8-K
Archer-Daniels-Midland Co (ADM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 29, 2020
ARCHER-DANIELS-MIDLAND COMPANY
(Exact name of registrant as specified in its charter)
| Delaware | 1-44 | 41-0129150 | |
|---|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |
| 77 West Wacker Drive, Suite 4600 | |||
| Chicago, | Illinois | 60601 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (312) 634-8100
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, no par value | ADM | NYSE |
| 1.000% Notes due 2025 | NYSE |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§230.12b-2 of this chapter).
Emerging growth 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. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On October 29, 2020, Archer-Daniels-Midland Company (ADM) issued a press release announcing third quarter results. A copy of such press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
ADM is making reference to non-GAAP financial measures in both the press release and the conference call. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.
| Item 9.01 | Financial Statements and Exhibits. |
|---|---|
| (d) Exhibits | The following exhibits are furnished or filed, as applicable, herewith: |
| --- | --- |
| 99.1 | Press release dated October 29, 2020 announcing third quarter results |
| --- | --- |
| 101 | Interactive Data File |
| --- | --- |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and incorporated by reference to Exhibit 101) |
| --- | --- |
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 hereunto duly authorized.
| ARCHER-DANIELS-MIDLAND COMPANY | |||
|---|---|---|---|
| Date: | October 29, 2020 | By | /s/ D. Cameron Findlay |
| --- | --- | --- | --- |
| D. Cameron Findlay | |||
| Senior Vice President, General Counsel, and Secretary |
EXHIBIT INDEX
| Exhibit | Description |
|---|---|
| 99.1 | Press release dated October 29, 2020 announcing third quarter results |
| --- | --- |
| 101 | Interactive Data File |
| --- | --- |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and incorporated by reference to Exhibit 101) |
| --- | --- |
Exhibit
Exhibit 99.1
ADM Reports Third Quarter Earnings of $0.40 per Share,
$0.89 per Share on an Adjusted Basis
•Net earnings of $225 million; adjusted net earnings of $499 million
•Outstanding results, great execution in all three businesses
•Continued focus on Readiness to drive growth, innovation, sustainability
CHICAGO, October 29, 2020—ADM (NYSE: ADM) today reported financial results for the quarter ended September 30, 2020.
“We delivered an outstanding quarter, and I am proud of our team’s continued great performance,” said Chairman and CEO Juan Luciano.
“Across the enterprise, ADM colleagues are doing what it takes to help our customers and our company succeed and grow. Our strategic initiatives, combined with exceptional execution, are driving strong results across all of our businesses. Readiness is enhancing our performance, accelerating our work in areas ranging from operations to sales. Our strong cash generation is allowing us to retire higher-cost debt while retaining balance sheet flexibility. And Nutrition continues its impressive upward trajectory, delivering a fifth consecutive quarter of 20-plus percent year-over-year operating profit growth.
“From our Strive 35 sustainability goals, to our partnership with Spiber to produce plant-based polymers, to the announcement of a significant expansion in probiotics with our new state-of-the art facility in Valencia, we’re advancing our work to enrich the quality of life around the globe. We’re excited about our future as we look ahead to another strong quarter, with positive momentum continuing through 2021.”
Third Quarter 2020 Highlights
| (Amounts in millions except per share amounts) | 2020 | 2019 | ||
|---|---|---|---|---|
| Earnings per share (as reported) | $ | 0.40 | $ | 0.72 |
| Adjusted earnings per share^1^ | $ | 0.89 | $ | 0.77 |
| Segment operating profit | $ | 904 | $ | 758 |
| Adjusted segment operating profit^1^ | $ | 849 | $ | 764 |
| Ag Services and Oilseeds | 436 | 417 | ||
| Carbohydrate Solutions | 246 | 182 | ||
| Nutrition | 147 | 118 | ||
| Other Business | 20 | 47 | ||
| • | EPS as reported of $0.40 includes a $0.53 per share charge related to early debt retirement, a $0.03 per share charge related to the mark-to-market adjustment of the exchangeable bond issued in August 2020, a $0.10 per share credit related to the gain on sale of Wilmar shares and certain assets, and other charges totaling $0.03 per share. Adjusted EPS, which excludes these items, was $0.89.^1^ | |||
| --- | --- |
^1^ Non-GAAP financial measures; see pages 5, 10, 11 and 13 for explanations and reconciliations, including after-tax amounts.
