EXHIBIT 13
PAGE 1
MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL
CONDITION - JUNE 30, 1998
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:
1998 compared to 1997
1998 1997 1996
(in millions)
Oilseed products $10,15 $ 8,860 $
2 8,027
Corn products 2,154 2,171 2,431
Wheat and other milled 1,491 1,631 1,662
products
Other products 1,191 1,120
2,312
$16,10 $13,853 $13,240
9
Net sales and other operating income increased $2.3 billion
to a record high $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 affected 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 has been positively
affected 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 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 overcapacity in the
synthetic amino acid industry. Low gasoline prices negatively
impacted average sales prices for the Company's fuel alcohol,
which has 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.
1
PAGE 2
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 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 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 12 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.
1997 compared to 1996
Net sales and other operating income increased $613 million
to $13.9 billion for 1997 due principally to a 4% increase in
average selling prices and to a lesser extent sales attributable
to recently acquired operations. Sales of oilseed products
increased 10% to $8.9 billion due primarily to higher average
selling prices reflecting relatively strong demand for protein
meal in the domestic market and the higher cost of raw
materials. Sales volumes of oilseed products were up for the
year due principally to improved export vegetable oil demand.
Sales of corn products decreased 11% to $2.2 billion due
primarily to decreased sales volumes of fuel alcohol as reduced
corn supplies and the resulting higher cost of corn resulted in
the Company reducing its production of fuel alcohol. Average
selling prices of corn products were up 3% for the year due to
the good demand for the Company's fuel alcohol and bioproducts,
including lysine and threonine. These average selling price
increases were partially offset by lower average selling prices
for the Company's sweetener products as a result of the start-up
of new corn wet milling facilities in the industry and the
resulting overcapacity in the marketplace. Sales of wheat and
other milled products decreased 2% to $1.6 billion due to both
decreased volumes of products sold and to lower average selling
prices reflecting excess milling capacity in the industry. This
volume decrease was partially offset by sales related to
recently acquired operations in Canada and the Caribbean. The
increase in other products and services was due principally to
the sales related to the Company's recently acquired cocoa
business partially offset by lower merchandising and
transportation revenues.
Cost of products sold and other operating costs increased
$700 million to $12.6 billion due principally to a 5% increase
in average raw material commodity prices and to costs
attributable to recently acquired operations.
The $86 million decrease in gross profit to $1.3 billion
resulted primarily from decreased merchandising and
transportation margins and the net effect of increased raw
material costs versus higher sales prices. These decreases were
partially offset by gross profit attributable to recently
acquired operations.
Selling, general and administrative expenses increased $202
million to $675 million due primarily to increased legal and
litigation related costs of $171 million including provisions
related to fines and litigation settlements 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 12 to the
financial statements). Additionally, selling, general and
administrative expenses increased $26 million due to expenses
attributable to recently acquired operations.
The decrease in other income for 1997 was due principally
to decreased gains on marketable securities transactions,
decreased investment income due to both lower invested funds and
lower interest rates, increased interest expense due primarily
to increased levels of borrowings, and a decrease in other
income as 1996 results included a $15 million gain on the sale
of the Company's Supreme Sugar subsidiary.
The decrease in income taxes for 1997 resulted primarily
from lower pretax earnings. The increase in the Company's
effective income tax rate to 41% for the year compared to an
effective rate of 34% last year was due principally to the non-
deductibility for income tax purposes of a portion of the
Company's litigation settlements and fines.
2
PAGE 3
Liquidity and Capital Resources
At June 30, 1998, the Company continued to show substantial
liquidity with working capital of $1.7 billion. Working capital
includes inventory with a replacement cost in excess of its LIFO
carrying value of approximately $46 million. During 1998, the
Company's cash and marketable securities net of short-term debt
decreased $762 million and working capital decreased $301
million reflecting the Company's investments in property, plant
and equipment expansions, investments in affiliates, and
business acquisitions. Capital resources remained strong as
reflected in the Company's net worth of $6.5 billion. The
principal sources of capital during the year were funds
generated from operations and funds generated from the issuance
of $200 million of 6.75% debentures due in 2027, $250 million of
6.95% debentures due in 2097 and $298 million of common stock
issued in a business acquisition. The Company's ratio of long-
term debt to total capital at year end was approximately 28%.
Annual maturities of long-term debt for the five years after
June 30, 1998 are $21 million, $21 million, $33 million, $434
million and $266 million, respectively.
Commercial paper and commercial bank lines of credit are
available to meet seasonal cash requirements. At June 30, 1998,
the Company had $1.9 billion 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 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 discussed in Note 12 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 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 12 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 $48 million in fiscal 1998,
$200 million in fiscal 1997 and $31 million in fiscal 1996 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
consolidated financial statements.
3
PAGE 4
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, changes in global demand created by
population growth and higher 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. 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 sales 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:
1998 Fair Value Market
Risk
(in millions)
Highest long position $423 $42
Highest short position 411 41
Average position long (8) 1
(short)
1997 Fair Value Market
Risk
(in millions)
Highest long position $468 $47
Highest short position 314 31
Average position long 123 12
(short)
The decrease in fair value of the average position for 1998
compared to 1997 was a result of both a decrease in the daily
net commodity position and a decrease in quoted futures prices
for the current year.
