Archer-Daniels-Midland Co 10-Q/A for FY2024 Q2
Archer-Daniels-Midland Co (ADM)
10-Q/A
2024-11-18
For: 2024-06-30
View Original
Added on
April 04, 2026
About this 10-Q/A
Archer-Daniels-Midland Co filed this 10-Q/A on November 18, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $22.25B
- down 11.7% from $25.19B a year earlier
- Net income
- $486M
- down 47.6% from net income of $927M a year earlier
- Diluted EPS
- $0.98
- down 42.4% from $1.70 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
For the quarterly period ended June 30, 2024
OR
For the transition period from __________ to __________
Commission file number 1-44
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I. R. S. Employer Identification No.) | ||||||||||
| | |||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(312 ) 634-8100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
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 ☒ No ☐.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated Filer | ☐ | Emerging Growth Company | ||||||||||||||
| Non-accelerated Filer | ☐ | Smaller Reporting Company | |||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, no par value – 478,142,028 shares
(July 29, 2024)
SAFE HARBOR STATEMENT
This Quarterly Report on Form 10-Q/A contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. All statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q/A, are forward-looking statements. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “outlook,” “will,” “should,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements the Company makes relating to its future results and operations, growth opportunities, pending litigation and investigations, and timing of the remediation of the Company’s material weakness in the Company’s internal control over financial reporting are forward-looking statements. All forward-looking statements are subject to significant risks, uncertainties and changes in circumstances that could cause actual results and outcomes to differ materially from the forward-looking statements. These forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, without limitation, those that are described in Item 1A, "Risk Factors" included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023, as may be updated in this or subsequent Quarterly Reports on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements. Except to the extent required by law, Archer-Daniels- Midland Company does not undertake, and expressly disclaims, any duty or obligation to update publicly any forward-looking statement whether as a result of new information, future events, changes in assumptions or otherwise.
Explanatory Note
Archer-Daniels-Midland Company (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (this “Amendment”) to its Quarterly Report on Form 10‑Q for the quarter ended June 30, 2024, which was originally filed with the United States Securities and Exchange Commission (“SEC”) on July 30, 2024 (the “Form 10‑Q”).
In filing this Amendment, the Company is restating its previously issued unaudited consolidated financial statements as of June 30, 2024 and 2023 and for the three and six months ended June 30, 2024 and 2023 (collectively, the “Affected Periods”) for the correction of certain segment-specific historical financial information as further described below.
In addition, the Company filed amendments to its Annual Report on Form 10-K for the year ended December 31, 2023 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, originally filed with the SEC on March 12, 2024 and April 30, 2024, respectively (such reports, together with this Amendment, the “Amended Reports”). All material restatement information will be included in the Amended Reports, and the Company does not intend to separately amend other filings that were previously filed with the SEC.
Accordingly, investors and other readers should rely only on the financial information and other disclosures regarding the periods described above in this Amendment and in any other future filings with the SEC (as applicable) and should not rely on any previously issued or filed reports, press releases, corporate presentations or similar communications relating to the Affected Periods.
Background of Correction
Following ongoing dialogue with the staff of the SEC, the Company concluded that it would amend the 2023 Form 10-K and Form 10-Qs for the first and second quarters of 2024 (collectively, the “Q1 and Q2 2024 Form 10-Qs”) to restate the segment information disclosure included in those filings. These restatements do not impact ADM’s Consolidated Statements of Earnings, Consolidated Statements of Comprehensive Income (Loss), Consolidated Balance Sheets, Consolidated Statements of Cash Flows or Consolidated Statements of Shareholders’ Equity as of and for the periods presented in the Amended Reports.
As previously disclosed in Note 13. Segment Information, to the Company’s unaudited Consolidated Financial Statements included in the Form 10-Q, the Company identified and corrected certain intersegment sales amounts that either (i) were not in accordance with prior disclosures about presenting such sales at amounts approximating market or (ii) included intrasegment sales (resulting from sales within the segment) and should have included exclusively intersegment sales (resulting from sales from one segment to another). In connection with the error corrections, the Company identified a material weakness in its internal control over financial reporting related to its accounting practices and procedures for intersegment sales. The Company put in place a plan to remediate this material weakness, as disclosed in the 2023 Form 10-K and Q1 and Q2 2024 Form 10-Qs.
In the course of testing new controls implemented as part of the Company’s material weakness remediation plan in the third quarter of 2024, the Company identified additional misclassified intersegment transactions. These newly identified errors concern additional intersegment sales for each of its Ag Services and Oilseeds, Carbohydrate Solutions and Nutrition segments that included certain intrasegment sales and should have included exclusively intersegment sales. The Company also identified some intersegment transactions between Ag Services and Oilseeds and Carbohydrate Solutions that were not accounted for consistently in accordance with revenue recognition and segment reporting standards and should not have been reported as intersegment sales. The Company also is correcting certain segment disclosure presentation errors in the Amended Reports.
This Amendment reflects corrections for the newly identified errors related to intersegment sales (described below), the previously-corrected errors related to intersegment sales and segment operating profit, and other segment disclosure corrections (See Note 1 to the Consolidated Financial Statements in this Amendment for further information).
Restatement of Consolidated Financial Statements
This Amendment includes unaudited restated Consolidated Financial Statements for the Affected Periods. See Note 13 to the Consolidated Financial Statements in this Amendment for the restated unaudited segment information as of June 30, 2024 and 2023 for the three and six months ended June 30, 2024 and 2023.
Items Amended in This Filing
This Amendment amends and restates the following items of the Form 10-Q:
•Part I - Item 1. Financial Statements
•Part I - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
•Part I - Item 4. Controls and Procedures
•Part II - Item 1A. Risk Factors
•Part II - Item 6. Exhibits
The exhibit list included in Item 6, “Exhibits” herein has been amended to contain currently dated certifications from the Company’s Chief Executive Officer (as Principal Executive Officer) and Chief Financial Officer (as Principal Financial Officer), as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and filed as Exhibits 31.1/31.2 and 32.1/32.2, respectively.
In accordance with applicable SEC rules, this Form 10-Q/A also includes an updated signature page.
Please note that the only changes to the Form 10-Q are those related to the matters described herein and only in the Items listed above. Otherwise, this Amendment speaks as of the original filing date of the Form 10-Q, and does not modify, amend or update any other item or disclosures in the Form 10-Q. As such, this Amendment does not reflect events occurring after the filing of the Form 10-Q or modify or update those disclosures affected by subsequent events.
Such subsequent information or events include, among others, the information and events described in our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024, and the information and events described in our Current Reports on Form 8-K filed subsequent to the date of the Form 10-Q. For a description of such subsequent information and events, please read our reports filed pursuant to the Exchange Act subsequent to the date of the Form 10-Q, which update and supersede certain information contained in the Form 10-Q and this Amendment.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Archer-Daniels-Midland Company
Consolidated Statements of Earnings
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
| Cost of products sold | |||||||||||||||||||||||
| Gross Profit | |||||||||||||||||||||||
| Selling, general, and administrative expenses | |||||||||||||||||||||||
| Asset impairment, exit, and restructuring costs | |||||||||||||||||||||||
| Equity in earnings of unconsolidated affiliates | ( | ( | ( | ( | |||||||||||||||||||
| Interest and investment income | ( | ( | ( | ( | |||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Other (income) expense – net | ( | ( | ( | ( | |||||||||||||||||||
| Earnings Before Income Taxes | |||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Net Earnings Including Noncontrolling Interests | |||||||||||||||||||||||
| Less: Net earnings (losses) attributable to noncontrolling interests | ( | ( | |||||||||||||||||||||
| Net Earnings Attributable to Controlling Interests | $ | $ | $ | $ | |||||||||||||||||||
| Average number of shares outstanding – basic | |||||||||||||||||||||||
| Average number of shares outstanding – diluted | |||||||||||||||||||||||
| Basic earnings per common share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per common share | $ | $ | $ | $ | |||||||||||||||||||
| Dividends per common share | $ | $ | $ | $ | |||||||||||||||||||
See notes to consolidated financial statements.
5
Archer-Daniels-Midland Company
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Net earnings including noncontrolling interests | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||||||||||||||
| Tax effect | ( | ( | |||||||||||||||||||||
| Net of tax amount | ( | ( | |||||||||||||||||||||
| Pension and other postretirement benefit liabilities adjustment | ( | ( | ( | ( | |||||||||||||||||||
| Tax effect | ( | ||||||||||||||||||||||
| Net of tax amount | ( | ( | ( | ( | |||||||||||||||||||
| Deferred gain (loss) on hedging activities | ( | ( | ( | ( | |||||||||||||||||||
| Tax effect | |||||||||||||||||||||||
| Net of tax amount | ( | ( | ( | ( | |||||||||||||||||||
| Unrealized gain (loss) on investments | ( | ||||||||||||||||||||||
| Tax effect | ( | ( | ( | ||||||||||||||||||||
| Net of tax amount | ( | ||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Comprehensive income (loss) | |||||||||||||||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||||||||
| Comprehensive income (loss) attributable to controlling interests | $ | $ | $ | $ | |||||||||||||||||||
See notes to consolidated financial statements.
6
Archer-Daniels-Midland Company
Consolidated Balance Sheets
| (In millions) | June 30, 2024 | December 31, 2023 | |||||||||
| (Unaudited) | |||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Segregated cash and investments | |||||||||||
| Trade receivables - net | |||||||||||
| Inventories | |||||||||||
| Other current assets | |||||||||||
| Total Current Assets | |||||||||||
| Investments and Other Assets | |||||||||||
| Investments in affiliates | |||||||||||
| Goodwill and other intangible assets | |||||||||||
| Right of use assets | |||||||||||
| Other assets | |||||||||||
| Total Investments and Other Assets | |||||||||||
| Property, Plant, and Equipment | |||||||||||
| Land and land improvements | |||||||||||
| Buildings | |||||||||||
| Machinery and equipment | |||||||||||
| Construction in progress | |||||||||||
| Accumulated depreciation | ( | ( | |||||||||
| Net Property, Plant, and Equipment | |||||||||||
| Total Assets | $ | $ | |||||||||
| Liabilities, Temporary Equity, and Shareholders’ Equity | |||||||||||
| Current Liabilities | |||||||||||
| Short-term debt | $ | $ | |||||||||
| Trade payables | |||||||||||
| Payables to brokerage customers | |||||||||||
| Accrued expenses and other payables | |||||||||||
| Current lease liabilities | |||||||||||
| Current maturities of long-term debt | |||||||||||
| Total Current Liabilities | |||||||||||
| Long-Term Liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred income taxes | |||||||||||
| Non-current lease liabilities | |||||||||||
| Other | |||||||||||
| Total Long-Term Liabilities | |||||||||||
| Temporary Equity - Redeemable noncontrolling interest | |||||||||||
| Shareholders’ Equity | |||||||||||
| Common stock | |||||||||||
| Reinvested earnings | |||||||||||
| Accumulated other comprehensive income (loss) | ( | ( | |||||||||
| Noncontrolling interests | |||||||||||
| Total Shareholders’ Equity | |||||||||||
| Total Liabilities, Temporary Equity, and Shareholders’ Equity | $ | $ | |||||||||
See notes to consolidated financial statements.
7
Archer-Daniels-Midland Company
Consolidated Statements of Cash Flows
(Unaudited)
| (In millions) | Six Months Ended June 30, | ||||||||||
| 2024 | 2023 | ||||||||||
| Operating Activities | |||||||||||
| Net earnings including noncontrolling interests | $ | $ | |||||||||
| Adjustments to reconcile net earnings to net cash provided by (used in) operating activities | |||||||||||
| Depreciation and amortization | |||||||||||
| Asset impairment charges | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Equity in earnings of affiliates, net of dividends | ( | ( | |||||||||
| Stock compensation expense | |||||||||||
| Deferred cash flow hedges | ( | ( | |||||||||
| (Gain) losses on sales/revaluation of assets | ( | ||||||||||
| Other – net | ( | ||||||||||
| Changes in operating assets and liabilities, net of acquisitions and dispositions | |||||||||||
| Segregated investments | ( | ( | |||||||||
| Trade receivables | ( | ||||||||||
| Inventories | |||||||||||
| Other current assets | |||||||||||
| Trade payables | ( | ( | |||||||||
| Payables to brokerage customers | ( | ( | |||||||||
| Accrued expenses and other payables | ( | ( | |||||||||
| Total Operating Activities | |||||||||||
| Investing Activities | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Net assets of businesses acquired | ( | ||||||||||
| Proceeds from sales of assets | |||||||||||
| Investments in affiliates | ( | ( | |||||||||
| Distributions from affiliates | |||||||||||
| Cost method investments | ( | ||||||||||
| Other – net | ( | ||||||||||
| Total Investing Activities | ( | ( | |||||||||
| Financing Activities | |||||||||||
| Long-term debt borrowings | |||||||||||
| Long-term debt payments | ( | ||||||||||
| Net borrowings (payments) under lines of credit agreements | ( | ||||||||||
| Share repurchases | ( | ( | |||||||||
| Cash dividends | ( | ( | |||||||||
| Other – net | ( | ( | |||||||||
| Total Financing Activities | ( | ( | |||||||||
| Effect of exchange rate on cash, cash equivalents, restricted cash, and restricted cash equivalents | ( | ( | |||||||||
| Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | ( | ( | |||||||||
| Cash, cash equivalents, restricted cash, and restricted cash equivalents - beginning of period | |||||||||||
| Cash, cash equivalents, restricted cash, and restricted cash equivalents - end of period | $ | $ | |||||||||
| Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the consolidated balance sheets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash and restricted cash equivalents included in segregated cash and investments | |||||||||||
| Total cash, cash equivalents, restricted cash, and restricted cash equivalents | $ | $ | |||||||||
See notes to consolidated financial statements.
8
Archer-Daniels-Midland-Company
Consolidated Statements of Shareholders’ Equity
(Unaudited)
| Common Stock | Reinvested Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||
| (In millions, except per share amounts) | Shares | Amount | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Comprehensive income | |||||||||||||||||||||||||||||||||||
| Net earnings | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||||||||
| Total comprehensive income | |||||||||||||||||||||||||||||||||||
| Cash dividends paid - $ | ( | ( | |||||||||||||||||||||||||||||||||
| Share repurchases | ( | 462 | ( | ( | |||||||||||||||||||||||||||||||
| Stock compensation expense | |||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Comprehensive income | |||||||||||||||||||||||||||||||||||
| Net earnings | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||||||||
| Total comprehensive income | |||||||||||||||||||||||||||||||||||
| Cash dividends paid - $ | ( | ( | |||||||||||||||||||||||||||||||||
| Share repurchases | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Stock compensation expense | |||||||||||||||||||||||||||||||||||
| Stock option exercises net of taxes | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Comprehensive income | |||||||||||||||||||||||||||||||||||
| Net earnings | |||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ||||||||||||||||||||||||||||||||||
| Total comprehensive income | |||||||||||||||||||||||||||||||||||
| Cash dividends paid - $ | ( | ( | |||||||||||||||||||||||||||||||||
| Share repurchases | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Stock compensation expense | |||||||||||||||||||||||||||||||||||
| Stock option exercises net of taxes | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Comprehensive income | |||||||||||||||||||||||||||||||||||
| Net earnings | |||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ||||||||||||||||||||||||||||||||||
| Total comprehensive income | |||||||||||||||||||||||||||||||||||
| Cash dividends paid - $ | ( | ( | |||||||||||||||||||||||||||||||||
| Share repurchases | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Stock compensation expense | |||||||||||||||||||||||||||||||||||
| Stock option exercises net of taxes | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
9
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Basis of Presentation and Restatement of Previously Filed Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K/A for the year ended December 31, 2023 for Archer-Daniels-Midland Company (the Company or ADM).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company consolidates all entities, including variable interest entities (VIEs), in which it has a controlling financial interest. For VIEs, the Company assesses whether it is the primary beneficiary as defined under the applicable accounting standard. Investments in affiliates, including VIEs through which the Company exercises significant influence but does not control the investee and is not the primary beneficiary of the investee’s activities, are carried at cost plus equity in undistributed earnings since acquisition and are adjusted, where appropriate, for basis differences between the investment balance and the underlying net assets of the investee and impairments determined to be other than temporary in nature. The Company’s portion of the results of certain affiliates and results of certain VIEs are included using the most recent available financial statements. In each case, the financial statements are within 93 days of the Company’s year end and are consistent from period to period.
Restatement of Previously Filed Financial Statements
Following ongoing dialogue with the staff of the United States Securities and Exchange Commission, the Company concluded that it would amend its fiscal year 2023 Form 10-K (the “FY2023 Form 10-K”) and Forms 10-Q for the first and second quarters of 2024 (collectively, the “Q1 and Q2 2024 Form 10-Qs”) to restate the segment information disclosure included in those filings. These restatements do not impact ADM’s Consolidated Statements of Earnings, Consolidated Statements of Comprehensive Income (Loss), Consolidated Balance Sheets, Consolidated Statements of Cash Flows or Consolidated Statements of Shareholders’ Equity as of and for the periods presented in the Amended Reports.
As previously disclosed in Note 13. Segment Information, to ADM’s consolidated financial statements included in the Form 10-Q for the quarter ended June 30, 2024, ADM identified and corrected certain intersegment sales amounts that either (i) were not in accordance with prior disclosures about presenting such sales at amounts approximating market or (ii) included intrasegment sales (resulting from sales within the segment) and should have included exclusively intersegment sales (resulting from sales from one segment to another). In connection with the error corrections, ADM identified a material weakness in its internal control over financial reporting related to its accounting practices and procedures for intersegment sales. The Company put in place a plan to remediate this material weakness, as disclosed in the FY2023 Form 10-K and Q1 and Q2 2024 Form 10-Qs.
In the course of testing new controls implemented as part of the Company’s material weakness remediation plan in the third quarter of 2024, ADM identified additional intrasegment sales previously misclassified and reported as intersegment sales. These newly identified errors concern intersegment sales for each of its Ag Services and Oilseeds, Carbohydrate Solutions and Nutrition segments that included certain additional intrasegment sales and should have included exclusively intersegment sales. The Company also identified some intersegment sales between Ag Services and Oilseeds and Carbohydrate Solutions that were not accounted for consistently in accordance with revenue recognition and segment reporting standards and should not have been reported as intersegment sales.
The Company also is correcting certain segment disclosure presentation errors. In this Amendment, the Company is revising its reconciliation and calculation of total segment operating profit. The revised reconciliation in Note 13. Segment Information presents a subtotal for total segment operating profit that is equal to the sum of the segment operating profit reported for each of the Ag Services and Oilseeds, Carbohydrate Solutions and Nutrition segments. Amounts for other business and specified items,
10
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 1. Basis of Presentation and Restatement of Previously Filed Consolidated Financial Statements (Continued)
which previously were reflected in the calculation of total segment operating profit, are now reflected as reconciling items, similar to Corporate, between total segment operating profit and earnings before income taxes.
