UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.  20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172021
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-44
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ARCHER-DANIELS-MIDLAND COMPANY
(Exact name of registrant as specified in its charter)
Delaware41-0129150
(State or other jurisdiction of
incorporation or organization)
(I. R. S. Employer
Identification No.)
77 West Wacker Drive, Suite 4600
Chicago,Illinois
 60601
(Address of principal executive offices)
60601
(Zip Code)
(312) 634-8100
(Registrant’s telephone number, including area code)
(312) 634-8100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, no par valueADMNYSE
1.000% Notes due 2025NYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         Yes  x☒  No ¨☐.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x☒  No  ¨☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  x
Accelerated Filer
☒
Accelerated filer  oFiler☐Emerging Growth Company☐
Non-accelerated filer     o
Filer
☐
Smaller reporting company  o
Reporting Company
Emerging growth company  o
☐



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. o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o☐  No  x☒.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, no par value – 559,250,312559,441,260 shares
(October 30, 2017)25, 2021)




SAFE HARBOR STATEMENT

This Form 10-Q contains forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995 that is subject to risks and uncertainties that could cause actual results to differ materially from those projected, expressed, or implied by such forward-looking information.  Risks and uncertainties that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2020, as may be updated in our subsequent Quarterly Reports on Form 10-Q. To the extent permitted under applicable law, the Company assumes no obligation to update any forward-looking statements as a result of new information or future events.






PART I - FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
ITEM 1.    FINANCIAL STATEMENTS
Archer-Daniels-Midland Company


Consolidated Statements of Earnings
(Unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2021202020212020
(In millions, except per share amounts)
Revenues$20,340 $15,126 $62,159 $46,377 
Cost of products sold19,014 14,084 57,822 43,276 
Gross Profit1,326 1,042 4,337 3,101 
Selling, general, and administrative expenses720 636 2,208 1,938 
Asset impairment, exit, and restructuring costs2 4 84 61 
Equity in (earnings) losses of unconsolidated affiliates(110)(160)(398)(403)
Investment income(20)(20)(83)(94)
Interest expense61 100 188 270 
Other (income) expense – net20 282 36 202 
Earnings Before Income Taxes653 200 2,302 1,127 
Income tax expense (benefit)120 (26)364 38 
Net Earnings Including Noncontrolling Interests533 226 1,938 1,089 
Less: Net earnings attributable to noncontrolling interests7 1 11 4 
Net Earnings Attributable to Controlling Interests$526 $225 $1,927 $1,085 
Average number of shares outstanding – basic564 561 564 561 
Average number of shares outstanding – diluted566 562 566 563 
Basic earnings per common share$0.93 $0.40 $3.42 $1.93 
Diluted earnings per common share$0.93 $0.40 $3.41 $1.93 
Dividends per common share$0.37 $0.36 $1.11 $1.08 
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
 (In millions, except per share amounts)
        
Revenues$14,827
 $15,832
 $44,758
 $45,845
Cost of products sold14,015
 14,742
 42,191
 43,237
Gross Profit812
 1,090
 2,567
 2,608
        
Selling, general, and administrative expenses478
 546
 1,530
 1,525
Asset impairment, exit, and restructuring costs107
 11
 140
 36
Interest expense79
 78
 246
 213
Equity in (earnings) losses of unconsolidated affiliates(46) 2
 (327) (153)
Interest income(27) (23) (75) (68)
Other (income) expense – net(4) (4) (13) (138)
Earnings Before Income Taxes225
 480
 1,066
 1,193
        
Income taxes30
 136
 256
 331
Net Earnings Including Noncontrolling Interests195
 344
 810
 862
        
Less: Net earnings attributable to noncontrolling interests3
 3
 3
 7
        
Net Earnings Attributable to Controlling Interests$192
 $341
 $807
 $855
        
Average number of shares outstanding – basic566
 586
 571
 591
        
Average number of shares outstanding – diluted569
 589
 574
 593
        
Basic earnings per common share$0.34
 $0.58
 $1.41
 $1.45
        
Diluted earnings per common share$0.34
 $0.58
 $1.41
 $1.44
        
Dividends per common share$0.32
 $0.30
 $0.96
 $0.90


See notes to consolidated financial statements.








3

Archer-Daniels-Midland Company


Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
(In millions)
Net earnings including noncontrolling interests$533 $226 $1,938 $1,089 
Other comprehensive income (loss):
Foreign currency translation adjustment(24)(154)305 (429)
Tax effect(30)51 (78)37 
Net of tax amount(54)(103)227 (392)
Pension and other postretirement benefit liabilities adjustment13 (5)102 — 
Tax effect5 3 (22)(9)
Net of tax amount18 (2)80 (9)
Deferred gain (loss) on hedging activities75 112 258 111 
Tax effect(1)(22)(41)(23)
Net of tax amount74 90 217 88 
Unrealized gain (loss) on investments6 (28)4 (25)
Tax effect— — (1)(1)
Net of tax amount6 (28)3 (26)
Other comprehensive income (loss)44 (43)527 (339)
Comprehensive income (loss) including noncontrolling interests577 183 2,465 750 
Less: Comprehensive income (loss) attributable to noncontrolling interests6 2 10 9 
Comprehensive income (loss) attributable to controlling interests$571 $181 $2,455 $741 
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
 (In millions)
        
Net earnings including noncontrolling interests$195
 $344
 $810
 $862
Other comprehensive income (loss):       
Foreign currency translation adjustment245
 (41) 628
 (57)
Tax effect(40) 5
 (4) 18
Net of tax amount205
 (36) 624
 (39)
        
Pension and other postretirement benefit liabilities adjustment174
 11
 193
 27
Tax effect(66) (4) (74) (7)
Net of tax amount108
 7
 119
 20
        
Deferred gain (loss) on hedging activities(26) 1
 12
 (10)
Tax effect6
 3
 1
 3
Net of tax amount(20) 4
 13
 (7)
        
Unrealized gain (loss) on investments6
 (28) 1
 (16)
Tax effect—
 1
 —
 (2)
Net of tax amount6
 (27) 1
 (18)
Other comprehensive income (loss)299
 (52) 757
 (44)
Comprehensive income (loss) including noncontrolling interests494
 292
 1,567
 818
        
Less: Comprehensive income (loss) attributable to noncontrolling interests4
 3
 5
 7
        
Comprehensive income (loss) attributable to controlling interests$490
 $289
 $1,562
 $811


See notes to consolidated financial statements.










4

Archer-Daniels-Midland Company


Consolidated Balance Sheets
(In millions)September 30, 2017 December 31, 2016
 (Unaudited)  
Assets   
Current Assets   
Cash and cash equivalents$518
 $619
Short-term marketable securities261
 296
Segregated cash and investments5,040
 5,011
Trade receivables1,911
 1,905
Inventories8,326
 8,831
Other current assets3,084
 4,383
Total Current Assets19,140
 21,045
    
Investments and Other Assets 
  
Investments in and advances to affiliates4,972
 4,497
Long-term marketable securities207
 187
Goodwill and other intangible assets3,939
 3,703
Other assets755
 579
Total Investments and Other Assets9,873
 8,966
    
Property, Plant, and Equipment 
  
Land467
 445
Buildings4,974
 4,679
Machinery and equipment17,858
 17,160
Construction in progress1,166
 1,213
 24,465
 23,497
Accumulated depreciation(14,509) (13,739)
Net Property, Plant, and Equipment9,956
 9,758
Total Assets$38,969
 $39,769
    
Liabilities, Temporary Equity, and Shareholders’ Equity 
  
Current Liabilities 
  
Short-term debt$728
 $154
Trade payables3,449
 3,606
Payables to brokerage customers5,135
 5,158
Accrued expenses and other payables2,548
 3,982
Current maturities of long-term debt13
 273
Total Current Liabilities11,873
 13,173
    
Long-Term Liabilities 
  
Long-term debt6,595
 6,504
Deferred income taxes1,754
 1,669
Other1,117
 1,218
Total Long-Term Liabilities9,466
 9,391
    
Temporary Equity - Redeemable noncontrolling interest53
 24
    
Shareholders’ Equity 
  
Common stock2,390
 2,327
Reinvested earnings17,023
 17,444
Accumulated other comprehensive income (loss)(1,843) (2,598)
Noncontrolling interests7
 8
Total Shareholders’ Equity17,577
 17,181
Total Liabilities, Temporary Equity, and Shareholders’ Equity$38,969
 $39,769
    
(In millions)September 30, 2021December 31, 2020
 (Unaudited)
Assets  
Current Assets  
Cash and cash equivalents$1,083 $666 
Segregated cash and investments7,891 5,890 
Trade receivables3,797 2,793 
Inventories11,169 11,713 
Current assets held for sale130 — 
Other current assets5,220 6,224 
Total Current Assets29,290 27,286 
Investments and Other Assets  
Investments in and advances to affiliates5,148 4,913 
Goodwill and other intangible assets5,705 5,413 
Right of use assets1,005 1,102 
Other assets1,302 1,054 
Total Investments and Other Assets13,160 12,482 
Property, Plant, and Equipment  
Land and land improvements523 545 
Buildings5,557 5,522 
Machinery and equipment18,955 19,154 
Construction in progress1,126 1,118 
 26,161 26,339 
Accumulated depreciation(16,313)(16,388)
Net Property, Plant, and Equipment9,848 9,951 
Total Assets$52,298 $49,719 
Liabilities, Temporary Equity, and Shareholders’ Equity  
Current Liabilities  
Short-term debt$314 $2,042 
Trade payables4,617 4,474 
Payables to brokerage customers8,675 6,460 
Accrued expenses and other payables4,121 4,943 
Current lease liabilities268 261 
Current maturities of long-term debt581 2 
Total Current Liabilities18,576 18,182 
Long-Term Liabilities  
Long-term debt8,039 7,885 
Deferred income taxes1,351 1,302 
Non-current lease liabilities759 863 
Other1,358 1,391 
Total Long-Term Liabilities11,507 11,441 
Temporary Equity - Redeemable noncontrolling interest225 74 
Shareholders’ Equity  
Common stock2,964 2,824 
Reinvested earnings21,081 19,780 
Accumulated other comprehensive income (loss)(2,076)(2,604)
Noncontrolling interests21 22 
Total Shareholders’ Equity21,990 20,022 
Total Liabilities, Temporary Equity, and Shareholders’ Equity$52,298 $49,719 
See notes to consolidated financial statements.