Marketable Equity Securities
Marketable equity securities, which are recorded at a fair
value and include net unrealized gains, have exposure to price
risk. This risk is estimated as the potential loss in fair value
resulting from a hypothetical 10% adverse change in prices
quoted by stock exchanges. Actual results may differ.
4
PAGE 5
1998 1997
(in millions)
Fair value $1,121 $911
Net unrealized 182 183
gains
Market risk 112 91
The increase in fair value for 1998 over 1997 primarily resulted
from additional purchases of securities.
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 the Company
considers 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
a hypothetical 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 and $1.7
billion at June 30, 1998 and June 30, 1997, respectively. The
potential loss in fair value resulting from a hypothetical 10%
adverse change in quoted foreign currency exchange rates amounts
to $175 million and $167 million for 1998 and 1997,
respectively. Actual results may differ.
Interest
The fair value of the Company's long-term debt is estimated
using quoted market prices or 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.
1998 1997
(in millions)
Fair value of long-term debt $3,359 $2,681
Excess of fair value over carrying 512 336
value
Market risk 165 107
The increase in fair value for the current year resulted from
both the issuance of long-term debt and a general decline in
quoted interest rates.
Year 2000 Issues
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
anticipates that internal business and technical information
system year 2000 compliance issues will be substantially
remediated by the end of calendar year 1998.
The Company has satisfactorily completed the identification
and review of computer hardware and software suppliers and is in
the process of verifying year 2000 preparedness of general
business partners, suppliers, vendors, and/or service providers
that the Company has identified as critical.
Cost
The total historical or 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. The
Company is in the process of identifying, reviewing, and logging
the year 2000 preparedness of critical third parties.
Anticipated completion of this review is calendar 1998 year-
end. Pending the results of that review, the Company will then
determine what course of action and contingencies will need to
be made.
5
PAGE 6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Company is in one business segment-procuring, transporting,
storing, processing, and merchandising agricultural commodities
and products. The availability and price of agricultural
commodities are subject to wide fluctuations due to
unpredictable factors such as weather, plantings, government
(domestic and foreign) farm programs and policies, changes in
global demand created by population growth and higher standards
of living, and global production of similar and competitive
crops.
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 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 $19.8
billion in 1998, $18.1 billion in 1997, and $18.0 billion in
1996, and such sales include export sales of $5.5 billion in
1998, $5.4 billion in 1997, and $5.7 billion in 1996.
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 1998 and payable in September 1998. Basic
earnings per common share is determined by dividing net earnings
by the weighted average number of common shares outstanding.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards Number 128
(SFAS 128) "Earnings Per Share." This statement, which was
required to be adopted for financial statements issued for
interim and annual periods ended after December 15, 1997,
replaced the previously reported primary and fully diluted
earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share
excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been
presented, and where necessary, restated to conform to SFAS 128
requirements.
New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Number 130 (SFAS
130) "Reporting Comprehensive Income." This statement, which is
required to be adopted for financial statements issued for
annual periods beginning after December 15, 1997, establishes
standards for reporting and display of comprehensive income and
its components in a full set of general-purpose financial
statements. At that time, the Company will be required to report
total comprehensive income, an amount that will include net
income as well as other comprehensive income. Other
comprehensive income refers to revenues, expenses, gains and
losses that under generally accepted accounting principles have
previously been reported as separate components of equity in the
Company's consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Number 131 (SFAS
131) "Disclosures about Segments of an Enterprise and Related
Information." This statement, which is required to be adopted
for financial statements issued for annual periods beginning
after December 15, 1997, establishes standards for the way that
public business enterprises report information about operating
segments in financial reports issued to shareholders. The
Company has not yet determined the financial statement impact of
SFAS 131.
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, 1999, establishes
standards for recognition and measurement of derivatives and
hedging activities. The Company has not yet determined the
financial statement impact of SFAS 133.
6
PAGE 7
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended June 30
1998 1997 1996
(In thousands, except per share
amounts)
Net sales and other operating $16,108,6 $13,853,2 $13,239,83
income 30 62 9
Cost of products sold and other
operating costs 14,727,67 12,552,71 11,853,07
0 8 0
_________ _________ _________
_ _ _
Gross Profit 1,380,960 1,300,544 1,386,769
Selling, general and
administrative 660,692 675,103 473,294
expenses
_________ _________ _________
_ _ _
Earnings From Operations 720,268 625,441 913,475
Other income (expense) (110,256) 18,964 140,938
_________ _________ _________
_ _ _
Earnings Before Income 610,012 644,405 1,054,413
Taxes
Income taxes 206,403 267,096 358,501
_________ _________ _________
_ _ _
Net Earnings $ 403,609 $ 377,309 $ 695,912
========= ========= =========
Basic and diluted earnings per
common $ .68 $ .63 $ 1.15
share
========= ========= =========
Average number of shares 592,634 596,352 606,424
outstanding
========= ========= =========
See notes to consolidated financial statements.
