PAGE 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period ________________________ TO ________________________ Commission file number 1-44 ARCHER-DANIELS-MIDLAND COMPANY (Exact name of registrant as specified in its charter) Delaware 41-0129150 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 4666 Faries Parkway Box 1470 Decatur, Illinois 62525 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code217-424-5200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, no par value - 557,527,630 shares (October 31, 1997) 1 PAGE 2 PART I - FINANCIAL INFORMATION ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) <TABLE> <CAPTION> THREE MONTHS ENDED SEPTEMBER 30, 1997 1996 -------------------------- (In thousands, except per share amounts) <S> <C> <C> Net sales and other operating income $3,651,30 $3,330,47 2 5 Cost of products sold and other operating costs 3,326,134 2,960,475 _________ _________ Gross Profit 325,168 370,000 Selling, general and administrative 134,986 311,332 expenses _________ _________ Earnings From Operations 190,182 58,668 Other income 8,833 19,441 _________ _________ Earnings Before Income Taxes 199,015 78,109 Income taxes 67,665 74,556 _________ _________ Net Earnings $ 131,3 $ 3,553 50 ========= ========= Average number of shares outstanding 557,695 572,360 Net earnings per common share $.24 $.01 Dividends per common share $.048 $.046 </TABLE> See notes to consolidated financial statements. 2 PAGE 3 ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) <TABLE> <CAPTION> SEPTEMBER JUNE 30, 30, 1997 1997 ------------------------ --- (In thousands) <S> <C> <C> ASSETS Current Assets Cash and cash equivalents $ 144,829 $ 397,788 Marketable securities 448,045 330,208 Receivables 1,553,390 1,329,350 Inventories 2,071,409 2,094,092 Prepaid expenses 156,395 132,897 __________ __________ Total Current Assets 4,374,068 4,284,335 Investments and Other Assets Investments in and advances to 1,327,325 1,102,420 affiliates Long-term marketable securities 1,104,476 987,665 Other assets 268,223 271,352 __________ __________ 2,700,024 2,361,437 Property, Plant and Equipment Land 122,257 118,898 Buildings 1,492,703 1,448,945 Machinery and equipment 7,029,320 6,841,225 Construction in progress 871,773 765,720 Less allowances for depreciation (4,567,256) (4,466,193) __________ __________ 4,948,797 4,708,595 __________ __________ $12,022,889 $11,354,367 =========== =========== </TABLE> See notes to consolidated financial statements. 3 PAGE 4 ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) <TABLE> <CAPTION> SEPTEMBER JUNE 30, 30, 1997 1997 ------------------------ -- (In thousands) <S> <C> <C> LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term debt $1,016,015 $ 604,831 Accounts payable 1,255,368 1,126,313 Accrued expenses 517,998 493,944 Current maturities of long-term debt 27,111 23,667 __________ __________ Total Current Liabilities 2,816,492 2,248,755 Long-term Debt 2,352,468 2,344,949 Deferred Credits Income taxes 607,491 597,514 Other 113,829 113,020 __________ __________ 721,320 710,534 Shareholders' Equity Common stock 4,180,285 4,192,321 Reinvested earnings 1,952,324 1,857,808 __________ __________ 6,132,609 6,050,129 __________ __________ $12,022,889 $11,354,367 ========== ========== </TABLE> See notes to consolidated financial statements. 4 PAGE 5 ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) <TABLE> <CAPTION> THREE MONTHS ENDED SEPTEMBER, 30 1997 1996 ------------------------ (In thousands) <S> <C> <C> Operating Activities Net earnings $ 131,350 $ 3,553 Adjustments to reconcile to net cash provided by operations Depreciation and amortization 117,539 106,254 Deferred income taxes 4,128 22,751 Amortization of long-term debt discount 7,849 6,875 (Gain)loss on marketable securities (23,698) (30,718) transactions Other 6,152 21,546 Changes in operating assets and liabilities Receivables (182,327) (79,361) Inventories 144,598 223,700 Prepaid expenses (23,201) 4,710 Accounts payable and accrued expenses 131,376 277,501 ________ ________ Total Operating Activities 313,766 556,811 Investing Activities Purchases of property, plant and equipment (190,591) (227,852) Net assets of businesses acquired (209,355) (10,970) Investments in and advances to affiliates (188,095) (307,809) Purchases of marketable securities (389,177) (375,671) Proceeds from sales of marketable securities 188,891 236,683 ________ ________ Total Investing Activities (788,327) (685,619) Financing Activities Long-term debt payments (3,900) (3,123) Net borrowings under line of credit 281,509 116,965 agreements Purchases of treasury stock (30,406) (40,989) Cash dividends and other (25,601) (25,876) ________ ________ Total Financing Activities 221,602 46,977 ________ ________ Decrease In Cash and Cash Equivalents (252,959) (81,831) Cash and Cash Equivalents Beginning of Period 397,788 534,702 ________ ________ Cash and Cash Equivalents End of Period $ 144,829 $ 452,871 ======== ======== </TABLE> See notes to consolidated financial statements. 