The Company has restated its consolidated financial statements for the quarters ended June 30, 2024 and 2023 in Note 13, Segment Information (Unaudited).
Segregated Cash and Investments
The Company segregates certain cash, cash equivalents, and investment balances in accordance with regulatory requirements, commodity exchange requirements, and insurance arrangements. These balances represent deposits received from customers of the Company’s registered futures commission merchant and commodity brokerage services, cash margins and securities pledged to commodity exchange clearinghouses, and cash pledged as security under certain insurance arrangements. Segregated cash and investments also include restricted cash collateral for the various insurance programs of the Company’s captive insurance business. To the degree these segregated balances are comprised of cash and cash equivalents, they are considered restricted cash and cash equivalents on the consolidated statements of cash flows.
Receivables
The Company records receivables at net realizable value in trade receivables, other current assets, and other assets. These amounts include allowances for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances including any accrued interest thereon. The Company estimates uncollectible accounts by pooling receivables according to type, region, credit risk rating, and age. Each pool is assigned an expected loss co-efficient to arrive at a general reserve based on historical write-offs adjusted, as needed, for regional, economic, and other forward-looking factors. The Company minimizes credit risk due to the large and diversified nature of its worldwide customer base. ADM manages its exposure to counter-party credit risk through credit analysis and approvals, credit limits, and monitoring procedures. Long-term receivables recorded in other assets were not material to the Company’s overall receivables portfolio.
Changes to the allowance for estimated uncollectible accounts were as follows:
| Three Months Ended June 30 | ||||||||
| 2024 | 2023 | |||||||
| (In millions) | ||||||||
| Beginning, April 1 | $ | $ | ||||||
| Current year provisions | ( | |||||||
| Write-offs against allowance | ( | ( | ||||||
| Foreign exchange translation adjustment | ( | |||||||
| Other | ( | ( | ||||||
| Ending, June 30 | $ | $ | ||||||
| Six Months Ended June 30 | ||||||||
| 2024 | 2023 | |||||||
| (In millions) | ||||||||
| Beginning, January 1 | $ | $ | ||||||
| Current year provisions | ( | |||||||
| Recoveries | ||||||||
| Write-offs against allowance | ( | ( | ||||||
| Foreign exchange translation adjustment | ||||||||
| Other | ( | |||||||
| Ending, June 30 | $ | $ | ||||||
11
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 1. Basis of Presentation and Restatement of Previously Filed Consolidated Financial Statements (Continued)
Current year provisions in the three months ended June 30, 2024 include reversals of prior general provisions for economic factors related to the pandemic. Write-offs against allowance in the three months and six months ended June 30, 2024 were primarily related to trade receivables and long-term receivables, respectively. Write-offs against allowance in the three months ended June 30, 2023 were primarily related to a customer in Brazil. Also included in write-offs against allowance in the six months ended June 30, 2023 was allowance on receivables that were subsequently sold.
Inventories
Certain merchandisable agricultural commodity inventories, which include inventories acquired under deferred pricing contracts, are stated at market value. In addition, the Company values certain inventories using the first-in, first-out (FIFO) method at the lower of cost or net realizable value.
The following table sets forth the Company’s inventories as of June 30, 2024 and December 31, 2023.
| June 30, 2024 | December 31, 2023 | ||||||||||
| (In millions) | |||||||||||
| Raw materials and supplies | $ | $ | |||||||||
| Finished goods | |||||||||||
| Market inventories | |||||||||||
| Total inventories | $ | $ | |||||||||
Included in raw materials and supplies are work in process inventories which were not material as of June 30, 2024 and December 31, 2023.
Cost Method Investments
Cost method investments of $440 million and $438 million as of June 30, 2024 and December 31, 2023, respectively, were included in Other Assets in the Company’s consolidated balance sheets. Revaluation losses of $18 million in the six months ended June 30, 2024 were related to an investment in alternative protein and precision fermentation, partially offset by an upward adjustment of $2 million in the six months ended June 30, 2024. There were no 115 million and $94 million, respectively.
Investments in Affiliates
The Company applies the equity method of accounting for investments over which the Company has the ability to exercise significant influence, including its 22.5 % investment in Wilmar International Limited (“Wilmar”). The Company’s investment in Wilmar had a carrying value of $4.1 billion as of June 30, 2024, and a market value of $3.2 billion based on the quoted Singapore Exchange market price converted to U.S. dollars at the applicable exchange rate at June 30, 2024. Wilmar does not have a recent history of operating losses, has positive working capital and positive cash flows and has a long history of paying dividends.
A significant portion of the decline in market value of Wilmar based on the quoted Singapore Exchange market price occurred during the quarter ended June 30, 2024. The Company considers its investment in Wilmar a significant and strategic relationship and has the intent and ability to retain its investment in Wilmar for a period of time sufficient to allow for any anticipated recovery in market value.
Based on the evaluation of the factors above and the Company’s evaluation of the near-term prospects of Wilmar in relation to the severity and duration of the decline in fair value, the Company does not consider the investment to be other-than-temporarily impaired at June 30, 2024.
12
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 2. New Accounting Standards
Through December 31, 2024, the Company has the option to adopt the amended guidance of Accounting Standards Codification (ASC) 848, Reference Rate Reform, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amended guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2024, except for hedging relationships existing as of December 31, 2024, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. ADM has completed the transition of its financing, funding, and hedging portfolios from LIBOR to alternative reference rates. The transition did not have an impact on the Company’s consolidated financial statements.
Effective December 31, 2024, the Company will be required to adopt the amended guidance of ASC 280, Segment Reporting, which improves disclosures about a public entity’s reportable segments and addresses requests from investors and other allocators of capital for more detailed information about a reportable segment’s expenses. The amended guidance improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses and permits entities to disclose more than one measure of a reportable segment’s profitability used by the Chief Operating Decision Maker. The adoption of the amended guidance will result in expanded disclosures in the Company’s segment and geographic information footnote but will not have an impact on the consolidated financial statements.
Effective December 31, 2025, the Company will be required to adopt the amended guidance of ASC 740, Income Taxes, which enhances the transparency and decision usefulness of income tax disclosures. The amendments address investor requests for more transparency about income tax information. The adoption of the amended guidance will result in expanded disclosures in the Company’s income taxes footnote but will not have an impact on the consolidated financial statements.
Note 3. Revenues
Revenue Recognition
The Company principally generates revenue from merchandising and transporting agricultural commodities, and manufacturing products for use in food, beverages, feed, energy, and industrial applications, and ingredients and solutions for human and animal nutrition. Revenue is measured based on the consideration specified in the contract with a customer. The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product or service to a customer. The majority of the Company’s contracts with customers have one performance obligation and a contract duration of one year or less. The Company applies the practical expedient in paragraph 10-50-14 of ASC 606, Revenue from Contracts with Customers, (Topic 606) and does not disclose information about remaining performance obligations that have original expected durations of one year or less. For transportation service contracts, the Company recognizes revenue over time as the mode of transportation moves towards its destination in accordance with the transfer of control guidance of Topic 606. The Company recognized revenue from transportation service contracts of $252 million and $445 million for the three and six months ended June 30, 2024, respectively, and $200 million and $378 million for the three and six months ended June 30, 2023, respectively. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610-20).
Shipping and Handling Costs
Shipping and handling costs related to contracts with customers for the sale of goods are accounted for as a fulfillment activity and are included in cost of products sold. Accordingly, amounts billed to customers for such costs are included as a component of revenues.
Taxes Collected from Customers and Remitted to Governmental Authorities
The Company does not include taxes assessed by governmental authorities that are (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers, in the measurement of transaction prices or as a component of revenues and cost of products sold.
13
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 3. Revenues (Continued)
Contract Liabilities
Contract liabilities relate to advance payments from customers for goods and services the Company has yet to provide. Contract liabilities of $364 million and $626 million as of June 30, 2024 and December 31, 2023, respectively, were recorded in accrued expenses and other payables in the consolidated balance sheets. Revenues recognized in the three and six months ended June 30, 2024 from the December 31, 2023 contract liabilities were $120 million and $355 million, respectively.
Disaggregation of Revenues
The following tables present revenue disaggregated by timing of recognition and major product lines for the three and six months ended June 30, 2024 and 2023.
| Three Months Ended June 30, 2024 | |||||||||||||||||
| Topic 606 Revenue | Topic 815(1) | Total | |||||||||||||||
| (In millions) | Point in Time | Over Time | Total | Revenue | Revenues | ||||||||||||
| Ag Services and Oilseeds | |||||||||||||||||
| Ag Services | $ | $ | $ | $ | $ | ||||||||||||
| Crushing | — | ||||||||||||||||
| Refined Products and Other | — | ||||||||||||||||
| Total Ag Services and Oilseeds | |||||||||||||||||
| Carbohydrate Solutions | |||||||||||||||||
| Starches and Sweeteners | — | ||||||||||||||||
| Vantage Corn Processors | — | — | |||||||||||||||
| Total Carbohydrate Solutions | — | ||||||||||||||||
| Nutrition | |||||||||||||||||
| Human Nutrition | — | — | |||||||||||||||
| Animal Nutrition | — | — | |||||||||||||||
| Total Nutrition | — | — | |||||||||||||||
| Total Segment Revenues | |||||||||||||||||
| Other Business | — | — | |||||||||||||||
| Total Revenues | $ | $ | $ | $ | $ | ||||||||||||
14
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 3. Revenues (Continued)
| Six Months Ended June 30, 2024 | |||||||||||||||||
| Topic 606 Revenue | Topic 815(1) | Total | |||||||||||||||
| Point in Time | Over Time | Total | Revenue | Revenues | |||||||||||||
| (In millions) | |||||||||||||||||
| Ag Services and Oilseeds | |||||||||||||||||
| Ag Services | $ | $ | $ | $ | $ | ||||||||||||
| Crushing | — | ||||||||||||||||
| Refined Products and Other | — | ||||||||||||||||
| Total Ag Services and Oilseeds | |||||||||||||||||
| Carbohydrate Solutions | |||||||||||||||||
| Starches and Sweeteners | — | ||||||||||||||||
| Vantage Corn Processors | — | — | |||||||||||||||
| Total Carbohydrate Solutions | — | ||||||||||||||||
| Nutrition | |||||||||||||||||
| Human Nutrition | — | — | |||||||||||||||
| Animal Nutrition | — | — | |||||||||||||||
| Total Nutrition | — | — | |||||||||||||||
| Total Segment Revenues | 11,438 | 445 | 11,883 | 31,990 | 43,873 | ||||||||||||
| Other Business | — | — | |||||||||||||||
| Total Revenues | $ | $ | $ | $ | $ | ||||||||||||
| Three Months Ended June 30, 2023 | |||||||||||||||||
| Topic 606 Revenue | Topic 815(1) | Total | |||||||||||||||
| (In millions) | Point in Time | Over Time | Total | Revenue | Revenues | ||||||||||||
| Ag Services and Oilseeds | |||||||||||||||||
| Ag Services | $ | $ | $ | $ | $ | ||||||||||||
| Crushing | — | ||||||||||||||||
| Refined Products and Other | — | ||||||||||||||||
| Total Ag Services and Oilseeds | |||||||||||||||||
| Carbohydrate Solutions | |||||||||||||||||
| Starches and Sweeteners | — | ||||||||||||||||
| Vantage Corn Processors | — | — | |||||||||||||||
| Total Carbohydrate Solutions | — | ||||||||||||||||
| Nutrition | |||||||||||||||||
| Human Nutrition | — | — | |||||||||||||||
| Animal Nutrition | — | — | |||||||||||||||
| Total Nutrition | — | — | |||||||||||||||
| Total Segment Revenues | 6,311 | 200 | 6,511 | 18,567 | 25,078 | ||||||||||||
| Other Business | — | — | |||||||||||||||
| Total Revenues | $ | $ | $ | $ | $ | ||||||||||||
15
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 3. Revenues (Continued)
| Six Months Ended June 30, 2023 | |||||||||||||||||
| Topic 606 Revenue | Topic 815(1) | Total | |||||||||||||||
| Point in Time | Over Time | Total | Revenue | Revenues | |||||||||||||
| (In millions) | |||||||||||||||||
| Ag Services and Oilseeds | |||||||||||||||||
| Ag Services | $ | $ | $ | $ | $ | ||||||||||||
| Crushing | — | ||||||||||||||||
| Refined Products and Other | — | ||||||||||||||||
| Total Ag Services and Oilseeds | |||||||||||||||||
| Carbohydrate Solutions | |||||||||||||||||
| Starches and Sweeteners | — | ||||||||||||||||
| Vantage Corn Processors | — | — | |||||||||||||||
| Total Carbohydrate Solutions | — | ||||||||||||||||
| Nutrition | |||||||||||||||||
| Human Nutrition | — | — | |||||||||||||||
| Animal Nutrition | — | — | |||||||||||||||
| Total Nutrition | — | — | |||||||||||||||
| Total Segment Revenues | 12,882 | 378 | 13,260 | 35,787 | 49,047 | ||||||||||||
| Other Business | — | — | |||||||||||||||
| Total Revenues | $ | $ | $ | $ | $ | ||||||||||||
Ag Services and Oilseeds
The Ag Services and Oilseeds segment generates revenue from the sale of commodities, from service fees for the transportation of goods, from the sale of products manufactured in its global processing facilities, and from its structured trade finance activities. Revenue is measured based on the consideration specified in the contract. Revenue is recognized when a performance obligation is satisfied by transferring control over a product or providing service to a customer. For transportation service contracts, the Company recognizes revenue over time as the mode of transportation moves towards its destination in accordance with the transfer of control guidance of Topic 606. The amount of revenue recognized follows the contractually specified price, which may include freight or other contractually specified cost components. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by Topic 610-20.
Carbohydrate Solutions
The Carbohydrate Solutions segment generates revenue from the sale of products manufactured at the Company’s global corn and wheat milling facilities around the world. Revenue is recognized when control over products is transferred to the customer. Products are shipped to customers from the Company’s various facilities and from its network of storage terminals. The amount of revenue recognized is based on the consideration specified in the contract, which could include freight and other costs depending on the specific shipping terms of each contract. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by Topic 610-20.
Nutrition
The Nutrition segment sells ingredients and solutions including plant-based proteins, natural flavors, flavor systems, natural colors, emulsifiers, soluble fiber, polyols, hydrocolloids, probiotics, prebiotics, enzymes, botanical extracts, edible beans,
16
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 3. Revenues (Continued)
formula feeds, animal health and nutrition products, pet food and treats, and other specialty food and feed ingredients. Revenue is recognized when control over products is transferred to the customer. The amount of revenue recognized follows the contracted price or the mutually agreed price of the product. Freight and shipping are recognized as a component of revenue at the same time control transfers to the customer.
Other Business
Other Business includes the Company’s futures commission business whose primary sources of revenue are commissions and brokerage income generated from executing orders and clearing futures contracts and options on futures contracts on behalf of its customers. Commissions and brokerage revenue are recognized on the date the transaction is executed. Other Business also includes the Company’s captive insurance business, which generates third party revenue through its proportionate share of premiums from third-party reinsurance pools. Reinsurance premiums are recognized on a straight-line basis over the period underlying the policy.
Note 4. Acquisitions
During the six months ended June 30, 2024, the Company acquired Revela Foods (“Revela”), a Wisconsin-based developer and manufacturer of innovative dairy flavor ingredients and solutions, FDL, a UK-based leading developer and producer of premium flavor and functional ingredient systems, PT Trouw Nutrition Indonesia (“PT”), a subsidiary of Nutreco and leading provider of functional and nutritional solutions for livestock farming in Indonesia, and Totally Natural Solutions (“TNS”), a UK-based hops flavoring producer, for an aggregate cash consideration of $948 million.
The aggregate cash consideration of these acquisitions, net of $12 million in cash acquired, was allocated as follows, subject to final measurement period adjustments:
| (In millions) | Revela | FDL | PT | TNS | Total | ||||||||||||
| Working capital | $ | $ | $ | $ | $ | ||||||||||||
| Property, plant, and equipment | |||||||||||||||||
| Goodwill | |||||||||||||||||
| Other intangible assets | |||||||||||||||||
| Other long-term assets | |||||||||||||||||
| Long-term liabilities | ( | ( | ( | ( | |||||||||||||
| Aggregate cash consideration | $ | $ | $ | $ | $ | ||||||||||||
Goodwill recorded in connection with the acquisitions is primarily attributable to the synergies expected to arise after the Company’s acquisition of the businesses. Of the $551 million allocated to goodwill, $313 million is expected to be deductible for tax purposes.
These acquisitions add capabilities to the Human and Animal Nutrition businesses. The Company’s consolidated statement of earnings for the three and six months ended June 30, 2024 includes the post-acquisition results of the acquired businesses which were immaterial.
The following table sets forth the fair values and the useful lives of the other intangible assets acquired.
| Useful Lives | Revela | FDL | TNS | Total | |||||||||||||||||||
| (In years) | (In millions) | ||||||||||||||||||||||
| Intangible assets with finite lives: | |||||||||||||||||||||||
| Trademarks/brands | $ | $ | $ | $ | |||||||||||||||||||
| Customer lists | to | ||||||||||||||||||||||
| Recipes and others | to | ||||||||||||||||||||||
| Total other intangible assets acquired | $ | $ | $ | $ | |||||||||||||||||||
17
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 5. Fair Value Measurements
The following tables set forth, by level, the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2024 and December 31, 2023.
| Fair Value Measurements at June 30, 2024 | |||||||||||||||||||||||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Inventories carried at market | $ | $ | $ | $ | |||||||||||||||||||
| Unrealized derivative gains: | |||||||||||||||||||||||
| Commodity contracts | |||||||||||||||||||||||
| Foreign currency contracts | |||||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Segregated investments | |||||||||||||||||||||||
| Total Assets | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Unrealized derivative losses: | |||||||||||||||||||||||
| Commodity contracts | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency contracts | |||||||||||||||||||||||
| Inventory-related payables | |||||||||||||||||||||||
| Total Liabilities | $ | $ | $ | $ | |||||||||||||||||||
18
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 5. Fair Value Measurements (Continued)
| Fair Value Measurements at December 31, 2023 | |||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Inventories carried at market | $ | $ | $ | $ | |||||||||||||||||||
| Unrealized derivative gains: | |||||||||||||||||||||||
| Commodity contracts | |||||||||||||||||||||||
| Foreign currency contracts | |||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Segregated investments | |||||||||||||||||||||||
| Total Assets | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Unrealized derivative losses: | |||||||||||||||||||||||
| Commodity contracts | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency contracts | |||||||||||||||||||||||
| Inventory-related payables | |||||||||||||||||||||||
| Total Liabilities | $ | $ | $ | $ | |||||||||||||||||||
Estimated fair values for inventories and inventory-related payables carried at market are based on exchange-quoted prices, adjusted for differences in local markets and quality, referred to as basis. Market valuations for the Company’s inventories are adjusted for location and quality (basis) because the exchange-quoted prices represent contracts with standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The basis adjustments are generally determined using the inputs from competitor and broker quotations or market transactions and are considered observable. Basis adjustments are impacted by specific local supply and demand characteristics at each facility and the overall market. Factors such as substitute products, weather, fuel costs, contract terms, and futures prices also impact the movement of these basis adjustments. In some cases, the basis adjustments are unobservable because they are supported by little to no market activity. When unobservable inputs have a significant impact (more than 10%) on the measurement of fair value, the inventory is classified in Level 3. Changes in the fair value of inventories and inventory-related payables are recognized in the consolidated statements of earnings as a component of cost of products sold.
