FORM 10-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-44

ARCHER-DANIELS-MIDLAND COMPANY

(Exact name of registrant as specified in its charter)

Delaware 41-0129150

(State or other jurisdiction of (I. R. S. Employer

incorporation or organization) Identification No.)

4666 Faries Parkway Box 1470 Decatur, Illinois 62525

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code 217-424-5200

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on

Title of each class which registered

Common Stock, no par value New York Stock Exchange

Chicago Stock Exchange

Swiss Stock Exchange

Frankfurt Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No____

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

State the aggregate market value of the voting stock held by non-affiliates of the registrant.

Common Stock, no par value--$6.4 billion

(Based on the closing sale price of Common Stock as reported on the New York Stock Exchange

on August 30, 2002)

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Common Stock, no par value-647,409,796 shares

(August 30, 2002)

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the annual shareholders' report for the year ended June 30, 2002 are incorporated by reference into Parts I, II and IV.

Portions of the annual proxy statement for the annual meeting of stockholders to be held November 7, 2002 are incorporated by reference into Part III.

 

 

SAFE HARBOR STATEMENT

This Form 10-K contains forward-looking information that is subject to certain risk and uncertainties that could cause actual results to differ materially from those projected, expressed, or implied by such forward-looking information. In some cases, you can identify forward-looking statements by our use of words such as "may, will, should, anticipates, believes, expects, plans, future, intends, could, estimate, predict, potential or contingent," the negative of these terms or other similar expressions. The Company's actual results could differ materially from those discussed or implied herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Form 10-K for the fiscal year ended June 30, 2002. Among these risks are legislative acts, changes in the prices of food, feed and other commodities, including gasoline, and macroeconomic conditions in various parts of the world. To the extent permitted under applicable law, the Company assumes no obligation to update any forward-looking statements as a result of new information or future events.

PART I

Item 1. BUSINESS

(a) General Description of Business

Archer Daniels Midland Company was incorporated in Delaware in 1923, successor to the Daniels Linseed Co. founded in 1902.

During the last five years, the Company has experienced significant growth, spending approximately $3 billion for construction of new plants, expansions of existing plants and the acquisitions of plants and transportation equipment. There have been no significant dispositions during this period. The Company incurred charges of $83 million and $108 million during 2002 and 2000, respectively, related to the abandonment and write-down of certain long-lived assets.

(b) Financial Information About Industry Segments

The Company is principally engaged in procuring, transporting, storing, processing and merchandising agricultural commodities and products.

The Company's operations are classified into four reportable business segments: Oilseeds Processing, Corn Processing, Wheat Processing and Agricultural Services. Each of these segments is organized based upon the nature of products and services offered. The Company's remaining operations are classified as Other.

Financial information with respect to the Company's reportable business segments is set forth in "Note 11 of Notes to Consolidated Financial Statements" of the annual shareholders' report for the year ended June 30, 2002 and is incorporated herein by reference.

(c) Narrative Description of Business

(i) Principal products produced and principal markets for and methods of distribution of such products:

Oilseeds Processing

The Company is engaged in processing oilseeds such as soybeans, cottonseed, sunflower seeds, canola, peanuts, flaxseed and corn germ into vegetable oils and meals principally for the food and feed industries. Crude vegetable oil is sold "as is" or is further processed by refining and hydrogenating into margarine, shortening, salad oils and other food products. Partially refined oil is sold for use in chemicals, paints and other industrial products. Oilseed meals supply more than one-half of the high protein ingredients used in the manufacture of commercial livestock and poultry feeds. Cottonseed flour is produced and sold primarily to the pharmaceutical industry. Cotton cellulose pulp is manufactured and sold to the chemical, paper and filter markets.

The Company owns a 28% interest in Pura PLC, a U.K. based company that processes and markets edible oil.

Golden Peanut Company LLC, a joint venture between the Company and Alimenta (U.S.A.), Inc., is a major supplier of peanuts to both the domestic and export markets. The Company has a 50% ownership interest in this joint venture.

 

Item 1. BUSINESS-Continued

The Company participates in various joint ventures that operate oilseed crushing facilities, oil refineries and related storage facilities in China and Indonesia.

Corn Processing

The Company is engaged in dry milling and wet milling corn operations. Products produced for use by the food and beverage industry include syrup, starch, glucose, dextrose, crystalline dextrose, high fructose sweeteners, crystalline fructose and grits. Corn gluten feed and distillers grains are produced for use as feed ingredients. Ethyl alcohol is produced to beverage grade or for industrial use as ethanol. In gasoline, ethanol increases octane and is used as an extender and oxygenate. Corn germ, a by-product of the milling process, is further processed as an oilseed.

The Company owned a 30% non-voting equity interest in Minnesota Corn Processors (MCP) prior to September 6, 2002. MCP operates wet corn milling plants in Minnesota and Nebraska. On July 11, 2002, the Company entered into a merger agreement with MCP. This agreement, approved by MCP shareholders, closed September 6, 2002, and was structured as a cash-for-stock transaction whereby the Company paid MCP shareholders a price of $2.90 for each outstanding Class A unit. The Company, which owned non-voting Class B units prior to the merger, paid approximately $382 million for the outstanding Class A units.

Almidones Mexicanos S.A., of which the Company has a 50% interest, operates a wet corn milling plant in Mexico.

Wheat Processing

The Company is engaged in milling wheat, corn and milo into flour. Wheat flour is sold primarily to large bakeries, durum flour is sold to pasta manufacturers and bulgur, a gelatinized wheat food, is sold to both the export and the domestic food markets. Corn meal and flour is sold primarily to the cereal, snack and bakery mix markets. The Company produces bakery products and mixes which are sold to the baking industry. The Company also mills milo to produce industrial flour used in the manufacturing of wallboard for the building industry.

ADM-Riceland Partnership, a joint venture between the Company and Riceland Foods, Inc., is a processor of rice and rice products for institutional and consumer food customers. The Company has a 50% ownership interest in this joint venture.

Agricultural Services

The Agricultural Services Segment utilizes the Company's vast grain elevator and transportation network to buy, store, clean and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats and barley, and resells these commodities primarily as food or feed ingredients.

A.C. Toepfer International and affiliates, in which the Company has an 80% interest, is one of the world's largest trading companies specializing in agricultural commodities and processed products. Toepfer has forty sales offices worldwide.

The Company has a 45% interest in Kalama Export Company, a grain export elevator in Washington.

 

Item 1. BUSINESS-Continued

Other

The Company produces value-added soy protein products by further processing soybean meal into soy flour and grits which are used in both food and industrial products. Textured vegetable protein (TVP®), a soy protein product developed by the Company, is sold primarily to the institutional food market and, through others, to the food consumer market. The Company also produces a wide range of other edible soy protein products including isolated soy protein, soy protein concentrate, soy-based milk products, soy flours and soy protein meat substitutes. The Company produces and markets a wide range of consumer and institutional health foods based on the Company's various soy protein products, including soy-derived isoflavones. Lecithin, an emulsifier produced in the vegetable oil refining process, is marketed as a food and feed ingredient. Natural source Vitamin E, an antioxidant, and distilled monoglycerides, an emulsifier, are produced from soybeans and other oilseeds.

By fermentation of dextrose, the Company produces citric and lactic acids, feed-grade amino acids, lactates, sorbitol and xanthan gum principally for the food and feed industries.

The Company grinds cocoa beans and produces cocoa liquor, cocoa butter, cocoa powder, chocolate and various compounds for the food processing industry.

The Company produces and distributes formula feeds and animal health and nutrition products to the livestock, dairy and poultry industries. Many of the feed ingredients and health and nutrition products are produced in the Company's other commodity processing operations.

The Company produces wheat starch and vital wheat gluten for the baking industry.

The Company produces lettuce, other fresh vegetables and herbs in its hydroponic greenhouse.

The Company processes and distributes edible beans for use in many parts of the food industry.

The Company raises fish in an aquaculture operation for distribution to consumer food customers.

Hickory Point Bank and Trust Company, fsb, a wholly-owned subsidiary of the Company, furnishes public banking and trust services, as well as cash management, transfer agency and securities safekeeping services for the Company.

ADM Investor Services, Inc., a wholly-owned subsidiary of the Company, is a registered futures commission merchant and a clearing member of all principal commodities exchanges. ADM Investor Services International, Ltd. specializes in futures, options and foreign exchange in the European marketplace.

Agrinational Insurance Company, a wholly-owned subsidiary of the Company, acts as a direct insurer and reinsurer of a portion of the Company's domestic and foreign property and casualty insurance risks.

Item 1. BUSINESS-Continued

The Company owns a 62% interest in Heartland Rail Corporation. Heartland's 80% owned affiliate, Iowa Interstate Railroad, operates a regional railroad in Iowa and Illinois.

Gruma S.A. de C.V. and affiliates, of which the Company has a 29% interest, is the world's largest producer and marketer of corn flour and tortillas with operations in the U.S., Mexico, Central America and South America. Additionally, the Company has a 20% interest in a joint venture which consists of the combined U.S. corn flour operations of ADM and Gruma. The Company also has a 40% share, through a joint venture with Gruma, in nine Mexican-based wheat flour mills.

Eaststarch C.V. (Netherlands), of which the Company has a 50% interest, owns interests in companies that operate wet corn milling plants in Bulgaria, Hungary, Romania, Slovakia and Turkey.

International Malting Company, a joint venture between the Company and the LeSaffre Company, operates barley malting plants in the United States, Australia, New Zealand, Canada and France. The Company has a 49% ownership interest in this joint venture.

The Company is a limited partner in various private equity funds which invest primarily in emerging markets that have agri-processing potential.

Methods of Distribution

Since the Company's customers are principally other manufacturers and processors, its products are distributed mainly in bulk from processing plants or storage facilities directly to the customers' facilities. The Company has developed a comprehensive transportation system utilizing trucks, rail, river barges and ocean-going vessels to efficiently move both commodities and processed products virtually anywhere in the world. The Company owns or leases large numbers of the trucks, trailers, railroad tank and hopper cars, river barges and towboats used in this transportation system.

(ii) Status of new products

The Company continues to expand its business through the development and production of new, value-added products. These new products include a wide-range of health and nutrition products known as nutraceuticals or functional foods. The Company acquired an exclusive license for flax lignan technology that may have potential for health maintenance and possible risk reduction of several diseases. The license gives the Company an exclusive, worldwide right to produce and sell flax lignans for use as an active ingredient in functional foods, nutraceuticals, pharmaceuticals, animal feed additives and veterinary products. Pillot scale quantities of this product have been produced to support clinical trials of this product. The Company is a leader in the processing of flaxseed.

The Company continues to develop its Cardio-Aid® phytosterol technology. In addition, the Company has acquired additional phytosterol technology under a licensing agreement. Phytosterols are natural plant extracts which are used in margarines and salad dressings. Studies have shown that phytosterols reduce cholesterol levels in the bloodstream. Production of the new product Cardio-Aid-L should begin this year.

 

Item 1. BUSINESS-Continued

The Company has formed a joint venture with Kao Corporation of Japan to manufacture and market diacylglycerol oil in America, Europe, Australia and New Zealand. This oil, developed by Kao, has been shown in several clinical studies in Japan to assist substantially in lowering body fat content. This naturally derived vegetable oil can be used as a home cooking oil or as an ingredient in packaged foods. Semi-works scale production of this product is beginning.

ADM is currently developing interesterification technology for the large-scale production of low-trans oil products for margarine, shortening, and specialty oil applications. These processes are in the process of being scaled up to production levels.

The Company continues to develop its soy protein meat substitutes, its soy protein powdered non-dairy beverage, and its non-dairy frozen dessert. New product research in the area include new extrusion processes for the development of meat substitutes and the development of a more complete soy beverage powdered product. In the nutraceutical area, work continues on expanding the use of isoflavones into more food formulations.

The company as a whole is developing synergies between its different divisions to provide new solutions to its customers. By bringing together the research and development in its milling, oils, protein, and sweetener product lines new products with increased functionality and efficiencies for its customers should be available.

(iii) Source and availability of raw materials

Substantially all of the Company's raw materials are agricultural commodities. In any single year, the availability and price of these commodities are driven by unpredictable factors such as weather, plantings, government (domestic and foreign) farm programs and policies, changes in global demand created by population growth and changes in standards of living and global production of similar and competitive crops.

(iv) Patents, trademarks and licenses

The Company owns several valuable patents, trademarks and licenses, but does not consider any segment of its business dependent upon any single or group of patents, trademarks or licenses.

(v) Extent to which business is seasonal

Since the Company is so widely diversified in global agribusiness markets, there are no material seasonal fluctuations in the manufacture, sale and distribution of its products and services. There is a degree of seasonality in the growing season and procurement of the Company's principal raw materials: oilseeds, corn, wheat, cocoa beans and other grains. However, the actual physical movement of the millions of bushels of these crops through the Company's storage and processing facilities is reasonably constant throughout the year.

(vi) Working capital items

Price variations and availability of raw agricultural commodities may cause fluctuations in the Company's inventories and short-term borrowings.

Item 1. BUSINESS-Continued

(vii) Dependence on single customer

No material part of the Company's business in any segment is dependent upon a single customer or very few customers.

(viii) Amount of backlog

Because of the nature of the Company's business, the backlog of orders at year end is not a significant indication of the Company's activity for the current or upcoming year.

(ix) Business subject to renegotiation

The Company has no business with the government subject to renegotiation.

(x) Competitive conditions

Markets for the Company's products are highly price competitive and sensitive to product substitution. No single company competes with the Company in all of its markets. However, a number of large companies compete with the Company in one or more markets. Major competitors in one or more markets include, but are not limited to, Cargill, Inc., ConAgra, Inc., Corn Products International, Inc., Bunge, Ltd., Barry Callebaut A.G. and Tate & Lyle PLC.

(xi) Research and development expenditures

Practically all of the Company's technical efforts and expenditures are concerned with food and feed ingredient products. Special efforts are being made to find improvements in food technology to alleviate protein malnutrition throughout the world, utilizing the three largest United States crops: corn, soybeans and wheat.

The need to successfully market new or improved food and feed ingredients developed in the Company's research laboratories led to the concept of technical support. The Company is staffed with technical representatives who work closely with customers and potential customers on the development of food and feed products which incorporate Company-produced ingredients. These technical representatives are an adjunct to both the research and sales functions.

The Company maintains a research laboratory in Decatur, Illinois where product and process development activities are conducted. To develop new bioproducts and to improve existing bioproducts, new cultures are developed using classical mutation and genetic engineering. Protein and vegetable oil research is conducted at facilities in Decatur where bakery, meat and dairy pilot plants support application research. Research to support sales and development for bakery products is done at a laboratory in Olathe, Kansas. Research to support sales and development for cocoa and chocolate products is done in Milwaukee, Wisconsin and the Netherlands. Research and technical support for industrial and food wheat starch applications is conducted in a Montreal, Canada research center. The Company maintains research centers in Quincy, Illinois and Decatur, Indiana that conduct swine and cattle feeding trials to test new formula feed products and to develop improved feeding efficiencies.

The amounts spent during the three years ended June 30, 2002, 2001 and 2000 for such technical efforts were approximately $26.1, $23.8 and $23.4 million, respectively.

 

Item 1. BUSINESS-Continued

(xii) Material effects of capital expenditures for environmental protection

During 2002, $17.6 million was spent for equipment, facilities and programs for pollution control and compliance with the requirements of various environmental agencies.

There have been no material effects upon the earnings and competitive position of the Company resulting from compliance with federal, state and local laws or regulations enacted or adopted relating to the protection of the environment.

The Company expects expenditures for environmental facilities and programs will continue at approximately the present rate with no unusual amounts anticipated for the next two years.

(xiii) Number of employees

The number of persons employed by the Company was 24,746 at June 30, 2002.

(d) Financial Information About Foreign and Domestic Operations and Export Sales

The Company's foreign operations are principally in developed countries and do not entail any undue or unusual business risks. Geographic financial information is set forth in "Note 11 of Notes to Consolidated Financial Statements" of the annual shareholders' report for the year ended June 30, 2002 and is incorporated herein by reference.

Export sales by segment for the last three years were as follows:

2002

 

2001

 

2000

(in thousands)

Oilseeds Processing

$ 1,268,901

$ 1,229,191

$ 1,212,521

Corn Processing

93,773

151,771

110,509

Wheat Processing

83,313

61,633

68,337

Agricultural Services

3,595,419

3,250,944

3,120,425

Other

190,492

203,012

186,941

Total

$ 5,231,898

$ 4,896,551

$ 4,698,733

 

Item 1. BUSINESS-Continued

(e) Executive Officers and Certain Significant Employees

 

Name

Title

Age

 

 

 

 

 

G. Allen Andreas

Chairman of the Board of Directors from January 1999. Chief Executive from July 1997. President from July 1997 to February 1999.

59

 

Martin L. Andreas

Assistant to the Chief Executive from 1989. Senior Vice President from 1989 to November 2001.

63

 

 

 

 

 

Charles P. Archer

Treasurer from October 1992.

46

 

Maureen K. Ausura

Vice President from June 2000. Senior Vice President, Human Resources, of Giant Eagle, Inc. from 1996 to June 2000. Various senior personnel positions with Campbell Soup Company from 1984 to 1996.

46

 

Ronald S. Bandler

Assistant Treasurer from January 1998. Manager of Treasury Operations from 1989 to January 1998.

41

 

Lewis W. Batchelder

Senior Vice President from December 2001. Group Vice President from July 1997 to December 2001. President of Grain Operations from March 2001.

57

 

William H. Camp

Senior Vice President from December 2001. Group Vice President and President, North American Oilseed Processing Division from April 2000 to December 2001. Group Vice President and President, South American Oilseed Processing Division from March 1999 to April 2000. Vice President from April 1993 to March 1999.

53

 

Mark J. Cheviron

Vice President from July 1997. Vice President of Corporate Security and Administrative Services since May 1997. Director of Security since 1980.

53

 

Larry H. Cunningham

Senior Vice President from February 2000. Consultant for ADM from October 1999 to February 2000. Group Vice President and President of ADM Corn Processing Division from October 1996 to October 1999. President of ADM Food Additives Division from October 1998 to October 1999.