5


Archer-Daniels-Midland Company


Consolidated Statements of Cash Flows
(Unaudited)
(In millions)Nine Months Ended
September 30,
 20212020
Operating Activities  
Net earnings including noncontrolling interests$1,938 $1,089 
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities  
Depreciation and amortization739 727 
Asset impairment charges54 50 
Deferred income taxes(95)57 
Equity in earnings of affiliates, net of dividends(36)(165)
Stock compensation expense135 114 
Loss on debt extinguishment36 410 
Deferred cash flow hedges258 111 
Gains on sales of assets and businesses/investment revaluation(95)(132)
Other – net156 34 
Changes in operating assets and liabilities  
Segregated investments594 147 
Trade receivables(1,060)(343)
Inventories405 370 
Deferred consideration in securitized receivables— (4,603)
Other current assets1,187 (467)
Trade payables170 (389)
Payables to brokerage customers2,236 1,060 
Accrued expenses and other payables(769)414 
Total Operating Activities5,853 (1,516)
Investing Activities  
Purchases of property, plant, and equipment(714)(558)
Proceeds from sales of assets and businesses73 708 
Net assets of businesses acquired(501)(3)
Investments in and advances to affiliates(7)(5)
Distributions from affiliates5 — 
Investments in retained interest in securitized receivables— (2,121)
Proceeds from retained interest in securitized receivables— 6,724 
Other – net(143)(17)
Total Investing Activities(1,287)4,728 
Financing Activities  
Long-term debt borrowings1,330 1,790 
Long-term debt payments(533)(2,032)
Net borrowings (payments) under lines of credit agreements(1,726)(993)
Share repurchases— (117)
Cash dividends(626)(607)
Other – net1 16 
Total Financing Activities(1,554)(1,943)
Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents3,012 1,269 
Cash, cash equivalents, restricted cash, and restricted cash equivalents - beginning of period4,646 2,990 
Cash, cash equivalents, restricted cash, and restricted cash equivalents - end of period$7,658 $4,259 
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the consolidated balance sheets
Cash and cash equivalents$1,083 $948 
Restricted cash and restricted cash equivalents included in segregated cash and investments6,575 3,311 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$7,658 $4,259 
Supplemental Disclosure of Noncash Investing Activity:
Retained interest in securitized receivables$— $4,656 
(In millions)Nine Months Ended 
 September 30,
 2017 2016
Operating Activities   
Net earnings including noncontrolling interests$810
 $862
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities 
  
Depreciation and amortization684
 678
Asset impairment charges81
 28
Deferred income taxes(27) 36
Equity in earnings of affiliates, net of dividends(131) 25
Stock compensation expense63
 58
Deferred cash flow hedges12
 (10)
Gains on sales of assets and businesses/revaluation(66) (117)
Other – net174
 1
Changes in operating assets and liabilities 
  
Segregated investments268
 46
Trade receivables106
 (463)
Inventories703
 1,053
Other current assets1,317
 (415)
Trade payables(259) (554)
Payables to brokerage customers(94) 355
Accrued expenses and other payables(1,486) (287)
Total Operating Activities2,155
 1,296
    
Investing Activities 
  
Purchases of property, plant, and equipment(696) (621)
Proceeds from sales of business and assets172
 104
Net assets of businesses acquired(187) (136)
Purchases of marketable securities(499) (1,127)
Proceeds from sales of marketable securities572
 1,162
Investments in and advances to affiliates(281) (628)
Other – net(14) 15
Total Investing Activities(933) (1,231)
    
Financing Activities 
  
Long-term debt borrowings509
 1,036
Long-term debt payments(840) (9)
Net borrowings (payments) under lines of credit agreements558
 107
Share repurchases(676) (754)
Cash dividends(544) (528)
Other – net4
 14
Total Financing Activities(989) (134)
    
Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents233
 (69)
Cash, cash equivalents, restricted cash, and restricted cash equivalents - beginning of period1,561
 1,796
Cash, cash equivalents, restricted cash, and restricted cash equivalents - end of period$1,794
 $1,727
    
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the consolidated balance sheets   
    
Cash and cash equivalents$518
 $701
Restricted cash and restricted cash equivalents included in segregated cash and investments1,276
 1,026
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$1,794
 $1,727
    

See notes to consolidated financial statements.

6


Archer-Daniels-Midland-Company


Consolidated StatementStatements of Shareholders’ Equity
(Unaudited)
 Common Stock 
Reinvested
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
Total
Shareholders’
Equity
 Shares Amount    
 (In millions)
            
Balance, December 31, 2016573
 $2,327
 $17,444
 $(2,598) $8
 $17,181
Impact of ASU 2016-16 (see Note 2)    (7)     (7)
Balance, January 1, 2017573
 $2,327
 $17,437
 $(2,598) $8
 $17,174
Comprehensive income 
  
  
  
  
  
Net earnings   
 807
  
 3
  
   Other comprehensive
     income (loss)
 
  
  
 755
 2
  
      Total comprehensive
       income
 
  
  
  
  
 1,567
Cash dividends paid- $0.96 per share 
  
 (544)  
  
 (544)
Share repurchases(16)   (676)     (676)
Stock compensation expense1
 63
  
  
  
 63
Other1
 —
 (1) —
 (6) (7)
Balance, September 30, 2017559
 $2,390
 $17,023
 $(1,843) $7
 $17,577

Common StockReinvested
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Noncontrolling
Interests		Total
Shareholders’
Equity
(In millions, except per share amounts)SharesAmount
Balance, June 30, 2021559 $2,941 $20,762 $(2,121)$21 $21,603 
Comprehensive income      
Net earnings 526  7  
Other comprehensive income (loss)   45 (1) 
Total comprehensive income     577 
Dividends paid - $0.37 per share  (209)  (209)
Stock compensation expense— 21    21 
Other— 2 2 — (6)(2)
Balance, September 30, 2021559 $2,964 $21,081 $(2,076)$21 $21,990 
Balance, December 31, 2020556 $2,824 $19,780 $(2,604)$22 $20,022 
Comprehensive income      
Net earnings 1,927  11  
Other comprehensive income (loss)   528 (1) 
Total comprehensive income     2,465 
Dividends paid - $1.11 per share  (626)  (626)
Stock compensation expense3 135    135 
Other— 5 — 0(11)(6)
Balance, September 30, 2021559 $2,964 $21,081 $(2,076)$21 $21,990 
Balance, June 30, 2020556 $2,705 $19,293 $(2,705)$18 $19,311 
Comprehensive income      
Net earnings 225  1  
Other comprehensive income (loss)   (44)1  
Total comprehensive income     183 
Dividends paid - $0.36 per share  (202)  (202)
Share repurchases— (5)(5)
Stock compensation expense— 39   39 
Other— 16 — — (1)15 
Balance, September 30, 2020556 $2,760 $19,311 $(2,749)$19 $19,341 
Balance, December 31, 2019557 $2,655 $18,958 $(2,405)$17 $19,225 
Impact of ASC 326 (see Note 1)(8)(8)
Balance, January 1, 2020557 2,655 18,950 (2,405)17 19,217 
Comprehensive income      
Net earnings 1,085  4  
Other comprehensive income (loss)   (344)5  
Total comprehensive income     750 
Dividends paid - $1.08 per share  (607)  (607)
Share repurchases(3)(117)(117)
Stock compensation expense2 114    114 
Other— (9)— — (7)(16)
Balance, September 30, 2020556 $2,760 $19,311 $(2,749)$19 $19,341 
See notes to consolidated financial statements.

7



Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements
(Unaudited)

Note 1.
Note 1.    Basis of Presentation


The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by generally accepted accounting principles for audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter and nine months ended September 30, 20172021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2021.  For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2020.


Principles of Consolidation


The consolidated financial statements include the accounts of the Company and its subsidiaries.  All significant intercompany accounts and transactions have been eliminated.  The Company consolidates all entities, including variable interest entities (VIEs), in which it has a controlling financial interest. For VIEs, the Company assesses whether it is the primary beneficiary as defined under the applicable accounting standard. Investments in affiliates, including VIEs through which the Company exercises significant influence but does not control the investee and is not the primary beneficiary of the investee’s activities, are carried at cost plus equity in undistributed earnings since acquisition and are adjusted, where appropriate, for basis differences between the investment balance and the underlying net assets of the investee.  The Company’s portion of the results of certain affiliates and results of certain VIEs are included using the most recent available financial statements.  In each case, the financial statements are within 93 days of the Company’s year end and are consistent from period to period.

Retirement Benefit Changes

On July 31, 2017, the Company announced that all participants in the Company’s U.S. salaried pension plan and the Supplemental Executive Retirement Plan (SERP) will begin accruing benefits under the cash balance formula effective January 1, 2022. Benefits for participants who were accruing under the final average pay formula will be frozen as of December 31, 2021, including pay and service through that date.

This change, along with other changes in participation associated with divestitures and restructuring, triggered a remeasurement of the salaried pension plan and the SERP resulting in decreases in the fiscal 2017 pension expense, accumulated other comprehensive loss, and underfunded status by $18 million, $182 million, and $164 million, respectively.

Concurrent with this change, the Company also changed the method used to estimate the service and interest cost components of the net periodic pension and postretirement benefit costs for its U.S. plans. The new method uses the spot rate yield curve approach to estimate the service and interest costs. Previously, those costs were determined using a single weighted-average discount rate applied to all future cash outflows. The change does not affect the measurement of the Company’s benefit obligations and was accounted for as a change in accounting estimate in accordance with the guidance of ASC Topic 250, Accounting Estimates and Error Corrections, thereby impacting the current and future quarters. The impact of this change on after-tax earnings and diluted earnings per share for the quarter ended September 30, 2017 was immaterial.

Reclassifications

The Company classified $17 million and $49 million of fees from its U.S. futures commission brokerage business in cost of products sold in the quarter and nine months ended September 30, 2017, respectively. Prior period amounts of $15 million and $50 million in the quarter and nine months ended September 30, 2016, respectively, have been reclassified from selling, general, and administrative expenses in the consolidated statement of earnings to conform to the current presentation.

In the quarter ended June 30, 2017, the Company began presenting certain specified items separately from the individual business segments, as further described in Note 14.


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 1.Basis of Presentation (Continued)

In line with the futures brokerage industry practice, the Company has correctly classified $1.2 billion of segregated cash and cash equivalents as restricted cash and cash equivalents in the statement of cash flows effective September 30, 2017. Prior period amounts have been restated to conform to the current presentation which resulted in an increase of $145 million in total cash provided by operating activities for the nine months ended September 30, 2016 and an increase of $938 million in the ending balance of cash, cash equivalents, restricted cash, and restricted cash equivalents as of September 30, 2016.


