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) April 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 April 29, 2020, Archer-Daniels-Midland Company (ADM) issued a press release announcing first 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 April 29, 2020 announcing first 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: | April 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 April 29, 2020 announcing first 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 First Quarter Earnings of $0.69 per Share,
$0.64 per Share on an Adjusted Basis
•Net earnings of $391 million
•Strong quarter-end balance sheet with cash and cash equivalents of $4.7 billion
•Playing critical role supporting global food chain and fulfilling customer needs amid pandemic
CHICAGO, April 29, 2020—ADM (NYSE: ADM) today reported financial results for the quarter ended March 31, 2020.
“I’m extremely grateful to our 38,000 global colleagues, whose commitment, ingenuity and agility are powering ADM as we support the global food supply chain and provide nutrition around the world,” said Chairman and CEO Juan Luciano. “Our performance is a testament to the resilience of our people, the strength of our business model, and the breadth and depth of our capabilities to fulfill customer needs, even in a market environment that is changing rapidly due to the COVID-19 pandemic.
“Our first priority during this extraordinary time is supporting our colleagues, and we are focused on that every single day. We’ve put into place detailed guidelines and protocols to help protect our teams and support continuity of operations, and I’m proud that we are operating around the globe with very minimal disruptions. We’ve also taken steps to bolster our already strong balance sheet and liquidity position to further enhance our ability to run our business.
“Even amid the challenge of COVID-19, the team is doing a great job advancing our important work to make ADM a better company. From improving underperforming businesses, to driving Readiness, to harvesting our investments — particularly in Nutrition — we remain committed to delivering our strategy and focusing on the business drivers under our control. There are many unknowns, and ADM isn’t immune from some of the negative effects of this pandemic, but we are confident in the ability of our great team to shift to whatever our customers need, and continue to deliver nutrition around the globe.”
1
First Quarter 2020 Highlights
| (Amounts in millions except per share amounts) | 2020 | 2019 | ||
|---|---|---|---|---|
| Earnings per share (as reported) | $ | 0.69 | $ | 0.41 |
| Adjusted earnings per share^1^ | $ | 0.64 | $ | 0.46 |
| Segment operating profit | $ | 599 | $ | 611 |
| Adjusted segment operating profit^1^ | $ | 643 | $ | 608 |
| Ag Services and Oilseeds | 422 | 417 | ||
| Carbohydrate Solutions | 68 | 96 | ||
| Nutrition | 142 | 81 | ||
| Other Business | 11 | 14 | ||
| • | EPS as reported of $0.69 includes a $0.06 per share charge related to asset impairment and restructuring charges, a $0.12 per share credit related to LIFO, and a $0.01 per share tax expense related to certain discrete items. Adjusted EPS, which excludes these items, was $0.64.^1^ | |||
| --- | --- |
Results of Operations
Ag Services & Oilseeds delivered strong results that were in line with the year-ago period.
| • | Ag Services results more than doubled versus the first quarter of 2019, which was negatively impacted by high water conditions in North America. Global trade performance was driven by strong results in destination marketing and structured trade finance. Robust farmer selling in Brazil drove higher year-over-year origination volumes and margins, which were partially offset by weaker results in North America. |
|---|---|
| • | Crushing results were lower than the prior-year-period. Volumes were strong, and execution margins were solid, though below the high realized margins in the first quarter of 2019, which benefited from the short crop in Argentina. The prior-year quarter also benefited from about $75 million of positive timing impacts. |
| --- | --- |
| • | Refined Products and Other results were higher than the first quarter of 2019. Higher margins in both biodiesel and refined oils in North America were offset by lower biodiesel margins in EMEAI. Peanut shelling results were significantly improved versus the prior-year period. |
| --- | --- |
| • | Wilmar results were significantly higher year over year. |
| --- | --- |
Carbohydrate Solutions results were lower than the first quarter of 2019.