58

Item 1. BUSINESS-Continued

 

Anthony P. Delio

Vice President of Marketing and External Affairs from March 2002. President ADM Natural Health and Nutrition September 2001 to March 2002. Vice President from May 2000. President of ADM Protein Specialties Division from October 1999 to September 2001. President of ADM Nutraceutical Division from May 1999 to September 2001. Various senior product development positions with Mars, Inc from 1980 to May 1999.

46

 

Craig A. Fischer

Vice President from September 2001. President of ADM Milling from September 2001. President of ADM BioProducts and Specialty Ingredients from July 2000 to September 2001. Vice President of ADM Corn Processing from 1985 to 2000. President of ARTCO from 1996 to 1999.

52

 

Dennis C. Garceau

Vice President from April 1999. President of ADM Technical Services Department from April 1999. Various senior engineering positions from 1969 to April 1999.

55

 

Edward J. Harjehausen

Group Vice President from March 2002. President of ADM BioProducts and Feed Division from March 2002. President of ADM Corn Processing Division from July 2000. Vice President from October 1992 to March 2002. President of ADM BioProducts and Food Additives from October 1999 to July 2000.

52

 

Craig E. Huss

Vice President from January 2001. President of ADM Transportation from 1999. Various grain elevator and merchandising management positions from 1976 to 1999.

49

 

Paul L. Krug, Jr.

Vice President from November 1991. President of ADM Investor Services from 1991.

58

 

Michael Lusk

Vice President from November 1999. Senior Vice President with AON/ International Risk Management Company, Inc. from 1989 to November 1999.

53

Item 1. BUSINESS-Continued

 

Steven R. Mills

Group Vice President from January 2002. Controller from October 1994. Vice President from February 2000 to January 2002.

47

 

Paul B. Mulhollem

Chief Operating Officer from January 2002. President from December 2001. Senior Vice President from October 1999 to December 2001. Group Vice President from July 1997 to October 1999. Vice President from January 1996 to July 1997. Managing Director of ADM International, Ltd., from 1993 to October 1999.

53

 

Brian F. Peterson

Group Vice President and Managing Director of ADM International, Ltd., from October 1999. Vice President from January 1996 to October 1999. President of ADM Protein Specialties Division from February 1999 to October 1999. President of ADM BioProducts Division from 1995 to October 1999.

60

 

Raymond V. Preiksaitis

Group Vice President from July 1997. Vice President of Management Information Systems from 1988 to July 1997.

50

 

John G. Reed

Vice President from 1982.

72

 

Richard P. Reising

Senior Vice President from July 1997. Vice President, Secretary and General Counsel from 1991 to July 1997.

58

 

John D. Rice

Senior Vice President from February 2000. Group Vice President and President, North American Oilseed Processing Division from February 1999 to February 2000. Vice President from 1993 to February 1999. President of ADM Food Oils Division from December 1996 to February 2000.

48

 

Scott A. Roberts

Assistant Secretary and Assistant General Counsel from July 1997. Member of the Law Department since 1985.

42

 

Kenneth A. Robinson

Vice President from January 1996.

55

 

 

Scott A. Roney

Vice President, Corporate Compliance and Regulatory Affairs from April 2001. Member of the Law Department from 1991 to April 2001.

37

 

Douglas J. Schmalz

Senior Vice President and Chief Financial Officer from January 2002. Vice President and Chief Financial Officer from 1986 to January 2002.

56

 

David J. Smith

Senior Vice President, Secretary and General Counsel from January 2002. Vice President, Secretary and General Counsel from July 1997 to January 2002. Assistant General Counsel from 1995 to July 1997. Assistant Secretary from 1988 to July 1997. Member of the Law Department since 1981.

47

 

Stephen H. Yu

Vice President from January 1996.

42

 

Officers of the Company are elected by the Board of Directors for terms of one year and until their successors are duly elected and qualified.

 

 

 

Item 2. PROPERTIES

The Company owns, leases, or has a 50% or greater interest in the following processing plants and grain procurement facilities:

 

Processing Plants

 

Grain Procurement Facilities

 

United States

Foreign

Total

 

United States

Foreign

Total

 

 

 

 

 

 

 

 

Owned

152

102

254

 

224

94

318

Leased

3

3

6

 

40

28

68

Joint Venture

2

9

11

 

5

-

5

 

157

114

271

 

269

122

391

The Company's operations are such that most products are efficiently processed near the source of raw materials. Consequently, the Company has many plants strategically located in grain producing areas. The annual volume of commodities processed will vary depending upon availability of raw materials and demand for finished products.

Oilseeds Processing

 

Processing Plants

 

Grain Procurement Facilities

 

United States

Foreign

Total

 

United States

Foreign

Total

 

 

 

 

 

 

 

 

Owned

40

44

84

 

16

83

99

Leased

2

1

3

 

-

28

28

Joint Venture

-

2

2

 

-

-

-

 

42

47

89

 

16

111

127

The Company operates twenty-three domestic and nineteen foreign oilseed crushing plants with a daily processing capacity of approximately 87,000 metric tons (3.2 million bushels). The domestic plants are located in Arkansas, Georgia, Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Carolina, Tennessee and Texas. The foreign plants are located in Bolivia, Brazil, Canada, England, Germany, India, Mexico, the Netherlands, Poland and Turkey.

The Company operates twelve domestic oilseed refineries in Georgia, Illinois, Indiana, Iowa, Minnesota, Missouri, Nebraska, North Dakota and Tennessee, as well as fifteen foreign refineries in Bolivia, Brazil, Canada, Germany, India, the Netherlands, Poland and Turkey. The Company also has an interest, through a joint venture, in an oilseed refinery in England. The Company packages oils in California, Georgia, Illinois, Bolivia, Brazil, Germany and Turkey and has an interest, through a joint venture, in a packaged oils plant in England. Cotton linter pulp is produced in Tennessee and cottonseed flour is produced in Texas. The Company operates two fertilizer-blending plants in Brazil and two bio-diesel plants in Germany.

The Oilseeds Processing Segment operates sixteen domestic country grain elevators as adjuncts to its processing plants. These elevators, with an aggregate storage capacity of 8 million bushels, are located in Arkansas, Illinois, Kansas, Missouri and North Carolina.

This segment also operates one hundred eleven foreign elevators including port facilities in Argentina, Brazil, Canada, Germany, Paraguay and Uruguay as adjuncts to its processing plants. These facilities have a storage capacity of 112 million bushels.

Item 2. PROPERTIES-Continued

Corn Processing

 

Processing Plants

 

Grain Procurement Facilities

 

United States

Foreign

Total

 

United States

Foreign

Total

 

 

 

 

 

 

 

 

Owned

9

-

9

 

3

-

3

Leased

-

-

-

 

-

-

-

Joint Venture

-

6

6

 

-

-

-

 

9

6

15

 

3

-

3

The Company operates seven wet corn milling and two dry corn milling plants with a daily grind capacity of approximately 51,300 metric tons (2.0 million bushels). These plants and other related properties, including two corn germ extraction plants, are located in Illinois, Iowa, Minnesota, Nebraska and North Dakota. The Corn Processing Segment operates three domestic grain terminal elevators as adjuncts to its processing plants. These elevators, with an aggregate storage capacity of 4.6 million bushels are located in Minnesota. The Company also has interests, through joint ventures, in corn milling plants in Bulgaria, Hungary, Mexico, Romania, Slovakia and Turkey.

Wheat Processing

 

Processing Plants

 

United States

Foreign

Total

 

 

 

 

Owned

34

26

60

Leased

-

-

-

Joint Venture

2

-

2

 

36

26

62

The Company operates twenty-four domestic wheat and durum flour mills, a domestic bulgur plant, three domestic corn flour mills, two domestic milo mills, and eighteen foreign flour mills with a total daily milling capacity of approximately 29,100 metric tons (1.1 million bushels). The Company also operates six bakery mix and specialty ingredient plants. These plants and related properties are located in California, Illinois, Indiana, Kansas, Minnesota, Missouri, Nebraska, New York, North Carolina, Oklahoma, Pennsylvania, Tennessee, Texas, Washington, Wisconsin, Barbados, Belize, Canada, England, Grenada, Jamaica, and the Netherlands Antilles. The Company operates four foreign formula feed plants as adjuncts to the wheat flour mills in Barbados, Belize, Grenada and the Netherlands Antilles. The Company operates a paper bag plant in West Virginia and through a joint venture, also has an interest in two rice milling plants in Arkansas and Louisiana. In addition, the Company operates a food ingredient plant in Jamaica.

Agricultural Services

 

Grain Procurement Facilities

 

United States

Foreign

Total

 

 

 

 

Owned

177

7

184

Leased

40

-

40

Joint Venture

5

-

5

 

222

7

229

Item 2. PROPERTIES-Continued

The Agricultural Services Segment operates two hundred seventeen domestic terminal, sub-terminal, country, and river elevators covering the major grain producing states, including ninety-four country elevators and one hundred fifteen sub-terminal, terminal and river loading facilities including eight grain export elevators in Florida, Louisiana, Maryland, Ohio and Texas. Elevators are located in Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, Tennessee, Texas and Utah. These elevators have an aggregate storage capacity of approximately 503 million bushels. The Company has four grain export elevators in Argentina and Brazil that have an aggregate storage capacity of approximately 12 million bushels. In addition, the Company has three country elevators in Canada.

The Company also has interests, through joint ventures, in five domestic grain elevators located in Minnesota and South Dakota with an aggregate storage capacity of approximately 7 million bushels.

Other

 

Processing Plants

 

Grain Procurement Facilities

 

United States

Foreign

Total

 

United States

Foreign

Total

 

 

 

 

 

 

 

 

Owned

69

32

101

 

28

4

32

Leased

1

2

3

 

-

-

-

Joint Venture

-

1

1

 

-

-

-

 

70

35

105

 

28

4

32

The Company operates four domestic and ten foreign chocolate and cocoa bean processing plants. The domestic plants are located in Georgia, Massachusetts, New Jersey, and Wisconsin, and the foreign plants are located in Brazil, Canada, China, England, Ivory Coast, the Netherlands, Poland and Singapore. The Company operates three cocoa bean procurement and handling facilities/port sites in the Ivory Coast.

The Company operates eight domestic soy protein specialty plants in Illinois and three foreign plants are located in the Netherlands. Lecithin products are produced at six domestic and four foreign plants in Illinois, Iowa, Nebraska, Canada, Germany and the Netherlands, and Vitamin E is produced in Illinois. The Company also operates a domestic starch and gluten plant in Iowa and one in Canada. The Company operates five various other food and food ingredient plants in England, France and Germany. The Company produces feed and food additives at eight plants located in Illinois, North Carolina, China and Ireland. The Company also operates a bakery mix and specialty ingredient plant in Kansas and a honey drying operation in Wisconsin.

The Company operates twenty-eight domestic and one foreign edible bean procurement facilities with an aggregate storage capacity of approximately 13 million bushels, located in Colorado, Idaho, Michigan, Minnesota, North Dakota, Wyoming and Canada. The Company has an edible bean dehydration facility in North Dakota.

The Company also operates forty-one domestic and nine foreign formula feed and animal health and nutrition plants. The domestic plants are located in Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, Ohio, Pennsylvania, South Dakota, Texas and Wisconsin. The foreign plants are located in Canada, China, Ireland, Puerto Rico and Trinidad. Through a joint venture, the Company also has an interest in a formula feed plant in China.

 

Item 3. LEGAL PROCEEDINGS

ENVIRONMENTAL MATTERS

In 1993, the State of Illinois Environmental Protection Agency ("Illinois EPA") brought administrative enforcement proceedings arising out of the Company's alleged failure to obtain proper permits for certain pollution control equipment at one of the Company's processing facilities in Illinois. In 1998, the Illinois EPA filed an administrative enforcement proceeding arising out of certain alleged permit exceedances relating to the same facility. Also, in 1998 the Company voluntarily reported to the Illinois EPA certain other permit exceedances related to other processes at that same facility, and in 1999 Illinois EPA issued a Notice of Violation relating to those exceedances. In 2000, the Company voluntarily disclosed certain other permit exceedances at the same facility. In 1998, the State of Illinois filed a civil administrative action against the Company alleging violations of the Illinois Environmental Protection Act, and regulations promulgated thereunder, arising from a one-time release of denatured ethanol at one of the Company's Illinois distribution facilities. The Company is in discussions with the Illinois EPA to settle all of the pending matters with the State. In January 2000, the United States Environmental Protection Agency ("U.S. EPA") issued a Notice of Violation to the Company for another Illinois facility regarding alleged emissions violations and the failure to obtain proper permits for various equipment at that facility. That matter has been referred to the Department of Justice ("DOJ"), and the Company has met with the U.S. EPA and DOJ regarding settlement of that matter. In management's opinion, the settlement of these proceedings, all seeking compliance with applicable environmental permits and regulations, will not, either individually or in the aggregate, have a material adverse effect on the Company's financial condition or results of operations.

The Company is involved in approximately 25 administrative and judicial proceedings in which it has been identified as a potentially responsible party ("PRP") under the federal Superfund law and its state analogs for the study and clean-up of sites contaminated by material discharged into the environment. In all of these matters, there are numerous PRPs. Due to various factors such as the required level of remediation and participation in the clean-up effort by others, the Company's future clean-up costs at these sites cannot be reasonably estimated. In management's opinion, these proceedings will not, either individually or in the aggregate, have a material adverse effect on the Company's financial condition or results of operations.

LITIGATION REGARDING ALLEGED ANTICOMPETITIVE PRACTICES

The Company is currently a defendant in various lawsuits related to alleged anticompetitive practices by the Company as described in more detail below. The Company intends to vigorously defend these actions unless they can be settled on terms deemed acceptable to the parties.

GOVERNMENTAL MATTERS

Federal grand juries in the Northern Districts of Illinois, California and Georgia, under the direction of the DOJ, have been investigating possible violations by the Company and others with respect to the sale of lysine, citric acid and high fructose corn syrup, respectively. In connection with an agreement with the DOJ in fiscal 1997, the Company paid the United States fines of $100 million. This agreement constituted a global resolution of all matters between the DOJ and the Company and brought to a close all DOJ investigations of the Company. The federal grand juries in the Northern Districts of Illinois (lysine) and Georgia (high fructose corn syrup) have been closed.

The Company has received notice that certain foreign governmental entities were commencing investigations to determine whether anticompetitive practices occurred in their jurisdictions. Except for the investigations being conducted by the Commission of the European Communities and the Brazilian Department of Protection and Economic Defense as described

Item 3. LEGAL PROCEEDINGS-Continued

below, all such matters have been resolved as previously reported. In June 1997, the Company and several of its European subsidiaries were notified that the Commission of the European Communities had initiated an investigation as to possible anticompetitive practices in the amino acid markets, in particular the lysine market, in the European Union. On October 29, 1998, the Commission of the European Communities initiated formal proceedings against the Company and others and adopted a Statement of Objections. The reply of the Company was filed on February 1, 1999 and the hearing was held on March 1, 1999. On August 8, 1999, the Commission of the European Communities adopted a supplementary Statement of Objections expanding the period of involvement as to certain other companies. On June 7, 2000, the Commission of the European Communities adopted a decision imposing a fine against the Company in the amount of EUR 47.3 million. The Company has appealed this decision. In September 1997, the Company received a request for information from the Commission of the European Communities with respect to an investigation being conducted by that Commission into the possible existence of certain agreements and/or concerted practices in the citric acid market in the European Union. On March 28, 2000, the Commission of European Communities initiated formal proceedings against the Company and others and adopted a Statement of Objections. The reply of the Company was filed on June 9, 2000. On December 17, 2001, the Commission of the European Communities adopted a decision imposing a fine against the Company in the amount of EUR 39.69 million. The Company has appealed this decision. In November 1998, a European subsidiary of the Company received a request for information from the Commission of the European Communities with respect to an investigation being conducted by that Commission into the possible existence of certain agreements and/or concerted practices in the sodium gluconate market in the European Union. On May 17, 2000, the Commission of European Communities initiated formal proceedings against the Company and others and adopted a Statement of Objections. The reply of Company was filed on September 1, 2000. On October 2, 2001, the Commission of the European Communities adopted a decision imposing a fine against the Company in the amount of EUR 10.3 million. The Company has appealed this decision. On May 8, 2000, a Brazilian subsidiary of the Company was notified of the commencement of an administrative proceeding by the Department of Protection and Economic Defense relative to possible anticompetitive practices in the lysine market in Brazil. On July 3, 2000, the Brazilian subsidiary of the Company filed a Statement of Defense in this proceeding.

The ultimate outcome of the proceedings of the Commission of the European Communities and the ultimate outcome and materiality of the proceedings of the Brazilian Department of Protection and Economic Defense cannot presently be determined. The Company may become the subject of similar antitrust investigations conducted by the applicable regulatory authorities of other countries.

HIGH FRUCTOSE CORN SYRUP ACTIONS

The Company, along with other companies, has been named as a defendant in thirty-one antitrust suits involving the sale of high fructose corn syrup in the United States. Thirty of these actions have been brought as putative class actions.

FEDERAL ACTIONS. Twenty-two of these putative class actions allege violations of federal antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup, and seek injunctions against continued alleged illegal conduct, treble damages of an unspecified amount, attorneys' fees and costs, and other unspecified relief. The putative classes in these cases comprise certain direct purchasers of high fructose corn syrup during certain periods in the 1990s. These twenty-two actions have been transferred to the United States District Court for the Central District of Illinois and consolidated under the caption In Re High Fructose Corn Syrup Antitrust Litigation, MDL No. 1087 and Master File No. 95-1477. On April 3, 2001, the Company and

Item 3. LEGAL PROCEEDINGS-Continued

the other defendants filed motions for summary judgment. On August 23, 2001, the Court entered a written order granting the defendants' motions for summary judgment. On June 18, 2002, the United States Court of Appeals for the Seventh Circuit reversed the district court's grant of summary judgment for defendants. On August 5, 2002, the Court of Appeals denied defendants petitions for rehearing and rehearing en banc.

On January 14, 1997, the Company, along with other companies, was named a defendant in a non-class action antitrust suit involving the sale of high fructose corn syrup and corn syrup. This action which is encaptioned Gray & Co. v. Archer Daniels Midland Co., et al, No. 97-69-AS, was filed in federal court in Oregon, alleges violations of federal antitrust laws and Oregon and Michigan state antitrust laws, including allegations that the defendants conspired to fix, raise, maintain and stabilize the price of corn syrup and high fructose corn syrup, and seeks treble damages, attorneys' fees and costs of an unspecified amount. This action was transferred for pretrial proceedings to the United States District Court for the Central District of Illinois. On August 29, 2001, the Court stayed this case pending the conclusion of the appeal of the class plaintiffs in In Re High Fructose Corn Syrup Antitrust Litigation, MDL No. 1087 and Master File No. 95-1477.

