PAGE 1
EXHIBIT 13--ANNUAL REPORT TO SECURITY HOLDERS
Archer Daniels Midland Company
MANAGEMENT'S DISCUSSION OF
OPERATIONS AND FINANCIAL CONDITION - June 30, 1995
The Company is in one business segment - procuring,
transporting, storing, processing and merchandising agricultural
commodities and products. The availability and price of
agricultural commodities are subject to wide fluctuations due to
unpredictable factors such as: weather; plantings; government
(domestic and foreign) farm programs and policies; changes in
global demand created by population growth and higher standards
of living; and global production of similar and competitive
crops. Generally, changes in the price of agricultural
commodities can be passed through to the price of processed
product. Ethanol is one of a limited few of the Company's
processed products which must be priced to compete with products
produced from other raw materials. The Company follows a policy
of hedging substantially all inventory and related purchase and
sale contracts. In addition, the Company from time to time will
hedge anticipated production, generally not exceeding six months
requirements. These hedges are made to reduce price risk of
market fluctuations and risk of crop failure. The instruments
used are principally readily marketable exchange traded futures
contracts which are designated as hedges. The changes in market
value of such contracts have a high correlation to the price
changes of the hedged commodity. Also, the underlying commodity
can be delivered against such contracts. To obtain a proper
matching of revenue and expense, gains or losses arising from
open and closed hedging transactions are included in inventory
as a cost of the commodities and reflected in the income
statement when the product is sold. Inflation, over time, has
an impact on agricultural commodity prices. The Company's
business is capital intensive and inflation could impact the
cost of capital investment.
OPERATIONS
A summary of net sales and other operating income by classes of
products and services is as follows:
1995 1994 1993
________________________________
(In millions)
Oilseed products $ 7,643$ 6,656 $ 5,688
Corn products 2,477 2,294 2,069
Wheat and other milled products 1,384 1,394 1,234
Other products 1,168 1,030 820
________ ________ ________
$ 12,672 $ 11,374 $ 9,811
======== ======== ========
1995 compared to 1994
Net sales and other operating income for 1995 increased $ 1.3
billion to a record high $12.7 billion. The increase is
primarily due to a 9% increase in volumes and to a lesser extent
a 2% increase in average selling prices. Sales of oilseed
products increased 15% to $7.6 billion due primarily to
increased volume as strong export demand for vegetable oils and
good domestic demand for meal products contributed to favorable
oilseed processing market conditions. Sales of corn products
increased 8% to $2.5 billion due primarily to increased average
selling prices resulting from strong demand from the food and
beverage industry for sweetener products and increased demand
for ethanol. Sales of wheat and other milled products were at
levels comparable to last year as sales attributable to acquired
companies were offset by the Company's contribution of its rice
milling operations to a joint venture in 1995. The increase in
sales of other products is due primarily to feed operations
acquired in 1994 a portion of which were contributed to a joint
venture in 1995.
Cost of products sold and other operating costs increased $793
million to $11 billion in 1995 due primarily to the 9% increase
in volumes partially offset by declines in average raw material
commodity prices.
The combined effect of increased sales volumes, higher average
selling prices and lower raw material commodity prices resulted
in gross profits increasing $505 million to $1.6 billion in
1995. Approximately $360 million of the increase can be
attributed to improved gross profits resulting from the net
price effect of higher average selling prices and lower average
raw material commodity prices. The remaining increase is due
primarily to sales volume increases.
Selling, general and administrative expenses increased $58
million to $429 million in 1995 due principally to general cost
increases in support of the increased sales volumes, a $12
million increase in bad debt expense and a $6 million increase
in charitable contribution expense.
The decrease in other income for 1995 resulted primarily from
losses on marketable securities transactions and decreased
equity in earnings of unconsolidated affiliates. These
decreases were partially offset by increased investment income,
due to both higher levels of invested funds and higher interest
rates, and by the $43 million gain on the sale of the Company's
British Arkady bakery ingredient business.
Excluding the effect in 1994 of the increase in the statutory
federal income tax rate from 34% to 35% which resulted in
additional income tax accruals and a non-recurring income tax
charge of $14 million, the Company's 1995 effective tax rate of
33% approximates the 1994 effective rate.