Derivative contracts include exchange-traded commodity futures and options contracts, forward commodity purchase and sale contracts, and over-the-counter (OTC) instruments related primarily to agricultural commodities, energy, interest rates, and foreign currencies. Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified in Level 1. Substantially all of the Company’s exchange-traded futures and options contracts are cash-settled on a daily basis and, therefore, are not included in these tables. Fair value for forward commodity purchase and sale contracts is estimated based on exchange-quoted prices adjusted for differences in local markets. Market valuations for the Company’s forward commodity purchase and sale contracts are adjusted for location (basis) because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The basis adjustments are generally determined using inputs from competitor and broker quotations or market transactions and are considered observable. Basis adjustments are impacted by specific local supply and demand characteristics at each facility and the overall market. Factors such as substitute products, weather, fuel costs, contract terms, and futures prices also impact the movement of these basis adjustments. In some cases, the basis adjustments are unobservable because they are supported by little to no market activity. When observable inputs are available for substantially the full term of the contract, it is classified in Level 2. When unobservable inputs have a significant impact (more than 10%) on
19
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 5. Fair Value Measurements (Continued)
the measurement of fair value, the contract is classified in Level 3. Except for certain derivatives designated as cash flow hedges, changes in the fair value of commodity-related derivatives are recognized in the consolidated statements of earnings as a component of cost of products sold. Changes in the fair value of foreign currency-related derivatives are recognized in the consolidated statements of earnings as a component of revenues, cost of products sold, and other (income) expense - net, depending upon the purpose of the contract. The changes in the fair value of derivatives designated as effective cash flow hedges are recognized in the consolidated balance sheets as a component of accumulated other comprehensive income (AOCI) until the hedged items are recorded in earnings or it is probable the hedged transaction will no longer occur.
The Company’s cash equivalents are comprised of money market funds valued using quoted market prices and are classified as Level 1.
The Company’s segregated investments are comprised of U.S. Treasury securities. U.S. Treasury securities are valued using quoted market prices and are classified in Level 1.
The following table presents a rollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended June 30, 2024.
| Level 3 Fair Value Asset Measurements at | |||||||||||||||||
| June 30, 2024 | |||||||||||||||||
| Inventories Carried at Market | Commodity Derivative Contracts Gains | Total Assets | |||||||||||||||
| (In millions) | |||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ||||||||||||||
Total increase (decrease) in net realized/unrealized gains included in cost of products sold* | |||||||||||||||||
| Purchases | |||||||||||||||||
| Sales | ( | ( | |||||||||||||||
| Settlements | ( | ( | |||||||||||||||
| Transfers into Level 3 | |||||||||||||||||
| Transfers out of Level 3 | ( | ( | ( | ||||||||||||||
| Ending balance, June 30, 2024 | $ | $ | $ | ||||||||||||||
* Includes increase in unrealized gains of $325 million relating to Level 3 assets still held at June 30, 2024.
20
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 5. Fair Value Measurements (Continued)
The following table presents a rollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended June 30, 2024.
| Level 3 Fair Value Liability Measurements at | |||||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||
| Inventory- related Payables | Commodity Derivative Contracts Losses | Total Liabilities | |||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ||||||||||||||||||||||||||
| Total increase (decrease) in net realized/unrealized losses included in cost of products sold* | ( | ||||||||||||||||||||||||||||
| Purchases | |||||||||||||||||||||||||||||
| Sales | ( | ( | |||||||||||||||||||||||||||
| Settlements | ( | ( | |||||||||||||||||||||||||||
| Transfers into Level 3 | |||||||||||||||||||||||||||||
| Transfers out of Level 3 | ( | ( | |||||||||||||||||||||||||||
| Ending balance, June 30, 2024 | $ | $ | $ | ||||||||||||||||||||||||||
* Includes increase in unrealized losses of $208 million relating to Level 3 liabilities still held at June 30, 2024.
The following table presents a rollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended June 30, 2023.
| Level 3 Fair Value Asset Measurements at | |||||||||||||||||
| June 30, 2023 | |||||||||||||||||
| Inventories Carried at Market | Commodity Derivative Contracts Gains | Total Assets | |||||||||||||||
| (In millions) | |||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ||||||||||||||
| Total increase (decrease) in net realized/unrealized gains included in cost of products sold* | |||||||||||||||||
| Purchases | |||||||||||||||||
| Sales | ( | ( | |||||||||||||||
| Settlements | ( | ( | ( | ||||||||||||||
| Transfers into Level 3 | |||||||||||||||||
| Transfers out of Level 3 | ( | ( | ( | ||||||||||||||
| Ending balance, June 30, 2023 | $ | $ | $ | ||||||||||||||
* Includes increase in unrealized gains of $780 million relating to Level 3 assets still held at June 30, 2023.
21
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 5. Fair Value Measurements (Continued)
The following table presents a rollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended June 30, 2023.
| Level 3 Fair Value Liability Measurements at | |||||||||||||||||||||||||||||
| June 30, 2023 | |||||||||||||||||||||||||||||
| Inventory- related Payables | Commodity Derivative Contracts Losses | Debt Conversion Option | Total Liabilities | ||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | |||||||||||||||||||||||||
| Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense* | ( | ||||||||||||||||||||||||||||
| Purchases | |||||||||||||||||||||||||||||
| Settlements | ( | ( | — | ( | |||||||||||||||||||||||||
| Transfers into Level 3 | — | ||||||||||||||||||||||||||||
| Transfers out of Level 3 | ( | — | ( | ||||||||||||||||||||||||||
| Ending balance, June 30, 2023 | $ | $ | $ | $ | |||||||||||||||||||||||||
* Includes increase in unrealized losses of $545 million relating to Level 3 liabilities still held at June 30, 2023.
| Level 3 Fair Value Asset Measurements at | |||||||||||||||||
| June 30, 2024 | |||||||||||||||||
| Inventories Carried at Market | Commodity Derivative Contracts Gains | Total Assets | |||||||||||||||
| (In millions) | |||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ||||||||||||||
| Total increase (decrease) in net realized/unrealized gains included in cost of products sold* | |||||||||||||||||
| Purchases | |||||||||||||||||
| Sales | ( | ( | |||||||||||||||
| Settlements | ( | ( | |||||||||||||||
| Transfers into Level 3 | |||||||||||||||||
| Transfers out of Level 3 | ( | ( | ( | ||||||||||||||
| Ending balance, June 30, 2024 | $ | $ | $ | ||||||||||||||
* Includes increase in unrealized gains of $889 million relating to Level 3 assets still held at June 30, 2024.
22
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 5. Fair Value Measurements (Continued)
The following table presents a rollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2024.
| Level 3 Fair Value Liability Measurements at | |||||||||||||||||||||||||||||
| June 30, 2024 | |||||||||||||||||||||||||||||
| Inventory- related Payables | Commodity Derivative Contracts Losses | Total Liabilities | |||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ||||||||||||||||||||||||||
| Total increase (decrease) in net realized/unrealized losses included in cost of products sold* | ( | ||||||||||||||||||||||||||||
| Purchases | |||||||||||||||||||||||||||||
| Sales | ( | ( | |||||||||||||||||||||||||||
| Settlements | ( | ( | |||||||||||||||||||||||||||
| Transfers into Level 3 | |||||||||||||||||||||||||||||
| Transfers out of Level 3 | ( | ( | |||||||||||||||||||||||||||
| Ending balance, June 30, 2024 | $ | $ | $ | ||||||||||||||||||||||||||
* Includes increase in unrealized losses of $546 million relating to Level 3 liabilities still held at June 30, 2024.
The following table presents a rollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2023.
| Level 3 Fair Value Asset Measurements at | |||||||||||||||||
| June 30, 2023 | |||||||||||||||||
| Inventories Carried at Market | Commodity Derivative Contracts Gains | Total Assets | |||||||||||||||
| (In millions) | |||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ||||||||||||||
| Total increase (decrease) in net realized/unrealized gains included in cost of products sold* | |||||||||||||||||
| Purchases | |||||||||||||||||
| Sales | ( | ( | |||||||||||||||
| Settlements | ( | ( | ( | ||||||||||||||
| Transfers into Level 3 | |||||||||||||||||
| Transfers out of Level 3 | ( | ( | ( | ||||||||||||||
| Ending balance, June 30, 2023 | $ | $ | $ | ||||||||||||||
* Includes increase in unrealized gains of $1.4 billion relating to Level 3 assets still held at June 30, 2023.
23
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 5. Fair Value Measurements (Continued)
The following table presents a rollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2023.
| Level 3 Fair Value Liability Measurements at | |||||||||||||||||||||||||||||
| June 30, 2023 | |||||||||||||||||||||||||||||
| Inventory- related Payables | Commodity Derivative Contracts Losses | Debt Conversion Option | Total Liabilities | ||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | |||||||||||||||||||||||||
| Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense* | ( | ||||||||||||||||||||||||||||
| Purchases | |||||||||||||||||||||||||||||
| Settlements | ( | ( | — | ( | |||||||||||||||||||||||||
| Transfers into Level 3 | — | ||||||||||||||||||||||||||||
| Transfers out of Level 3 | ( | — | ( | ||||||||||||||||||||||||||
| Ending balance, June 30, 2023 | $ | $ | $ | $ | |||||||||||||||||||||||||
* Includes increase in unrealized losses of $0.8 billion relating to Level 3 liabilities still held at June 30, 2023.
Transfers into Level 3 of assets and liabilities previously classified in Level 2 were due to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts rising above the 10% threshold. Transfers out of Level 3 were primarily due to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts falling below the 10% threshold and thus permitting reclassification to Level 2.
In some cases, the price components that result in differences between exchange-traded prices and local prices for inventories and commodity purchase and sale contracts are observable based upon available quotations for these pricing components, and in some cases, the differences are unobservable. These price components primarily include transportation costs and other adjustments required due to location, quality, or other contract terms. In the table below, these other adjustments are referred to as basis. The changes in unobservable price components are determined by specific local supply and demand characteristics at each facility and the overall market. Factors such as substitute products, weather, fuel costs, contract terms, and futures prices also impact the movement of these unobservable price components.
The following table sets forth the weighted average percentage of the unobservable price components included in the Company’s Level 3 valuations as of June 30, 2024 and December 31, 2023. The Company’s Level 3 measurements may include basis only, transportation cost only, or both price components. As an example, for Level 3 inventories with basis, the unobservable component as of June 30, 2024 is a weighted average 39.1 % of the total price for assets and 42.7 % of the total price for liabilities.
| Weighted Average % of Total Price | |||||||||||||||||||||||
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Component Type | Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||
| Inventories and Related Payables | |||||||||||||||||||||||
| Basis | % | % | % | % | |||||||||||||||||||
| Transportation cost | % | % | % | % | |||||||||||||||||||
| Commodity Derivative Contracts | |||||||||||||||||||||||
| Basis | % | % | % | % | |||||||||||||||||||
| Transportation cost | % | % | % | % | |||||||||||||||||||
24
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 5. Fair Value Measurements (Continued)
In certain of the Company’s principal markets, the Company relies on price quotes from third parties to value its inventories and physical commodity purchase and sale contracts. These price quotes are generally not further adjusted by the Company in determining the applicable market price. In some cases, availability of third-party quotes is limited to only one or two independent sources. In these situations, absent other corroborating evidence, the Company considers these price quotes as 100% unobservable and, therefore, the fair value of these items is reported in Level 3.
Note 6. Derivative Instruments and Hedging Activities
Derivatives Not Designated as Hedging Instruments
The majority of the Company’s derivative instruments have not been designated as hedging instruments. The Company uses exchange-traded futures and exchange-traded and OTC options contracts to manage its net position of merchandisable agricultural product inventories and forward cash purchase and sales contracts to reduce price risk caused by market fluctuations in agricultural commodities and foreign currencies. The Company also uses exchange-traded futures and exchange-traded and OTC options contracts as components of merchandising strategies designed to enhance margins. The results of these strategies can be significantly impacted by factors such as the correlation between the value of exchange-traded commodities futures contracts and the value of the underlying commodities, counterparty contract defaults, and volatility of freight markets. Derivatives, including exchange-traded contracts and forward commodity purchase or sale contracts, and inventories of certain merchandisable agricultural products, which include amounts acquired under deferred pricing contracts, are stated at fair value. Inventory is not a derivative and therefore fair values of and changes in fair values of inventories are not included in the tables below.
The following table sets forth the fair value of derivatives not designated as hedging instruments as of June 30, 2024 and December 31, 2023.
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Foreign Currency Contracts | $ | $ | $ | $ | |||||||||||||||||||
| Interest Rate Contracts | |||||||||||||||||||||||
| Commodity Contracts | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
25
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 6. Derivative Instruments and Hedging Activities (Continued)
The following tables set forth the pre-tax gains (losses) on derivatives not designated as hedging instruments that have been included in the consolidated statements of earnings for the three and six months ended June 30, 2024 and 2023.
| Other (income) expense - net | |||||||||||||||||||||||||||||
| Cost of | Interest | ||||||||||||||||||||||||||||
| (In millions) | Revenues | products sold | expense | ||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||
| Consolidated Statement of Earnings | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Pre-tax gains (losses) on: | |||||||||||||||||||||||||||||
| Foreign Currency Contracts | $ | $ | ( | $ | $ | — | |||||||||||||||||||||||
| Commodity Contracts | — | ( | — | ||||||||||||||||||||||||||
| Total gain (loss) recognized in earnings | $ | $ | ( | $ | $ | $ | ( | ||||||||||||||||||||||
| Three Months Ended June 30, 2023 | |||||||||||||||||||||||||||||
| Consolidated Statement of Earnings | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Pre-tax gains (losses) on: | |||||||||||||||||||||||||||||
| Foreign Currency Contracts | $ | ( | $ | $ | $ | — | |||||||||||||||||||||||
| Commodity Contracts | — | — | |||||||||||||||||||||||||||
| Debt Conversion Option | — | — | — | ||||||||||||||||||||||||||
| Total gain (loss) recognized in earnings | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||
| Other (income) expense - net | |||||||||||||||||||||||||||||
| Cost of | Interest | ||||||||||||||||||||||||||||
| (In millions) | Revenues | products sold | expense | ||||||||||||||||||||||||||
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||
| Consolidated Statement of Earnings | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Pre-tax gains (losses) on: | |||||||||||||||||||||||||||||
| Foreign Currency Contracts | $ | $ | ( | $ | $ | — | |||||||||||||||||||||||
| Commodity Contracts | — | — | |||||||||||||||||||||||||||
| Total gain (loss) recognized in earnings | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||
| Six Months Ended June 30, 2023 | |||||||||||||||||||||||||||||
| Consolidated Statement of Earnings | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Pre-tax gains (losses) on: | |||||||||||||||||||||||||||||
| Foreign Currency Contracts | $ | ( | $ | $ | $ | — | |||||||||||||||||||||||
| Commodity Contracts | — | — | |||||||||||||||||||||||||||
| Debt Conversion Option | — | — | — | ||||||||||||||||||||||||||
| Total gain (loss) recognized in earnings | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||
Changes in the market value of inventories of certain merchandisable agricultural commodities, inventory-related payables, forward cash purchase and sales contracts, exchange-traded futures and exchange-traded and OTC options contracts are recognized in earnings immediately as a component of cost of products sold.
26
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 6. Derivative Instruments and Hedging Activities (Continued)
Changes in the fair value of foreign currency-related derivatives are recognized in the consolidated statements of earnings as a component of revenues, cost of products sold, and other (income) expense - net depending on the purpose of the contract.
Derivatives Designated as Cash Flow, Fair Value, and Net Investment Hedging Strategies
The Company had certain derivatives designated as cash flow and net investment hedges as of June 30, 2024 and December 31, 2023. In addition, the Company had certain derivatives designated as fair value hedges as of June 30, 2024.
For derivative instruments that are designated and qualify as highly-effective cash flow hedges (i.e., hedging the exposure to variability in expected future cash flow that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of AOCI and as an operating activity in the statement of cash flows, and is reclassified into earnings in the same line item affected by the hedged transaction in the same period or periods during which the hedged transaction affects earnings. Hedge components excluded from the assessment of effectiveness and gains and losses related to discontinued hedges are recognized in the consolidated statement of earnings during the current period.
Commodity Contracts
For each of the hedge programs described below, the derivatives are designated as cash flow hedges. The changes in the market value of such derivative contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. Once the hedged item is recognized in earnings, the gains and losses arising from the hedge are reclassified from AOCI to either revenues or cost of products sold, as applicable.
The Company uses futures or options contracts to hedge the purchase price of anticipated volumes of corn to be purchased and processed in a future month. The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s forecasted purchases of corn. The Company’s corn processing plants normally grind approximately 59 million bushels of corn per month. During the past 12 months, the Company hedged between 12 % and 34 % of its monthly grind. At June 30, 2024, the Company had designated hedges representing between 1 % and 31 % of its anticipated monthly grind of corn for the next 12 months.
The Company uses futures and options contracts to hedge the purchase price of the anticipated volumes of soybeans to be purchased and processed in a future month for certain of its U.S. soybean crush facilities, subject to certain program limits. The Company also uses futures or options contracts to hedge the sales prices of anticipated soybean meal and soybean oil sales proportionate to the soybean crushing process at these facilities, subject to certain program limits. During the past 12 months, the Company hedged between 77 % and 100 % of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities. At June 30, 2024, the Company had designated hedges representing between 0 % and 100 % of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities over the next 12 months.
The Company uses futures and OTC swaps to hedge the purchase price of anticipated volumes of natural gas consumption in a future month for certain of its facilities in North America and Europe, subject to certain program limits. During the past 12 months, the Company hedged between 39 % and 76 % of the anticipated monthly natural gas consumption at the designated facilities. At June 30, 2024, the Company had designated hedges representing between 33 % and 58 % of the anticipated monthly natural gas consumption over the next 12 months.
As of June 30, 2024 and December 31, 2023, the Company had after-tax gains of $26 million and after-tax gains of $42 million in AOCI, respectively, related to gains and losses from these programs. The Company expects to recognize $26 million of the June 30, 2024 after-tax gains in its consolidated statement of earnings during the next 12 months.