Segregated Cash and Investments


The Company segregates certain cash, cash equivalent,equivalents, and investment balances in accordance with regulatory requirements, commodity exchange requirements, and insurance arrangements. These balances represent deposits received from customers of the Company’s registered futures commission merchant and commodity brokerage services, cash margins and securities pledged to commodity exchange clearinghouses, and cash pledged as security under certain insurance arrangements. Segregated cash and investments also include restricted cash collateral for the various insurance programs of the Company’s captive insurance business. To the degree these segregated balances are comprised of cash and cash equivalents, they are considered restricted cash and cash equivalents on the consolidated statements of cash flows.

Receivables

The Company records receivables at net realizable value in trade receivables, other current assets, and other assets.  These amounts include allowances for estimated uncollectible accounts totaling $82 million and $100 million at September 30, 2021 and December 31, 2020, respectively, to reflect any loss anticipated on the accounts receivable balances including any accrued interest receivables thereon. Long-term receivables recorded in other assets were not material to the Company’s overall receivables portfolio.

Effective January 1, 2020, the Company adopted Accounting Standards Codification (ASC) Topic 326, Financial Instruments - Credit Losses (Topic 326), and developed a new methodology for estimating uncollectible accounts. Under this methodology, receivables are pooled according to type, region, credit risk rating, and age. Each pool is assigned an expected loss co-efficient to arrive at a general reserve based on historical write-offs adjusted, as needed, for regional, economic, and other forward-looking factors. The Company minimizes credit risk due to the large and diversified nature of its worldwide customer base. ADM manages its exposure to counter-party credit risk through credit analysis and approvals, credit limits, and monitoring procedures. The Company recorded a cumulative effect adjustment to retained earnings at January 1, 2020 of $8 million as a result of the adoption of Topic 326.

The Company recorded bad debt expense in selling, general, and administrative expenses of $1 million and $9 million in the three and nine months ended September 30, 2021, respectively, and $7 million and $32 million in the three and nine months ended September 30, 2020.

8
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 1.    Basis of Presentation (Continued)
Inventory Valuation

Effective January 1, 2020, the Company changed the method of accounting for certain of its agricultural commodity inventories from the last-in, first-out (LIFO) method to market value in the Ag Services and Oilseeds segment. As of December 31, 2019, inventories accounted for using LIFO at the lower of cost or net realizable value represented approximately 10% of consolidated inventories. The Company believes market value is preferable because it: (i) conforms to the inventory valuation methodology used for the majority of ADM’s agricultural commodity inventories; (ii) enhances the matching of inventory costs with revenues and better reflects the current cost of inventory on the Company’s balance sheet; and (iii) provides better comparability with the Company’s peers.

The Company concluded that the accounting change did not have a material effect on prior periods’ financial statements and elected not to apply the change on a retrospective basis. As a result, the Company recorded a reduction in cost of products sold of $91 million ($69 million after tax, equal to $0.12 per diluted share) for the cumulative effect of the change in the nine months ended September 30, 2020 with no impact to the statement of cash flows.


Last-in, First-out (LIFO) InventoriesReclassification


Interim period LIFO calculations are basedDuring the quarter and nine months ended September 30, 2021, the Company recorded revaluation gains on interim period costscost method investments of $9 million and management’s estimates$49 million, respectively, in connection with observable third-party transactions in investment income (previously interest income) in the consolidated statements of year-end inventory levels.  Becauseearnings. Revaluation gains previously recorded in other (income) expense - net of $4 million and $23 million in the availabilityquarter and price of agricultural commodity-based LIFO inventories are unpredictable duenine months ended September 30, 2020, respectively, were reclassified to factors such as weather, government farm programs and policies, and changes in global demand, quantities of LIFO-based inventories at interim periods may vary significantly from management’s estimates of year-end inventory levels.conform to the current presentation.


Note 2.
Note 2.    New Accounting Standards


Effective January 1, 2017, the Company adopted the amended guidance of ASC Topic 330, Inventory, which simplifies the measurement of inventory. The amended guidance requires an entity to measure its cost-based inventory at the lower of cost or net realizable value, where net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Effective January 1, 2017, the Company adopted the amended guidance of ASC Topic 323, Investments - Equity Method and Joint Ventures, which simplifies the transition to the equity method of accounting. The amended guidance eliminates the requirement of an investor to adjust the investment, results of operations, and retained earnings retroactively when an investment qualifies for equity method accounting as a result of an increase in the level of ownership interest or degree of influence. The amendments require the investor add the cost of acquiring the additional interest in the investee to the current basis of the investors’ previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The adoption of this amended guidance did not have an impact on the Company’s financial results.

Effective January 1, 2017, the Company adopted the amended guidance of ASC Topic 810, Consolidation, which affects reporting entities that are required to evaluate whether they should consolidate a variable interest entity in certain situations involving entities under common control. The amended guidance changes the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity treats indirect interests in the entity held through related parties that are under common control with the reporting entity. The Company was required to adopt the amended guidance using a retrospective transition approach to all periods presented. The adoption of this amended guidance did not result in the deconsolidation or consolidation of any of its variable interest entities.

Effective January 1, 2017,2021, the Company adopted the amended guidance of ASC Topic 740, Income Taxes(Topic 740), which requires entities to recognize the income tax consequences of an intra-entity transfer, other than inventory, when the transfer occurs.  Under the previous accounting rules, entities were prohibited from recognizing current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party.  The amended guidance does not changesimplifies the accounting for income taxes by removing certain exceptions to the pre-tax effectsgeneral principles in Topic 740. The amendments also simplify and improve consistent application of an intra-entity asset transfer or for an intra-entity transferother areas of inventory.Topic 740. The Company adoptedadoption of the amended guidance did not have a significant impact on a modified retrospective approach basis through a $7 million cumulative effect adjustment to retained earnings as of January 1, 2017.the Company’s consolidated financial statements.



Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 3.
Note 3.    Pending Accounting Standards

Effective January 1, 2018,
Through December 31, 2022, the Company will be required to adopthas the amended guidance of ASC Subtopic 825-10, Financial Instruments - Overall, which is intended to improve the recognition and measurement of financial instruments. The amended guidance requires an entity to measure equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, at fair value with changes in fair value recognized in net income and simplify the impairment assessment of equity investments without readily determinable fair values by using a qualitative assessment to identify impairment. The Company does not expect the adoption of this amended guidance to have a significant impact on the Company’s financial results.

Effective January 1, 2018, the Company will be required to adopt the new guidance of ASC Topic 606, Revenue from Contracts with Customers (Topic 606), which will supersede the revenue recognition requirements in ASC Topic 605, Revenue Recognition. Topic 606 requires the Company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance requires the Company to apply the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the Company satisfies a performance obligation. The Company will adopt Topic 606 on a modified retrospective basis and will be required to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period, as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes. The adoption of this new guidance will require expanded disclosures in the Company’s consolidated financial statements including separate quantitative disclosure of revenues within the scope of Topic 606 and revenues excluded from the scope of Topic 606. Many of the Company’s sales contracts are considered derivatives under ASC Topic 815, Derivatives and Hedging, and are therefore excluded from the scope of Topic 606. The Company has established a cross-functional implementation team consisting of representatives from all of its business segments. The Company utilized surveys to validate all of its current revenue recognition streams and identify areas of its business where potential differences could result from applying the requirements of the new standard. The Company also conducted workshops and performed contract reviews to gather more information about the nature, magnitude, and frequency of the underlying transactions that drove the survey responses. Based on the surveys, workshops, and contract reviews, the Company identified potential accounting changes in the areas of control transfer, voyage charter revenue, bill and hold arrangements, and variable consideration. In the fourth quarter of 2017, the Company will complete the final phase of its revenue recognition implementation plan which includes quantification of the areas of accounting change, assessment of the financial impact of the new guidance on its consolidated financial statements, and finalization of its revenue recognition accounting policy and position papers.

Effective January 1, 2018, the Company will be requiredoption to adopt the amended guidance of ASC Topic 805, Business Combinations848, Reference Rate Reform,which clarifiesprovides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the definition of a business. The amended guidance is intendeddo not apply to help companiescontract modifications made and other organizations evaluate whether transactions should be accountedhedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as acquisitions (disposals) of assets or businessesDecember 31, 2022, that an entity has elected certain optional expedients for and provides a more robust framework to use in determining when a setthat are retained through the end of assets and activities is a business. Early adoption is permitted for transactions that have not been reported in financial statements that have been issued or made available for issuance. No disclosures are required at adoption.the hedging relationship.  The Company plans to adopt the amended guidance on October 1, 2017.

Effective January 1, 2018, the Company will be required to adoptexpedients and exceptions provided by the amended guidance of ASC Topic 715, Compensation - Retirement Benefits, which requires that an employer reportbefore the service cost component in the same line or items as other compensation costs arising from services rendered by the pertinent employees during the period.  The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The adoption of this amended guidance will require expanded disclosures and the reclassification of the other components of net benefit cost from cost of products sold and selling, general, and administrative expenses to other (income) expense - net in the Company’s consolidated statements of earnings but will not impact financial results.







Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 3.Pending Accounting Standards (Continued)


Effective January 1, 2018, the Company will be required to adopt the amended guidance of ASC Topic 718, Compensation - Stock Compensation (Topic 718), which provides clarity and reduces diversity in practice as well as cost and complexity when applying the guidance in Topic 718 to the modification of the terms and conditions of a share-based payment. The amendments include guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. Early adoption is permitted, including in any interim period for which financial statements have not yet been issued. The Company plans to adopt the amended guidance on October 1, 2017 and does not expect the adoption of this amended guidance to have a significant impact on the Company’s financial results.
Effective January 1, 2019, the Company will be required to adopt the new guidance of ASC Topic 842, Leases (Topic 842), which will supersede ASC Topic 840, Leases. Topic 842 requires lessees to recognize assets and liabilities for all leases with lease terms of more than 12 months. The Company expects to adopt Topic 842 using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The adoption of this new guidance will require expanded disclosures in the Company’s consolidated financial statements. The Company has established a cross-functional implementation team consisting of representatives from accounting, legal, procurement, and operations. The Company utilized surveys to centrally gather more information about its existing leases and lease processes and to gather lease contracts. To ensure completeness of the population of lease contracts, the results of the survey were cross-referenced against other available lease information (i.e., year-end disclosures and general ledger). The Company is also working with a vendor to implement a lease management system which will assist in delivering the required accounting changes and disclosures. The next phase of the implementation plan is the abstraction of the relevant lease contract data points which is expected to be completed in the first quarter of 2018. The impact of the new standard will be a significant increase to right of use assets and lease liabilities on the Company’s consolidated balance sheet, primarily as a result of operating leases currently not recognized on the balance sheet. The Company has not yet completed its assessment of the impact of the new guidance on its consolidated statement of earnings.

