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) July 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 July 29, 2020, Archer-Daniels-Midland Company (ADM) issued a press release announcing second 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 July 29, 2020 announcing second 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: | July 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 July 29, 2020 announcing second 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 Second Quarter Earnings of $0.84 per Share,
$0.85 per Share on an Adjusted Basis
•Net earnings of $469 million
•Strong first half; execution of strategic plan continued delivering results
•Safely served customers, protected employees while supporting global food supply chain with minimal disruptions despite challenging environment
CHICAGO, July 29, 2020—ADM (NYSE: ADM) today reported financial results for the quarter ended June 30, 2020.
“This was another strong quarter for ADM. I am proud of our team’s excellent work, as their execution of our strategy continued to deliver results,” said Chairman and CEO Juan Luciano. “Through good and challenging times alike, we have kept a strong and steady focus on transforming and improving our company. Thanks to that work, and thanks to the ADM colleagues who have gone above and beyond to support our customers and the global food supply chain, we are delivering on our purpose by providing high quality nutrition around the world.
“We’re also living up to our ideals,” Luciano continued. “From our ambitious new sustainability goals, to the continued expansion of products and services to meet evolving consumer needs, to the critical efforts we are all making to protect our employees and support our communities during challenging times, our team is making a positive impact.
“As we advance our strategy, we are increasingly seeing growing benefits flow to our bottom line. Our team is exceeding the targets we’ve set for those factors under our control, and as we look at the second half of the year, we’ll continue to advance our key focus areas: optimizing business performance, accelerating Readiness – which has been critical to our resilience and agility this year – and harvesting the benefits of strategic growth investments, especially in our Nutrition segment. We are in a strong position, with great momentum, and we are confident in our ability to continue to deliver strong earnings and returns in 2020 and beyond.”
1
Second Quarter 2020 Highlights
| (Amounts in millions except per share amounts) | 2020 | 2019 | ||
|---|---|---|---|---|
| Earnings per share (as reported) | $ | 0.84 | $ | 0.42 |
| Adjusted earnings per share^1^ | $ | 0.85 | $ | 0.60 |
| Segment operating profit | $ | 813 | $ | 645 |
| Adjusted segment operating profit^1^ | $ | 804 | $ | 682 |
| Ag Services and Oilseeds | 413 | 362 | ||
| Carbohydrate Solutions | 195 | 192 | ||
| Nutrition | 158 | 117 | ||
| Other Business | 38 | 11 | ||
| • | EPS as reported of $0.84 includes a $0.02 per share charge related to asset impairment and restructuring accruals, a $0.02 per share charge related to early debt extinguishment, and a $0.03 per share credit related to the gain on sale of certain assets. Adjusted EPS, which excludes these items, was $0.85.^1^ | |||
| --- | --- |
Results of Operations
Ag Services & Oilseeds delivered higher results versus the second quarter of 2019.
| • | Ag Services results were substantially better year over year. Strong execution in South America helped deliver record quarterly origination and export volumes in a significantly improved margin environment, driven by a weaker Brazilian Real and strong farmer selling. Global trade delivered another strong quarter, as countries looked to secure stable supplies of food amid the pandemic. Lower interior grain margins affected results in North America. |
|---|---|
| • | Crushing was lower versus the prior-year period. South America delivered significantly higher year-over-year results in an environment of solid domestic meal demand and the weaker Brazilian Real. In EMEAI, crush volumes and margins remained solid. In North America, margins were impacted by COVID-19 effects on customers. |
| --- | --- |
| • | Refined Products and Other was higher year over year, driven by improved biodiesel volumes and margins in North and South America as well as strong volumes and margins in refined and packaged oils in South America. Demand was lower for biodiesel in EMEAI, and edible oils in both EMEAI and North America. |
| --- | --- |
| • | Wilmar results were lower year over year. |
| --- | --- |
Carbohydrate Solutions results were similar to the year-ago quarter.
| • | Starches and Sweeteners was lower year over year. Results were impacted by lower food service demand in North America and mark-to-market losses on corn oil contracts, partially offset by lower net raw material costs and strong risk management results. Wheat milling had another strong quarter, as solid retail demand and footprint optimization initiatives continued to drive results. |
|---|
^1^ Non-GAAP financial measures; see pages 5, 10, 11 and 13 for explanations and reconciliations, including after-tax amounts.