STATE ACTIONS. The Company, along with other companies, also has been named as a defendant in seven putative class action antitrust suits filed in California state court involving the sale of high fructose corn syrup. These California actions allege violations of the California antitrust and unfair competition laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup, and seek treble damages of an unspecified amount, attorneys' fees and costs, restitution and other unspecified relief. One of the California putative classes comprises certain direct purchasers of high fructose corn syrup in the State of California during certain periods in the 1990s. This action was filed on October 17, 1995 in Superior Court for the County of Stanislaus, California and encaptioned Kagome Foods, Inc. v Archer-Daniels-Midland Co. et al., Civil Action No. 37236. This action has been removed to federal court and consolidated with the federal class action litigation pending in the Central District of Illinois referred to above. The other six California putative classes comprise certain indirect purchasers of high fructose corn syrup and dextrose in the State of California during certain periods in the 1990s. One such action was filed on July 21, 1995 in the Superior Court of the County of Los Angeles, California and is encaptioned Borgeson v. Archer-Daniels-Midland Co., et al., Civil Action No. BC131940. This action and four other indirect purchaser actions have been coordinated before a single court in Stanislaus County, California under the caption, Food Additives (HFCS) cases, Master File No. 39693. The other four actions are encaptioned, Goings v. Archer Daniels Midland Co., et al., Civil Action No. 750276 (Filed on July 21, 1995, Orange County Superior Court); Rainbow Acres v. Archer Daniels Midland Co., et al., Civil Action No. 974271 (Filed on November 22, 1995, San Francisco County Superior Court); Patane v. Archer Daniels Midland Co., et al., Civil Action No. 212610 (Filed on January 17, 1996, Sonoma County Superior Court); and St. Stan's Brewing Co. v. Archer Daniels Midland Co., et al., Civil Action No. 37237 (Filed on October 17, 1995, Stanislaus County Superior Court). On October 8, 1997, Varni Brothers Corp. filed a complaint in intervention with respect to the coordinated action pending in Stanislaus County Superior Court, asserting the same claims as those advanced in the consolidated class action.

The Company, along with other companies, also has been named a defendant in a putative class action antitrust suit filed in Alabama state court. The Alabama action alleges violations of the Alabama, Michigan and Minnesota antitrust laws, including allegations that defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup, and seeks an injunction against continued illegal conduct, damages of an unspecified amount, attorneys' fees and costs, and other unspecified relief. The putative class in the Alabama action comprises certain indirect purchasers in Alabama, Michigan and Minnesota during the period

Item 3. LEGAL PROCEEDINGS-Continued

March 18, 1994 to March 18, 1996. This action was filed on March 18, 1996 in the Circuit Court of Coosa County, Alabama, and is encaptioned Caldwell v. Archer-Daniels-Midland Co., et al., Civil Action No. 96-17. On April 23, 1997, the court granted the defendants' motion to sever and dismiss the non-Alabama claims. On March 27, 2000, defendants moved for summary judgment in light of a recent Alabama Supreme Court case holding that the Alabama antitrust laws apply only to intrastate commerce. On June 28, 2000, and August 11, 2000, plaintiffs filed amended complaints. On September 6, 2000, defendants moved to dismiss or in the alternative to strike plaintiffs' amended complaints. On April 5, 2002, the Court granted defendants' motions.

LYSINE ACTIONS

The Company, along with other companies, had been named as a defendant in twenty-three putative class action antitrust suits involving the sale of lysine in the United States and two putative class action antitrust suits in Canada involving the sale of lysine in Canada. Except for the actions specifically described below, all such suits have been settled, dismissed or withdrawn.

CANADIAN ACTIONS. The Company, along with other companies, has been named as a defendant in one putative class action antitrust suit filed in Ontario Superior Court of Justice in which the plaintiffs allege the defendants reached agreements with one another as to the price at which each of them would sell lysine to customers in Ontario and as to the total volume of lysine that each company would supply in Ontario in violation of Part VI of the Competition Act and for damages for the civil tort of conspiracy and intentional interference with economic relations. The putative class is comprised of all corporations in Canada and all consumers, other than those in the Province of Quebec, who purchased lysine, products containing lysine, or products derived from animals that consumed lysine during the period from June 1, 1992 to June 27, 1995. The plaintiffs seek C$15 million for violations of the Competition Act, C$30 million as damages for alleged tortious conduct, C$5 million in punitive, exemplary and aggravated damages, interest and costs of the action. This action was served upon the Company on June 11, 1999 and is encaptioned Rein Minnema and Minnema Farms Ltd. v. Archer-Daniels-Midland Company, et al., Court File No. G23495-99CP. The Company, along with other companies, has been named as a respondent in a motion seeking authorization to institute a class action filed on or about October 20, 1999 in Superior Court in the Province of Quebec, District of Montreal, in which the applicants allege the respondents conspired, combined, agreed or arranged to prevent or lessen, unduly, competition with respect to the sale of lysine in Canada in violation of Section 45(1)(c) of the Competition Act. The putative class is comprised of certain indirect purchasers in Quebec after June 1992. The applicants seek at least C$4.4 million, costs of investigation, attorneys' fees and interest. This motion is encaptioned Option Consommateurs, et al v. Archer-Daniels-Midland Company, et al., Court No. 500-06-000089-991. On or about July 15, 2002, the plaintiffs and the defendants in the Ontario and Quebec actions described above entered into a settlement agreement pursuant to which the Company will pay the plaintiffs C$4.5 million. This settlement agreement is subject to court approval.

STATE ACTION. The Company has been named as a defendant, along with other companies, in one putative class action antitrust suit alleging violations of the Alabama antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of lysine, and seeking an injunction against continued alleged illegal conduct, damages of an unspecified amount, attorneys' fees and costs, and other unspecified relief. The putative class in this action comprises certain indirect purchasers of lysine in the State of Alabama during certain periods in the 1990s. This action was filed on August 17, 1995 in the Circuit Court of DeKalb County, Alabama, and is encaptioned Ashley v. Archer-Daniels-Midland Co., et al., Civil Action No. 95-336. On March 13, 1998, the court denied plaintiff's

Item 3. LEGAL PROCEEDINGS-Continued

motion for class certification. Subsequently, the plaintiff amended his complaint to add approximately 300 individual plaintiffs. On March 23, 2000, defendants filed a motion for summary judgment in light of a recent Alabama Supreme Court case holding that the Alabama antitrust laws apply only to intrastate commerce. On August 11, 2000, plaintiffs filed an amended complaint. On September 15, 2000, defendants moved to dismiss or in the alternative to strike plaintiffs' amended complaint. On June 19, 2001, the Court granted defendants' motion for summary judgment on plaintiffs' claim for restraint of trade in interstate commerce and granted defendants' motion to dismiss the plaintiffs' unjust enrichment claim. The Court denied defendants' motion to dismiss plaintiffs' restraint of trade in intrastate commerce claim. However, on July 3, 2001, plaintiffs voluntarily dismissed this claim. On July 18, 2001, plaintiffs moved to amend, alter or vacate the Court's dismissal of the unjust enrichment claim. On July 24, 2001, plaintiffs noticed an appeal of that part of the Court's order granting defendants' summary judgment motion. On October 9, 2001, the Court denied plaintiffs' motion to amend, alter or vacate the Court's dismissal of the unjust enrichment claim. The plaintiffs subsequently noticed an appeal of the Court's order dated June 19, 2001 regarding the unjust enrichment claim. These appeals are currently pending in the Alabama Supreme Court. On May 30, 2002, plaintiffs moved to amend their complaint to add a claim under the Alabama Deceptive Trade Practices Statute. On July 2, 2002, defendants filed a motion to strike and/or dismiss that claim.

HIGH FRUCTOSE CORN SYRUP/CITRIC ACID STATE CLASS ACTIONS

The Company, along with other companies, has been named as a defendant in five putative class action antitrust suits involving the sale of both high fructose corn syrup and citric acid. Two of these actions allege violations of the California antitrust and unfair competition laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seek treble damages of an unspecified amount, attorneys' fees and costs, restitution and other unspecified relief. The putative class in one of these California cases comprises certain direct purchasers of high fructose corn syrup and citric acid in the State of California during the period January 1, 1992 until at least October 1995. This action was filed on October 11, 1995 in the Superior Court of Stanislaus County, California and is entitled Gangi Bros. Packing Co. v. Archer-Daniels-Midland Co., et al., Civil Action No. 37217. The putative class in the other California case comprises certain indirect purchasers of high fructose corn syrup and citric acid in the state of California during the period October 12, 1991 until November 20, 1995. This action was filed on November 20, 1995 in the Superior Court of San Francisco County and is encaptioned MCFH, Inc. v. Archer-Daniels-Midland Co., et al., Civil Action No. 974120. The California Judicial Council has bifurcated the citric acid and high fructose corn syrup claims in these actions and coordinated them with other actions in San Francisco County Superior Court and Stanislaus County Superior Court. As noted in prior filings, the Company accepted a settlement agreement with counsel for the citric acid plaintiff class. This settlement received final court approval and the case was dismissed on September 30, 1998. The Company, along with other companies, also has been named as a defendant in one putative class action antitrust suit filed in West Virginia state court involving the sale of high fructose corn syrup and citric acid. This action also alleges violations of the West Virginia antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, attorney's fees and costs, and other unspecified relief. The putative class in the West Virginia action comprises certain entities within the State of West Virginia that purchased products containing high fructose corn syrup and/or citric acid for resale from at least 1992 until 1994. This action was filed on October 26, 1995, in the Circuit Court for Boone County, West Virginia, and is encaptioned Freda's v. Archer-Daniels-Midland Co., et al., Civil Action No. 95-C-125. The Company, along with other companies, also has been named as a defendant in a putative class action antitrust suit filed in the Superior Court for the District of Columbia

Item 3. LEGAL PROCEEDINGS-Continued

involving the sale of high fructose corn syrup and citric acid. This action alleges violations of the District of Columbia antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, attorney's fees and costs, and other unspecified relief. The putative class in the District of Columbia action comprises certain persons within the District of Columbia that purchased products containing high fructose corn syrup and/or citric acid during the period January 1, 1992 through December 31, 1994. This action was filed on April 12, 1996 in the Superior Court for the District of Columbia, and is encaptioned Holder v. Archer-Daniels-Midland Co., et al., Civil Action No. 96-2975. On November 13, 1998, plaintiff's motion for class certification was granted. Plaintiffs are seeking to conduct additional discovery. The Company, along with other companies, has been named as a defendant in a putative class action antitrust suit filed in Kansas state court involving the sale of high fructose corn syrup and citric acid. This action alleges violations of the Kansas antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup and citric acid, and seeks treble damages of an unspecified amount, court costs and other unspecified relief. The putative class in the Kansas action comprises certain persons within the State of Kansas that purchased products containing high fructose corn syrup and/or citric acid during at least the period January 1, 1992 through December 31, 1994. This action was filed on May 7, 1996 in the District Court of Wyandotte County, Kansas and is encaptioned Waugh v. Archer-Daniels-Midland Co., et al., Case No. 96-C-2029. Plaintiff's motion for class certification is currently pending.

HIGH FRUCTOSE CORN SYRUP/CITRIC ACID/LYSINE STATE CLASS ACTIONS

The Company, along with other companies, has been named as a defendant in six putative class action antitrust suits filed in California state court involving the sale of high fructose corn syrup, citric acid and/or lysine. These actions allege violations of the California antitrust and unfair competition laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the prices of high fructose corn syrup, citric acid and/or lysine, and seek treble damages of an unspecified amount, attorneys' fees and costs, restitution and other unspecified relief. One of the putative classes is comprised of certain direct purchasers of high fructose corn syrup, citric acid and/or lysine in the State of California during a certain period in the 1990s. This action was filed on December 18, 1995 in the Superior Court for Stanislaus County, California and is encaptioned Nu Laid Foods, Inc. v. Archer-Daniels-Midland Co., et al., Civil Action No. 39693. The other five putative classes comprise certain indirect purchasers of high fructose corn syrup, citric acid and/or lysine in the State of California during certain periods in the 1990s. One such action was filed on December 14, 1995 in the Superior Court for Stanislaus County, California and is encaptioned Batson v. Archer-Daniels-Midland Co., et al., Civil Action No. 39680. The other actions are encaptioned Abbott v. Archer Daniels Midland Co., et al., No. 41014 (Filed on December 21, 1995, Stanislaus County Superior Court); Noldin v. Archer Daniels Midland Co., et al., No. 41015 (Filed on December 21, 1995, Stanislaus County Superior Court); Guzman v. Archer Daniels Midland Co., et al., No. 41013 (Filed on December 21, 1995, Stanislaus County Superior Court) and Ricci v. Archer Daniels Midland Co., et al., No. 96-AS-00383 (Filed on February 6, 1996, Sacramento County Superior Court). As noted in prior filings, the plaintiffs in these actions and the lysine defendants have executed a settlement agreement that has been approved by the court, and the California Judicial Council has bifurcated the citric acid and high fructose corn syrup claims and coordinated them with other actions in San Francisco County Superior Court and Stanislaus County Superior Court.

 

 

Item 3. LEGAL PROCEEDINGS-Continued

MONOSODIUM GLUTAMATE ACTIONS

The Company, along with other companies, has been named as a defendant in fourteen putative class action antitrust suits involving the sale of monosodium glutamate and/or other food flavor enhancers in the United States and three putative class action antitrust suits in Canada involving the sale of nucleotides, including monosodium glutamate, in Canada.

CANADIAN ACTIONS. The Company, along with other companies, has been named as a defendant in three actions filed pursuant to the Class Proceedings Act in which the plaintiffs allege that the defendants violated the Competition Act with respect to the sale of nucleotides in Canada. The putative classes are comprised of direct and indirect purchasers in Canada during the period from January 1, 1990 to November 1, 1999. The plaintiffs in these actions seek general, punitive and exemplary damages and "disgorgement of ill-gotten overcharges", plus prejudgment interest and costs of the actions. The first action was filed on or about September 7, 2001 in the Superior Court of Justice in Toronto, Ontario, and is encaptioned Long Duc Ngo and Christopher McLean v. Ajinomoto U.S.A., Inc., et al., Court File No. 37708. The second action was filed on or about October 4, 2001 in the Supreme Court of British Columbia in Vancouver and is encaptioned Abel Lam and Klas Consulting & Investment Ltd. v. Ajinomoto U.S.A., Inc., et alCourt File No. S015589. The third action was filed on or about October 18, 2001 in the "Cour Superieure" in the Province of Quebec and District of Quebec, and is encaptioned Colette Brochu v. Ajinomoto U.S.A. Inc., et al., No.: 200-06-000019-011. The hearing on the plaintiffs' motion for class certification in the Ontario action has been scheduled for March 2003. No schedule has been established for the actions pending in British Columbia and Quebec.

FEDERAL ACTIONS. Eight of these putative class actions allege violations of federal antitrust laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the price of monosodium glutamate, disodium inosinate and disodium guanylate, and seek various relief, including treble damages of an unspecified amount, attorneys' fees and costs, and other unspecified relief. The putative classes in these cases comprise certain direct purchasers of monosodium glutamate, disodium inosinate and/or disodium guanylate during certain periods in the 1990's to the present. The Company has never produced or sold disodium inosinate or disodium guanylate. One such action was filed on October 27, 1999 in the United States District Court for the Northern District of California and is encaptioned Thorp, Inc. v. Archer-Daniels-Midland Company, et al., NoC99 4752 (VRW). The second action was filed on October 27, 1999 in the United States District Court for the Northern District of California and is encaptioned Premium Ingredients, Ltd. v. Archer-Daniels-Midland Co., et al., No. C 99 4742(MJJ). The third action was filed on October 28, 1999 in the United States District Court for the Northern District of California and is encaptioned Felbro Food Products v. Archer-Daniels-Midland Company, et al., No.C99 4761(MJJ). The fourth action was filed on November 17, 1999 in the United States District Court for the Northern District of California and is encaptioned First Spice Mixing Co., Inc. v. Archer Daniels Midland Co., et al., No. C 99 4977 (PJH). The fifth action was filed on November 23, 1999 in the United States District Court for the District of New Jersey and is encaptioned Diversified Foods and Seasonings, Inc. v. Archer Daniels Midland Co., Inc. et al., No. 99 CV 5501. The sixth action was filed on December 16, 1999 in the United States District Court for the Eastern District of New York and is encaptioned M. Phil Yen, Inc. v. Ajinomoto Co. Inc., et al., No. 99 Div 06514 (EK). The seventh action was filed on January 27, 2000 in the Northern District of California and is encaptioned Chicago Ingredients, Inc. v. Archer-Daniels-Midland Co., et al., No. C 00 0308 (JL). The eighth action was filed on April 12, 2000 in the Eastern District of Pennsylvania and is encaptioned Heller Seasonings & Ingredients, Inc. v. Ajinomoto U.S.A., Inc., et al., No. 00-CV-1905. The Judicial Panel on Multidistrict Litigation has consolidated these actions for coordinated pretrial discovery in the United States District Court for the District of Minnesota. On June 3, 2001, the Court granted the plaintiffs' motion for class certification. The Company

Item 3. LEGAL PROCEEDINGS-Continued

and the plaintiffs in these eight actions have executed a settlement agreement pursuant to which the Company will pay the plaintiffs $1.25 million. On August 15, 2002 the court preliminarily approved the settlement agreement. The settlement agreement is subject to final approval by the court.