7
PAGE 8
CONSOLIDATED BALANCE SHEETS
June 30
Assets 1998 1997
(In thousands)
Current Assets
Cash and cash equivalents $ 346,325 $ 397,788
Marketable securities 379,169 330,208
Receivables 1,990,686 1,329,350
Inventories 2,562,650 2,094,092
Prepaid expenses 172,884 132,897
___________ ___________
Total Current Assets 5,451,714 4,284,335
Investments and Other Assets
Investments in and advances to 1,473,364 1,102,420
affiliates
Long-term marketable securities 1,168,380 987,665
Other assets 417,372 271,352
___________ ___________
3,059,116 2,361,437
Property, Plant and Equipment
Land 148,135 118,898
Buildings 1,777,146 1,448,945
Machinery and equipment 7,901,309 6,841,225
Construction in progress 613,792 765,720
Less allowances for depreciation (5,117,678) (4,466,193)
___________ ___________
5,322,704 4,708,595
___________ ___________
$13,833,534 $11,354,367
=========== ==========
8
PAGE 9
Liabilities and Shareholders' Equity
June 30
1998 1997
(In thousands)
Current Liabilities
Short-term debt $ 1,545,276 $ 604,831
Accounts payable 1,634,681 1,126,313
Accrued expenses 516,287 493,944
Current maturities of long-term 21,059 23,667
debt
___________ ___________
Total Current Liabilities 3,717,303 2,248,755
Long-Term Debt 2,847,130 2,344,949
Deferred Liabilities
Income taxes 632,893 597,514
Other 131,296 113,020
___________ ___________
764,189 710,534
Shareholders' Equity
Common stock 4,936,649 4,192,321
Reinvested earnings 1,568,263 1,857,808
___________ ___________
6,504,912 6,050,129
___________ ___________
$13,833,534 $11,354,367
=========== ===========
See notes to consolidated financial statements.
9
PAGE 10
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30
1998 1997 1996
(In thousands)
Operating Activities
Net earnings $ 403,609 $ $
377,309 695,912
Adjustments to reconcile to net cash
provided by operations
Depreciation and amortization 526,813 446,412 393,605
Deferred income taxes 28,659 (12,235 72,673
)
Amortization of long-term debt 33,297 29,094 25,584
discount
Gain on marketable securities (36,303) (59,549 (109,35
transactions ) 9)
Other 39,292 (40,758 (33,243
) )
Changes in operating assets and
liabilities
Receivables (294,407) (23,225 (183,56
) 9)
Inventories (150,509) 23,046 (320,52
9)
Prepaid expenses (27,275) (18,760 (1,683)
)
Accounts payable and accrued 90,203 (110,65 314,494
expenses 3)
_________ _______ _______
__ __
Total Operating Activities 613,379 610,681 853,885
Investing Activities
Purchases of property, plant and (702,683) (779,50 (754,26
equipment 8) 8)
Net assets of businesses acquired (370,561) (429,94 (28,612
0) )
Investments in and advances to (366,968) (416,86 (110,61
affiliates 1) 5)
Purchases of marketable securities (1,202,66 (966,20 (816,40
2) 3) 1)
Proceeds from sales of marketable 1,007,373 1,607,6 1,260,7
securities 31 10
_________ _______ _______
__ __
Total Investing Activities (1,635,50 (984,88 (449,18
1) 1) 6)
Financing Activities
Long-term debt borrowings 441,464 348,695 42,066
Long-term debt payments (55,972) (115,85 (22,233
3) )
Net borrowings under line of credit 774,033 421,046 -
agreements
Purchases of treasury stock (81,154) (312,52 (259,98
5) 0)
Cash dividends and other (107,712) (104,07 (84,443
7) )
_________ _______ _______
__ __
Total Financing Activities 970,659 237,286 (324,59
0)
_________ _______ _______
__ __
Increase (Decrease) In Cash And
Cash
Equivalents (51,463) (136,91 80,109
4)
Cash And Cash Equivalents Beginning Of 397,788 534,702 454,593
Period
_________ _______ _______
__ __
Cash And Cash Equivalents End Of $ 346,325 $ $
Period 397,788 534,702
========= ======= =======
== ==
Supplemental Cash Flow Information
Noncash Investing and Financing
Activities
Common stock issued in purchase $ 298,244 $ - $ -
acquisition
See notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity
Common Stock
Reinvest
Shares Amount ed
Earnings
(In thousands)
Balance July 1, 1995 532,524 $3,668,97 $2,185,1
7 88
Net earnings - - 695,912
Cash dividends paid-$.15 per share - - (90,860)
5% stock dividend 25,991 411,542 (411,542
)
Treasury stock purchases (15,632) (259,980) -
Foreign currency translation - - (96,101)
Change in unrealized net gains on
marketable securities - - (7,421)
Other 2,938 49,336 (239)
_______ _________ ________
_ __
Balance June 30, 1996 545,821 3,869,875 2,274,93
7
Net earnings - - 377,309
Cash dividends paid-$.18 per share - - (106,990
)
5% stock dividend 26,565 594,590 (594,590
)
Treasury stock purchases (16,707) (312,525) -
Foreign currency translation - - (73,393)
Change in unrealized net gains on
marketable securities - - (19,199)
Other 2,195 40,381 (266)
_______ _________ ________
_ __
Balance June 30, 1997 557,874 4,192,321 1,857,80
8
Net earnings - - 403,609
Cash dividends paid-$.19 per share - - (111,551
)
5% stock dividend 28,534 473,948 (473,948
)
Treasury stock purchases (3,767) (81,154) -
Common stock issued in purchase 13,953 298,244 -
acquisition
Foreign currency translation - - (108,551
)
Change in unrealized net gains on
marketable securities - - 1,187
Other 2,627 53,290 (291)
_______ _________ ________
_ __
Balance June 30, 1998 599,221 $4,936,64 $1,568,2
9 63
======= ========= ========
= ==
See notes to consolidated financial statements.