1
Results of Operations
Ag Services & Oilseeds results were higher than the third quarter of 2019. Both Ag Services and Crushing saw expanding margins during the quarter, resulting in approximately $155 million in total negative timing effects, which are expected to reverse in the coming quarters.
| • | Ag Services executed extremely well to capitalize on strong North American industry export margins and volumes. Results were lower in South America, as the pace of Brazilian farmer selling slowed as expected following the aggressive selling in the first half of the year. Global Trade’s continued focus on serving customers contributed significantly to results, as did a $54 million settlement related to 2019 U.S. high water insurance claims. Negative timing impacts of almost $80 million led to lower overall results versus the prior year. |
|---|---|
| • | In Crushing, strong execution in an environment of tighter soybean supplies and solid global demand for meal and oil supported improved execution margins in North and South America, partially offset by lower year-over-year margins in EMEAI. Negative timing impacts of approximately $75 million versus a gain of approximately $50 million recognized in the prior-year quarter led to lower year-over-year results. |
| --- | --- |
| • | Refined Products and Other delivered significantly higher year-over-year results, driven by improved biodiesel margins around the globe. Packaged oils in South America also contributed. |
| --- | --- |
| • | Equity earnings from Wilmar were substantially higher versus the prior-year period. |
| --- | --- |
Carbohydrate Solutions results were significantly higher year over year.
| • | Starches and Sweeteners subsegment results were substantially higher versus the third quarter of 2019. In North America, balanced ethanol industry supply and demand drove improved wet mill ethanol margins versus the prior year. Demand for starches in North America was substantially stronger than earlier in the year, and higher than the prior-year quarter. Reduced food service demand affected sweetener and flour volumes, though retail demand for flour remained solid. Strong risk management and improved net corn costs contributed positively to results. EMEAI delivered improved results on higher demand and reduced manufacturing and raw material costs. |
|---|---|
| • | In Vantage Corn Processors, distribution gains on wet mill ethanol, in addition to significantly improved year-over-year industry ethanol margins, helped to offset fixed costs from the two temporarily idled dry mills, driving higher year-over-year results. Increased volumes and margins of USP-grade industrial alcohol for hand sanitizer also supported improved performance. |
| --- | --- |
Nutrition delivered its fifth consecutive quarter of 20-plus percent year-over-year profit growth.
| • | Human Nutrition results were substantially higher versus the prior-year quarter, with improved results across the business portfolio. Flavors delivered another exceptional quarter, driven by increased revenue globally and improved mix and margins. Plant-based proteins helped drive a solid performance in Specialty Ingredients. Sales growth in probiotics, along with income from the Spiber fermentation agreement, contributed to strong results in Health & Wellness. |
|---|
2
| • | Animal Nutrition was higher year over year. Continued delivery of Neovia synergies, strength in livestock feed and year-over-year improvement in amino acids were partially offset by softer aquaculture feed demand as well as negative foreign currency impacts. |
|---|
Other Business results were lower, driven by lower ADM Investor Services earnings and captive insurance underwriting losses, including a $17 million settlement impact for the high water claim with Ag Services & Oilseeds.
Other Items of Note
As additional information to help clarify underlying business performance, the table on page 10 includes reported earnings and EPS as well as adjusted earnings and EPS.
Segment operating profit of $904 million for the quarter includes charges related to asset impairment, restructuring, and settlement activities of $2 million and gains on the sale of Wilmar shares and certain assets of $57 million ($0.10 per share).
During the quarter, the company leveraged its strong cash position to re-balance its mix of long- and short-term debt, which will also reduce future interest payments, by economically retiring $1.2 billion of higher-coupon debt, resulting in a debt extinguishment charge of $396 million ($0.53 per share).
In Corporate results, unallocated corporate costs for the quarter were higher year over year due primarily to variable performance-related compensation expense accruals, which were low in the prior year. Other charges increased due to railroad maintenance expenses, partially offset by improved foreign hedging results on intercompany funding and investment gains in ADM Ventures. Corporate results also include the early debt retirement charge referenced above, a mark-to-market loss on the exchangeable bonds issued in August 2020 of $15 million ($0.03 per share), and an impairment charge of $6 million ($0.01 per share).
The effective tax rate for the quarter was a benefit of 13 percent compared to an expense of 19 percent in the prior year. The current quarter rate reflects the effects of the early debt retirement as well as the sale of Wilmar shares and increased year-over-year Wilmar earnings on the annual effective tax rate. The impact of U.S. tax credits, primarily the biodiesel and railroad tax credits, also contributed significantly to the decreased Q3 rate from the prior year; the railroad tax credits have an offsetting expense in cost of products sold. Absent the effect of EPS adjusting items, the effective tax rate for the current quarter was approximately 11 percent.
Note: Additional Facts and Explanations
Additional facts and explanations about results and industry environment can be found at the end of the ADM Q3 Earnings Presentation at www.adm.com/webcast.