STATE ACTIONS. The Company, along with at least one other company, has been named as a defendant in four putative class action antitrust suits filed in California state court involving the sale of monosodium glutamate and/or other food flavor enhancers. These actions allege violations of California antitrust and unfair competition laws, including allegations that the defendants agreed to fix, stabilize and maintain at artificially high levels the price of monosodium glutamate and/or other food flavor enhancers, and seek treble damages of an unspecified amount, restitution, attorneys' fees and costs, and other unspecified relief. The putative classes in these actions comprise certain indirect purchasers of monosodium glutamate and/or other food flavor enhancers in the State of California during certain periods in the 1990's. The first action originally was filed on June 25, 1999 in the Superior Court of San Francisco County and is encaptioned Fu's Garden Restaurant v. Archer-Daniels-Midland Company, et al., Civil Action No. 304471. The second action was filed on January 14, 2000 in the Superior Court of San Francisco County and is encaptioned JMN Restaurant Management, Inc. v. Ajinomoto Co., Inc., et al., Civil Action No. 309236. The third action was filed on May 2, 2000 in the Superior Court of San Francisco County and is encaptioned Tanuki Restaurant and Lilly Zapanta v. Archer Daniels Midland Co., et al, Civil Action No. 311871. The fourth action was filed on May 24, 2000 in the Superior Court of San Francisco County and is encaptioned Tasty Sunrise Burgers v. Archer Daniels Midland Co., et al., Civil Action No. 312373. On June 19, 2000, the Court consolidated all of these cases for pretrial and trial purposes. The Company, along with other defendants, also has been named as a defendant in one putative class action antitrust suit filed in Massachusetts state court involving the sale of monosodium glutamate and/or other food flavor enhancers. The action alleges violations of the Massachusetts Consumer Protection Act, including allegations that the defendants agreed to fix prices, allocate market shares and eliminate and suppress competition in the sale of monosodium glutamate, nucleotides and other food flavor enhancers, and seeks treble damages of an unspecified amount, attorneys' fees and costs, and other unspecified relief. The putative class in this action comprises persons within the State of Massachusetts that purchased for consumer purposes products containing monosodium glutamate and/or nucleotides during anytime between January 1990 and August 23, 2001. This action was filed on June 5, 2002 in Middlesex Superior Court, and is encaptioned Fortin v. Ajinomoto U.S.A., Inc., et al, Civil Action No. 02-2345. The Company, along with other defendants, also has been named as a defendant in one putative class action antitrust suit filed in Kansas state court involving the sale of monosodium glutamate and nucleotides. The action alleges violations of the Kansas antitrust laws, including allegations that the defendants agreed to fix, stabilize, control and maintain prices for monosodium glutamate and nucleotides, and seeks damages, including treble damages, of an unspecified amount, attorneys' fees and costs, and other unspecified relief. The putative class in this action comprises all persons or entities in the State of Kansas that indirectly purchased monosodium glutamate and/or nucleotides during any time between January 1990 and November 1, 1999 for use as an ingredient in the manufacture or preparation of final food products. This action was filed on July 22, 2002 in the District Court of Johnson County, Kansas and is encaptioned Williams Foods, Inc. v. Ajinomoto U.S.A., Inc., et al., Civil Action No. 02-CV-04661.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Information responsive to this Item is set forth in "Common Stock Market Prices and Dividends" of the annual shareholders' report for the year ended June 30, 2002 and is incorporated herein by reference.

Item 6. SELECTED FINANCIAL DATA

Information responsive to this Item is set forth in the "Ten-Year Summary of Operating, Financial and Other Data" of the annual shareholders' report for the year ended June 30, 2002 and is incorporated herein by reference.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information responsive to this Item is set forth in "Management's Discussion of Operations and Financial Condition" of the annual shareholders' report for the year ended June 30, 2002 and is incorporated herein by reference.

Item 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information responsive to this Item is set forth in "Management's Discussion of Operations and Financial Condition" of the annual shareholders' report for the year ended June 30, 2002 and is incorporated herein by reference.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements and supplementary data included in the annual shareholders' report for the year ended June 30, 2002 are incorporated herein by reference:

Consolidated balance sheets--June 30, 2002 and 2001

Consolidated statements of earnings--Years ended

June 30, 2002, 2001 and 2000

Consolidated statements of shareholders' equity--Years ended

June 30, 2002, 2001 and 2000

Consolidated statements of cash flows--Years ended

June 30, 2002, 2001 and 2000

Notes to consolidated financial statements--June 30, 2002

Summary of Significant Accounting Policies

Report of Independent Auditors

Quarterly Financial Data (Unaudited)

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

 

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to directors and executive officers is set forth in "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" of the definitive proxy statement for the Company's annual meeting of stockholders to be held on November 7, 2002 and is incorporated herein by reference. Certain information with respect to executive officers is included in Item 1(e) of this report.

Item 11. EXECUTIVE COMPENSATION

Information responsive to this Item is set forth in "Executive Compensation" and "Compensation Committee Report" of the definitive proxy statement for the Company's annual meeting of stockholders to be held on November 7, 2002 and is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information responsive to this Item is set forth in "Principal Holders of Voting Securities", "Election of Directors" and "Equity Compensation Plan Information" of the definitive proxy statement for the Company's annual meeting of stockholders to be held on November 7, 2002 and is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information responsive to this Item is set forth in "Certain Relationships and Related Transactions" of the definitive proxy statement for the Company's annual meeting of stockholders to be held on November 7, 2002 and is incorporated herein by reference.

Item 14. CONTROLS AND PROCEDURES

Not applicable.

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) The following consolidated financial statements and other financial data of the registrant and its subsidiaries, included in the annual report of the Company to its shareholders for the year ended June 30, 2002, are incorporated by reference in Item 8, and are also incorporated herein by reference:

Consolidated balance sheets--June 30, 2002 and 2001

Consolidated statements of earnings--Years ended

June 30, 2002, 2001 and 2000

Consolidated statements of shareholders' equity-

Years ended June 30, 2002, 2001 and 2000

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM

8-K

 

Consolidated statements of cash flows--Years ended

June 30, 2002, 2001 and 2000

Notes to consolidated financial statements--June 30, 2002

Summary of Significant Accounting Policies

Quarterly Financial Data (Unaudited)

(a)(2) Financial Statement Schedules

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

Balance at

Balance at

Beginning

End

 

 

of Year

 

Additions

 

Deductions (1)

 

Other (2)

 

of Year

(In thousands)

Classification

Allowance for doubtful accounts

2000

$ 47,209

22,230

(26,028)

3,162

$ 46,573

2001

$ 46,573

7,802

(6,235)

(1,124)

$ 47,016

2002

$ 47,016

11,016

(21,258)

12,515

$ 49,289

(1) Uncollectible accounts written off, net of recoveries

(2) Impact of business combinations and foreign currency exchange adjustments

All other schedules are either not required, not applicable or the information is otherwise included.

(a)(3) LIST OF EXHIBITS

(3)(i) Composite Certificate of Incorporation, as amended, filed on November 13, 2001, as Exhibit (3)(i) to Form 10-Q for the quarter ended September 30, 2001, is incorporated herein by reference.

(ii) Bylaws, as amended and restated, filed on May 12, 2000 as Exhibit 3(ii) to Form 10-Q for the quarter ended March 31, 2000, are incorporated herein by reference.

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM

8-K-Continued

      1. Instruments defining the rights of security holders, including:
        1. Indenture dated June 1, 1986 between the registrant and The Chase Manhattan Bank, formerly known as Chemical Bank, (as successor to Manufacturers Hanover Trust Company), as Trustee (incorporated by reference to Exhibit 4(a) to Registration Statement No. 33-6721), and Supplemental Indenture dated as of August 1, 1989 between the registrant and Chemical Bank (as successor to Manufacturers Hanover Trust Company), as Trustee (incorporated by reference to Exhibit 4(c) to Post-Effective Amendment No. 3 to Registration Statement No. 33-6721), relating to:

the $300,000,000 - 8 7/8% Debentures due April 15, 2011,

the $300,000,000 - 8 3/8% Debentures due April 15, 2017,

the $300,000,000 - 8 1/8% Debentures due June 1, 2012,

the $250,000,000 - 6 1/4% Notes due May 15, 2003,

the $250,000,000 - 7 1/8% Debentures due March 1, 2013,

the $350,000,000 - 7 1/2% Debentures due March 15, 2027,

the $200,000,000 - 6 3/4% Debentures due December 15, 2027,

the $250,000,000 - 6 7/8% Debentures due December 15, 2097,

the $196,210,000 - 5 7/8% Debentures due November 15, 2010,

the $300,000,000 - 6 5/8% Debentures due May 1, 2029, and

the $400,000,000 - 7% Debentures due February 1, 2031.

Copies of constituent instruments defining rights of holders of long-term debt of the Company and Subsidiaries, other than the Indentures specified herein, are not filed herewith, pursuant to Instruction (b)(4) (iii)(A) to Item 601 of Regulation S-K, because the total amount of securities authorized under any such instrument does not exceed 10% of the total assets of the Company and Subsidiaries on a consolidated basis. The registrant hereby agrees that it will, upon request by the Commission, furnish to the Commission a copy of each such instrument.

(10) Material Contracts--Copies of the Company's stock option and stock unit plans, deferred compensation plan, and savings and investment plans, pursuant to Instruction (10)(iii)(A) to Item 601 of Regulation S-K, each of which is a management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K, are incorporated herein by reference as follows:

(i) Exhibits 4(c) and 4(d) to Registration Statement No. 33-49409 on Form S-8 dated March 15, 1993 relating to the Archer Daniels Midland 1991 Incentive Stock Option Plan and Archer Daniels Midland Company Savings and Investment Plan.

(ii) Exhibits 4(c) and 4(d) to Registration Statement No. 333-39605 on Form S-8 dated November 5, 1997 relating to the ADM Savings and Investment Plan for Salaried Employees and the ADM Savings and Investment Plan for Hourly Employees.

(iii) Exhibit 4 to Registration Statement No. 333-51381 on Form S-8 dated April 30, 1998 relating to the Archer-Daniels-Midland Company 1996 Stock Option Plan.

 

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM

8-K-Continued

(iv) The Archer-Daniels-Midland Company Stock Unit Plan for Nonemployee Directors (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, (File No. 1-44)).

      1. Exhibits 4(c) and 4(d) to Registration Statement No. 333-75073 on Form S-8 dated March 26, 1999 relating to the ADM Employee Stock Ownership Plan for Salaried Employees and the ADM Employee Stock Ownership Plan for Hourly Employees.
      2. The Archer-Daniels-Midland Company Incentive Compensation Plan (incorporated by reference to Exhibit A to the Company's Definitive Proxy Statement filed with the Securities and Exchange Commission on September 15, 1999 (File No. 1-44)).
      3. Exhibits 4.3 and 4.4 to Registration Statement No. 333-42612 on Form S-8 dated July 31, 2000 relating to the ADM 401(k) Plan for Salaried Employees and the ADM 401(k) Plan for Hourly Employees, as amended by Post-Effective No. 1 to Registration Statement No. 333-42612 on Form S-8 dated August 8, 2000.
      4. Exhibit 4.3 to Registration Statement No. 333-67962 on Form S-8 dated August 20, 2001 relating to the ADM Deferred Compensation Plan for Selected Management Employees.
      5. The Archer-Daniels-Midland Company Voluntary Employee Payroll Deduction Stock Purchase Plan.

(13) Portions of annual report to shareholders incorporated by reference

(21) Subsidiaries of the registrant

(23) Consent of independent auditors

(24) Powers of attorney

(b) Reports on Form 8-K

A Form 8-K was not filed during the quarter ended June 30, 2002.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: September 20, 2002

ARCHER-DANIELS-MIDLAND COMPANY

By: /s/ D. J. Smith

D. J. Smith

Senior Vice President, Secretary

and General Counsel

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on September 20, 2002, by the following persons on behalf of the Registrant and in the capacities indicated.

/s/ G. A. Andreas

/s/ S. A. McMurtrie

G. A. Andreas*,

Mrs. S. A. McMurtrie *,

Chief Executive and Director

Director

(Principal Executive Officer)

 

 

/s/ D. J. Mimran

/s/D. J. Schmalz

D. J. Mimran*,

D. J. Schmalz

Director

Senior Vice President and

 

Chief Financial Officer

/s/ M. B. Mulroney

(Principal Financial Officer)

M. B. Mulroney*,

 

Director

/s/S. R. Mills

 

S. R. Mills

/s/ J. K. Vanier

Group Vice President and Controller

J. K. Vanier*,

(Controller)

Director

 

 

/s/ H. de Boon

/s/ O. G. Webb

H. de Boon,

O. G. Webb*,

Director

Director

 

 

/s/ Mrs. M. H. Carter

/s/ A. Young

Mrs. M. H. Carter*,

A. Young*,

Director

Director

 

 

/s/ R. S. Joslin

/s/ D. J. Smith

R. S. Joslin *,

Attorney-in-Fact

Director

 

 

 

*Powers of Attorney authorizing D. J. Schmalz, S. R. Mills and D. J. Smith and each of them, to sign the Form 10-K on behalf of the above-named officers and directors of the Company copies of which are being filed with the Securities and Exchange Commission.

 

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

 

 

I, G. A. Andreas, certify that:

  1. I have reviewed this annual report on Form 10-K of Archer-Daniels-Midland Company;
  2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and
  3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

 

Date: September 20, 2002

 

/s/ G. A. Andreas

G. A. Andreas

Chairman and Chief Executive

 

 

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

 

 

I, D. J. Schmalz, certify that:

1. I have reviewed this annual report on Form 10-K of Archer-Daniels-Midland Company;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

 

Date: September 20, 2002

 

/s/ D. J. Schmalz

D. J. Schmalz

Senior Vice President and

Chief Financial Officer

EXHIBIT 13-- PORTIONS OF ANNUAL REPORT TO SHAREHOLDERS INCORPORATED BY REFERENCE

MANAGEMENT'S DISCUSSION OF

OPERATIONS AND FINANCIAL CONDITION - JUNE 30, 2002

Operations

Net earnings for fiscal 2002 increased due principally to improved oilseeds crush margins, a $147 million gain from the partial settlement of vitamin antitrust litigation related to the Company's feed and animal health operations, and improved results of the Company's agricultural services and wheat processing operations. These increases were partially offset by an $83 million charge for abandonment and write-down of long-lived assets and a reduction in operating results of the Company's cocoa and ethanol operations.

The $83 million charge for abandonment and write-down of long-lived assets primarily represents the write-down of abandoned idle assets to their estimated salvage values. The remaining asset write-downs included in the charge are associated with a new product line which, based upon current market conditions, would not allow the Company to realize an acceptable rate of return on these assets. The Company now plans to utilize the remaining assets associated with the new product line to produce alternative products, and these assets were written down to fair value in consideration of this alternative use.

2002 Compared to 2001

Net sales and other operating income increased 17 percent to $23.5 billion due to recently-acquired grain, feed, oilseeds, and cocoa operations and, to a lesser extent, increased sales volumes and prices as described in Segment Information.

Cost of products sold increased $3.2 billion to $21.8 billion due primarily to recently-acquired businesses and, to a lesser extent, to the aforementioned $83 million charge for abandonment and write-down of long-lived assets. Manufacturing costs were relatively unchanged from the prior year.

Selling, general and administrative expenses increased $96 million to $827 million due principally to recently-acquired grain, feed, oilseeds, and cocoa operations and, to a lesser extent, increased personnel-related expenses.

Other expense decreased $41 million to $138 million due principally to increased gains on securities transactions partially offset by decreased equity in earnings of unconsolidated affiliates. Realized gains on securities transactions were $38 million in 2002 compared to realized losses on securities transactions of $56 million for the prior year. The decrease in equity in earnings of unconsolidated affiliates is principally due to a $50 million decline in the Company's private equity fund investments due to lower valuations and to last year's gain of $95 million representing the Company's equity share of the gain reported by the Company's unconsolidated affiliate, Compagnie Industrelle et Financiere des Produits Amylaces SA ("CIP"), upon the sale of its interest in wet corn milling and wheat starch production businesses (the "CIP Gain").

Income taxes increased primarily due to higher pretax earnings and to no taxes being provided in the prior year on the CIP Gain. Partially offsetting this increase was a $26 million reduction in taxes resulting from the resolution of various outstanding state and federal tax issues. CIP is a foreign corporate joint venture, and CIP intends to permanently reinvest the proceeds from the sale transaction. The Company's effective tax rate, excluding the effect of the aforementioned tax credit and the CIP Gain, was approximately 33 percent for both 2002 and 2001.

Segment Information

The Company is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. The Company's operations are classified into four reportable business segments: Oilseeds Processing, Corn Processing, Wheat Processing, and Agricultural Services. The Company's remaining operations are included in the Other segment.

Oilseeds Processing segment includes activities related to processing oilseeds such as soybeans, cottonseed, sunflower seeds, canola, peanuts, flaxseed and corn germ into vegetable oils and meals principally for the food and feed industries. Crude vegetable oil is sold "as is" or is further processed by refining and hydrogenating into margarine, shortening, salad oils and other food products. Partially refined oil is sold for use in chemicals, paints and other industrial products. Oilseed meals are primary ingredients used in the manufacture of commercial livestock and poultry feeds.

Corn Processing segment includes activities related to the production of products for use in the food and beverage industry. These products include syrup, starch, glucose, dextrose and high fructose sweeteners. Corn gluten feed and distillers grains are produced for use as feed ingredients. Ethyl alcohol is produced to beverage grade or for industrial use as ethanol.

Wheat Processing segment includes activities related to the production of wheat flour for use primarily by bakeries and pasta manufacturers.

Agricultural Services segment utilizes the Company's vast grain elevator and transportation network to buy, store, clean and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats and barley, and resells these commodities primarily as food or feed ingredients. Also included in Agricultural Services are the activities of A.C. Toepfer International and affiliates, one of the world's largest trading companies specializing in agricultural commodities and processed products.

 Sales to external customers

 

2002

 

2001

 

Change

 

 

(In thousands)

Oilseeds Processing

$ 8,997,197

$ 8,346,650

$ 650,547

Corn Processing

1,939,100

2,117,098

(177,998)

Wheat Processing

1,360,895

1,308,692

52,203

Agricultural Services

8,280,078

5,644,237

2,635,841

Other

2,876,291

2,634,744

241,547

Total

 

$ 23,453,561

 

$ 20,051,421

 

$ 3,402,140

Operating profit

 

2002

 

2001

 

Change

 

 

(In thousands)

Oilseeds Processing

$ 387,960

$ 260,116

$ 127,844

Corn Processing

214,875

242,211

(27,336)

Wheat Processing

78,800

71,519

7,281

Agricultural Services

169,593

119,548

50,045

Other

188,592

210,005

(21,413)

Total

 

$ 1,039,820

 

$ 903,399

 

$ 136,421

Oilseeds Processing sales increased 8 percent to $9.0 billion primarily due to increased sales volumes and higher average selling prices. These increases were primarily due to continued strong, worldwide demand for protein meal and fiber and higher average vegetable oil selling prices rebounding from historic low levels. Oilseeds Processing operating profits increased due to improved oilseed crush margins resulting from increased protein meal demand and improved plant capacity utilization. These increases were partially offset by a $23 million charge related to abandonment and write-down of long-lived assets.