Effective January 1, 2019, the Company will be required to adopt the amended guidance of ASC Topic 815, Derivatives and Hedging, which expands and refines hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amended guidance also simplifies the application of hedge accounting guidance and eases the administrative burden of hedge documentation requirements and assessing hedge effectiveness. Early adoption is permitted in any interim period with the effect of adoption reflected as an adjustment to the opening balance of retained earnings as of the beginning of the fiscal year of adoption. The Company is considering adopting the amended guidance on January 1, 2018December 31, 2022 expiry date but has not yet completed its assessment of the impact of this amended guidance on the Company’sconsolidated financial results.statements.


Effective January 1, 2020, the Company will be required to adopt the amended guidance of ASC Topic 326, Financial Instruments - Credit Losses, which is intended to improve financial reporting by requiring more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The amended guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company does not expect the adoption of this amended guidance to have a significant impact on the Company’s financial results.


Effective January 1, 2020, the Company will be required to adopt the amended guidance of ASC Topic 350, Goodwill and Other, which simplifies the subsequent measurement of goodwill. The amended guidance removes the second step of the goodwill impairment test and requires the application of a one-step quantitative test where the amount of goodwill impairment is the excess of a reporting unit's carrying amount over its fair value, but not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company plans to adopt the amended guidance on October 1, 2017 and does not expect the adoption of this amended guidance to have a significant impact on the Company’s financial results.











9

Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    Revenues
Note 4.Acquisitions


Revenue Recognition

The Company principally generates revenue from merchandising and transporting agricultural commodities, and manufacturing products for use in food, beverages, feed, energy, and industrial applications, and ingredients and solutions for human and animal nutrition. Revenue is measured based on the consideration specified in the contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product or service to a customer. The majority of the Company’s contracts with customers have one performance obligation and a contract duration of one year or less. The Company applies the practical expedient in paragraph 10-50-14 of ASC 606, Revenue from Contracts with Customers (Topic 606) and does not disclose information about remaining performance obligations that have original expected durations of one year or less. For transportation service contracts, the Company recognizes revenue over time as the barge, ocean-going vessel, truck, rail, or container freight moves towards its destination in accordance with the transfer of control guidance of Topic 606. The Company recognized revenue from transportation service contracts of $153 million and $408 million for the three and nine months ended September 30, 2021, respectively, and $87 million and $310 million for the three and nine months ended September 30, 2020, respectively. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610-20).
Shipping and Handling Costs

Shipping and handling costs related to contracts with customers for the sale of goods are accounted for as a fulfillment activity and are included in cost of products sold. Accordingly, amounts billed to customers for such costs are included as a component of revenues.
Taxes Collected from Customers and Remitted to Governmental Authorities
The Company does not include taxes assessed by governmental authorities that are (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers, in the measurement of transactions prices or as a component of revenues and cost of products sold.

Contract Liabilities

Contract liabilities relate to advance payments from customers for goods and services that the Company has yet to provide. Contract liabilities of $374 million and $626 million as of September 30, 2021 and December 31, 2020, respectively, were recorded in accrued expenses and other payables in the consolidated balance sheets. Contract liabilities recognized as revenues were $128 million and $697 million for the three and nine months ended September 30, 2021, respectively, and $121 million and $742 million for the three and nine months ended September 30, 2020, respectively.

















10
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    Revenues (Continued)

Disaggregation of Revenues

The following tables present revenue disaggregated by timing of recognition and major product lines for the three and nine months ended September 30, 2021 and 2020.

Three Months Ended September 30, 2021
Topic 606 Revenue
Topic 815(1)
Total
Point in TimeOver TimeTotalRevenueRevenues
(In millions)
Ag Services and Oilseeds
Ag Services$616 $153 $769 $9,130 $9,899 
Crushing119 — 119 2,723 2,842 
Refined Products and Other657 — 657 2,291 2,948 
Total Ag Services and Oilseeds1,392 153 1,545 14,144 15,689 
Carbohydrate Solutions
Starches and Sweeteners1,516 — 1,516 456 1,972 
Vantage Corn Processors894 — 894 — 894 
Total Carbohydrate Solutions2,410 — 2,410 456 2,866 
Nutrition
Human Nutrition808 — 808 — 808 
Animal Nutrition889 — 889 — 889 
Total Nutrition1,697 — 1,697 — 1,697 
Other Business88 — 88 — 88 
Total Revenues$5,587 $153 $5,740 $14,600 $20,340 

11
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    Revenues (Continued)

Nine Months Ended September 30, 2021
Topic 606 Revenue
Topic 815(1)
Total
Point in TimeOver TimeTotalRevenueRevenues
(In millions)
Ag Services and Oilseeds
Ag Services$2,080 $408 $2,488 $30,372 $32,860 
Crushing335 — 335 8,076 8,411 
Refined Products and Other1,828 — 1,828 5,868 7,696 
Total Ag Services and Oilseeds4,243 408 4,651 44,316 48,967 
Carbohydrate Solutions
Starches and Sweeteners4,326 — 4,326 1,237 5,563 
Vantage Corn Processors2,346 — 2,346 — 2,346 
Total Carbohydrate Solutions6,672 — 6,672 1,237 7,909 
Nutrition
Human Nutrition2,410 — 2,410 — 2,410 
Animal Nutrition2,583 — 2,583 — 2,583 
Total Nutrition4,993 — 4,993 — 4,993 
Other Business290 — 290 — 290 
Total Revenues$16,198 $408 $16,606 $45,553 $62,159 
Three Months Ended September 30, 2020
Topic 606 Revenue
Topic 815(1)
Total
Point in TimeOver TimeTotalRevenueRevenues
(In millions)
Ag Services and Oilseeds
Ag Services$776 $87 $863 $6,489 $7,352 
Crushing113 — 113 2,204 2,317 
Refined Products and Other462 — 462 1,396 1,858 
Total Ag Services and Oilseeds1,351 87 1,438 10,089 11,527 
Carbohydrate Solutions
Starches and Sweeteners1,162 — 1,162 412 1,574 
Vantage Corn Processors490 — 490 — 490 
Total Carbohydrate Solutions1,652 — 1,652 412 2,064 
Nutrition
Human Nutrition719 — 719 — 719 
Animal Nutrition732 — 732 — 732 
Total Nutrition1,451 — 1,451 — 1,451 
Other Business84 — 84 — 84 
Total Revenues$4,538 $87 $4,625 $10,501 $15,126 

12
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    Revenues (Continued)

Nine Months Ended September 30, 2020
Topic 606 Revenue
Topic 815(1)
Total
Point in TimeOver TimeTotalRevenueRevenues
(In millions)
Ag Services and Oilseeds
Ag Services$2,504 $310 $2,814 $20,116 $22,930 
Crushing493 — 493 6,542 7,035 
Refined Products and Other1,501 — 1,501 3,881 5,382 
Total Ag Services and Oilseeds4,498 310 4,808 30,539 35,347 
Carbohydrate Solutions
Starches and Sweeteners3,539 — 3,539 1,230 4,769 
Vantage Corn Processors1,625 — 1,625 — 1,625 
Total Carbohydrate Solutions5,164 — 5,164 1,230 6,394 
Nutrition
Human Nutrition2,161 — 2,161 — 2,161 
Animal Nutrition2,198 — 2,198 — 2,198 
Total Nutrition4,359 — 4,359 — 4,359 
Other Business277 — 277 — 277 
Total Revenues$14,298 $310 $14,608 $31,769 $46,377 

(1) Topic 815 revenue relates to the physical delivery or the settlement of the Company’s sales contracts that are accounted for as derivatives and are outside the scope of Topic 606.

Ag Services and Oilseeds

The Ag Services and Oilseeds segment generates revenue from the sale of commodities, from service fees for the transportation of goods, from the sale of products manufactured in its global processing facilities, and from its structured trade finance activities. Revenue is measured based on the consideration specified in the contract and excludes any sales incentives and amounts collected on behalf of third parties. Revenue is recognized when a performance obligation is satisfied by transferring control over a product or providing service to a customer. For transportation service contracts, the Company recognizes revenue over time as the barge, ocean-going vessel, truck, rail, or container freight moves towards its destination in accordance with the transfer of control guidance of Topic 606. The amount of revenue recognized follows the contractually specified price which may include freight or other contractually specified cost components. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by Topic 610-20.

Carbohydrate Solutions

The Carbohydrate Solutions segment generates revenue from the sale of products manufactured at the Company’s global corn and wheat milling facilities around the world. Revenue is recognized when control over products is transferred to the customer. Products are shipped to customers from the Company’s various facilities and from its network of storage terminals. The amount of revenue recognized is based on the consideration specified in the contract which could include freight and other costs depending on the specific shipping terms of each contract. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by Topic 610-20.



13
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    Revenues (Continued)

Nutrition

The Nutrition segment sells a wide array of ingredients and solutions including plant-based proteins, natural flavors, flavor systems, natural colors, emulsifiers, soluble fiber, polyols, hydrocolloids, probiotics, prebiotics, enzymes, botanical extracts, edible beans, formula feeds, animal health and nutrition products, pet food and treats, and other specialty food and feed ingredients. Revenue is recognized when control over products is transferred to the customer. The amount of revenue recognized follows the contracted price or the mutually agreed price of the product. Freight and shipping are recognized as a component of revenue at the same time control transfers to the customer.

Other Business

Other Business includes the Company’s futures commission business whose primary sources of revenue are commissions and brokerage income generated from executing orders and clearing futures contracts and options on futures contracts on behalf of its customers. Commissions and brokerage revenue are recognized on the date the transaction is executed. Other Business also includes the Company’s captive insurance business which generates third party revenue through its proportionate share of premiums from third-party reinsurance pools. Reinsurance premiums are recognized on a straight-line basis over the period underlying the policy.