Fair Value Hedges
The Company uses interest rate swaps designated as fair value hedges to protect the fair value of fixed-rate debt due to changes in interest rates. The changes in the fair value of the interest rate swaps and the underlying fixed-rate debt is recognized in the consolidated statement of earnings during the current period. The terms of the interest rate swaps match the terms of the underlying debt. The Company executed fixed to floating rate interest swaps with an aggregate notional amount of $500 million as of as of June 30, 2024. As of June 30, 2024, the Company had after-tax gains of $5 million in other current assets and a corresponding decrease to the underlying debt for the same amount with no net impact to earnings.
27
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 6. Derivative Instruments and Hedging Activities (Continued)
Foreign Currency Contracts
The Company uses cross-currency swaps and foreign exchange forwards designated as net investment hedges to protect the Company’s investment in a foreign subsidiary against changes in foreign currency exchange rates. The Company executed USD-fixed to Euro-fixed cross-currency swaps with an aggregate notional amount of $0.8 2.0 billion and $2.1 billion as of June 30, 2024 and December 31, 2023, respectively.
As of June 30, 2024 and December 31, 2023, the Company had after-tax gains of $60 million and after-tax losses of $5 million in AOCI, respectively, related to foreign exchange gains and losses from net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested.
The following table sets forth the fair value of derivatives designated as hedging instruments as of June 30, 2024 and December 31, 2023.
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Commodity Contracts | $ | $ | $ | $ | |||||||||||||||||||
| Foreign Currency Contracts | |||||||||||||||||||||||
| Interest Rate Contracts | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The following table sets forth the pre-tax gains (losses) on derivatives designated as hedging instruments that have been included in the consolidated statements of earnings for the three and six months ended June 30, 2024 and 2023.
| Cost of products sold | |||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Consolidated Statement of Earnings | $ | ||||||||||||||||||||||||||||||||||||||||
| Effective amounts recognized in earnings | |||||||||||||||||||||||||||||||||||||||||
| Pre-tax gains (losses) on: | |||||||||||||||||||||||||||||||||||||||||
| Commodity Contracts | $ | ( | |||||||||||||||||||||||||||||||||||||||
| Total gain (loss) recognized in earnings | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Consolidated Statement of Earnings | $ | ||||||||||||||||||||||||||||||||||||||||
| Effective amounts recognized in earnings | |||||||||||||||||||||||||||||||||||||||||
| Pre-tax gains (losses) on: | |||||||||||||||||||||||||||||||||||||||||
| Commodity Contracts | $ | ( | |||||||||||||||||||||||||||||||||||||||
| Total gain (loss) recognized in earnings | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||
28
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 6. Derivative Instruments and Hedging Activities (Continued)
| Cost of products sold | |||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||
| Consolidated Statement of Earnings | $ | ||||||||||||||||||||||||||||
| Effective amounts recognized in earnings | |||||||||||||||||||||||||||||
| Pre-tax gains (losses) on: | |||||||||||||||||||||||||||||
| Commodity Contracts | $ | ( | |||||||||||||||||||||||||||
| Total gain (loss) recognized in earnings | $ | ( | $ | ( | |||||||||||||||||||||||||
| Six Months Ended June 30, 2023 | |||||||||||||||||||||||||||||
| Consolidated Statement of Earnings | $ | ||||||||||||||||||||||||||||
| Effective amounts recognized in earnings | |||||||||||||||||||||||||||||
| Pre-tax gains (losses) on: | |||||||||||||||||||||||||||||
| Commodity Contracts | $ | ( | |||||||||||||||||||||||||||
| Total gain (loss) recognized in earnings | $ | ( | $ | ( | |||||||||||||||||||||||||
Other Net Investment Hedging Strategies
The Company has designated €0.7 227 million and $212 million in AOCI, respectively, related to foreign exchange gains and losses from the net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested.
Note 7. Other Current Assets
The following table sets forth the items in other current assets:
| June 30, | December 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| (In millions) | |||||||||||
| Unrealized gains on derivative contracts | $ | $ | |||||||||
| Margin deposits and grain accounts | |||||||||||
| Customer omnibus receivable | |||||||||||
Financing receivables - net (1) | |||||||||||
| Insurance premiums receivable | |||||||||||
| Prepaid expenses | |||||||||||
| Biodiesel tax credit | |||||||||||
| Tax receivables | |||||||||||
| Non-trade receivables | |||||||||||
| Other current assets | |||||||||||
| $ | $ | ||||||||||
(1) The Company provides financing to certain suppliers, primarily Brazilian farmers, to finance a portion of the suppliers’ production costs. The amounts are reported net of allowances of $6 5 million and $10 million for the three and six months ended June 30, 2024,
29
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 7. Other Current Assets (Continued)
respectively, and $4 million and $10 million for the three and six months ended June 30, 2023, respectively, is included in interest and investment income in the consolidated statements of earnings.
Note 8. Accrued Expenses and Other Payables
The following table sets forth the items in accrued expenses and other payables:
| June 30, | December 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| (In millions) | |||||||||||
| Unrealized losses on derivative contracts | $ | $ | |||||||||
| Accrued compensation | |||||||||||
| Income tax payable | |||||||||||
| Other taxes payable | |||||||||||
| Insurance claims payable | |||||||||||
| Contract liability | |||||||||||
Other accruals and payables | |||||||||||
| $ | $ | ||||||||||
Note 9. Debt and Financing Arrangements
At June 30, 2024, the fair value of the Company’s long-term debt was below the carrying value by $0.5 billion, as estimated using quoted market prices (a Level 2 measurement under applicable accounting standards).
At June 30, 2024, the Company had lines of credit, including the accounts receivable securitization programs described below, totaling $12.3 billion, of which $7.8 billion was unused. Of the Company’s total lines of credit, $5.0 billion supported the combined U.S. and European commercial paper borrowing programs, against which there was $1.0 billion of commercial paper outstanding at June 30, 2024.
Note 10. Income Taxes
The Company’s effective tax rate was 19.3 % and 19.0 % for the three and six months ended June 30, 2024, respectively, compared to 18.0 % and 17.0 % for the three and six months ended June 30, 2023, respectively. The increase in the rate was primarily due to the impact of discrete tax items, partially offset by the change in the geographic mix of forecasted pretax earnings.
The Organization for Economic Cooperation and Development’s Pillar Two initiative introduced a 15% global minimum tax applied on a country-by-country basis that has been enacted in certain jurisdictions in which the Company operates, with effective dates starting in fiscal year 2024. The Company is in scope of the enacted legislation and has performed an assessment of the potential exposure based on its most recent tax filings, country-by-country reporting, and the financial results of the constituent entities. Based on the assessment, the effective tax rates in most of the jurisdictions in which the Company operates are above the 15% global minimum tax threshold. However, there are a limited number of jurisdictions where the effective tax rate is close to 15%. ADM does not expect a material liability to global minimum tax in those jurisdictions.
The Company is subject to income taxation and routine examinations in many jurisdictions around the world and frequently faces challenges regarding the amount of taxes due. These challenges include positions taken by the Company related to the timing, nature, and amount of deductions and the allocation of income among various tax jurisdictions. In its routine evaluations of the exposure associated with various tax filing positions, the Company recognizes a liability, when necessary, for
30
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 10. Income Taxes (Continued)
estimated potential tax owed by the Company in accordance with applicable accounting standards. Resolution of the related tax positions, through negotiations with relevant tax authorities or through litigation, may take years to complete. Therefore, it is difficult to predict the timing for resolution of tax positions and the Company cannot predict or provide assurance as to the ultimate outcome of these ongoing or future examinations. However, the Company does not anticipate the total amount of unrecognized tax benefits will increase or decrease significantly in the next twelve months. Given the long periods of time involved in resolving tax positions, the Company does not expect the recognition of unrecognized tax benefits will have a material impact on the Company’s effective income tax rate in any given period.
In 2014, the Company’s wholly-owned subsidiary in the Netherlands, ADM Europe B.V., received a tax assessment from the Netherlands tax authority challenging the transfer pricing aspects of a 2009 business reorganization, which involved two of its subsidiary companies in the Netherlands. As of June 30, 2024, this assessment was $87 million in tax and $35 million in interest (adjusted for variation in currency exchange rates). On April 23, 2020, the court issued an unfavorable ruling and in October 2020, assigned a third party expert to establish a valuation. During the second quarter of 2021, the third party expert issued a final valuation. On September 30, 2022, the court issued a ruling consistent with the valuation report, and both the Dutch tax authorities and ADM filed an appeal. On July 11, 2024, the Court of Appeals issued a decision which resulted in the Company increasing its uncertain tax position for this matter equal to the Court’s decision. The Company is evaluating the legal options. As of June 30, 2024, the Company has accrued its best estimate of what it believes will be the likely outcome of the litigation.
Note 11. Shareholders’ Equity
Accelerated Share Repurchase
On March 12, 2024, the Company entered into an accelerated share repurchase (“ASR”) transaction agreement (“ASR Agreement”) with Merrill Lynch International, an affiliate of BofA Securities, Inc., to repurchase $1.0 billion (the “Prepayment Amount”) of ADM common stock (“Common Stock”). The ASR transaction is part of ADM’s existing share repurchase program to repurchase up to 200 million shares through December 31, 2024 .
Under the terms of the ASR Agreement, on March 13, 2024, the Company paid the Prepayment Amount and received no upfront shares of Common Stock. The total number of shares of Common Stock repurchased under the ASR Agreement were determined based on volume weighted-average prices of the Common Stock during the term of the ASR transaction less a discount and subject to certain adjustments pursuant to the terms of the ASR Agreement.
On March 28, 2024, the Company received an interim delivery of 8,880,986 shares at an average share price of $60.596 or $538 million. The Prepayment Amount initially recorded in additional paid in capital was partially reclassified to reinvested earnings for the $538 million amount repurchased. On April 15, 2024, the Company received a final delivery of 7,325,733 shares at an average share price of $63.045 , or $462 million in aggregate, as final settlement of the ASR transaction and such amount was reclassified during the quarter ended June 30, 2024, to reinvested earnings.
As of June 30, 2024, the Company had 14.8 million remaining shares under its share repurchase program.
31
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 11. Shareholders’ Equity (Continued)
Accumulated Other Comprehensive Income
The following tables set forth the changes in AOCI by component for the three and six months ended June 30, 2024 and the reclassifications out of AOCI for the three and six months ended June 30, 2024 and 2023:
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||
| Foreign Currency Translation Adjustment | Deferred Gain (Loss) on Hedging Activities | Pension Liability Adjustment | Unrealized Gain (Loss) on Investments | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | ( | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ( | ||||||||||||||||||||||||||
| Gain (loss) on net investment hedges | — | — | — | ||||||||||||||||||||||||||
| Amounts reclassified from AOCI | ( | ||||||||||||||||||||||||||||
| Tax effect | ( | ||||||||||||||||||||||||||||
| Net of tax amount | ( | ( | ( | ( | |||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | ( | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||
| Foreign Currency Translation Adjustment | Deferred Gain (Loss) on Hedging Activities | Pension Liability Adjustment | Unrealized Gain (Loss) on Investments | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Gain (loss) on net investment hedges | — | — | — | ||||||||||||||||||||||||||
| Amounts reclassified from AOCI | ( | ( | |||||||||||||||||||||||||||
| Tax effect | ( | ( | ( | ||||||||||||||||||||||||||
| Net of tax amount | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | ( | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
32
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 11. Shareholders’ Equity (Continued)
| Amount reclassified from AOCI | ||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | Affected line item in the consolidated statements of earnings | ||||||||||||||||||
| Details about AOCI components | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||
| (In millions) | ||||||||||||||||||||
| Deferred loss (gain) on hedging activities | ||||||||||||||||||||
| $ | $ | $ | $ | Cost of products sold | ||||||||||||||||
| Total before tax | ||||||||||||||||||||
| ( | ( | ( | Tax | |||||||||||||||||
| $ | $ | $ | $ | Net of tax | ||||||||||||||||
| Pension liability adjustment | ||||||||||||||||||||
| Amortization of defined benefit pension items: | ||||||||||||||||||||
| Prior service loss (credit) | $ | ( | $ | ( | $ | ( | $ | ( | Other (income) expense-net | |||||||||||
| Actuarial losses | ( | Other (income) expense-net | ||||||||||||||||||
| ( | ( | ( | ( | Total before tax | ||||||||||||||||
| ( | Tax | |||||||||||||||||||
| $ | ( | $ | ( | $ | ( | $ | ( | Net of tax | ||||||||||||
The Company’s accounting policy is to release the income tax effects from AOCI when the individual units of account are sold, terminated, or extinguished.
Note 12. Other (Income) Expense – Net
The following table sets forth the items in other (income) expense:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Gains on sale of assets | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other – net | ( | ( | ( | ( | |||||||||||||||||||
| Other (Income) Expense – Net | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Gains on sale of assets in the three and six months ended June 30, 2024 and 2023 consisted of gains on sales of certain assets and disposals of individually insignificant assets in the ordinary course of business.
Note 13. Segment Information - Restated
The Company’s operations are organized, managed, and classified into three reportable business segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. Each of these segments is organized based upon the nature of products and services offered. The Company’s remaining operations are not reportable segments, as defined by the applicable accounting standard, and are classified as Other Business.
Intersegment sales have been recorded using principles consistent with ASC 606, Revenue from Contracts with Customers.
33
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 13. Segment Information - Restated (Continued)
Operating profit for each segment is based on net sales less identifiable operating expenses. Also included in operating profit for each segment is equity in earnings of affiliates based on the equity method of accounting. Specified items and certain corporate items are not allocated to the Company’s individual business segments because operating performance of each business segment is evaluated by management exclusive of these items. Corporate results principally include unallocated corporate expenses, interest cost net of interest income, and revaluation gains and losses on cost method investments and the share of the results of equity investments in early-stage start-up companies.
Restatement of Certain Segment-Specific Historical Financial Information
As described in Note 1 to the Consolidated Financial Statements, the Company has restated its Consolidated Financial Statements as of June 30, 2024 and 2023 and for the three and six months ended June 30, 2024 and 2023. As a result, the previously reported financial information as of June 30, 2024 and 2023 and for the three and six months ended June 30, 2024 and 2023 in this Note 13. Segment Information, has been updated to reflect the restatements.
The following tables set forth the impact of the restatements on intersegment sales and segment operating profit for each of the Company’s three reportable segments for the three and six months ended June 30, 2024 and 2023.
Intersegment pricing adjustments include restatements related to intersegment sales that were not in accordance with prior disclosures about presenting such sales at amounts approximating market. Intersegment classification adjustments include restatements related to intrasegment sales (resulting from sales within the segment) previously misclassified and reported as intersegment sales (resulting from sales from one segment to another). Intersegment pricing adjustments and Intersegment classification adjustments are included within the Intersegment sales amounts and segment operating profit amounts previously reported by the Company in the Form 10-Q filed with the SEC on July 30, 2024.
In the course of testing new controls implemented as part of the Company’s material weakness remediation plan in the third quarter of 2024, ADM identified additional intrasegment sales previously misclassified and reported as intersegment sales. The Company also identified some intersegment sales that were not accounted for consistently in accordance with revenue recognition and segment reporting standards and should not have been reported as intersegment sales. These amounts are presented in the table below as Additional intersegment classification adjustments. The Company also is correcting certain segment disclosure presentation errors in this Form 10-Q/A. See Note 1. for further information.
Impact of the Restatement on the Ag Services and Oilseeds Segment
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
| (In millions) | 2024 (Restated) | 2023 (Restated) | 2024 (Restated) | 2023 (Restated) | |||||||||||||
| Intersegment revenues, as originally reported | $ | $ | $ | $ | |||||||||||||
| Intersegment pricing adjustments | |||||||||||||||||
| Intersegment classification adjustments | ( | ( | |||||||||||||||
| Intersegment revenues, as previously reported | |||||||||||||||||
| Additional intersegment classification adjustments | ( | ( | ( | ( | |||||||||||||
| Intersegment revenues, as restated | $ | $ | $ | $ | |||||||||||||
| Segment operating profit, as originally reported | $ | $ | $ | $ | |||||||||||||
| Intersegment pricing adjustments | |||||||||||||||||
| Segment operating profit, as restated | $ | $ | $ | $ | |||||||||||||
34
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 13. Segment Information - Restated (Continued)
Impact of the Restatement on the Carbohydrate Solutions Segment
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
| (In millions) | 2024 (Restated) | 2023 (Restated) | 2024 (Restated) | 2023 (Restated) | |||||||||||||
| Intersegment revenues, as originally reported | $ | $ | $ | $ | |||||||||||||
| Intersegment pricing adjustments | |||||||||||||||||
| Intersegment classification adjustments | ( | ( | |||||||||||||||
| Intersegment revenues, as previously reported | |||||||||||||||||
| Additional intersegment classification adjustments | ( | ( | ( | ( | |||||||||||||
| Intersegment revenues, as restated | $ | $ | $ | $ | |||||||||||||
| Segment operating profit, as originally reported | $ | $ | $ | $ | |||||||||||||
| Intersegment pricing adjustments | |||||||||||||||||
| Segment operating profit, as restated | $ | $ | $ | $ | |||||||||||||
Impact of the Restatement on the Nutrition Segment
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
| (In millions) | 2024 (Restated) | 2023 (Restated) | 2024 (Restated) | 2023 (Restated) | |||||||||||||
| Intersegment revenues, as originally reported | $ | $ | $ | $ | |||||||||||||
| Intersegment pricing adjustments | |||||||||||||||||
| Intersegment classification adjustments | ( | ( | |||||||||||||||
| Intersegment revenues, as previously reported | |||||||||||||||||
| Additional intersegment classification adjustments | ( | ( | |||||||||||||||
| Intersegment revenues, as restated | $ | $ | $ | $ | |||||||||||||
| Segment operating profit, as originally reported | $ | $ | $ | $ | |||||||||||||
| Intersegment pricing adjustments | ( | ( | |||||||||||||||
| Segment operating profit, as restated | $ | $ | $ | $ | |||||||||||||
For more information about the Company’s business segments, refer to Note 17 of “Notes to Consolidated Financial Statements” included in Item 8, “Financial Statements and Supplementary Data” included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023.