Corn Processing sales decreased 8 percent to $1.9 billion due principally to lower ethanol sales volumes. Operating profits also decreased due to the lower ethanol sales volumes and a $10 million charge related to abandonment and write-down of long-lived assets.

Wheat Processing sales increased slightly due principally to increased selling prices for wheat flour products. Operating profits increased primarily due to improved processing margins as a result of improvements in plant capacity utilization resulting from industry production capacity rationalization, partially offset by a $6 million charge for abandonment and write-down of long-lived assets.

Agricultural Services sales increased 47 percent to $8.3 billion due principally to recently acquired trading operations, including the sales of A.C. Toepfer ("ACTI"). ACTI, which was consolidated in the fourth quarter of 2002, had net sales of approximately $1.3 billion for that quarter. Operating profits increased due primarily to increased trading volumes and improved results of international trading operations.

Other sales increased 9 percent to $2.9 billion due primarily to recently-acquired feed and cocoa operations. This increase was partially offset by decreased average selling prices of food additives and amino acid products, and decreased sales volumes of cocoa products and edible beans. Operating profits of the Other segment decreased due to a $44 million charge related to abandonment and write-down of long-lived assets, a decline in private equity fund investments due to lower valuations, and to last year's $95 million CIP Gain. Additionally, the Company's cocoa operations declined from prior year levels due principally to reduced grinding margins created by excess butter stocks and higher cocoa bean prices. These declines were partially offset by a $147 million gain from the partial settlement of vitamin antitrust litigation and improved results of the Company's protein specialties operations.

 

2001 Compared to 2000

Sales and other operating income increased 8 percent to $20.1 billion due to increased average selling prices and volumes, and increased volumes of grain merchandised. The higher average selling prices and volumes were due to increased world-wide demand for protein meal and increased demand for fuel alcohol arising from new market expansions and higher gasoline prices.

 

Cost of products sold increased $1.2 billion to $18.6 billion due primarily to increased volumes of grain merchandised and to higher energy and fuel costs. Raw agricultural commodity prices remained relatively unchanged for the year.

Selling, general and administrative expenses increased $2 million for the year to $731 million due principally to $4 million of expenses attributable to recently acquired operations and to increased advertising and promotional expenses. These increases were partially offset by decreased bad debt expense and decreased salary-related costs associated with the prior year's facility closures and consolidations.

Other expense increased $42 million to $179 million due principally to realized losses on marketable securities transactions and increased interest expense due to higher average borrowing rates and reduced capitalized interest. These increases were partially offset by increased equity in earnings of unconsolidated affiliates and by increased investment income. The increase in earnings of unconsolidated affiliates resulted primarily from the CIP Gain of $95 million partially offset by lower valuations of the Company's private equity fund investments. The increase in investment income was due primarily to interest on income tax refunds related to IRS settlements.

Income taxes increased for 2001 resulted primarily from higher pretax earnings and to a $60 million tax credit in 2000 related to a redetermination of foreign sales corporation benefits for prior years and the resolution of various other tax issues. The Company's effective income tax rate for 2001 was 27 percent, reflecting no taxes being provided on the CIP Gain. CIP is a foreign corporate joint venture, and CIP intends to permanently reinvest the proceeds from the sale. Excluding the effects of the CIP Gain in 2001 and the $60 million tax credit in 2000, the Company's effective tax rates for 2001 and 2000 were approximately 33 and 32 percent, respectively.

Segment Information

 Sales to external customers

 

2001

 

2000

 

Change

 

 

(In thousands)

Oilseeds Processing

$ 8,346,650

$ 8,310,970

$ 35,680

Corn Processing

2,117,098

1,798,215

318,883

Wheat Processing

1,308,692

1,347,340

(38,648)

Agricultural Services

5,644,237

4,640,187

1,004,050

Other

2,634,744

2,515,711

119,033

Total

 

$ 20,051,421

 

$ 18,612,423

 

$ 1,438,998

Operating profit

 

2001

 

2000

 

Change

 

 

(In thousands)

Oilseeds Processing

$ 260,116

$ 175,454

$ 84,662

Corn Processing

242,211

179,203

63,008

Wheat Processing

71,519

95,575

(24,056)

Agricultural Services

119,548

129,149

(9,601)

Other

210,005

177,343

32,662

Total

 

$ 903,399

 

$ 756,724

 

$ 146,675

Oilseeds Processing sales increased due principally to increased world-wide demand for protein meal due to meat and bone meal restrictions stemming from Bovine Spongiform Encephalopathy (BSE) concerns. This increase was partially offset by decreased vegetable oil selling prices resulting from industry wide record vegetable oil stocks. Operating profits increased due principally to strong worldwide demand for protein meals partially offset by higher energy costs.

Corn Processing sales increased $319 million to $2.1 billion due primarily to higher average selling prices and, to a lesser extent, increased sales volumes. These volume and price increases were due principally to increased demand for ethanol arising from new market expansions and higher gasoline prices. Operating profits increased due principally to this increased demand for ethanol. This increase in operating profits was partially offset by higher energy costs.

Wheat Processing sales and operating profits decreased due to decreased volumes and prices of wheat flour and other milled products due to weak demand for the products, customer consolidations, and industry production overcapacity.

Agricultural Services sales increased 22 percent to $5.6 billion due to increased sales volumes attributable principally to the Company's recently-established Latin American merchandising offices. Operating profits decreased slightly for the year due to difficult operating conditions for the Company's barge and towboat operations stemming from ice and flooding on the Mississippi River and to higher fuel prices. This decrease was partially offset by increased grain merchandising margins.

Other sales increased $119 million to $2.6 billion due primarily to increased demand for the Company's cocoa products and to increased volumes and higher average selling prices for the Company's amino acid products due to increases in competing protein meal prices. Operating profits of the Other segment increased principally due to the $95 million CIP Gain and improved results of the Company's cocoa operations due to increased demand for cocoa products partially offset by lower valuations of the Company's private equity fund investments.

Liquidity and Capital Resources

At June 30, 2002, the Company continued to show substantial liquidity with working capital of $2.6 billion and a current ratio, defined as current assets divided by current liabilities, of 1.6. Included in this $2.6 billion of working capital is $979 million of cash, cash equivalents and short-term marketable securities as well as $1.4 billion of readily marketable commodity inventories. Cash generated from operating activities totaled $1.5 billion for the year compared to $872 million last year. This increase was primarily due to increased net income, non-cash expenses related to plant shutdowns and impairments, and a reduction in working capital requirements. Cash used in investing activities increased $210 million for the year to $407 million as less cash was generated from sales of marketable securities. Cash used in financing activities increased $466 million to $941 million. $400 million of zero coupon debt was paid in 2002 whereas $400 million of 7% debentures were issued in 2001. Purchases of the Company's common stock increased $122 million to $185 million. Net payments under line-of-credit agreements were $174 million in 2002 compared to $674 million in 2001.

Capital resources were strengthened as shown by the increase in the Company's net worth to $6.8 billion. The Company's ratio of long-term debt to total capital (the sum of the Company's long-term debt and shareholders' equity) decreased to 32% at June 30, 2002 from 35% at June 30, 2001. This ratio is a measure of the Company's long-term liquidity and is an indicator of financial flexibility. Commercial paper and commercial bank lines of credit are available to meet seasonal cash requirements. At June 30, 2002, the Company had $967 million outstanding and an additional $1.5 billion available under its commercial paper and bank lines of credit programs. Standard & Poor's and Moody's rate the Company's commercial paper as A-1 and P-1, respectively, and rate the Company's long-term debt as A+ and A1, 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 domestic and international markets.

Contractual Obligations and Commercial Commitments

In the normal course of business, the Company enters into contracts and commitments which obligate the Company to make payments in the future. The table below sets forth the Company's significant future obligations by time period. Excluded from this table are commodity-based contracts entered into in the normal course of business which are further described in the "Market Risk Sensitive Instruments and Positions" section of Management's Discussion of Operations and Financial Condition. Where applicable, information included in the Company's consolidated financial statements and notes are cross-referenced in this table.

Payments due by period

Long-Term Contractual

Note

2006 and

Obligations

 

Reference

 

Total

2003

2004

2005

Beyond

(in thousands)

Short-term debt

$ 967,473

$ 967,473

Long-term debt

Note 4

3,339,783

295,718

$ 16,762

$ 121,406

$ 2,905,897

Capital leases

Note 4

77,301

10,072

9,691

10,443

47,095

Operating leases

Note 9

231,572

48,734

38,740

32,525

111,573

Total

$4,616,129

$ 1,321,997

$ 65,193

$ 164,374

$ 3,064,565

 

At June 30, 2002, the Company estimates it will cost approximately $325 million to complete construction in progress and other commitments to purchase or construct property, plant and equipment. The Company is a limited partner in various private equity funds which invest primarily in emerging markets that have agri-processing potential. At June 30, 2002, the Company's carrying value of these limited partnership investments was approximately $500 million. The Company has future capital commitments related to these partnerships of $130 million and expects the majority of these additional capital commitments, if called for, to be funded by cash flows generated by the partnerships.

In addition, the Company has also entered into debt guarantee agreements, primarily related to equity-method investees, which could obligate the Company to make future payments under contingent commitments. The Company's liability under these agreements arises only if the primary entity fails to perform its contractual obligation. If the Company is called upon to make payments pursuant to these guarantees, the Company has, for a majority of these agreements, a security interest in the underlying assets of the primary entity. At June 30, 2002, these debt guarantees total approximately $316 million.

On July 11, 2002, the Company entered into a merger agreement with Minnesota Corn Processors, LLC ("MCP"), a corn wet-milling company. This agreement, subject to regulatory approvals and approval of MCP shareholders, is structured as a cash-for-stock transaction whereby the Company will pay MCP shareholders a price of $2.90 for each outstanding Class A unit. The Company, which currently owns 30% of MCP through ownership of non-voting Class B units, will pay approximately $382 million for the outstanding Class A units.

Critical Accounting Policies

The process of preparing financial statements requires management to make estimates and judgments that affect the carrying values of the Company's assets and liabilities as well as the recognition of revenues and expenses. These estimates and judgments are based on the Company's historical experience and management's knowledge and understanding of current facts and circumstances. Certain of the Company's accounting policies are considered critical, as these policies are important to the depiction of the Company's financial statements and require significant or complex judgment by management. There have been no significant changes in critical accounting policies in the past year. Following are accounting policies management considers critical to the Company's financial statements.

Inventories and Derivatives

Certain of the Company's merchandisable agricultural commodity inventories, forward fixed-price purchase and sale contracts, and exchange-traded futures contracts are valued at estimated market values. These merchandisable agricultural commodities are freely traded, have quoted market prices, and may be sold without significant, additional processing. Management estimates market value based on exchange-quoted prices, adjusted for differences in local markets. Changes in the market values of these inventories and contracts are recognized in the statement of earnings as a component of cost of products sold. If management used different methods or factors to estimate market value, amounts reported as inventories and cost of products sold could differ. Additionally, if market conditions change subsequent to year-end, amounts reported in future periods as inventories and cost of products sold could differ.

The Company, from time to time, enters into futures contracts which are designated as hedges of specific volumes of commodities to be purchased and processed in a future month. These readily marketable exchange-traded futures contracts are designated as cash flow hedges. The change in the market value of such futures contracts has historically been, and is expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. Gains and losses arising from such open and closed hedging transactions are deferred in other comprehensive income, net of applicable income taxes, and recognized in the statement of earnings when the finished goods produced from the hedged item are sold. If it is determined that the hedge instruments used are no longer effective at offsetting changes in the price of the hedged item, then the changes in the market value of these exchange-traded futures contracts would be recorded in the statement of earnings as a component of cost of products sold.

Employee Benefit Plans

The Company provides substantially all employees with pension benefits and also provides substantially all domestic employees with postretirement health care and life insurance benefits. In order to measure the expense and funded status of these employee benefit plans, management makes several estimates and assumptions, including interest rates used to discount certain liabilities, rates of return on assets set aside to fund these plans, rates of compensation increases, employee turnover rates, anticipated mortality rates, and anticipated future healthcare costs. These estimates and assumptions are based on the Company's historical experience combined with management's knowledge and understanding of current facts and circumstances. The Company uses third-party specialists to assist management in measuring the expense and funded status of these employee benefit plans. If management used different estimates and assumptions regarding these plans, the funded status of the plans could vary significantly and then the Company could recognize different amounts of expense over future periods.

 

Tax and Litigation Contingencies

The Company frequently faces challenges from domestic and foreign tax authorities regarding the amount of taxes due. These challenges include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposure associated with various tax filing positions, the Company records reserves for probable exposures. Based on management's evaluation of the Company's tax position, it is believed the amounts related to these tax exposures are appropriately accrued. To the extent the Company were to prevail in matters for which accruals have been established or be required to pay amounts in excess of the aforementioned reserves, the Company's effective tax rate in a given financial statement period may be impacted.

As described in Note 12 to the Company's consolidated financial statements, the Company has made provisions to cover fines, litigation settlements and costs related to certain putative class action antitrust suits and other proceedings involving the sale of lysine, citric acid, sodium gluconate and monosodium glutamate. As to certain other suits and proceedings, including those related to high fructose corn syrup, where the ultimate outcome and materiality cannot presently be determined, no provision for any liability that may result therefrom has been made in the consolidated financial statements. The Company intends to vigorously defend these actions and proceedings unless they can be settled on terms deemed acceptable by the parties. To the extent additional information arises regarding these actions and proceedings or the Company's strategies change, it is possible that management's best estimate of the Company's probable liability may change.

Asset Abandonments and Write-downs

The Company is principally engaged in the business of procuring, transporting, storing, processing and merchandising agricultural commodities and products. This business is global in nature and is highly capital-intensive. Both the availability of the Company's raw materials and the demand for the Company's finished products are driven by unpredictable factors such as weather, plantings, government (domestic and foreign) farm programs and policies, changes in population growth, changes in standards of living, and production of similar and competitive crops. These aforementioned unpredictable factors, therefore, may cause a shift in the supply/demand dynamics for the Company's products. This shift will cause management to evaluate the efficiency and profitability of the Company's fixed asset base in terms of geographic location, size, and age of its factories. The Company, from time-to-time, will also invest in equipment and technology related to new, value-added products produced from agricultural commodities and products. These new products are not always successful from either a commercial production or marketing perspective. Management evaluates the Company's property, plant and equipment for impairment whenever indicators of impairment exist. Assets are abandoned after consideration of the ability to utilize the assets for their intended purpose, or to employ the assets in alternative uses, or sell the assets to recover the carrying value. If management used different estimates and assumptions in its evaluation of this fixed asset base, then the Company could recognize different amounts of expense over future periods.

Valuation of Marketable Securities and Investments in Affiliates

In determining if and when a decline in market value below carrying value of the Company's marketable securities or the recorded value of an investment accounted for on the equity method is other-than-temporary, management evaluates the market conditions, trends of earnings, price multiples, trading volumes and other key measures of these investments. When such a decline in value is deemed to be other-than-temporary, an impairment loss is recognized in the current period operating results to the extent of the decline. See Notes 1 and 3 to the Company's consolidated financial statements for information regarding the Company's marketable securities and investments in affiliates. If management used different estimates and assumptions in its evaluation of these marketable securities, then the Company could recognize different amounts of expense over future periods.

The Company is a limited partner in various private equity funds which invest primarily in emerging markets that have agri-processing potential. The Company accounts for these limited partnerships using the equity method of accounting. Therefore, the Company is recording in the consolidated statement of earnings its proportional share of the limited partnerships' net income or loss. The limited partnerships value their investments at fair value. Thus, unrealized gains and losses related to the change in fair value of these investments are recorded in the limited partnerships' statements of earnings. The valuation of these investments, as determined by the general partner, can be subjective and the values may vary significantly in a short period of time. Some of the factors causing the subjectivity and volatility of these valuations include the illiquidity and minority positions of these investments, currency exchange rate fluctuations, less regulated securities exchanges, and the inherent business risks and limitations present in the emerging market countries. The Company records the results of these limited partnerships based on the information provided to the Company by the general partner. Due to the subjectivity and volatility in valuing these investments, the fair value of these investments, and thus the Company's results, could vary significantly over future periods.

 

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, market prices of limited partnerships' investments, foreign currency exchange rates and interest rates as described 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 resulting from population growth and changes in standards of living, and global production of similar and competitive crops. To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange-traded futures contracts to minimize its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts. In addition, the Company from time to time enters into futures contracts which are designated as hedges of specific volumes of commodities that will be purchased and processed in a future month. The changes in the market value of such futures contracts has historically been, and is expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. Gains and losses arising from open and closed hedging transactions are deferred in other comprehensive income, net of applicable taxes, and recognized in the statement of earnings when the finished goods produced from the hedged items are sold.

A sensitivity analysis has been prepared to estimate the Company's exposure to market risk of its commodity position. The Company's daily net commodity position consists of inventories, related purchase and sale contracts, and exchange-traded futures 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 percent adverse change in such prices. The results of this analysis, which may differ from actual results, are as follows.

 

2002

Fair Value Market Risk

2001

Fair Value Market Risk

 

(in millions)

Highest long position

$ 373

$37

$ 237

$24

Highest short position

315

32

302

30

Average position long (short)

128

13

(52)

5

The increase in fair value of the average position for 2002 compared to 2001 was principally a result of an increase in the daily net commodity position and, to a lesser extent, from an increase in quoted futures prices.

Marketable Equity Securities

Marketable equity securities, which are recorded at fair value, have exposure to price risk. The fair value of marketable equity securities is based on quoted market prices. Risk is estimated as the potential loss in fair value resulting from a hypothetical 10 percent adverse change in quoted market prices. Actual results may differ.

 

 

 

2002

2001

 

(in millions)

Fair value

$658

$699

Market risk

66

70

The decrease in fair value for 2002 compared to 2001 resulted primarily from disposals of securities.