6 PAGE 7 ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1.The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending June 30, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended June 30, 1997. Certain items in prior year financial statements have been reclassified to conform to the current year's presentation. <TABLE> <CAPTION> Note 2. Other Income THREE MONTHS ENDED SEPTEMBER 30 1997 1996 --------------------- (In thousands) <S> <C> <C> Investment income $28,202 $38,867 Interest expense (55,419) (46,127) Gain on marketable securities transactions 23,701 30,301 Equity in earnings of affiliates 10,557 (1,991) Other 1,792 (1,609) ----- ------ $ 8,833 $19,441 ===== ====== </TABLE> Note 3. Per Share Data All references to share and per share information have been adjusted for the 5 percent stock dividend paid September 15, 1997. 7 PAGE 8 ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 4.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, the Company has paid the United States a fine 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. Following public announcement in June 1995 of these investigations, the Company and certain of its then current directors and executive officers were named as defendants in a number of putative class action suits for alleged violations of federal securities laws on behalf of all purchasers of securities of the Company during the period between certain dates in 1992 and 1995. The Company, along with other domestic and foreign companies, was named as a defendant in a number of putative class action antitrust suits and other proceedings involving the sale of lysine, citric acid, and high fructose corn syrup. The plaintiffs generally request unspecified compensatory damages, costs, expenses and unspecified relief. The Company and the individuals named as defendants intend to vigorously defend these 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 $200 million in fiscal 1997 and $31 million in fiscal 1996 to cover the fine, 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, and related costs and expenses associated with the litigation described in the proceeding paragraph. Because of the early stage of other putative class actions and proceedings, including those related to high fructose corn syrup, the ultimate outcome and materiality of these matters cannot presently be determined. Accordingly, no provision for any liability that may result therefrom has been made in the unaudited consolidated financial statements. The Company and its directors have also been named as defendants in a putative class action suit which alleges violations of Delaware state law and seeks invalidation of the election of the Company's directors on the basis of alleged omissions from the proxy statement issued by the Company prior to its 1995 Annual Meeting of Shareholders. This case was dismissed, appealed and has now been remanded to provide the plaintiffs an opportunity to replead. 8 PAGE 9 ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION OPERATIONS The Company is in one business segment - procuring, transporting, storing, processing and merchandising agricultural commodities and products. A summary of net sales and other operating income by classes of products and services is as follows: <TABLE> <CAPTION> THREE MONTHS ENDED SEPTEMBER 30, 1997 1996 ------------------- (In millions) <S> <C> <C> Oilseed products $2,309 $2,106 Corn products 535 549 Wheat and other milled products 387 449 Other products and services 420 226 ----- ----- $3,651 $3,330 ===== ===== </TABLE> Net sales and other operating income increased 10 percent for the quarter to $3.7 billion due primarily to sales attributable to recently acquired operations. Sales of oilseed products increased 10 percent for the quarter due principally to higher sales volumes reflecting strong worldwide vegetable oil demand. This increase was partially offset by lower average selling prices reflecting the lower cost of raw materials. Sales of corn products decreased 2 percent due primarily to lower average selling prices for both the Company's sweetener products and fuel alcohol. This decrease was partially offset by increased sales volumes for both fuel alcohol and sweetener products as well as by increased average selling prices for lysine. Sales of wheat and other milled products decreased 14 percent for the quarter due to decreased average selling prices reflecting the lower cost of raw materials. The increase in other products and services was due principally from sales related to the Company's recently acquired cocoa business. Cost of products sold and other operating costs increased $366 million for the quarter to $3.3 billion due principally to costs related to recently acquired operations. To a lesser extent, costs increased due to higher sales volumes partially offset by lower average raw material costs. Gross profit declined $45 million to $325 million for the quarter due primarily to the net effect of decreased sales prices versus lower raw material costs and decreased merchandising and transportation margins. These decreases were partially offset by increased sales volumes and margins from recently acquired operations. 