Note 5.    Acquisitions

During the nine months ended September 30, 2017,2021, the Company’s Nutrition segment acquired Golden Farm Production & Commerce Company Limited and a 75% majority stake in PetDine, Pedigree Ovens, The Pound Bakery, and NutraDine (“P4”), premier providers of private label pet treats and supplements, for an aggregate consideration of $501 million in cash. The acquisition of P4 advances ADM’s growth strategy by significantly expanding the Company’s pet treat and supplements capabilities. The consideration paid for these acquisitions was allocated as follows, subject to final measurement period adjustments:

(In Millions)
Working capital$11 
Property, plant, and equipment85 
Goodwill360 
Other intangible assets195 
Temporary equity - redeemable noncontrolling interest(150)
Aggregate cash consideration$501 

The Company has the option to acquire the remaining 25% interest in P4 from December 31, 2023 to March 31, 2025, based on a fixed multiple of earnings before interest, taxes, depreciation, and amortization for the twelve months prior to the exercise of this option. The noncontrolling interest holders also have the option to put the 25% interest to the Company acquired Crosswind Industries, Inc., Chamtor SA, a 51% controllingon the same terms. The Company records the 25% remaining interest in Industries Centers, and an 89% controlling interesttemporary equity - redeemable noncontrolling interest.

Goodwill recorded in Biopolis SL. The aggregate cash purchase priceconnection with the acquisitions is primarily attributable to synergies expected to arise after the Company’s acquisition of the businesses, of which, $358 million is expected to be deductible for tax purposes.

Nutrition segment results include the post-acquisition financial results of these acquisitions of $187 million, net of cash acquired of $7 million, was preliminarily allocated as follows:which were immaterial.










14


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)
 (In millions)
Working capital$16
Property, plant, and equipment111
Goodwill34
Other intangible assets50
Other long-term assets6
Long-term liabilities(19)
Noncontrolling interest(11)
Aggregate cash purchase price, net of cash acquired$187

Note 5.
Note 6.    Fair Value Measurements


The following tables set forth, by level, the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 20172021 and December 31, 2016.2020.
 Fair Value Measurements at September 30, 2021
 
Quoted Prices in
 Active Markets
 for Identical
 Assets
 (Level 1)		Significant
 Other
 Observable
 Inputs
 (Level 2)		Significant 
Unobservable
Inputs
(Level 3)		Total
 (In millions)
 
Assets:    
Inventories carried at market$— $4,912 $2,502 $7,414 
Unrealized derivative gains:    
Commodity contracts— 963 485 1,448 
Foreign currency contracts— 337 — 337 
Interest rate contracts— 58 — 58 
Cash equivalents326 — — 326 
Segregated investments1,099 — — 1,099 
Total Assets$1,425 $6,270 $2,987 $10,682 
Liabilities:    
Unrealized derivative losses:    
Commodity contracts$— $904 $703 $1,607 
Foreign currency contracts— 256 — 256 
Interest rate contracts— 1 — 1 
Debt conversion option— — 17 17 
Inventory-related payables— 735 15 750 
Total Liabilities$— $1,896 $735 $2,631 
15
 Fair Value Measurements at September 30, 2017
 

Quoted Prices in
 Active Markets
 for Identical
 Assets
 (Level 1)
 
Significant
 Other
 Observable
 Inputs
 (Level 2)
 
Significant 
Unobservable
Inputs
(Level 3)
 Total
 (In millions)
        
Assets:       
Inventories carried at market$—
 $3,361
 $1,094
 $4,455
Unrealized derivative gains:       
Commodity contracts—
 240
 120
 360
Foreign currency contracts—
 81
 —
 81
Interest rate contracts—
 2
 —
 2
Cash equivalents49
 —
 —
 49
Marketable securities376
 92
 —
 468
Segregated investments1,827
 —
 —
 1,827
Deferred receivables consideration—
 399
 —
 399
Total Assets$2,252
 $4,175
 $1,214
 $7,641
        
Liabilities:       
Unrealized derivative losses:       
Commodity contracts$—
 $300
 $145
 $445
Foreign currency contracts—
 119
 —
 119
Inventory-related payables—
 493
 20
 513
Total Liabilities$—
 $912
 $165
 $1,077
Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 5.
Note 6.    Fair Value Measurements (Continued)

Fair Value Measurements at December 31, 2016 Fair Value Measurements at December 31, 2020
 
Quoted Prices in
 Active Markets
 for Identical
 Assets
 (Level 1)
 
Significant
 Other
 Observable
 Inputs
 (Level 2)
 
Significant 
Unobservable
Inputs
(Level 3)
 Total  
Quoted Prices in
 Active Markets
 for Identical
 Assets
 (Level 1)		Significant
 Other
 Observable
 Inputs
 (Level 2)		Significant 
Unobservable
Inputs
(Level 3)		Total
(In millions) (In millions)
       
Assets:       Assets:    
Inventories carried at market$—
 $3,102
 $1,322
 $4,424
Inventories carried at market$— $5,758 $2,183 $7,941 
Unrealized derivative gains:       Unrealized derivative gains:    
Commodity contracts—
 371
 140
 511
Commodity contracts— 1,905 859 2,764 
Foreign exchange contracts—
 102
 —
 102
Foreign currency contractsForeign currency contracts— 283 — 283 
Interest rate contracts—
 11
 —
 11
Interest rate contracts— 61 — 61 
Cash equivalents286
 —
 —
 286
Cash equivalents297 — — 297 
Marketable securities408
 69
 —
 477
Marketable securities1 — — 1 
Segregated investments1,613
 —
 —
 1,613
Segregated investments1,067 — — 1,067 
Deferred receivables consideration—
 540
 —
 540
Total Assets$2,307
 $4,195
 $1,462
 $7,964
Total Assets$1,365 $8,007 $3,042 $12,414 
       
Liabilities:       Liabilities:    
Unrealized derivative losses:       Unrealized derivative losses:    
Commodity contracts$—
 $419
 $142
 $561
Commodity contracts$— $1,116 $918 $2,034 
Foreign exchange contracts—
 90
 —
 90
Foreign currency contractsForeign currency contracts— 535 — 535 
Interest rate contractsInterest rate contracts— 15 — 15 
Debt conversion optionDebt conversion option— — 34 34 
Inventory-related payables—
 491
 30
 521
Inventory-related payables— 498 11 509 
Total Liabilities$—
 $1,000
 $172
 $1,172
Total Liabilities$— $2,164 $963 $3,127 


Estimated fair values for inventories carried at market are based on exchange-quoted prices, adjusted for differences in local markets broker or dealer quotations or market transactions in either listed or over-the-counter (OTC) markets.and quality, referred to as basis. Market valuations for the Company’s inventories are adjusted for location and quality (basis) because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The basis adjustments are generally determined using the inputs from broker or dealer quotations or market transactions in either the listed or over the counter (OTC) markets and are considered observable. In some cases, the basis adjustments are unobservable because they are supported by little to no market activity. When unobservable inputs have a significant impact on the measurement of fair value, the inventory is classified in Level 3. Changes in the fair value of inventories are recognized in the consolidated statements of earnings as a component of cost of products sold.


16
Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.Fair Value Measurements (Continued)


Note 6.    Fair Value Measurements (Continued)
Derivative contracts include exchange-traded commodity futures and options contracts, forward commodity purchase and sale contracts, and OTC instruments related primarily to agricultural commodities, energy, interest rates, and foreign currencies.  Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified in Level 1.  The majority of the Company’s exchange-traded futures and options contracts are cash-settled on a daily basis and, therefore, are not included in these tables.  Fair value for forward commodity purchase and sale contracts is estimated based on exchange-quoted prices adjusted for differences in local markets.  These differencesMarket valuations for the Company’s forward commodity purchase and sale contracts are adjusted for location (basis) because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The basis adjustments are generally determined using inputs from broker or dealer quotations or market transactions in either the listed or OTC markets.markets and are considered observable. In some cases, the basis adjustments are unobservable because they are supported by little to no market activity. When observable inputs are available for substantially the full term of the contract, it is classified in Level 2.  When unobservable inputs have a significant impact (more than 10%) on the measurement of fair value, the contract is classified in Level 3. Except for certain derivatives designated as cash flow hedges, changes in the fair value of commodity-related derivatives are recognized in the consolidated statements of earnings as a component of cost of products sold.  Changes in the fair value of foreign currency-related derivatives are recognized in the consolidated statements of earnings as a component of revenues, cost of products sold, or other (income) expense - net, depending upon the purpose of the contract. The effective portions of changes in the fair value of derivatives designated as effective cash flow hedges are recognized in the consolidated balance sheets as a component of accumulated other comprehensive income (loss) (AOCI) until the hedged items are recorded in earnings or it is probable the hedged transaction will no longer occur.


The Company’s cash equivalents are comprised of money market funds valued using quoted market prices and are classified asin Level 1.

The Company’s marketable securities are comprised of equity investments, U.S. Treasury securities, corporate debt securities, and other debt securities.  Publicly traded equity investments and U.S. Treasury securities are valued using quoted market prices and are classified in Level 1.  Corporate debt and other debt securities are valued using third-party pricing services and substantially all are classified in Level 2. Unrealized changes in the fair value of available-for-sale marketable securities are recognized in the consolidated balance sheets as a component of AOCI unless a decline in value is deemed to be other-than-temporary at which point the decline is recorded in earnings.


The Company’s segregated investments are comprised of U.S. Treasury securities. U.S. Treasury securities are valued using quoted market prices and are classified in Level 1.


The Company has deferred consideration under its accounts receivable securitization programs (the “Programs”) which represents notes receivable fromdebt conversion option is the purchasers underequity-linked embedded derivative related to the Programs (see Note 16). This amount is reflectedexchangeable bonds issued in other current assets on the consolidated balance sheet (see Note 8). The Company carries the deferred consideration at fair value determined by calculating the expected amount of cash to be received.August 2020. The fair value is principally based on observable inputs (a Level 2 measurement) consisting mainly of the face amountembedded derivative is included in long-term debt, with changes in fair value recognized as interest, and is valued with the assistance of the receivables adjusted for anticipated credit losses and discounted at the appropriate market rate. Payment of deferred consideration is not subject to significant risks other than delinquencies and credit losses on accounts receivable transferreda third-party pricing service (a level 3 measurement under the Programs, which have historically been insignificant.applicable accounting standards).


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.Fair Value Measurements (Continued)

The following table presents a reconciliationrollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended September 30, 2017.2021.


