-----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, Av3W6dlPTq0FCe0jCf0tU8bPkEsMKxxd+X3ovrVbzSkBYfDtWZD24c20J7ZS4MLz MBskwd/aM7nWsm+0Cks/bg== 0000007084-99-000022.txt : 19990923 0000007084-99-000022.hdr.sgml : 19990923 ACCESSION NUMBER: 0000007084-99-000022 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990922 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARCHER DANIELS MIDLAND CO CENTRAL INDEX KEY: 0000007084 STANDARD INDUSTRIAL CLASSIFICATION: FATS & OILS [2070] IRS NUMBER: 410129150 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-00044 FILM NUMBER: 99715036 BUSINESS ADDRESS: STREET 1: 4666 FARIES PKWY CITY: DECATUR STATE: IL ZIP: 62526 BUSINESS PHONE: 2174244798 10-K 1 10K630 26 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, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-44 ARCHER-DANIELS-MIDLAND COMPANY (Exact name of registrant as specified in its charter) Delaware 41-0129150 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 4666 Faries Parkway Box 1470 Decatur, Illinois 62525 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code217-424-5200 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, no par value New York Stock Exchange Chicago Stock Exchange Swiss Exchange Tokyo Stock Exchange Frankfurt Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ 1 PAGE 2 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non- affiliates of the registrant. Common Stock, no par value--$7.3 billion (Based on the closing price of the New York Stock Exchange on August 23, 1999) Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock, no par value-580,565,821 shares (August 31, 1999) DOCUMENTS INCORPORATED BY REFERENCE Portions of the annual shareholders' report for the year ended June 30, 1999 are incorporated by reference into Parts I, II and IV. Portions of the annual proxy statement for the year ended June 30, 1999 are incorporated by reference into Part III. 2 PAGE 3 PART I Item 1. BUSINESS (a) General Development of Business Archer Daniels Midland Company was incorporated in Delaware in 1923, successor to the Daniels Linseed Co. founded in 1902. During the last five years, the Company has experienced significant growth, spending approximately $4.6 billion for construction of new plants, expansions of existing plants and the acquisitions of plants and transportation equipment. There have been no significant dispositions during this period. However, during this period, the Company has disposed of its Supreme Sugar subsidiary and its British Arkady bakery ingredient business. In addition, the Company has contributed malting operations, formula feed operations, rice milling operations, Mexican wheat flour mills and masa corn flour operations to various unconsolidated joint ventures. (b) Financial Information About Industry Segments The Company is in one business segment-- procuring, transporting, storing, processing and merchandising agricultural commodities and products. (c) Narrative Description of Business (i)Principal products produced and principal markets for and methods of distribution of such products: The Company is engaged in the business of procuring, transporting, storing, processing and merchandising agricultural commodities and products. It is one of the world's largest processors of oilseeds, corn and wheat. The Company also processes cocoa beans, milo, oats, barley and peanuts. Other operations include transporting, merchandising and storing agricultural commodities and products. These operations and processes produce products which have primarily two end uses: food or feed ingredients. Each commodity processed is in itself a feed ingredient as are the by-products produced during the processing of each commodity. Production processes of all commodities are capital intensive and similar in nature. These processes involve grinding, crushing or milling with further value added through extraction, refining and fermenting. Generally, each commodity can be processed by any of these methods to generate additional value-added products. 3 PAGE 4 Item 1. BUSINESS-Continued All commodities and related processed products share the same network of commodity procurement facilities, transportation services (including rail, barge, truck and ocean vessels) and storage facilities. The geographic areas, customers and marketing methods are basically the same for all commodities and their related further processed products. Feed ingredient products and by- products are sold to farmers, feed dealers and livestock producers, all of whom purchase products from across the entire commodity chain. Food ingredient products are also sold to one basic group of customers: food and beverage processors. Any single customer may purchase products produced from all commodities, and any single food or feed product could include ingredients produced from all commodities processed. Oilseed Products Soybeans, cottonseed, sunflower seeds, canola, peanuts, flaxseed and corn germ are processed to provide vegetable oils and meals principally for the food and feed industries. Crude vegetable oil is sold "as is" or is further processed by refining and hydrogenating into margarine, shortening, salad oils and other food products. Partially refined oil is sold for use in chemicals, paints and other industrial products. Lecithin, an emulsifier produced in the vegetable oil refining process, is marketed as a food and feed ingredient. Natural source Vitamin E, an antioxidant, and distilled monoglycerides, an emulsifier, are produced from soybeans and other oilseeds. Oilseed meals supply more than one-half of the high protein ingredients used in the manufacture of commercial livestock and poultry feeds. Soybean meal is further processed into soy flour and grits, used in both food and industrial products, and into value-added soy protein products. Textured vegetable protein (TVP), a soy protein product developed by the Company, is sold primarily to the institutional food market and, through others, to the food consumer market. The Company also produces a wide range of other edible soy protein products including isolated soy protein, soy protein concentrate, soy-based milk products, soy flours and soy protein meat substitutes (Harvest Burgers and Harvest Burgers for Recipes). The Company produces and markets a wide range of consumer and institutional health foods based on the Company's various soy protein products, including soy-derived isoflavones. The Company produces cottonseed flour which is sold primarily to the pharmaceutical industry. Cotton cellulose pulp is manufactured and sold to the chemical, paper and filter markets. 4 PAGE 5 Item 1. BUSINESS-Continued Corn Products The Company is engaged in dry milling and wet milling corn operations. Products produced for use by the food and beverage industry include syrup, starch, glucose, dextrose, crystalline dextrose, high fructose sweeteners, crystalline fructose and grits. Corn gluten feed and distillers grains are produced for use as feed ingredients. Ethyl alcohol is produced to beverage grade or for industrial use as ethanol. In gasoline, ethanol increases octane and is used as an extender and oxygenate. Corn germ, a by-product of the milling process, is further processed as an oilseed. By fermentation of dextrose, the Company produces citric and lactic acids, feed-grade amino acids and vitamins, lactates, sorbitol, xanthan gum, and food emulsifiers principally for the food and feed industries. Wheat and Other Milled Products Wheat flour is sold primarily to large bakeries, durum flour is sold to pasta manufacturers and bulgur, a gelatinized wheat food, is sold to both the export and the domestic food markets. The Company produces wheat starch and vital wheat gluten for the baking industry. The Company mills oats into oat bran and oat flour for institutional and consumer food customers. The Company also mills milo to produce industrial flour that is used in the manufacturing of wall board for the building industry. Other Products and Services The Company buys, stores and cleans agricultural commodities, such as oilseeds, corn, wheat, milo, oats and barley, for resale to other processors worldwide. The Company grinds cocoa beans and produces cocoa liquor, cocoa butter, cocoa powder, chocolate and various compounds for the food processing industry. The Company produces and distributes formula feeds and animal health and nutrition products to the livestock, dairy and poultry industries. Many of the feed ingredients and health and nutrition products are produced in the Company's other commodity processing operations. The Company produces bakery products and mixes which are sold to the baking industry. 5 PAGE 6 Item 1. BUSINESS--Continued The Company produces spaghetti, noodles, macaroni, and other consumer food products. The Company also produces lettuce, other fresh vegetables and herbs in its hydroponic greenhouse. The Company processes and distributes edible beans for use in many parts of the food industry. The Company raises fish in an aquaculture operation for distribution to consumer food customers. Hickory Point Bank and Trust Co. furnishes public banking and trust services, as well as cash management and securities safekeeping services for the Company. ADM Investor Services, Inc. is a registered futures commission merchant and a clearing member of all principal commodities exchanges. ADM Investor Services International, Ltd. specializes in futures, options and foreign exchange in the European marketplace. Agrinational Insurance Company acts as a direct insurer and reinsurer of a portion of the Company's domestic and foreign property and casualty insurance risks. The Company owns a 57% interest in Heartland Rail Corporation. Heartland's 80% owned affiliate, Iowa Interstate Railroad, operates a regional railroad in Iowa and Illinois. Alfred C. Toepfer International (Germany) and affiliates, in which the Company has a 50% interest, is one of the world's largest, most respected trading companies specializing in agricultural commodities and processed products. Toepfer has forty-three sales offices worldwide. Compagnie Industrielle et Financiere des Produits Amylaces SA (Luxembourg) and affiliates, of which the Company has a 41.5% interest, owns European agricultural processing plants that are primarily engaged in wet corn milling and wheat starch production. Gruma S.A. de C.V. (Mexico) and affiliates, of which the Company has a 22% interest, is the world's largest producer and marketer of corn flour and tortillas with operations in the U.S., Mexico and Central America. Additionally, the Company has a 20% interest in a joint venture which consists of the combined U.S. corn flour operations of ADM 6 PAGE 7 and Gruma. The Company also has a 40% share, through a joint venture with Gruma, in seven Mexican-based wheat flour mills. 7 PAGE 8 Item 1. BUSINESS-Continued The Company owns a 30% non-voting equity interest in Minnesota Corn Processors (MCP). MCP operates wet corn milling plants in Minnesota and Nebraska. The Company formed a strategic alliance with United Grain Growers of Canada (UGG) which resulted in the Company having approximately 42% ownership of UGG. UGG, with 173 facilities located throughout Western Canada, is involved in grain merchandising, crop input marketing and distribution, livestock production services and farm business communications. Consolidated Nutrition, L.C., a joint venture between the Company and Ag Processing Inc., is a supplier of premium animal feeds and animal health products. The Company has a 50% ownership interest in this joint venture. The Company has a 45% interest in Kalama Export Company, a grain export elevator in Washington. The Company owns a 28% interest in Acatos & Hutchinson, a U.K. based company, that processes and markets edible oil. Eaststarch C.V. (Netherlands), of which the Company has a 50% interest, operates wet corn milling plants in Bulgaria, Hungary, Romania, Slovakia and Turkey. Almidones Mexicanos S.A. (Mexico), of which the Company has a 50% interest, operates a wet corn milling plant in Mexico. Golden Peanut Company, a joint venture between the Company, Gold Kist, Inc. and Alimenta Processing Corporation, is a major supplier of peanuts to both the domestic and export markets. The Company has a 33 1/3% ownership interest in this joint venture. ADM-Riceland Partnership, a joint venture between the Company and Riceland Foods, Inc., is a processor of rice and rice products for institutional and consumer food customers. The Company has a 50% ownership interest in this joint venture. The Company owns a 50% interest in Sociedad Aceitera Oriente, S.A., a Bolivian company that is in the oilseed crushing, refining and bottling business. 8 PAGE 9 Item 1. BUSINESS-Continued International Malting Company, a joint venture between the Company and the LeSaffre Company, operates barley malting plants in the United States, Australia, Canada and France. The Company has a 40% ownership interest in this joint venture. The Company participates in various joint ventures that operate oilseed crushing facilities, oil refineries and related storage facilities in China and Indonesia. The Company is a limited partner in various private equity funds which invest primarily in emerging markets that have agri-processing potential. The percentage of net sales and other operating income by classes of products and services for the last three fiscal years were as follows:
1999 1998 1997 Oilseed products 59% 63% 64% Corn products 13 13 16 Wheat and other milled products 10 9 12 Other products and services 18 15 8 ---- ---- ---- 100% 100% 100% ==== ==== ====
Methods of Distribution Since the Company's customers are principally other manufacturers and processors, its products are distributed mainly in bulk from processing plants or storage facilities directly to the customers' facilities. The Company owns a large number of trucks and trailers and owns or leases large numbers of railroad tank cars and hopper cars to augment those provided by the railroads. The Company uses the inland waterway systems of North and South America and functions as a contract carrier of commodities for its own operations as well as for other companies. The Company owns or leases approximately 2,250 river barges and 52 line-haul towboats. 9 PAGE 10 Item 1. BUSINESS-Continued (ii) Status of new products The Company continues to expand its business through the development and production of new, value-added products. These new products include a wide-range of health and nutrition products known as nutraceuticals or functional foods. The Company has entered the vitamin market with the production of riboflavin and vitamin E and is currently expanding production facilities to produce vitamin C. The Company continues to develop its soy protein meat substitutes, Harvest Burgers and Harvest Burgers for Recipes, its soy protein powdered non-dairy beverage, Nutribev, and its non-dairy frozen dessert, Dairylike. The Company is developing and expanding production facilities to produce soy- derived isoflavones, sterols, granular lecithin, astaxathin, distilled monoglycerides and xanthan gum. Additionally, the Company is in the early stages of development of the antioxidants beta- carotene and tocotrienols. (iii) Source and availability of raw materials Substantially all of the Company's raw materials are agricultural commodities. In any single year, the availability and price of these commodities are subject to wide fluctuations due to unpredictable factors such as weather, plantings, government (domestic and foreign) farm programs, international trade policies, shifts in global demand created by population growth, changes in standard of living and worldwide production of similar and competitive crops. (iv) Patents, trademarks and licenses The Company owns several valuable patents, trademarks and licenses but does not consider its business dependent upon any single or group of patents, trademarks or licenses. (v) Extent to which business is seasonal Since the Company is so widely diversified in global agribusiness markets, there are no material seasonal fluctuations in the manufacture, sale and distribution of its products and services. There is a degree of seasonality in the growing season and procurement of the Company's principal raw materials: oilseeds, wheat, corn and other grains. However, the actual physical movement of the millions of bushels of these crops through the Company's storage and processing facilities is reasonably constant 10 PAGE 11 throughout the year. The worldwide need for food is not Item 1. BUSINESS-Continued seasonal and is ever expanding as is the world's population. (vi) Working capital items Price variations and availability of grain at harvest often cause fluctuations in the Company's inventories and short-term borrowings. (vii) Dependence on single customer No material part of the Company's business is dependent upon a single customer or very few customers. (viii) Amount of backlog Because of the nature of the Company's business, the backlog of orders at year end is not a significant indication of the Company's activity for the current or upcoming year. (ix) Business subject to renegotiation The Company has no business with the government that is subject to renegotiation. (x) Competitive conditions Markets for the Company's products are highly price competitive and sensitive to product substitution. No single company competes with the Company in all of its markets. However, a number of large companies compete with the Company in one or more markets. Major competitors in one or more markets include, but are not limited to, Cargill, Inc., ConAgra, Inc., Corn Products International, Inc., Eridania Beghin-Say and Tate & Lyle. (xi) Research and development expenditures Practically all of the Company's technical efforts and expenditures are concerned with food and feed ingredient products. Special efforts are being made to find improvements in food technology to alleviate the protein malnutrition throughout the world, utilizing the three largest United States crops: corn, soybeans and wheat. 11 PAGE 12 Item 1. BUSINESS-Continued The need to successfully market new or improved food and feed ingredients developed in the Company's research laboratories led to the concept of technical support. The Company is staffed with technical representatives who work closely with customers and potential customers on the development of food and feed products which incorporate Company- produced ingredients. These technical representatives are an adjunct to both the research and sales functions. The Company maintains a research laboratory in Decatur, Illinois where product and process development activities are conducted. To develop new bioproducts and to improve existing bioproducts, new cultures are developed using classical mutation and genetic engineering. Protein research is conducted at facilities in Decatur where meat and dairy pilot plants support application research. Starch and amyolitic enzyme research is done at a laboratory in Clinton, Iowa. Research to support sales and development for bakery products is done at a laboratory in Olathe, Kansas. Research to support sales and development for cocoa and chocolate products is done in Milwaukee, Wisconsin and the Netherlands. The Company maintains research centers in Quincy, Illinois that conduct swine and cattle feeding trials to test new formula feed products and to develop improved feeding efficiencies. The amounts spent during the three years ended June 30, 1999, 1998 and 1997 for such technical efforts were approximately $22.0 million, $17.1 million and $12.2 million, respectively. (xii)Material effects of capital expenditures for environmental protection During 1999, $16.2 million was spent for equipment, facilities and programs for pollution control and compliance with the requirements of various environmental agencies. There have been no material effects upon the earnings and competitive position of the Company resulting from compliance with federal, state and local laws or regulations enacted or adopted relating to the protection of the environment. The Company expects that expenditures for environmental facilities and programs will continue at approximately the present rate with no unusual amounts anticipated for the next two years. 