| • | The Starches and Sweeteners subsegment, including wet mill ethanol results, was down year over year, largely due to about $50 million in negative mark to market impacts on forward sales of corn oil, much of which could reverse over the balance of the year. Absent those impacts, results were higher due to better operating performance at the Decatur complex, strong results in wheat milling, and improved conditions in EMEAI. |
|---|---|
| • | Vantage Corn Processors results were slightly higher than the prior year. Effective risk management, combined with the lack of the severe weather impacts seen in the first quarter of 2019, helped offset weak industry ethanol margins caused by significantly decreased demand. |
| --- | --- |
^1^ Non-GAAP financial measures; see pages 5, 10, 11, 12 and 13 for explanations and reconciliations, including after-tax amounts.
2
Nutrition results were once again substantially higher year over year.
| • | Human Nutrition businesses, including flavors, specialty ingredients and health & wellness, delivered strong performance and growth across the broad portfolio. Increased sales revenue in North America and EMEAI flavors, continued sales growth in alternative proteins, and additional bioactives income helped drive improved results. |
|---|---|
| • | Animal Nutrition continued its growth trajectory. Improved year-over-year results were driven by a strong performance from Neovia, good volumes and margins in feed additives, and solid sales in pet care. Amino acids were negatively impacted by a year-over-year decline in the global pricing environment. |
| --- | --- |
Other Business results were down year over year. Futures commission loss provisions were partially offset 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 $599 million for the quarter includes charges related to asset impairment and restructuring activities of $44 million ($0.06 per share).
In Corporate results, interest expense was down due to lower average borrowing costs from liability management actions taken in late 2019. Unallocated corporate costs for the quarter were slightly higher year over year principally due to continued investments in IT and business transformation. Other charges increased due to a railroad maintenance expense that had an offsetting benefit in tax expense (see below), partially offset by improved foreign hedging results on intercompany funding.
Corporate results also included a LIFO credit of $91 million ($0.12 per share) due to the discontinuation of LIFO effective January 1, 2020.
The effective tax rate for the quarter was a benefit of approximately 4 percent compared to an expense of 26 percent in the prior year. The favorable 2020 tax rate was due primarily to the impact of U.S. tax credits signed into law in December. In the absence of the railway tax credits and specified items, the effective tax rate for the quarter would have been approximately 14 percent.
Note: Additional Facts and Explanations
Additional facts and explanations about Q1 results and industry environment can be found at the end of the ADM Q1 Earnings Presentation at www.adm.com/webcast.
Conference Call Information
ADM will host a webcast on April 30, 2020, at 10:00 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.
3
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
4
Segment Operating Profit, Adjusted Segment Operating Profit (a non-GAAP financial measure)
and Corporate Results
(unaudited)
| Quarter ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31 | |||||||||