2
| • | Vantage Corn Processors results were higher than the second quarter of 2019, driven by favorable risk management results on inventory positions and strong demand for industrial ethanol. While average industry ethanol margins were down versus the prior year, prices and margins improved throughout the quarter as lower production, including two idled ADM dry mills, and some recovery in driving miles led to falling industry stocks. |
|---|
Nutrition continued to deliver significant year-over-year profit growth.
| • | Human Nutrition results were higher versus the prior-year quarter. Flavors continued to deliver solid results, as favorable sales mix and margin expansion in North America was offset by some softness in EMEAI. Strong execution to meet rising customer demand for plant-based proteins and edible beans drove higher results in Specialty Ingredients. Health & Wellness delivered higher performance on strong sales for probiotics, improved volumes and margins in fiber, and additional fermentation income. |
|---|---|
| • | Animal Nutrition was again higher year over year. Despite impacts from COVID-19 on demand in some regions, continued execution on Neovia synergies, robust demand for pet food and treats, and improvement in amino acids drove better results. |
| --- | --- |
Other Business results were higher, driven by improvements in captive insurance operations.
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 $813 million for the quarter includes charges related to asset impairment and restructuring activities of $14 million ($0.02 per share) and gains on the sale of certain assets of $23 million ($0.03 per share).
In Corporate results, interest expense decreased due to lower average borrowing costs from liability management actions taken in late 2019. Unallocated corporate costs for the quarter were higher year over year due to higher variable performance-related compensation expense accruals, and transfers of costs from business segments into Corporate due to centralization of certain activities. Other charges declined due to improved foreign hedging results on intercompany funding and improved investment performance. Corporate results also included debt extinguishment expenses of $14 million related to the early retirement of a bond.
The effective tax rate for the quarter was approximately 14 percent, very similar to the 13 percent in the prior year.
Note: Additional Facts and Explanations
Additional facts and explanations about results and industry environment can be found at the end of the ADM Q2 Earnings Presentation at www.adm.com/webcast.
3
Conference Call Information
ADM will host a webcast on July 30, 2020, at 7:00 a.m. Central Time to discuss financial results and provide a company update. 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
Corporate Release
4
Segment Operating Profit, Adjusted Segment Operating Profit (a non-GAAP financial measure)
and Corporate Results
(unaudited)
| Quarter ended | Six months ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30 | June 30 | |||||||||||||||||
| (In millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | ||||||||||||
| Segment Operating Profit | $ | 813 | $ | 645 | $ | 168 | $ | 1,412 | $ | 1,256 | $ | 156 | ||||||
| Specified items: | ||||||||||||||||||
| (Gains) losses on sales of assets and businesses | (23 | ) | — | (23 | ) | (23 | ) | (12 | ) | (11 | ) | |||||||
| Impairment, restructuring, and settlement charges | 14 | 37 | (23 | ) | 58 | 46 | 12 | |||||||||||
| Adjusted Segment Operating Profit | $ | 804 | $ | 682 | $ | 122 | $ | 1,447 | $ | 1,290 | $ | 157 | ||||||
| Ag Services and Oilseeds | $ | 413 | $ | 362 | $ | 51 | $ | 835 | $ | 779 | $ | 56 | ||||||
| Ag Services | 171 | 90 | 81 | 335 | 165 | 170 | ||||||||||||
| Crushing | 113 | 139 | (26 | ) | 183 | 355 | (172 | ) | ||||||||||
| Refined Products and Other | 78 | 71 | 7 | 159 | 143 | 16 | ||||||||||||
| Wilmar | 51 | 62 | (11 | ) | 158 | 116 | 42 | |||||||||||
| Carbohydrate Solutions | $ | 195 | $ | 192 | $ | 3 | $ | 263 | $ | 288 | $ | (25 | ) | |||||