3
Conference Call Information
ADM will host a webcast on October 30, 2020, at 8:00 a.m. Central Time to discuss financial results and provide a company update, including an overview of our Nutrition business. To listen to the webcast, go to www.adm.com/webcast. A replay of the webcast will also be available for an extended period of time at www.adm.com/webcast.
Forward-Looking Statements
Some of our comments and materials in this presentation constitute forward-looking statements that reflect management’s current views and estimates of future economic circumstances, industry conditions, Company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risk and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation, and you should carefully review the assumptions and factors in our SEC reports. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events.
About ADM
At ADM, we unlock the power of nature to provide access to nutrition worldwide. With industry-advancing innovations, a complete portfolio of ingredients and solutions to meet any taste, and a commitment to sustainability, we give customers an edge in solving the nutritional challenges of today and tomorrow. We’re a global leader in human and animal nutrition and the world’s premier agricultural origination and processing company. Our breadth, depth, insights, facilities and logistical expertise give us unparalleled capabilities to meet needs for food, beverages, health and wellness, and more. From the seed of the idea to the outcome of the solution, we enrich the quality of life the world over. Learn more at www.adm.com.
| Media Relations | Investor Relations |
|---|---|
| Jackie Anderson | Victoria de la Huerga |
| 312-634-8484 | 312-634-8457 |
Financial Tables Follow
Source: Corporate Release
4
Segment Operating Profit, Adjusted Segment Operating Profit (a non-GAAP financial measure)
and Corporate Results
(unaudited)
| Quarter ended | Nine months ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30 | September 30 | |||||||||||||||||
| (In millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | ||||||||||||
| Segment Operating Profit | $ | 904 | $ | 758 | $ | 146 | $ | 2,316 | $ | 2,014 | $ | 302 | ||||||
| Specified items: | ||||||||||||||||||
| (Gains) losses on sales of assets and businesses | (57 | ) | — | (57 | ) | (80 | ) | (12 | ) | (68 | ) | |||||||
| Impairment, restructuring, and settlement charges | 2 | 6 | (4 | ) | 60 | 52 | 8 | |||||||||||
| Adjusted Segment Operating Profit | $ | 849 | $ | 764 | $ | 85 | $ | 2,296 | $ | 2,054 | $ | 242 | ||||||
| Ag Services and Oilseeds | $ | 436 | $ | 417 | $ | 19 | $ | 1,271 | $ | 1,196 | $ | 75 | ||||||
| Ag Services | 147 | 161 | (14 | ) | 482 | 326 | 156 | |||||||||||
| Crushing | 66 | 138 | (72 | ) | 249 | 493 | (244 | ) | ||||||||||
| Refined Products and Other | 127 | 80 | 47 | 286 | 223 | 63 | ||||||||||||
| Wilmar | 96 | 38 | 58 | 254 | 154 | 100 | ||||||||||||
| Carbohydrate Solutions | $ | 246 | $ | 182 | $ | 64 | $ | 509 | $ | 470 | $ | 39 | ||||||
| Starches and Sweeteners | 257 | 197 | 60 | 533 | 547 | (14 | ) | |||||||||||
| Vantage Corn Processors | (11 | ) | (15 | ) | 4 | (24 | ) | (77 | ) | 53 | ||||||||
| Nutrition | $ | 147 | $ | 118 | $ | 29 | $ | 447 | $ | 316 | $ | 131 | ||||||
| Human Nutrition | 128 | 102 | 26 | 372 | 293 | 79 | ||||||||||||
| Animal Nutrition | 19 | 16 | 3 | 75 | 23 | 52 | ||||||||||||
| Other Business | $ | 20 | $ | 47 | $ | (27 | ) | $ | 69 | $ | 72 | $ | (3 | ) | ||||
| Segment Operating Profit | $ | 904 | $ | 758 | $ | 146 | $ | 2,316 | $ | 2,014 | $ | 302 | ||||||
| Corporate Results | $ | (704 | ) | $ | (255 | ) | $ | (449 | ) | $ | (1,189 | ) | $ | (922 | ) | $ | (267 | ) |
| Interest expense - net | (83 | ) | (85 | ) | 2 | (246 | ) | (276 | ) | 30 | ||||||||
| Unallocated corporate costs | (196 | ) | (139 | ) | (57 | ) | (579 | ) | (454 | ) | (125 | ) | ||||||
| Other charges | (8 | ) | — | (8 | ) | (25 | ) | (18 | ) | (7 | ) | |||||||
| Specified items: | ||||||||||||||||||
| LIFO credit (charge) | — | 16 | (16 | ) | 91 | (10 | ) | 101 | ||||||||||
| Early debt retirement charges | (396 | ) | — | (396 | ) | (410 | ) | — | (410 | ) | ||||||||
| Expenses related to acquisitions | — | — | — | — | (14 | ) | 14 | |||||||||||
| Loss on debt conversion option | (15 | ) | — | (15 | ) | (15 | ) | — | (15 | ) | ||||||||
| Impairment and restructuring charges | (6 | ) | (47 | ) | 41 | (5 | ) | (150 | ) | 145 | ||||||||
| Earnings Before Income Taxes | $ | 200 | $ | 503 | $ | (303 | ) | $ | 1,127 | $ | 1,092 | $ | 35 |
Segment operating profit is ADM’s consolidated income from operations before income tax excluding corporate items. Adjusted segment operating profit, a non-GAAP financial measure, is segment operating profit excluding specified items. Management believes that segment operating profit and adjusted segment operating profit are useful measures of ADM’s performance because they provide investors information about ADM’s business unit performance excluding corporate overhead costs as well as specified items. Segment operating profit and adjusted segment operating profit are not measures of consolidated operating results under U.S. GAAP and should not be considered alternatives to income before income taxes, the most directly comparable GAAP financial measure, or any other measure of consolidated operating results under U.S. GAAP.