9 PAGE 10 Selling, general and administrative expenses decreased $176 million to $135 million due primarily to decreased legal and litigation related costs of $200 million arising out of the United States Department of Justice antitrust investigation of the Company's lysine and citric acid products as well as a securities suit brought by shareholders (see note 4 to the financial statements). Additionally, selling, general and administrative costs increased $13 million due to expenses attributable to recently acquired operations. The decrease in other income for the quarter was due to decreased investment income due to lower invested funds, increased interest expense due to higher borrowing levels and decreased gains on marketable securities transactions. These decreases were partially offset by increased equity in earnings of unconsolidated affiliates. The decrease in income taxes for the quarter was a result of a lower effective income tax rate partially offset by higher pretax earnings. The decrease in the Company's effective income tax rate to 34 percent for the quarter compared to an effective rate of 95 percent last year is due primarily to the non- deductibility for income tax purposes last year of a portion of the Company's litigation settlements and fines. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1997, the Company continued to show substantial liquidity with working capital of $1.6 billion, including cash and marketable securities of $593 million. During the quarter, the Company's cash and marketable securities net of short-term debt decreased $429 million and working capital decreased $478 million reflecting the Company's business acquisitions, investments in property, plant and equipment expansions and investments in affiliates. Capital resources remained strong as reflected in the Company's net worth of $6.1 billion. The Company's ratio of long-term debt to total capital at September 30, 1997 was approximately 26 percent. As discussed in Note 4 to the unaudited consolidated financial statements, various grand juries under the direction of the United States Department of Justice ("DOJ") have been conducting investigations into possible violations by the Company and others of federal antitrust laws and related matters with respect to the sale of lysine, citric acid and high fructose corn syrup. In connection with an agreement with the DOJ, the Company has paid the United States a fine 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 discussed in Note 4 to the unaudited 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 made provisions of $231 million in prior years to cover such fines and settlements and related costs and expenses. Because of the early stage of other putative class actions and proceedings, including those related to high fructose corn syrup, the ultimate outcome and materiality of these matters cannot presently be determined. Accordingly, no provision for any liability that may result therefrom has been made in the unaudited consolidated financial statements. 10 PAGE 11 PART II - OTHER INFORMATION Item 3. LEGAL PROCEEDINGS ENVIRONMENTAL MATTERS In 1993, the State of Illinois Environmental Protection Agency ("IEPA") brought administrative enforcement proceedings arising out of the Company's alleged failure to obtain permits for certain pollution control equipment at certain of the Company's processing facilities in Illinois. The Company and IEPA have executed a settlement agreement with respect to one of these proceedings. That agreement is currently before the Illinois Pollution Control Board for approval. The Company believes it has meritorious defenses to the remaining proceeding. In management's opinion this settlement and the remaining proceeding will not, either individually or in the aggregate, have a material adverse effect on the Company's financial condition or results of operations. The Company is involved in approximately 35 administrative and judicial proceedings in which it has been identified as a potentially responsible party (PRP) under the federal Superfund law and its state analogs for the study and clean-up of sites contaminated by material discharged into the environment. In all of these matters, there are numerous PRPs. Due to various factors such as the required level of remediation and participation in the clean-up effort by others, the Company's future clean-up costs at these sites cannot be reasonably estimated. However, in management's opinion these proceedings will not, either individually or in the aggregate, have a material adverse effect on the Company's financial condition or results of operations. 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. 