| (In millions) | 2020 | 2019 | Change | ||||||
| Segment Operating Profit | $ | 599 | $ | 611 | $ | (12 | ) | ||
| Specified items: | |||||||||
| (Gains) losses on sales of assets and businesses | — | (12 | ) | 12 | |||||
| Impairment and restructuring charges | 44 | 9 | 35 | ||||||
| Adjusted Segment Operating Profit | $ | 643 | $ | 608 | $ | 35 | |||
| Ag Services and Oilseeds | $ | 422 | $ | 417 | $ | 5 | |||
| Ag Services | 164 | 75 | 89 | ||||||
| Crushing | 70 | 216 | (146 | ) | |||||
| Refined Products and Other | 81 | 72 | 9 | ||||||
| Wilmar | 107 | 54 | 53 | ||||||
| Carbohydrate Solutions | $ | 68 | $ | 96 | $ | (28 | ) | ||
| Starches and Sweeteners | 99 | 135 | (36 | ) | |||||
| Vantage Corn Processors | (31 | ) | (39 | ) | 8 | ||||
| Nutrition | $ | 142 | $ | 81 | $ | 61 | |||
| Human Nutrition | 113 | 88 | 25 | ||||||
| Animal Nutrition | 29 | (7 | ) | 36 | |||||
| Other Business | $ | 11 | $ | 14 | $ | (3 | ) | ||
| Segment Operating Profit | $ | 599 | $ | 611 | $ | (12 | ) | ||
| Corporate Results | $ | (224 | ) | $ | (296 | ) | $ | 72 | |
| Interest expense - net | (77 | ) | (90 | ) | 13 | ||||
| Unallocated corporate costs | (189 | ) | (183 | ) | (6 | ) | |||
| Other charges | (52 | ) | (6 | ) | (46 | ) | |||
| Specified items: | |||||||||
| LIFO credit (charge) | 91 | (1 | ) | 92 | |||||
| Expenses related to acquisitions | — | (14 | ) | 14 | |||||
| Impairment, restructuring, and settlement charges | 3 | (2 | ) | 5 | |||||
| Earnings Before Income Taxes | $ | 375 | $ | 315 | $ | 60 |
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 | ||||||
|---|---|---|---|---|---|---|
| March 31 | ||||||
| 2020 | 2019 | |||||
| (in millions, except per share amounts) | ||||||
| Revenues | $ | 14,970 | $ | 15,304 | ||
| Cost of products sold ^(1)^ | 14,019 | 14,376 | ||||
| Gross profit | 951 | 928 | ||||
| Selling, general, and administrative expenses ^(2)^ | 664 | 659 | ||||
| Asset impairment, exit, and restructuring costs ^(3)^ | 41 | 11 | ||||
| Equity in (earnings) losses of unconsolidated affiliates | (140 | ) | (101 | ) | ||
| Interest income | (40 | ) | (49 | ) | ||
| Interest expense | 83 | 101 | ||||
| Other (income) expense - net ^(4)^ | (32 | ) | (8 | ) | ||
| Earnings before income taxes | 375 | 315 | ||||
| Income tax (benefit) expense ^(5)^ | (16 | ) | 81 | |||
| Net earnings including noncontrolling interests | 391 | 234 | ||||
| Less: Net earnings (losses) attributable to noncontrolling interests | — | 1 | ||||
| Net earnings attributable to ADM | $ | 391 | $ | 233 | ||
| Diluted earnings per common share | $ | 0.69 | $ | 0.41 | ||
| Average diluted shares outstanding | 564 | 566 |
^(1)^Includes a charge (credit) related to changes in the Company’s LIFO reserves of $(91) million in the current quarter and $1 million in the prior quarter.
^(2)^ Includes acquisition-related expenses of $14 million in the prior quarter.
^(3)^^^Includes net charges related to impairment of certain assets and restructuring of $41 million in the current quarter and $11 million in the prior quarter.
^(4)^ Includes gains of $12 million related to the sale of certain assets and a step-up gain on an equity investment in the prior quarter.
^(5)^Includes the tax expense impact of the above specified items and tax discrete items totaling $20 million in the current quarter and the tax expense impact of the above specified items, tax discrete items, and true-up adjustments totaling $14 million in the prior quarter.