10
PAGE 11
Notes to Consolidated Financial Statements
Note 1-Marketable Securities and Cash Equivalents
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
========= ======== ======== =========
= =
Unrealiz Unrealiz Fair
ed ed
Cost Gains Losses Value
(In thousands)
1997
United States government
obligations
Maturity less than 1 $ $ $ $
year 455,657 66 19 455,704
Maturity 1 year to 5 74,332 70 108 74,294
years
Other debt securities
Maturity less than 1 157,588 435 - 158,023
year
Equity securities 728,448 186,551 3,540 911,459
_________ ________ _______ _________
_ _ _ _
$1,416,02 $ $ $1,599,48
5 187,122 3,667 0
========= ======== ======== =========
= = =
11
PAGE 12
Note 2-Inventories
1998 1997
(In thousands)
LIFO inventories
FIFO value $ 412,086 $ 521,277
LIFO valuation reserve (45,517) (44,811)
__________ __________
LIFO carrying value 366,569 476,466
FIFO inventories, including
hedging procedure method 2,196,081 1,617,626
__________ __________
$2,562,650 $2,094,092
========== ==========
Note 3-Accrued Expenses
1998 1997
(In thousands)
Payroll and employee benefits $ 149,601 $ 128,205
Income taxes 62,138 99,744
Other 304,548 265,995
__________ __________
$ 516,287 $ 493,944
========== ==========
12
PAGE 13
Note 4-Investments in and Advances to Affiliates
The Company has 80 unconsolidated affiliates, primarily located
in North and South America, Europe, and Asia, accounted for
under the equity method. The following table summarizes the
balance sheets as of June 30, 1998 and 1997, and the statements
of earnings for the three years ended June 30, 1998 of the
Company's unconsolidated affiliates:
1998 1997 1996
(In thousands)
Current assets $ 3,510,436 $ 2,796,698 $ -
Non-current assets 4,937,077 3,295,371 -
Current liabilities 1,841,687 1,419,183 -
Non-current liabilities 1,756,864 1,193,114 -
Minority interests 267,666 247,747 -
Net sales 13,651,086 12,653,544 10,270,952
Gross profit 1,161,673 839,436 317,435
Net income (loss) 216,178 233,543 (14,505)
The increase in summarized balance sheets and statements of
earnings of the Company's unconsolidated affiliates in 1998 and
1997 is primarily due to the inclusion of new affiliates and the
growth of the Company's existing affiliates. The Company's
investment in unconsolidated affiliates exceeds the underlying
equity in net assets by $146 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 $375 million have a market value of $271 million based
on quoted market prices and exchange rates at June 30, 1998.
13
PAGE 14
Note 5-Debt and Financing Arrangements
1998 1997
(In thousands)
7.5% Debentures $350 million
face amount, due in 2027 $ 347,881 $ 347,860
8.875% Debentures $300 million
face amount, due in 2011 298,396 298,331
8.125% Debentures $300 million
face amount, due in 2012 298,148 298,079
8.375% Debentures $300 million
face amount, due in 2017 294,403 294,285
7.125% Debentures $250 million
face amount, due in 2013 249,438 249,416
6.25% Notes $250 million
face amount, due in 2003 249,430 249,353
6.95% Debentures $250 million
face amount, due in 2097 246,066 -
Zero Coupon Debt $400 million
face amount, due in 2002 239,943 209,967
6.75% Debentures $200 million
face amount, due in 2027 195,469 -
7% Debentures $250 million
face amount, due in 2011 134,272 131,486
10.25% Debentures $100 million
face amount, due in 2006 98,936 98,847
Industrial Revenue Bonds at
various rates from 5.30% to 13.25%
and due in varying amounts
to 2011 69,016 74,571
Other 146,791 116,421
__________ __________
Total long-term debt 2,868,189 2,368,616
Less current maturities (21,059) (23,667)
__________ __________
$2,847,130 $2,344,949
========== ==========
At June 30, 1998, the fair value of the Company's long-term debt
exceeded the carrying value by $512 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 10.19% and 5.21%, respectively.
The aggregate maturities for long-term debt for the five years
after June 30, 1998 are $21 million, $21 million, $33 million,
$434 million, and $266 million, respectively.
At June 30, 1998 the Company had lines of credit totaling $1.9
billion. The weighted average interest rates on short-term
borrowings outstanding at June 30, 1998 and 1997 were 5.16% and
4.81%, respectively.
14
PAGE 15
Note 6-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, 1998 and 1997,
the Company had approximately 5.9 million and 20.7 million
common shares, respectively, in treasury. Treasury stock is
recorded at cost, $102 million at June 30, 1998, as a reduction
of common stock.
Cumulative foreign currency translation losses of $216 million
and unrealized gains on securities of $122 million at June 30,
1998, net of applicable taxes, are included as components of
reinvested earnings.
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, 1998, there were 4,186,540
shares available for future grant. Stock option activity during
the periods indicated is as follows:
Weighted
Average
Number Exercise
Price
of Shares Per Share
(In
thousands)
Shares under option at June 30, 5,008 $12.17
1995
Exercised (879) 9.17
Cancelled (461) 12.58
______
Shares under option at June 30, 3,668 12.84
1996
Granted 1,272 15.86
Exercised (293) 12.34
Cancelled (110) 13.03
______
Shares under option at June 30, 4,537 13.71
1997
Granted 35 21.14
Exercised (508) 12.57
Cancelled (65) 15.16
______
Shares under option at June 30, 3,999 $13.90
1998
======
Shares exercisable at June 30, 2,115 12.93
1998
Shares exercisable at June 30, 1,697 12.53
1997
Shares exercisable at June 30, 1,256 12.40
1996
At June 30, 1998 the range of exercise prices and weighted
average remaining contractual life of outstanding options was
$11.35-$21.52 and four 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 1998 and 1997
net earnings and earnings per share would have been affected by
less than one quarter of one percent.