1994 compared to 1993
Net sales and other operating income for 1994 increased $1.6
billion to $11.4 billion. The increase is primarily due to an
8% increase in average selling prices of the Company's products
and to a lesser extent, a 5% increase in volume of products
sold. Sales of oilseed products increased 17% to $6.7 billion
due primarily to a 15% increase in average selling prices and a
2% increase in sales volumes. Sales of corn products increased
11% to $2.3 billion due primarily to a 12% increase in volume of
product sold partially offset by slightly lower average selling
prices as ethanol prices declined due to lower imported oil
prices. Sales of wheat and other milled products increased 13%
to $1.4 billion due primarily to increased volumes including
sales of acquired businesses. Sales of other products increased
26% to $1 billion due primarily to feed operations acquired in
1994.
Cost of products sold and other operating costs increased $1.5
billion to $10.2 billion in 1994 due primarily to higher raw
material commodity costs, principally higher corn costs due to
the impact of widespread Midwest flooding on the corn crop, and
also increased volumes of products sold.
The combined effect of increased sales volumes and higher
average selling prices partially offset by higher raw material
commodity prices and the negative impact of the widespread
Midwest flooding resulted in gross profits increasing $75
million to $1.1 billion. Volume increases contributed
approximately $90 million and the net price effect of higher
average selling prices and higher raw material commodity prices
increased gross profits approximately $25 million. These
increases were partially offset by the negative impact of the
widespread Midwest flooding on procuring, transporting and
merchandising operations. We estimate that costs of
approximately $40 million were incurred in the first quarter of
1994 due to transportation and plant operation interruptions
resulting from such flood.
Selling, general and administrative expenses increased $46
million to $371 million in 1994 due principally to $26 million
of expense attributable to acquired businesses, a $7 million
increase in advertising costs and other general cost increases
in support of increased sales volumes.
The decrease in other income for 1994 resulted primarily from
increased interest expense, due principally to higher average
borrowing levels, and to a lesser extent reduced gains on
marketable securities transactions.
The Company's effective tax rate was 34% in 1994 compared to 28%
in 1993. The 1994 effective rate included the increase in the
statutory federal income tax rate from 34% to 35% resulting in
additional income tax accruals and a non-recurring income tax
charge of $14 million. The 1993 effective rate reflects a $30
million credit from settlement with the Internal Revenue Service
of prior years' tax audits. Excluding the impact of these
items, the effective rates in 1994 and 1993 were comparable.
Effective July 1, 1992, the Company adopted FASB Statements No.
106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," and No. 109, "Accounting For Income Taxes." The
cumulative effect of adopting these accounting changes was to
decrease earnings by $35 million, net of income tax, for FASB
Statement No. 106 and to increase earnings by $ 68 million for
FASB Statement No. 109. The new standards did not have a
material effect on the Company's operating results.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company continued to show substantial
liquidity with working capital of $2.5 billion, including cash
and marketable securities of $1.1 billion. Working capital also
includes inventory with a replacement cost in excess of its LIFO
carrying value of approximately $56 million. The cash and
marketable securities, consisting principally of United States
government obligations, are available for working capital,
future expansion and stock repurchase plans. Capital resources
were strengthened as shown by the increase in net worth to $5.9
billion. The principal source of capital during the year was
funds generated from operations. The Company's ratio of long-
term debt to total capital at year end was approximately 24%.
Annual maturities of long-term debt range from $12 million to
$34 million during the next five years except for 1997 when $126
million is due.
Commercial paper and commercial bank lines of credit are
available to meet seasonal cash requirements. At June 30, 1995,
the Company had $398 million of short-term bank credit lines.
Both Standard & Poor's and Moody's continue to assign their
highest ratings to the Company's commercial paper and to rate
the Company's long-term debt as AA- and Aa2, respectively. In
addition to the cash flow generated from operations, the Company
has access to equity and debt capital through numerous
alternatives from public and private sources in the domestic and
international markets.
As discussed in Note 11 to the consolidated financial
statements, the Company, along with a number of other domestic
and foreign companies, is the subject of a grand jury
investigation into possible violations of federal antitrust laws
and possible related crimes in the food additives industry.
Neither the Company nor any director, officer or employee has
been charged in connection with the investigation. In addition,
related civil class actions are pending. These matters could
result in the Company being subject to monetary damages, fines,
penalties and other sanctions and expenses. However, because of
the early stage of the investigation, the ultimate outcome of
these matters cannot presently be determined. Accordingly, no
provision for any liability that may result therefrom has been
made in the accompanying consolidated financial statements.
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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.
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.
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
Effective July 1, 1994, the Company adopted FASB Statement No.