5
Consolidated Statements of Earnings
(unaudited)
| Quarter ended | Nine months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30 | September 30 | |||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| (in millions, except per share amounts) | ||||||||||||
| Revenues | $ | 15,126 | $ | 16,726 | $ | 46,377 | $ | 48,327 | ||||
| Cost of products sold ^(1)^ | 14,084 | 15,648 | 43,276 | 45,349 | ||||||||
| Gross profit | 1,042 | 1,078 | 3,101 | 2,978 | ||||||||
| Selling, general, and administrative expenses ^(2)^ | 636 | 578 | 1,938 | 1,839 | ||||||||
| Asset impairment, exit, and restructuring costs ^(3)^ | 4 | 53 | 61 | 200 | ||||||||
| Equity in (earnings) losses of unconsolidated affiliates | (160 | ) | (88 | ) | (403 | ) | (279 | ) | ||||
| Interest income | (16 | ) | (47 | ) | (71 | ) | (142 | ) | ||||
| Interest expense^(4)^ | 100 | 97 | 270 | 307 | ||||||||
| Other (income) expense - net ^(5)^ | 278 | (18 | ) | 179 | (39 | ) | ||||||
| Earnings before income taxes | 200 | 503 | 1,127 | 1,092 | ||||||||
| Income tax (benefit) expense ^(6)^ | (26 | ) | 95 | 38 | 212 | |||||||
| Net earnings including noncontrolling interests | 226 | 408 | 1,089 | 880 | ||||||||
| Less: Net earnings (losses) attributable to noncontrolling interests | 1 | 1 | 4 | 5 | ||||||||
| Net earnings attributable to ADM | $ | 225 | $ | 407 | $ | 1,085 | $ | 875 | ||||
| Diluted earnings per common share | $ | 0.40 | $ | 0.72 | $ | 1.93 | $ | 1.55 | ||||
| Average diluted shares outstanding | 562 | 563 | 563 | 565 |
^(1)^ Includes a charge (credit) related to changes in the Company’s LIFO reserves of $(91) million in the current YTD and $(16) million and $10 million in the prior quarter and YTD, respectively.
^(2)^ Includes a settlement charge of $4 million in the current quarter and YTD and acquisition-related expenses of $14 million in the prior YTD.
^(3)^^^Includes charges related to impairment of certain assets and restructuring of $4 million and $61 million in the current quarter and YTD, respectively, and charges related to impairment of certain assets, restructuring, and pension settlement of $53 million and $200 million in the prior quarter and YTD, respectively.
^(4)^ Includes charges related to the mark-to-market adjustment of the conversion option of the exchangeable bond issued in August 2020 of $15 million in the current quarter and YTD.
^(5)^ Includes current quarter and YTD gains related to the sale of Wilmar shares and certain other assets totaling $57 million and $80 million, respectively, and early debt retirement charges of $396 million and $410 million, respectively, and prior YTD gains related to the sale of certain assets and a step-up gain on an equity investment of $12 million and a settlement charge of $2 million.
^(6)^Includes the tax benefit impact of the above specified items and tax discrete items totaling $88 million and $69 million, in the current quarter and YTD, respectively, and the tax benefit impact of the above specified items and certain discrete items totaling $13 million and $57 million in the prior quarter and YTD, respectively.