The weighted average fair value of options granted during 1998
and 1997 are $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%, risk free interest rate of 6%, and
expected volatility of .2%. Expected option life was assumed to
be four years in 1998 and six years in 1997.
Note 7-Other Income (Expense)
1998 1997 1996
(In thousands)
Investment income $ 123,729 $ 121,991 $ 150,446
Interest expense (293,220) (197,214) (170,089)
Gain on marketable
securities transactions 36,544 59,810 109,359
Equity in earnings
of affiliates 20,364 35,243 31,780
Other 2,327 (866) 19,442
__________ __________ __________
$ (110,256) $ 18,964 $ 140,938
========== ========== ==========
Interest expense is net of interest capitalized of $37 million,
$41 million, and $43 million in 1998, 1997, and 1996,
respectively.
The Company made interest payments of $295 million, $198
million, and $188 million in 1998, 1997, and 1996, respectively.
The realized gains on sales of available-for-sale marketable
securities totaled $37 million, $63 million, and $109 million in
1998, 1997, and 1996, respectively. The realized losses totaled
$3 million in 1997.
Note 8-Income Taxes
For financial reporting purposes, earnings before income taxes
includes the following components:
1998 1997 1996
(In thousands)
United States $ 458,184 $ 563,086 $
907,376
Foreign 151,828 81,319 147,037
_________ _________ _________
_
$ 610,012 $ 644,405 $1,054,41
3
========= ========= =========
=
15
PAGE 16
Significant components of income taxes are as follows:
1998 1997 1996
(In thousands)
Current
$ $ 216,641 $ 207,166
Federal 111,152
State 20,879 29,440 29,604
54,724 27,352 46,646
Foreign
Deferred
14,474 (5,357) 69,253
Federal
State 1,451 (2,910) 6,467
3,723 1,930 (635)
Foreign
_________ _________ _________
$ 206,403 $ 267,096 $ 358,501
========= ========= =========
Significant components of the Company's deferred tax liabilities
and assets are as follows:
1998 1997
(In thousands)
Deferred tax liabilities
Depreciation $ 484,336 $ 446,083
Unrealized gain on marketable
securities 60,820 62,957
Bond discount amortization 52,645 56,312
Other 86,161 76,992
_________ _________
683,962 642,344
Deferred tax assets
Postretirement benefits 31,073 29,318
Other 81,431 64,186
_________ _________
112,504 93,504
_________ _________
Net deferred tax liabilities 571,458 548,840
Current net deferred tax assets
included
in prepaid expenses 61,435 48,674
_________ _________
Non-current net deferred
tax liabilities $ 632,893 $ 597,514
========= =========
16
PAGE 17
Reconciliation of the statutory federal income tax rate to the
Company's effective tax rate is as follows:
1998 1997 1996
Statutory rate 35.0% 35.0% 35.0%
Foreign sales corporation (4.7) (3.4) (2.4)
State income taxes, net of
federal tax benefit 2.4 2.7 2.2
Litigation settlements and 1.4 7.5 -
fines
Other (0.3) (0.4) (0.8)
______ ______ ______
Effective rate 33.8% 41.4% 34.0%
====== ====== ======
The Company made income tax payments of $225 million, $312
million, and $268 million in 1998, 1997, and 1996, respectively.
Undistributed earnings of the Company's foreign subsidiaries
amounting to approximately $529 million at June 30, 1998, 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.
Note 9-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 1998, 1997, and 1996 was $82 million, $69 million,
and $73 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)
1999 $ 37,557
2000 23,879
2001 16,069
2002 13,332
2003 14,929
Thereafter 96,928
_________
Total minimum lease payments $ 202,694
=========
17
PAGE 18
Note 10-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 federal laws and
regulations. At June 30, 1998, the plans had assets at fair
value of $614 million and projected benefit obligations of $638
million based on a discount rate of 7%. Pension expense is not
material.
The Company has postretirement health care and life insurance
plans covering substantially all employees. The fully accrued
accumulated postretirement benefit obligations (APBO) for the
unfunded plans at June 30, 1998 were $61 million, based on a
discount rate of 7% and an assumed health care cost trend rate
of 9% for 1999 gradually decreasing to 5.5% by 2004. Expense of
these plans is not material. A 1% increase in the health care
cost trend rate assumption would not have had a material impact
on the APBO or expense for the year.
In addition, the Company has savings and investment plans
available to eligible employees with one year of service.
Employees may contribute up to 10% of their salaries, not to
exceed $10,000. The Company matches these contributions, at
various levels.