12 PAGE 13 Item 1. BUSINESS-Continued (xiii) Number of employees The number of persons employed by the Company was 23,603 at June 30, 1999. (d)Financial Information About Foreign and Domestic Operations and Export Sales The Company's foreign operations are principally in developed countries and do not entail any undue or unusual business risks. Geographic financial information is set forth in "Note 10 of Notes to Consolidated Financial Statements" of the annual shareholders' report for the year ended June 30, 1999 and is incorporated herein by reference. 13 PAGE 14 Item 1. BUSINESS--Continued (e) Executive Officers and Certain Significant Employees Name Title Age G. Allen Andreas Chairman of the Board of Directors 56 from January 1999. Chief Executive Officer from July 1997. President from July 1997 to February 1999. Counsel to the Executive Committee from September 1994 to July 1997. Vice President from 1988 to July 1997. Martin L. Andreas Senior Vice President from 1989.60 Assistant to the Chief Executive from 1989. Charles P. Archer Treasurer from October 1992. 43 Ronald S. Bandler Assistant Treasurer from January38 1998. Manager of Treasury Operations from 1989 to January 1998. Lewis W. Batchelder Group Vice President from 54 July 1997. Senior Vice President of ADM/Growmark. Various grain merchandising positions since 1971. Charles T. Bayless Executive Vice President from 64 July 1997. Special Assistant to the Chief Executive Officer from February 1999. Group Vice President from January 1993 to July 1997. Howard E. Buoy Group Vice President from 73 January 1993. William H. Camp Group Vice President and President, 50 South American Oilseed Processing Division from March 1999. Vice President from April 1993 to March 1999. Mark J. Cheviron Vice President from July 1997.50 Vice President of Corporate Security and Administrative Services since May 1997. Director of Security since 1980. 14 PAGE 15 Item 1. BUSINESS-Continued Larry H. Cunningham Group Vice President and 55 President of ADM Corn Processing Division from October 1996. President of ADM Food Additives Division from October 1998. Vice President from July 1993 to October 1996. Dennis C. Garceau Vice President from April 1999.52 President of ADM Technical Services Department. Various senior engineering positions from 1969. Craig L. Hamlin Group Vice President from 53 October 1994. President of ADM Milling from 1989. Edward A. Harjehausen Vice President from October49 1992. Burnell D Kraft Senior Vice President from 68 July 1997. Group Vice President from January 1993 to July 1997. President of ADM/Growmark, ADM/Countrymark and Tabor Grain Co. Paul L. Krug, Jr. Vice President from 1991 and 55 President of ADM Investor Services. John E. Long Vice President from July 1996.70 President of ADM Research Division from 1992. Various senior research positions from 1975. Claudia M. Madding Executive Assistant to the Chairman 48 and Chairman Emeritus from January 1999. Secretary to the Executive Committee from September 1997. Executive Assistant to the Chairman from July 1997 to January 1999. Assistant Secretary from 1993. Administrative Assistant to the Chairman from 1984 to 1997. 15 PAGE 16 Item 1. BUSINESS-Continued John D. McNamara President from February 1999. 51 Group Vice President and President of North American Oilseed Processing Division from July 1997 to February 1999. President of ADM Agri-Industries since 1992. Steven R. Mills Controller from October 1994. 44 Various senior treasury and accounting positions from 1979. Stephen W. Minder Corporate Compliance Officer from 43 July 1997. Various senior internal audit positions since 1990. Paul B. Mulhollem Group Vice President from 50 July 1997. Vice President from January 1996 to July 1997. Managing Director of ADM International, Ltd., from 1993. Brian F. Peterson Vice President from January 1996. 57 President of ADM Protein Specialties Division from February 1999. President of ADM BioProducts Division from 1995. Various merchandising positions from 1980. Raymond V. Preiksaitis Group Vice President from47 July 1997. Vice President - Management Information Systems from 1988 to July 1997. John G. Reed Vice President from 1982. 69 Richard P. Reising Senior Vice President from July55 1997. Vice President, Secretary and General Counsel from 1991 to 1997. John D. Rice Group Vice President and President, 45 North American Oilseed Processing Division from February 1999. Vice President from 1993 to 1999. President of ADM Food Oils Division since December 1996. 16 PAGE 17 Item 1. BUSINESS-Continued Scott A. Roberts Assistant Secretary and Assistant 39 General Counsel from July 1997. Member of the Law Department since 1985. Kenneth A. Robinson Vice President from January 1996. 52 Vice President of ADM Processing Division from 1985. Douglas J. Schmalz Vice President and Chief 53 Financial Officer from 1986. Controller from 1985 to 1994. David J. Smith Vice President, Secretary and 44 General Counsel from July 1997. Assistant General Counsel from 1995 to 1997. Assistant Secretary from 1988 to 1997. Member of the Law Department since 1981. Stephen H. Yu Vice President from January 1996. 39 Managing Director of ADM Asia-Pacific, Ltd., from 1993. Officers of the registrant are elected by the Board of Directors for terms of one year and until their successors are duly elected and qualified. 17 PAGE 18 Item 2. PROPERTIES (a) Processing Facilities The Company owns, leases, or has a 50% or greater interest in the following processing plants:
United Foreign Total States Owned 196 91 287 Leased 2 2 4 Joint Venture 49 28 77 ____ ____ ____ 247 121 368 === === ===
The Company's operations are such that most products are efficiently processed near the source of raw materials. Consequently, the Company has many plants located strategically in grain producing areas. The annual volume processed will vary depending upon availability of raw material and demand for finished products. The Company operates thirty-nine domestic and sixteen foreign oilseed crushing plants with a daily processing capacity of approximately 105,000 metric tons (3.9 million bushels). The domestic plants are located in Alabama, Arkansas, Georgia, Illinois, Indiana, Iowa, Kansas, Louisiana, Minnesota, Missouri, Mississippi, Nebraska, North Dakota, Ohio, South Carolina, Tennessee and Texas. The foreign plants are located in Brazil, Canada, England, Germany, India, Mexico, the Netherlands and Poland. The Company also has an interest, through a joint venture, in an oilseed crushing plant in Bolivia. The Company operates four wet corn milling and two dry corn milling plants with a daily grind capacity of approximately 41,700 metric tons (1.6 million bushels). These plants and other related properties, including corn germ extraction and corn gluten pellet plants, are located in Illinois, Iowa, New York and North Dakota. The Company also has interests, through joint ventures, in corn milling plants in Bulgaria, Hungary, Mexico, Romania, Slovakia and Turkey. The Company operates twenty-nine domestic wheat and durum flour mills, a domestic bulgur plant, three domestic corn flour mills, two domestic milo mills, one foreign oat mill, and sixteen foreign flour mills with a total daily milling capacity of approximately 30,800 metric tons (1.1 million bushels). The Company also operates seven bakery mix and specialty ingredient plants, two pasta plants, and two starch and gluten plants. These plants and other related properties are located in California, Illinois, Indiana, Iowa, Kansas, Louisiana, Minnesota, Missouri, Nebraska, 18 PAGE 19 Item 2. PROPERTIES New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Washington, Wisconsin, Barbados, Belize, Canada, England and Jamaica. The Company also has an interest, through a joint venture, in rice milling plants in Arkansas and Louisiana. The Company operates sixteen domestic oilseed refineries in Arkansas, Georgia, Illinois, Indiana, Iowa, Minnesota, Missouri, Nebraska, North Dakota, Tennessee and Texas as well as twelve foreign refineries in Brazil, Canada, Germany, India, the Netherlands and Poland. The Company also has interests, through joint ventures, in oilseed refineries in Texas, Bolivia and England. The Company produces packaged oils in California, Georgia, Illinois, Brazil and Germany and has interests, through joint ventures, in packaged oils plants in Bolivia and England. Soy protein specialty products are produced in Illinois and the Netherlands, lecithin products are produced in Arkansas, Illinois, Iowa, Nebraska, Canada, Germany and the Netherlands, and Vitamin E is produced in Illinois. Cotton linter pulp is produced in Tennessee and cottonseed flour is produced in Texas. The Company produces feed and food additives at seven bioproducts plants located in Illinois, North Carolina, China and Ireland. The Company also operates thirteen domestic and nine foreign formula feed and animal health and nutrition plants. The domestic plants are located in Georgia, Illinois, Indiana, Iowa, Nebraska, Ohio, Texas and Washington. The foreign plants are located in Barbados, Belize, Canada, China, Ireland and Puerto Rico. The Company also has interests, through joint ventures, in formula feed plants in Arkansas, Colorado, Georgia, Illinois, Iowa, Indiana, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, Ohio, Pennsylvania, Tennessee, Wisconsin, Canada, China, Puerto Rico and Trinidad. The Company operates five domestic and eleven foreign chocolate and cocoa bean processing plants. The domestic plants are located in Georgia, Massachusetts, New Jersey, North Carolina and Wisconsin, and the foreign plants are located in Brazil, Canada, China, England, France, Germany, the Netherlands, Poland and Singapore. The Company operates forty-nine domestic and four foreign edible bean processing facilities located in California, Colorado, Idaho, Kansas, Michigan, Minnesota, North Dakota, Wyoming and Canada. The Company operates various other food and food ingredient plants in England, France, Germany and Jamaica. 19 PAGE 20 Item 2. PROPERTIES Procurement Facilities The Company operates two hundred twenty-four domestic terminal, country, and river elevators covering the major grain producing states, including one hundred fifty-seven country elevators and sixty-six terminal and river loading facilities including four grain export elevators in Louisiana and Maryland. Elevators are located in Arkansas, Colorado, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, Tennessee and Texas. Domestic grain terminals, elevators and processing plants have an aggregate storage capacity of approximately 475 million bushels. The Company also has interests, through joint ventures, in seven domestic grain elevators located in Minnesota and South Dakota. Domestic joint venture grain terminals and elevators have an aggregate storage capacity of approximately 5.8 million bushels. The Company also operates one hundred sixty-four foreign grain elevators with an aggregate storage capacity of approximately 136 million bushels, including four export facilities located in Brazil. These elevators are located in Argentina, Barbados, Brazil, Canada, Germany, Paraguay and Uruguay. The Company also has an interest, through a joint venture, in fifteen grain elevators in Bolivia with an aggregate storage capacity of approximately 6.4 million bushels. Six cotton gins are located in Texas and serve the cottonseed crushing plants in that area. 20 PAGE 21 Item 3. LEGAL PROCEEDINGS ENVIRONMENTAL MATTERS In 1993, the State of Illinois Environmental Protection Agency ("Illinois EPA") brought administrative enforcement proceedings arising out of the Company's alleged failure to obtain proper permits for certain pollution control equipment at one of the Company's processing facilities in Illinois. The Company and Illinois EPA executed a agreement which is currently before the Illinois Pollution Control Board for approval. In June 1999, the United States Environmental Protection Agency issued a Notice of Violations involving matters covered under the pending State settlement. In 1998, the Illinois EPA filed an administrative enforcement proceeding arising out of certain alleged permit exceedances relating to one of the Company's production facilities located in Illinois. Also in 1998, the Company voluntarily reported to the Illinois EPA certain permit exceedances relating to another Illinois production facility operated by the Company. Also in 1998, the State of Illinois filed a civil administrative action alleging violations of the Illinois Environmental Protection Act, and regulations promulgated thereunder, arising from a one time release of denatured ethanol at one of its Illinois distribution facilities. In management's opinion the settlements and the remaining proceedings, all seeking compliance with applicable environmental permits and regulations, will not, either individually or in the aggregate, have a material adverse affect on the Company's financial condition or results of operations. The Company is involved in approximately 30 administrative and judicial proceedings in which it has been identified as a potentially responsible party (PRP) under the federal Superfund law and its state analogs for the study and clean- up of sites contaminated by material discharged into the environment. In all of these matters, there are numerous PRPs. Due to various factors such as the required level of remediation and participation in the clean-up effort by others, the Company's future clean-up costs at these sites cannot be reasonably estimated. However, in management's opinion, these proceedings will not, either individually or in the aggregate, have a material adverse affect on the Company's financial condition or results of operations. LITIGATION REGARDING ALLEGED ANTICOMPETITIVE PRACTICES The Company and certain of its current and former officers and directors are currently defendants in various lawsuits related to alleged anticompetitive practices by the Company as described in more detail below. The Company and the individual defendants named in these actions intend to vigorously defend the actions unless they can be settled on terms deemed acceptable to the parties. The Company has paid and intends to continue to pay the legal expenses of its current and former officers and directors and to indemnify these persons with respect to these actions in accordance with Article X of the Bylaws of the Company. 21 PAGE 22 GOVERNMENTAL INVESTIGATIONS Federal grand juries in the Northern Districts of Illinois, California and Georgia, under the direction of the United States Department of Justice ("DOJ"), have been investigating possible violations by the Company and others with respect to the sale of lysine, citric acid and high fructose corn syrup, respectively. In connection with an agreement with the DOJ in fiscal 1997, the Company paid the United States fines of $100 million. This agreement constitutes a global resolution of all matters between the DOJ and the Company and brought to a close all DOJ investigations of the Company. The federal grand juries in the Northern Districts of Illinois (lysine) and Georgia (high fructose corn syrup) have been closed. The Company has received notice that certain foreign governmental entities were commencing investigations to determine whether anticompetitive practices occurred in their jurisdictions. Except for the investigations being conducted by the Commission of the European Communities and the Mexican Federal Competition Commission as described below, all such matters have been resolved as previously reported. In June 1997, the Company and several of its European subsidiaries were notified that the Commission of the European Communities had initiated an investigation as to possible anticompetitive practices in the amino acid markets, in particular the lysine market, in the European Union. On October 29, 1998, the Commission of the European Communities initiated formal proceedings against the Company and others and adopted a Statement of Objections. The reply of the Company was filed on February 1, 1999 and the hearing was held on March 1, 1999. On August 8, 1999, the Commission of the European Communities adopted a supplementary Statement of Objections expanding the period of involvement as to certain other companies. In September 1997, the Company received a request for information from the Commission of the European Communities with respect to an investigation being conducted by that Commission into the possible existence of certain agreements and/or concerted practices in the citric acid market in the European Union. In November 1998, a European subsidiary of the Company received a request for information from the Commission of the European Communities with respect to an investigation being conducted by that Commission into the possible existence of certain agreements and/or concerted practices in the sodium gluconate market in the European Union. On February 11, 1999 a Mexican subsidiary of the Company was notified that the Mexican Federal Competition Commission had initiated an investigation as to possible anticompetitive practices in the citric acid market in Mexico. The ultimate outcome and materiality of the proceedings of the Commission of the European Communities cannot presently be determined. The Company may become the subject of similar antitrust investigations conducted by the applicable regulatory authorities of other countries. 