Archer Daniels Midland 2004 Annual Report Download

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The Essential Link
2004 ANNUAL REPORT

Table of contents

  • Page 1
    2 0 0 4 A N N U A L R E P O R T The Essential Link

  • Page 2
    ..., Archer Daniels Midland Company provides the essential link between farmers and consumers. With a global network of 26,000 employees and more than 700 processing plants, origination facilities and sales offices in 60 countries, ADM is one of the world's largest processors of oilseeds, corn...

  • Page 3
    ... ...Per common share Net earnings ...Cash dividends ...Working capital ...Shareholders' equity ...Number of shareholders ...Number of employees ...$ 36,151,394...75 7.07 0.76 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 P a g e 1 ADM 2004 Annual Report

  • Page 4
    ... successfully addressed the issues we confronted and produced a solid improvement in operating results from our unparalleled network of global resources. For fiscal 2004, ADM reported earnings increased 9% to $495 million or $.76 per share from $451 million or $.70 per share in 2003. Net sales...

  • Page 5
    ... confidence in our future. Sincerely, Right; Paul B. Mulhollem President and Chief Operating Officer Left; G. Allen Andreas Chairman and Chief Executive G. Allen Andreas Chairman and Chief Executive Paul B. Mulhollem President and Chief Operating Officer P a g e 3 ADM 2004 Annual Report

  • Page 6
    ... transformed into aluminum to build the air transportation industry. Crude oil is refined to power trucks and pave the roads they travel. The pattern is no different for agricultural processing, where Archer Daniels Midland Company provides the essential link between the farmer and the consumer. ADM...

  • Page 7
    ADM adds extra value to each bushel of corn by transforming corn starch into such bioproducts as lysine and threonine, both of which are used in animal feed. P a g e 5 ADM 2004 Annual Report

  • Page 8
    ... in demand for specific crops and the geographic balance of those demands. In fiscal 2004, for example, relatively short supplies of soybeans led to substantial price increases for oilseeds. Later in 2002 2003 2004 Primary Products 19% High-protein meals and vegetable oils produced from soybeans...

  • Page 9
    ... facilities and products in Asia. â...¢ Growing participation in developing markets for zero/low-trans-fat oils. ADM processes oilseeds into a wide variety of vegetable oil products, enhancing flavor and health in cooking, salad dressings, sauces and food products. P a g e 7 ADM 2004 Annual Report

  • Page 10
    ... to customers, from high-volume soy and palm oils to branded oils like our Enovaâ„¢ and Nova-Lipidâ„¢ products. ADM adjusts product mix and processing steps in response to near-term changes in customer demand, while the Company ADM 2004 Annual Report seeks to make long-term commitments of capital...

  • Page 11
    As economies grow and wealth increases, people seek more protein in their diets, including meats produced from high-protein vegetable meal. ADM continues to invest in the protein meal market with expanded soybean origination capabilities in South America and processing capacity in Asia. P a g e 9

  • Page 12
    ... 2004 Primary Products Sweeteners, including high fructose corn syrup. Bioproducts, including ethanol used to increase octane in gasoline, and such specialty products as feed additives (lysine, threonine), and citric acid. Competitive Position World's largest corn processor with largest market...

  • Page 13
    ADM's processing of corn to produce sweeteners, such as high fructose corn syrup, creates a market for approximately 270 million bushels of corn per year in the United States. Offering the same qualities and taste as natural Key Developments â...¢ Sweetener market exhibits moderate growth and pricing ...

  • Page 14
    ...provides ADM 2004 Annual Report the pink color for farm-raised salmon. High prices of protein meal in fiscal 2004 helped increase both the demand and pricing of lysine and threonine as feed ingredients. Xanthan gum, maltodextrin, and lactic acid also address specific market segments. Citric acid is...

  • Page 15
    American farmers fuel the energy needs of drivers through the renewable and environmentally friendly fuel - ethanol. Ethanol demand continues to increase across the United States as ADM's processing facilities create the essential link between the farm and a cleaner environment. P a g e 1 3

  • Page 16
    ...Canada and United Kingdom produce wheat flour for commercial bakeries, food companies, food service firms and retailers. ADM responds to market demands, in some cases, by developing custom blends, including high-protein flours, for specific customers. 2002 2003 2004 Primary Products Cocoa, wheat...

  • Page 17
    .... Increasingly, ADM offers bakeries and other customers custom blends that include high-protein and low-carKey Developments â...¢ Cocoa revenue and profitability grow as industry capacity is rationalized and ADM expands revenue mix with finished and semi-finished chocolate products. â...¢ Wheat flour...

  • Page 18
    ... from a single crop. Although these high-value products are produced in relatively small volumes when compared with oilseeds, sweeteners and ethanol, each offers intriguing opportunities to move up the value chain as markets develop and production efficiencies are enhanced. ADM 2004 Annual Report...