115, "Accounting for Certain Investments in Debt and Equity
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. The effect of adopting this Statement increased the
opening balance of shareholders' equity by $51 million (net of
$25 million in deferred income taxes) to reflect the net
unrealized gain on marketable securities classified as available-
for-sale which were previously carried at cost.
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.
The Company follows a policy of hedging substantially all
inventory and related purchase and sale contracts. In addition,
the Company from time to time will hedge anticipated production,
generally not exceeding six months requirements. These hedges
are made to reduce price risk of market fluctuations and risk of
crop failure. The instruments used are principally readily
marketable exchange traded futures contracts which are
designated as hedges. The changes in market value of such
contracts have a high correlation to the price changes of the
hedged commodity. Also, the underlying commodity can be
delivered against such contracts. To obtain a proper matching
of revenue and expense, gains or losses arising from open and
closed hedging transactions are included in inventory as a cost
of the commodities and reflected in the statement of earnings
when the product is sold.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. The Company
uses the straight line method in computing depreciation for
financial reporting purposes and generally uses accelerated
methods for income tax purposes.
Net Sales
The Company follows a policy of recognizing sales at the time of
product shipment. Net margins from grain merchandised, rather
than the total sales value thereof, are included in net sales in
the consolidated statements of earnings. Gross sales of the
Company, including the total sales value of grain merchandised,
were $15.9 billion in 1995, $14.1 billion in 1994 and $12.1
billion in 1993, and include export sales of $4.2 billion in
1995, $3.2 billion in 1994 and $2.9 billion in 1993.
Per Share Data
Share and per share information have been adjusted to give
effect to the 50% stock dividend in the form of a three-for-two
stock split paid in December 1994 and to the 5% stock dividends
in the three years ended June 30, 1995, including the 5% stock
dividend declared in July 1995, and payable in September 1995.
Net earnings per common share is determined by dividing net
earnings by the weighted average number of common shares
outstanding. The impact of common stock equivalents is not
material.
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CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended June 30
_________________________________
1995 1994 1993
_________________________________
(In thousands, except
per share amounts)
Net sales and other operating $12,671,868 $11,374,372 $9,811,362
income
Cost of products sold and other
operating costs 11,029,38410,236,737 8,748,418
______________________________
Gross Profit 1,642,484 1,137,635 1,062,944
Selling, general and administrative
expenses 429,358 371,237 324,793
______________________________
Earnings From Operations 1,213,126 766,398 738,151
Other income (expense) (31,603) (28,095) 7,858
______________________________
Earnings Before Income Taxes
and Cumulative Effect of
Accounting Changes 1,181,523 738,303 746,009
Income taxes 385,608 254,234 211,500
______________________________
Earnings Before Cumulative Effect
of Accounting Changes 795,915 484,069 534,509
Cumulative effect of accounting changes- - 33,018
______________________________
Net Earnings $ 795,915$ 484,069$ 567,527
==============================
Earnings per common share
Before Cumulative Effect
of Accounting Changes $ 1.47$ .89$ .94
Cumulative Effect of Accounting
Changes - - .06
______________________________
Net Earnings $ 1.47$ .89$ 1.00
==============================
<FN>
See notes to consolidated financial statements.