6
Summary of Financial Condition
(unaudited)
| September 30, <br>2020 | September 30, <br>2019 | |||
|---|---|---|---|---|
| (in millions) | ||||
| Net Investment In | ||||
| Cash and cash equivalents (a) | $ | 948 | $ | 932 |
| Short-term marketable securities (a) | — | 26 | ||
| Operating working capital (b) | 8,122 | 7,457 | ||
| Property, plant, and equipment | 9,816 | 10,101 | ||
| Investments in and advances to affiliates | 4,771 | 5,399 | ||
| Long-term marketable securities | 9 | 10 | ||
| Goodwill and other intangibles | 5,275 | 5,401 | ||
| Other non-current assets | 2,158 | 1,715 | ||
| $ | 31,099 | $ | 31,041 | |
| Financed By | ||||
| Short-term debt (a) | $ | 209 | $ | 1,242 |
| Long-term debt, including current maturities (a) | 7,924 | 7,646 | ||
| Deferred liabilities | 3,540 | 3,205 | ||
| Temporary equity | 85 | 53 | ||
| Shareholders’ equity | 19,341 | 18,895 | ||
| $ | 31,099 | $ | 31,041 | |
| (a) | Net debt is calculated as short-term debt plus long-term debt (including current maturities) less cash and cash equivalents and short-term marketable securities. | |||
| --- | --- | |||
| (b) | Current assets (excluding cash and cash equivalents and short-term marketable securities) less current liabilities (excluding short-term debt and current maturities of long-term debt). | |||
| --- | --- |
7
Summary of Cash Flows
(unaudited)
| Nine months ended | ||||||
|---|---|---|---|---|---|---|
| September 30 | ||||||
| 2020 | 2019 | |||||
| (in millions) | ||||||
| Operating Activities | ||||||
| Net earnings | $ | 1,089 | $ | 880 | ||
| Depreciation and amortization | 727 | 742 | ||||
| Asset impairment charges | 50 | 50 | ||||
| (Gains) losses on sales of assets | (132 | ) | (37 | ) | ||
| Loss on debt extinguishment | 410 | — | ||||
| Other - net | 151 | 65 | ||||
| Change in deferred consideration in securitized receivables^(a)^ | (4,603 | ) | (5,714 | ) | ||
| Other changes in operating assets and liabilities | 792 | 375 | ||||
| Total Operating Activities | (1,516 | ) | (3,639 | ) | ||
| Investing Activities | ||||||
| Purchases of property, plant and equipment | (558 | ) | (566 | ) | ||
| Net assets of businesses acquired | (3 | ) | (1,946 | ) | ||
| Proceeds from sale of business/assets | 708 | 43 | ||||
| Investments in retained interest in securitized receivables^(a)^ | (2,121 | ) | (3,813 | ) | ||
| Proceeds from retained interest in securitized receivables^(a)^ | 6,724 | 9,527 | ||||
| Marketable securities - net | (1 | ) | 41 | |||
| Investments in and advances to affiliates | (5 | ) | (12 | ) | ||
| Other investing activities | (16 | ) | (23 | ) | ||
| Total Investing Activities | 4,728 | 3,251 | ||||
| Financing Activities | ||||||
| Long-term debt borrowings | 1,790 | 3 | ||||
| Long-term debt payments | (2,032 | ) | (615 | ) | ||
| Net borrowings (payments) under lines of credit | (993 | ) | 960 | |||
| Share repurchases | (117 | ) | (150 | ) | ||
| Cash dividends | (607 | ) | (592 | ) | ||
| Other | 16 | (36 | ) | |||
| Total Financing Activities | (1,943 | ) | (430 | ) | ||
| Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | 1,269 | (818 | ) | |||
| Cash, cash equivalents, restricted cash, and restricted cash equivalents - beginning of period | 2,990 | 3,843 | ||||
| Cash, cash equivalents, restricted cash, and restricted cash equivalents - end of period | $ | 4,259 | $ | 3,025 |
(a) Cash flows related to the Company’s retained interest in securitized receivables as required by ASU 2016-15 which took effect January 1, 2018.