 

Limited Partnerships

The Company is a limited partner in various private equity funds which invest primarily in emerging markets that have agri-processing potential. The Company accounts for these limited partnerships using the equity method of accounting. Therefore, the Company is recording in the consolidated statement of earnings its proportional share of the limited partnerships' net income or loss. The limited partnerships value their investments at fair value. Risk is estimated as the potential loss in fair value resulting from a hypothetical 10 percent adverse change in market prices of the limited partnerships' investments. Actual results may differ.

 

 

2002

2001

 

(in millions)

Fair value of partnerships' investments

$462

$494

Market risk

46

49

Currencies

In order to reduce the risk of foreign currency exchange rate fluctuations, the Company follows a policy of hedging substantially all transactions, except for amounts permanently invested as described below, denominated in a currency other than the functional currencies applicable to each of its various entities. The instruments used for hedging are readily marketable exchange-traded futures contracts and forward contracts with banks. The changes in market value of such contracts have a high correlation to the price changes in the currency of the related hedged transactions. The potential loss in fair value for such net currency position resulting from a hypothetical 10 percent 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 rates is $2.7 billion at June 30, 2002 and $2.3 billion at June 30, 2001. This increase is principally due to the strengthening of the Euro and British Pound currencies versus the U.S. dollar. The potential loss in fair value resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates amounts to $272 million and $232 million for 2002 and 2001, respectively. Actual results may differ.

Interest

The fair value of the Company's long-term debt is estimated below using quoted market prices, where available, and discounted future cash flows based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Such fair value exceeded the long-term debt carrying value. Market risk is estimated as the potential increase in fair value resulting from a hypothetical one-half percent decrease in interest rates.

 

2002

2001

 

(in millions)

Fair value of long-term debt

$3,530

$3,553

Excess of fair value over carrying value

419

202

Market risk

160

190

The decrease in fair value for the current year resulted from the maturities and pay-downs of long-term debt partially offset by a decrease in quoted interest rates.

 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

The Company is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its 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 its marketable securities as available-for-sale, except for certain designated securities which are classified as trading securities. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of income taxes, reported as a component of other comprehensive income (loss). Unrealized gains and losses related to trading securities are included in income on a current basis. The Company uses the specific identification method when securities are sold or classified out of accumulated other comprehensive income (loss) into earnings.

Inventories

Inventories of certain merchandisable agricultural commodities, which include amounts acquired under deferred pricing contracts, are stated at market value. The Company also values certain inventories using the lower of cost, determined by either the last-in, first-out (LIFO) or first-in, first-out (FIFO) methods, or market.

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.

Asset Abandonments and Write-Downs

The Company recorded an $83 million charge in cost of products sold during the fourth quarter of fiscal year 2002 and recorded a $108 million charge in cost of products sold during the fourth quarter of 2000 principally related to the abandonment and write-down of certain long-lived assets. In each of these years, the majority of the assets were idle, and the decision to abandon was finalized after consideration of the ability to utilize the assets for their intended purpose, employ the assets in alternative uses, or sell the assets to recover the carrying value. In 2002, the remaining assets were intended to be used in the production of a new product line, but the Company determined current market conditions for this new product line would not allow the Company to realize an acceptable rate of return on these assets. The Company now plans to use these assets to produce alternative products and the assets were written down to fair value in consideration of this alternative use. In 2000, the remaining assets were in use in a product line, and were being marketed for sale, but were written down to fair value to recognize an impairment in the value of the assets. After the write-down, the carrying value of these assets is immaterial.

 

 

Net Sales

The Company follows a policy of recognizing sales revenue at the time of delivery of the product. Included as a component of net sales are freight costs and handling charges related to the sales. Credit risk on trade receivables arising from the Company's net sales is minimized as a result of the large and diversified nature of the Company's worldwide customer base. The Company controls its exposure to credit risk through credit approvals, credit limits and monitoring procedures. Collateral is generally not required for the Company's trade receivables.

As of the fourth quarter of 2002, when the Company acquired control of A.C. Toepfer International ("ACTI") by increasing its ownership to 80%, the Company began consolidating the operations of ACTI. Prior to the fourth quarter, the Company accounted for ACTI, a global merchandiser and supplier of agricultural commodities and products, on the equity method of accounting. ACTI's net sales revenues related to non-affiliated customers totaled approximately $1.3 billion for the fourth quarter.

Per Share Data

Basic earnings per common share is determined by dividing net earnings by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of common shares outstanding is increased by common stock options outstanding with exercise prices lower than the average market prices of common shares during each year. The number of common stock options outstanding excluded from the diluted earnings per share computation is not material.

New Accounting Standards

Effective July 1, 2002, the Company adopted Statement of Financial Accounting Standards Number 142 (SFAS 142), "Goodwill and Other Intangible Assets." Under the standard, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized, but will be subject to annual impairment tests. At June 30, 2002, the Company has $114 million of unamortized acquired goodwill and $108 million of unamortized goodwill associated with its investments in unconsolidated affiliates. The nonamortization of goodwill is expected to result in an increase in net income of $28 million ($.04 per share) in fiscal 2003. Other intangible assets will continue to be amortized over their useful lives. Beginning in fiscal 2003, the Company will annually test acquired goodwill for impairment using the two-step impairment process prescribed in SFAS 142. Goodwill associated with investments in unconsolidated affiliates will continue to be evaluated for impairment under the provisions of Accounting Principles Board Opinion Number 18, "The Equity Method of Accounting for Investments in Common Stock." The Company has performed the transitional impairment tests prescribed in SFAS 142. These tests resulted in an immaterial impairment charge which will be recorded during the first quarter of fiscal 2003.

Subsequent Events

On July 11, 2002, the Company entered into a merger agreement with Minnesota Corn Processors, LLC ("MCP"), a corn wet-milling company. This agreement, subject to regulatory approvals and approval of MCP shareholders, is structured as a cash-for-stock transaction whereby the Company will pay MCP shareholders a price of $2.90 for each outstanding Class A unit. The Company, which currently owns 30% of MCP through ownership of non-voting Class B units, will pay approximately $382 million for the outstanding Class A units.

Reclassifications

Certain items in prior year financial statements have been reclassified to conform to the current year's presentation.

CONSOLIDATED STATEMENTS OF EARNINGS

Archer Daniels Midland Company

 

Year Ended June 30

2002

 

2001

 

2000

(In thousands, except per share amounts)

Net sales and other operating income

$23,453,561

$20,051,421

$18,612,423

Cost of products sold

21,770,105

18,619,623

17,392,848

Gross Profit

1,683,456

1,431,798

1,219,575

Selling, general and administrative expenses

826,922

731,029

729,358

Other expense - net

137,597

178,870

136,980

Earnings Before Income Taxes

718,937

521,899

353,237

Income taxes

207,844

138,615

52,334

Net Earnings

$ 511,093

$ 383,284

$ 300,903

Basic and diluted earnings per common share

$ .78

$ .58

$ .45

Average number of shares outstanding

656,955

664,507

669,279

See notes to consolidated financial statements.

 

CONSOLIDATED BALANCE SHEETS

Archer Daniels Midland Company

 

June 30

ASSETS

2002

2001

(In thousands)

Current Assets

Cash and cash equivalents

$ 844,187

$ 676,086

Marketable securities

134,474

141,672

Receivables

2,849,523

2,416,432

Inventories

3,255,412

2,631,885

Prepaid expenses

279,635

284,226

Total Current Assets

7,363,231

6,150,301

Investments and Other Assets

Investments in and advances to affiliates

1,761,938

2,052,222

Long-term marketable securities

876,802

698,629

Other assets

524,061

518,354

3,162,801

3,269,205

Property, Plant and Equipment

Land

172,279

155,236

Buildings

2,247,112

2,067,654

Machinery and equipment

9,250,880

8,752,507

Construction in progress

351,803

411,150

12,022,074

11,386,547

Allowances for depreciation

(7,131,833)

(6,466,122)

4,890,241

4,920,425

$15,416,273

$14,339,931

 

CONSOLIDATED BALANCE SHEETS

Archer Daniels Midland Company

 

June 30

Liabilities and Shareholders' Equity

2002

2001

(In thousands)

Current Liabilities

Short-term debt

$ 967,473

$ 875,703

Accounts payable

2,330,992

1,794,684

Accrued expenses

1,115,042

814,450

Current maturities of long-term debt

305,790

382,144

Total Current Liabilities

4,719,297

3,866,981

Long-Term Debt

3,111,294

3,351,067

Deferred Liabilities

Income taxes

631,923

644,295

Other

198,938

145,905

830,861

790,200

Shareholders' Equity

Common stock

5,436,151

5,608,741

Reinvested earnings

1,567,570

1,187,357

Accumulated other comprehensive loss

(248,900)

(464,415)

6,754,821

6,331,683

$15,416,273

$14,339,931

 

 

See notes to consolidated financial statements.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Archer Daniels Midland Company

 

Year Ended June 30

2002

 

2001

 

2000

(In thousands)

Operating Activities

Net earnings

$511,093

$383,284

$300,903

Adjustments to reconcile to net cash provided by operations

Depreciation and amortization

566,576

572,390

604,229

Plant shut downs and abandonments

82,927

-

108,477

Deferred income taxes

(4,972)

3,919

(23,812)

Amortization of long-term debt discount

47,494

49,584

43,410

(Gain) loss on marketable securities transactions

(38,588)

56,160

(10,166)

Stock contributed to employee benefit plans

23,263

40,425

61,721

Other - net

1,631

(4,936)

(14,881)

Changes in operating assets and liabilities

Receivables

(37,142)

(84,017)

(370,738)

Inventories

(72,508)

229,289

(126,250)

Prepaid expenses

(44,197)

1,557

(3,338)

Accounts payable and accrued expenses

481,011

(376,082)

239,907

Total Operating Activities

1,516,588

871,573

809,462

Investing Activities

Purchases of property, plant and equipment

(349,637)

(273,168)

(428,737)

Net assets of businesses acquired

(40,012)

(124,639)

(30,422)

Investments in and advances to affiliates, net

2,963

(147,735)

(362,072)

Purchases of marketable securities

(455,908)

(460,195)

(1,101,100)

Proceeds from sales of marketable securities

434,826

838,859

912,923

Other - net

404

(30,922)

(44,512)

Total Investing Activities

(407,364)

(197,800)

(1,053,920)

Financing Activities

Long-term debt borrowings

7,621

429,124

108,895

Long-term debt payments

(459,826)

(41,702)

(54,609)

Net borrowings (payments) under lines of credit agreements

(174,399)

(674,350)

316,932

Purchases of treasury stock

(184,519)

(62,932)

(210,911)

Cash dividends

(130,000)

(125,053)

(120,001)

Total Financing Activities

(941,123)

(474,913)

40,306

Increase (Decrease) In Cash And Cash Equivalents

168,101

198,860

(204,152)

Cash And Cash Equivalents Beginning Of Year

676,086

477,226

681,378

Cash And Cash Equivalents End Of Year

$844,187

$676,086

$477,226

Supplemental Cash Flow Information

Noncash Investing and Financing Activities

Common stock issued for acquisitions and investments

$ -

$ 425

$ 24,150

See notes to consolidated financial statements.

 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Archer Daniels Midland Company

 

Accumulated

Other

Total

Common Stock

Reinvested

Comprehensive

Shareholders'

Shares

 

Amount

 

Earnings

 

Loss

 

Equity

(In thousands)

Balance July 1, 1999

612,795

$ 5,081,320

$ 1,419,321

$ (260,001)

$ 6,240,640

Comprehensive income

Net earnings

300,903

Other comprehensive loss

(187,676)

Total comprehensive income

113,227

Cash dividends paid-$.18 per share

(120,001)

(120,001)

5% stock dividend

30,109

274,473

(274,473)

Treasury stock purchases

(17,711)

(210,911)

(210,911)

Other

7,103

87,715

(427)

 

87,288

Balance June 30, 2000

632,296

5,232,597

1,325,323

(447,677)

6,110,243

Comprehensive income

Net earnings

383,284

Other comprehensive loss

(16,738)

Total comprehensive income

366,546

Cash dividends paid-$.19 per share

(125,053)

(125,053)

5% stock dividend

31,542

395,923

(395,923)

Treasury stock purchases

(5,525)

(62,932)

(62,932)

Other

4,065

43,153

(274)

 

42,879

Balance June 30, 2001

662,378

5,608,741

1,187,357

(464,415)

6,331,683

Comprehensive income

Net earnings

511,093

Other comprehensive income

215,515

Total comprehensive income

726,608

Cash dividends paid-$.20 per share

(130,000)

(130,000)

Treasury stock purchases

(12,818)

(184,519)

(184,519)

Other

433

11,929

(880)

 

11,049

Balance June 30, 2002

649,993

$ 5,436,151

$ 1,567,570

$ (248,900)

$ 6,754,821

See notes to consolidated financial statements.

 

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

Note 1-Marketable Securities and Cash Equivalents

 

Unrealized

Unrealized

Cost

Gains

Losses

Fair Value

2002

(In thousands)

United States Government Obligations

Maturity less than 1 year

$ 350,498

$ 159

$ (174)

$ 350,483

Maturity 1 to 5 years

248

4

-

252

Other debt securities

Maturity less than 1 year

455,130

143

(7)

455,266

Maturity 1 to 5 years

30,000

428

-

30,428

Maturity 5 to 10 years

128,599

3,771

-

132,370

Maturity greater than 10 years

54,967

795

-

55,762

Equity securities

Available-for-sale

541,402

144,534

(31,043)

654,893

Trading

3,097

-

-

3,097

$ 1,563,941

$ 149,834

$ (31,224)

$ 1,682,551

Unrealized

Unrealized

Cost

Gains

Losses

Fair Value

2001

(In thousands)

United States Government obligations

Maturity less than 1 year

$ 364,576

$ 978

$ (430)

$ 365,124

Other debt securities

Maturity less than 1 year

227,541

501

-

228,042

Equity securities Available-for-sale

586,928

125,856

(14,155)

698,629

$ 1,179,045

$ 127,335

$ (14,585)

$ 1,291,795

 

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

Note 2-Inventories and Derivatives

 

To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange-traded futures contracts to minimize its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts. Inventories of certain merchandisable agricultural commodities, which include amounts acquired under deferred pricing contracts, are stated at market value. Exchange-traded futures contracts, forward cash purchase contracts and forward cash sales contracts, which have not been designated as fair value hedges, are valued at market price. Changes in the market value of inventories of merchandisable agricultural commodities, forward cash purchase and sales contracts and exchange-traded futures contracts are recognized in earnings immediately, resulting in cost of goods sold approximating FIFO cost. Unrealized gains on forward cash purchase contracts, forward cash sales contracts and exchange-traded futures contracts represent the fair value of such instruments and are classified on the Company's balance sheet as receivables. Unrealized losses on forward cash purchase contracts, forward cash sales contracts and exchange-traded futures contracts represent the fair value of such instruments and are classified on the Company's balance sheet as accounts payable.

In addition, the Company from time to time enters into futures contracts which are designated as hedges of specific volumes of commodities to be purchased and processed in a future month. These readily marketable exchange-traded futures contracts are designated as cash flow hedges. The changes in the market value of such futures contracts have historically been, and is expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. The amounts representing the ineffectiveness of these cash flow hedges are immaterial. Gains and losses arising from open and closed hedging transactions are deferred in other comprehensive income, net of applicable income taxes, and recognized as a component of cost of products sold in the statement of earnings when the finished goods produced from the hedged item are sold. The gains and losses arising from these cash flow hedges will be recognized in the statement of earnings within the next 12 months.

The Company also values certain inventories using the lower of cost, determined by either the last-in, first out (LIFO) or first-in, first out (FIFO) method, or market.

 

 

2002

 

2001

 

 

(In thousands)

 

LIFO inventories

 

 

 

 

FIFO value

$ 352,365

 

$ 367,265

 

LIFO valuation reserve

(1,678)

 

-

 

LIFO carrying value

350,687

 

367,265

 

FIFO inventories

1,486,362

 

837,520

 

Market inventories

1,418,363

 

1,427,100

 

 

$3,255,412

 

$2,631,885

 

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

Note 3-Investments In and Advances to Affiliates

 

 

The Company has ownership interests in various, non-majority owned affiliates accounted for under the equity method. The Company had 83 and 99 unconsolidated affiliates as of June 30, 2002 and 2001, respectively, located in North and South America, Africa, Europe and Asia. During fiscal 2002, the Company acquired controlling interests in 12 previously unconsolidated affiliates, disposed of its investments in 9 affiliates and diluted its ownership in 1 affiliate to less than 20%. Additionally, the Company made initial investments in 6 unconsolidated affiliates during fiscal 2002. The following table summarizes the balance sheets as of June 30, 2002 and 2001, and the statements of earnings for each of the three years ended June 30, 2002 of the Company's unconsolidated affiliates.

2002

2001

2000

(In thousands)

Current assets

$2,790,239

$ 3,942,532

Non-current assets

7,557,131

8,055,513

Current liabilities

1,624,651

2,410,587

Non-current liabilities

1,439,162

1,936,852

Minority interests

280,283

280,789

Net assets

$7,003,274

$ 7,369,817

Net sales

$9,853,370

$16,447,274

$15,009,536

Gross profit

1,276,901

1,550,299

1,211,868

Net income

21,627

137,299

725,759

The Company's investment in unconsolidated affiliates exceeds the underlying equity in net assets by $108 million, which amount has been amortized on a straight-line basis over 10 to 40 years through June 30, 2002. As described in "Summary of Significant Accounting Policies - New Accounting Standards," the Company will cease amortization of these amounts upon adoption of SFAS 142 in fiscal 2003.

Two foreign affiliates for which the Company has a carrying value of $321 million have a market value of $164 million based on quoted market prices and exchange rates at June 30, 2002.