| Starches and Sweeteners | 177 | 215 | (38 | ) | 276 | 350 | (74 | ) | ||||||||||
| Vantage Corn Processors | 18 | (23 | ) | 41 | (13 | ) | (62 | ) | 49 | |||||||||
| Nutrition | $ | 158 | $ | 117 | $ | 41 | $ | 300 | $ | 198 | $ | 102 | ||||||
| Human Nutrition | 131 | 103 | 28 | 244 | 191 | 53 | ||||||||||||
| Animal Nutrition | 27 | 14 | 13 | 56 | 7 | 49 | ||||||||||||
| Other Business | $ | 38 | $ | 11 | $ | 27 | $ | 49 | $ | 25 | $ | 24 | ||||||
| Segment Operating Profit | $ | 813 | $ | 645 | $ | 168 | $ | 1,412 | $ | 1,256 | $ | 156 | ||||||
| Corporate Results | $ | (261 | ) | $ | (371 | ) | $ | 110 | $ | (485 | ) | $ | (667 | ) | $ | 182 | ||
| Interest expense - net | (86 | ) | (101 | ) | 15 | (163 | ) | (191 | ) | 28 | ||||||||
| Unallocated corporate costs | (194 | ) | (132 | ) | (62 | ) | (383 | ) | (315 | ) | (68 | ) | ||||||
| Other charges | 35 | (12 | ) | 47 | (17 | ) | (18 | ) | 1 | |||||||||
| Specified items: | ||||||||||||||||||
| LIFO credit (charge) | — | (25 | ) | 25 | 91 | (26 | ) | 117 | ||||||||||
| Early debt repayment expenses | (14 | ) | — | (14 | ) | (14 | ) | — | (14 | ) | ||||||||
| Expenses related to acquisitions | — | — | — | — | (14 | ) | 14 | |||||||||||
| Impairment and restructuring charges | (2 | ) | (101 | ) | 99 | 1 | (103 | ) | 104 | |||||||||
| Earnings Before Income Taxes | $ | 552 | $ | 274 | $ | 278 | $ | 927 | $ | 589 | $ | 338 |
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 | Six months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30 | June 30 | |||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| (in millions, except per share amounts) | ||||||||||||
| Revenues | $ | 16,281 | $ | 16,297 | $ | 31,251 | $ | 31,601 | ||||
| Cost of products sold ^(1)^ | 15,173 | 15,325 | 29,192 | 29,701 | ||||||||
| Gross profit | 1,108 | 972 | 2,059 | 1,900 | ||||||||
| Selling, general, and administrative expenses ^(2)^ | 638 | 602 | 1,302 | 1,261 | ||||||||
| Asset impairment, exit, and restructuring costs ^(3)^ | 16 | 136 | 57 | 147 | ||||||||
| Equity in (earnings) losses of unconsolidated affiliates | (103 | ) | (90 | ) | (243 | ) | (191 | ) | ||||
| Interest income | (15 | ) | (46 | ) | (55 | ) | (95 | ) | ||||
| Interest expense | 87 | 109 | 170 | 210 | ||||||||
| Other (income) expense - net ^(4)^ | (67 | ) | (13 | ) | (99 | ) | (21 | ) | ||||
| Earnings before income taxes | 552 | 274 | 927 | 589 | ||||||||
| Income tax (benefit) expense ^(5)^ | 80 | 36 | 64 | 117 | ||||||||
| Net earnings including noncontrolling interests | 472 | 238 | 863 | 472 | ||||||||
| Less: Net earnings (losses) attributable to noncontrolling interests | 3 | 3 | 3 | 4 | ||||||||
| Net earnings attributable to ADM | $ | 469 | $ | 235 | $ | 860 | $ | 468 | ||||
| Diluted earnings per common share | $ | 0.84 | $ | 0.42 | $ | 1.53 | $ | 0.83 | ||||
| Average diluted shares outstanding | 562 | 566 | 563 | 566 |
^(1)^ Includes a charge (credit) related to changes in the Company’s LIFO reserves of $(91) million in the current YTD and $25 million and $26 million in the prior quarter and YTD, respectively.
^(2)^ Includes acquisition-related expenses of $14 million in the prior YTD.
^(3)^^^Includes charges related to impairment of certain assets and restructuring of $16 million and $57 million in the current quarter and YTD, respectively, and $136 million and $147 million in the prior quarter and YTD, respectively.
^(4)^ Includes gains of $23 million related to the sale of certain assets and early debt repayment expenses of $14 million in the current quarter and YTD and a settlement charge of $2 million in the prior quarter and YTD. Prior YTD also includes gains of $12 million related to the sale of certain assets and a step-up gain on an equity investment.
^(5)^Includes the tax expense (benefit) impact of the above specified items and tax discrete items totaling $(1) million and $19 million, in the current quarter and YTD, respectively, and the tax benefit impact of the above specified items and certain discrete items totaling $(58) million and $(44) million in the prior quarter and YTD, respectively.