8
Segment Operating Analysis
(unaudited)
| Quarter ended | Nine months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30 | September 30 | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| (in ‘000s metric tons) | ||||||||
| Processed volumes (by commodity) | ||||||||
| Oilseeds | 8,970 | 9,062 | 27,236 | 27,002 | ||||
| Corn | 4,084 | 5,619 | 13,717 | 16,297 | ||||
| Total processed volumes | 13,054 | 14,681 | 40,953 | 43,299 | ||||
| Quarter ended | Nine months ended | |||||||
| September 30 | September 30 | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| (in millions) | ||||||||
| Revenues | ||||||||
| Ag Services and Oilseeds | $ | 11,527 | $ | 12,616 | $ | 35,347 | $ | 36,382 |
| Carbohydrate Solutions | 2,064 | 2,565 | 6,394 | 7,409 | ||||
| Nutrition | 1,451 | 1,457 | 4,359 | 4,263 | ||||
| Other Business | 84 | 88 | 277 | 273 | ||||
| Total revenues | $ | 15,126 | $ | 16,726 | $ | 46,377 | $ | 48,327 |
9
Adjusted Earnings Per Share
A non-GAAP financial measure
(unaudited)
| Quarter ended September 30 | Nine months ended September 30 | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||
| In millions | Per share | In millions | Per share | In millions | Per share | In millions | Per share | |||||||||||||||||
| Net earnings and fully diluted EPS | $ | 225 | $ | 0.40 | $ | 407 | $ | 0.72 | $ | 1,085 | $ | 1.93 | $ | 875 | $ | 1.55 | ||||||||
| Adjustments: | ||||||||||||||||||||||||
| LIFO charge (credit) (a) | — | — | (12 | ) | (0.02 | ) | (69 | ) | (0.12 | ) | 8 | 0.01 | ||||||||||||
| Losses (gains) on sales of assets and businesses (b) | (54 | ) | (0.10 | ) | — | — | (72 | ) | (0.13 | ) | (9 | ) | (0.02 | ) | ||||||||||
| Impairment, restructuring, and settlement charges (c) | 5 | 0.01 | 41 | 0.08 | 49 | 0.09 | 156 | 0.28 | ||||||||||||||||
| Expenses related to acquisitions (d) | — | — | — | — | — | — | 9 | 0.02 | ||||||||||||||||
| Early debt retirement charges (e) | 300 | 0.53 | — | — | 311 | 0.55 | — | — | ||||||||||||||||
| Loss on debt conversion option (f) | 15 | 0.03 | — | — | 15 | 0.03 | — | — | ||||||||||||||||
| Tax adjustment (g) | 8 | 0.02 | (5 | ) | (0.01 | ) | 16 | 0.03 | (7 | ) | (0.01 | ) | ||||||||||||
| Sub-total adjustments | 274 | 0.49 | 24 | 0.05 | 250 | 0.45 | 157 | 0.28 | ||||||||||||||||
| Adjusted net earnings and adjusted EPS | $ | 499 | $ | 0.89 | $ | 431 | $ | 0.77 | $ | 1,335 | $ | 2.38 | $ | 1,032 | $ | 1.83 | ||||||||
| (a) | Current YTD changes in the Company’s LIFO reserves of $(91) million pretax ($69 million after tax), tax effected using the Company’s U.S. income tax rate. Prior quarter and YTD changes in the Company’s LIFO reserves of $(16) million and $10 million pretax, respectively ($12 million and $8 million after tax, respectively), tax effected using the Company’s U.S. income tax rate. | |||||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||
| (b) | Current quarter and YTD gain of $57 million pretax ($54 million after tax) and $80 million pretax ($72 million after tax), respectively, primarily related to the sale of Wilmar shares and certain other assets, tax effected using the applicable tax rates. Prior YTD gains of $12 million pretax ($9 million after tax) related to the sale of certain assets and a step-up gain on an equity investment, tax effected using the Company’s U.S. income tax rate. | |||||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||
| (c) | Current quarter and YTD charges of $8 million pretax ($5 million after tax) and $65 million pretax ($49 million after tax), respectively, related to the impairment of certain assets, restructuring, and a settlement, tax effected using the applicable rates. Prior quarter and YTD charges of $53 million and $202 million pretax, respectively ($41 million and $156 million after tax, respectively), related to the impairment of certain assets, restructuring, and pension settlement, tax effected using the applicable tax rates. | |||||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||
| (d) | Prior YTD acquisition expenses of $14 million pretax ($9 million after tax) consisted of expenses primarily related to the Neovia acquisition. | |||||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||
| (e) | Current quarter and YTD early debt retirement charges of $396 million pretax ($300 million after tax) and $410 million pretax ($311 million after tax), respectively, tax effected using the Company’s U.S. income tax rate, related to the early repurchase of certain of the Company’s debentures. | |||||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||
| (f) | Current quarter and YTD loss on debt conversion option of $15 million pretax ($15 million after tax) related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020. | |||||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||
| (g) | Tax adjustment totaling $8 million and $16 million due to certain discrete items in the current quarter and YTD, respectively, and $(5) million and $(7) million due to U.S. tax reform and certain discrete items in the prior quarter and YTD, respectively. | |||||||||||||||||||||||
| --- | --- |
Adjusted net earnings reflects ADM’s reported net earnings after removal of the effect on net earnings of specified items as more fully described above. Adjusted EPS reflects ADM’s fully diluted EPS after removal of the effect on EPS as reported of specified items as more fully described above. Management believes that Adjusted net earnings and Adjusted EPS are useful measures of ADM’s performance because they provide investors additional information about ADM’s operations allowing better evaluation of underlying business performance and better period-to-period comparability. These non-GAAP financial measures are not intended to replace or be alternatives to net earnings and EPS as reported, the most directly comparable GAAP financial measures, or any other measures of operating results under GAAP. Earnings amounts described above have been divided by the company’s diluted shares outstanding for each respective period in order to arrive at an adjusted EPS amount for each specified item.