35
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 13. Segment Information - Restated (Continued)
Segment Information for the Three and Six Months ended June 30, 2024 and 2023 | |||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Revenues from external customers | |||||||||||||||||||||||
| Ag Services and Oilseeds | |||||||||||||||||||||||
| Ag Services | $ | $ | $ | $ | |||||||||||||||||||
| Crushing | |||||||||||||||||||||||
| Refined Products and Other | |||||||||||||||||||||||
| Total Ag Services and Oilseeds | |||||||||||||||||||||||
| Carbohydrate Solutions | |||||||||||||||||||||||
| Starches and Sweeteners | |||||||||||||||||||||||
| Vantage Corn Processors | |||||||||||||||||||||||
| Total Carbohydrate Solutions | |||||||||||||||||||||||
| Nutrition | |||||||||||||||||||||||
| Human Nutrition | |||||||||||||||||||||||
| Animal Nutrition | |||||||||||||||||||||||
| Total Nutrition | |||||||||||||||||||||||
Total segment revenues from external customers | |||||||||||||||||||||||
| Other Business | |||||||||||||||||||||||
| Total revenues from external customers | $ | $ | $ | $ | |||||||||||||||||||
Intersegment revenues, as restated | |||||||||||||||||||||||
| Ag Services and Oilseeds | $ | $ | $ | $ | |||||||||||||||||||
| Carbohydrate Solutions | |||||||||||||||||||||||
| Nutrition | |||||||||||||||||||||||
Total intersegment revenues, as restated | $ | 675 | $ | 798 | $ | 1,323 | $ | 1,610 | |||||||||||||||
Segment operating profit, as restated | |||||||||||||||||||||||
| Ag Services and Oilseeds | $ | $ | $ | $ | |||||||||||||||||||
| Carbohydrate Solutions | |||||||||||||||||||||||
| Nutrition | |||||||||||||||||||||||
Total segment operating profit, as restated | |||||||||||||||||||||||
Other Business earnings (loss) | |||||||||||||||||||||||
| Corporate | ( | ( | ( | ( | |||||||||||||||||||
| Specified items: | |||||||||||||||||||||||
Gains on sale of assets(1) | |||||||||||||||||||||||
Impairment and restructuring charges(2) | ( | ( | ( | ( | |||||||||||||||||||
| Earnings before income taxes | $ | $ | $ | $ | |||||||||||||||||||
(1) Prior year period gains were related to the sale of certain assets.
36
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 14. Asset Impairment, Exit, and Restructuring Costs
Asset impairment, exit, and restructuring costs in the three and six months ended June 30, 2024 consisted of impairments related to certain long-lived assets of $7 million and $10 million, respectively, and restructuring charges of $3 million for the six months ended June 30, 2024, presented as specified items, and restructuring charges in Corporate of $12 million, for the six months ended June 30, 2024.
Asset impairment, exit, and restructuring costs in the three and six months ended June 30, 2023 consisted of $43 million and $46 million, respectively, of impairments related to certain long-lived assets and intangibles, respectively, and $17 million and $21 million, respectively, of restructuring charges, presented as specified items.
Note 15. Sale of Accounts Receivable
The Company has an accounts receivable securitization program (the “First Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “First Purchasers”). Under the First Program, certain U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Receivables, LLC (“ADM Receivables”). ADM Receivables transfers certain of the purchased accounts receivable to each of the First Purchasers together with a security interest in all of its right, title, and interest in the remaining purchased accounts receivable. In exchange, ADM Receivables receives a cash payment of up to $1.7 billion for the accounts receivable transferred. The First Program terminates on May 16, 2025, unless extended.
The Company also has an accounts receivable securitization program (the “Second Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “Second Purchasers”). Under the Second Program, certain non-U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Ireland Receivables Company (ADM Ireland Receivables). ADM Ireland Receivables transfers certain of the purchased accounts receivable to each of the Second Purchasers together with a security interest in all of its right, title, and interest in the remaining purchased accounts receivable. In exchange, ADM Ireland Receivables receives a cash payment of up to $1.1 billion (€1.0 billion) for the accounts receivables transferred. The Second Program terminates on April 18, 2025, unless extended.
Under the First and Second Programs (collectively, the “Programs”), ADM Receivables and ADM Ireland Receivables use the cash proceeds from the transfer of receivables to the First Purchasers and Second Purchasers (collectively, the “Purchasers”) and other consideration, as applicable, to finance the purchase of receivables from the Company and the ADM subsidiaries originating the receivables. The Company accounts for these transfers as sales. The Company acts as a servicer for the transferred receivables. At June 30, 2024 and December 31, 2023, the Company did not record a servicing asset or liability related to its retained responsibility, based on its assessment of the servicing fee, market values for similar transactions, and its cost of servicing the receivables sold.
As of June 30, 2024 and December 31, 2023, the fair value of trade receivables transferred to the Purchasers under the Programs and derecognized from the Company’s consolidated balance sheets was $2.1 billion and $1.6 billion, respectively. Total receivables sold were $23.6 billion and $28.8 billion for the six months ended June 30, 2024 and 2023, respectively. Cash collections from customers on receivables sold were $23.0 billion and $28.4 billion for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, receivables pledged as collateral to the Purchasers was $0.8 billion and $1.1 billion, respectively.
Transfers of receivables under the Programs resulted in an expense for the loss on sale of $26 million and $53 million for the three and six months ended June 30, 2024, respectively, and $11 million and $34 million for the three and six months ended June, 30, 2023, respectively, which is classified as selling, general, and administrative expenses in the consolidated statements of earnings.
All cash flows under the Programs are classified as operating activities because the cash received from the Purchasers upon both the sale and collection of the receivables is not subject to significant interest rate risk given the short-term nature of the Company’s trade receivables.
37
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 16. Supplier Finance Programs
ADM has Supplier Payable Programs (“SPP”) with financial institutions which act as its paying agents for payables due to certain of its suppliers. The Company has neither an economic interest in a supplier’s participation in the SPP nor a direct financial relationship with the financial institutions, and has concluded that its obligations to the suppliers, including amounts due and scheduled payment terms, are not impacted by their participation in the SPP. Accordingly, amounts associated with the SPP continue to be classified in trade payables in the Company’s consolidated balance sheet and in operating activities in its consolidated statement of cash flows. The supplier invoices that have been confirmed as valid under the program require payment in full generally within 90 days of the invoice date. As of June 30, 2024 and December 31, 2023, the Company’s outstanding payment obligations that suppliers had elected to sell to the financial institutions were $289 million and $274 million, respectively.
Changes to the outstanding payment obligations were as follows:
| June 30, 2024 | |||||
| (In millions) | |||||
| Beginning, January 1, 2024 | $ | ||||
| Obligations confirmed | |||||
| Obligations paid | ( | ||||
| Ending, June 30, 2024 | $ | ||||
Note 17. Legal Proceedings
The Company is routinely involved in a number of actual or threatened legal actions, including those involving alleged personal injuries, employment law, product liability, intellectual property, environmental issues, alleged tax liability (see Note 10 for information on income tax matters), and class actions. The Company also routinely receives inquiries from regulators and other government authorities relating to various aspects of its business, and at any given time, the Company has matters at various stages of resolution. The outcomes of these matters are not within the Company’s complete control and may not be known for prolonged periods of time. In some actions, claimants seek damages, as well as other relief including injunctive relief, that could require significant expenditures or result in lost revenues. In accordance with applicable accounting standards, the Company records a liability in its consolidated financial statements for material loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a material loss contingency is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict, particularly when the matters are in early procedural stages, with incomplete facts or legal discovery; involve unsubstantiated or indeterminate claims for damages; potentially involve penalties, fines, disgorgement, or punitive damages; or could result in a change in business practice. The Company’s estimated loss or range of loss with respect to loss contingencies may change from time to time, and it is reasonably possible the Company will incur actual losses in excess of the amounts currently accrued and such additional amounts may be material. While the Company continues to work with parties with respect to potential resolution, no assurance can be given that it will be successful in doing so and the Company cannot predict the outcome of these matters.
Commodities Class Actions
On September 4, 2019, AOT Holding AG (“AOT”) filed a putative class action under the U.S. Commodities Exchange Act in federal district court in Urbana, Illinois, alleging the Company sought to manipulate the benchmark price used to price and settle ethanol derivatives traded on futures exchanges. On March 16, 2021, AOT filed an amended complaint adding a second named plaintiff Maize Capital Group, LLC (“Maize”). AOT and Maize allege that members of the putative class collectively suffered damages calculated to be between approximately $500 million to over $2.0 billion as a result of the Company’s alleged actions. On July 14, 2020, Green Plains Inc. and its related entities (“GP”) filed a putative class action lawsuit, alleging
38
Archer-Daniels-Midland Company
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 17. Legal Proceedings (Continued)
substantially the same operative facts, in federal court in Nebraska, seeking to represent sellers of ethanol. On July 23, 2020, Midwest Renewable Energy, LLC (“MRE”) filed a putative class action in federal court in Illinois alleging substantially the same operative facts and asserting claims under the Sherman Act. On November 11, 2020, United Wisconsin Grain Producers LLC (“UWGP”) and five other ethanol producers filed a lawsuit in federal court in Illinois alleging substantially the same facts and asserting claims under the Sherman Act and Illinois, Iowa, and Wisconsin law. The court granted ADM’s motion to dismiss the MRE and UWGP complaints without prejudice on August 9, 2021 and September 28, 2021, respectively. On August 16, 2021, the court granted ADM’s motion to dismiss the GP complaint, dismissing one claim with prejudice and declining jurisdiction over the remaining state law claim. MRE filed an amended complaint on August 30, 2021, which ADM moved to dismiss on September 27, 2021. The court denied ADM’s motion to dismiss on September 26, 2023. UWGP filed an amended complaint on October 19, 2021, which the court dismissed on July 12, 2022. UWGP has appealed the dismissal to the United States Court of Appeals for the Seventh Circuit. On October 26, 2021, GP filed a new complaint in Nebraska federal district court, alleging substantially the same facts and asserting a claim for tortious interference with contractual relations. On March 18, 2022, the Nebraska federal district court granted ADM’s motion to transfer the GP case back to the Central District of Illinois for further proceedings. ADM moved to dismiss the complaint on May 20, 2022 and on December 30, 2022, the court dismissed GP’s complaint with prejudice. GP appealed the dismissal. On January 12, 2024, the appellate court vacated the dismissal and remanded the case to the district court for further proceedings. On March 8, 2024, GP filed an amended complaint, which ADM has moved to dismiss. The Company denies liability, and is vigorously defending itself in these actions. As these actions are in pretrial proceedings, the Company is unable at this time to predict the final outcome with any reasonable degree of certainty, but believes the outcome will not have a material adverse effect on its financial condition, results of operations, or cash flows.
Intersegment Sales Investigations
On June 30, 2023, the Company received a voluntary document request from the SEC relating to intersegment sales between the Company’s Nutrition reporting segment and the Company’s Ag Services and Oilseeds and Carbohydrate Solutions reporting segments, and subsequently received additional document requests from the SEC. The Company is cooperating with the SEC. Following the Company’s January 21, 2024 announcement of the Investigation, the Company received document requests from the Department of Justice (“DOJ”) focused primarily on the same subject matter, and the DOJ directed grand jury subpoenas to certain current and former Company employees. The Company is cooperating with the DOJ. The Company is unable to predict the final outcome of these investigations with any reasonable degree of certainty.
Shareholder Litigation
On January 24, 2024, following the Company’s January 21, 2024 announcement of the investigation relating to intersegment sales, a purported stockholder of the Company filed a putative class action in the U.S. District Court for the Northern District of Illinois against the Company and its Chief Executive Officer, as well as Vikram Luthar and Ray Young. On June 24, 2024, the court-appointed lead plaintiffs filed an amended putative class action complaint against the Company, its Chief Executive Officer, as well as Vikram Luthar, Ray Young, and Vince Macciocchi. Plaintiffs allege false and misleading statements in the Company’s disclosures related to ADM’s Nutrition segment and seek unspecified compensatory and punitive damages. Beginning on March 29, 2024, purported stockholders of the Company filed four derivative lawsuits in the U.S. District Court for the Northern District of Illinois and the U.S. District Court for the District of Delaware, against the Chief Executive Officer, Vikram Luthar, Ray Young, and certain individual current and former ADM Directors, alleging false and misleading statements in the Company’s proxy statements, breach of fiduciary duty, and corporate waste, among other claims, and seeking unspecified damages. The plaintiffs voluntarily dismissed one of the derivative complaints; the remainder have been consolidated in the U.S. District Court for the District of Delaware and the plaintiffs’ amended complaint is due September 13, 2024. The Company is unable to predict the final outcome of these proceedings with any reasonable degree of certainty.
Note 18. Subsequent Event
On July 28, 2024, there was an explosion at the Company’s Decatur, Illinois production complex resulting in damage to an elevator with no injuries to employees. The Company is assessing the operational and financial impacts of this event.
39
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the accompanying unaudited consolidated financial statements.
Restatement of Previously Issued Consolidated Financial Statements
As described in the Explanatory Note above and in Part I, Item 1, Note 1 to the Consolidated Financial Statements, the Company has restated its Consolidated Financial Statements as of June 30, 2024 and 2023 and for the three and six months ended June 30, 2024 and 2023 contained in this Amendment. As a result, the previously reported financial information as of June 30, 2024 and 2023 and for the three and six months ended June 30, 2024 and 2023, in this Item 2. MD&A has been updated to reflect the relevant restatements. See Item 1, Note 1. Basis of Presentation and Restatement of Previously Filed Consolidated Financial Statements, and Note 13. Segment Information, in the Consolidated Financial Statements for additional information related to the restatements, including descriptions of the adjustments and the impacts on the Consolidated Financial Statements.
The Company also is correcting certain segment disclosure presentation errors. In this Amendment, the Company is revising its reconciliation and calculation of total segment operating profit. The revised reconciliation in Note 13. Segment Information presents a subtotal for total segment operating profit that is equal to the sum of the segment operating profit reported for each of the Ag Services and Oilseeds, Carbohydrate Solutions and Nutrition segments. Amounts for other business and specified items, which previously were reflected in the calculation of total segment operating profit, are now reflected as reconciling items, similar to Corporate, between total segment operating profit and earnings before income taxes.
Company Overview
ADM is an essential global agricultural supply chain manager and processor; a premier human and animal nutrition provider; a trailblazer in groundbreaking solutions to support healthier living; an industry-leading innovator in replacing petroleum-based products; and a leader in sustainability. The Company is one of the world’s leading producers of ingredients for sustainable nutrition. The Company uses its significant global asset base to originate and transport agricultural commodities, connecting to markets in over 190 countries. The Company also processes corn, oilseeds, and wheat into products for food, animal feed, industrial, and energy uses. The Company also engages in the manufacturing, sale, and distribution of a wide array of ingredients and solutions including plant-based proteins, natural flavors, flavor systems, natural colors, emulsifiers, soluble fiber, polyols, hydrocolloids, probiotics, prebiotics, enzymes, botanical extracts, and other specialty food and feed ingredients. The Company uses its global asset network, business acumen, and its relationships with suppliers and customers to efficiently connect the harvest to the home thereby generating returns for its shareholders, principally from margins earned on these activities.
The Company’s operations are organized, managed, and classified into three reportable business segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. Each of these segments is organized based upon the nature of products and services offered. The Company’s remaining operations are not reportable business segments, as defined by the applicable accounting standard, and are classified as Other Business. Financial information with respect to the Company’s reportable business segments is set forth in Note 13 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements”.
ADM’s recent significant portfolio actions and announcements include:
•the acquisitions in January 2024 of Revela Foods, a Wisconsin-based developer and manufacturer of innovative dairy flavor ingredients and solutions and FDL, a UK-based leading developer and producer of premium flavor and functional ingredient systems.
Sustainability is a key driver in ADM’s expanding portfolio of environmentally responsible, plant-derived products. Consumers today increasingly expect their food and drink to come from sustainable ingredients, produced by companies that share their values, and ADM is continually finding new ways to meet those needs through its portfolio actions.
The Company’s strategic transformation is focused on three strategic pillars: Productivity, Innovation, and Culture.
The Productivity pillar includes (1) partnering across various global teams including procurement, supply chain, operations, and commercial to optimize costs and improve production volumes across the enterprise; (2) continued roll out of the 1ADM
40
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
business transformation program and implementation of improved standardized business processes; and (3) increased use of technology, data analytics, and automation at production facilities, in offices, and with customers to improve efficiencies and customer service.
The Innovation pillar includes expansions and investments in (1) improving the customer experience by leveraging producer relationships and enhancing the use of state-of-the-art digital technology; (2) sustainability-driven innovation, which encompasses the full range of products, solutions, capabilities, and commitments to serve customers’ needs; and (3) growth initiatives, including organic growth with additional capacity to meet growing market demand and strategic objectives.
The Culture pillar focuses on building capabilities and enabling collaboration, teamwork, and agility from process standardization and digitalization and ADM’s diversity, equity, and inclusion initiatives, which bring new perspectives and expertise to the Company’s decision-making.
ADM plans to support the three pillars with investments in technology, which include expanding digital capabilities and investing further in research and development.
Environmental and Social Responsibility
The Company’s policy to protect forests, biodiversity, and communities includes provisions that promote conservation of water resources and biodiversity in agricultural landscapes, promote solutions to reduce climate change and greenhouse gas emissions, and support agriculture as a means to advance sustainable development by reducing poverty and increasing food security. Additionally, the policy confirms ADM’s commitment to protect human rights defenders, whistleblowers, complainants, and community spokespersons; ADM’s aspiration to cooperate with all parties necessary to enable access to fair and just remediation; and the Company’s non-compliance protocol for suppliers. In 2022, the Company achieved full traceability of its direct and indirect sourcing throughout its soy supply chains in Brazil, Paraguay, and Argentina. ADM is committed to eliminating deforestation from all of the Company’s supply chains by 2025. In 2023, after a strategic investigation of the impact of conversion of native habitats in its key supply chains, the Company announced its commitment to eliminate conversion of native habitats in high risk areas in South America for direct suppliers of all commodities by 2025 and indirect suppliers by 2027, with a 2025 cutoff date (a date after which conversion of primary native vegetation renders a given area or production unit non-compliant) for both direct and indirect suppliers.
The Company’s environmental goals, collectively called “Strive 35” – an ambitious plan to, by 2035, reduce absolute Scope 1 and 2 greenhouse gas (GHG) emissions by 25 percent from a 2019 baseline, reduce Scope 3 emissions by 25% from a 2021 baseline, reduce energy intensity by 15 percent from a 2019 baseline, reduce water intensity by 10 percent from a 2019 baseline, and achieve a 90 percent landfill diversion rate. In 2023, ADM refined two of its Strive 35 commitments to more meaningfully drive progress: ADM aims to reduce its absolute water withdrawal by 10%, from a 2019 baseline, by 2035, and ADM aims to increase its use of low-carbon energy sources to 25% of total energy used by 2035.
Operating Performance Indicators
The Company is exposed to certain risks inherent to an agricultural-based commodity business. These risks are further described in Part I Item 1A, “Risk Factors” included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023.
The Company’s Ag Services and Oilseeds and Carbohydrate Solutions operations are principally agricultural commodity-based businesses where changes in selling prices move in relationship to changes in prices of the commodity-based agricultural raw materials. As a result, changes in agricultural commodity prices have relatively equal impacts on both revenues and cost of products sold. Therefore, changes in revenues of these businesses do not necessarily correspond to changes in margins or gross profit. Thus, gross margins per volume or metric ton are more meaningful than gross margins as percentage of revenues.