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, the Company has paid the United States a fine 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 Company received notice that certain foreign governmental entities were commencing investigations to determine whether anticompetitive practices occurred in their jurisdictions. In February 1997, the Company's three Mexican subsidiaries were notified that the Mexican Federal Competition Commission commenced an investigation as to whether the Company's marketing and sale of lysine in Mexico resulted in violations of that country's federal antitrust laws. In June 1997, the Company and several of its European subsidiaries were notified that the Commission of the European Communities initiated an investigation as to their possible anticompetitive practices in the amino acid markets, in particular the lysine market, in the European Union. 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 within the European Union. Each of these investigations is in the early stages and, accordingly, their ultimate outcome and materiality cannot presently be determined. HIGH FRUCTOSE CORN SYRUP ACTIONS The Company, along with other companies, has been named as a defendant in thirty antitrust suits involving the sale of high fructose corn syrup. Twenty-nine 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 in the midst of discovery in this action. 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 actions 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. The parties are in the midst of discovery in this action. STATE ACTIONS. The Company, along with other companies, also 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. 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 five California putative classes comprise certain indirect purchasers of high fructose corn syrup and dextrose in the State of California during certain periods in the 1990s. One such action was filed on July 21, 1995 in the Superior Court of the County of Los Angeles, California and is encaptioned Borgeson v. Archer- Daniels-Midland Co., et al., Civil Action No. BC131940. This action and the other four 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). The parties are in the midst of discovery in this 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. 11 PAGE 12 LYSINE ACTIONS The Company, along with other companies, had been named as a defendant in twenty-one putative class action antitrust suits involving the sale of lysine. Except for several plaintiffs that opted out of the federal class action settlement and the actions specifically described below, all such suits have been settled, dismissed or withdrawn. STATE ACTIONS. The Company has been named as a defendant, along with other companies, in two putative class action antitrust suits and one non-class action suit filed in Alabama state court, one putative class action antitrust suit filed in Tennessee state court and one putative class action antitrust suit filed in Michigan state court involving the sale of lysine. The two putative Alabama class actions allege violations of the Alabama antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of lysine, and seek an injunction against continued alleged illegal conduct, damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The two putative classes in the Alabama actions comprise certain indirect purchasers of lysine in the State of Alabama during certain periods in the 1990s. One such action was filed on August 17, 1995 in the Circuit Court of DeKalb County, Alabama, and is encaptioned Ashley v. Archer-Daniels-Midland Co., et al., Civil Action No. 95-336. The parties are in the midst of discovery in this action. The other Alabama action, encaptioned Bailey v. Archer Daniels Midland Co., et al., Civil Action No. 95-165, and filed on December 11, 1995 in the Circuit Court of Tallapoosa County, has been placed on the court's administrative docket pending the outcome of the Ashley action. The non-class action, encaptioned Kent v. Archer Daniels Midland Co., et al, No. CV 9701108, and filed on February 21, 1997 in the Circuit Court of Jefferson County, Alabama, includes allegations that are similar to these contained in the putative class actions and seeks monetary relief in the amount of $670,000, injunctive relief against alleged illegal conduct, attorneys fees and costs, punitive damages and other unspecified relief. This action has been removed to federal court in the Northern District of Alabama. The Tennessee action, encaptioned McCormack Farms v. Archer Daniels Midland Co., et al., Civil Action No. 96C-2190, and filed on June 11, 1996 in Davidson County Circuit Court, alleges a restraint of trade in violation of the Tennessee Trade Practices Act and Tennessee Consumer Protection Act. This action includes allegations that defendants conspired to fix, maintain or stabilize the prices of lysine and seeks an injunction against continued illegal conduct, treble damages of an unspecified amount, attorneys' fees and costs, and other unspecified relief. The putative class