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Adjusted Return on Invested Capital
A non-GAAP financial measure
(unaudited)
| Adjusted ROIC Earnings (in millions) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Four Quarters | |||||||||||||||
| Quarter Ended | Ended | ||||||||||||||
| Dec. 31, 2019 | Mar. 31, 2020 | Jun 30, 2020 | Sep. 30, 2020 | Sep. 30, 2020 | |||||||||||
| Net earnings attributable to ADM | $ | 504 | $ | 391 | $ | 469 | $ | 225 | $ | 1,589 | |||||
| Adjustments: | |||||||||||||||
| Interest expense | 95 | 83 | 87 | 100 | 365 | ||||||||||
| LIFO | 27 | (91 | ) | — | — | (64 | ) | ||||||||
| Other adjustments | 253 | 48 | 8 | 355 | 664 | ||||||||||
| Total adjustments | 375 | 40 | 95 | 455 | 965 | ||||||||||
| Tax on adjustments | (8 | ) | (7 | ) | (23 | ) | (120 | ) | (158 | ) | |||||
| Net adjustments | 367 | 33 | 72 | 335 | 807 | ||||||||||
| Total Adjusted ROIC Earnings | $ | 871 | $ | 424 | $ | 541 | $ | 560 | $ | 2,396 | |||||
| Adjusted Invested Capital (in millions) | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| Quarter Ended | Trailing Four | ||||||||||||||
| Dec. 31, 2019 | Mar. 31, 2020 | Jun 30, 2020 | Sep. 30, 2020 | Quarter Average | |||||||||||
| Equity ^(1)^ | $ | 19,208 | $ | 18,952 | $ | 19,293 | $ | 19,322 | $ | 19,194 | |||||
| + Interest-bearing liabilities ^(2)^ | 8,891 | 12,512 | 9,181 | 8,141 | 9,681 | ||||||||||
| + LIFO adjustment (net of tax) | 69 | — | — | — | 17 | ||||||||||
| Other adjustments | 274 | 39 | 6 | 259 | 145 | ||||||||||
| Total Adjusted Invested Capital | $ | 28,442 | $ | 31,503 | $ | 28,480 | $ | 27,722 | $ | 29,037 | |||||
| Adjusted Return on Invested Capital | 8.3 | % |
^(1)^ Excludes noncontrolling interests
^(2)^ Includes short-term debt, current maturities of long-term debt, finance lease obligations, and long-term debt
Adjusted ROIC is Adjusted ROIC earnings divided by adjusted invested capital. Adjusted ROIC earnings is ADM’s net earnings adjusted for the after tax effects of interest expense, changes in the LIFO reserve and other specified items. Adjusted invested capital is the sum of ADM’s equity (excluding noncontrolling interests) and interest-bearing liabilities adjusted for the after tax effect of the LIFO reserve, and other specified items. Management believes Adjusted ROIC is a useful financial measure because it provides investors information about ADM’s returns excluding the impacts of LIFO inventory reserves and other specified items and increases period-to-period comparability of underlying business performance. Management uses Adjusted ROIC to measure ADM’s performance by comparing Adjusted ROIC to its weighted average cost of capital (WACC). Adjusted ROIC, Adjusted ROIC earnings and Adjusted invested capital are non-GAAP financial measures and are not intended to replace or be alternatives to GAAP financial measures.