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CONSOLIDATED BALANCE SHEETS
June 30
__________________________________
1995 1994
__________________________________
Assets (In thousands)
Current Assets
Cash and cash equivalents $ 454,593 $ 316,394
Marketable securities 664,690 1,019,059
Receivables 1,013,562 1,041,769
Inventories 1,473,896 1,422,147
Prepaid expenses 105,904 111,426
__________ __________
Total Current Assets 3,712,645 3,910,795
Investments and Other Assets
Investments in and advances
to affiliates 502,698 297,147
Long-term marketable securities1,604,219 891,073
Other assets 175,044 109,263
__________ __________
2,281,961 1,297,483
Property, Plant and Equipment
Land 113,098 101,854
Buildings 1,109,249 1,029,817
Machinery and equipment 5,443,561 5,073,631
Construction in progress 642,825 455,729
Less allowances for depreciation(3,546,452) (3,122,456)
__________ __________
3,762,281 3,538,575
__________ __________
$9,756,887 $8,746,853
========== ==========
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CONSOLIDATED BALANCE SHEETS
June 30
_________________________________
1995 1994
_________________________________
Liabilities and Shareholders' (In thousands)
Equity
Current Liabilities
Accounts payable $ 725,046 $ 690,824
Accrued expenses 431,725 412,438
Current maturities of 15,614 23,716
long-term debt __________ __________
Total Current Liabilities 1,172,385 1,126,978
Long-Term Debt 2,070,095 2,021,417
Deferred Credits
Income taxes 538,351 432,396
Other 121,891 120,641
__________ __________
660,242 553,037
Shareholders' Equity
Common stock 3,668,977 3,415,955
Reinvested earnings 2,185,188 1,629,466
__________ __________
5,854,165 5,045,421
__________ __________
$9,756,887 $8,746,853
========== ==========
<FN>
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30
1995 1994 1993
(In thousands)
Operating Activities
Net earnings $ 795,915 $ 484,069 $ 567,527
Adjustments to reconcile to net
cash provided by operations
Cumulative effect of accounting changes- - (33,018)
Depreciation and amortization 384,872 354,463 328,549
Deferred income taxes 25,421 22,009 16,238
Amortization of long-term debt discount21,90819,613 16,900
Other 36,065 (23,230) (39,743)
Changes in operating assets and liabilities
Receivables (82,203) (114,741) (90,890)
Inventories (41,561) (172,649) (69,927)
Prepaid expenses 5,219 (13,450) (8,019)
Accounts payable and accrued expenses45,611 74,287 (13,804)
________ ________ ________
Total Operating Activities 1,191,247 630,371 673,813
Investing Activities
Purchases of property, plant and equipment(558,604) (514,364)
(394,400)
Business acquisitions (55,126) (257,731) (200,023)
Investments in and advances to affiliates(122,565)16,506(11,44
1)
Purchases of marketable securities(2,017,619)(2,136,553)(2,691
,913)
Proceeds from sales of marketable
securities 1,940,370 2,643,368 1,637,373
_________ _________ _________
Total Investing Activities (813,544) (248,774)(1,660,404)
Financing Activities
Long-term debt borrowings 17,626 12,001 506,576
Long-term debt payments (32,304) (76,133) (33,256)
Purchases of treasury stock (179,613) (355,226) (35,429)
Cash dividends and other (45,213) (32,328) (29,177)
_________ _________ _________
Total Financing Activities (239,504) (451,686) 408,714
_________ _________ _________
Increase (Decrease) In Cash And Cash
Equivalents 138,199 (70,089) (577,877)
Cash And Cash Equivalents Beginning Of
Period 316,394 386,483 964,360
_________ _________ _________
Cash And Cash Equivalents End Of
Period $ 454,593$ 316,394$ 386,483
========= ========= =========
<FN>
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock
___________________
Reinvested
Shares Amount Earnings
_____________________________
(In thousands)
Balance July 1, 1992 326,480 $3,030,600 $1,461,753
Net earnings 567,527
Cash dividends paid-$.06 per share (32,266)
Treasury stock purchases (1,531) (35,429)
5% stock dividend-September 1993 16,300 348,927 (348,927)
Foreign currency translation (131,153)
Other 1,050 22,524 (305)
_______ __________ __________
Balance June 30, 1993 342,299 3,366,622 1,516,629
Net earnings 484,069
Cash dividends paid-$.06 per share (32,586)
Treasury stock purchases (15,597) (355,226)
5% stock dividend-September 1994 16,364 381,707 (381,707)
Foreign currency translation 43,363
Other 573 22,852 (302)
_______ __________ __________
Balance June 30, 1994 343,639 3,415,955 1,629,466
Net earnings 795,915
Cash dividends paid-$.09 per share (46,825)
3-for-2 stock split 172,030
Treasury stock purchases (9,756) (179,613)
5% stock dividend-declared July 199525,358 406,019 (406,019)
Foreign currency translation 66,005
Net unrealized gains on marketable
securities 147,118
Other 1,253 26,616 (472)
_______ _________ _________
Balance June 30, 1995 532,524 $3,668,977 $2,185,188
======= ========== ==========
<FN>
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1-Marketable Securities
Investments accounted for in accordance with FASB Statement No.