22 PAGE 23 HIGH FRUCTOSE CORN SYRUP ACTIONS The Company, along with other companies, has been named as a defendant in thirty-one antitrust suits involving the sale of high fructose corn syrup. Thirty of these actions have been brought as putative class actions. FEDERAL ACTIONS. Twenty-two of these putative class actions allege violations of federal antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup, and seek injunctions against continued alleged illegal conduct, treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative classes in these cases comprise certain direct purchasers of high fructose corn syrup during certain periods in the 1990s. These twenty-two actions have been transferred to the United States District Court for the Central District of Illinois and consolidated under the caption In Re High Fructose Corn Syrup Antitrust Litigation, MDL No. 1087 and Master File No. 95-1477. The parties are currently appealing certain discovery rulings to the United States Court of Appeals for the Seventh Circuit. On January 14, 1997, the Company, along with other companies, was named a defendant in a non-class action antitrust suit involving the sale of high fructose corn syrup and corn syrup. This action which is encaptioned Gray & Co. v. Archer Daniels Midland Co., et al, No. 97-69- AS, and was filed in federal court in Oregon, alleges violations of federal antitrust laws and Oregon and Michigan state antitrust laws, including allegations that defendants conspired to fix, raise, maintain and stabilize the price of corn syrup and high fructose corn syrup, and seeks treble damages, attorneys' fees and costs of an unspecified amount. This action was transferred for pretrial proceedings to the United States District Court for the Central District of Illinois. STATE ACTIONS. The Company, along with other companies, also has been named as a defendant in seven putative class action antitrust suits filed in California state court involving the sale of high fructose corn syrup. These California actions allege violations of the California antitrust and unfair competition laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup, and seek treble damages of an unspecified amount, attorneys fees and costs, restitution and other unspecified relief. One of the California putative classes comprises certain direct purchasers of high fructose corn syrup in the State of California during certain periods in the 1990s. This action was filed on October 17, 1995 in Superior Court for the County of Stanislaus, California and encaptioned Kagome Foods, Inc. v Archer-Daniels-Midland Co. et al., Civil Action No. 37236. This action has been removed to federal court and consolidated with the federal class action litigation pending in the Central District of Illinois referred to above. The other six California putative classes comprise certain indirect purchasers of high fructose corn syrup and dextrose in the State of California during certain periods in the 1990s. One such action was filed on July 21, 1995 in the Superior Court of the County of Los Angeles, California and is encaptioned Borgeson v. 23 PAGE 24 Archer-Daniels-Midland Co., et al., Civil Action No. BC131940. This action and four other indirect purchaser actions have been coordinated before a single court in Stanislaus County, California under the caption, Food Additives (HFCS) cases, Master File No. 39693. The other four actions are encaptioned, Goings v. Archer Daniels Midland Co., et al., Civil Action No. 750276 (Filed on July 21, 1995, Orange County Superior Court); Rainbow Acres v. Archer Daniels Midland Co., et al., Civil Action No. 974271 (Filed on November 22, 1995, San Francisco County Superior Court); Patane v. Archer Daniels Midland Co., et al., Civil Action No. 212610 (Filed on January 17, 1996, Sonoma County Superior Court); and St. Stan's Brewing Co. v. Archer Daniels Midland Co., et al., Civil Action No. 37237 (Filed on October 17, 1995, Stanislaus County Superior Court). On October 8, 1997, Varni Brothers Corp. filed a complaint in intervention with respect to the coordinated action pending in Stanislaus County Superior Court, asserting the same claims as those advanced in the consolidated class action. The parties are in the midst of discovery in the coordinated action. The Company, along with other companies, also has been named a defendant in a putative class action antitrust suit filed in Alabama state court. The Alabama action alleges violations of the Alabama, Michigan and Minnesota antitrust laws, including allegations that defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup, and seeks an injunction against continued illegal conduct, damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in the Alabama action comprises certain indirect purchasers in Alabama, Michigan and Minnesota during the period March 18, 1994 to March 18, 1996. This action was filed on March 18, 1996 in the Circuit Court of Coosa County, Alabama, and is encaptioned Caldwell v. Archer-Daniels-Midland Co., et al., Civil Action No. 96-17. On April 23, 1997, the court granted the defendants' motion to sever and dismiss the non-Alabama claims. The remaining parties are in the midst of discovery in this action. LYSINE ACTIONS The Company, along with other companies, had been named as a defendant in twenty-two putative class action antitrust suits involving the sale of lysine. Except for the actions specifically described below, all such suits have been settled, dismissed or withdrawn. CANADIAN ACTION. The Company, along with other companies, has been named as a defendant in one putative class action antitrust suit filed in Ontario Court (General Division) in which the plaintiffs allege the defendants reached agreements with one another as to the price at which each of them would sell lysine to customers in Ontario and as to the total volume of lysine that each company would supply in Ontario in violation of Sections 45 (1)(c) and 61(1)(b)of the Competition Act. The plaintiffs seek C$25,000,000 for violations of the Competition Act, C$10,000,000 in punitive, exemplary and aggravated damages, interest and costs of the action. This action was served upon the Company on June 11, 1999 and is encaptioned Rein Minnema and Minnema Farms Ltd. v. Archer-Daniels-Midland Company, et al., Court File No. G23495-99. 24 PAGE 25 STATE ACTION. The Company has been named as a defendant, along with other companies, in one putative class action antitrust suit alleging violations of the Alabama antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of lysine, and seeking an injunction against continued alleged illegal conduct, damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in this action comprises certain indirect purchasers of lysine in the State of Alabama during certain periods in the 1990s. This action was filed on August 17, 1995 in the Circuit Court of DeKalb County, Alabama, and is encaptioned Ashley v. Archer-Daniels-Midland Co., et al., Civil Action No. 95- 336. On March 13, 1998, the court denied plaintiff's motion for class certification. Subsequently, the plaintiff amended his complaint to add approximately 300 individual plaintiffs. CITRIC ACID ACTIONS The Company, along with other companies, had been named as a defendant in eleven putative class action antitrust suits and two non-class action antitrust suits involving the sale of citric acid. Except for the action specifically described below, all such suits have been settled or dismissed. STATE ACTIONS. The Company, along with other companies, has been named as a defendant in one putative class action antitrust suit filed in Alabama state court involving the sale of citric acid. This action alleges violations of the Alabama antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of citric acid, and seeks an injunction against continued alleged illegal conduct, damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in the Alabama action comprises certain indirect purchasers of citric acid in the State of Alabama from July 1993 until July 1995. This action was filed on July 27, 1995 in the Circuit Court of Walker County, Alabama and is encaptioned Seven Up Bottling Co. of Jasper, Inc. v. Archer-Daniels-Midland Co., et al., Civil Action No. 95- 436. On June 25, 1999, the Alabama Supreme Court reversed the lower court's denial of defendants' motion to dismiss, and held that the Alabama antitrust laws apply only to intrastate commerce. Plaintiff subsequently filed a motion for reconsideration of this decision and that motion currently is pending before the Alabama Supreme Court. HIGH FRUCTOSE CORN SYRUP/CITRIC ACID STATE CLASS ACTIONS The Company, along with other companies, has been named as a defendant in five putative class action antitrust suits involving the sale of both high fructose corn syrup and citric acid. Two of these actions allege violations of the California antitrust and unfair competition laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seek treble damages of an unspecified amount, attorneys fees and costs, restitution and other unspecified relief. The putative class in one of these California cases 25 PAGE 26 comprises certain direct purchasers of high fructose corn syrup and citric acid in the State of California during the period January 1, 1992 until at least October 1995. This action was filed on October 11, 1995 in the Superior Court of Stanislaus County, California and is entitled Gangi Bros. Packing Co. v. Archer-Daniels-Midland Co., et al., Civil Action No. 37217. The putative class in the other California case comprises certain indirect purchasers of high fructose corn syrup and citric acid in the state of California during the period October 12, 1991 until November 20, 1995. This action was filed on November 20, 1995 in the Superior Court of San Francisco County and is encaptioned MCFH, Inc. v. Archer-Daniels-Midland Co., et al., Civil Action No. 974120. The California Judicial Council has bifurcated the citric acid and high fructose corn syrup claims in these actions and coordinated them with other actions in San Francisco County Superior Court and Stanislaus County Superior Court. As noted in prior filings, the Company accepted a settlement agreement with counsel for the citric acid plaintiff class. This settlement received final court approval and the case was dismissed on September 30, 1998. The Company, along with other companies, also has been named as a defendant in at least one putative class action antitrust suit filed in West Virginia state court involving the sale of high fructose corn syrup and citric acid. This action also alleges violations of the West Virginia antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in the West Virginia action comprises certain entities within the State of West Virginia that purchased products containing high fructose corn syrup and/or citric acid for resale from at least 1992 until 1994. This action was filed on October 26, 1995, in the Circuit Court for Boone County, West Virginia, and is encaptioned Freda's v. Archer-Daniels-Midland Co., et al., Civil Action No. 95-C- 125. The Company, along with other companies, also has been named as a defendant in a putative class action antitrust suit filed in the Superior Court for the District of Columbia involving the sale of high fructose corn syrup and citric acid. This action alleges violations of the District of Columbia antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in the District of Columbia action comprises certain persons within the District of Columbia that purchased products containing high fructose corn syrup and/or citric acid during the period January 1, 1992 through December 31, 1994. This action was filed on April 12, 1996 in the Superior Court for the District of Columbia, and is encaptioned Holder v. Archer-Daniels-Midland Co., et al., Civil Action No. 96-2975. On November 13, 1998, plaintiff's motion for class certification was granted. The Company, along with other companies, has been named as a defendant in a putative class action antitrust suit filed in Kansas state court involving the sale of high fructose corn syrup and citric acid. This action alleges violations of the Kansas antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, court 26 PAGE 27 costs and other unspecified relief. The putative class in the Kansas action comprises certain persons within the State of Kansas that purchased products containing high fructose corn syrup and/or citric acid during at least the period January 1, 1992 through December 31, 1994. This action was filed on May 7, 1996 in the District Court of Wyandotte County, Kansas and is encaptioned Waugh v. Archer-Daniels-Midland Co., et al., Case No. 96-C-2029. Plaintiff's motion for class certification is currently pending. HIGH FRUCTOSE CORN SYRUP/CITRIC ACID/LYSINE STATE CLASS ACTIONS The Company, along with other companies, has been named as a defendant in six putative class action antitrust suits filed in California state court involving the sale of high fructose corn syrup, citric acid and/or lysine. These actions allege violations of the California antitrust and unfair competition laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup, citric acid and/or lysine, and seek treble damages of an unspecified amount, attorneys fees and costs, restitution and other unspecified relief. One of the putative classes comprises certain direct purchasers of high fructose corn syrup, citric acid and/or lysine in the State of California during a certain period in the 1990s. This action was filed on December 18, 1995 in the Superior Court for Stanislaus County, California and is encaptioned Nu Laid Foods, Inc. v. Archer-Daniels-Midland Co., et al., Civil Action No. 39693. The other five putative classes comprise certain indirect purchasers of high fructose corn syrup, citric acid and/or lysine in the State of California during certain periods in the 1990s. One such action was filed on December 14, 1995 in the Superior Court for Stanislaus County, California and is encaptioned Batson v. Archer-Daniels-Midland Co., et al., Civil Action No. 39680. The other actions are encaptioned Nu Laid Foods, Inc. v. Archer Daniels Midland Co., et al., No 39693 (Filed on December 18, 1995, Stanislaus County Superior Court); Abbott v. Archer Daniels Midland Co., et al., No. 41014 (Filed on December 21, 1995, Stanislaus County Superior Court); Noldin v. Archer Daniels Midland Co., et al., No. 41015 (Filed on December 21, 1995, Stanislaus County Superior Court); Guzman v. Archer Daniels Midland Co., et al., No. 41013 (Filed on December 21, 1995, Stanislaus County Superior Court) and Ricci v. Archer Daniels Midland Co., et al., No. 96-AS-00383 (Filed on February 6, 1996, Sacramento County Superior Court). As noted in prior filings, the plaintiffs in these actions and the lysine defendants have executed a settlement agreement that has been approved by the court and the California Judicial Council has bifurcated the citric acid and high fructose corn syrup claims and coordinated them with other actions in San Francisco County Superior Court and Stanislaus County Superior Court. SODIUM GLUCONATE ACTIONS The Company, along with other companies, has been named as a defendant in three federal antitrust class actions involving the sale of sodium gluconate. These actions allege violations of federal antitrust laws, including allegations that the defendants agreed to fix, raise and maintain at artificially high levels the prices of sodium gluconate, and seek various relief, including treble damages of an unspecified 27 PAGE 28 amount, attorneys fees and costs, and other unspecified relief. The putative classes in these cases comprise certain direct purchasers of sodium gluconate during periods in the 1990s. One such action was filed on December 2, 1997, in the United States District Court for the Northern District of California and is encaptioned Chemical Distribution, Inc, v. Akzo Nobel Chemicals BV, et al., No. C -97-4141 (CW). The second action was filed on December 31, 1997, in the United States District Court for the District of Massachusetts and is encaptioned Stetson Chemicals, Inc. v. Akzo Nobel Chemicals BV, 97-CV-1285 RCL. The third action, which was amended on February 12, 1998 to name the Company as a defendant, was filed in the United States District Court for the Northern District of Illinois. On April 9, 1998, the Judicial Panel on Multidistrict Litigation transferred all three sodium gluconate actions to the United States District Court for the Northern District of California for coordinated or consolidated pretrial proceedings. On October 29, 1998, the Company executed a Settlement Agreement with counsel for the plaintiff class in which, among other things, the Company agreed to pay $69,600 to the plaintiff class. On May 28, 1999, the court granted final approval of the settlement and dismissed the action. MONOSODIUM GLUTAMATE ACTION The Company, along with a least one other company, has been named as a defendant in one putative class action antitrust suit filed in California state court involving the sale of monosodium glutamate. This action alleges violations of California antitrust and unfair competition laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the price of monosodium glutamate, and seeks treble damages of an unspecified amount, restitution, attorneys' fees and costs, and other unspecified relief. The putative class in this action comprises certain indirect purchasers of monosodium glutamate in the State of California from January 1, 1993 until July 1999. This action originally was filed on June 25, 1999 in the Superior Court of San Francisco County and is encaptioned Fu's Garden Restaurant v. Ajinomoto U.S.A., Inc., et al, Civil Action No. 304471. OTHER The Company has made provisions to cover certain legal proceedings and related costs and expenses as described in the notes to the consolidated financial statements and Management's Discussion of Operations and Financial Condition. However, because of the early stage of other putative class actions and proceedings described above, including those related to high fructose corn syrup, the ultimate outcome and materiality of these matters cannot presently be determined. Accordingly, no provision for any liability that may result therefrom has been made in the consolidated financial statements. 28 PAGE 29 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information responsive to this Item is set forth in "Common Stock Market Prices and Dividends" of the annual shareholders' report for the year ended June 30, 1999 and is incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA Information responsive to this Item is set forth in the "Ten-Year Summary of Operating, Financial and Other Data" of the annual shareholders' report for the year ended June 30, 1999 and is incorporated herein by reference. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information responsive to this Item is set forth in "Management's Discussion of Operations and Financial Condition" of the annual shareholders' report for the year ended June 30, 1999 and is incorporated herein by reference. Item 7A.QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information responsive to this Item is set forth in "Management's Discussion of Operations and Financial Condition" of the annual shareholders' report for the year ended June 30, 1999 and is incorporated herein by reference. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements and supplementary data included in the annual shareholders' report for the year ended June 30, 1999 are incorporated herein by reference: Consolidated balance sheets--June 30, 1999 and 1998 Consolidated statements of earnings--Years ended June 30, 1999, 1998 and 1997 Consolidated statements of shareholders' equity--Years ended June 30, 1999, 1998 and 1997 Consolidated statements of cash flows--Years ended June 30, 1999, 1998 and 1997 Notes to consolidated financial statements--June 30, 1999 Summary of Significant Accounting Policies Report of Independent Auditors Quarterly Financial Data (Unaudited) 29 PAGE 30 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to directors and executive officers is set forth in "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" of the definitive proxy statement for the Company's annual meeting of Stockholders to be held on October 21,1999 and is incorporated herein by reference. Certain information with respect to executive officers is included in Item 1(e) of this report. Item 11. EXECUTIVE COMPENSATION Information responsive to this Item is set forth in "Executive Compensation" and "Compensation Committee Report" of the definitive proxy statement for the Company's annual meeting of Stockholders to be held on October 21,1999 and is incorporated herein by reference. Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information responsive to this Item is set forth in "Principal Holders of Voting Securities" and "Election of Directors" of the definitive proxy statement for the Company's annual meeting of Stockholders to be held on October 21,1999 and is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information responsive to this Item is set forth in "Certain Relationships and Related Transactions" of the definitive proxy statement for the Company's annual meeting of Stockholders to be held on October 21,1999 and is incorporated herein by reference. PART IV Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) The following consolidated financial statements and other financial data of the registrant and its subsidiaries, included in the annual report of the registrant to its shareholders for the year ended June 30, 1999, are incorporated by reference in Item 8, and are also incorporated herein by reference: Consolidated balance sheets--June 30, 1999 and 1998 Consolidated statements of earnings--Years ended June 30, 1999, 1998 and 1997 Consolidated statements of shareholders' equity-- Years ended June 30, 1999, 1998 and 1997 30 PAGE 31 Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ` --Continued Consolidated statements of cash flows--Years ended June 30, 1999, 1998 and 1997 Notes to consolidated financial statements--June 30, 1999 Summary of Significant Accounting Policies Quarterly Financial Data (Unaudited) (a)(2) Schedules are not applicable and therefore not included in this report. Financial statements of affiliates accounted for by the equity method have been omitted because they do not, considered individually, constitute significant subsidiaries. (a)(3) LIST OF EXHIBITS (3) (i)Composite Certificate of Incorporation, as amended. (ii)Bylaws filed on May 14, 1999 as Exhibit 3(ii) to Form 10Q for the quarter ended March 31, 1999, are incorporated herein by reference. (4) Instruments defining the rights of security holders, including: (i)Indenture dated May 1, 1982, between the re gistrant and Morgan Guaranty Trust Company of New York, as Trustee (incorporated by reference to Exhibit 4(c) to Registration Statement No. 2- 77368), relating to the $400,000,000 Zero Coupon Debentures due May 1, 2002; (ii)Indenture dated as of March 1, 1984 between the registrant and The Chase Manhattan Bank, formerly known as Chemical Bank, as Trustee (incorporated by reference to Exhibit 4 to the registrant's Current Report on Form 8-K dated August 3, 1984 (File No. 1-44)), as supplemented by the Supplemental Indenture dated as of January 9, 1986, between the registrant and Chemical Bank, as Trustee (incorporated by reference to Exhibit 4 to the registrant's Current Report on Form 8-K dated January 9, 1986 (File No. 1-44)), relating to the $100,000,000 - 10 1/4% Debentures due January 15, 2006; 31 PAGE 32 Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K --Continued (iii)Indenture dated June 1, 1986 between the registrant and The Chase Manhattan Bank, formerly known as Chemical Bank, (as successor to Manufacturers Hanover Trust Company), as Trustee (incorporated by reference to Exhibit 4(a) to Registration Statement No. 33-6721), and Supplemental Indenture dated as of August 1, 1989 between the registrant and Chemical Bank (as successor to Manufacturers Hanover Trust Company), as Trustee (incorporated by reference to Exhibit 4(c) to Post-Effective Amendment No. 3 to Registration Statement No. 33-6721), relating to the $300,000,000 - 8 7/8% Debentures due April 15, 2011, the $300,000,000 - 8 3/8% Debentures due April 15, 2017, the $300,000,000 - 8 1/8% Debentures due June 1, 2012, the $250,000,000 - 6 1/4% Notes due May 15, 2003, the $250,000,000 - 7 1/8% Debentures due March 1, 2013, the $350,000,000 - 7 1/2% Debentures due March 15, 2027, the $200,000,000 - 6 3/4% Debentures due December 15, 2027, the $250,000,000 - 6 7/8% Debentures due December 15, 2097, the $196,210,000 - 5 7/8% Debentures due November 15, 2010, and the $300,000,000 - 6 5/8% Debentures due May 1, 2029. Copies of constituent instruments defining rights of holders of long-term debt of the Company and Subsidiaries, other than the Indentures specified herein, are not filed herewith, pursuant to Instruction (b)(4) (iii)(A) to Item 601 of Regulation S-K, because the total amount of securities authorized under any such instrument does not exceed 10% of the total assets of the Company and Subsidiaries on a consolidated basis. The registrant hereby agrees that it will, upon request by the Commission, furnish to the Commission a copy of each such instrument. (10) Material Contracts--Copies of the Company's stock option and stock unit plans and its savings and investment plans, pursuant to Instruction (10)(iii)(A) to Item 601 of Regulation S-K, each of which is a management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K, are incorporated herein by reference as follows: (i)Registration Statement No. 2-91811 on Form S-8 dated June 22, 1984 (definitive Prospectus dated July 16, 1984) relating to the Archer Daniels Midland 1982 Incentive Stock Option Plan. (ii)Registration Statement No. 33-49409 on Form S- 8 dated March 15, 1993 relating to the Archer Daniels M idland 1991 Incentive Stock Option Plan and Archer Dan iels Midland Company Savings and Investment Plan. 32 PAGE 33 Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K --Continued (iii)Registration Statement No. 333-39605 on Fo rm S-8 dated November 5, 1997 relating to the ADM Savings and Investment Plan for Salaried Employees and the ADM Savings and Investment Plan for Hourly Employees. (iv)Registration Statement No. 333-51381 on For m S-8 dated April 30, 1998 relating to the Archer-Daniels-Midland Company 1996 Stock Option Plan. (v)The Archer-Daniels-Midland Company Stock Uni t Plan for Nonemployee Directors (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997). (vi)Registration Statement No. 333-75073 on For m S-8 dated March 26, 1999 relating to the ADM Employee Stock Ownership Plan for Salaried Employees and the ADM Employee Stock Ownership Plan for Hourly Employees. (13)Portions of annual report to shareholders incorporated by reference (21)Subsidiaries of the registra nt (23)Consent of independent audit ors (24) Powers of attorney (27) Financial Data Schedule (b) Reports on Form 8-K A Form 8-K was not filed during the quarter ended June 30, 1999. 33 PAGE 34 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: September 22, 1999 ARCHER-DANIELS-MIDLAND COMPANY By: /s/ D. J. Smith D. J. Smith Vice President, Secretary and General Counsel Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on September 22, 1999, by the following persons on behalf of the Registrant and in the capacities indicated. /s/ G. A. Andreas /s/ M. B. Mulroney G. A. Andreas*, M. B. Mulroney*, Chief Executive and Director Director (Principal Executive Officer) /s/ R. S. Strauss /s/D. J. Schmalz R. S. Strauss*, D. J. Schmalz Director Vice President and Chief Financial Officer /s/ J. K. Vanier (Principal Financial Officer) J. K. Vanier*, Director /s/S. R. Mills S. R. Mills /s/ O. G. Webb Controller O. G. Webb*, (Controller Director /s/ D. O. Andreas /s/ A. Young D. O. Andreas* A. Young*, Director Director /s/ J. R. Block /s/ D. J. Smith J. R. Block*, Attorney-in-Fact Director /s/ R. R. Burt R. R. Burt*, Director /s/ Mrs. M. H. Carter Mrs. M. H. Carter*, Director /s/ G. O. Coan G. O. Coan*, Director /s/ F. R. Johnson F. R. Johnson*, Director *Powers of Attorney authorizing R. P. Reising, D. J. Schmalz and D. J. Smith and each of them, to sign the Form 10-K on behalf of the above-named officers and directors of the Company copies of which are being filed with the Securities and Exchange Commission. 34 EX-13 2 ANNUALREPORT PAGE 1 MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION - JUNE 30, 1999 Operations The Company is in one business segment - procuring, transporting, storing, processing and merchandising agricultural commodities and products. A summary of net sales and other operating income by classes of products and services is as follows:
1999 1998 1997 (in millions) Oilseed products $8,494 $10,15 $8,860 2 Corn products 1,855 2,154 2,171 Wheat and other milled 1,378 1,491 1,631 products Other products 2,556 2,312 1,191 $14,28 $16,10 $13,85 3 9 3
1999 compared to 1998 Net sales and other operating income decreased 11 percent to $14.3 billion for 1999 due principally to decreases in average selling prices of 11 percent and in volumes of products sold of 7 percent. These decreases were partially offset by sales of $852 million attributable to recently acquired operations. Sales of oilseed products decreased 16 percent to $8.5 billion due primarily to lower average selling prices reflecting the lower cost of raw materials. Sales volumes of oilseed products decreased by 8 percent due to weak demand from Asia and Eastern Europe for both protein meals and vegetable oils as well as new domestic industry production capacity more than offsetting good domestic demand for oilseed products. These decreases were partially offset by sales attributable to recently acquired operations. Sales of corn products decreased 14 percent for the year to $1.9 billion as lower average selling prices for the Company's alcohol and amino acid products more than offset the increase in average selling price of the Company's sweetener products. Low gasoline prices have negatively affected average sales prices of fuel alcohol. Excess production capacity in the amino acid industry as well as low protein meal and corn prices have depressed selling prices of the Company's amino acid products to historically low levels. Sales volumes of both the alcohol and sweetener products decreased as excess production capacity in these industries resulted in difficult market conditions. Sales of wheat and other milled products decreased 8 percent to $1.4 billion due principally to lower average selling prices reflecting the lower cost of raw materials. Sales volumes increased slightly for the year due to sales attributable to recently acquired operations. The increase in sales of other products and services was due principally to the sales volumes attributable to the Company's recently acquired feed and cocoa businesses as well as increased grain merchandising and transportation revenues. These increases were partially offset by lower average 1 PAGE 2 selling prices for cocoa products. Cost of products sold and other operating costs decreased $1.7 billion to $13.1 billion due primarily to lower average raw material costs arising from an abundant worldwide supply of agricultural commodities and decreased sales volumes. These decreases were partially offset by costs related to recently acquired operations. Gross profit decreased $149 million to $1.2 billion in 1999 due primarily to selling price declines exceeding declines in lower average raw material costs and to lower volumes of products sold. These decreases were partially offset by gross profit attributable to recently acquired operations and to increased grain merchandising and transportation margins. Selling, general and administrative expenses increased $40 million to $701 million due principally to $78 million of expenses attributable to recently acquired operations. This increase was partially offset by a decline in on-going expenses, primarily legal and litigation related costs. Other expense of $111 million for 1999 was relatively unchanged from 1998. Increased interest expense due principally to higher average borrowing levels and decreased equity in earnings of unconsolidated affiliates due primarily to lower valuations of the Company's private equity fund investments were offset by increased gains on marketable securities transactions. The decrease in income taxes for 1999 resulted primarily from lower pretax earnings. The Company's effective income tax rate for 1999 was 33% compared to an effective rate of 34% for 1998. In 1999, the Company incurred an extraordinary charge, net of tax, of $15 million resulting from the repurchase of a portion of its 7% debentures due May 2011. 1998 compared to 1997 Net sales and other operating income increased $2.3 billion to $16.1 billion for 1998 due primarily to sales attributable to recently acquired operations and to a 13 percent increase in volumes of products sold. These increases were partially offset by an 8 percent decrease in average selling prices. Sales of oilseed products increased 15 percent to $10.2 billion due principally to higher sales volumes reflecting strong worldwide protein meal demand and good oil demand in North America and Europe. Asian economic volatility has negatively impacted oil demand from this region. Oilseed product sales also increased approximately 6 percent from sales attributable to recently acquired operations. These increases were partially offset by lower average selling prices reflecting the lower cost of raw materials. Sales of corn products for the year decreased 1 percent to $2.2 billion as lower average selling prices for the Company's sweetener, alcohol and amino acid products more than offset the increased sales volumes of these same products. Sweetener sales volume was positively impacted by good demand from both the U.S. and Mexican soft drink industry. The lower average selling prices of the sweetener products result principally from the production overcapacity in the industry. The lower average selling prices for amino acid products reflect the effect of low protein prices on synthetic amino acids. Additionally, poor feed business conditions in Southeast Asia have caused a supply/demand imbalance and a resulting production 2 PAGE 3 overcapacity in the synthetic amino acid industry. Historically low gasoline prices have negatively impacted average sales prices for the Company's fuel alcohol, which have had good demand and corresponding volume growth. Sales of wheat and other milled products decreased 9 percent to $1.5 billion due principally to lower average selling prices reflecting the lower cost of raw materials. These decreases were partially offset by sales attributable to recently acquired operations. The increase in other products and services was due primarily to the sales related to the Company's recently acquired cocoa and feed businesses. Cost of products sold and other operating costs increased $2.2 billion to $14.7 billion due principally to costs related to recently acquired operations and to increased costs related to increased sales volumes. These increases were partially offset by lower average raw material costs. The $80 million increase in gross profit to $1.4 billion in 1998 is due primarily to gross profits of recently acquired operations and to increased sales volumes. These increases were partially offset by the net effect of decreased sales prices versus lower raw material costs. Selling, general and administrative expenses decreased $14 million to $661 million due principally to decreased legal and litigation related costs of $133 million (see note 11 to the financial statements). Partially offsetting this decrease was $108 million of selling, general and administrative expenses attributable to recently acquired operations. The decrease in other income for 1998 was due principally to increased interest expense due to both higher short-term and long- term borrowing levels. Additionally, the Company had decreased gains on marketable securities transactions and decreased equity in earnings of unconsolidated affiliates. The decrease in income taxes for 1998 was due primarily to a lower effective income tax rate. The decrease in the Company's effective tax rate to 34% for the year compared to an effective rate of 41% last year was due principally to the non- deductibility for income tax purposes in 1997 of a portion of the Company's litigation settlements and fines. Liquidity and Capital Resources At June 30, 1999, the Company continued to show substantial liquidity with working capital of $1.9 billion. Capital resources remained strong as reflected in the Company's net worth of $6.2 billion. The principal sources of capital during the year were funds generated from operations, net funds generated from the sale of marketable securities and funds generated from the issuance of $300 million of 6.625% debentures due in 2029. The principal uses of capital during the year were investments in property, plant and equipment expansions, reduction of short-term debt and purchases of the Company's common stock. The Company's ratio of long-term debt to total capital at year-end was approximately 31%. Annual maturities of long-term debt for the five years after June 30, 1999 are $27 million, $31 million, $439 million, $274 million and $23 million, respectively. Commercial paper and commercial bank lines of credit are available to meet seasonal cash requirements. At June 30, 1999, the Company had $2.4 billion of short-term bank credit lines. Both Standard & Poor's and Moody's continue to 3 PAGE 4 assign their highest ratings to the Company's commercial paper and to rate the Company's long-term debt as AA- and Aa3, respectively. In addition to the cash flow generated from operations, the Company has access to equity and debt capital through numerous alternatives from public and private sources in the domestic and international markets. As described in Note 11 to the consolidated financial statements, various grand juries under the direction of the United States Department of Justice ("DOJ") have been investigating possible violations by the Company and others with respect to the sale of lysine, citric acid and high fructose corn syrup. In connection with an agreement with the DOJ in fiscal 1997, the Company paid the United States fines of $100 million. This agreement constitutes a global resolution of all matters between the DOJ and the Company and brings to a close all DOJ investigations of the Company. In addition, related civil class actions and other proceedings have been filed against the Company, which could result in the Company being subject to monetary damages, other sanctions and expenses. As also described in Note 11 to the consolidated financial statements, the Company has settled certain civil federal class action suits involving lysine, citric acid, and securities, and certain state actions filed by indirect purchasers of lysine. The Company has made provisions of $21 million in fiscal 1999, $48 million in fiscal 1998 and $200 million in fiscal 1997 to cover the fines, litigation settlements related to the federal lysine class action, federal securities class action, the federal citric class action, and certain state actions filed by indirect purchasers of lysine, certain actions filed by parties that opted out of the class action settlements, certain other proceedings and the related costs and expenses associated with the litigation described above. Because of the early stage of other putative class actions and proceedings, including those related to high fructose corn syrup, the ultimate outcome and materiality of these matters cannot presently be determined. Accordingly, no provision for any liability that may result therefrom has been made in the consolidated financial statements. Market Risk Sensitive Instruments and Positions The market risk inherent in the Company's market risk sensitive instruments and positions is the potential loss arising from adverse changes in commodity prices, marketable equity security prices, foreign currency exchange rates, and interest rates as discussed below. Commodities The availability and price of agricultural commodities are subject to wide fluctuations due to unpredictable factors such as weather, plantings, government (domestic and foreign) farm programs and policies, shifts in global demand created by population growth and changes in standards of living, and global production of similar and competitive crops. To reduce price risk caused by market fluctuations, the Company generally follows a policy of hedging its inventories and related purchase and sale contracts. In addition, the Company from time to time will hedge portions of its production requirements. The instruments used are principally readily marketable exchange traded futures contracts which are designated as hedges. The changes in market value of such contracts have a high correlation to the price changes of the hedged commodity. 4 PAGE 5 To obtain a proper matching of revenue and expense, gains or losses arising from open and closed hedging transactions are included in inventories as a cost of the commodities and reflected in the statement of earnings when the product is sold. A sensitivity analysis has been prepared to estimate the Company's exposure to market risk of its commodity position. The Company's daily net commodity position consists of inventories, related purchase and sale contracts, and exchange traded contracts, including those to hedge portions of production requirements. The fair value of such position is a summation of the fair values calculated for each commodity by valuing each net position at quoted futures prices. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in such prices. The results of this analysis, which may differ from actual results, are as follows.