The Nutrition businesses also utilize agricultural commodities (or products derived from agricultural commodities) as raw materials. However, in these operations, agricultural commodity market price changes do not necessarily correlate to changes in cost of products sold. Therefore, changes in revenues of these businesses may correspond to changes in margins or gross profit. Thus, gross margins rates are more meaningful as a performance indicator in these businesses.
41
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company has consolidated subsidiaries in more than 70 countries. For the majority of the Company’s subsidiaries located outside the United States, the local currency is the functional currency except for certain significant subsidiaries in Switzerland where Euro is the functional currency, and Brazil and Argentina where U.S. dollar is the functional currency. Revenues and expenses denominated in foreign currencies are translated into U.S. dollars at the weighted average exchange rates for the applicable periods. For the majority of the Company’s business activities in Brazil and Argentina, the functional currency is the U.S. dollar; however, certain transactions, including taxes, occur in local currency and require remeasurement to the functional currency. Changes in revenues are expected to be correlated to changes in expenses reported by the Company caused by fluctuations in the exchange rates of foreign currencies, primarily the Euro, British pound, Canadian dollar, and Brazilian real, as compared to the U.S. dollar. Effective April 1, 2022, the Company changed the functional currency of its Turkish entities to the U.S. dollar which did not and is not expected to have a material impact on the Company’s consolidated financial statements.
The Company measures its performance using key financial metrics including net earnings, adjusted earnings per share (EPS), gross margins, segment operating profit, total segment operating profit, earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA, return on invested capital, economic value added, and operating cash flows before working capital. Some of these metrics are not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures. For more information, see “Non-GAAP Financial Measures” on page 46. The Company’s financial results can vary significantly due to changes in factors such as fluctuations in energy prices, weather conditions, crop plantings, government programs and policies, trade policies, changes in global demand, general global economic conditions, changes in standards of living, global production of similar and competitive crops, and geopolitical developments. Due to the unpredictable nature of these and other factors, the Company undertakes no responsibility for updating any forward-looking information contained within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Market Factors Influencing Operations or Results in the Three Months Ended June 30, 2024
The Company is subject to a variety of market factors which affect the Company's operating results. In Ag Services and Oilseeds, following two years of very favorable market conditions, several headwinds in the agriculture cycle led to more normalized conditions throughout the entire value chain. Ag Services experienced slow South American farmer selling, depressed margins, low demand for North American exports along with limited trade opportunities as a carry market has contributed to slow farmer selling. Crushing saw good demand with lower North American meal exports. In Refined Products and Other, despite strong global demand for oil and biodiesel, margins were limited by oil values, particularly in North America, due to low carbon intensity feedstocks competing in the renewable diesel market. In Carbohydrate Solutions, demand for starches and sweeteners remained solid with margins remaining steady across the entire portfolio. Demand for ethanol was strong going into summer driving season. Strong ethanol export demand was due to higher mandates in certain jurisdictions and discretionary blending. Industry ethanol stocks declined and ethanol margins improved. In Nutrition, demand was softer in a few food and beverage product categories driven by shifts in consumer discretionary spend. Human Nutrition was impacted by inflation which drove lower demand and impacted sales volumes in alternative proteins. In Animal Nutrition, a soft amino acids market driven by price weakness in North America was partially compensated by a slightly improved market in Europe, Middle East, and Africa (EMEA). The global feed and feed additives market remained challenged on the demand side, with weakness in the Chinese beef and pork business and continued subdued global shrimp prices.
Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023
Earnings before income taxes decreased $536 million from $1.1 billion to $596 million due to lower pricing and execution margins as well as higher Corporate costs. Total segment operating profit (a non-GAAP measure) decreased $617 million from $1.5 billion to $925 million due primarily to lower results in Ag Services and Oilseeds, and Human Nutrition, partially offset by higher results in Carbohydrate Solutions, Other Business, and Animal Nutrition. Total segment operating profit (a non-GAAP measure) excluded asset impairment and restructuring charges totaling $7 million. Excluded from total segment operating profit (a non-GAAP measure) in the prior-year quarter was a net charge of $103 million consisting of charges totaling $114 million and a gain on the sale of certain assets of $11 million. Corporate results in the current quarter were a net charge of $418 million. Corporate results in the prior-year quarter were a net charge of $393 million and included a mark-to-market gain of $1 million on the conversion option of the exchangeable bonds issued in August 2020.
Income tax expense decreased $89 million to $115 million. The effective tax rate for the quarter ended June 30, 2024 was 19.3% compared to 18.0% for the quarter ended June 30, 2023. The increase in the rate was primarily due to the impact of discrete tax items, partially offset by the change in the geographic mix of forecasted pretax earnings.
42
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Analysis of Statements of Earnings
Processed volumes by product for the quarter were as follows (in metric tons):
| Three Months Ended | |||||||||||||||||
| June 30, | |||||||||||||||||
| (In thousands) | 2024 | 2023 | Change | ||||||||||||||
| Oilseeds | 8,872 | 8,783 | 89 | ||||||||||||||
| Corn | 4,482 | 4,448 | 34 | ||||||||||||||
| Total | 13,354 | 13,231 | 123 | ||||||||||||||
The Company generally operates its production facilities, on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions. Oilseeds and corn processed volumes were fairly consistent between the quarters with increases due to more favorable weather and reduced unplanned downtime compared to the previous year.
Revenues by segment for the quarter were as follows:
| Three Months Ended | |||||||||||||||||
| June 30, | |||||||||||||||||
| 2024 | 2023 | Change | |||||||||||||||
| (In millions) | |||||||||||||||||
| Ag Services and Oilseeds | |||||||||||||||||
| Ag Services | $ | 11,746 | $ | 13,366 | $ | (1,620) | |||||||||||
| Crushing | 2,850 | 3,480 | (630) | ||||||||||||||
| Refined Products and Other | 2,737 | 2,998 | (261) | ||||||||||||||
| Total Ag Services and Oilseeds | 17,333 | 19,844 | (2,511) | ||||||||||||||
| Carbohydrate Solutions | |||||||||||||||||
| Starches and Sweeteners | 2,211 | 2,475 | (264) | ||||||||||||||
| Vantage Corn Processors | 683 | 906 | (223) | ||||||||||||||
| Total Carbohydrate Solutions | 2,894 | 3,381 | (487) | ||||||||||||||
| Nutrition | |||||||||||||||||
| Human Nutrition | 1,061 | 966 | 95 | ||||||||||||||
| Animal Nutrition | 847 | 887 | (40) | ||||||||||||||
| Total Nutrition | 1,908 | 1,853 | 55 | ||||||||||||||
| Total Segment Revenues | 22,135 | 25,078 | (2,943) | ||||||||||||||
| Other Business | 113 | 112 | 1 | ||||||||||||||
| Total Revenues | $ | 22,248 | $ | 25,190 | $ | (2,942) | |||||||||||
Revenues and cost of products sold in a commodity merchandising and processing business are significantly correlated to the underlying commodity prices and volumes. During periods of significant changes in commodity prices, the underlying performance of the Company is better evaluated by looking at margins because both revenues and cost of products sold, particularly in Ag Services and Oilseeds, generally have a relatively equal impact from market price changes, which generally result in an insignificant impact to gross profit.
43
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Revenues decreased $2.9 billion to $22.2 billion due to lower sales prices ($3.6 billion), partially offset by higher sales volumes ($0.7 billion). Lower sales prices of emulsifiers and thickeners, biodiesel, and corn and lower sales volumes of meal and farming materials, were partially offset by higher sales volumes of animal feeds, oils, soybeans and rapeseed. Ag Services and Oilseeds revenues decreased 13% to $17.3 billion due to lower sales prices ($3.1 billion), partially offset by higher sales volumes ($0.6 billion). Carbohydrate Solutions revenues decreased 14% to $2.9 billion due to lower sales prices ($0.5 billion). Nutrition revenues increased 3% to $1.9 billion due to slightly higher sales volumes ($0.2 billion), partially offset by lower prices ($0.1 billion).
Cost of products sold decreased $2.5 billion to $20.9 billion due principally to lower average commodity costs. Manufacturing expenses increased $20 million to $1.9 billion due principally to higher salaries and benefit costs, maintenance costs, and commercial services, partially offset by lower energy costs.
Foreign currency translation decreased revenues by $114 million and cost of products sold by $95 million.
Gross profit decreased $0.5 billion or 26% to $1.4 billion. Lower results in Ag Services and Oilseeds ($507 million), and Human Nutrition ($54 million) were partially offset by higher results in Carbohydrate Solutions ($32 million), Animal Nutrition ($24 million), and Other ($20 million). These factors are explained in the segment operating profit discussion on page 45.
Selling, general, and administrative expenses increased $66 million to $907 million due primarily to increased legal and professional fees, increased amortization of intangibles, and higher salaries and benefit costs.
Asset impairment, exit, and restructuring costs decreased $53 million to $7 million. Charges in the current quarter consisted of $7 million of impairments related to certain long-lived assets presented as specified items. Charges in the prior-year quarter consisted of $43 million of impairments related to certain long-lived assets and intangibles and $17 million of restructuring, presented as specified items.
Equity in earnings of unconsolidated affiliates increased $1 million to $152 million due primarily to higher earnings from the Company’s investments in Hungrana, Almindones Mexicanos S.A., and Stratas, partially offset by lower earnings from the Company’s investment in Wilmar.
Interest and investment income decreased $2 million to $140 million due primarily to lower interest income.
Interest expense increased $7 million to $187 million due primarily to increased short-term rates on customer deposit balances in ADM Investor Services. Interest expense in the prior-year quarter also included a mark-to-market gain adjustment of $1 million related to the conversion option of the exchangeable bonds issued in August 2020.
Other income-net decreased $28 million to $9 million. Income in the current quarter included gains on disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, net foreign exchange gains, and net other income. Income in the prior-year quarter included gains on disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, net foreign exchange gains, and net other income.
44
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Total segment operating profit (a non-GAAP measure) is reconciled to earnings before income taxes, the most directly comparable GAAP measure, for the quarters ended June 30, 2024 and 2023 as follows:
| Three Months Ended | |||||||||||||||||
| June 30, | |||||||||||||||||
| 2024 | 2023 | Change | |||||||||||||||
| (In millions) | |||||||||||||||||
| Earnings before income taxes | $ | 596 | $ | 1,132 | $ | (536) | |||||||||||
| Other Business (earnings) loss | (96) | (86) | (10) | ||||||||||||||
| Corporate | 418 | 393 | 25 | ||||||||||||||
| Specified Items: | |||||||||||||||||
| Gains on sale of assets | — | (11) | 11 | ||||||||||||||
| Impairment and restructuring charges | 7 | 114 | (107) | ||||||||||||||
| Total Segment Operating Profit | $ | 925 | $ | 1,542 | $ | (617) | |||||||||||
| Segment Operating Profit | |||||||||||||||||
| Ag Services and Oilseeds | |||||||||||||||||
| Ag Services | $ | 122 | $ | 380 | $ | (258) | |||||||||||
| Crushing | 132 | 224 | (92) | ||||||||||||||
| Refined Products and Other | 137 | 362 | (225) | ||||||||||||||
| Wilmar | 68 | 88 | (20) | ||||||||||||||
| Total Ag Services and Oilseeds | $ | 459 | $ | 1,054 | $ | (595) | |||||||||||
| Carbohydrate Solutions | |||||||||||||||||
| Starches and Sweeteners | $ | 323 | $ | 301 | $ | 22 | |||||||||||
| Vantage Corn Processors | 34 | 18 | 16 | ||||||||||||||
| Total Carbohydrate Solutions | $ | 357 | $ | 319 | $ | 38 | |||||||||||
| Nutrition | |||||||||||||||||
| Human Nutrition | $ | 103 | $ | 185 | $ | (82) | |||||||||||
| Animal Nutrition | 6 | (16) | 22 | ||||||||||||||
| Total Nutrition | $ | 109 | $ | 169 | $ | (60) | |||||||||||
Ag Services and Oilseeds segment operating profit decreased 56%. Ag Services results were lower than the second quarter of 2023 due to the stabilization of trade flows leading to lower global trade and risk management results. In South America, slower farmer selling led to much lower margins. North American results were lower due to strong supplies out of Brazil and Argentina shifting export demand to South America. Crushing results were lower than the prior year quarter as global soy crush margins moderated due to more balanced supply and demand conditions and lower oil values caused by an increase in imports of used cooking oil. During the quarter, negative mark-to-market timing impacts were significantly lower than in the prior-year quarter. Refined Products & Other (RPO) results were lower, as the margin structure in North America and EMEA has eased from historically high levels in the prior year period. RPO negative mark-to-market timing impacts affected current quarter results versus positive impacts in the prior-year quarter. Equity earnings from Wilmar were lower versus the second quarter of 2023.
Carbohydrate Solutions segment operating profit increased 12%. Starches and Sweeteners results were higher year-over-year as strong starches and sweeteners margins and higher volumes were partially offset by lower domestic ethanol margins, as well as moderating margins in the EMEA region. Vantage Corn Processors results improved year-over-year as strong demand for exports of ethanol supported higher margins.
45
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Nutrition segment operating profit decreased 36%. Human Nutrition results were lower than the second quarter of 2023 as impacts related to unplanned downtime at Decatur East, a normalizing texturants market, and higher manufacturing costs negatively impacted margins. Animal Nutrition results were higher compared to the same quarter last year as cost optimization efforts and lower input costs bolstered margins.
Other Business operating profit increased $10 million. Captive insurance results were higher due to lower claim activity. ADM Investor Services was lower on higher operating costs.
Corporate results for the quarter were as follows:
| Three Months Ended | |||||||||||||||||||||||
| June 30, | |||||||||||||||||||||||
| 2024 | 2023 | Change | |||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Interest expense-net | $ | (128) | $ | (125) | $ | (3) | |||||||||||||||||
| Unallocated corporate costs | (292) | (262) | (30) | ||||||||||||||||||||
| Expenses related to acquisitions | (4) | (3) | (1) | ||||||||||||||||||||
| Gain on debt conversion option | — | 1 | (1) | ||||||||||||||||||||
| Restructuring charges | — | (3) | 3 | ||||||||||||||||||||
| Other income (expense) | 6 | (1) | 7 | ||||||||||||||||||||
| Total Corporate | $ | (418) | $ | (393) | $ | (25) | |||||||||||||||||
Corporate results were a net charge of $418 million in the current quarter compared to a net charge of $393 million in the prior-year quarter. Interest expense-net increased $3 million due to higher borrowings. Unallocated corporate costs increased $30 million due primarily to increases in legal and professional fees, global technology spend, and securitization fees. Gain on debt conversion option in the prior-year quarter was related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020. Other income in the current quarter includes foreign exchange gains of $12 million and the non-service components of net pension benefit income of $5 million. Other expense in the prior-year quarter included foreign exchange losses and railroad maintenance expenses, partially offset by the non-service components of net pension benefit income of $5 million.
Non-GAAP Financial Measures
The Company uses adjusted net earnings, adjusted earnings per share (EPS), EBITDA, adjusted EBITDA, and total segment operating profit, non-GAAP financial measures as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. These performance measures are not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.
Adjusted net earnings is defined as net earnings adjusted for the effects on net earnings of specified items. Adjusted EPS is defined as diluted EPS adjusted for the effects on reported diluted EPS of specified items. EBITDA is defined as earnings before interest on borrowings, taxes, and depreciation and amortization. EBITDA is defined as earnings before interest on borrowings, taxes, and depreciation and amortization. Adjusted EBITDA is defined as earnings before interest on borrowings, taxes, depreciation, and amortization, adjusted for specified items. The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of income tax expense, interest expense on borrowings and depreciation and amortization to net earnings. Total segment operating profit is defined as ADM’s consolidated earnings before income taxes, adjusted for Other business, Corporate, and specified items.
Management believes that adjusted net earnings, adjusted EPS, EBITDA, adjusted EBITDA, and total segment operating profit are useful measures of the Company’s performance because they provide investors additional information about the Company’s operations allowing better evaluation of underlying business performance and better period-to-period comparability. Adjusted net earnings, adjusted EPS, EBITDA, adjusted EBITDA, and total segment operating profit are not intended to replace or be an alternative to net earnings, diluted EPS and earnings before income taxes, the most directly comparable amounts reported under GAAP. The table on page 45 provides a reconciliation of total segment operating profit to earnings before income taxes for the three months ended June 30, 2024 and 2023.
46
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
In this Amendment, the Company is revising its reconciliation and calculation of total segment operating profit. The revised reconciliation in Note 13. Segment Information presents a subtotal for total segment operating profit that is equal to the sum of the segment operating profit reported for each of the Ag Services and Oilseeds, Carbohydrate Solutions and Nutrition segments. Amounts for other business and specified items, which previously were reflected in the calculation of total segment operating profit, are now reflected as reconciling items, similar to Corporate, between total segment operating profit and earnings before income taxes.
The table below provides a reconciliation of net earnings to adjusted net earnings and diluted EPS to adjusted EPS for the three months ended June 30, 2024 and 2023.
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| In millions | Per share | In millions | Per share | ||||||||||||||||||||
| Average number of shares outstanding - diluted | 493 | 546 | |||||||||||||||||||||
| Net earnings and reported EPS (fully diluted) | $ | 486 | $ | 0.98 | $ | 927 | $ | 1.70 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
Gains on sale of assets and businesses - net of tax of $3 million in 2023 (1) | — | — | (8) | (0.02) | |||||||||||||||||||
| Gain on debt conversion option | — | — | (1) | — | |||||||||||||||||||
Impairment and restructuring charges and contingency provisions - net of tax of $2 million in 2024 and $24 million in 2023 (1) | 5 | 0.01 | 93 | 0.17 | |||||||||||||||||||
Expenses related to acquisitions - net of tax of $1 million in 2024 and 2023(1) | 3 | 0.01 | 2 | — | |||||||||||||||||||
| Certain discrete tax adjustments | 14 | 0.03 | 21 | 0.04 | |||||||||||||||||||
| Total adjustments | 22 | 0.05 | 107 | 0.19 | |||||||||||||||||||
| Adjusted net earnings and adjusted EPS | $ | 508 | $ | 1.03 | $ | 1,034 | $ | 1.89 | |||||||||||||||
(1) Tax effected using the U.S. and other applicable tax rates.