115, "Accounting for Certain Investments in Debt and Equity
Securities," which are included in cash equivalents and
marketable securities, consist of:
Unrealized Unrealized Fair
Cost Gains Losses Value
_____________________________________
(In thousands)
1995
United States
government
obligations
Maturity less than 1 $1,057,1 $ $ $1,057,6
year 89 731 281 39
Maturity 1 year to 5 453,276 9,719 462,995
years
Other debt securities
Maturity less than 1 59,319 61 59,258
year
Maturity 1 year to 5 174,811 2,441 177,252
years
Equity securities 751,344 217,014 6,495 961,863
________ _________ ________ ________
__ _ __ __
$2,495,9 $ $ $2,719,0
39 229,905 6,837 07
======== ========= ======== ========
== = == ==
1994
United States
government $1,243,6 $ 1,019 $ $1,242,5
obligations 96 2,193 22
Other debt securities 202,467 2,725 923 204,269
Equity securities 732,467 131,204 56,266 807,405
________ _________ ________ ________
__ _ _ __
$2,178,6 $ $ $2,254,1
30 134,948 59,382 96
======== ========= ======== ========
== = == ==
Note 2-Inventories
1995 1994
(In thousands)
LIFO inventories
FIFO value $ 416,804 $ 459,640
LIFO valuation reserve (56,036) (74,016)
__________ __________
LIFO carrying value 360,768 385,624
FIFO inventories, including
hedging procedure method 1,113,128 1,036,523
__________ __________
$1,473,896 $1,422,147
========== ==========
Note 3-Accrued Expenses
1995 1994
(In thousands)
Payroll and employee benefits $ 111,452 $ 105,283
Income taxes 109,323 116,650
Insurance loss reserves 76,987 79,488
Other 133,963 111,017
__________ __________
$ 431,725 $ 412,438
========== ==========
Note 4-Long-Term Debt and Financing Arrangements
1995 1994
_____________________
(In thousands)
8.875% Debentures $300 million face
amount, due in 2011 $ 298,216 $ 298,166
8.125% Debentures $300 million face
amount, due in 2012 297,955 297,901
8.375% Debentures $300 million face
amount, due in 2017 294,079 293,988
7.125% Debentures $250 million face
amount, due in 2013 249,378 249,361
6.25% Notes $250 million
face amount, due in 2003 248,998 249,293
Zero Coupon Debt $400 million face
amount, due in 2002 160,855 140,768
7% Debentures $250 million face amount,
due in 2011 127,017 125,228
6% Bonds 150 million Deutsche Mark
face amount, due in 1997 108,424 94,400
10.25% Debentures $100 million
face amount, due in 2006 98,693 98,628
Industrial Revenue Bonds at various
rates from 5.30% to 13.25% and due
in varying amounts to 2011 78,253 79,442
Other 123,841 117,958
__________ __________
Total long-term debt 2,085,709 2,045,133
Less current maturities (15,614) (23,716)
__________ __________
$2,070,095 $2,021,417
========== ==========
At June 30, 1995, the fair value of the Company's long-term debt
exceeded the carrying value by $367 million, as estimated by
using quoted market prices or discounted future cash flows based
on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.
Unamortized original issue discounts on the 7% Debentures and
Zero Coupon Debt issues are being amortized at 15.35% and
13.80%, respectively. Accelerated amortization of the discounts
for tax purposes has the effect of lowering the actual rate of
interest to be paid over the remaining lives of the issues to
approximately 10.64% and 5.69%, respectively.
The aggregate maturities for long-term debt for the five years
after June 30, 1995 are $16 million, $126 million, $34 million,
$17 million and $12 million, respectively.
At June 30, 1995 the Company had lines of credit totaling $398
million.
Note 5-Shareholders' Equity
The Company has authorized 800 million shares of common stock
and 500,000 shares of preferred stock, both without par value.
No preferred stock has been issued. At June 30, 1995 and 1994,
the Company had approximately 33.5 million and 24.6 million
common shares, respectively, in treasury. Treasury stock is
recorded at cost, $541 million at June 30, 1995, as a reduction
of common stock.
Stock option plans provide for the granting of options to
employees to purchase common stock of the Company at market
value on the date of grant. Options expire five to ten years
after the date of grant. At June 30, 1995 options for 4,325,819
shares at prices ranging from $7.54 to $19.17 per share were
outstanding of which 1,219,990 shares were exercisable. There
were 304,298 shares available for future grant at June 30, 1995.
Cumulative foreign currency translation gains of $62 million and
unrealized gains on marketable securities of $147 million at
June 30, 1995, net of applicable taxes, are included as a
component of reinvested earnings.