1999 1998 Fair Market Fair Market Value Risk Value Risk (in millions) Highest long position $319 $32 $423 $42 Highest short position 149 15 411 41 Average position long 29 3 (8) 1 (short)
The increase in fair value of the average position for 1999 compared to 1998 was a result of an increase in the daily net commodity position partially offset by a decrease in quoted futures prices for the current year. Marketable Equity Securities Marketable equity securities, which are recorded at fair value, have exposure to price risk. The fair value of marketable equity securities is based on quoted market prices. Risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in quoted market prices. Actual results may differ.
1999 1998 (in millions) Fair value $743 $1,121 Market risk 74 112
The decrease in fair value for 1999 compared to 1998 resulted primarily from disposal of securities. 5 PAGE 6 Currencies In order to reduce the risk of foreign currency exchange rate fluctuations, the Company follows a policy of hedging substantially all transactions, except for amounts permanently invested as described below, denominated in a currency other than the functional currencies applicable to each of its various entities. The instruments used for hedging are readily marketable exchange traded futures contracts and forward contracts with banks. The changes in market value of such contracts have a high correlation to the price changes in the currency of the related hedged transactions. The potential loss in fair value for such net currency position resulting from 10% adverse change in foreign currency exchange rates is not material. The amount the Company considers permanently invested in foreign subsidiaries and affiliates and translated into dollars using the year end exchange rate is $1.8 billion at June 30, 1999 and June 30, 1998. The potential loss in fair value resulting from a hypothetical 10% adverse change in quoted foreign currency exchange rates amounts to $183 million and $175 million for 1999 and 1998, respectively. Actual results may differ. Interest The fair value of the Company's long-term debt is estimated below using quoted market prices, where available, and discounted future cash flows based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Such fair value exceeded the long-term debt carrying value. Market risk is estimated as the potential increase in fair value resulting from a hypothetical one-half percent decrease in interest rates.
1999 1998 (in millions) Fair value of long-term debt $3,430 $3,359 Excess of fair value over 238 512 carrying value Market risk 171 165
The increase in fair value for the current year resulted from the issuance of long-term debt, which was partially offset by the effect of an increase in quoted interest rates. Year 2000 Disclosure Readiness The Company's centralized corporate business and technical information systems have been fully assessed as to year 2000 compliance and functionality. Presently, these systems are nearly complete with respect to required software changes, tests, and migration to the production environment. The Company's internal business and technical information system year 2000 compliance issues are substantially remediated. Any remaining remediation is expected to occur during the third quarter of 1999. 6 PAGE 7 The Company has satisfactorily completed the identification and review of computer hardware and software suppliers and has completed the process of verifying year 2000 preparedness of general business partners, suppliers, vendors and/or service providers that the Company has identified as critical. At present, these critical third parties indicate that they expect to be substantially year 2000 ready. Cost The total historical and anticipated remaining costs for year 2000 remediation activity are not material. Risks and Contingency Plans Considering the substantial progress made to date, the Company does not anticipate delays in finalizing internal year 2000 remediation within remaining time schedules. However, third parties having a material relationship with the Company may be a potential risk based on their individual year 2000 preparedness which may not be within the Company's reasonable control. 7 PAGE 8 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Company is in one business segment - procuring, transporting, storing, processing, and merchandising agricultural commodities and products. The availability and price of agricultural commodities are subject to wide fluctuations due to unpredictable factors such as weather, plantings, government (domestic and foreign) farm programs and policies, shifts in global demand created by population growth and changes in standards of living, and global production of similar and competitive crops. Principles of Consolidation The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. Investments in affiliates are carried at cost plus equity in undistributed earnings since acquisition. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in its consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Marketable Securities The Company classifies all of its marketable securities as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of income taxes, reported as a component of shareholders' equity. Inventories Inventories, consisting primarily of merchandisable agricultural commodities and related value-added products, are carried at cost, which is not in excess of market prices. Inventory cost methods include the last-in, first-out (LIFO) method, the first- in, first-out (FIFO) method and the hedging procedure method. The hedging procedure method approximates FIFO cost. To reduce price risk caused by market fluctuations, the Company generally follows a policy of hedging its inventories and related purchase and sale contracts. In addition, the Company from time to time will hedge portions of its production requirements. The instruments used are readily marketable exchange traded futures contracts which are designated as hedges. The changes in market value of such contracts have a high correlation to the price changes of the hedged commodity. Also, the underlying commodity can be delivered 8 PAGE 9 against such contracts. To obtain a proper matching of revenue and expense, gains or losses arising from open and closed hedging transactions are included in inventories as a cost of the commodities and reflected in the statement of earnings when the product is sold. Property, Plant and Equipment Property, plant, and equipment are recorded at cost. The Company generally uses the straight line method in computing depreciation for financial reporting purposes and generally uses accelerated methods for income tax purposes. The annual provisions for depreciation have been computed principally in accordance with the following ranges of asset lives: buildings - 10 to 50 years; machinery and equipment - 3 to 30 years. Net Sales The Company follows a policy of recognizing sales at the time of product shipment. Net margins from grain merchandised, rather than the total sales value thereof, are included in net sales in the consolidated statements of earnings. Sales of the Company, including the sales value of grain merchandised, were $18.5 billion in 1999, $19.8 billion in 1998, and $18.1 billion in 1997, and such sales include export sales of $ 5.2 billion in 1999, $5.5 billion in 1998 and $5.4 billion in 1997. Per Share Data Share and per share information have been adjusted to give effect to all stock dividends, including the 5% stock dividend declared in July 1999 and payable in September 1999. Basic earnings per common share is determined by dividing net earnings by the weighted average number of common shares outstanding. New Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards Number 133 (SFAS 133) "Accounting for Derivative Instruments and Hedging Activities." This statement, which is required to be adopted for annual periods beginning after June 15, 2000, establishes standards for recognition and measurement of derivatives and hedging activities. The Company has not yet determined the financial statement impact of SFAS 133. 9 PAGE 10
CONSOLIDATED STATEMENTS OF EARNINGS Year Ended June 30 1999 1998 1997 (In thousands, except per share amounts) Net sales and other operating $14,283,3 $16,108,6 $13,853,2 income 35 30 62 Cost of products sold and other Operating costs 13,051,30 14,727,67 12,552,71 6 0 8 _________ _________ _________ _ _ _ Gross Profit 1,232,029 1,380,960 1,300,544 Selling, general and administrative 701,075 660,692 675,103 Expenses _________ _________ _________ _ _ _ Earnings From Operations 530,954 720,268 625,441 Other income (expense) (111,121) (110,256) 18,964 _________ _________ _________ _ _ _ Earnings Before Income Taxes and 419,833 610,012 644,405 Extraordinary Loss Income taxes 138,545 206,403 267,096 _________ _________ _________ _ _ _ Earnings Before Extraordinary 281,288 403,609 377,309 Loss Extraordinary loss, net of tax, on (15,324) - - debt repurchase _________ _________ _________ _ _ _ Net Earnings $ 265,964 $ 403,609 $ 377,309 ========= ========= ========= = = = Basic and diluted earnings per common Share Before extraordinary loss $ .45 $ .65 $ .60 Extraordinary loss on debt repurchase $ (.02) - - ========= ========= ========= = = = After extraordinary loss $ .43 $ .65 $ .60 Average number of shares 621,613 622,265 626,169 outstanding ========= ========= ========= = = =
See notes to consolidated financial statements. 10 PAGE 11
CONSOLIDATED BALANCE SHEETS June 30 Assets 1999 1998 (In thousands) Current Assets Cash and cash equivalents $ 681,378 $ 346,325 Marketable securities 222,191 379,169 Receivables 1,922,163 1,990,686 Inventories 2,732,694 2,562,650 Prepaid expenses 231,162 172,884 ___________ __________ _ Total Current Assets 5,789,588 5,451,714 Investments and Other Assets Investments in and advances to 1,484,980 1,473,364 affiliates Long-term marketable securities 779,916 1,168,380 Other assets 408,236 417,372 ___________ __________ _ 2,673,132 3,059,116 Property, Plant and Equipment Land 163,607 148,135 Buildings 1,949,211 1,777,146 Machinery and equipment 8,384,865 7,901,309 Construction in progress 675,870 613,792 Less allowances for depreciation (5,606,392) (5,117,678 ) ___________ __________ _ 5,567,161 5,322,704 ___________ __________ _ $14,029,881 $13,833,53 4 =========== ========== =
11 PAGE 12
Liabilities and Shareholders' Equity June 30 1999 1998 (In thousands) Current Liabilities Short-term debt $ 1,241,369 $ 1,545,276 Accounts payable 2,004,396 1,634,681 Accrued expenses 567,593 516,287 Current maturities of long-term 26,907 21,059 debt ___________ ___________ Total Current Liabilities 3,840,265 3,717,303 Long-Term Debt 3,191,883 2,847,130 Deferred Liabilities Income taxes 619,752 632,893 Other 137,341 131,296 ___________ ___________ 757,093 764,189 Shareholders' Equity Common stock 5,081,320 4,936,649 Reinvested earnings 1,419,321 1,662,563 Accumulated other comprehensive (260,001) (94,300) income ___________ ___________ 6,240,640 6,504,912 ___________ ___________ $14,029,881 $13,833,534 =========== ===========
See notes to consolidated financial statements. 12 PAGE 13
CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended June 30 1999 1998 1997 (In thousands) Operating Activities Net earnings $ 265,964 $ 403,609 $ 377,309 Adjustments to reconcile to net cash Provided by operations Depreciation and amortization 584,965 526,813 446,412 Deferred income taxes 49,676 28,659 (12,235) Amortization of long-term debt 37,216 33,297 29,094 discount (Gain)loss on marketable securities transactions (101,780) (36,303) (59,549) Extraordinary loss on debt 15,324 - - repurchase Other 95,456 39,292 (40,758) Changes in operating assets and liabilities Receivables 56,946 (294,407) (23,225) Inventories (79,811) (150,509) 23,046 Prepaid expenses (63,294) (27,275) (18,760) Accounts payable and accrued 359,185 90,203 (110,653) expenses _________ _________ _________ Total Operating Activities 1,219,847 613,379 610,681 Investing Activities Purchases of property, plant and (671,471) (702,683) (779,508) equipment Net assets of businesses acquired (136,021) (370,561) (429,940) Investments in and advances to (117,371) (366,968) (416,861) affiliates, net Purchases of marketable securities (635,562) (1,202,66 (966,203) 2) Proceeds from sales of marketable 1,139,466 1,007,373 1,607,631 securities _________ _________ _________ Total Investing Activities (420,959) (1,635,50 (984,881) 1) Financing Activities Long-term debt borrowings 383,735 441,464 348,695 Long-term debt payments (88,785) (55,972) (115,853) Net borrowings (payments) under line of credit (338,109) 774,033 421,046 Agreements Purchases of treasury stock (313,829) (81,154) (312,525) Cash dividends and other (106,847) (107,712) (104,077) _________ _________ _________ Total Financing Activities (463,835) 970,659 237,286 _________ _________ _________ Increase (Decrease) In Cash And Cash 335,053 (51,463) (136,914) Equivalents Cash And Cash Equivalents Beginning Of 346,325 397,788 534,702 Year _________ _________ _________ Cash And Cash Equivalents End Of $681,378 $ 346,325 $ 397,788 Year ========= ========= ========= Supplemental Cash Flow Information Noncash Investing and Financing Activities Common stock issued in purchase $ - $ 298,244 $ - acquisition
See notes to consolidated financial statements. 13 PAGE 14
Consolidated Statements of Shareholders' Equity Accumulated Other Comprehensive Income Unreali Common Stock zed Foreign Net Total Reinves Currency Gains Shareholde ted Translat on rs' Earning ion Marketa Equity s ble Securit ies Shares Amount (In thousands) Balance July 1, 545,82 $3,869, $2,169, $ $139,69 $6,144,812 1996 1 875 281 (34,041 7 ) Comprehensive income Net earnings 377,309 Foreign currency Translation (73,393 ) Change in unrealized Net gains on (19,199 Marketable ) securities Total comprehensive 284,717 income Cash dividends paid- $.17 (106,99 (106,990) per share 0) 5% stock dividend 26,565 594,590 (594,59 - 0) Treasury stock (16,70 (312,52 (312,525) purchases 7) 5) Other 2,195 40,381 (266) 40,115 ______ _______ _______ _______ _______ _________ __ __ __ __ __ Balance June 30, 557,87 4,192,3 1,844,7 (107,43 120,498 6,050,129 1997 4 21 44 4) Comprehensive income Net earnings 403,609 Foreign currency Translation (108,55 1) Change in unrealized Net gains on 1,187 Marketable securities Total comprehensive 296,245 income Cash dividends paid- $.18 per share (111,55 (111,551) 1) 5% stock dividend 28,534 473,948 (473,94 - 8) Treasury stock (3,767 (81,154 (81,154) purchases ) ) Common stock issued in 13,953 298,244 298,244 Purchase acquisition Other 2,627 53,290 (291) 52,999 ______ _______ _______ _______ _______ _________ __ __ __ __ __ Balance June 30, 599,22 4,936,6 1,662,5 (215,98 121,685 6,504,912 1998 1 49 63 5) Comprehensive income Net earnings 265,964 Foreign currency Translation (83,842 ) Change in unrealized Net gains on (81,859 Marketable ) securities Total comprehensive 100,263 income Cash dividends paid- $.19 per share (117,08 (117,089) 9) 5% stock dividend 29,180 391,889 (391,88 - 9) Treasury stock (19,86 (313,82 (313,829) purchases 7) 9) Other 4,261 66,611 (228) 66,383 ______ _______ _______ _______ _______ _________ __ __ __ __ __ Balance June 30, 612,79 $5,081, $1,419, $(299,8 $ $6,240,640 1999 5 320 321 27) 39,826 ====== ======= ======= ======= ======= ========== == === === == ==
See notes to consolidated financial statements. 14 PAGE 15
Notes to Consolidated Financial Statements Note 1-Marketable Securities and Cash Equivalents Unrealiz Unrealiz Fair ed ed Cost Gains Losses Value (In thousands) 1999 United States government Obligations Maturity less than 1 $ $ 260 $ 279 $ year 405,723 405,704 Maturity 1 year to 5 35,392 - 298 35,094 years Other debt securities Maturity less than 1 238,827 75 2 238,900 year Equity securities 705,156 103,762 65,808 743,110 _________ ________ _______ _________ _ _ _ $1,385,09 $104,097 $ 66,387 $1,422,80 8 8 ========= ======== ======== ========= = = Unrealiz Unrealiz Fair ed ed Cost Gains Losses Value (In thousands) 1998 United States government Obligations Maturity less than 1 $ $ 255 $ 43 $ year 430,724 430,936 Maturity 1 year to 5 45,423 266 - 45,689 years Other debt securities Maturity less than 1 93,024 - 1 93,023 year Equity securities 938,849 243,231 61,203 1,120,877 _________ ________ _______ _________ _ _ _ $1,508,02 $243,752 $ 61,247 $1,690,52 0 5 ========= ======== ======== ========= = =
15 PAGE 16
Note 2-Inventories 1999 1998 (In thousands) LIFO inventories FIFO value $ 367,902 $ 412,086 LIFO valuation reserve (1,360) (45,517) __________ __________ LIFO carrying value 366,542 366,569 FIFO inventories, including Hedging procedure method 2,366,152 2,196,081 __________ __________ $2,732,694 $2,562,650 ========== ==========