 Level 3 Fair Value Asset Measurements at
September 30, 2021
 Inventories
 Carried at
 Market		Commodity
Derivative
Contracts
Gains
 
Total 
Assets
 (In millions)
Balance, June 30, 2021$2,824 $551 $3,375 
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*70 288 358 
Purchases7,351 — 7,351 
Sales(7,346)— (7,346)
Settlements— (311)(311)
Transfers into Level 3205 34 239 
Transfers out of Level 3(602)(77)(679)
Ending balance, September 30, 2021$2,502 $485 $2,987 
 Level 3 Fair Value Asset Measurements at
 September 30, 2017
 
Inventories
 Carried at
 Market
 
Commodity
Derivative
Contracts
Gains
 
 
Total 
Assets
 (In millions)
      
Balance, June 30, 2017$1,000
 $106
 $1,106
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*15
 54
 69
Purchases2,792
 —
 2,792
Sales(2,655) —
 (2,655)
Settlements—
 (82) (82)
Transfers into Level 337
 45
 82
Transfers out of Level 3(95) (3) (98)
Ending balance, September 30, 2017$1,094
 $120
 $1,214


* Includes increase in unrealized gains of $52$435 million relating to Level 3 assets still held at September 30, 2017.2021.

17
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.    Fair Value Measurements (Continued)
The following table presents a reconciliationrollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended September 30, 2017.2021.


Level 3 Fair Value Liability Measurements at
 September 30, 2021
 Inventory-
 related
 Payables		Commodity
Derivative
Contracts
Losses		Debt Conversion Option
 
Total 
Liabilities
 (In millions)
Balance, June 30, 2021$38 $1,037 $24 $1,099 
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*3 310 (7)306 
Purchases1 — — 1 
Sales(27)— — (27)
Settlements— (654)— (654)
Transfers into Level 3— 60 — 60 
Transfers out of Level 3— (50)— (50)
Ending balance, September 30, 2021$15 $703 $17 $735 
 Level 3 Fair Value Liability Measurements at
 September 30, 2017
 
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 
 
Total 
Liabilities
 (In millions)
      
Balance, June 30, 2017$32
 $154
 $186
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*(9) 82
 73
Purchases2
 —
 2
Sales(5) —
 (5)
Settlements—
 (123) (123)
Transfers into Level 3—
 35
 35
Transfers out of Level 3—
 (3) (3)
Ending balance, September 30, 2017$20
 $145
 $165


* Includes increase in unrealized losses of $79$313 million relating to Level 3 liabilities still held at September 30, 2017.2021.


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.Fair Value Measurements (Continued)

The following table presents a reconciliationrollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended September 30, 2016.2020.

 Level 3 Fair Value Asset Measurements at
September 30, 2020
 Inventories
 Carried at
 Market		Commodity
Derivative
Contracts
Gains
 
Total 
Assets
 (In millions)
Balance, June 30, 2020$1,399 $442 $1,841 
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*258 286 544 
Purchases3,181 — 3,181 
Sales(2,703)— (2,703)
Settlements— (96)(96)
Transfers into Level 3290 13 303 
Transfers out of Level 3(333)(65)(398)
Ending balance, September 30, 2020$2,092 $580 $2,672 

 Level 3 Fair Value Asset Measurements at
 September 30, 2016
 
Inventories
 Carried at
 Market
 
Commodity
Derivative
Contracts
Gains
 
 
Total 
Assets
 (In millions)
      
Balance, June 30, 2016$1,099
 $153
 $1,252
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*(97) 76
 (21)
Purchases2,523
 —
 2,523
Sales(2,529) —
 (2,529)
Settlements—
 (85) (85)
Transfers into Level 3206
 66
 272
Transfers out of Level 3(38) (6) (44)
Ending balance, September 30, 2016$1,164
 $204
 $1,368

* Includes increase in unrealized gains of $22$392 million relating to Level 3 assets still held at September 30, 2016.2020.

18
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.    Fair Value Measurements (Continued)

The following table presents a reconciliationrollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended September 30, 2016.2020.

Level 3 Fair Value Liability Measurements at
 September 30, 2020
 Inventory-
 related
 Payables		Commodity
Derivative
Contracts
Losses		Debt Conversion Option
 
Total 
Liabilities
 (In millions)
Balance, June 30, 2020$14 $363 $— $377 
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*(3)618 15 630 
Purchases3 — 17 20 
Sales(7)— — (7)
Settlements— (188)— (188)
Transfers into Level 3— 24 — 24 
Transfers out of Level 3— (21)— (21)
Ending balance, September 30, 2020$7 $796 $32 $835 

 Level 3 Fair Value Liability Measurements at
 September 30, 2016
 
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 
 
Total 
Liabilities
 (In millions)
      
Balance, June 30, 2016$12
 $500
 $512
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*3
 (1) 2
Purchases3
 —
 3
Sales(3) —
 (3)
Settlements—
 (247) (247)
Transfers into Level 3—
 33
 33
Transfers out of Level 3—
 (167) (167)
Ending balance, September 30, 2016$15
 $118
 $133

* Includes increase in unrealized losses of $1$635 million relating to Level 3 liabilities still held at September 30, 2016.2020.































19
Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.Fair Value Measurements (Continued)


The following table presents a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2017.
 Level 3 Fair Value Asset Measurements at
 September 30, 2017
 
Inventories
 Carried at
 Market
 
Commodity
Derivative
Contracts
Gains
 
 
Total 
Assets
 (In millions)
      
Balance, December 31, 2016$1,322
 $140
 $1,462
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*(55) 194
 139
Purchases8,369
 —
 8,369
Sales(8,526) —
 (8,526)
Settlements—
 (291) (291)
Transfers into Level 337
 111
 148
Transfers out of Level 3(53) (34) (87)
Ending balance, September 30, 2017$1,094
 $120
 $1,214

* Includes increase in unrealized gains of $18 million relating to Level 3 assets still held at September 30, 2017.

The following table presents a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2017.

 Level 3 Fair Value Liability Measurements at
 September 30, 2017
 
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 
 
Total 
Liabilities
 (In millions)
      
Balance, December 31, 2016$30
 $142
 $172
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*(4) 201
 197
Purchases19
 —
 19
Sales(25) —
 (25)
Settlements—
 (289) (289)
Transfers into Level 3—
 108
 108
Transfers out of Level 3—
 (17) (17)
Ending balance, September 30, 2017$20
 $145
 $165

* Includes increase in unrealized losses of $204 million relating to Level 3 liabilities still held at September 30, 2017.



Archer-Daniels-Midland Company

Notes to Consolidated Financial StatementsNote 6.    Fair Value Measurements (Continued)
(Unaudited)

Note 5.Fair Value Measurements (Continued)

The following table presents a reconciliationrollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2016.2021.

Level 3 Fair Value Asset Measurements at
Level 3 Fair Value Asset Measurements at September 30, 2021
September 30, 2016 Inventories
 Carried at
 Market		Commodity
Derivative
Contracts
Gains
 
Total 
Assets
Inventories
 Carried at
 Market
 
Commodity
Derivative
Contracts
Gains
 
 
Total 
Assets
 (In millions)
(In millions)
     
Balance, December 31, 2015$1,004
 $243
 $1,247
Balance, December 31, 2020Balance, December 31, 2020$2,183 $859 $3,042 
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*(210) 171
 (39)Total increase (decrease) in net realized/unrealized gains included in cost of products sold*875 804 1,679 
Purchases7,565
 —
 7,565
Purchases20,899 — 20,899 
Sales(7,272) —
 (7,272)Sales(21,334)— (21,334)
Settlements—
 (302) (302)Settlements— (1,134)(1,134)
Transfers into Level 3206
 132
 338
Transfers into Level 31,131 79 1,210 
Transfers out of Level 3(129) (40) (169)Transfers out of Level 3(1,252)(123)(1,375)
Ending balance, September 30, 2016$1,164
 $204
 $1,368
Ending balance, September 30, 2021Ending balance, September 30, 2021$2,502 $485 $2,987 
*Includes increase in unrealized gains of $36 million$1.7 billion relating to Level 3 assets still held at September 30, 2016.2021.


The following table presents a reconciliationrollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2016.2021.


Level 3 Fair Value Liability Measurements at
Level 3 Fair Value Liability Measurements at September 30, 2021
September 30, 2016 Inventory-
 related
 Payables		Commodity
Derivative
Contracts
Losses		Debt Conversion Option
 
Total 
Liabilities
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 
 
Total 
Liabilities
 (In millions)
(In millions)
     
Balance, December 31, 2015$16
 $113
 $129
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*5
 494
 499
Purchases5
 —
 5
Balance, December 31, 2020Balance, December 31, 2020$11 $918 $34 $963 
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*3 1,372 (17)1,358 
PurchasePurchase30 — — 30 
Sales(11) —
 (11)Sales(29)— — (29)
Settlements—
 (392) (392)Settlements— (1,667)— (1,667)
Transfers into Level 3—
 115
 115
Transfers into Level 3— 284 — 284 
Transfers out of Level 3—
 (212) (212)Transfers out of Level 3— (204)— (204)
Ending balance, September 30, 2016$15
 $118
 $133
Ending balance, September 30, 2021Ending balance, September 30, 2021$15 $703 $17 $735 
*Includes increase in unrealized losses of $499 million$1.4 billion relating to Level 3 liabilities still held at September 30, 2021.
20
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.    Fair Value Measurements (Continued)
The following table presents a rollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2020.

 Level 3 Fair Value Asset Measurements at
September 30, 2020
 Inventories
 Carried at
 Market		Commodity
Derivative
Contracts
Gains
 
Total 
Assets
 (In millions)
Balance, December 31, 2019$1,477 $201 $1,678 
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*626 732 1,358 
Purchases9,600 — 9,600 
Sales(9,838)— (9,838)
Settlements— (331)(331)
Transfers into Level 3290 57 347 
Transfers out of Level 3(63)(79)(142)
Ending balance, September 30, 2020$2,092 $580 $2,672 
* Includes increase in unrealized gains of $1.2 billion relating to Level 3 assets still held at September 30, 2016.2020.


Archer-Daniels-Midland CompanyThe following table presents a rollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2020.