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Note 6-Other Income (Expense)
1995 1994 1993
________________________________
(In thousands)
Investment income $147,133 $100,706 $100,715
Interest expense (170,886 (173,429 (150,945
) ) )
Gain (loss) on marketable
securities transactions (27,633) 25,785 33,531
Other, including equity
in earnings of affiliates 19,783 18,843 24,557
________ ________ ________
$(31,603 $(28,095 $ 7,858
) )
======== ======== ========
Interest expense is net of interest capitalized of $32 million,
$26 million and $23 million in 1995, 1994 and 1993,
respectively.
The Company made interest payments of $181 million, $180 million
and $151 million in 1995, 1994 and 1993, respectively.
The realized gains on sales of available-for-sale marketable
securities totaled $18 million, $36 million and $34 million in
1995, 1994 and 1993, respectively. The realized losses totaled
$46 million and $10 million in 1995 and 1994, respectively.
Note 7-Income Taxes
1995 1994 1993
_____________________________
(In thousands)
Current
Federal $271,702 $202,708 $160,966
State 38,768 30,969 31,471
Foreign 42,085 14,460 (583)
Deferred
Federal 30,191 4,102 23,103
State 2,108 (3,036) (1,857)
Foreign 754 5,031 (1,600)
________ ________ ________
$385,608 $254,234 $211,500
======== ======== ========
Significant components of the Company's deferred tax liabilities
and assets are as follows:
1995 1994
________________________
(In thousands)
Deferred tax liabilities
Depreciation $386,883 $365,491
Unrealized gain on marketable 75,978 -
securities
Bond discount amortization 62,941 60,308
Other 62,036 55,575
________ ________
587,838 481,374
Deferred tax assets
Postretirement benefits 26,274 27,624
Other 79,829 85,406
________ ________
106,103 113,030
________ ________
Net deferred tax liabilities 481,735 368,344
Current net deferred tax assets included
in prepaid expenses 56,616 64,052
________ ________
Non-current net deferred tax $538,351 $432,396
liabilities
======== ========
Reconciliation of the statutory federal income tax rate to the
Company's effective tax rate is as follows:
1995 1994 1993
Statutory rate 35.0% 35.0% 34.0%
State income taxes, net of
federal tax benefit 2.3 2.3 2.6
Foreign sales corporation (1.8) (2.7) (2.3)
Settlement of tax issues - - (4.0)
Federal tax rate increase - 1.8 -
Other (2.9) (2.0) (1.9)
____ ____ ____
Effective rate 32.6% 34.4% 28.4%
==== ==== ====
The Company made income tax payments of $354 million, $250
million and $251 million in 1995, 1994 and 1993, respectively.
In 1994, the federal income tax rate increase resulted in
additional income tax accruals and a non-recurring income tax
charge of $14 million, or $.03 per share.
During 1993, the Company settled various tax matters related to
audits of prior tax years by the Internal Revenue Service. The
settlement resulted in a $30 million credit, or $.05 per share,
to the 1993 provision.
Effective July 1, 1992, the Company adopted FASB Statement No.
109, "Accounting for Income Taxes." The cumulative effect of
restating deferred taxes as of July 1, 1992, was to increase
1993 earnings by $68 million, or $.12 per share.
Note 8-Leases
The Company has noncancellable operating leases, principally for
transportation equipment, with total future rental commitments
of $98 million, which range from $5 million to $26 million
during each of the next five years, and expire on various dates
through 2026. Rent expense for 1995, 1994 and 1993 was $73
million, $69 million and $66 million, respectively.
9
PAGE 10
Note 9-Employee Benefit Plans
The Company has noncontributory and trusteed pension plans
covering substantially all employees. It is the Company's
policy to fund pension costs as required by the Employee
Retirement Income Security Act. At June 30, 1995, the plans had
assets at fair value of $260 million and projected benefit
obligations of $297 million based on a discount rate of 8.0%.
Pension expense is not material.
The Company adopted FASB Statement No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," for
health care and life insurance benefit plans as of July 1, 1992.
The cumulative effect of adopting this statement decreased 1993
earnings by $35 million (net of related taxes of $20 million),
or $.06 per share. This charge represented the discounted
present value of expected future retiree health benefits
attributed to employees' service rendered prior to July 1, 1992.
The accumulated postretirement benefit obligations (APBO) for
the unfunded plans at June 30, 1995 were $72 million, based on a
discount rate of 8.0% and an assumed health care cost trend rate
of 11.1% for 1996 gradually decreasing to 5.5% by 2004. The
expense of these plans is not material. A 1% increase in the
health care cost trend rate assumption would not have had a
material impact on the APBO or expense for the year.