6
Summary of Financial Condition
(unaudited)
| March 31, <br>2020 | March 31, <br>2019 | |||
|---|---|---|---|---|
| (in millions) | ||||
| Net Investment In | ||||
| Cash and cash equivalents (a) | $ | 4,734 | $ | 926 |
| Short-term marketable securities (a) | — | 9 | ||
| Operating working capital (b) | 7,985 | 8,175 | ||
| Property, plant, and equipment | 9,883 | 10,299 | ||
| Investments in and advances to affiliates | 5,143 | 5,332 | ||
| Long-term marketable securities | 2 | 22 | ||
| Goodwill and other intangibles | 5,194 | 5,459 | ||
| Other non-current assets | 2,027 | 1,777 | ||
| $ | 34,968 | $ | 31,999 | |
| Financed By | ||||
| Short-term debt (a) | $ | 3,382 | $ | 1,595 |
| Long-term debt, including current maturities (a) | 9,121 | 8,289 | ||
| Deferred liabilities | 3,418 | 3,156 | ||
| Temporary equity | 71 | 49 | ||
| Shareholders’ equity | 18,976 | 18,910 | ||
| $ | 34,968 | $ | 31,999 | |
| (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)
| Three months ended | ||||||
|---|---|---|---|---|---|---|
| March 31 | ||||||
| 2020 | 2019 | |||||
| (in millions) | ||||||
| Operating Activities | ||||||
| Net earnings | $ | 391 | $ | 234 | ||
| Depreciation and amortization | 245 | 245 | ||||
| Asset impairment charges | 44 | 9 | ||||
| Losses (gains) on sales of assets | — | (15 | ) | |||
| Other - net | 159 | (7 | ) | |||
| Change in deferred consideration in securitized receivables^(a)^ | (2,045 | ) | (1,778 | ) | ||
| Other changes in operating assets and liabilities | 551 | (723 | ) | |||
| Total Operating Activities | (655 | ) | (2,035 | ) | ||
| Investing Activities | ||||||
| Purchases of property, plant and equipment | (194 | ) | (198 | ) | ||
| Net assets of businesses acquired | (8 | ) | (1,876 | ) | ||
| Proceeds from sale of business/assets | 7 | 18 | ||||
| Investments in retained interest in securitized receivables^(a)^ | (1,271 | ) | (1,313 | ) | ||
| Proceeds from retained interest in securitized receivables^(a)^ | 3,316 | 3,091 | ||||
| Marketable securities - net | 5 | 50 | ||||
| Investments in and advances to affiliates | (3 | ) | (9 | ) | ||
| Other investing activities | 1 | (34 | ) | |||
| Total Investing Activities | 1,853 | (271 | ) | |||
| Financing Activities | ||||||
| Long-term debt borrowings | 1,481 | — | ||||
| Long-term debt payments | (1 | ) | (4 | ) | ||
| Net borrowings (payments) under lines of credit | 2,188 | 1,309 | ||||
| Share repurchases | (112 | ) | — | |||
| Cash dividends | (203 | ) | (198 | ) | ||
| Other | (11 | ) | (42 | ) | ||
| Total Financing Activities | 3,342 | 1,065 | ||||
| Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | 4,540 | (1,241 | ) | |||
| 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 | $ | 7,530 | $ | 2,602 |
(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 | ||||
|---|---|---|---|---|
| March 31 | ||||
| 2020 | 2019 | |||
| (in ‘000s metric tons) | ||||
| Processed volumes (by commodity) | ||||
| Oilseeds | 9,163 | 9,167 | ||
| Corn | 5,534 | 5,132 | ||
| Total processed volumes | 14,697 | 14,299 | ||
| Quarter ended | ||||
| March 31 | ||||
| 2020 | 2019 | |||
| (in millions) | ||||
| Revenues | ||||
| Ag Services and Oilseeds | $ | 11,079 | $ | 11,538 |
| Carbohydrate Solutions | 2,316 | 2,403 | ||
| Nutrition | 1,471 | 1,282 | ||
| Other Business | 104 | 81 | ||
| Total revenues | $ | 14,970 | $ | 15,304 |
9
Adjusted Earnings Per Share
A non-GAAP financial measure
(unaudited)
| Quarter ended March 31 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||||||||
| In millions | Per share | In millions | Per share | |||||||||