Notes
Level 3 Fair Value Liability Measurements at
 September 30, 2020
 Inventory-
 related
 Payables		Commodity
Derivative
Contracts
Losses		Debt Conversion Option
 
Total 
Liabilities
 (In millions)
Balance, December 31, 2019$27 $199 $— $226 
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*1 1,070 15 1,086 
Purchases11 — 17 28 
Sales(32)— — (32)
Settlements— (521)— (521)
Transfers into Level 3— 79 — 79 
Transfers out of Level 3— (31)— (31)
Ending balance, September 30, 2020$7 $796 $32 $835 
* Includes increase in unrealized losses of $1.1 billion relating to Consolidated Financial Statements (Continued)Level 3 liabilities still held at September 30, 2020.
(Unaudited)

Note 5.Fair Value Measurements (Continued)

For all periods presented, the Company had no transfers between Level 1 and 2. Transfers into Level 3 of assets and liabilities previously classified in Level 2 were due to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts rising above the 10% threshold. Transfers out of Level 3 were primarily due





21
Archer-Daniels-Midland Company

Notes to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts falling below the 10% threshold and thus permitting reclassification to Level 2.Consolidated Financial Statements (Continued)

(Unaudited)

Note 6.    Fair Value Measurements (Continued)
In some cases, the price components that result in differences between exchange-traded prices and local prices for inventories and commodity purchase and sale contracts are observable based upon available quotations for these pricing components, and in some cases, the differences are unobservable. These price components primarily include transportation costs and other adjustments required due to location, quality, or other contract terms. In the table below, these other adjustments are referred to as Basis.basis. The changes in unobservable price components are determined by specific local supply and demand characteristics at each facility and the overall market. Factors such as substitute products, weather, fuel costs, contract terms, and futures prices also impact the movement of these unobservable price components.


The following table sets forth the weighted average percentage of the unobservable price components included in the Company’s Level 3 valuations as of September 30, 20172021 and December 31, 2016.2020. The Company’s Level 3 measurements may include Basisbasis only, transportation cost only, or both price components. As an example, for Level 3 inventories with Basis,basis, the unobservable component as of September 30, 20172021 is a weighted average 16.2%33.3% of the total price for assets and 62.7%14.5% of the total price for liabilities.


Weighted Average % of Total Price
September 30, 2021December 31, 2020
Component TypeAssetsLiabilitiesAssetsLiabilities
Inventories and Related Payables
Basis33.3 %14.5 %4.3 %13.7 %
Transportation cost16.2 %— %10.6 %— %
Commodity Derivative Contracts
Basis25.6 %33.5 %28.3 %0.7 %
Transportation cost3.7 %3.4 %1.9 %1.3 %
 Weighted Average % of Total Price
 September 30, 2017 December 31, 2016
Component TypeAssets Liabilities Assets Liabilities
Inventories and Related Payables       
Basis16.2% 62.7% 16.5% 67.1%
Transportation cost18.2% —% 8.3% —
        
Commodity Derivative Contracts       
Basis22.3% 21.3% 16.9% 27.0%
Transportation cost12.9% 12.3% 11.6% 13.4%


In certain of the Company’s principal markets, the Company relies on price quotes from third parties to value its inventories and physical commodity purchase and sale contracts. These price quotes are generally not further adjusted by the Company in determining the applicable market price. In some cases, availability of third-party quotes is limited to only one or two independent sources. In these situations, absent other corroborating evidence, the Company considers these price quotes as 100% unobservable and, therefore, the fair value of these items is reported in Level 3.



Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.Derivative Instruments and Hedging Activities

Note 7.    Derivative Instruments and Hedging Activities

Derivatives Not Designated as Hedging Instruments


The majority of the Company’s derivative instruments have not been designated as hedging instruments. The Company uses exchange-traded futures and exchange-traded and OTC options contracts to manage its net position of merchandisable agricultural commodityproduct inventories and forward cash purchase and sales contracts to reduce price risk caused by market fluctuations in agricultural commodities and foreign currencies.  The Company also uses exchange-traded futures and exchange-traded and OTC options contracts as components of merchandising strategies designed to enhance margins. The results of these strategies can be significantly impacted by factors such as the correlation between the value of exchange-traded commodities futures contracts and the value of the underlying commodities, counterparty contract defaults, and volatility of freight markets. Derivatives, including exchange-traded contracts and physical purchase or sale contracts, are stated at market value and inventories of certain merchandisable agricultural commodities,product inventories, which include amounts acquired under deferred pricing contracts, are stated at market value.  Inventory is not a derivative and therefore fair values of and changes in fair values of inventories are not included in the tables below.






22
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 7.    Derivative Instruments and Hedging Activities (Continued)
The following table sets forth the fair value of derivatives not designated as hedging instruments as of September 30, 20172021 and December 31, 2016.2020.


 September 30, 2021December 31, 2020
 AssetsLiabilitiesAssetsLiabilities
 (In millions)
Foreign Currency Contracts$328 $139 $283 $270 
Commodity Contracts1,448 1,607 2,764 2,034 
Debt Conversion Option— 17 — 34 
Total$1,776 $1,763 $3,047 $2,338 
 September 30, 2017 December 31, 2016
 Assets Liabilities Assets Liabilities
 (In millions)
        
Foreign Currency Contracts$81
 $119
 $102
 $90
Commodity Contracts360
 445
 511
 561
Total$441
 $564
 $613
 $651


The following table setstables set forth the pre-tax gains (losses) on derivatives not designated as hedging instruments that have been included in the consolidated statements of earnings for the three and nine months ended September 30, 20172021 and 2016.2020.

Other expense (income) - net
 Cost ofInterest
(In millions)Revenuesproducts soldexpense
Three Months Ended September 30, 2021
Consolidated Statement of Earnings$20,340 $19,014 $20 $61 
Pre-tax gains (losses) on:
Foreign Currency Contracts$13 $(92)$62 $— 
Commodity Contracts— 214 — — 
Debt Conversion Option— — — 7 
Total gain (loss) recognized in earnings$13 $122 $62 $7 $204 
Three Months Ended September 30, 2020
Consolidated Statement of Earnings$15,126 $14,084 $282 $100 
Pre-tax gains (losses) on:
Foreign Currency Contracts$8 $(77)$(85)$— 
Commodity Contracts— (272)— — 
Debt Conversion Option— — — (15)
Total gain (loss) recognized in earnings$8 $(349)$(85)$(15)$(441)
23
 Three months ended September 30,
 2017 2016
 (In millions)
Foreign Currency Contracts 
  
Revenues$(8) $(19)
Cost of products sold52
 1
Other income (expense) – net52
 (3)
    
Commodity Contracts 
  
Cost of products sold34
 369
Total gain (loss) recognized in earnings$130
 $348
Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 6.
Note 7.    Derivative Instruments and Hedging Activities (Continued)

 Nine months ended September 30,
 2017 2016
 (In millions)
Foreign Currency Contracts 
  
Revenues$(16) $(32)
Cost of products sold82
 263
Other income (expense) – net186
 (108)
    
Commodity Contracts 
  
Cost of products sold$294
 $(266)
Total gain (loss) recognized in earnings$546
 $(143)
Other expense (income) - net
 Cost ofInterest
(In millions)Revenuesproducts soldexpense
Nine Months Ended September 30, 2021
Consolidated Statement of Earnings$62,159 $57,822 $36 $188 
Pre-tax gains (losses) on:
Foreign Currency Contracts$— $(140)$137 $— 
Commodity Contracts— (1,241)— — 
Debt Conversion Option— — — 17 
Total gain (loss) recognized in earnings$— $(1,381)$137 $17 $(1,227)
Nine Months Ended September 30, 2020
Consolidated Statement of Earnings$46,377 $43,276 $202 $270 
Pre-tax gains (losses) on:
Foreign Currency Contracts$54 $(738)$(13)$— 
Commodity Contracts— 321 55 — 
Debt Conversion Option— — — (15)
Total gain (loss) recognized in earnings$54 $(417)$42 $(15)$(336)


Inventories of certain merchandisable agricultural commodities, which include amounts acquired under deferred pricing contracts, are stated at market value. Changes in the market value of inventories of certain merchandisable agricultural commodities,product inventories, forward cash purchase and sales contracts, exchange-traded futures and exchange-traded and OTC options contracts are recognized in earnings immediately.immediately as a component of cost of products sold.


Derivatives Designated as Cash Flow or Fair Valueand Net Investment Hedging Strategies


As of September 30, 2017 and December 31, 2016, theThe Company hashad certain derivatives designated as cash flow and fair value hedges.net investment hedges as of September 30, 2021 and December 31, 2020.


For derivative instruments that are designated and qualify as net investment hedges, foreign exchange gains and losses related to changes in foreign currency exchange rates are deferred in AOCI until the underlying investment is divested.

The Company uses cross-currency swaps and foreign exchange forwards designated as net investment hedges to protect the Company’s investment in a foreign subsidiary against changes in foreign currency exchange rates. The Company executed USD-fixed to Euro-fixed cross-currency swaps with an aggregate notional amount of $1.3 billion as of September 30, 2021 and December 31, 2020, and foreign exchange forwards with an aggregate notional amount of $1.7 billion and $1.8 billion as of September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021 and December 31, 2020, the Company had after-tax losses of $82 million and $202 million in AOCI, respectively, related to foreign exchange gains and losses from these net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested.

For derivative instruments that are designated and qualify as highly-effective cash flow hedges (i.e., hedging the exposure to variability in expected future cash flow that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of AOCI and as an operating activity in the statement of cash flows and reclassified into earnings in the same line item affected by the hedged transaction and in the same period or periods during which the hedged transaction affects earnings.  Hedge components excluded from the assessment of effectiveness and gains and losses related to discontinued hedges are recognized in the consolidated statement of earnings during the current period.
24
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 7.    Derivative Instruments and Hedging Activities (Continued)
The Company’s structured trade finance programs use interest rate swaps designated as fair valuecash flow hedges to protecthedge the fair valueforecasted interest payments on certain letters of fixed-rate debt due to changes in interest rates. The changes in the fair value of the interest rate swaps and the underlying fixed-rate debt are recorded in other (income) expense - net.credit from banks. The terms of the interest rate swaps match the terms of the forecasted interest payments. The deferred gains and losses are recognized in revenues over the period in which the related interest payments are paid to the banks. The amounts are recorded in revenues as the underlying debt resultingcommodity trade flows are also recorded in no ineffectiveness. At revenues. As of September 30, 2017,2021 and December 31, 2020, the Company has $2had interest rate swaps maturing on various dates with aggregate notional amounts of $0.2 billion and $3.3 billion, respectively.