6
Summary of Financial Condition
(unaudited)
| June 30, <br>2020 | June 30, <br>2019 | |||
|---|---|---|---|---|
| (in millions) | ||||
| Net Investment In | ||||
| Cash and cash equivalents (a) | $ | 1,203 | $ | 849 |
| Short-term marketable securities (a) | — | 4 | ||
| Operating working capital (b) | 8,540 | 7,804 | ||
| Property, plant, and equipment | 9,833 | 10,245 | ||
| Investments in and advances to affiliates | 5,239 | 5,449 | ||
| Long-term marketable securities | 3 | 8 | ||
| Goodwill and other intangibles | 5,212 | 5,545 | ||
| Other non-current assets | 2,043 | 1,821 | ||
| $ | 32,073 | $ | 31,725 | |
| Financed By | ||||
| Short-term debt (a) | $ | 531 | $ | 1,699 |
| Long-term debt, including current maturities (a) | 8,642 | 7,713 | ||
| Deferred liabilities | 3,504 | 3,281 | ||
| Temporary equity | 85 | 53 | ||
| Shareholders’ equity | 19,311 | 18,979 | ||
| $ | 32,073 | $ | 31,725 | |
| (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)
| Six months ended | ||||||
|---|---|---|---|---|---|---|
| June 30 | ||||||
| 2020 | 2019 | |||||
| (in millions) | ||||||
| Operating Activities | ||||||
| Net earnings | $ | 863 | $ | 472 | ||
| Depreciation and amortization | 489 | 493 | ||||
| Asset impairment charges | 47 | 44 | ||||
| (Gains) losses on sales of assets | (64 | ) | (30 | ) | ||
| Other - net | 276 | 37 | ||||
| Change in deferred consideration in securitized receivables^(a)^ | (2,456 | ) | (3,613 | ) | ||
| Other changes in operating assets and liabilities | 409 | (116 | ) | |||
| Total Operating Activities | (436 | ) | (2,713 | ) | ||
| Investing Activities | ||||||
| Purchases of property, plant and equipment | (360 | ) | (383 | ) | ||
| Net assets of businesses acquired | (3 | ) | (1,944 | ) | ||
| Proceeds from sale of business/assets | 91 | 23 | ||||
| Investments in retained interest in securitized receivables^(a)^ | (2,121 | ) | (2,590 | ) | ||
| Proceeds from retained interest in securitized receivables^(a)^ | 4,577 | 6,203 | ||||
| Marketable securities - net | (3 | ) | 65 | |||
| Investments in and advances to affiliates | (5 | ) | (10 | ) | ||
| Other investing activities | (3 | ) | (18 | ) | ||
| Total Investing Activities | 2,173 | 1,346 | ||||
| Financing Activities | ||||||
| Long-term debt borrowings | 1,478 | 2 | ||||
| Long-term debt payments | (525 | ) | (611 | ) | ||
| Net borrowings (payments) under lines of credit | (667 | ) | 1,413 | |||
| Share repurchases | (112 | ) | (94 | ) | ||
| Cash dividends | (405 | ) | (395 | ) | ||
| Other | 3 | (42 | ) | |||
| Total Financing Activities | (228 | ) | 273 | |||
| Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | 1,509 | (1,094 | ) | |||
| 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 | $ | 4,499 | $ | 2,749 |
(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 | Six months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| June 30 | June 30 | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| (in ‘000s metric tons) | ||||||||
| Processed volumes (by commodity) | ||||||||
| Oilseeds | 9,103 | 8,773 | 18,266 | 17,940 | ||||
| Corn | 4,099 | 5,546 | 9,633 | 10,678 | ||||
| Total processed volumes | 13,202 | 14,319 | 27,899 | 28,618 | ||||
| Quarter ended | Six months ended | |||||||
| June 30 | June 30 | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| (in millions) | ||||||||
| Revenues | ||||||||
| Ag Services and Oilseeds | $ | 12,741 | $ | 12,228 | $ | 23,820 | $ | 23,766 |
| Carbohydrate Solutions | 2,014 | 2,441 | 4,330 | 4,844 | ||||
| Nutrition | 1,437 | 1,524 | 2,908 | 2,806 | ||||
| Other Business | 89 | 104 | 193 | 185 | ||||
| Total revenues | $ | 16,281 | $ | 16,297 | $ | 31,251 | $ | 31,601 |
9
Adjusted Earnings Per Share
A non-GAAP financial measure
(unaudited)
| Quarter ended June 30 | Six months ended June 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 | $ | 469 | $ | 0.84 | $ | 235 | $ | 0.42 | $ | 860 | $ | 1.53 | $ | 468 | $ | 0.83 | ||||||||