Note 11-Geographic Information
1998 1997 1996
(In millions)
Net sales and other
operating income:
United States $10,784 $ 9,773 $ 9,661
Europe 3,869 3,039 2,753
Other foreign 1,456 1,041 826
_______ _______ _______
$16,109 $13,853 $13,240
======= ======= =======
Sales or transfers between
geographic areas:
United States $ 339 $ 354 $ 282
Europe 47 51 108
Other foreign 228 146 133
_______ _______ _______
$ 614 $ 551 $ 523
======= ======= =======
Earnings from operations:
United States $ 552 $ 550 $ 805
Europe 111 46 69
Other foreign 57 29 39
_______ _______ _______
$ 720 $ 625 $ 913
======= ======= =======
Identifiable assets:
United States $ 7,885 $ 6,663 $ 6,025
Europe 1,537 1,288 929
Other foreign 1,050 585 418
_______ _______ _______
$10,472 $ 8,536 $ 7,372
======= ======= =======
Earnings from operations represent earnings before other income
(expense) and income taxes.
Sales or transfers between geographic areas are made at
established transfer prices.
Identifiable assets exclude cash and cash equivalents,
marketable securities and investments in and advances to
affiliates. At June 30, 1998, approximately $1.4 billion of the
Company's cash and cash equivalents, marketable securities and
investments in affiliates were foreign assets, of which $681
million were in Europe.
Note 12-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 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. The federal grand jury in the
Northern District of Illinois (lysine) has been closed.
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 $48 million in fiscal 1998,
$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, 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 in the preceding 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
consolidated financial statements.
18
PAGE 19
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, 1998 and 1997, and the related consolidated statements
of earnings, shareholders' equity and cash flows for each of the
three years in the period ended June 30, 1998. 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, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended June 30, 1998, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
July 31, 1998
19
PAGE 20
Quarterly Financial Data (Unaudited)
Quarter
First Second Third Fourth Total
(In thousands, except per share amounts)
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 0.22 0.24 0.12 0.10 0.68
share
Fiscal 1997
Net sales $3,330,47 $3,514,93 $3,414,81 $3,593,03 $13,853,2
5 8 8 1 62
Gross profit 370,000 386,463 216,407 327,674 1,300,544
Net earnings 3,553 189,941 61,167 122,648 377,309
Per common 0.01 0.31 0.10 0.21 0.63
share
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 $.07 per share for fines and litigation settlements.
Net earnings for the three months ended September 30, 1996 and
the year ended June 30, 1997 include an after-tax charge of $177
million or $.30 per share for fines and litigation settlements.
Common Stock Market Prices and Dividends
The Company's common stock is listed and traded on the New York
Stock Exchange, Chicago Stock Exchange, Tokyo Stock Exchange,
Frankfurt Stock Exchange, and the Swiss Exchange. The following
table sets forth, for the periods indicated, the high and low
market prices of the common stock and common stock cash
dividends.
Cash
Market Price Dividends
High Low Per Share
Fiscal 1998-Quarter Ended
June 30 21 11/16 17 5/8 0.048
March 31 22 1/2 19 3/4 0.048
December 31 23 1/4 17 1/8 0.048
September 30 23 7/16 19 5/16 0.046
Fiscal 1997-Quarter Ended
June 30 21 13/16 15 1/2 0.046
March 31 20 13/16 15 11/16 0.046
December 31 20 15/16 17 1/4 0.046
September 30 17 1/2 14 3/16 0.043
The number of shareholders of the Company's common stock at June
30, 1998 was 32,539. 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.
20
PAGE 21
Ten Year Summary
Operating, Financial and Other Data (Dollars in thousands, except per share
data)
1998 1997 1996
Operating
Net sales and other operating income $16,108,6 $13,853,2 $13,239,8
30 62 39
Depreciation and amortization 526,813 446,412 393,605
Net earnings 403,609 377,309 695,912
Per common share .68 .63 1.15
Cash dividends 111,551 106,990 90,860
Per common share .19 .18 .15
Financial
Working capital $ $ $
1,734,411 2,035,580 2,751,132
Per common share 2.89 3.48 4.57
Current ratio 1.5 1.9 2.7
Inventories 2,562,650 2,094,092 1,790,636
Net property, plant and equipment 5,322,704 4,708,595 4,114,301
Gross additions to property, plant and 1,228,553 1,127,360 801,426
equipment
Total assets 13,833,53 11,354,36 10,449,86
4 7 9
Long-term debt 2,847,130 2,344,949 2,002,979
Shareholders' equity 6,504,912 6,050,129 6,144,812
Per common share 10.86 10.33 10.21
Other
Weighted average shares outstanding (000's) 592,634 596,352 606,424
Number of shareholders 32,539 33,834 35,431
Number of employees 23,132 17,160 14,811
21
PAGE 22
1995 1994 1993 1992 1991 1990 1989
$12,555,4 $11,158,4 $9,578,37 $9,026,17 $8,271,58 $7,551,97 $7,729,62
03 79 0 7 8 2 0
384,872 354,463 328,549 293,729 261,367 248,113 220,538
795,915 484,069 567,527 503,757 466,678 483,522 424,673
1.27 .77 .86 .77 .71 .73 .65
46,825 32,586 32,266 30,789 29,527 25,976 17,271
.07 .05 .05 .05 .04 .04 .03
$2,540,26 $ $2,961,50 $2,276,56 $1,674,73 $1,627,45 $1,487,15
0 2,783,817 3 4 5 9 1
4.12 4.44 4.52 3.47 2.55 2.46 2.27
3.2 3.5 4.1 3.4 3.0 3.4 3.4
1,473,896 1,422,147 1,131,787 1,025,030 917,495 771,233 694,998
3,762,281 3,538,575 3,214,834 3,060,096 2,695,625 2,131,807 1,832,258
657,915 682,485 572,022 614,844 911,586 550,851 405,888
9,756,887 8,746,853 8,404,111 7,524,530 6,260,607 5,450,010 4,728,308
2,070,095 2,021,417 2,039,143 1,562,491 980,273 750,901 690,052
5,854,165 5,045,421 4,883,251 4,492,353 3,922,295 3,573,228 3,033,503
9.50 8.05 7.45 6.85 5.98 5.41 4.64
625,946 632,422 656,217 657,973 660,251 657,940 651,808
34,385 33,940 33,654 32,277 28,981 26,076 20,382
14,833 16,013 14,168 13,524 13,049 11,861 10,214
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
1998.