  • Page 19
    Chocolate, the world's favorite flavor, is delivered consistently to millions of consumers through ADM's facilities. As the world's largest cocoa processor, ADM serves the needs of many large candy companies, bakeries and other food manufacturers. P a g e 1 7

  • Page 20
    ... the largest logistics firms in the world. While ADM's processing facilities add one type of value to farm products, our agricultural services network creates the essential physical link between producers and customers. ADM collects and stores crops at elevators and silos, moves these commodities to...

  • Page 21
    ... large food processors. â...¢ Repositioning of assets to increase efficiency and improve service levels. network of facilities, our unparalleled capacity to source and distribute agricultural products strengthens the link between local farmers and world markets. P a g e 1 9 ADM 2004 Annual Report

  • Page 22
    ...efficient use of capital is reflected in the use of external transportation fleets and facilities to fill surge demand requirements. ADM's owned and leased facilities and fleets accommodate most of the company's needs, but the company both buys and ADM 2004 Annual Report sells capacity as needed to...

  • Page 23
    Maximum service to farmers and customers requires a commitment to flexibility and continual repositioning of assets. P a g e 2 1

  • Page 24
    ... 30, 2004 ...Page 23 Summary of Significant Accounting Policies ......Report of Independent Registered Public Accounting Firm ...Page 50 Quarterly Financial Data (Unaudited) ...Page 51 Common Stock Market Prices and Dividends ...Page 51 Ten Year Summary ...Page 52 P a g e 2 2 Archer Daniels Midland

  • Page 25
    ... well as activities related to the production, by fermentation, of bioproducts such as alcohol, amino acids, and other specialty food and feed ingredients. The Agricultural Services segment utilizes the Company's extensive grain elevator and transportation network to buy, store, clean, and transport...

  • Page 26
    ... involving the sale of high-fructose corn syrup pursuant to which the Company will pay $400 million, which amount has been accrued in the consolidated financial statements. Net earnings for fiscal 2004 increased principally due to improved Corn Processing and Agricultural Services operating results...

  • Page 27
    ...to currency exchange rate fluctuations. Last year's cost of products sold includes a $13 million charge for abandonment and write-down of long-lived assets and a $28 million credit from partial settlement of the Company's claims related to vitamin antitrust litigation. Oilseeds Processing operating...

  • Page 28
    ... of protein meal and the price of corn. Operating profits for 2004 include a $15 million gain from an insurance-related lawsuit pertaining to the flood of 1993 and a $15 million charge for abandonment and write-down of long-lived assets. Agricultural Services operating profits increased $158 million...

  • Page 29
    ... principally due to recently-acquired Corn Processing and Agricultural Services operations and, to a lesser extent, increased sales volumes and higher average selling prices of commodity-based oilseeds finished products and South American exports of oilseeds. Net sales and other operating income are...

  • Page 30
    ...to fund higher levels of working capital due to increased commodity prices. Capital resources were strengthened as shown by the increase in the Company's net worth to $7.7 billion. The Company's ratio of long-term debt to total capital (the sum of the Company's longterm debt and shareholders' equity...

  • Page 31
    ... the Company's merchandisable agricultural commodity inventories, forward fixed-price purchase and sale contracts, and exchange-traded futures and options contracts are valued at estimated market values. These merchandisable agricultural commodities are freely traded, have quoted market prices, and...

  • Page 32
    ... of operations. 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...

  • Page 33
    ..., 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 and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward...

  • Page 34
    ... 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...

  • Page 35
    ... U.S. government securities, and money-market funds. The Company is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. Principles of Consolidation In January 2003, the Financial Accounting Standards Board (FASB) issued FASB...

  • Page 36
    ... product line. Stock Compensation The Company accounts for its stock-based compensation 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...

  • Page 37
    ...N T S 2004 Net sales and other operating income ...Cost of products sold ...Gross Profit ...Selling, general, and administrative expenses ...Other expense - net ...Earnings Before Income Taxes ...Income taxes ...Net Earnings ...Basic and diluted earnings per common share ...Average number of shares...

  • Page 38
    ...2004 (In thousands) 2003 Current Assets Cash and cash equivalents ...Segregated cash and investments ...Receivables ...Inventories ...Other assets ...Total Current Assets ...Investments and Other Assets Investments in and advances to affiliates ...Long-term marketable...Archer Daniels Midland Company

  • Page 39
    ...2004 (In thousands) 2003 Current Liabilities Short-term debt ...Accounts payable ...Accrued expenses ...Current maturities of long-term debt ...Total Current Liabilities ...Long-Term Liabilities Long-term debt ...Deferred income taxes ...Other ...Shareholders' Equity Common stock...2004 Annual Report

  • Page 40
    ...on marketable securities transactions ...Equity in (earnings) of affiliates, net of dividends ...Stock contributed to employee benefit plans ...Other - net ...Changes in operating assets and liabilities Segregated cash and investments ...Receivables ...Inventories ...Other assets ...Accounts payable...