in this case comprises certain indirect purchasers of lysine within the State of Tennessee during the period June 10, 1992 through June 10, 1996. The Company has not yet filed a responsive pleading. The Michigan action alleges a restraint of trade in violation of the Michigan Antitrust Reform Act and include allegations that defendants conspired to fix, raise, maintain and stabilize the price of lysine and seeks an injunction against continued illegal conduct, treble damages of an unspecified amount, attorneys' fees and costs, and other unspecified relief. The putative class in this case comprises certain indirect purchasers of lysine within the State of Michigan during certain periods in the 1990s. This action, encaptioned Michigan Pork Producers Assn, et al. v. Archer Daniels Midland Co., et al., No. 906-10696-CZ, was filed on September 25, 1996 in Kent County Circuit Court. The Company has not yet filed a responsive pleading in either action. 12 PAGE 13 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 several plaintiffs that opted out of the federal class action settlement and the actions specifically described below, all such suits have been settled or dismissed. FEDERAL ACTIONS. Seven of these actions alleged violations of federal antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of citric acid, and sought injunctions against continued alleged illegal conduct, treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative classes in these cases comprise certain direct purchasers of citric acid for certain periods in the 1990s. These six actions were transferred to the United States District Court for the Northern District of California and consolidated as In Re Citric Acid Antitrust Litigation, MDL No. 1092, Master File No. C-95-2963(FMS). On September 27, 1996 the Company entered into an agreement with counsel for the plaintiff class in this consolidated action in which among other things, the Company agreed to pay $35 million to members of the class, without admitting the alleged violations of law. On March 3, 1997, the court preliminarily approved the settlement and final approval was granted on July 23, 1997. On February 4, 1997, a class action complaint, encaptioned Galavan Supplements Ltd. v. Archer Daniels Midland Co., et al., No. 97-0704 JGD (VAPx), was filed in the United States District Court for the Central District of California. The Company, along with other companies, was named a defendant in this putative class action brought on behalf of a class consisting of all persons and entities outside of the United States who purchased citric acid directly from any defendants through their foreign facilities during the time period July 1, 1991 through June 30, 1995. This action alleges violations of the federal antitrust laws, including allegations that the defendants conspired to fix, maintain and stabilize the price of citric acid and to allocate amongst themselves their major citric acid customers, accounts and market shares on a worldwide basis. The Company, along with other defendants, has moved to dismiss this action. The Company, along with other companies, also has been named as a defendant in two non-class action federal antitrust suits involving the sale of citric acid. One action was filed on June 9, 1997 in the United States District Court for the Northern District of California and is encaptioned The Proctor & Gamble Manufacturing Co., et al. v. Archer- Daniels-Midland Company, et al., Civil Action No. 97-2155 (VRW). The other action was filed on June 26, 1997 in the United States District Court for the Northern District of California and is encaptioned Conopco, Inc., et al. v. Archer-Daniels-Midland Company, et al., Civil Action No. 97- 2407 (MMC). Both actions allege violations of federal antitrust laws, including allegations that defendants agreed to fix, raise and maintain the price of citric acid, and seek an injunction against continued alleged illegal conduct, treble damages of an unspecified amount, attorney's fees and costs, and other unspecified relief. These actions, which have been brought by entities that opted out of the federal class action, have been coordinated with In Re Citric Acid Antitrust Litigation that also is pending in the United States District Court for the Northern District of California. The Company and the plaintiffs in Conopco have settled this action, the terms of which provide for consideration to be paid by the Company in the form of cash and product in amounts not deemed material. The parties are in the midst of discovery in the remaining action. 