Net earnings for 1998, 1997, and 1996 include charges of $40 million ($.07 per
share), $177 million ($.30 per share) and $19 million ($.03 per share),
respectively, for fines and litigation settlements.
Net earnings for 1993 includes a 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.
22
PAGE 23
Directors
+Dwayne O. Andreas
Chairman of the Board
*Gaylord O. Coan
Vice Chairman of the Board
President, Chief Executive Officer
Gold Kist Inc.
*G. Allen Andreas
President and Chief Executive Officer
Shreve M. Archer, Jr.
Private Investments
John R. Block
Food Distributors International
Richard R. Burt
IEP Advisors, Inc.
*Mollie Hale Carter
Star A Inc.
F. Ross Johnson
Chairman and Chief Executive
Officer, RJM Group, Inc.
M. Brian Mulroney
Senior Partner
Ogilvy Renault
(a law firm)
*Robert S. Strauss
Partner
Akin, Gump, Strauss, Hauer & Feld
(a law firm)
John K. Vanier
Chief Executive Officer, Western Star
Ag. Resources, Inc.
O. Glenn Webb
Chairman of the Board
and President, GROWMARK, Inc.
Andrew Young
GoodWorks International
Audit Committee
Gaylord O. Coan
Chairman
John R. Block
Richard R. Burt
Mollie Hale Carter
Andrew Young
23
PAGE 24
Public Policy Committee
M. Brian Mulroney
Chairman
Shreve M. Archer, Jr.
John R. Block
Richard R. Burt
O. Glenn Webb
Andrew Young
Nominating Committee
Mollie Hale Carter
Chairman
Richard R. Burt
Gaylord O. Coan
Andrew Young
+Ex officio member of all committees
*Executive Committee
Corporate Officers
G. Allen Andreas
President and
Chief Executive Officer
Charles T. Bayless
Executive Vice President
Martin L. Andreas
Senior Vice President and
Assistant to the Chairman
Douglas J. Schmalz
Vice President
and Chief Financial Officer
Charles P. Archer
Treasurer
Steven R. Mills
Controller
Burnell D Kraft
Senior Vice President
*Richard P. Reising
Senior Vice President
Lewis W. Batchelder
Group Vice President
Howard E. Buoy
Group Vice President
Larry H. Cunningham
Group Vice President
Craig L. Hamlin
Group Vice President
James C. Ielase
Group Vice President
John D. McNamara
Group Vice President
Paul B. Mulhollem
Group Vice President
Raymond V. Preiksaitis
Group Vice President
David J. Smith
Vice President, Secretary
and General Counsel
Scott A. Roberts
Assistant Secretary and
Assistant General Counsel
+Claudia M. Madding
Executive Assistant to the Chairman
and Assistant Secretary
Stephen W. Minder
Corporate Compliance Officer
William H. Camp
Vice President
Mark J. Cheviron
Vice President
Edward A. Harjehausen
Vice President
Paul L. Krug, Jr.
Vice President
John E. Long
Vice President
Jack McDonald
Vice President
Brian F. Peterson
Vice President
John G. Reed, Jr.
Vice President
John D. Rice
Vice President
Kenneth A. Robinson
Vice President
Stephen Yu
Vice President
*Secretary to the Board of Directors
+Secretary to the Executive Committee
24
PAGE 25
Officers of Subsidiaries and Divisions
ADM Agri Industries
John McNamara, President
Gregory W. Webb, Vice President
ADM Animal Health
and Nutrition Division
Steven E. Dale, Vice President/
General Manager
James Krug, Vice President
ADM Asia Pacific
Stephen Yu, Managing Director
Matthew J. Morgenroth, Operations
Manager
ADM Australia (Pty) Ltd.
Ern T. Newton, President
ADM BioProducts Division
Brian F. Peterson, President
John Hanson, Vice President
Daniel E. Larson, Vice President
Ern T. Newton, Vice President
ADM Cocoa Division
Hans Leijdekker, President
Alan C. Girard, Vice President
ADM/COUNTRYMARK
John Ade, General Manager
ADM Corn Processing Division
Larry H. Cunningham, President
Norbert W. Cremers, Vice President
Edward A. Harjehausen,
Vice President
J. Robert Heard, Vice President
Craig Fischer, Vice President
ADM Europoort B.V.
Wim Groenenboom, Managing
Director
ADM Export Company
Elnathan Anderson, Vice President
ADM Exportadora e Importadora
S. A.
Paulo Roberto Moreira Garcez,
President
Ingomar Julio Heinz Kalder,
Vice President
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ADM Far East Ltd.