16 PAGE 17 Note 3-Investments in and Advances to Affiliates The Company has 84 unconsolidated affiliates, located in North and South America, Africa, Europe, and Asia, accounted for under the equity method. The following table summarizes the balance sheets as of June 30, 1999 and 1998, and the statements of earnings for the three years ended June 30, 1999 of the Company's unconsolidated affiliates:
1999 1998 1997 (In thousands) Current assets $3,359,596 $3,510,436 Non-current assets 6,155,709 4,937,077 Current liabilities 2,241,739 1,841,687 Non-current liabilities 1,695,557 1,756,864 Minority interests 309,712 267,666 Net sales 14,605,815 13,651,086 $12,653,544 Gross profit 1,124,363 1,161,673 839,436 Net income (loss) (2,630) 216,178 233,543
The Company's investment in unconsolidated affiliates exceeds the underlying equity in net assets by $138 million, which amount is being amortized on a straight-line basis over 10 to 40 years. Three foreign affiliates for which the Company has a carrying value of $356 million have a market value of $204 million based on quoted market prices and exchange rates at June 30, 1999. 17 PAGE 18
Note 4-Debt and Financing Arrangements 1999 1998 (In thousands) 7.5% Debentures $350 million face amount, due in 2027 $ 347,903 $ 347,881 6.625% Debentures $300 million face amount, due in 2029 298,563 - 8.875% Debentures $300 million face amount, due in 2011 298,467 298,396 8.125% Debentures $300 million face amount, due in 2012 298,224 298,148 8.375% Debentures $300 million face amount, due in 2017 294,530 294,403 Zero Coupon Debt $400 million face amount, due in 2002 274,198 239,943 6.25% Notes $250 million face amount, due in 2003 249,513 249,430 7.125% Debentures $250 million face amount, due in 2013 249,460 249,438 6.95% Debentures $250 million face amount, due in 2097 246,095 246,066 6.75% Debentures $200 million face amount, due in 2027 195,572 195,469 5.87% Debentures $196 million face amount, due in 2010 105,520 - 10.25% Debentures $100 million face amount, due in 2006 99,035 98,936 7% Debentures $250 million face amount - 134,272 Industrial Revenue Bonds at Various rates from 5.30% to 13.25% and due in varying amounts to 2011 67,168 69,016 Other 194,542 146,791 __________ __________ Total long-term debt 3,218,790 2,868,189 Less current maturities (26,907) (21,059) __________ __________ $3,191,883 $2,847,130 ========== ==========
18 PAGE 19 In 1999, the Company incurred a pre-tax extraordinary charge of $24 million resulting from the repurchase of a portion of its 7% debentures due in 2011. The remaining 7% debentures were exchanged for 5.87% debentures due in 2010. At June 30, 1999, the fair value of the Company's long-term debt exceeded the carrying value by $238 million, as estimated by using quoted market prices or discounted future cash flows based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Unamortized original issue discounts on the Zero Coupon Debt is being amortized at 13.80%. Accelerated amortization of the discount for tax purposes has the effect of lowering the actual rate of interest to be paid over the remaining life of the issue to approximately 5.07%. The aggregate maturities for long-term debt for the five years after June 30, 1999 are 27 million, $31 million, $439 million, $274 million, and $23 million, respectively. At June 30, 1999, the Company had lines of credit totaling $2.4 billion. The weighted average interest rates on short-term borrowings outstanding at June 30, 1999 and 1998 were 4.71% and 5.16%, respectively. 19 PAGE 20 Note 5-Shareholders' Equity The Company has authorized 800 million shares of common stock and 500,000 shares of preferred stock, both without par value. No preferred stock has been issued. At June 30, 1999 and 1998, the Company had approximately 22.5 million and 6.1 million common shares, respectively, in treasury. Treasury stock is recorded at cost, $337 million at June 30, 1999, as a reduction of common stock. As of July 1, 1998, the Company adopted Statement of Financial Accounting Standards Number 130 (SFAS 130) "Reporting Comprehensive Income." SFAS 130 establishes standards for the reporting and display of comprehensive income and its components. SFAS 130 requires foreign currency translation adjustments and unrealized gains or losses on the Company's available-for-sale marketable securities to be included in "other comprehensive income." Prior to the adoption of SFAS 130, the Company reported such adjustments and unrealized gains or losses as components of reinvested earnings. Amounts in prior year financial statements have been reclassified to conform to SFAS 130. Stock option plans provide for the granting of options to employees to purchase common stock of the Company at market value on the date of grant. Options expire five to ten years after the date of grant. At June 30, 1999, there were 2.3 million shares available for future grant. Stock option activity during the years indicated is as follows:
Weighted Average Number Exercise Price of Shares Per Share (In thousands) Shares under option at June 30, 3,852 $12.23 1996 Granted 1,335 15.10 Exercised (308) 11.75 Cancelled (116) 12.41 ______ Shares under option at June 30, 4,763 13.06 1997 Granted 36 20.13 Exercised (533) 11.97 Cancelled (67) 14.44 ______ Shares under option at June 30, 4,199 13.24 1998 Granted 2,284 14.93 Exercised (1,225) 11.54 Cancelled (205) 12.20 ______ Shares under option at June 30, 5,053 14.46 1999 ====== Shares exercisable at June 30, 1,371 13.77 1999 Shares exercisable at June 30, 2,221 12.32 1998 Shares exercisable at June 30, 1,782 11.93 1997
20 PAGE 21 At June 30, 1999 the range of exercise prices and weighted average remaining contractual life of outstanding options was $10.84 - $20.49 and five years, respectively. The Company accounts for its stock option plans in accordance with Accounting Principles Board (APB) Opinion Number 25 "Accounting for Stock Issued to Employees." Under APB 25, compensation expense is recognized if the exercise price of the employee stock option is less than the market price on the grant date. Statement of Financial Accounting Standards Number 123 "Accounting for Stock-Based Compensation" requires the fair value of options granted and the pro forma impact on earnings and earnings per share be disclosed when material. Had compensation expense for stock options been determined based on the fair value of options granted, the Company's 1999 net earnings would have been impacted by approximately one half of one percent. 1998 and 1997 net earnings would have been affected by less than one quarter of one percent. The Company's 1999, 1998 and 1997 earnings per share would have been affected by approximately one quarter of one percent. The weighted average fair value of options granted during 1999, 1998 and 1997 are $4.62, $5.88 and $5.71, respectively. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes single option pricing model for pro forma footnote purposes with the following assumptions used for all years, dividend yield of 1% and risk free interest rate of 6%. Expected volatility was assumed of .3% in 1999 and .2% in 1998 and 1997. Expected option life was assumed to be five years in 1999, four years in 1998 and six years in 1997. 21 PAGE 22
Note 6-Other Income (Expense) 1999 1998 1997 (In thousands) Investment income $ 118,720 $ 123,729 $ 121,991 Interest expense (326,207) (293,220) (197,214) Net gain on marketable Securities transactions 101,319 36,544 59,810 Equity in earnings (losses) of affiliates (4,273) 20,364 35,243 Other (680) 2,327 (866) __________ __________ __________ $ (111,121) $ (110,256) $ 18,964 ========== ========== ==========
Interest expense is net of interest capitalized of $26 million, $37 million and $41 million in 1999, 1998 and 1997, respectively. The Company made interest payments of $299 million, $295 million and $198 million in 1999, 1998 and 1997, respectively. Realized gains on sales of available-for-sale marketable securities totaled $102 million, $37 million and $63 million in 1999, 1998 and 1997, respectively. Realized losses totaled $1 million and $3 million in 1999 and 1997, respectively. 22 PAGE 23 Note 7-Income Taxes For financial reporting purposes, earnings before income taxes and extraordinary loss includes the following components:
1999 1998 1997 (In thousands) United States $ 327,489 $ 458,184 $ 563,086 Foreign 92,344 151,828 81,319 _________ _________ _________ $ 419,833 $ 610,012 $ 644,405 ========= ========= =========
Significant components of income taxes are as follows:
1999 1998 1997 (In thousands) Current $ $ $ 216,641 Federal 74,040 111,152 State 12,787 20,879 29,440 27,968 54,724 27,352 Foreign Deferred 25,085 14,474 (5,357) Federal State 674 1,451 (2,910) (2,009) 3,723 1,930 Foreign _________ _________ _________ $ 138,545 $ 206,403 $ 267,096 ========= ========= =========
Significant components of the Company's deferred tax liabilities and assets are as follows:
1999 1998 (In thousands) Deferred tax liabilities Depreciation $ 527,833 $ 484,336 Unrealized gain (loss) on marketable (2,117) 60,820 Securities Bond discount amortization 58,286 52,645 Other 85,285 86,161 _________ _________ 669,287 683,962 Deferred tax assets Postretirement benefits 32,786 31,073 Other 107,771 81,431 _________ _________ 140,557 112,504 _________ _________ Net deferred tax liabilities 528,730 571,458 Current net deferred tax assets included in prepaid expenses 91,022 61,435 _________ _________ Non-current net deferred tax liabilities $ 619,752 $ 632,893 ========= =========
Reconciliation of the statutory federal income tax rate to the Company's effective tax rate on earnings before extraordinary loss is as follows:
1999 1998 1997 Statutory rate 35.0% 35.0% 35.0% Foreign sales corporation (4.5) (4.7) (3.4) State income taxes, net of Federal tax benefit 2.2 2.4 2.7 Indefinitely invested earnings of (1.8) 0.7 (0.9) Foreign affiliates Litigation settlements and - 1.4 7.5 fines Other 2.1 (1.0) 0.5 ______ ______ ______ Effective rate 33.0% 33.8% 41.4% ====== ====== ======
The Company made income tax payments of $111 million, $225 million and $312 million in 1999, 1998 and 1997, respectively. Undistributed earnings of the Company's foreign subsidiaries amounting to approximately $544 million at June 30, 1999, are considered to be permanently reinvested and, accordingly, no provision for U.S. income taxes has been provided thereon. It is not practicable to determine the deferred tax liability for temporary differences related to these undistributed earnings. 23 PAGE 24 Note 8-Leases The Company leases manufacturing and warehouse facilities, real estate, transportation and other equipment under operating leases which expire at various dates through the year 2026. Rent expense for 1999, 1998 and 1997 was $86 million, $82 million and $69 million, respectively. Future minimum rental payments for non- cancellable operating leases with initial or remaining terms in excess of one year are as follows:
Fiscal years (In thousands) 2000 $ 37,688 2001 22,090 2002 13,803 2003 13,908 2004 11,021 Thereafter 76,574 _________ Total minimum lease payments $ 175,084 =========
24 PAGE 25 Note 9-Employee Benefit Plans The Company provides substantially all employees with pension benefits. The Company also provides substantially all domestic employees with postretirement health care and life insurance benefits. It is the Company's policy to fund pension costs as required by applicable laws and regulations. In addition, the Company has savings and investment plans available to eligible employees with one year of service. Total retirement plan expense includes the following components:
Pension Benefits Postretirement Benefits 1999 1998 1997 1999 1998 1997 (In thousands) (In thousands) Defined benefit plans: Service cost (benefits Earned during the $23,23 $22,55 $18,92 $ $4,139 $3,303 period) 9 9 8 4,355 Interest cost 37,903 33,658 29,557 4,284 4,403 3,843 Expected return on plan Assets (43,84 (37,15 (32,22 - - - 4) 9) 2) Actuarial loss (gain) 969 (53) 401 (769) (663) (820) Net amortization 40 (951) (1,110 (111) (111) (111) ) ______ ______ ______ ______ ______ ______ _ _ _ _ _ _ Net periodic pension expense 18,307 18,054 15,554 7,759 7,768 6,215 Defined contribution plans 17,775 15,497 10,247 ______ ______ ______ ______ ______ ______ _ _ _ _ _ _ Total retirement plan Expense $36,08 $33,55 $25,80 $ $ $ 2 1 1 7,759 7,768 6,215 ====== ====== ====== ====== ====== ====== = = = = = =
The following tables set forth changes in the benefit obligation and the fair value of plan assets: Pension Benefits Postretirement Benefits 1999 1998 1999 1998 (In thousands) (In thousands) Benefit obligation, $638,00 $458,148 $ 61,190 $ 58,710 beginning 6 Service cost 23,239 22,559 4,355 4,139 Interest cost 37,903 33,658 4,284 4,403 Actuarial loss (gain) (6,581) 35,373 8,288 (3,241) Benefits paid (23,961 (21,769) (2,851) (2,815) ) Plan Amendments 35,254 17,442 - - Acquisitions/divestitures, - 98,683 6,065 - net Foreign currency effects (7,202) (6,088) (1) (6) _______ _______ _______ _______ Benefit obligation, ending $696,65 $638,006 $ 81,330 $ 61,190 8 ======= ======== ======== ======== = Fair value of plan assets, Beginning $613,51 $431,673 $ - $ - 6 Actual return on plan 15,685 100,521 - - assets Employer contributions 20,378 16,475 2,851 2,815 Benefits paid (23,961 (21,769) (2,851) (2,815) ) Acquisitions/divestitures, - 95,243 - - net Foreign currency effects (9,641) (8,627) - - _______ _______ _______ _______ Fair value of plan assets, Ending $615,97 $613,516 $ - $ - 7 ======= ======== ======== ======== = Funded Status $(80,68 $(24,490 $(81,330 $(61,190 1) ) ) ) Unamortized transition (14,729 (17,631) - - amount ) Unrecognized net loss 40,146 15,936 (13,971) (23,028) (gain) Unrecognized prior service 59,600 26,926 4,779 (1,397) costs Adjustment for fourth quarter 491 1,434 - - Contributions _______ _______ _______ _______ Pension asset (liability) Recognized in the balance Sheet $ $ 2,175 $(90,522 $(85,615 4,827 ) ) ======= ======== ======== ======== =
At June 30, 1999 and 1998, a prepaid pension benefit cost of $57 million and $49 million, respectively, and an accrued pension benefit liability of $83 million and $71 million, respectively, were recognized in the consolidated balance sheet. For postretirement benefit plans, an accrued benefit liability of $91 million and $86 million was recognized at June 30, 1999 and 1998, respectively. The following table sets for the principal assumptions used in developing the benefit obligation and the net periodic pension expense:
Pension Benefits Postretirement Benefits 1999 1998 1999 1998 Discount Rate 7.0% 7.0% 7.0% 7.0% Expected return on plan 8.9% 8.9% N/A N/A assets Rate of compensation 4.5% 4.5% N/A N/A increase
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the U.S. retirement plans with accumulated benefits obligations in excess of plan assets were $539 million, $455 million and $386 million, respectively as of June 30, 1999, and $473 million, $323 million and $384 million, respectively, as of June 30, 1998. For measurement purposes, an 8.3% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2000. The rate was assumed to decrease gradually to 5.5% for 2004 and remain at that level thereafter. Assumed health care cost trend rates have a significant impact on the amounts reported for the health care plans. A 1% change in assumed health care cost trend rates would have the following effect:
1% Increase 1% Decrease (In thousands) Effect on total of service and interest cost $1,091 $(1,011) Components Effect on accumulated postretirement benefit $6,655 $(6,261) Obligations
25 PAGE 26 Note 10-Segment and Geographic Information As of July 1, 1998, the Company adopted Statement of Financial Accounting Standards Number 131 (SFAS 131) "Disclosures about Segments of an Enterprise and Related Information." SFAS 131 establishes standards for the way public business enterprises report information about operating segments in financial reports issued to shareholders. Based on the Company's organizational structure and the manner in which performance is assessed and operating decisions are made, the Company operates as one business segment - procuring, transporting, storing, processing and merchandising agricultural commodities and products. Information about the Company's operations by geographic areas is as follows:
1999 1998 1997 (In millions) Net sales and other Operating income: United States $9,288 $10,784 $ 9,773 Germany 1,795 1,889 1,479 Other foreign 3,200 3,436 2,601 _______ _______ _______ $14,283 $16,109 $13,853 ======= ======= ======= Long-lived assets United States $ 4,525 $ 4,350 $ 3,936 Germany 196 206 191 Other foreign 987 924 628 _______ _______ _______ $ 5,708 $ 5,480 $ 4,755 ======= ======= =======