  • Page 41
    .... Total comprehensive income ...Cash dividends paid$.27 per share ...Treasury stock purchases ...Other ...Balance June 30, 2004 ...See notes to consolidated financial statements. Reinvested Earnings (In ...,510 $2,183,751 (174,109) (4,113) 62,618 $7,698,216 $ 82,955 P a g e 3 9 2004 Annual Report

  • Page 42
    ...offices and terminating MCP's corn sweetener marketing joint venture. The Company has paid substantially all of the costs related to these activities. The operating results of MCP are consolidated in the Company's net earnings from September 6, 2002. Prior to September 6, 2002, the Company accounted...

  • Page 43
    ...411 $ 7,470,486 $17,181,800 2,037,875 (62,707) 2002 $9,853,370 1,276,901 21,627 Two foreign affiliates for which the Company has a carrying value of $369 million have a market value of $281 million based on quoted market prices and exchange rates at June 30, 2004. P a g e 4 1 2004 Annual Report

  • Page 44
    ... 2004 are principally related to the disposal of an Agricultural Services subsidiary, finalization of allocations of purchase prices for acquisitions, and foreign currency translation adjustments. The Company's other intangible assets are not material. P a g e 4 2 Archer Daniels Midland Company

  • Page 45
    ... shares, respectively, in treasury. Treasury stock of $259 million at June 30, 2004 and $330 million at June 30, 2003 is recorded at cost 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...

  • Page 46
    ...of tax assets related to excess foreign tax credits which expire in fiscal 2008. Undistributed earnings of the Company's foreign subsidiaries and affiliated corporate joint venture companies accounted for on the equity method amounting to approximately $1.1 billion at June 30, 2004 are considered to...

  • Page 47
    ... subsidiaries with pension benefits. The Company also provides substantially all domestic salaried employees with postretirement health care and life insurance benefits. During 2004, the FASB issued Staff Positions 106-1 and 106-2, Accounting and Disclosure Requirements Related to the Medicare...

  • Page 48
    ... of Company common stock at June 30, 2004, with a market value of $56 million. Cash dividends received on shares of Company common stock by these plans during the year ended June 30, 2004 were $1 million. 227,896 (41,100) - - $(133,935) $(125,914) P a g e 4 6 Archer Daniels Midland Company

  • Page 49
    ... Company's agricultural processing operations. Also included in Agricultural Services are the activities of A.C. Toepfer International, a global merchandiser of agricultural commodities and processed products. 2005 ...2006 ...2007 ...2008 ...2009 ...2010 - 2014 ... P a g e 4 7 2004 Annual Report

  • Page 50
    ... 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...

  • Page 51
    ... 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 highfructose corn syrup...

  • Page 52
    ... and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2004, in conformity with United States generally accepted accounting principles. St. Louis, Missouri August 4, 2004 P a g e 5 0 Archer Daniels Midland Company

  • Page 53
    ...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 as reported on the New York Stock...

  • Page 54
    ...,317 646,086 25,539 26,197 656,955 26,715 24,746 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 1996 through September 2001. P a g e 5 2 Archer Daniels Midland Company

  • Page 55
    ...,603 686,047 32,539 23,132 690,352 33,834 17,160 702,012 35,431 14,811 724,610 34,385 14,833 P a g e 5 3 2004 Annual Report

  • Page 56
    ... of an international food processing, grain trading and shipping conglomerate). He also serves on the Board of Ample Communications, Inc. Mr. Mimran joined ADM's Board in 1999 and serves on the Audit Committee. Mollie Hale Carter Chairman, Sunflower Bank and Vice President, Star A, Inc. (a farming...

  • Page 57
    ...Officer of Millennium Digital Media, LLC (a broadband services company) Mr. Westbrook, 49, is also a Director of Angelica Corporation and BJC Healthcare. He joined ADM's Board in 2003. Mr. Westbrook serves on the Audit and Nominating/Corporate Governance Committees. P a g e 5 5 2004 Annual Report

  • Page 58
    ... and Chief Executive Paul B. Mulhollem President and Chief Operating Officer David J. Smith Executive Vice President, Secretary and General Counsel Lewis W. Batchelder Senior Vice President (Agricultural Services) William H. Camp Senior Vice President (Oilseeds Processing, Cocoa and Milling) Brian...

  • Page 59
    ... Chicago Stock Exchange, Frankfurt Stock Exchange and the Swiss Stock Exchange. Ticker symbol: ADM. Transfer Agent and Registrar Hickory Point Bank & Trust, fsb P. O. Box 2548 225 North Water Street Decatur, IL 62523 888/740-5512 Independent Auditors Ernst & Young LLP, St. Louis, MO Notice of Annual...

  • Page 60