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

Note 4-Debt and Financing Arrangements

2002

 

2001

(In thousands)

7.0% Debentures $400 million

face amount, due in 2031

$397,285

$397,191

7.5% Debentures $350 million

face amount, due in 2027

347,980

347,952

8.875% Debentures $300 million

face amount, due in 2011

298,722

298,629

6.625% Debentures $300 million

face amount, due in 2029

298,614

298,596

8.125% Debentures $300 million

face amount, due in 2012

298,489

298,394

8.375% Debentures $300 million

face amount, due in 2017

294,984

294,820

6.25% Notes $250 million

face amount, due in 2003

249,793

249,693

7.125% Debentures $250 million

face amount, due in 2013

249,539

249,511

6.95% Debentures $250 million

face amount, due in 2097

246,183

246,154

6.75% Debentures $200 million

face amount, due in 2027

195,890

195,782

5.87% Debentures $196 million

face amount, due in 2010

117,824

113,150

Zero Coupon Debt $400 million

face amount, paid in 2002

-

385,079

Other

421,781

358,260

Total long-term debt

3,417,084

3,733,211

Current maturities

(305,790)

(382,144)

$3,111,294

$3,351,067

At June 30, 2002, the fair value of the Company's long-term debt exceeded the carrying value by $419 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.

The aggregate maturities of long-term debt for the five years after June 30, 2002 are $306 million, $26 million, $132 million, $131 million, and $29 million, respectively.

At June 30, 2002, the Company had lines of credit totaling $2.5 billion, of which $1.5 billion was unused. The weighted average interest rates on short-term borrowings outstanding at June 30, 2002 and 2001 were 1.96% and 4.31%, respectively.

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

Note 5-Shareholders' Equity

 

The Company has authorized one billion shares of common stock and 500 thousand shares of preferred stock, each without par value. No preferred stock has been issued. At June 30, 2002 and 2001, the Company had approximately 21.9 million and 9.6 million common shares, respectively, in treasury. Treasury stock is recorded at cost, $269 million at June 30, 2002 and $92 million at June 30, 2001, 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, 2002, there were 6 million shares available for future grant. Stock option activity during the years indicated is as follows:

Weighted Average

Number of

Exercise Price

Shares

Per Share

(In thousands)

Shares under option at June 30, 1999

5,571

$13.12

Granted

6,084

10.21

Exercised

(5)

11.84

Cancelled

(685)

12.21

Shares under option at June 30, 2000

10,965

11.56

Granted

41

10.94

Exercised

(34)

9.27

Cancelled

(392)

12.23

Shares under option at June 30, 2001

10,580

11.54

Granted

2,632

12.54

Exercised

(724)

12.01

Cancelled

(1,907)

12.27

Shares under option at June 30, 2002

10,581

$11.62

Shares exercisable at June 30, 2002

3,705

$11.55

Shares exercisable at June 30, 2001

3,311

$12.35

Shares exercisable at June 30, 2000

1,885

$13.07

At June 30, 2002, the range of exercise prices and weighted average remaining contractual life of outstanding options was $8.33 to $18.59 and four years, respectively.

The Company accounts for its stock option plans in accordance with Accounting Principles Board Opinion Number 25 (APB 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 2002, 2001 and 2000 net earnings and earnings per share would have decreased approximately one percent.

The weighted average fair value of options granted during 2002, 2001 and 2000 are $4.31, $3.79 and $3.20, 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. Expected dividend yield was assumed to be 2% in 2002 and 2000 and 1% in 2001. An expected risk-free interest rate of 5% was assumed in 2002, 7% in 2001 and 8% in 2000. Expected volatility was assumed to be 40% in 2002 and 2001 and 30% in 2000. Expected option life was assumed to be five years in 2002, four years in 2001 and six years in 2000.

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

Note 6-Accumulated Other Comprehensive Loss

 

The following table sets forth information with respect to accumulated other comprehensive income (loss):

Foreign

Deferred

Minimum

Unrealized

Accumulated

Currency

Gain (Loss)

Pension

Gain (Loss)

Other

Translation

on Hedging

Liability

on

Comprehensive

Adjustment

Activities

Adjustment

Investments

Income (Loss)

(In thousands)

Balance at June 30, 1999

$ (299,827)

$ 39,826

$ (260,001)

Unrealized gains (losses)

(97,030)

(120,577)

(217,607)

(Gaines) losses reclassified to

net earnings

(5,288)

(5,288)

Tax effect

 

 

 

35,219

35,219

Net of tax amount

(97,030)

(90,646)

(187,676)

Balance at June 30, 2000

(396,857)

(50,820)

(447,677)

Adoption of SFAS 133 - net of tax

$ (32,076)

(32,076)

Unrealized gains (losses)

(101,991)

(35,648)

$ (22,424)

147,520

(12,543)

(Gaines) losses reclassified to

net earnings

51,672

53,385

105,057

Tax effect

 

(6,076)

8,504

(79,604)

(77,176)

Net of tax amount

(101,991)

(22,128)

(13,920)

121,301

(16,738)

Balance at June 30, 2001

(498,848)

(22,128)

(13,920)

70,481

(464,415)

Unrealized gains (losses)

125,636

66,391

(17,392)

65,978

240,613

(Gains) losses reclassified to

net earnings

35,648

(35,937)

(289)

Tax effect

 

(38,699)

6,596

7,294

(24,809)

Net of tax amount

125,636

63,340

(10,796)

37,335

215,515

Balance at June 30, 2002

$ (373,212)

$ 41,212

$ (24,716)

$ 107,816

$ (248,900)

 

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

Note 7-Other Expense - Net

 

2002

 

2001

 

2000

(In thousands)

Interest expense

$ 355,956

$ 398,131

$ 377,404

Investment income

(114,032)

(149,401)

(136,317)

Net (gain) loss on marketable

securities transactions

(38,296)

56,311

(10,103)

Equity in (earnings) losses

of unconsolidated affiliates

(61,532)

(104,909)

(88,206)

Other - net

(4,499)

(21,262)

(5,798)

$ 137,597

$ 178,870

$ 136,980

Interest expense is net of interest capitalized of $6 million, $16 million and $23 million in 2002, 2001 and 2000, respectively.

The Company made interest payments of $308 million, $348 million and $366 million in 2002, 2001, and 2000, respectively.

Realized gains on sales of available-for-sale marketable securities totaled $61 million, $3 million and $17 million in 2002, 2001 and 2000, respectively. Realized losses totaled $23 million, $59 million and $7 million in 2002, 2001 and 2000, respectively.

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

Note 8-Income Taxes

 

For financial reporting purposes, earnings before income taxes include the

following components:

2002

 

2001

 

2000

(In thousands)

United States

$ 440,517

$ 242,772

$ 211,159

Foreign

278,420

279,127

142,078

$ 718,937

$ 521,899

$ 353,237

Significant components of income taxes are as follows:

2002

 

2001

 

2000

(In thousands)

Current

Federal

$ 169,802

$ 48,578

$ 36,624

State

12,214

7,890

22,099

Foreign

102,570

64,009

30,480

Deferred

Federal

(71,547)

15,122

(33,025)

State

(2,522)

4,599

(7,693)

Foreign

(2,673)

(1,583)

3,849

$ 207,844

$ 138,615

$ 52,334

Significant components of the Company's deferred tax liabilities

and assets are as follows:

2002

 

2001

(In thousands

Deferred tax liabilities

Depreciation

$ 602,834

$ 601,899

Bond discount amortization

29,728

40,045

Unrealized gain on marketable securities

35,933

45,052

Equity in earnings of affiliates

92,405

95,051

Other

52,074

 

31,000

812,974

813,047

Deferred tax assets

Pension and Postretirement benefits

80,213

70,246

Reserves and other accruals

96,808

86,131

Other

117,624

 

130,489

294,645

 

286,866

Net deferred tax liabilities

518,329

526,181

Current net deferred tax assets included

in prepaid expenses

113,594

 

118,114

Non-current net deferred tax liabilities

$ 631,923

 

$ 644,295

Reconciliation of the statutory federal income tax rate to the Company's effective tax rate

on earnings is as follows:

2002

 

2001

 

2000

 

Statutory rate

35.0%

35.0%

35.0%

Prior years tax redetermination

(3.6)

-

(17.0)

Foreign sales corporation

(3.6)

(4.9)

(6.3)

State income taxes, net of

federal tax benefit

0.8

1.6

2.7

Foreign gain permanently reinvested

-

(6.4)

-

Foreign earnings taxed at rates

other than the U.S. statutory rate

(0.3)

(2.0)

(0.3)

Other

0.6

 

3.3

 

0.7

 

Effective rate

28.9%

26.6%

14.8%

 

The Company made income tax payments of $162 million, $104 million and $89 million in 2002, 2001 and 2000, respectively.

During the fourth quarter of 2002, the Company recognized a reduction in income tax of $26 million, or $.04 per share, as taxes were relieved upon resolution of various outstanding state and federal tax issues.

During the fourth quarter of 2000, the Company recognized a reduction in income tax related to a redetermination of foreign sales corporation benefits for prior years and the resolution of various other tax issues. This resulted in a $60 million credit, or $.09 per share, to the 2000 provision.

Undistributed earnings of the Company's foreign subsidiaries and affiliated corporate joint venture companies accounted for on the equity method amounting to approximately $758 million at June 30, 2002, 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.

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

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 2076. Rent expense for 2002, 2001 and 2000 was $88 million, $81 million and $89 million, respectively. Future minimum rental payments for non-cancelable operating leases with initial or remaining terms in excess of one year are as follows:

Fiscal years

(In thousands)

2003

$ 48,734

2004

38,740

2005

32,525

2006

28,996

2007

21,905

Thereafter

60,672

Total minimum lease payments

$ 231,572

 

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

Note 10-Employee Benefit Plans

 

The Company provides substantially all employees with pension benefits. The Company also provides substantially all domestic employees with postretirement health care and life insurance benefits. It is the Company's policy to fund pension costs as required by applicable laws and regulations. In addition, the Company has savings and investment plans available to employees. The Company also maintains stock ownership plans for qualifying employees. The Company contributes shares of its stock to the plans to match qualifying employee contributions. Employees have the choice of retaining Company stock in their accounts or diversifying the shares into other investment options. Expense is measured and recorded based upon the fair market value of the stock contributed to the plans each month. The expense recorded in each period presented related to stock ownership plans is disclosed as "retirement plan expense for defined contribution plans." The number of shares designated for use in the plans is not significant compared to the shares outstanding for the periods presented. Assets of the Company's pension and defined contribution plans consist primarily of listed common stocks and mutual funds. The Company's plans held 27.8 million shares of Company common stock at June 30, 2002, with a market value of $356 million. Cash dividends received on Company stock by the pension and defined contribution plans during the year ended June 30, 2002, were $5 million. Total retirement plan expense includes the following components:

Pension Benefits

2002

2001

2000

(In thousands)

Defined benefit plans:

Service cost (benefits earned during the period)

$ 32,727

$ 29,120

$ 31,084

Interest cost

56,404

50,163

47,818

Expected return on plan assets

(55,907)

(54,625)

(50,910)

Actuarial loss (gain)

1,767

407

891

Net amortization

1,725

1,160

1,071

Net periodic pension expense

36,716

26,225

29,954

Defined contribution plans

20,784

19,114

18,455

Total retirement plan expense

$ 57,500

$ 45,339

$ 48,409

Postretirement Benefits

2002

2001

2000

(In thousands)

Defined benefit plans:

Service cost (benefits earned during the period)

$ 5,888

$ 5,892

$ 5,546

Interest cost

7,863

6,922

5,693

Expected return on plan assets

-

-

-

Actuarial loss (gain)

-

(12)

(265)

Net amortization

436

165

165

Net periodic pension expense

14,187

12,967

11,139

Defined contribution plans

-

-

-

Total retirement plan expense

$ 14,187

$ 12,967

$ 11,139

 

 

 

The following tables set forth changes in the benefit obligation and the fair value of plan assets:

Pension Benefits

Postretirement Benefits

2002

2001

2002

2001

(In thousands)

(In Thousands)

Benefit obligation, beginning

$ 783,869

$ 712,016

$ 108,459

$ 92,305

Service cost

32,727

29,120

5,888

5,892

Interest cost

56,404

50,163

7,863

6,922

Actuarial loss (gain)

(7,406)

39,213

(2,483)

4,036

Benefits paid

(35,900)

(34,644)

(4,358)

(5,573)

Plan amendments

2,063

3,689

-

4,882

Acquisitions

58,397

-

1,137

-

Foreign currency effects

22,349

(15,688)

(1)

(5)

Benefit obligation, ending

$ 912,503

$ 783,869

$ 116,505

$ 108,459

Fair value of plan assets, beginning

$ 618,532

 

$ 656,744

$ -

$ -

Actual return on plan assets

12,595

 

(8,750)

-

-

Employer contributions

46,418

26,992

4,358

5,573

Benefits paid

(35,900)

(34,644)

(4,358)

(5,573)

Acquisitions

31,418

-

-

-

Foreign currency effects

25,943

(21,810)

-

-

Fair value of plan assets, ending

$ 699,006

$ 618,532

$ -

$ -

Funded status

$ (213,497)

$ (165,337)

$ (116,505)

$ (108,459)

Unamortized transition amount

(9,023)

(9,915)

-

-

Unrecognized net loss (gain)

157,208

122,812

(7,903)

(5,419)

Unrecognized prior service costs

43,861

44,952

10,031

9,330

Adjustment for fourth quarter contributions

762

3,440

-

-

Pension liability recognized in the balance sheet

$ (20,689)

$ (4,048)

$ (114,377)

$ (104,548)

Prepaid benefit cost

$ 64,342

$ 54,445

$ -

$ -

Accrued benefit liability

(164,515)

(112,983)

(114,377)

(104,548)

Intangible asset

39,668

32,066

-

-

Minimum pension liability

39,816

22,424

-

-

Net amount recognized, June 30

$ (20,689)

$ (4,048)

$ (114,377)

$ (104,548)

The following table sets forth the principal assumptions used in developing the benefit obligation and the net periodic pension expense:

Pension Benefits

Postretirement Benefits

2002

2001

2002

2001

Discount rate

6.7%

7.0%

7.3%

7.3%

Expected return on plan assets

8.3%

8.3%

N/A

N/A

Rate of compensation increase

4.1%

4.3%

N/A

N/A

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the U.S. retirement plans with accumulated benefit obligations in excess of plan assets were $657 million, $591 million, and $455 million, respectively, as of June 30, 2002, and $608 million, $514 million, and $402 million, respectively, as of June 30, 2001.

 

For postretirement benefit measurement purposes, a 10.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2003. The rate was assumed to decrease gradually to 6.0% for 2011 and remain at that level thereafter.

Assumed health care cost trend rates have a significant impact on the amounts reported for the health care plans. A 1% change in assumed health care cost trend rates would have the following effect:

1% Increase

1% Decrease

(In thousands)

Effect on combined service and interest cost components

$ 1,206

$ (1,100)

Effect on accumulated postretirement benefit obligations

$ 10,571

$ (9,691)

 

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

Note 11-Segment and Geographic Information

The Company is principally engaged in procuring, transporting, storing, processing and merchandising of agricultural commodities and products. The Company's operations are classified into four reportable business segments: Oilseeds Processing, Corn Processing, Wheat Processing and Agricultural Services. Each of these segments is organized based upon the nature of products and services offered. The Company's remaining operations are included in the Other segment. Prior years' information has been reclassified to conform to the current year's presentation.

The Oilseeds Processing segment includes activities related to processing oilseeds such as soybeans, cottonseed, sunflower seeds, canola, peanuts, flaxseed and corn germ into vegetable oils and meals principally for the food and feed industries. Crude vegetable oil is sold "as is" or is further processed by refining and hydrogenating into margarine, shortening, salad oils and other food products. Partially refined oil is sold for use in chemicals, paints and other industrial products. Oilseed meals are primary ingredients used in the manufacture of commercial livestock and poultry feeds.

The Corn Processing segment includes activities related to the production of products for use in the food and beverage industry. These products include syrup, starch, glucose, dextrose and high fructose sweeteners. Corn gluten feed and distillers grains are produced for use as feed ingredients. Ethyl alcohol is produced to beverage grade or for industrial use as ethanol.

The Wheat Processing segment includes activities related to the production of wheat flour for use primarily by bakeries and pasta manufacturers.

The Agricultural Services segment utilizes the Company's vast grain elevator and transportation network to buy, store, clean and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats and barley, and resells these commodities primarily as food or feed ingredients. Also included in Agricultural Services are the activities of A.C. Toepfer International and affiliates, one of the world's largest trading companies specializing in agricultural commodities and processed products.

Intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on net sales less identifiable operating expenses, including an interest charge related to working capital usage. Also included in operating profit are the related equity in earnings (losses) of affiliates based on the equity method of accounting. General corporate expenses, investment income, unallocated interest expense, marketable securities transactions and FIFO to LIFO inventory adjustments have been excluded from segment operations and classified as Corporate. All assets, other than cash, marketable securities and those assets related to the corporate office, have been identified with the segments to which they relate.