Information about the Company's revenues by classes of products and services is as follows:
1999 1998 1997 (In millions) Oilseed products $ 8,494 $10,152 $ 8,860 Corn products 1,855 2,154 2,171 Wheat and other milled 1,378 1,491 1,631 products Other products and services 2,556 2,312 1,191 _______ _______ _______ $14,283 $16,109 $13,853 ======= ======= =======
26 PAGE 27 Note 11-Antitrust Investigation and Related Litigation Federal grand juries in the Northern Districts of Illinois, California and Georgia, under the direction of the United States Department of Justice ("DOJ"), have been investigating possible violations by the Company and others with respect to the sale of lysine, citric acid and high fructose corn syrup, respectively. In connection with an agreement with the DOJ in fiscal 1997, the Company paid the United States fines of $100 million. This agreement constitutes a global resolution of all matters between the DOJ and the Company and brings to a close all DOJ investigations of the Company. The federal grand juries in the Northern Districts of Illinois (lysine) and Georgia (high fructose corn syrup) have been closed. The Company, along with other domestic and foreign companies, was named as a defendant in a number of putative class action antitrust suits and other proceedings involving the sale of lysine, citric acid, sodium gluconate and high fructose corn syrup. These actions and proceedings generally involve claims for unspecified compensatory damages, fines, costs, expenses and unspecified relief. The Company intends to vigorously defend these actions and proceedings unless they can be settled on terms deemed acceptable by the parties. These matters have resulted and could result in the Company being subject to monetary damages, other sanctions and expenses. The Company has made provisions of $21 million in fiscal 1999, $48 million in fiscal 1998 and $200 million in fiscal 1997 to cover the fines, litigation settlements related to the federal lysine class action, federal securities class action, the federal citric class action and certain state actions filed by indirect purchasers of lysine, certain actions filed by parties that opted out of the class action settlements, certain other proceedings and the related costs and expenses associated with the litigation described above. Because of the early stage of other putative class actions and proceedings, including those related to high fructose corn syrup, the ultimate outcome and materiality of these matters cannot presently be determined. Accordingly, no provision for any liability that may result therefrom has been made in the consolidated financial statements. 27 PAGE 28 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders Archer Daniels Midland Company Decatur, Illinois We have audited the accompanying consolidated balance sheets of Archer Daniels Midland Company and subsidiaries as of June 30, 1999 and 1998, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three years in the period ended June 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Archer Daniels Midland Company and its subsidiaries at June 30, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 1999, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP St. Louis, Missouri July 30, 1999 28 PAGE 29
Quarterly Financial Data (Unaudited) Quarter First Second Third Fourth Total (In thousands, except per share amounts) Fiscal 1999 Net sales $3,801,42 $3,911,53 $3,378,12 $3,192,24 $14,283,3 1 9 6 9 35 Gross profit 293,636 421,330 238,923 278,140 1,232,029 Earnings before extraordinary loss 116,855 110,434 11,742 42,257 281,288 Per common 0.19 0.17 0.02 0.07 0.45 share Net earnings 116,855 95,110 11,742 42,257 265,964 Per common 0.19 0.15 0.02 0.07 0.43 share Fiscal 1998 Net sales $3,651,30 $4,130,29 $4,280,27 $4,046,75 $16,108,6 2 8 9 1 30 Gross profit 325,168 362,359 384,471 308,962 1,380,960 Net earnings 131,350 139,208 70,303 62,748 403,609 Per common 0.21 0.23 0.11 0.10 0.65 share
During the second quarter of the year ended June 30, 1999, the Company incurred an extraordinary charge, net of tax, of $15 million or $.02 per share resulting from the repurchase of a portion of its 7% debentures due May 2011. Net earnings for the three months ended March 31, 1998 and the year ended June 30, 1998 include an after-tax charge of $40 million or $.06 per share for fines and litigation settlements arising principally out of the United States Department of Justice investigation of the Company's lysine and citric acid products as well as resolution of a securities suit brought by shareholders. Common Stock Market Prices and Dividends The Company's common stock is listed and traded on the New York Stock Exchange, Chicago Stock Exchange, Tokyo Stock Exchange, Frankfurt Stock Exchange, and the Swiss Exchange. The following table sets forth, for the periods indicated, the high and low market prices of the common stock and common stock cash dividends.
The number of shareholders of the Company's common stock at June 30, 1999 was 31,764. The Company expects to continue its policy of paying regular cash dividends, although there is no assurance as to future dividends because they are dependent on future earnings, capital requirements and financial condition. 29 PAGE 30
Archer Daniels Midland Company TEN-YEAR SUMMARY Operating, Financial and Other Data (Dollars in thousands, except per share data) 1999 1998 1997 Operating Net sales and other operating income $14,283,335 $16,108,630 $13,853,262 Depreciation and amortization 584,965 526,813 446,412 Net earnings 265,964 403,609 377,309 Per common share .43 .65 .60 Cash dividends 117,089 111,551 106,990 Per common share .19 .18 .17 Financial Working capital $1,949,323 $1,734,411 $2,035,580 Per common share 3.18 2.76 3.31 Current ratio 1.5 1.5 1.9 Inventories 2,732,694 2,562,650 2,094,092 Net property, plant and equipment 5,567,161 5,322,704 4,708,595 Gross additions to property, plant And equipment 825,676 1,228,553 1,127,360 Total assets 14,029,881 13,833,534 11,354,367 Long-term debt 3,191,883 2,847,130 2,344,949 Shareholders' equity 6,240,640 6,504,912 6,050,129 Per common share 10.18 10.34 9.84 Other Weighted average shares outstanding (000's) 621,613 622,265 626,169 Number of shareholders 31,764 32,539 33,834 Number of employees 23,603 23,132 17,160
Share and per share data have been adjusted for three-for-two stock splits in December 1989 and December 1994, and annual 5% stock dividends through September 1999. Net earnings for 1999 include an extraordinary charge of $15 million or $.02 per share from the repurchase of debt. Net earnings for 1993 includes a net credit of $68 million or $.10 per share and a charge of $35 million or $.05 per share for the cumulative effects of changes in accounting for income taxes and postretirement benefits, respectively. 30 PAGE 31
1996 1995 1994 1993 1992 1991 1990 $13,239,8 $12,555,4 $11,158,4 $9,578,37 $9,026,17 $8,271,5 $7,551,9 39 03 79 0 7 88 72 393,605 384,872 354,463 328,549 293,729 261,367 248,113 695,912 795,915 484,069 567,527 503,757 466,678 483,522 1.09 1.21 .73 .82 .73 .67 .70 90,860 46,825 32,586 32,266 30,789 29,527 25,976 .14 .07 .05 .05 .04 .04 .04 $ $2,540,26 $2,783,81 $2,961,50 $2,276,56 $1,674,7 $1,627,4 2,751,132 0 7 3 4 35 59 4.35 3.92 4.23 4.30 3.30 2.43 2.35 2.7 3.2 3.5 4.1 3.4 3.0 3.4 1,790,636 1,473,896 1,422,147 1,131,787 1,025,030 917,495 771,233 4,114,301 3,762,281 3,538,575 3,214,834 3,060,096 2,695,62 2,131,80 5 7 801,426 657,915 682,485 572,022 614,844 911,586 550,851 10,449,86 9,756,887 8,746,853 8,404,111 7,524,530 6,260,60 5,450,01 9 7 0 2,002,979 2,070,095 2,021,417 2,039,143 1,562,491 980,273 750,901 6,144,812 5,854,165 5,045,421 4,883,251 4,492,353 3,922,29 3,573,22 5 8 9.72 9.04 7.67 7.10 6.52 5.69 5.15 636,745 657,243 664,044 689,028 690,871 693,264 690,837 35,431 34,385 33,940 33,654 32,277 28,981 26,076 14,811 14,833 16,013 14,168 13,524 13,049 11,861
31 EX-21 3 COMMENTS PAGE 1 EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT ARCHER DANIELS MIDLAND COMPANY June 30, 1999 Following is a list of the Registrant's subsidiaries showing the percentage of voting securities owned:
Organized Under Laws of Ownershi p ADM Agri-Industries Ltd. Canada 100% ADM Europe BV Netherlands 100 ADM Europoort BV Netherlands 100 ADM/Growmark River Systems, Inc. Delaware 100 ADM Beteiligungs GmbH Germany 100 ADM International Ltd. (B) England 100 ADM Investor Services, Inc. Delaware 100 ADM Ireland Holdings Ltd. Ireland 100 ADM Milling Co. Minnesota 100 ADM Oelmuhlen GmbH & Co. KG Germany 100 ADM Ringaskiddy Ireland 100 ADM Transportation Co. Delaware 100 ADMIC Investments NV Netherlands 100 Antilles Agrinational Insurance Company Vermont 100 Agrinational Ltd. Cayman Islands 100 Alfred C. Toepfer International (A) Germany 50 American River Transportation Co. Delaware 100 Ardanco, Inc. Guam 100 Collingwood Grain, Inc. Kansas 100 Compagnie Industrielle Et Financiere Luxembourg 42 (CIP)(A) Consolidated Nutrition, L.C. (A) Iowa 50 Erith Oil Works Ltd. England 100 Fleischmann Malting Company, Inc. Delaware 100 Gruma S.A. de C.V. (A) Mexico 22 Hickory Point Bank & Trust Co. Illinois 100 Midland Stars, Inc. Delaware 100 Oelmuhle Hamburg AG (C) Germany 95 Premiere Agri Technologies Inc. Delaware 100 Tabor Grain Co. Nevada 100
(A) Not included in consolidated financial statements--included on the equity basis. (B) ADM International Ltd. has twenty-five subsidiary companies whose names have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary. (C) Oelmuhle Hamburg AG has twelve subsidiaries whose names have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary. The names of forty-two domestic subsidiaries and ninety-five international subsidiaries have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary. 1 EX-23 4 EXHIBIT 23 E&Y PAGE 1 EXHIBIT 23--CONSENT OF INDEPENDENT AUDITORS ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES We consent to the incorporation by reference in this Annual Report (Form 10-K) of Archer Daniels Midland Company of our report dated July 30, 1999 included in the 1999 Annual Report to Shareholders of Archer Daniels Midland Company. We also consent to the incorporation by reference in the following Registration Statements of our report dated July 30, 1999, with respect to the consolidated financial statements of Archer Daniels Midland Company incorporated herein by reference in this Annual Report (Form 10-K) for the year ended June 30, 1999. Registration Statement No. 2-91811 on Form S-8 dated June 22, 1984 (definitive Prospectus dated July 16, 1984) relating to the Archer Daniels Midland Company 1982 Incentive Stock Option Plan. Registration Statement No. 33-49409 on Form S-8 dated March 15, 1993 relating to the Archer Daniels Midland 1991 Incentive Stock Option Plan and Archer Daniels Midland Company Savings and Investment Plan. Registration Statement No. 33-50879 on Form S-3 dated November 1, 1993 relating to Debt Securities and Warrants to purchase Debt Securities of Archer Daniels Midland Company. Registration Statement No. 33-55301 on Form S-3 dated August 31, 1994 as amended by Amendment No. 1 dated October 7, 1994 (definitive Prospectus dated October 11, 1994) relating to secondary offering of the Common Stock of Archer Daniels Midland Company. Registration Statement No. 33-56223 on Form S-3 dated October 28, 1994 as amended by Amendment No. 1 dated December 27, 1994 (definitive Prospectus dated December 30, 1994) relating to secondary offering of the Common Stock of Archer Daniels Midland Company. Registration Statement No. 33-58387 on Form S-8 dated April 3, 1995 relating to the ADM Savings and Investment Plan for Salaried Employees and the ADM Savings and Investment Plan for Hourly Employees. Registration Statement No. 333-13233 on Form S-3 dated October 1, 1996 as amended by Amendment No. 1 dated November 8, 1996, Amendment No. 2 dated March 20, 1997 and Amendment No. 3 dated March 31, 1997 (definitive Prospectus dated April 1, 1997) relating to secondary offering of the Common Stock of Archer Daniels Midland Company. Registration Statement No. 333-30137 on Form S-3 dated June 26, 1997 relating to Debt Securities and Warrants to purchase Debt Securities of Archer Daniels Midland Company. 1 PAGE 2 Registration Statement No. 333-31623 on Form S-3 dated July 18, 1997 as amended by Amendment No. 1 dated July 29, 1997, (definitive Prospectus dated August 5, 1997) relating to secondary offering of the Common Stock of Archer Daniels Midland Company. Registration Statement No. 333-39605 on Form S-8 dated November 5, 1997 relating to the ADM Savings and Investment Plan for Salaried Employees and the ADM Savings and Investment Plan for Hourly Employees. Registration Statement No. 333-48903 on Form S-3 dated March 30, 1998 relating to Debt Securities and Warrants to purchase Debt Securities of Archer Daniels Midland Company. Registration Statement No. 333-51381 on Form S-8 dated April 29, 1998 relating to the Archer Daniels Midland Company 1996 Stock Option Plan. Registration Statement No. 333-68339 on Form S-3 dated December 3, 1998 as amended by Amendment No. 1 dated December 10, 1998 relating to secondary offering of the common stock of Archer Daniels Midland Company. Registration Statement No. 333-75073 on Form S-8 dated March 26, 1999 relating to the ADM Employee Stock Ownership Plan for Salaried Employees and the ADM Employee Stock Ownership Plan for Hourly Employees. ERNST & YOUNG LLP St. Louis, Missouri September 22, 1999 2 EX-24 5 POWERS OF ATTORNEY PAGE 1 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10- K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/D. O. ANDREAS D. O. ANDREAS 1 PAGE 2 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned, the Chief Executive Officer (Principal Executive Officer) and Chairman of the Board of Directors of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as the Chief Executive Officer and Chairman of the Board of Directors of said Company to the Form 10-K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in - -fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/G. ALLEN ANDREAS G. ALLEN ANDREAS 2 PAGE 3 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10- K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/J. R. BLOCK J. R. BLOCK 3 PAGE 4 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10- K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/RICHARD BURT RICHARD BURT 4 PAGE 5 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10- K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/ M. H. CARTER M. H. CARTER 5 PAGE 6 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10- K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/G. O. COAN G. O. COAN 6 PAGE 7 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10- K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/ F. ROSS JOHNSON F. ROSS JOHNSON 7 PAGE 8 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10- K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/ M. BRIAN MULRONEY M. BRIAN MULRONEY 8 PAGE 9 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10- K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/ R. S. STRAUSS R. S. STRAUSS 9 PAGE 10 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10- K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/ J. K. VANIER J. K. VANIER 10 PAGE 11 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10- K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/ O. G. WEBB O. G. WEBB 11 PAGE 12 ARCHER-DANIELS-MIDLAND COMPANY Power of Attorney of Director KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, R. P. REISING and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10- K for the fiscal year ended June 30, 1999, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted. IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 16th day of September, 1999. /s/ANDREW YOUNG ANDREW YOUNG 12 EX-27 6 FINANCIAL DATA
5 1,000 YEAR JUN-30-1999 JUL-01-1998 JUN-30-1999 681,378 222,191 1,922,163 0 2,732,694 5,789,588 11,173,553 5,606,392 14,029,881 3,840,265 3,191,883 0 0 5,081,320 1,159,320 14,029,881 14,283,335 14,283,335 13,051,306 13,051,306 0 0 326,207 419,833 138,545 281,288 0 (15,324) 0 265,964 .43 .43