| Net earnings and fully diluted EPS | $ | 391 | $ | 0.69 | $ | 233 | $ | 0.41 | ||||
| Adjustments: | ||||||||||||
| LIFO charge (credit) (a) | (69 | ) | (0.12 | ) | 1 | — | ||||||
| Losses (gains) on sales of assets and businesses (b) | — | — | (9 | ) | (0.02 | ) | ||||||
| Asset impairment and restructuring charges (c) | 32 | 0.06 | 10 | 0.02 | ||||||||
| Expenses related to acquisitions (d) | — | — | 9 | 0.02 | ||||||||
| Tax adjustment (e) | 7 | 0.01 | 17 | 0.03 | ||||||||
| Sub-total adjustments | (30 | ) | (0.05 | ) | 28 | 0.05 | ||||||
| Adjusted net earnings and adjusted EPS | $ | 361 | $ | 0.64 | $ | 261 | $ | 0.46 | ||||
| (a) | Current quarter 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 changes in the Company’s LIFO reserves of $1 million pretax ($1 million after tax), tax effected using the Company’s U.S. income tax rate. | |||||||||||
| --- | --- | |||||||||||
| (b) | Prior quarter 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 net charges of $41 million pretax ($32 million after tax) related to the impairment of certain assets and restructuring, tax effected using the applicable rates. Prior quarter charges of $11 million pretax ($10 million after tax) related to the impairment of certain assets and restructuring, tax effected using the applicable tax rates. | |||||||||||
| --- | --- | |||||||||||
| (d) | Prior quarter acquisition expenses of $14 million pretax ($9 million after tax) consisted of expenses primarily related to the Neovia acquisition. | |||||||||||
| --- | --- | |||||||||||
| (e) | Tax adjustment totaling $7 million in the current quarter due to certain discrete items and $17 million in the prior quarter due to certain discrete items and true-up adjustments. | |||||||||||
| --- | --- |
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.
10
Adjusted Return on Invested Capital
A non-GAAP financial measure
(unaudited)
| Adjusted ROIC Earnings (in millions) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Four Quarters | |||||||||||||||
| Quarter Ended | Ended | ||||||||||||||
| June 30, 2019 | Sep. 30, 2019 | Dec. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2020 | |||||||||||
| Net earnings attributable to ADM | $ | 235 | $ | 407 | $ | 504 | $ | 391 | $ | 1,537 | |||||
| Adjustments: | |||||||||||||||
| Interest expense | 109 | 97 | 95 | 83 | 384 | ||||||||||
| LIFO | 25 | (16 | ) | 27 | (91 | ) | (55 | ) | |||||||
| Other adjustments | 119 | 48 | 253 | 48 | 468 | ||||||||||
| Total adjustments | 253 | 129 | 375 | 40 | 797 | ||||||||||
| Tax on adjustments | (65 | ) | (32 | ) | (8 | ) | (7 | ) | (112 | ) | |||||
| Net adjustments | 188 | 97 | 367 | 33 | 685 | ||||||||||
| Total Adjusted ROIC Earnings | $ | 423 | $ | 504 | $ | 871 | $ | 424 | $ | 2,222 | |||||
| Adjusted Invested Capital (in millions) | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| Quarter Ended | Trailing Four | ||||||||||||||
| June 30, 2019 | Sep. 30, 2019 | Dec. 31, 2019 | Mar. 31, 2020 | Quarter Average | |||||||||||
| Equity ^(1)^ | $ | 18,955 | $ | 18,873 | $ | 19,208 | $ | 18,952 | $ | 18,997 | |||||
| + Interest-bearing liabilities ^(2)^ | 9,417 | 8,891 | 8,891 | 12,512 | 9,928 | ||||||||||
| + LIFO adjustment (net of tax) | 61 | 49 | 69 | — | 45 | ||||||||||
| Other adjustments | 86 | 36 | 274 | 39 | 109 | ||||||||||
| Total Adjusted Invested Capital | $ | 28,519 | $ | 27,849 | $ | 28,442 | $ | 31,503 | $ | 29,079 | |||||
| Adjusted Return on Invested Capital | 7.6 | % |
^(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.