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Adjusted Earnings Before Taxes, Interest, and Depreciation and Amortization (EBITDA)
A non-GAAP financial measure
(unaudited)
The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the trailing four quarters ended September 30, 2020.
| Four Quarters | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter Ended | Ended | ||||||||||||||
| Dec. 31, 2019 | Mar. 31, 2020 | Jun 30, 2020 | Sep. 30, 2020 | Sep. 30, 2020 | |||||||||||
| (in millions) | |||||||||||||||
| Earnings before income taxes | $ | 496 | $ | 375 | $ | 552 | $ | 200 | $ | 1,623 | |||||
| Interest expense | 95 | 83 | 87 | 100 | 365 | ||||||||||
| Depreciation and amortization | 251 | 245 | 244 | 238 | 978 | ||||||||||
| LIFO charge (credit) | 27 | (91 | ) | — | — | (64 | ) | ||||||||
| Losses (gains) on sales of assets and businesses | 101 | — | (23 | ) | (57 | ) | 21 | ||||||||
| Asset impairment and restructuring charges | 103 | 41 | 16 | 8 | 168 | ||||||||||
| Railroad maintenance expense | 51 | 73 | — | 28 | 152 | ||||||||||
| Early debt retirement charges | — | — | 14 | 396 | 410 | ||||||||||
| Expenses related to acquisitions | 3 | — | — | — | 3 | ||||||||||
| Adjusted EBITDA | $ | 1,127 | $ | 726 | $ | 890 | $ | 913 | $ | 3,656 | |||||
| Four Quarters | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Quarter Ended | Ended | ||||||||||||||
| Dec. 31, 2019 | Mar. 31, 2020 | Jun 30, 2020 | Sep. 30, 2020 | Sep. 30, 2020 | |||||||||||
| (in millions) | |||||||||||||||
| Ag Services and Oilseeds | $ | 833 | $ | 514 | $ | 502 | $ | 527 | $ | 2,376 | |||||
| Carbohydrate Solutions | 258 | 148 | 274 | 323 | 1,003 | ||||||||||
| Nutrition | 160 | 199 | 217 | 201 | 777 | ||||||||||
| Other Business | 20 | 15 | 39 | 21 | 95 | ||||||||||
| Corporate | (144 | ) | (150 | ) | (142 | ) | (159 | ) | (595 | ) | |||||
| Adjusted EBITDA | $ | 1,127 | $ | 726 | $ | 890 | $ | 913 | $ | 3,656 |
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The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the trailing four quarters ended September 30, 2019.
| Four Quarters | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter Ended | Ended | ||||||||||||||
| Dec. 31, 2018 | Mar. 31, 2019 | Jun 30, 2019 | Sep. 30, 2019 | Sep. 30, 2019 | |||||||||||
| (in millions) | |||||||||||||||
| Earnings before income taxes | $ | 312 | $ | 315 | $ | 274 | $ | 503 | $ | 1,404 | |||||
| Interest expense | 97 | 101 | 109 | 97 | 404 | ||||||||||
| Depreciation and amortization | 235 | 245 | 248 | 249 | 977 | ||||||||||
| LIFO charge (credit) | (4 | ) | 1 | 25 | (16 | ) | 6 | ||||||||
| Losses (gains) on sales of assets and businesses | 8 | (12 | ) | — | — | (4 | ) | ||||||||
| Asset impairment, restructuring, & settlement charges | 250 | 11 | 138 | 53 | 452 | ||||||||||
| Expenses related to acquisitions | 12 | 14 | — | — | 26 | ||||||||||
| Adjusted EBITDA | $ | 910 | $ | 675 | $ | 794 | $ | 886 | $ | 3,265 | |||||
| Four Quarters | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Quarter Ended | Ended | ||||||||||||||
| Dec. 31, 2018 | Mar. 31, 2019 | Jun 30, 2019 | Sep. 30, 2019 | Sep. 30, 2019 | |||||||||||
| (in millions) | |||||||||||||||
| Ag Services and Oilseeds | $ | 711 | $ | 510 | $ | 457 | $ | 511 | $ | 2,189 | |||||
| Carbohydrate Solutions | 281 | 178 | 274 | 264 | 997 | ||||||||||
| Nutrition | 99 | 134 | 173 | 175 | 581 | ||||||||||
| Other Business | (3 | ) | 24 | 18 | 55 | 94 | |||||||||
| Corporate | (178 | ) | (171 | ) | (128 | ) | (119 | ) | (596 | ) | |||||
| Adjusted EBITDA | $ | 910 | $ | 675 | $ | 794 | $ | 886 | $ | 3,265 |
Adjusted EBITDA is defined as earnings before taxes, interest, and 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 interest expense and depreciation
and amortization to earnings before income taxes. Management believes that adjusted EBITDA is a useful measure of the
Company’s performance because it provides investors additional information about the Company’s operations allowing better
evaluation of underlying business performance and better period-to-period comparability. Adjusted EBITDA is a non-GAAP financial measure and is not intended to replace or be an alternative to earnings before income taxes, the most directly comparable GAAP financial measure.
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