13 PAGE 14 STATE ACTIONS. The Company, along with other companies, also 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. The Company currently is seeking appellate review of the denial of its motion to dismiss this action. The Company, along with other companies, also has been named as a defendant in two putative class action antitrust suits filed in California state court involving the sale of citric acid. These actions allege violations of the California antitrust and unfair competition laws, including allegations that the defendants conspired to fix, maintain or stabilize the price of citric acid, and seek injunctions against continued illegal conduct, treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative classes in these cases comprise certain indirect purchasers of citric acid within the State of California during certain periods in the 1990s. One such action was filed on June 12, 1996 in the Superior Court of the County of San Francisco, California and is encaptioned Bianco v. Archer Daniels Midland Co., et al., Civil Action No. 978912. The second action was filed on June 28, 1996 in San Francisco County Superior Court and is encaptioned Wignall v. Archer Daniels Midland Co., et al., Civil Action No. 979360. These actions recently have been coordinated before a single court in San Francisco, County, California under the caption, Food Additives (Lysine/Citric Acid) cases, Coordination Proceeding No. 3265. The Company, along with other companies, also has been named as a defendant in one putative class action antitrust suit filed in Wisconsin state court involving the sale of citric acid. This action alleges violations of the laws of Wisconsin, Minnesota, Alabama, Arizona, California, District of Columbia, Florida, Tennessee, West Virginia, Mississippi, New Mexico, North Carolina, South Dakota, North Dakota, Kansas, Louisiana, Michigan and Maine, including allegations that defendants conspired to maintain the price of citric acid at artificially high levels and seeks injunctive relief, treble damages of an unspecified amount, attorneys fees and costs and other unspecified relief. The putative class in this case comprises certain indirect purchasers of citric acid in the above referenced states during the period July 1, 1991 through June 27, 1995. This action was filed on December 20, 1996 in the Circuit Court for Milwaukee County, Wisconsin and is encaptioned Raz, et al. v. Archer-Daniels-Midland Co., et al., No. 96-CV-9729. 14 PAGE 15 HIGH FRUCTOSE CORN SYRUP/CITRIC ACID STATE CLASS ACTIONS The Company, along with other companies, has been named as a defendant in six putative class action antitrust suits involving the sale of both high fructose corn syrup and citric acid. Two of these actions allege violations of the California antitrust and unfair competition laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seek treble damages of an unspecified amount, attorneys fees and costs, restitution and other unspecified relief. The putative class in one of these California cases comprises certain direct purchasers of high fructose corn syrup and citric acid in the State of California during the period January 1, 1992 until at least October 1995. This action was filed on October 11, 1995 in the Superior Court of Stanislaus County, California and is entitled Gangi Bros. Packing Co. v. Archer-Daniels-Midland Co., et al., Civil Action No. 37217. The putative class in the other California case comprises certain indirect purchasers of high fructose corn syrup and citric acid in the state of California during the period October 12, 1991 until November 20, 1995. This action was filed on November 20, 1995 in the Superior Court of San Francisco County and is encaptioned MCFH, Inc. v. Archer-Daniels-Midland Co., et al., Civil Action No. 974120. The 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. 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 defendant in a putative class action antitrust suit filed in Michigan state court involving the sale of high fructose corn syrup and citric acid. This action alleges violations of the Michigan antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, attorneys fees and costs, and other unspecified relief. The putative class in the Michigan action comprises certain persons within the State of Michigan that purchased products containing high fructose corn syrup and/or citric acid during the period January 1993 through June 27, 1995. This action was filed on February 26, 1996 in the Circuit Court for Ingham County, Michigan, and is encaptioned Wilcox v. Archer-Daniels-Midland Co., et al., Civil Action No. 96- 82473-CP. The parties are in the midst of discovery in this action. On September 29, 1997, the court denied the plaintiff's motion for class certification. 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. The parties are in the midst of discovery in this action. The Company, along with other companies, has been named as a defendant in a putative class action antitrust suit filed in Kansas state court involving the sale of high fructose corn syrup and citric acid. This action alleges violations of the Kansas antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, court costs and other unspecified relief. The putative class in the Kansas action comprises certain persons within the State of Kansas that purchased products containing high fructose corn syrup and/or citric acid during at least the period January 1, 1992 through December 31, 1994. This action was filed on May 7, 1996 in the District Court of Wyandotte County, Kansas and is encaptioned Waugh v. Archer-Daniels- Midland Co., et al., Case No. 96-C-2029. The parties are in the midst of discovery in this action. 