| Adjustments: | ||||||||||||||||||||||||
| LIFO charge (credit) (a) | — | — | 19 | 0.03 | (69 | ) | (0.12 | ) | 20 | 0.03 | ||||||||||||||
| Losses (gains) on sales of assets and businesses (b) | (18 | ) | (0.03 | ) | — | — | (18 | ) | (0.03 | ) | (9 | ) | (0.02 | ) | ||||||||||
| Impairment, restructuring, and settlement charges (c) | 12 | 0.02 | 105 | 0.18 | 44 | 0.08 | 115 | 0.20 | ||||||||||||||||
| Expenses related to acquisitions (d) | — | — | — | — | — | — | 9 | 0.02 | ||||||||||||||||
| Early debt repayment expenses (e) | 11 | 0.02 | — | — | 11 | 0.02 | — | — | ||||||||||||||||
| Tax adjustment (f) | 1 | — | (19 | ) | (0.03 | ) | 8 | 0.01 | (2 | ) | — | |||||||||||||
| Sub-total adjustments | 6 | 0.01 | 105 | 0.18 | (24 | ) | (0.04 | ) | 133 | 0.23 | ||||||||||||||
| Adjusted net earnings and adjusted EPS | $ | 475 | $ | 0.85 | $ | 340 | $ | 0.60 | $ | 836 | $ | 1.49 | $ | 601 | $ | 1.06 | ||||||||
| (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 $25 million and $26 million pretax, respectively ($19 million and $20 million after tax, respectively), tax effected using the Company’s U.S. income tax rate. | |||||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||
| (b) | Current quarter and YTD gain of $23 million pretax ($18 million after tax) related to the sale of certain assets. 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 $16 million and $57 million pretax, respectively ($12 million and $44 million after tax, respectively), related to the impairment of certain assets and restructuring, tax effected using the applicable rates. Prior quarter and YTD charges of $138 million and $149 million pretax, respectively ($105 million and $115 million after tax, respectively), related to the impairment of certain assets, restructuring, and 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 repayment expenses of $14 million pretax ($11 million after tax), tax effected using the Company’s U.S. income tax rate, related to the make-whole call provisions on a bond. | |||||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||
| (f) | Tax adjustment totaling $1 million and $8 million due to certain discrete items in the current quarter and YTD, respectively, and $(19) million and $(2) 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 | ||||||||||||||
| Sep. 30, 2019 | Dec. 31, 2019 | Mar. 31, 2020 | June 30, 2020 | June 30, 2020 | |||||||||||
| Net earnings attributable to ADM | $ | 407 | $ | 504 | $ | 391 | $ | 469 | $ | 1,771 | |||||
| Adjustments: | |||||||||||||||
| Interest expense | 97 | 95 | 83 | 87 | 362 | ||||||||||
| LIFO | (16 | ) | 27 | (91 | ) | — | (80 | ) | |||||||
| Other adjustments | 48 | 253 | 48 | 8 | 357 | ||||||||||
| Total adjustments | 129 | 375 | 40 | 95 | 639 | ||||||||||
| Tax on adjustments | (32 | ) | (8 | ) | (7 | ) | (23 | ) | (70 | ) | |||||
| Net adjustments | 97 | 367 | 33 | 72 | 569 | ||||||||||
| Total Adjusted ROIC Earnings | $ | 504 | $ | 871 | $ | 424 | $ | 541 | $ | 2,340 | |||||
| Adjusted Invested Capital (in millions) | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| Quarter Ended | Trailing Four | ||||||||||||||
| Sep. 30, 2019 | Dec. 31, 2019 | Mar. 31, 2020 | June 30, 2020 | Quarter Average | |||||||||||
| Equity ^(1)^ | $ | 18,873 | $ | 19,208 | $ | 18,952 | $ | 19,293 | $ | 19,082 | |||||
| + Interest-bearing liabilities ^(2)^ | 8,891 | 8,891 | 12,512 | 9,181 | 9,869 | ||||||||||
| + LIFO adjustment (net of tax) | 49 | 69 | — | — | 30 | ||||||||||
| Other adjustments | 36 | 274 | 39 | 6 | 89 | ||||||||||
| Total Adjusted Invested Capital | $ | 27,849 | $ | 28,442 | $ | 31,503 | $ | 28,480 | $ | 29,070 | |||||
| Adjusted Return on Invested Capital | 8.1 | % |
^(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 June 30, 2020.