11
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 March 31, 2020.
| Four Quarters | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter Ended | Ended | ||||||||||||||
| June 30, 2019 | Sep. 30, 2019 | Dec. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2020 | |||||||||||
| (in millions) | |||||||||||||||
| Earnings before income taxes | $ | 274 | $ | 503 | $ | 496 | $ | 375 | $ | 1,648 | |||||
| Interest expense | 109 | 97 | 95 | 83 | 384 | ||||||||||
| Depreciation and amortization | 248 | 249 | 251 | 245 | 993 | ||||||||||
| LIFO charge (credit) | 25 | (16 | ) | 27 | (91 | ) | (55 | ) | |||||||
| Gains (Losses) on sales of assets and businesses | — | — | 101 | — | 101 | ||||||||||
| Asset impairment, restructuring, & settlement charges | 138 | 53 | 103 | 41 | 335 | ||||||||||
| Railroad maintenance expense | — | — | 51 | 73 | 124 | ||||||||||
| Expenses related to acquisitions | — | — | 3 | — | 3 | ||||||||||
| Adjusted EBITDA | $ | 794 | $ | 886 | $ | 1,127 | $ | 726 | $ | 3,533 | |||||
| Four Quarters | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Quarter Ended | Ended | ||||||||||||||
| June 30, 2019 | Sep. 30, 2019 | Dec. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2020 | |||||||||||
| (in millions) | |||||||||||||||
| Ag Services and Oilseeds | $ | 457 | $ | 511 | $ | 833 | $ | 514 | $ | 2,315 | |||||
| Carbohydrate Solutions | 274 | 264 | 258 | 148 | 944 | ||||||||||
| Nutrition | 173 | 175 | 160 | 199 | 707 | ||||||||||
| Other Business | 18 | 55 | 20 | 15 | 108 | ||||||||||
| Corporate | (128 | ) | (119 | ) | (144 | ) | (150 | ) | (541 | ) | |||||
| Adjusted EBITDA | $ | 794 | $ | 886 | $ | 1,127 | $ | 726 | $ | 3,533 |
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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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 March 31, 2019.
| Four Quarters | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter Ended | Ended | ||||||||||||||
| June 30, 2018 | Sep. 30, 2018 | Dec 31, 2018 | Mar. 31, 2019 | Mar. 31, 2019 | |||||||||||
| (in millions) | |||||||||||||||
| Earnings before income taxes | $ | 652 | $ | 632 | $ | 312 | $ | 315 | $ | 1,911 | |||||
| Interest expense | 89 | 87 | 97 | 101 | 374 | ||||||||||
| Depreciation and amortization | 239 | 232 | 235 | 245 | 951 | ||||||||||
| LIFO charge (credit) | (13 | ) | 7 | (4 | ) | 1 | (9 | ) | |||||||
| Gains (Losses) on sales of assets and businesses | — | (21 | ) | 8 | (12 | ) | (25 | ) | |||||||
| Asset impairment, restructuring, & settlement charges | 24 | 2 | 250 | 11 | 287 | ||||||||||
| Expenses related to acquisitions | — | (4 | ) | 12 | 14 | 22 | |||||||||
| Adjusted EBITDA | $ | 991 | $ | 935 | $ | 910 | $ | 675 | $ | 3,511 | |||||
| Four Quarters | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Quarter Ended | Ended | ||||||||||||||
| June 30, 2018 | Sep. 30, 2018 | Dec 31, 2018 | Mar. 31, 2019 | Mar. 31, 2019 | |||||||||||
| (in millions) | |||||||||||||||
| Ag Services and Oilseeds | $ | 633 | $ | 580 | $ | 711 | $ | 510 | $ | 2,434 | |||||
| Carbohydrate Solutions | 333 | 364 | 281 | 178 | 1,156 | ||||||||||
| Nutrition | 151 | 103 | 99 | 134 | 487 | ||||||||||
| Other Business | 39 | 37 | (3 | ) | 24 | 97 | |||||||||
| Corporate | (165 | ) | (149 | ) | (178 | ) | (171 | ) | (663 | ) | |||||
| Adjusted EBITDA | $ | 991 | $ | 935 | $ | 910 | $ | 675 | $ | 3,511 |
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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