EX-3 7 ARTICLES OF INCORPORATION PAGE 1 COMPOSITE CERTIFICATE OF INCORPORATION of ARCHER-DANIELS-MIDLAND COMPANY (giving effect to all amendments through October 15, 1992) First: The name of the Corporation is ARCHER-DANIELS-MIDLAND COMPANY Second: The principal office of the Corporation in the State of Delaware is located at 1209 Orange Street, in the City of Wilmington, County of New Castle and State of Delaware, and the name and address of its resident agent is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. Third: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. Fourth: The total number of shares of all classes which the Corporation shall have authority to issue is 800,500,000, consisting of 800,000,000 shares of Common Stock and 500,000 shares of Preferred Stock, all without par value. The designations and the voting powers, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, of the Preferred Stock and the Common Stock which are fixed by the Certificate of Incorporation and the express grant of authority to the Board of Directors of the Corporation (hereinafter referred to as the Board of Directors) to fix by resolution or resolutions the designations and the voting powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, of the Preferred Stock which are not fixed by the Certificate of Incorporation, are as follows: (1) The Preferred Stock may be issued at any time or from time to time in any amount, provided not more than 500,000 shares thereof shall be outstanding at any one time, as Preferred Stock of one or more series, as hereinafter provided. Each share of any one series of Preferred Stock shall be alike in every particular except as to the date from which dividends thereon shall be cumulative, each series thereof shall be distinctly designated by letter or descriptive words, and all series of Preferred Stock shall rank equally and be identical in all respects except as permitted by the provisions of Section 2 of this Article Fourth. Shares of Preferred Stock shall be issued as fully paid and nonassessable shares. (2) Authority is hereby expressly granted to and vested in the Board of Directors at any time or from time to time to issue the Preferred Stock as Preferred Stock of any series, and in connection with the creation of each such series, to fix by resolution or resolutions providing for the issue of shares thereof the designations and the voting powers, preferences and relative, participating, option or other special rights, and the qualifications, limitations or restrictions thereof, of such series so far as not inconsistent with the provisions of this Article Fourth applicable to all series of Preferred 1 PAGE 2 Stock, and to the full extent now or hereafter permitted by the laws of the State of Delaware, in respect of the matters set forth in the following subdivisions (a) and (g) inclusive: (a) The distinctive designation of such series and the number of shares which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors in creating such series) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (b) The rate or rates at which shares of such series shall be entitled to receive dividends, the conditions and limitations upon the payment, and the preferences, of such dividends, whether such dividends shall be cumulative and, if cumulative, the date or dates from which such dividends shall accumulate, and the dates upon which such dividends, if declared, shall be payable; (c) The rights of the Corporation at its option to redeem shares of such series, the manner of selecting shares for redemption, the redemption price or prices, and the manner of redemption and the effect thereof; (d) The amount payable on shares of such series in the event of any liquidation, dissolution or winding up of the affairs of the Corporation which amount may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary; (e) The obligation, if any, of the Corporation to maintain a purchase, retirement or sinking fund for shares of such series, or to redeem shares or such series and the provisions with respect thereto; (f) The rights, if any, of the holders of shares of such series to convert such shares into shares of stock of the Corporation of any class or of any series of any class and the terms and conditions of such conversion; and (g) The voting rights, if any, and any other preferences, and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof. (3) The voting powers, preferences and rights, and the qualifications, limitations and restrictions thereof, applicable to the Common Stock and to the Preferred Stock of all series, except as set forth in Article Fifth hereof, are as follows: (a) The holders of shares of Preferred Stock of each series shall be entitled to such cash dividends, but only when and as declared by the Board of Directors out of funds legally available therefor, as they may be entitled to in accordance with the resolution or resolutions adopted by the Board of Directors providing for the issuance of such series; and (b) So long as there shall be outstanding any shares of Preferred Stock of any series entitled to cumulative dividends pursuant to the resolution or resolutions providing for the issuance of such series, no dividend, whether in cash or property, shall be paid or declared, nor shall any distribution be made, on Common Stock, nor shall any shares of Common Stock be purchased, redeemed, or otherwise acquired for value by the Corporation, unless the full cumulative 2 PAGE 3 dividends on the Preferred Stock of all series entitled to cumulative dividends for all past quarterly dividend periods and for the then current quarterly dividend period shall have been paid or declared and a sum sufficient for the payment thereof set apart. The foregoing provisions of this subdivision (b) shall not, however, apply to a dividend payable in Common Stock or to the acquisition of shares of Common Stock in exchange for, or through application of the proceeds of the sale of, shares of Common Stock. Subject to the foregoing and to any further limitations prescribed in accordance with the provisions of Section 2 of this Article Fourth, the Board of Directors may declare, out of any funds legally available therefor, dividends upon the then outstanding shares of Common Stock, and shares of Preferred Stock of any series shall not be entitled to share therein. (c) In the event of any liquidation or dissolution or winding up of the Corporation, the holders of the Preferred Stock of each series shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, before any distribution of assets shall be made to the holders of Common Stock, payment of the amount per share provided for in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such series; and the holders of the Common Stock shall be entitled, to the exclusion of the holders of the Preferred Stock of any and all series, to share ratably in all the assets of the Corporation then remaining in accordance with their respective rights and preferences. If upon any liquidation or dissolution or winding up of the Corporation the assets available for distribution shall be insufficient to pay the holders of all outstanding shares of Preferred Stock the full amounts to which they respectively shall be entitled, the holders of shares of Preferred Stock of all series shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable in respect of the Preferred Stock of all series were paid in full. Neither the statutory merger nor consolidation of the Corporation into or with any other corporation, nor the statutory merger or consolidation of any other corporation into or with the Corporation, nor a sale, transfer or lease of all or any part of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this subdivision (c). (d) Except as provided in the resolution or resolutions providing for the issue of any series of Preferred Stock, the exclusive voting power for all purposes shall be vested in the holders of Common Stock, each holder of Common Stock being entitled to one vote for each share of Common Stock held by him. (4) Shares of Preferred Stock and Common Stock may be issued by the Corporation from time to time for such consideration as may be fixed from time to time by the Board of Directors. Shares for which the consideration so fixed shall have been paid or delivered shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon; and the holder of such shares shall not be liable for any further payments in respect of such shares. (5) The amount of capital stock with which the Corporation will commence business is One Thousand Dollars ($1,000). The Corporation will also commence business with an original or paid in surplus of not less than One Million Five Hundred Thousand Dollars ($1,500,000). 3 PAGE 4 Fifth: No holder of Preferred Stock or Common Stock shall be entitled as such, as a matter of right, to subscribe for or purchase any part of any new or additional issues of shares of any class whatsoever or of any securities convertible into or exchangeable for any shares of any class whatsoever, whether now or hereafter authorized and whether issued for cash or other consideration. Sixth: The names and places of residence of each of the original subscribers to the capital stock of the Corporation and the number of shares subscribed for by each are as follows:
Number of Shares Name Residence Common Frank C. Taylor 37 Wall Str., New York 14 H. B. Holland 37 Wall Str., New York 13 Robert A. MacLean 37 Wall Str., New York 13
Seventh: The Corporation is to have perpetual existence. Eighth: The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever. Ninth: The Board of Directors shall consist of the number (never less than three) provided for in the Bylaws and the number may be increased or decreased and any vacancies filled, as therein provided. It shall not be necessary to be a stockholder in order to be a director. Tenth: In furtherance, and not in limitation, of the powers conferred by statute, the Board of Directors of the Corporation are expressly authorized: To make, alter, amend and rescind the Bylaws of the Corporation, but any Bylaws, so made, altered or amended by the Board of Directors may be altered, amended and rescinded either by the directors or the stockholders of the Corporation. To fix and change, from time to time, the amount that shall be reserved as working capital. To determine, from time to time, whether and to what extent, and at what time and places, and under what conditions and regulations, the accounts and books of the Corporation (other than the stock ledger) or any of them shall be open to inspection of the stockholders; and no stockholder shall have any right to inspect any account, book or document of the Corporation, except as conferred by statute, unless authorized by a resolution of the stockholders or the Board of Directors of the Corporation. To remove at any time any officer elected or appointed by the Board of Directors, but only by the affirmative vote of a majority of the then Board of Directors, and to remove any other officer or employee of the Corporation or to confer such power on any committee or officer. Any removal may be for cause or without cause. 4 PAGE 5 To designate from their number by vote of a majority of the entire Board of Directors in accordance with law, an Executive Committee of not less than three members, who, to the extent provided in the Bylaws or the resolution of the Board of Directors so designating them, shall have and exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation during the intervals between the meetings of the Board of Directors and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. The Board may also appoint from their number such other committees as they may deem judicious and to such extent as shall be provided by resolution of the Board of Directors or in the Bylaws may delegate to such committees all or any of the powers of the Board of Directors which may be lawfully delegated. The Board of Directors may fill vacancies in any committee appointed by it. The stockholders having voting power of the Corporation may in its Bylaws confer powers additional to the foregoing (not, however, inconsistent with law) upon the Board of Directors, in addition to the powers and authorities expressly conferred upon them by the statutes of the State of Delaware. Eleventh: The stockholders may hold their meetings, annual or special, within or without the State of Delaware, if the Bylaws so provide; and the Board of Directors or any committee thereof may hold any or all of their meetings within or without the State of Delaware at such places as the Board of Directors or the Committee, as the case may be, may designate. The Corporation may have one or more offices in addition to the principal office in the State of Delaware and may keep its books (except when otherwise expressly provided by law) outside the State of Delaware at such places as may be, from time to time, designated by the Board of Directors. Twelfth: No contract or other transaction of the Corporation shall be affected by the fact that any of the directors of the Corporation are in any wise interested in or connected with any other party to such contract or transaction or are themselves parties to such contract or transaction, provided that at the meeting of the Board of Directors authorizing or confirming such contract or transaction there shall be present a quorum of directors not so interested or connected and such contract or transaction shall be approved by a majority of such quorum, which majority shall consist of directors not so interested or connected. Any contract, transaction or act of the Corporation or of the Board of Directors or of the Executive Committee which shall be ratified by a majority in interest of a quorum of the stockholders of the Corporation having voting power at any annual meeting or any special meeting called for such purpose shall be as valid and as binding as though ratified by every stockholder of the Corporation. Thirteenth: The Corporation reserves the right (1) to create one or more classes of stock with such designations, preferences, redemption or dividend provisions and voting powers, or restrictions or qualifications thereof, as shall be stated and expressed in any certificate amendatory hereof, duly authorized, executed and filed in the manner now or hereafter prescribed by statutes of the State of Delaware, and (2) to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, or any amendment thereof, in the manner now or hereafter prescribed by the statutes of the State of Delaware, and all rights of the stockholders of the Corporation, except as aforesaid, are granted subject to these reservations. 5 PAGE 6 Fourteenth: A director of the Corporation shall have no personal liability to the Corporation or its stockholders for monetary damages for breach of his fiduciary duty as a director; provided, however, this Article shall not eliminate or limit the liability of a director (1) for any breach of the director's duty of loyalty to the Corporation or its stockholders; (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (3) for the unlawful payment of dividends or unlawful stock repurchases under Section 174 of the General Corporation Law of the State of Delaware; or (4) for any transaction from which the director derived an improper personal benefit. This Article shall not eliminate or limit the liability of a director for any act or omission occurring prior to the effective date of this Article. We, the undersigned, being each of the original subscribers to the capital stock of the Corporation hereinbefore named for the purpose of forming a corporation to do business both within and without the State of Delaware, and in pursuance of an Act of the Legislature of the State of Delaware entitled "An Act Providing a General Corporation Law" (approved March 10, 1899), being Chapter 65 of the Revised Code of Delaware, and the acts amendatory thereof and supplemental thereto, do make and file this certificate, hereby declaring and certifying that the facts herein stated are true, and do respectively agree to take the number of shares of stock hereinbefore set forth and accordingly have hereunto set our hands and seals this first day of May, 1923. Frank C. Taylor (L.S.) H. B. Holland (L.S.) Robert A. MacLean (L.S.) In the Presence of: ALLEN E. MOORE COUNTY OF NEW YORK ) ss: STATE OF NEW YORK ) BE IT REMEMBERED, that on this first day of May, 1923, personally came before me, Allen E. Moore, a Notary Public for the State of New York, Frank C. Taylor, H. B. Holland and Robert A. MacLean, parties to the foregoing Certificate of Incorporation, known to me personally to be such, and severally acknowledged the said certificate to be the act and deed of the signers respectively and that the facts therein stated are truly set forth. GIVEN under my hand and seal of office the day and year aforesaid. ALLEN E. MOORE ALLEN E. MOORE NOTARY PUBLIC Notary Public, Richmond RICHMOND COUNTY County Certificate Filed in New York County No. 800 Kings County No. 147 Register New York County No. 4080A Register Kings County No. 4294 Certificate Filed in Dutchess County My Commission Expires March 30, 1924 6 -----END PRIVACY-ENHANCED MESSAGE-----