,912 1.27 1.27
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