Shuji Tani, President
ADM Food Additives Division
Barrie R. Cox, President
Roger Dawson, Vice President
Tom Fox, Vice President
Norma Maddio, Vice President
ADM Food Oils Division
John D. Rice, President
Edward J. Campbell,
Vice President
Gordon D. Gregory, Vice President
Lewis G. Jacobs, Vice President
Patrick S. Laegeler, Vice President
Doug C. Millar, Vice President
ADM/GROWMARK
O. Glenn Webb, Chairman
Burnell D Kraft, President
Lewis W. Batchelder, Senior
Vice President
Marvin R. Rau, Senior Vice President
Warren Duffy, Vice President
Kim Ekena, Vice President
Mark Kolkhorst, Vice President
John L. McClenathan, Vice President
Gregory C. Muench, Vice President
David Ragan, Vice President
James F. Voigt, Vice President
ADM Ingredients Ltd.
Barrie R. Cox, President
Robert Hobson, Senior Vice President
Tony Miles-Prouten, Vice President
Roger Dawson, Vice President
ADM International Ltd.
Paul B. Mulhollem, Managing
Director
Dirk Bok, Senior Vice President
Robert Hobson, Senior Vice President
and CFO
Sig Peterson, Vice President
Hidde Van der Wal, Vice President
ADM Investor Services, Inc.
Paul L. Krug, Jr., President
Richard W. Dodson, Senior Vice
President
John D. Coffin, Vice President
Keith A. Jones, Vice President
Jeffery B. Lelliott, Vice President
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ADM Milling Co.
Craig L. Hamlin, President
James C. Brainard, Vice President
Anthony A. Degnan, Vice President
Michael M. Marsh, Vice President
Roy L. Robinson, Vice President
Daniel L. Wells, Vice President
J. Robert Woolery, Vice President
Arkady Products
Gerard A. Degnan, President
Bruce E. Criss, Vice President
Fred C. Livermore, Vice President
ADM North American Oilseed
Processing Division
John D. McNamara, President
Dennis Garceau, Vice President
Craig Huss, Vice President
Gary Berry, Vice President
ADM Protein Specialties Division
Larry H. Cunningham, President
Peter Fitch, Managing Director,
Haldane Foods
Daun R. Henze, Vice President
John C. Painter, Vice President
Patricia S. Schroder, Vice President
John I. Wainright, Vice President
ADM Research Division
John E. Long, President
Thomas P. Binder, Vice President
ADM Trucking
W. H. Camp, President
William Patterson, Vice President
Agrinational Insurance Company
Richard P. Reising, President
Agri-Sales Inc.
Wendell Schwarz, President
American River Transportation Co.
Craig A. Fischer, President
Royce Wilken, Vice President
Gene Senesac, Vice President
Archer Daniels Midland
Shipping Co.
Gail F. Patterson, President
Dirk Bok, Vice President
Shuji Tani, Vice President
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Benson-Quinn Company
Lawrence Neumann, President
Paul D. Savre, Executive Vice
President and CFO
Lewis W. Batchelder, Vice President
Ronald A. Dinga, Vice President
Kevin A. Keiser, Vice President
Randal L. Narloch, Vice President
Collingwood Grain, Inc.
G. Lowell Downey, President
John Bair, Vice President
Peter Goetzmann, Vice President
Roy Space, Vice President
Randy Whisenhunt, Vice President
Demeter, Inc.
Burnell D Kraft, President
Kenneth E. Klemme, Vice President
Brian Schwalbe, Vice President
Gooch Foods, Inc.
Timothy O. Malm, President
Brent T. Braun, Vice President
Peter J. Kolb, Vice President
Robert M. Ryan, Vice President
Hickory Point Bank and Trust
Dale P. Arnold, President
Michael Gibson, Senior Vice
President
June A. McCormick, Vice President
Kirk A. Myers, Vice President
Eugene Pride, Vice President
Deborah Warren, Vice President
MoorMan's Inc.
Mike Foster, President
Fred Gutzmann, Vice President
Dave Holzgraefe, Vice President
Rail Transportation Division
William H. Camp, President
Randall Neumeyer, Vice President
Southern Cellulose Products, Inc.
Jack McDonald, President
Southern Cotton Oil Company
Jack McDonald, President
Tabor Grain Co.
Burnell D Kraft, President
Marvin R. Rau, Vice President
Brian Schwalbe, Vice President
Kenneth Klemme, Vice President
Stock Exchanges Archer Daniels Midland Company 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.
Transfer Agent and Registrar Harris Trust and Savings Bank,
Corporate Trust Department, 311 West Monroe,
P.O. Box A-3504, Chicago, Illinois 60690
800/824-6309, 312/461-6001
Notice of Annual Meeting The Annual Meeting of Shareholders of
the Company will be held at the James R. Randall Research Center
(formerly ADM Lakeview Office), 1001 Brush College Road in
Decatur, Illinois at 10:00 a.m. on October 22, 1998. Proxies
will be requested by Management on or about September 16, 1998,
at which time a Proxy Statement and Form of Proxy will be sent
to Shareholders.
Independent Auditors Ernst & Young LLP, Minneapolis,
Minnesota
Mailing Address Archer Daniels Midland Company
P. O. Box 1470
Decatur, Illinois 62525
Internet http://www.admworld.com
Copies of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K will be available to
Shareholders without charge, during a reasonable period of time,
upon written request to the Corporate Relations Department.
Archer Daniels Midland Company is an equal opportunity
employer.
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