In addition, the Company has savings and investment plans
available to eligible employees with one year of service.
Employees may contribute up to 6% of their salaries, not to
exceed $9,000. The Company matches these contributions, at
various levels, to a maximum of $6,000.
Note 10-Geographic Information
Net Sales
and Other Earnings
Operating From Identifiable
Income Operations Assets
_________ __________ ____________
(In millions)
1995
United States $ 9,177 $1,089 $5,350
Foreign 3,495 124 1,181
_______ ______ ______
$12,672 $1,213 $6,531
======= ====== ======
1994
United States $ 8,365 $704 $5,140
Foreign 3,009 62 1,083
_______ ____ ______
$11,374 $766 $6,223
======= ==== ======
1993
United States $ 7,266 $716 $4,407
Foreign 2,545 22 925
_______ ____ ______
$ 9,811 $738 $5,332
======= ==== ======
Earnings from operations represent earnings before other income,
income taxes and cumulative effect of accounting changes.
Identifiable assets exclude cash and cash equivalents,
marketable securities and investments in and advances to
affiliates.
Note 11-Antitrust Investigation and Related Litigation
The Company, along with a number of other domestic and foreign
companies, is the subject of a grand jury investigation into
possible violations of federal antitrust laws and possible
related crimes in the food additives industry. The
investigation is directed towards possible price-fixing with
respect to lysine, citric acid and high fructose corn syrup.
Neither the company nor any director, officer or employee has
been charged in connection with the investigation.
Following public announcement of the investigation, the Company
and certain of its directors and executive officers were named
as defendants in a number of putative class actions alleging
violations of antitrust and securities laws relating to the
Company's marketing practices in the food additives industry,
specifically with respect to lysine, citric acid and high
fructose corn syrup. The plaintiffs generally request
unspecified compensatory and punitive damages, costs, expenses
and unspecified relief. The Company and the individuals named
as defendants intend to vigorously defend these class actions.
These matters could result in the Company being subject to
monetary damages, fines, penalties and other sanctions and
expenses. However, because of the early stage of the
investigation, the ultimate outcome of the investigation and the
putative class actions cannot presently be determined.
Accordingly, no provision for any liability that may result
therefrom has been made in the accompanying consolidated
financial statements.
Shareholder derivative actions also have been filed against
certain of the Company's directors and executive officers and
nominally against the Company alleging that the individuals
named as defendants breached their fiduciary duties to the
Company and seeking monetary damages and other relief on behalf
of the Company from the individuals named as defendants. The
Company intends to seek dismissal of these derivative actions on
the ground that they cannot be maintained unless the plaintiffs
first brought their complaints to the Company's Board of
Directors, which they did not.
The Company from time to time, in the ordinary course of
business, is named as a defendant in various other lawsuits. In
management's opinion, the gross liability from such other
lawsuits, including environmental exposure, with or without
insurance recoveries is not considered to be material to the
Company's financial condition or results of operations.
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PAGE 11
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, 1995 and 1994, and the related consolidated statements
of earnings, shareholders' equity and cash flows for each of the
three years in the period ended June 30, 1995. 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, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended June 30, 1995, in conformity
with generally accepted accounting principles.
As discussed in Note 11 to the consolidated financial
statements, the Company, along with a number of other foreign
and domestic companies, is the subject of a grand jury
investigation into possible violations of federal antitrust laws
and possible related crimes in the food additives industry.
Related civil class actions are pending. Because of the early
stage of the investigation, the ultimate outcome of these
matters cannot presently be determined. Accordingly, no
provision for any liability that may result therefrom has been
made in the accompanying consolidated financial statements.
As discussed in the notes to the consolidated financial
statements, the Company changed its method of accounting for
income taxes and postretirement benefits in 1993.
ERNST & YOUNG, LLP
Minneapolis, Minnesota
July 28, 1995
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PAGE 12
QUARTERLY FINANCIAL DATA (Unaudited)
Quarter
First Second Third Fourth Total
(In thousands, except per share amounts)
Fiscal 1995
Net sales $3,015,223$3,221,804$3,299,662$3,135,179$12,671,868
Gross profit 344,819 477,625 425,513 394,527 1,642,484
Net earnings 154,544 220,098 195,701 225,572 795,915
Per common share .28 .41 .36 .42 1.47
Fiscal 1994
Net sales $2,613,628$2,821,561$3,010,001$2,929,182$11,374,372
Gross profit 223,137 322,337 285,658 306,503 1,137,635
Net earnings 69,063 146,059 131,269 137,678 484,069
Per common share .13 .27 .24 .25 .89
Results for the fourth quarter of fiscal 1995 included a $36 million, or $.07
per share, after tax gain from the sale of the Company's British Arkady bakery
ingredient business.