15 PAGE 16 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. SHAREHOLDER DERIVATIVE ACTIONS Following the public announcement of the grand jury investigations in June 1995 discussed above, three shareholder derivative suits were filed against certain of the Company's then current directors and executive officers and nominally against the Company in the United States District Court for the Northern District of Illinois and fourteen similar shareholder derivative suits were filed in the Delaware Court of Chancery. The derivative suits filed in federal court in Illinois were consolidated under the name Felzen, et al. v. Andreas, et al., Civil Action No. 95- C-4006, 95-C-4535, and a consolidated amended derivative complaint was filed on September 29, 1995. This complaint names all then current directors of the Company (except Mr. Coan) and one former director as defendants and names the Company as a nominal defendant. It alleges breach of fiduciary duty, waste of corporate assets, abuse of control and gross mismanagement, based on the antitrust allegations described above, as well as other alleged wrongdoing. On October 31, 1995, the Court granted the defendants' motion to transfer the Illinois consolidated derivative action to the Central District of Illinois, wherein it now bears the case number 95-2279. On April 26, 1996, the court dismissed the suit without prejudice and permitted the plaintiffs twenty-one days to refile it. The plaintiffs refiled the complaint on May 17, 1996. The defendants again moved to dismiss the complaint on June 1, 1996. Plaintiffs have supplemented the complaint to include the antitrust settlements and guilty plea described above. The fourteen shareholder derivative suits filed in the Delaware Court of Chancery have been consolidated as In Re Archer Daniels Midland Derivative Litigation, Consolidated No. 14403. An amended and consolidated complaint was filed on November 19, 1996. ADM moved to dismiss the complaint on December 12, 1996. On May 29, 1997, the Company executed a Memorandum of Understanding with counsel for both the Illinois and Delaware shareholder derivative plaintiffs. This Memorandum of Understanding provides for, among other things, $8 million to be paid by or on behalf of certain defendants in these actions to the Company and certain changes in the structure and policies of the Company's Board of Directors. On May 30, 1997, the United States District Court for the Central District of Illinois preliminarily approved this settlement and on July 7, 1997 final approval was granted. Certain entities appealed the final settlement approval order to the United States Court of Appeals for the Seventh Circuit and that appeal is pending. Provided the order approving the Memorandum of Understanding is affirmed, the parties have agreed to jointly seek dismissal of the Delaware actions with prejudice. 16 PAGE 17 DELAWARE STATE LAW/FEDERAL SECURITIES LAWS ACTIONS The Company and certain of its current and former directors also have been named as defendants in a putative class action suit encaptioned Loudon v. Archer-Daniels- Midland Co., et al., Civil Action No. 14638, filed in the Delaware Court of Chancery on October 20, 1995. This action alleges violations of Delaware state law and seeks invalidation of the 1995 election of the Company's directors on the basis of alleged omissions from the proxy statement issued by the Company prior to its October 19, 1995 annual meeting of shareholders. The Delaware Court of Chancery dismissed this action on February 20, 1996. On September 17, 1997, the Supreme Court of Delaware affirmed the lower court's judgment and remanded the case to provide the plaintiff's an opportunity to replead. The revised complaint must be filed on or before November 21, 1997. OTHER As described in the notes to the unaudited consolidated financial statements and management's discussion of operations and financial condition, the Company has made provisions to cover assessed fines, litigation settlements and related costs and expenses described above. 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. Item 2. Changes in Securities a) In July, 1997, the Board of Directors declared a 5 percent stock dividend which was paid on September 15, 1997, to shareholders of record on August 18, 1997. Item 6. Exhibits and Reports on Form 8-K a) A Form 8-K was not filed during the quarter ended September 30, 1997. 17 PAGE 18 SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ARCHER-DANIELS-MIDLAND COMPANY /s/ D. J. Schmalz D. J. Schmalz Vice President and Chief Financial Officer /s/ D. J. Smith D. J. Smith Vice President, Secretary and General Counsel Dated: November 7, 1997 18