The tables below provide a reconciliation of net earnings to EBITDA and adjusted EBITDA for the three months ended June 30, 2024 and 2023.
| Three Months Ended | |||||||||||||||||
| June 30, | |||||||||||||||||
| (In millions) | 2024 | 2023 | Change | ||||||||||||||
| Net earnings | $ | 486 | $ | 927 | $ | (441) | |||||||||||
| Net earnings (losses) attributable to noncontrolling interests | (5) | 1 | (6) | ||||||||||||||
| Income tax expense | 115 | 204 | (89) | ||||||||||||||
| Interest expense | 135 | 124 | 11 | ||||||||||||||
| Depreciation and amortization | 286 | 262 | 24 | ||||||||||||||
| EBITDA | 1,017 | 1,518 | (501) | ||||||||||||||
| (Gain) loss on sales of assets and businesses | — | (11) | 11 | ||||||||||||||
| Expenses related to acquisitions | 4 | 3 | 1 | ||||||||||||||
| Railroad maintenance expenses | 4 | 2 | 2 | ||||||||||||||
| Impairment and restructuring charges and contingency provisions | 7 | 117 | (110) | ||||||||||||||
| Adjusted EBITDA | $ | 1,032 | $ | 1,629 | $ | (597) | |||||||||||
47
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Market Factors Influencing Operations or Results in the Six Months Ended June 30, 2024
The Company is subject to a variety of market factors which affect the Company's operating results. In Ag Services and Oilseeds, following two years of very favorable market conditions, several headwinds in the agriculture cycle led to more normalized results throughout the entire value chain. Ag Services experienced slow South American farmer selling, low demand for North American exports, with good crop prospects in North America. Crushing experienced strong run rates in Europe and South America, the anticipation of a more normal global supply environment, and new capacity suppressing meal and oil values. In Refined Products and Other, oil values in North America were under pressure due to low carbon intensity feedstocks competing in the renewable diesel market, nevertheless the biodiesel mandate increase from B12 to B14 in Brazil had a positive impact on results. In Carbohydrate Solutions, demand for starches and sweeteners remained solid with margins remaining steady across the entire portfolio. Strong export demand for ethanol helped offset higher industry production to minimize the imbalance between supply and demand. In Nutrition, demand was softer in a few food and beverage product categories driven by shifts in consumer discretionary spend. Human Nutrition was impacted by inflation which drove lower demand and impacted sales volumes in alternative proteins. Demand has started to recover in the food, beverage, and dietary supplement segment. In Animal Nutrition, a soft amino acids market driven by price weakness in North America was partially compensated by a slightly improved market in Europe, Middle East, and Africa (EMEA). The global feed and feed additives market remained challenged on the demand side, with weakness in the Chinese beef and pork business and continued subdued global shrimp prices.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Earnings before income taxes decreased $1.0 billion from $2.5 billion to $1.5 billion due to lower pricing and execution margins as well as higher Corporate costs. Total segment operating profit (a non-GAAP measure) decreased $1.0 billion to $2.1 billion due primarily to lower results in Crushing, Refined Products and Other, Ag Services, Human Nutrition, and Starches and Sweeteners, partially offset by higher results in Wilmar, Vantage Corn Processors, and Animal Nutrition. Total segment operating profit (a non-GAAP measure) excluded a net charge of $13 million consisting of asset impairment charges totaling $13 million. Excluded from the total segment operating profit (a non-GAAP measure) in the prior period was a net charge of $109 million consisting of charges totaling $121 million related to the impairment of certain assets, restructuring, and a contingency/settlement, partially offset by gains on the sale of certain assets of $12 million. Corporate results in the current period were a net charge of $0.8 billion. Corporate results in the prior period were a net charge of $0.7 billion and included a mark-to-market gain of $6 million on the conversion option of the exchangeable bonds issued in August 2020. The bonds were paid off in full, as scheduled, in August 2023.
Income taxes of $281 million decreased $148 million. The Company’s effective tax rate for the six months ended June 30, 2024 was 19.0% compared to 17.0% for the six months ended June 30, 2023. The increase in the rate was primarily due to the impact of discrete tax items, partially offset by the change in the geographic mix of forecasted pretax earnings.
Analysis of Statements of Earnings
Processed volumes by product for the six months ended June 30, 2024 and 2023 were as follows (in metric tons):
| Six Months Ended | |||||||||||||||||
| June 30, | |||||||||||||||||
| (In thousands) | 2024 | 2023 | Change | ||||||||||||||
| Oilseeds | 18,259 | 17,410 | 849 | ||||||||||||||
| Corn | 8,890 | 8,842 | 48 | ||||||||||||||
| Total | 27,149 | 26,252 | 897 | ||||||||||||||
48
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company generally operates its production facilities, on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions. The overall increase in oilseeds processed volumes was primarily related to improved crush rates in South America and EMEA compared to lower crush rates in the prior year due to inclement weather, unplanned downtime, and reduced capacity due to the Russian-Ukraine war. In addition, plant reliability has increased slightly year over year.
Revenues by segment for the six months ended June 30, 2024 and 2023 were as follows:
| Six Months Ended | |||||||||||||||||
| June 30, | |||||||||||||||||
| 2024 | 2023 | Change | |||||||||||||||
| (In millions) | |||||||||||||||||
| Ag Services and Oilseeds | |||||||||||||||||
| Ag Services | $ | 22,943 | $ | 25,061 | $ | (2,118) | |||||||||||
| Crushing | 6,177 | 7,163 | (986) | ||||||||||||||
| Refined Products and Other | 5,432 | 6,199 | (767) | ||||||||||||||
| Total Ag Services and Oilseeds | 34,552 | 38,423 | (3,871) | ||||||||||||||
| Carbohydrate Solutions | |||||||||||||||||
| Starches and Sweeteners | 4,367 | 5,212 | (845) | ||||||||||||||
| Vantage Corn Processors | 1,210 | 1,706 | (496) | ||||||||||||||
| Total Carbohydrate Solutions | 5,577 | 6,918 | (1,341) | ||||||||||||||
| Nutrition | |||||||||||||||||
| Human Nutrition | 2,025 | 1,902 | 123 | ||||||||||||||
| Animal Nutrition | 1,719 | 1,804 | (85) | ||||||||||||||
| Total Nutrition | 3,744 | 3,706 | 38 | ||||||||||||||
| Total Segment Revenues | 43,873 | 49,047 | (5,174) | ||||||||||||||
| Other Business | 222 | 215 | 7 | ||||||||||||||
| Total Revenues | $ | 44,095 | $ | 49,262 | $ | (5,167) | |||||||||||
Revenues and cost of products sold in a commodity merchandising and processing business are significantly correlated to the underlying commodity prices and volumes. During periods of significant changes in commodity prices, management believes that margins can be a helpful indicator of the Company’s underlying performance because both revenues and cost of products sold, particularly in Ag Services and Oilseeds, generally have a relatively equal impact from commodity price changes, which generally result in an insignificant impact to gross profit.
Revenues decreased $5.2 billion to $44.1 billion due to lower sales prices ($8.5 billion), partially offset by higher sales volumes ($3.4 billion). Lower sales prices of oils, soybeans, corn, and meal, and lower sales volumes of milled rice and alcohol, were partially offset by higher sales volumes of soybeans, wheat, oils and corn. Ag Services and Oilseeds revenues decreased 10% to $34.6 billion due to lower sales prices ($7.4 billion), partially offset by higher sales volumes ($3.6 billion). Carbohydrate Solutions revenues decreased 19% to $5.6 billion due to lower sales prices ($1.2 billion) and lower sales volumes ($0.2 billion). Nutrition revenues increased 1% to $3.7 billion due to higher volumes ($0.1 billion), partially offset by lower prices ($0.1 billion).
49
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Cost of products sold decreased $4.3 billion to $41.0 billion due principally to lower average commodity costs. Manufacturing expenses decreased $0.1 billion to $3.7 billion due principally to decreases in energy costs, and operating supplies, partially offset by increases in salaries and benefits, legal, professional, and other fees, and commercial services.
Foreign currency translation decreased revenues and cost of products sold by $50 million and $32 million, respectively.
Gross profit decreased $0.9 billion or 23% to $3.1 billion due principally to lower results in Ag Services and Oilseeds ($870 million), Human Nutrition ($102 million), and Starches and Sweeteners ($35 million), partially offset by Animal Nutrition ($44 million), Vantage Corn Processors ($24 million), and Other ($37 million). These factors are explained in the segment operating profit discussion on page 51.
Selling, general, and administrative expenses increased $0.1 billion to $1.9 billion due primarily to higher salaries and benefit costs, increased expenses for contracted outside labor, and higher legal and financing fees, partially offset by decreased provisions for bad debt.
Asset impairment, exit, and restructuring costs decreased $42 million to $25 million. Charges in the current period consisted of $10 million of impairments related to certain long-lived assets, and $4 million of restructuring, presented as specified items, and $11 million of restructuring in Corporate. Charges in the prior period consisted of $46 million of impairments related to certain long-lived assets and intangible assets and $21 million of restructuring, presented as specified items.
Equity in earnings of unconsolidated affiliates increased $39 million to $364 million due primarily to higher earnings from the Company’s investments in Almindones Mexicanos S.A., Wilmar, Skyland Grain, LLC, and Hungrana Kft., partially offset by lower earnings from ADM’s investment in SoyVen, Olenex Sarl, and Stratas.
Interest and investment income decreased $13 million to $263 million due primarily to a valuation loss related to an investment in alternative protein and precision fermentation, partially offset by higher interest income driven by higher interest rates.
Interest expense increased $26 million to $353 million due primarily to increased short-term rates on customer deposit balances in ADM Investor Services. Interest expense in the prior period included a $6 million mark-to-market gain adjustment related to the conversion option of the exchangeable bonds issued in August 2020. The exchangeable bonds were paid off in full in August 2023.
Other income-net decreased $46 million to $35 million. Income in the current period included gains on disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, and net foreign exchange gains. Income in the prior period included gains on disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, net foreign exchange gains, and net other income.
50
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Total segment operating profit (a non-GAAP measure) is reconciled to earnings before income taxes, the most directly comparable GAAP measure, for the six months ended June 30, 2024 and 2023 as follows:
| Six Months Ended | |||||||||||||||||
| June 30, | |||||||||||||||||
| 2024 | 2023 | Change | |||||||||||||||
| (In millions) | |||||||||||||||||
| Earnings before income taxes | $ | 1,481 | $ | 2,529 | $ | (1,048) | |||||||||||
| Other Business (earnings) loss | (217) | (183) | (34) | ||||||||||||||
| Corporate | 844 | 715 | 129 | ||||||||||||||
| Specified Items: | |||||||||||||||||
| Gains on sale of assets | — | (12) | 12 | ||||||||||||||
| Impairment and restructuring charges | 13 | 121 | (108) | ||||||||||||||
| Total Segment Operating Profit | $ | 2,121 | $ | 3,170 | $ | (1,049) | |||||||||||
| Ag Services and Oilseeds | |||||||||||||||||
| Ag Services | $ | 354 | $ | 728 | $ | (374) | |||||||||||
| Crushing | 445 | 651 | (206) | ||||||||||||||
| Refined Products and Other | 307 | 689 | (382) | ||||||||||||||
| Wilmar | 217 | 197 | 20 | ||||||||||||||
| Total Ag Services and Oilseeds | $ | 1,323 | $ | 2,265 | $ | (942) | |||||||||||
| Carbohydrate Solutions | |||||||||||||||||
| Starches and Sweeteners | $ | 584 | $ | 614 | $ | (30) | |||||||||||
| Vantage Corn Processors | 21 | (16) | 37 | ||||||||||||||
| Total Carbohydrate Solutions | $ | 605 | $ | 598 | $ | 7 | |||||||||||
| Nutrition | |||||||||||||||||
| Human Nutrition | $ | 179 | $ | 323 | $ | (144) | |||||||||||
| Animal Nutrition | 14 | (16) | 30 | ||||||||||||||
| Total Nutrition | $ | 193 | $ | 307 | $ | (114) | |||||||||||
Ag Services and Oilseeds segment operating profit decreased 42%. Ag Services results are down from the prior period. South America Origination margins have compressed due to slower farmer selling and increased freight costs. North America Origination continues to see weak export demand and a carry market has contributed to slow farmer selling limiting trade opportunities. Execution in destination marketing as well as effective risk management continued to deliver strong Global Trade results, though lower than the prior year. Crushing results were lower than the prior period, particularly in North America. Increased industry capacity pressured Crush margins and increased supply of competing low carbon intensity feedstocks affected margins. Board crush rallied the end of the quarter due to industry downtime, strong product demand and ample supply. Refined Products and Other results are down from the prior period. North America margins compressed due to increased used cooking oil imports. Europe biodiesel benefited from high spot margins due to supply shortage. Wilmar earnings are higher versus the prior period.
Carbohydrate Solutions segment operating profit increased 1%. Starches and Sweeteners results were lower year-over-year on moderating margins in the EMEA region and lower domestic ethanol margins due to strong industry production that were offset in part by strong starches and sweeteners margins. Vantage Corn Processors results improved year-over-year as strong demand for exports of ethanol supported volumes and margins.
51
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Nutrition segment operating profit decreased 37%. Human Nutrition results were lower than the prior period, as impacts related to unplanned downtime at Decatur East, and a normalizing texturants market negatively impacted margins. Animal Nutrition results were higher compared to the prior period, as amino acids market recovery, cost optimization efforts and lower input costs bolstered margins.
Other Business operating profit increased $34 million. Captive insurance results were higher due to lower claim activity. ADM Investor Services profits were lower on higher operating costs.
Corporate results for the six months ended June 30, 2024 and 2023 were as follows:
| Six Months Ended | |||||||||||||||||
| June 30, | |||||||||||||||||
| 2024 | 2023 | Change | |||||||||||||||
| (In millions) | |||||||||||||||||
| Interest expense-net | $ | (238) | $ | (228) | (10) | ||||||||||||
| Unallocated corporate costs | (596) | (510) | (86) | ||||||||||||||
| Expenses related to acquisitions | (4) | (3) | (1) | ||||||||||||||
| Gain on debt conversion option | — | 6 | (6) | ||||||||||||||
| Restructuring (charges) | (12) | (3) | (9) | ||||||||||||||
| Other income | 6 | 23 | (17) | ||||||||||||||
| Total Corporate | $ | (844) | $ | (715) | $ | (129) | |||||||||||
Corporate results were a net charge of $0.8 billion in the current period compared to a net charge of $0.7 billion in the prior period. Interest expense-net increased $10 million due primarily to increased short-term rates on the Company’s commercial paper borrowing programs and increased interest expense from new debt issuances. Unallocated corporate costs increased $86 million due primarily to increases in legal and professional fees, global technology spend, and securitization fees. Gain on debt conversion option in the prior period was related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020. Other income in the current period included the non-service components of net pension benefit income of $9 million and foreign exchange gains of $27 million, partially offset by railroad maintenance expenses of $4 million. This was offset by valuation losses of approximately $18 million in the Company’s ADM Ventures portfolio. Other income in the prior period included the non-service components of net pension benefit income of $9 million, and foreign exchange gains, partially offset by railroad maintenance expenses.
Non-GAAP Financial Measures
The Company uses adjusted net earnings, adjusted earnings per share (EPS), EBITDA, adjusted EBITDA, and total segment operating profit, non-GAAP financial measures as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. These performance measures are not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.
Adjusted net earnings is defined as net earnings adjusted for the effects on net earnings of specified items. Adjusted EPS is defined as diluted EPS adjusted for the effects on reported diluted EPS of specified items. EBITDA is defined as earnings before interest on borrowings, taxes, and depreciation and amortization. Adjusted EBITDA is defined as earnings before interest on borrowings, taxes, depreciation, and amortization, adjusted for specified items. The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of income tax expense, interest expense on borrowings and depreciation and amortization to net earnings. Total segment operating profit is defined as ADM’s consolidated earnings before income taxes, adjusted for Other business, Corporate, and specified items.
Management believes that adjusted net earnings, adjusted EPS, EBITDA, adjusted EBITDA, and total segment operating profit are useful measures of the Company’s performance because they provide investors additional information about the Company’s operations allowing better evaluation of underlying business performance and better period-to-period comparability. Adjusted net earnings, adjusted EPS, EBITDA, adjusted EBITDA, and total segment operating profit are not intended to replace or be an alternative to net earnings, diluted EPS and earnings before income taxes, the most directly comparable amounts reported under
52
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
GAAP. The table on page 51 provides a reconciliation of total segment operating profit to earnings before income taxes for the six months ended June 30, 2024 and 2023.
In this Amendment, the Company is revising its reconciliation and calculation of total segment operating profit in Note 13. Segment Information. The revised reconciliation in Note 13. Segment Information presents a subtotal for total segment operating profit that is equal to the sum of the segment operating profit reported for each of the Ag Services and Oilseeds, Carbohydrate Solutions and Nutrition segments. Amounts for other business and specified items, which previously were reflected in the calculation of total segment operating profit, are now reflected as reconciling items, similar to Corporate, between total segment operating profit and earnings before income taxes.
The table below provides a reconciliation of net earnings to adjusted net earnings and diluted EPS to adjusted EPS for the six months ended June 30, 2024 and 2023.
| Six Months Ended June 30, | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| In millions | Per share | In millions | Per share | |||||||||||||||||||||||
| Average number of shares outstanding - diluted | 503 | 549 | ||||||||||||||||||||||||
| Net earnings and reported EPS (fully diluted) | $ | 1,215 | $ | 2.41 | $ | 2,097 | $ | 3.82 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
Gains on sales of assets and businesses - net of tax of $3 million in 2023(1) | — | — | (9) | (0.02) | ||||||||||||||||||||||
Impairment and restructuring charges and contingency provisions - net of tax of $2 million in 2024 and $26 million in 2023 (1) | 23 | 0.04 | 98 | 0.18 | ||||||||||||||||||||||
Expenses related to acquisitions - net of tax of $1 million in 2024 and $1 million in 2023 (1) | 3 | 0.01 | 2 | — | ||||||||||||||||||||||
Gain on debt conversion option - net of tax of $0 (1) | — | — | (6) | (0.01) | ||||||||||||||||||||||
| Certain discrete tax adjustments | 17 | 0.03 | 3 | 0.01 | ||||||||||||||||||||||
| Total adjustments | 43 | 0.08 | 88 | 0.16 | ||||||||||||||||||||||
| Adjusted net earnings and adjusted EPS | $ | 1,258 | $ | 2.49 | $ | 2,185 | $ | 3.98 | ||||||||||||||||||
(1) Tax effected using the U.S. and other applicable tax rates.