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PAGE 13
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, Stock
Exchange of Basle, Switzerland, Stock Exchange of Geneva, Switzerland and the
Stock Exchange of Zurich, Switzerland. The following table sets forth, for the
periods indicated, the high and low market prices of the common stock and common
stock cash dividends.
Cash
Market Price Dividends
High Low Per Share
Fiscal 1995--Quarter Ended
June 30 18 7/8 17 1/8 .024
March 31 20 17 3/8 .024
December 31 20 1/8 15 3/4 .024
September 30 16 5/8 14 1/4 .015
Fiscal 1994--Quarter Ended
June 30 15 1/8 13 1/2 .015
March 31 16 5/8 13 5/8 .015
December 31 14 1/2 13 1/8 .015
September 30 14 5/8 12 5/8 .014
The number of shareholders of the Company's common stock at June 30, 1995 was
34,385. 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.
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TEN-YEAR SUMMARY
Operating, Financial and Other Data (Dollars in thousands, except per share
data)
1995 1994 1993
Operating
Net sales and other operating income $12,671,868 $11,374,372 $9,811,362
Depreciation and amortization 384,872 354,463 328,549
Net earnings 795,915 484,069 567,527
Per common share 1.47 .89 1.00
Cash dividends 46,825 32,586 32,266
Per common share .09 .06 .06
Financial
Working capital $2,540,260 $2,783,817 $2,961,503
Per common share 4.77 5.14 5.23
Current ratio 3.2 3.5 4.1
Inventories 1,473,896 1,422,147 1,131,787
Net property, plant and equipment 3,762,281 3,538,575 3,214,834
Gross additions to property, plant
and equipment 657,915 682,485 572,022
Total assets 9,756,887 8,746,853 8,404,111
Long-term debt 2,070,095 2,021,417 2,039,143
Shareholders' equity 5,854,165 5,045,421 4,883,251
Per common share 10.99 9.32 8.63
Other
Weighted average shares outstanding (000's) 540,715 546,310 566,865
Number of shareholders 34,385 33,940 33,654
Number of employees 14,833 16,013 14,168
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
1995.
Net earnings for 1993 includes a credit of $68 million or $.12 per share and a
charge of $35 million or $.06 per share for the cumulative effects of changes in
accounting for income taxes and postretirement benefits, respectively.
Net earnings for 1986 include an extraordinary loss on debt repurchase of $9
million or $.02 per share.
1992 1991 1990 1989 1988 1987 1986
$9,231,50 $8,468,19 $7,751,3 $7,928,8 $6,798,3 $5,774,6 $5,335,9
2 8 41 36 94 21 75
293,729 261,367 248,113 220,538 183,952 155,899 138,453
503,757 466,678 483,522 424,673 353,058 265,355 230,386
.89 .82 .85 .75 .62 .46 .41
30,789 29,527 25,976 17,271 17,095 16,189 14,199
.05 .05 .05 .03 .03 .03 .03
$2,276,56 $1,674,73 $1,627,4 $1,487,1 $1,408,6 $1,252,4 $1,147,7
4 5 59 51 64 06 57
4.02 2.95 2.85 2.63 2.51 2.18 2.02
3.4 3.0 3.4 3.4 3.0 3.5 4.2
1,025,030 917,495 771,233 694,998 773,702 784,338 521,592
3,060,096 2,695,625 2,131,80 1,832,25 1,661,22 1,478,45 1,315,07
7 8 0 8 5
614,844 911,586 550,851 405,888 370,295 314,730 341,900
7,524,530 6,260,607 5,450,01 4,728,30 4,397,56 3,862,09 3,315,43
0 8 4 1 6
1,562,491 980,273 750,901 690,052 692,878 657,465 570,248
4,492,353 3,922,295 3,573,22 3,033,50 2,630,52 2,367,67 2,075,88
8 3 9 3 7
7.92 6.92 6.26 5.37 4.68 4.13 3.65
568,382 570,350 568,353 563,056 572,854 572,128 563,651
32,377 28,981 26,076 20,382 18,491 17,199 16,815
13,524 13,049 11,861 10,214 9,631 10,573 10,386
14