 

Segment Information

 

 

2002

 

2001

 

2000

 

 

(In thousands)

Sales to external customers

Oilseeds Processing

$ 8,997,197

$ 8,346,650

$ 8,310,970

Corn Processing

1,939,100

2,117,098

1,798,215

Wheat Processing

1,360,895

1,308,692

1,347,340

Agricultural Services

8,280,078

5,644,237

4,640,187

Other

2,876,291

2,634,744

2,515,711

Total

 

$ 23,453,561

 

$ 20,051,421

 

$ 18,612,423

Intersegment sales

Oilseeds Processing

$ 218,894

$ 136,276

$ 128,137

Corn Processing

233,551

172,369

186,239

Wheat Processing

25,895

26,160

33,201

Agricultural Services

 

1,694,831

1,525,030

1,503,719

Other

99,704

105,731

114,749

Total

$ 2,272,875

$ 1,965,566

$ 1,966,045

Net sales

Oilseeds Processing

$ 9,216,091

$ 8,482,926

$ 8,439,107

Corn Processing

2,172,651

2,289,467

1,984,454

Wheat Processing

1,386,790

1,334,852

1,380,541

Agricultural Services

9,974,909

7,169,267

6,143,906

Other

2,975,995

2,740,475

2,630,460

Intersegment elimination

(2,272,875)

(1,965,566)

(1,966,045)

Total

 

$ 23,453,561

 

$ 20,051,421

 

$ 18,612,423

Interest expense

Oilseeds Processing

$ 44,360

$ 75,588

$ 71,019

Corn Processing

10,266

21,039

20,942

Wheat Processing

8,831

12,984

12,732

Agricultural Services

35,944

44,214

38,880

Other

62,460

78,753

82,471

Total

 

$ 161,861

 

$ 232,578

 

$ 226,044

Depreciation and amortization

Oilseeds Processing

$ 154,526

$ 155,736

$ 161,182

Corn Processing

120,478

124,071

140,419

Wheat Processing

41,356

45,452

46,591

Agricultural Services

71,788

71,445

67,636

Other

163,320

153,263

167,708

Total

 

$ 551,468

 

$ 549,967

 

$ 583,536

Equity in earnings (losses) of affiliates

Oilseeds Processing

$ 17,974

$ 13,883

$ 8,325

Corn Processing

17,204

8,854

10,974

Wheat Processing

2,219

305

479

Agricultural Services

29,036

11,797

3,513

Other

(4,901)

70,070

64,915

Total

 

$ 61,532

 

$ 104,909

 

$ 88,206

 

 

Operating profit

Oilseeds Processing

$ 387,960

$ 260,116

$ 175,454

Corn Processing

214,875

242,211

179,203

Wheat Processing

 

78,800

 

71,519

 

95,575

Agricultural Services

169,593

119,548

129,149

Other

188,592

210,005

177,343

Total operating profit

1,039,820

903,399

756,724

Corporate

(320,883)

(381,500)

(403,487)

Income before income taxes

 

$ 718,937

 

$ 521,899

 

$ 353,237

Investments in and advances to affiliates

Oilseeds Processing

$ 231,997

$ 234,639

$ 198,443

Corn Processing

165,805

151,933

145,505

Wheat Processing

16,422

16,027

13,319

Agricultural Services

39,660

263,201

269,634

Other

1,308,054

1,386,422

1,249,732

Total

 

$ 1,761,938

 

$ 2,052,222

 

$ 1,876,633

Identifiable assets

Oilseeds Processing

$ 3,532,508

$ 3,206,931

$ 3,833,321

Corn Processing

1,390,985

1,335,160

1,477,725

Wheat Processing

764,130

752,649

793,793

Agricultural Services

2,456,276

1,946,320

1,785,242

Other

5,078,301

5,258,620

4,896,758

Corporate

2,194,073

1,840,251

1,685,097

Total

 

$ 15,416,273

 

$ 14,339,931

 

$ 14,471,936

Gross additions to property, plant & equipment

Oilseeds Processing

$ 75,077

$ 109,402

$ 233,141

Corn Processing

152,690

75,116

95,763

Wheat Processing

11,194

29,145

59,122

Agricultural Services

111,043

61,824

52,928

Other

235,936

26,594

25,406

Total

 

$ 585,940

$ 302,081

$ 466,360

Geographic Information: The following geographic area data include net sales and other operating income attributed to the countries based on the location of the subsidiary making the sale and long-lived assets based on physical location.

2002

2001

2000

(In millions)

Net sales and other operating income:

United States

$ 14,695

$ 13,114

$ 12,585

Germany

2,481

1,381

1,523

Other foreign

6,278

5,556

4,504

$ 23,454

$ 20,051

$ 18,612

Long-lived assets

United States

$ 3,838

$ 3,987

$ 4,275

Foreign

1,188

1,052

1,130

$ 5,026

$ 5,039

$ 5,405

 

Notes to Consolidated Financial Statements

Archer Daniels Midland Company

Note 12-Antitrust Investigation and Related Litigation

 

The Company, along with other domestic and foreign companies, was named as a defendant in a number of putative class action antitrust suits and other proceedings involving the sale of lysine, citric acid, sodium gluconate, monosodium glutamate and high fructose corn syrup. These actions and proceedings generally involve claims for unspecified compensatory damages, fines, costs, expenses and unspecified relief. The Company intends to vigorously defend these actions and proceedings unless they can be settled on terms deemed acceptable by the parties. These matters have resulted and could result in the Company being subject to monetary damages, other sanctions and expenses.

The Company has made provisions to cover the fines, litigation settlements and costs related to certain of the aforementioned suits and proceedings. The ultimate outcome and materiality of other putative class actions and proceedings, including those related to high fructose corn syrup, cannot presently be determined. Accordingly, no provision for any liability that may result therefrom has been made in the consolidated financial statements.

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, 2002 and 2001, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three years in the period ended June 30, 2002. 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 auditing standards generally accepted in the United States. 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, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2002, in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young, LLP

St. Louis, Missouri

July 31, 2002

 

Quarterly Financial Data (Unaudited)

Archer Daniels Midland Company

 

Quarter

First

Second

Third

Fourth

Total

(In thousands, except per share amounts)

Fiscal 2002

Net Sales

$5,504,132

$5,554,224

$5,326,399

$7,068,806

$23,453,561

Gross Profit

405,497

507,288

390,243

380,428

1,683,456

Net Earnings

131,618

150,025

117,184

112,266

511,093

Per Common Share

.20

.23

.18

.17

.78

Fiscal 2001

Net Sales

$4,634,784

$4,940,999

$5,130,346

$5,345,292

$20,051,421

Gross Profit

283,908

416,308

369,652

361,930

1,431,798

Net Earnings

109,429

124,607

93,149

56,099

383,284

Per Common Share

0.17

0.19

0.14

0.08

0.58

 

Net sales for the three months and year ended June 30, 2002 include $1.3 billion of net sales revenue attributable to the operations of A.C. Toepfer International ("ACTI"). Prior to the fourth quarter of fiscal 2002, the Company accounted for ACTI on the equity method of accounting.

Net earnings for the three months and year ended June 30, 2002 include a charge to cost of products sold of $83 million ($51 million after tax, equal to $.08 per share) principally related to the abandonment and write-down of certain long-lived assets and a $26 million tax credit, equal to $.04 per share, related to the resolution of various outstanding state and federal tax issues. Net earnings for the quarter also include a gain of $93 million ($58 million after tax, equal to $.09 per share) related to a partial settlement of the Company's claims related to vitamin antitrust litigation. For the year ended June 30, 2002, gains related to this vitamin antitrust litigation totaled $147 million ($91 million after tax, equal to $.14 per share).

Common Stock Market Prices and Dividends

Archer Daniels Midland Company

 

The Company's common stock is listed and traded on the New York Stock Exchange, Chicago Stock Exchange, Frankfurt Stock Exchange, and Swiss Stock 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 2002--Quarter Ended

June 30

$

14.

67

$

12.

47

$

0.05

March 31

14.

85

12.

95

0.05

December 31

15.

80

11.

80

0.05

September 30

14.

10

11.

60

0.048

Fiscal 2001--Quarter Ended

June 30

$

13.

52

$

10.

24

$

0.048

March 31

15.

23

11.

95

0.048

December 31

14.

47

8.

22

0.048

September 30

9.

70

7.

80

0.045

The number of registered shareholders of the Company's common stock at June 30, 2002 was 26,715. 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.

 

 

TEN YEAR SUMMARY

Archer Daniels Midland Company

Operating, Financial and Other Data (Dollars in thousands, except per share data)

2002

2001

2000

1999

Operating

Net sales and other operating income

$23,453,561

$20,051,421

$18,612,423

$18,509,903

Depreciation and amortization

566,576

572,390

604,229

584,965

Net earnings

511,093

383,284

300,903

265,964

Per common share

0.78

0.58

0.45

0.39

Cash dividends

130,000

125,053

120,001

117,089

Per common share

0.20

0.19

0.18

0.17

Financial

Working capital

$2,643,934

$2,283,320

$1,829,422

$1,949,323

Per common share

4.07

3.45

2.76

2.89

Current ratio

1.6

1.6

1.4

1.5

Inventories

3,255,412

2,631,885

2,822,712

2,732,694

Net property, plant and equipment

4,890,241

4,920,425

5,277,081

5,567,161

Gross additions to property, plant and equipment

596,559

318,168

475,396

825,676

Total assets

15,416,273

14,339,931

14,471,936

14,029,881

Long-term debt

3,111,294

3,351,067

3,277,218

3,191,883

Shareholders' equity

6,754,821

6,331,683

6,110,243

6,240,640

Per common share

10.39

9.56

9.20

9.24

Other

Weighted average shares outstanding (000's)

656,955

664,507

669,279

685,328

Number of shareholders

26,715

27,918

29,911

31,764

Number of employees

24,746

22,834

22,753

23,603

Share and per share data have been adjusted for a three-for-two stock split in December 1994 and annual 5% stock dividends from September 1992 through September 2001.

Net earnings for 1999 include an extraordinary charge of $15 million, or $.02 per share, from the repurchase of debt.

Net earnings for 1993 include a net credit of $68 million, or $.09 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.

 

 

 

 

1998

1997

1996

1995

1994

1993

$19,832,594

$18,104,827

$17,981,264

$15,576,471

$13,863,065

$11,883,198

526,813

446,412

393,605

384,872

354,463

328,549

403,609

377,309

695,912

795,915

484,069

567,527

0.59

0.55

0.99

1.10

0.66

0.75

111,551

106,990

90,860

46,825

32,586

32,266

0.16

0.15

0.13

0.06

0.04

0.04

$1,734,411

$2,035,580

$2,751,132

$2,540,260

$2,783,817

$2,961,503

2.50

3.00

3.95

3.56

3.84

3.90

1.5

1.9

2.7

3.2

3.5

4.1

2,562,650

2,094,092

1,790,636

1,473,896

1,422,147

1,131,787

5,322,704

4,708,595

4,114,301

3,762,281

3,538,575

3,214,834

1,228,553

1,127,360

801,426

657,915

682,485

572,022

13,833,534

11,354,367

10,449,869

9,756,887

8,746,853

8,404,111

2,847,130

2,344,949

2,002,979

2,070,095

2,021,417

2,039,143

6,504,912

6,050,129

6,144,812

5,854,165

5,045,421

4,883,251

9.38

8.92

8.82

8.20

6.96

6.44

686,047

690,352

702,012

724,610

732,108

759,653

32,539

33,834

35,431

34,385

33,940

33,654

23,132

17,160

14,811

14,833

16,013

14,168

EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT

ARCHER DANIELS MIDLAND COMPANY

June 30, 2002

Following is a list of the Registrant's subsidiaries showing the percentage of voting securities owned:

 

Organized Under

Laws of

Ownership

     

ADM Beteiligungs GmbH (A)

Germany

100

ADM Europe BV (B)

Netherlands

100

ADM European Management Holding GmbH & Co. KG (C)

Germany

100

ADM Germany Holdings BV (C)

Netherlands

100

ADM Ireland Holdings Ltd. (D)

Ireland

100

ADM Ringaskiddy Unlimited Liability Co. (C)

Ireland

100

ADM Milling Co. (E)

Minnesota

100

ADM Worldwide Holdings LP (F)

Cayman Islands

100

Oelmuhle Hamburg AG (G)

Germany

95

(A) ADM Beteiligungs GmbH has fourteen subsidiary companies whose names have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.

(B) ADM Europe BV has fifty-eight subsidiary companies whose names have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.

(C) ADM European Management Holding GmbH & Co. KG, ADM Germany Holdings BV and ADM Ringaskiddy Unlimited Liabilty Co. each have fifteen subsidiary companies whose names have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.

(D) ADM Ireland Holdings Ltd. has fifteen subsidiary companies whose names have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.

(E) ADM Milling Co. has sixteen subsidiary companies whose names have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.

(F) ADM Worldwide Holdings LP has twenty-five subsidiary companies whose names have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.

(G) Oelmuhle Hamburg AG has twelve subsidiary companies whose names have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.

The names of sixty-four domestic subsidiaries and forty-four international subsidiaries have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.

EXHIBIT 23-- CONSENT OF INDEPENDENT AUDITORS

 

We consent to the incorporation by reference in this Annual Report (Form 10-K) of Archer-Daniels-Midland Company of our report dated July 31, 2002 included in the 2002 Annual Report to Shareholders of Archer-Daniels-Midland Company.

Our audits also included the financial statement schedule of Archer-Daniels-Midland Company listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also consent to the incorporation by reference in the following Registration Statements of our report dated July 31, 2002, with respect to the consolidated financial statements of Archer-Daniels-Midland Company incorporated by reference and our report in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) for the year ended June 30, 2002.

Registration Statement No. 33-49409 on Form S-8 dated March 15, 1993 relating to the Archer-Daniels-Midland 1991 Incentive Stock Option Plan and Archer-Daniels-Midland Company Savings and Investment Plan.

Registration Statement No. 33-55301 on Form S-3 dated August 31, 1994 as amended by Amendment No. 1 dated October 7, 1994 (definitive Prospectus dated October 11, 1994) relating to secondary offering of the Common Stock of Archer-Daniels-Midland Company.

Registration Statement No. 33-56223 on Form S-3 dated October 28, 1994 as amended by Amendment No. 1 dated December 27, 1994 (definitive Prospectus dated December 30, 1994) relating to secondary offering of the Common Stock of Archer-Daniels-Midland Company.

Registration Statement No. 333-13233 on Form S-3 dated October 1, 1996 as amended by Amendment No. 1 dated November 8, 1996, Amendment No. 2 dated March 20, 1997 and Amendment No. 3 dated March 31, 1997 (definitive Prospectus dated April 1, 1997) relating to secondary offering of the Common Stock of Archer-Daniels-Midland Company.

Registration Statement No. 333-31623 on Form S-3 dated July 18, 1997 as amended by Amendment No. 1 dated July 29, 1997, (definitive Prospectus dated August 5, 1997) relating to secondary offering of the Common Stock of Archer-Daniels-Midland Company.

Registration Statement No. 333-51381 on Form S-8 dated April 30, 1998 relating to the Archer-Daniels-Midland Company 1996 Stock Option Plan.

Registration Statement No. 333-68339 on Form S-3 dated December 3, 1998 as amended by Amendment No. 1 dated December 10, 1998 relating to secondary offering of the Common Stock of Archer-Daniels-Midland Company.

Registration Statement No. 333-75073 on Form S-8 dated March 26, 1999 relating to the ADM Employee Stock Ownership Plan for Salaried Employees and the ADM Employee Stock Ownership Plan for Hourly Employees.

Registration Statement No. 333-37690 on Form S-8 dated May 24, 2000 relating to the Archer-Daniels-Midland Company Incentive Compensation Plan.

Registration Statement No. 333-37694 on Form S-8 dated May 24, 2000 relating to the ADM Employee Stock Ownership Plan for Salaried Employees and the ADM Employee Stock Ownership Plan for Hourly Employees.

Registration Statement No. 333-42612 on Form S-8 dated July 31, 2000 as amended by Post-Effective Amendment No. 1 dated August 8, 2000, relating to the ADM 401(k) Plan for Salaried Employees and the ADM 401(k) Plan for Hourly Employees.

Registration Statement No. 333-64524 on Form S-3 dated July 3, 2001 relating to secondary offering of the Common Stock of Archer-Daniels-Midland Company.

Registration Statement No. 333-67962 on Form S-8 dated August 20, 2001 relating to the ADM Deferred Compensation Plan for Selected Management Employees.

Registration Statement No. 333-72434 on Form S-3 dated October 29, 2001 relating to Debt Securities and Warrants to purchase Debt Securities of Archer-Daniels-Midland Company.

Registration Statement No. 333-86344 on Form S-8 dated April 16, 2002 relating to the ADM Voluntary Employee Payroll Deduction Stock Purchase Plan.

 

 

/s/ Ernst & Young LLP

 

St. Louis, Missouri

September 18, 2002

EXHIBIT 24-- POWERS OF ATTORNEY

ARCHER-DANIELS-MIDLAND COMPANY

Power of Attorney

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, S. R. MILLS and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10-K for the fiscal year ended June 30, 2002, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted.

IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 17th day of September, 2002.

/s/ R. S. JOSLIN

R. S. JOSLIN

 

ARCHER-DANIELS-MIDLAND COMPANY

Power of Attorney of Director

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, the Chief Executive Officer (Principal Executive Officer) and Chairman of the Board of Directors of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, S. R. MILLS and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as the Chief Executive Officer and Chairman of the Board of Directors of said Company to the Form 10-K for the fiscal year ended June 30, 2002, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted.

IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 17th day of September, 2002.

/s/ G. ALLEN ANDREAS

G. ALLEN ANDREAS

 

 

ARCHER-DANIELS-MIDLAND COMPANY

Power of Attorney of Director

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, S. R. MILLS and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10-K for the fiscal year ended June 30, 2002, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted.

IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 19th day of September, 2002.

/s/ S. A. MCMURTRIE

S. A. MCMURTRIE

 

ARCHER-DANIELS-MIDLAND COMPANY

Power of Attorney of Director

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, S. R. MILLS and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10-K for the fiscal year ended June 30, 2002, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted.

IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 18th day of September, 2002.

/s/ M. H. CARTER

M. H. CARTER

 

ARCHER-DANIELS-MIDLAND COMPANY

Power of Attorney of Director

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, S. R. MILLS and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10-K for the fiscal year ended June 30, 2002, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted.

IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 2002.

/s/ H. de BOON

H. de BOON

 

ARCHER-DANIELS-MIDLAND COMPANY

Power of Attorney of Director

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, S. R. MILLS and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10-K for the fiscal year ended June 30, 2002, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted.

IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 17th day of September, 2002.

/s/ M. BRIAN MULRONEY

M. BRIAN MULRONEY

 

ARCHER-DANIELS-MIDLAND COMPANY

Power of Attorney of Director

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, S. R. MILLS and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10-K for the fiscal year ended June 30, 2002, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted.

 

IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 17th day of September, 2002.

/s/ J. K. VANIER

J. K. VANIER

 

ARCHER-DANIELS-MIDLAND COMPANY

Power of Attorney of Director

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, S. R. MILLS and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10-K for the fiscal year ended June 30, 2002, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted.

IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 2002.

/s/ O. G. WEBB

O. G. WEBB

 

ARCHER-DANIELS-MIDLAND COMPANY

Power of Attorney of Director

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, S. R. MILLS and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10-K for the fiscal year ended June 30, 2002, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted.

IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 20th day of September, 2002.

/s/ ANDREW YOUNG

ANDREW YOUNG

 

ARCHER-DANIELS-MIDLAND COMPANY

Power of Attorney of Director

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation, does hereby make, constitute and appoint D. J. SCHMALZ, S. R. MILLS and D. J. SMITH, and each or any one of them, the undersigned's true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned's name, place and stead, to sign and affix the undersigned's name as a director of said Company to the Form 10-K for the fiscal year ended June 30, 2002, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C., and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers therein expressly granted.

IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand this 18th day of September, 2002.

/s/ DAVID J. MIMRAN

DAVID J. MIMRAN