The tables below provide a reconciliation of net earnings to EBITDA and adjusted EBITDA for the six months ended June 30, 2024 and 2023.
| Six Months Ended | |||||||||||||||||
| June 30, | |||||||||||||||||
| (In millions) | 2024 | 2023 | Change | ||||||||||||||
| Net earnings | $ | 1,215 | $ | 2,097 | $ | (882) | |||||||||||
| Net earnings (losses) attributable to noncontrolling interests | (15) | 3 | (18) | ||||||||||||||
| Income tax expense | 281 | 429 | (148) | ||||||||||||||
| Interest expense | 250 | 224 | 26 | ||||||||||||||
| Depreciation and amortization | 566 | 521 | 45 | ||||||||||||||
| EBITDA | 2,297 | 3,274 | (977) | ||||||||||||||
| Gains on sales of assets and businesses | — | (12) | 12 | ||||||||||||||
| Expenses related to acquisitions | 4 | 3 | 1 | ||||||||||||||
| Railroad maintenance expenses | 4 | 2 | 2 | ||||||||||||||
| Impairment and restructuring charges and contingency provisions | 25 | 124 | (99) | ||||||||||||||
| Adjusted EBITDA | $ | 2,330 | $ | 3,391 | $ | (1,061) | |||||||||||
53
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources
A Company objective is to have sufficient liquidity, balance sheet strength, and financial flexibility to fund the operating and capital requirements of a capital-intensive agricultural commodity-based business. The Company depends on access to credit markets, which can be impacted by its credit rating and factors outside of ADM’s control, to fund its working capital needs and capital expenditures. The primary source of funds to finance ADM’s operations, capital expenditures, and advancement of its growth strategy is cash generated by operations and lines of credit, including a commercial paper borrowing facility and accounts receivable securitization programs. In addition, the Company believes it has access to funds from public and private equity and debt capital markets in both U.S. and international markets.
Cash provided by operating activities was $1.2 billion for the six months ended June 30, 2024 compared to cash provided of $0.9 billion for the same period last year. Working capital changes decreased cash by $0.5 billion for the six months ended June 30, 2024 compared to a decrease of $1.6 billion for the same period last year. Segregated investments increased $0.3 billion due to increased trading activity in the Company’s futures commission and brokerage business. Trade receivables increased $0.2 billion due to timing of sales. Inventories decreased $1.4 billion due to lower inventory prices and volumes. Trade payables decreased $1.3 billion primarily due to lower payables related to grain purchases. Brokerage payables decreased approximately $0.4 billion due to decreased trading activity in the Company’s futures commission and brokerage business.
Cash used in investing activities was $1.6 billion for the six months ended June 30, 2024 compared to $0.6 billion for the same period last year. Capital expenditures for the six months ended June 30, 2024 of $0.7 billion were comparable to the same period last year. Net assets of businesses acquired in the six months ended June 30, 2024 were $0.9 billion compared to none in the same period last year.
Cash used in financing activities was $0.7 billion for the six months ended June 30, 2024 compared to cash used of $2.1 billion for the same period last year. Long-term debt payments were immaterial for the six months ended June 30, 2024 compared to $0.7 billion for the same period last year, due to no corporate bond issues coming due in the current year period, compared to one issue coming due in the prior year period. Net borrowings on short-term credit agreements for the six months ended June 30, 2024 were $2.2 billion compared to net payments of $0.4 billion for the same period last year. Share repurchases for the six months ended June 30, 2024 were $2.3 billion compared to $1.0 billion for the same period last year. Dividends were $0.5 billion for the six months ended June 30, 2024 compared to $0.5 billion for the same period last year.
At June 30, 2024, the Company had $0.8 billion of cash and cash equivalents and a current ratio, defined as current assets divided by current liabilities, of 1.4 to 1. Included in working capital was $5.7 billion of readily marketable commodity inventories. At June 30, 2024, the Company’s capital resources included shareholders’ equity of $22.2 billion and lines of credit, including the accounts receivable securitization programs described below, totaling $12.3 billion, of which $7.8 billion was unused. The Company’s ratio of long-term debt to total capital (the sum of long-term debt of $8.2 billion and shareholders’ equity of $22.2 billion in 2024 and the sum of long-term debt of $8.3 billion and shareholders’ equity of $24.1 billion in 2023) was 27% and 25% at June 30, 2024 and December 31, 2023, respectively. The Company uses this ratio as a measure of the Company’s long-term indebtedness and an indicator of financial flexibility. The Company’s ratio of net debt (the sum of short-term debt of $2.3 billion, current maturities of long-term debt of $1 million, and long-term debt of $8.2 billion less the sum of cash and cash equivalents of $0.8 billion and short-term marketable securities of none in 2024 and the sum of short-term debt of $0.1 billion, current maturities of long-term debt of $1 million, and long-term debt of $8.3 billion less the sum of cash and cash equivalents of $1.4 billion and short-term marketable securities of none in 2023) to capital (the sum of net debt of $9.8 billion and shareholders’ equity of $22.2 billion in 2024 and the sum of net debt of $7.0 billion and shareholders' equity of $24.1 billion in 2023) was 31% and 22% at June 30, 2024 and December 31, 2023, respectively. Of the Company’s total lines of credit, $5.0 billion supported the combined U.S. and European commercial paper borrowing programs, against which there was $1.0 billion of commercial paper outstanding at June 30, 2024.
As of June 30, 2024, the Company had $0.8 billion of cash and cash equivalents, $0.5 billion of which was cash held by foreign subsidiaries whose undistributed earnings are considered indefinitely reinvested. Based on the Company’s historical ability to generate sufficient cash flows from its U.S. operations and unused and available U.S. credit capacity of $5.0 billion, the Company has asserted that these funds are indefinitely reinvested outside the U.S.
The Company has accounts receivable securitization programs (the “Programs”) with certain commercial paper conduit purchasers and committed purchasers. The Programs provide the Company with up to $2.8 billion in funding against accounts
54
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
receivable transferred into the Programs and expands the Company’s access to liquidity through efficient use of its balance sheet assets (see Note 15 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information and disclosures on the Programs). As of June 30, 2024, the Company had $0.7 billion unused capacity of its facility under the Programs.
As of June 30, 2024, the Company has total available liquidity of $8.6 billion comprised of cash and cash equivalents and unused lines of credit with a well-diversified group of primarily investment-grade institutions.
For the six months ended June 30, 2024, the Company spent approximately $0.7 billion in capital expenditures, $0.5 billion in dividends, and $2.3 billion in share repurchases. The Company has a stock repurchase program. On March 12, 2024, the Company entered into an ASR Agreement with Merrill Lynch International, an affiliate of BofA Securities, Inc., to repurchase $1.0 billion of ADM common stock as part of ADM’s existing share repurchase program to repurchase up to 200 million shares through December 31, 2024. On March 28, 2024, the Company received an interim delivery of 8,880,986 shares at an average share price of $60.596 or $538 million. On April 15, 2024, the Company received a final delivery of 7,325,733 shares as final settlement of the ASR transaction (see Notes 11 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information). As of June 30, 2024, the Company had 14.8 million shares remaining that may be repurchased under the program until December 31, 2024.
In 2024, the Company expects total capital expenditures of approximately $1.4 billion and additional cash outlays of approximately $1.0 billion in dividends and $2.3 billion in share repurchases, subject to other strategic uses of capital and the evolution of operating cash flows and the working capital position throughout the year.
Contractual Obligations and Commercial Commitments
The Company’s purchase obligations as of June 30, 2024 and December 31, 2023 were $12.7 billion and $14.0 billion, respectively. The decrease is primarily related to lower energy commitments. As of June 30, 2024, the Company expects to make payments related to purchase obligations of $11.9 billion within the next twelve months. There were no other material changes in the Company’s contractual obligations during the quarter ended June 30, 2024.
Off Balance Sheet Arrangements
There were no material changes in the Company’s off balance sheet arrangements during the quarter ended June 30, 2024.
Critical Accounting Policies and Estimates
There were no material changes in the Company’s critical accounting policies and estimates during the quarter ended June 30, 2024. For a description of the Company’s critical accounting policies, estimates, and assumptions used in the preparation of the Company’s financial statements, see Part II, Item 7 and Note 1 of “Notes to Consolidated Financial Statements” included in Part II, Item 8, of the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in the Company’s market risk sensitive instruments and positions is the potential loss arising from adverse changes in: commodity market prices as they relate to the Company’s net commodity position, foreign currency exchange rates, and interest rates. Significant changes in market risk sensitive instruments and positions for the quarter ended June 30, 2024 are described below. There were no material changes during the period in the Company’s potential loss arising from changes in foreign currency exchange rates and interest rates.
For detailed information regarding the Company’s market risk sensitive instruments and positions, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023.
55
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)
Commodities
The availability and prices of agricultural commodities are subject to wide fluctuations due to factors such as changes in weather conditions, crop disease, plantings, government programs and policies, competition, changes in global demand, changes in customer preferences and standards of living, and global production of similar and competitive crops.
The fair value of the Company’s commodity position is a summation of the fair values calculated for each commodity by valuing all of the commodity positions at quoted market prices for the period, where available, or utilizing a close proxy. The Company has established metrics to monitor the amount of market risk exposure, which consist of volumetric limits and value-at-risk (VaR) limits. VaR measures the potential loss, at a 95% confidence level, that could be incurred over a one-year period. Volumetric limits are monitored daily and VaR calculations and sensitivity analysis are monitored weekly.
In addition to measuring the hypothetical loss resulting from an adverse two standard deviation move in market prices (assuming no correlations) over a one-year period using VaR, sensitivity analysis is performed measuring the potential loss in fair value resulting from a hypothetical 10% adverse change in market prices. The highest, lowest, and average weekly position together with the market risk from a hypothetical 10% adverse price change is as follows:
| Six Months Ended | Year ended | |||||||||||||||||||||||||
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
Long/(Short) (In millions) | Fair Value | Market Risk | Fair Value | Market Risk | ||||||||||||||||||||||
| Highest position | $ | 543 | $ | 54 | $ | 498 | $ | 50 | ||||||||||||||||||
| Lowest position | (265) | (27) | (6) | (1) | ||||||||||||||||||||||
| Average position | 75 | 8 | 125 | 13 | ||||||||||||||||||||||
The change in fair value of the average position was due to the overall decrease in average quantities, partially offset by the increase in prices of certain commodities.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
At the time of the filing of this Amendment, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)), as of June 30, 2024. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer, concluded the Company’s disclosure controls and procedures were not effective as of June 30, 2024, due to the material weakness described below.
Internal Control Over Financial Reporting
As disclosed in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023, during the fourth quarter of 2023, in connection with the Investigation, the Company identified a material weakness in its internal control over financial reporting related to the Company’s accounting practices and procedures for segment disclosures. The material weakness resulted from inadequate controls that allowed for certain intersegment sales to be reported at amounts that were not in accordance with ASC 606, Revenue from Contracts with Customers. Specifically, the Company did not have adequate controls in place around measurement of certain intersegment sales between the Company’s reporting segments. In addition, appropriate controls were not in place for the reporting of intersegment sales and for the application of disclosure requirements within ASC 280, Segment Reporting. The absence of adequate controls with respect to the reporting of intersegment sales impacted the completeness and accuracy of the Company’s segment disclosures and review controls over projected financial information utilized in goodwill and other long-lived asset impairment tests.
Remediation Plan
The Company is implementing enhancements to its internal controls to remediate the identified material weakness in its internal control over financial reporting related to the Company’s accounting practices and procedures for intersegment sales and to enhance the reliability of its financial statements with respect to the pricing and reporting of such sales. Specifically, the
56
ITEM 4. CONTROLS AND PROCEDURES (Continued)
Company is: (i) enhancing the Company’s accounting policies with respect to the measurement of intersegment sales; (ii) improving and documenting the Company’s pricing guidelines for intersegment sales; (iii) enhancing the design and documentation of the execution of pricing and measurement controls, including as to the completeness and accuracy of the reporting for intersegment sales disclosure purposes and projected financial information used in impairment analyses; and (iv) increasing training for relevant personnel on the measurement of and application of relevant accounting guidance to intersegment sales and segment disclosures.
While the Company believes that these efforts will improve its internal control over financial reporting, the Company will not be able to conclude whether the steps the Company is taking will remediate the material weakness in internal control over financial reporting until a sustained period of time has passed to allow management to test the design and operational effectiveness of the new and enhanced controls.
Changes in Internal Control Over Financial Reporting
The Company is implementing a new enterprise resource planning (ERP) system on a worldwide basis, which is expected to occur in phases over the next several years. The Company did not have any further deployments of the ERP system during the quarter ended June 30, 2024.
Except for the material weakness described above and the related remediation measures that are being implemented, there have been no changes in internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
During the six months ended June 30, 2024, the Company completed the acquisitions of Revela, FDL, PT, and TNS. As a result of the acquisitions, the Company is in the process of reviewing the internal control structures of these businesses and, if necessary, will make appropriate changes as the Company incorporates its controls and procedures into the acquired businesses.
57
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is routinely involved in a number of actual or threatened legal actions, including those involving alleged personal injuries, employment law, product liability, intellectual property, environmental issues, alleged tax liability (see Note 10, Income Taxes of “Notes to Consolidated Financial Statements” included in Part I, Item 1 herein, “Financial Statements,” for information on income tax matters), and class actions. The Company also routinely receives inquiries from regulators and other government authorities relating to various aspects of its business, and at any given time, the Company has matters at various stages of resolution. The outcomes of these matters are not within the Company’s complete control and may not be known for prolonged periods of time. In some actions, claimants seek damages, as well as other relief including injunctive relief, that could require significant expenditures or result in lost revenues. In accordance with applicable accounting standards, the Company records a liability in its consolidated financial statements for material loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a material loss contingency is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict, particularly when the matters are in early procedural stages, with incomplete facts or legal discovery; involve unsubstantiated or indeterminate claims for damages; potentially involve penalties, fines, disgorgement, or punitive damages; or could result in a change in business practice. The Company’s estimated loss or range of loss with respect to loss contingencies may change from time to time, and it is reasonably possible the Company will incur actual losses in excess of the amounts currently accrued and such additional amounts may be material. While the Company continues to work with parties with respect to potential resolution, no assurance can be given that it will be successful in doing so and the Company cannot predict the outcome of these matters. See Note 17, Legal Proceedings of “Notes to Consolidated Financial Statements” included in Part I, Item 1 herein, “Financial Statements,” for information on the Company’s legal proceedings which is incorporated herein by reference.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
| Period | Total Number of Shares Purchased(1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program(2) | Number of Shares Remaining to be Purchased Under the Program(2) | ||||||||||||||||||||||
| April 1, 2024 to | ||||||||||||||||||||||||||
| April 30, 2024 | 7,328,793 | $ | 63.044 | 7,325,733 | 31,172,929 | |||||||||||||||||||||
| May 1, 2024 to | ||||||||||||||||||||||||||
| May 31, 2024 | 11,505,999 | 60.759 | 11,504,804 | 19,668,125 | ||||||||||||||||||||||
| June 1, 2024 to | ||||||||||||||||||||||||||
| June 30, 2024 | 4,903,983 | 61.372 | 4,904,076 | 14,764,049 | ||||||||||||||||||||||
| Total | 23,738,775 | $ | 61.591 | 23,734,613 | 14,764,049 | |||||||||||||||||||||
(1)Total shares purchased represent those shares purchased in the open market as part of the Company’s publicly announced share repurchase program described below, shares received as payment for the exercise price of stock option exercises, and shares received as payment for the withholding taxes on vested restricted stock awards. During the three-month period ended June 30, 2024, there were 4,162 shares received as payments for the withholding taxes on vested restricted stock awards.
58
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS (Continued)
(2)On November 5, 2014, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to 100,000,000 shares of the Company’s common stock during the period commencing January 1, 2015 and ending December 31, 2019. On August 7, 2019, the Company’s Board of Directors approved the extension of the stock repurchase program through December 31, 2024 and the repurchase of up to an additional 100,000,000 shares under the extended program.
ITEM 5. OTHER INFORMATION
On May 6, 2024 , Juan R. Luciano , the Company’s Chair of the Board, President and Chief Executive Officer , entered into a pre-arranged trading plan that is intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act. This plan provides for the sale of up to 905,920 shares of the Company’s common stock in the aggregate, and terminates on the earlier of the close of market on May 2, 2025 or the date all shares are sold thereunder.
On May 9, 2024 , Gregory A. Morris , the Company’s Senior Vice President, President, Agricultural Services and Oilseeds , entered into a pre-arranged trading plan that is intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act. This plan provides for the sale of up to 90,000 shares of the Company’s common stock in the aggregate, and terminates on the earlier of the close of market on August 12, 2025 or the date all shares are sold thereunder.
On June 10, 2024 , Jennifer L. Weber , the Company’s Senior Vice President, Chief People and Diversity Officer , entered into a pre-arranged trading plan that is intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act. This plan provides for the sale of up to 23,077 shares of the Company’s common stock in the aggregate, and terminates on the earlier of the close of market on February 28, 2025 or the date all shares are sold thereunder.
There were no other Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements adopted , modified or terminated
59
ITEM 6. EXHIBITS
| (3)(i) | ||||||||
| (3)(ii) | ||||||||
| (10.1) | ||||||||
| (10.2) | ||||||||
| (31.1) | ||||||||
| (31.2) | ||||||||
| (32.1) | ||||||||
| (32.2) | ||||||||
| (101) | Inline XBRL file set for the consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” and for the information under Part II, Item 5, “Other Information” of this Quarterly Report on Form 10-Q. | |||||||
| (104) | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL file set. | |||||||
60
SIGNATURES
Pursuant to the requirements 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.
| ARCHER-DANIELS-MIDLAND COMPANY | ||||||||
| Dated: | November 18, 2024 | /s/ M. Patolawala | ||||||
| M. Patolawala | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial Officer and Duly Authorized Officer) | ||||||||
61
Exhibit 31.1
RULE 13a – 14(a)/15d-14(a) CERTIFICATION
I, J. R. Luciano, certify that:
1.I have reviewed this quarterly report on Form 10-Q/A of Archer-Daniels-Midland Company;
2.Based on my knowledge, this 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 report;
3.Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 18, 2024
| /s/ J. R. Luciano | |||||
| J. R. Luciano | |||||
| Chair of the Board of Directors, President and Chief Executive Officer | |||||
Exhibit 31.2
RULE 13a – 14(a)/15d-14(a) CERTIFICATION
I, M. Patolawala, certify that:
1.I have reviewed this quarterly report on Form 10-Q/A of Archer-Daniels-Midland Company;
2.Based on my knowledge, this 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 report;
3.Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 18, 2024
| /s/ M. Patolawala | |||||
| M. Patolawala | |||||
| Chief Financial Officer | |||||
Exhibit 32.1
SECTION 1350 CERTIFICATION
In connection with the Quarterly Report of Archer-Daniels-Midland Company (the “Company”) on Form 10-Q/A for the quarter ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. R. Luciano, Chair of the Board of Directors, President and Chief Executive Officer of the Company, certify that:
(i)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 18, 2024
| /s/ J. R. Luciano | |||||
| J. R. Luciano | |||||
| Chair of the Board of Directors, President and Chief Executive Officer | |||||
Exhibit 32.2
SECTION 1350 CERTIFICATION
In connection with the Quarterly Report of Archer-Daniels-Midland Company (the “Company”) on Form 10-Q/A for the quarter ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, M. Patolawala, Chief Financial Officer of the Company, certify that:
(i)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 18, 2024
| /s/ M. Patolawala | |||||
| M. Patolawala | |||||
| Chief Financial Officer | |||||