| Four Quarters | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter Ended | Ended | ||||||||||||||
| Sep. 30, 2019 | Dec. 31, 2019 | Mar. 31, 2020 | June 30, 2020 | June 30, 2020 | |||||||||||
| (in millions) | |||||||||||||||
| Earnings before income taxes | $ | 503 | $ | 496 | $ | 375 | $ | 552 | $ | 1,926 | |||||
| Interest expense | 97 | 95 | 83 | 87 | 362 | ||||||||||
| Depreciation and amortization | 249 | 251 | 245 | 244 | 989 | ||||||||||
| LIFO charge (credit) | (16 | ) | 27 | (91 | ) | — | (80 | ) | |||||||
| Losses (gains) on sales of assets and businesses | — | 101 | — | (23 | ) | 78 | |||||||||
| Asset impairment and restructuring charges | 53 | 103 | 41 | 16 | 213 | ||||||||||
| Railroad maintenance expense | — | 51 | 73 | — | 124 | ||||||||||
| Early debt repayment expenses | — | — | — | 14 | 14 | ||||||||||
| Expenses related to acquisitions | — | 3 | — | — | 3 | ||||||||||
| Adjusted EBITDA | $ | 886 | $ | 1,127 | $ | 726 | $ | 890 | $ | 3,629 | |||||
| Four Quarters | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Quarter Ended | Ended | ||||||||||||||
| Sep. 30, 2019 | Dec. 31, 2019 | Mar. 31, 2020 | June 30, 2020 | June 30, 2020 | |||||||||||
| (in millions) | |||||||||||||||
| Ag Services and Oilseeds | $ | 511 | $ | 833 | $ | 514 | $ | 502 | $ | 2,360 | |||||
| Carbohydrate Solutions | 264 | 258 | 148 | 274 | 944 | ||||||||||
| Nutrition | 175 | 160 | 199 | 217 | 751 | ||||||||||
| Other Business | 55 | 20 | 15 | 39 | 129 | ||||||||||
| Corporate | (119 | ) | (144 | ) | (150 | ) | (142 | ) | (555 | ) | |||||
| Adjusted EBITDA | $ | 886 | $ | 1,127 | $ | 726 | $ | 890 | $ | 3,629 |
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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 June 30, 2019.
| Four Quarters | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter Ended | Ended | ||||||||||||||
| Sep. 30, 2018 | Dec. 31, 2018 | Mar 31, 2019 | Jun. 30, 2019 | Jun. 30, 2019 | |||||||||||
| (in millions) | |||||||||||||||
| Earnings before income taxes | $ | 632 | $ | 312 | $ | 315 | $ | 274 | $ | 1,533 | |||||
| Interest expense | 87 | 97 | 101 | 109 | 394 | ||||||||||
| Depreciation and amortization | 232 | 235 | 245 | 248 | 960 | ||||||||||
| LIFO charge (credit) | 7 | (4 | ) | 1 | 25 | 29 | |||||||||
| Losses (gains) on sales of assets and businesses | (21 | ) | 8 | (12 | ) | — | (25 | ) | |||||||
| Asset impairment, restructuring, & settlement charges | 2 | 250 | 11 | 138 | 401 | ||||||||||
| Expenses related to acquisitions | (4 | ) | 12 | 14 | — | 22 | |||||||||
| Adjusted EBITDA | $ | 935 | $ | 910 | $ | 675 | $ | 794 | $ | 3,314 | |||||
| Four Quarters | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Quarter Ended | Ended | ||||||||||||||
| Sep. 30, 2018 | Dec. 31, 2018 | Mar 31, 2019 | Jun. 30, 2019 | Jun. 30, 2019 | |||||||||||
| (in millions) | |||||||||||||||
| Ag Services and Oilseeds | $ | 580 | $ | 711 | $ | 510 | $ | 457 | $ | 2,258 | |||||
| Carbohydrate Solutions | 364 | 281 | 178 | 274 | 1,097 | ||||||||||
| Nutrition | 103 | 99 | 134 | 173 | 509 | ||||||||||
| Other Business | 37 | (3 | ) | 24 | 18 | 76 | |||||||||
| Corporate | (149 | ) | (178 | ) | (171 | ) | (128 | ) | (626 | ) | |||||
| Adjusted EBITDA | $ | 935 | $ | 910 | $ | 675 | $ | 794 | $ | 3,314 |
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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