The Company also uses swap locks designated as cash flow hedges to hedge the changes in the forecasted interest payments due to changes in the benchmark rate leading up to future bond issuance dates. The terms of the swap locks match the terms of the forecasted interest payments. The deferred gains and losses will be recognized in interest expense over the period in which the related interest payments will be paid. As of September 30, 2021 and December 31, 2020, the Company executed swap locks maturing on various dates with an aggregate notional amount of $400 million and $550 million, respectively.

As of September 30, 2021 and December 31, 2020, the Company had after-tax gains of $44 million and $31 million in other current assets representing the fair value ofAOCI, respectively, related to the interest rate swaps and a corresponding increasethe swap locks. The Company expects to recognize this amount in its consolidated statements of earnings during the underlyinglife of the debt for the same amount with no net impact to earnings.instruments.

For each of the commodity hedge programs described below, the derivatives are designated as cash flow hedges.  Assuming normal market conditions, theThe changes in the market value of such derivative contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of the hedged item.  Once the hedged item is recognized in earnings, the gains/gains and losses arising from the hedge are reclassified from AOCI to either revenues or cost of products sold, as applicable. As of September 30, 2017,2021 and December 31, 2020, the Company has $12had after-tax gains of $371 million of after-tax lossesand $164 million in AOCI, respectively, related to gains and losses from commodity cash flow hedge transactions.these programs.  The Company expects to recognize $12$371 million of thesethe September 30, 2021 after-tax lossesgains in its consolidated statementstatements of earnings during the next 12 months.

The Company uses futures or options contracts to fixhedge the purchase price of anticipated volumes of corn to be purchased and processed in a future month.  The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s forecasted purchases of corn.  The Company’s corn processing plants currentlynormally grind approximately 72 million bushels of corn per month. From April 2020 to March 2021, the Company temporarily idled dry mill assets and was grinding approximately 56 million bushels of corn per month.  In April 2021, the Company resumed ethanol production at its two corn dry mill facilities. During the past 12 months, the Company hedged between 19%23% and 62%34% of its monthly anticipated grind. At September 30, 2017,2021, the Company hashad designated hedges representing between 6%3% and 41%31% of its anticipated monthly grind of corn for the next 12 months.


The Company, from time to time, also uses futures, options, and swaps to fixhedge the sales price of certain ethanol sales contracts.  The Company has established hedging programs for ethanol sales contracts that are indexed to unleaded gasoline prices and to various exchange-traded ethanol contracts. The objective of these hedging programs is to reduce the variability of cash flows associated with the Company’s sales of ethanol.  During the past 12 months and as of September 30, 2021, the Company had no hedges related to ethanol sales under these programs.

The Company uses futures and options contracts to hedge the purchase price of the anticipated volumes of soybeans to be purchased and processed in a future month for certain of its U.S. soybean crush facilities, subject to certain program limits. The Company also uses futures or options contracts to hedge the sales prices of the anticipated soybean meal and soybean oil sales proportionate to the soybean crushing process at these facilities, subject to certain program limits. During the past 12 months, the Company hedged between 1 million27% and 66 million gallons100% of ethanolthe anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales per month under these programs.at the designated facilities. At September 30, 2017,2021, the Company hashad designated hedges representing between 00% and 1 million gallons100% of ethanolthe anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales per monthat the designated facilities over the next 12 months.


The Company uses futures and OTC swaps to hedge the purchase price of anticipated volumes of natural gas consumption in a future month for certain of its facilities in North America and Europe, subject to certain program limits. During the past 12 months, the Company hedged between 20% and 94% of the anticipated monthly natural gas consumption at the designated facilities. At September 30, 2021, the Company had designated hedges representing between 10% and 96% of the anticipated monthly natural gas consumption over the next 12 months.

25
Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.Derivative Instruments and Hedging Activities (Continued)


Note 7.    Derivative Instruments and Hedging Activities (Continued)

The following table sets forth the fair value of derivatives designated as hedging instruments as of September 30, 20172021 and December 31, 2016.2020.


 September 30, 2021December 31, 2020
 AssetsLiabilitiesAssetsLiabilities
 (In millions)
Foreign Currency Contracts$9 $117 $— $265 
Interest Rate Contracts58 1 61 15 
Total$67 $118 $61 $280 
 September 30, 2017 December 31, 2016
 Assets Liabilities Assets Liabilities
 (In millions)
Interest Rate Contracts$2
 $—
 $11
 $—
Total$2
 $—
 $11
 $—


The following table sets forth the pre-tax gains (losses) on derivatives designated as hedging instruments that have been included in the consolidated statements of earnings for the three and nine months ended September 30, 20172021 and 2016.2020.

Cost of products sold
(In millions)Revenues
Three Months Ended September 30, 2021
Consolidated Statement of Earnings$20,340 $19,014 
Effective amounts recognized in earnings 
Pre-tax gains (losses) on:
Commodity Contracts$— $122 
Total gain (loss) recognized in earnings$— $122 $122 
Three Months Ended September 30, 2020
Consolidated Statement of Earnings$15,126 $14,084 
Effective amounts recognized in earnings
Pre-tax gains (losses) on:
Commodity Contracts$1 $79 
Interest Contracts(14)— 
Total gain (loss) recognized in earnings$(13)$79 $66 
   Three months ended
 
Consolidated Statement of
Earnings Locations
 September 30,
  2017 2016
   (In millions)
Effective amounts recognized in earnings     
Foreign Currency ContractsOther income/expense – net $—
 $(3)
Interest ContractsInterest expense —
 (2)
Commodity ContractsRevenues —
 (9)
 Cost of products sold (15) (37)
Ineffective amount recognized in earnings     
Commodity ContractsRevenues —
 (1)

Cost of products sold (4) 1
Total amount recognized in earnings  $(19) $(51)
   Nine months ended
 
Consolidated Statement of
Earnings Locations
 September 30,
  2017 2016
   (In millions)
Effective amounts recognized in earnings     
Foreign Currency ContractsOther income/expense – net $(2) $(25)
Interest ContractsInterest expense —
 (2)
Commodity ContractsRevenues —
 (14)

Cost of products sold (20) (61)
Ineffective amount recognized in earnings     
Commodity ContractsRevenues 4
 —

Cost of products sold 5
 5
Total amount recognized in earnings  $(13) $(97)
26

Hedge ineffectiveness for commodity contracts results when the change in the price of the underlying commodity in a specific cash market differs from the change in the price of the derivative financial instrument used to establish the hedging relationship.  As an example, if the change in the price of a corn futures contract is strongly correlated to the change in cash price paid for corn, the gain or loss on the derivative instrument is deferred and recognized at the time the corn grind occurs.  If the change in price of the derivative does not strongly correlate to the change in the cash price of corn, in the same example, some portion or all of the derivative gains or losses may be required to be recognized in earnings prior to when the corn grind occurs.
Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.Derivative Instruments and Hedging Activities (Continued)


Note 7.    Derivative Instruments and Hedging Activities (Continued)
Cost of products soldInterest expense
(In millions)Revenues
Nine Months Ended September 30, 2021
Consolidated Statement of Earnings$62,159 $57,822 $188 
Effective amounts recognized in earnings 
Pre-tax gains (losses) on:
Commodity Contracts$— $450 $— 
Interest Contracts(15)— — 
Total gain (loss) recognized in earnings$(15)$450 $— $435 
Nine Months Ended September 30, 2020
Consolidated Statement of Earnings$46,377 $43,276 $270 
Effective amounts recognized in earnings
Pre-tax gains (losses) on:
Commodity Contracts$9 $19 $— 
Interest Contracts(55)— (8)
Total gain (loss) recognized in earnings$(46)$19 $(8)$(35)
Other Net Investment Hedging Strategies


On June 24, 2015, the Company issued €500 million aggregate principal amount of Floating Rate Notes and €600 million aggregate principal amount of 1.75% Notes (collectively, the “Notes”). The Company has designated €1.1€1.8 billion and €1.5 billion of the Notesits outstanding long-term debt and commercial paper borrowings at September 30, 2021 and December 31, 2020, respectively, as a hedgehedges of its net investment in a foreign subsidiary. As of September 30, 2017,2021 and December 31, 2020, the Company has $47had after-tax gains of $11 million and losses of after-tax losses$87 million in AOCI, respectively, related to foreign exchange gains and losses from thethese net investment hedge transaction.transactions. The amount is deferred in AOCI until the underlying investment is divested.



Note 7.Marketable Securities






















27
 Cost 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
 (In millions)
        
September 30, 2017       
United States government obligations       
Maturity less than 1 year$259
 $—
 $—
 $259
Maturity 1 to 5 years117
 —
 —
 117
Corporate debt securities 
  
  
  
Maturity less than 1 year2
 —
 —
 2
Maturity 1 to 5 years90
 —
 —
 90
 $468
 $—
 $—
 $468

 Cost 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
 (In millions)
        
December 31, 2016       
United States government obligations       
Maturity less than 1 year$287
 $—
 $—
 $287
Maturity 1 to 5 years121
 —
 (1) 120
Corporate debt securities 
  
  
  
Maturity less than 1 year1
 —
 —
 1
Maturity 1 to 5 years66
 —
 —
 66
Other debt securities 
  
  
  
Maturity less than 1 year8
 —
 —
 8
Equity securities 
  
  
  
Available-for-sale1
 —
 —
 1
 $484
 $—
 $(1) $483





Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 8.     Other Current Assets


The following table sets forth the items in other current assets:

September 30,December 31,
20212020
 (In millions)
Unrealized gains on derivative contracts$1,843 $3,108 
Margin deposits and grain accounts580 500 
Customer omnibus receivable1,075 860 
Financing receivables - net (1)
154 297 
Insurance premiums receivable17 35 
Prepaid expenses325 290 
Biodiesel tax credit40 101 
Tax receivables765 680 
Non-trade receivables (2)
270 218 
Other current assets151 135 
 $5,220 $6,224 
 September 30, December 31,
 2017 2016
 (In millions)
    
Unrealized gains on derivative contracts$443
 $624
Deferred receivables consideration399
 540
Customer omnibus receivable474
 521
Financing receivables - net (1)
407
 373
Insurance premiums receivable137
 648
Prepaid expenses248
 268
Tax receivables423
 480
Non-trade receivables (2)
374
 478
Other current assets179
 451
 $3,084
 $4,383

(1) The Company provides financing to certain suppliers, primarily Brazilian farmers, to finance a portion of the suppliers’ production costs. The amounts are reported net of allowances of $6$3 million and $7$4 million at September 30, 20172021 and December 31, 2016,2020, respectively. Interest earned on financing receivables of $6$2 million and $18$8 million for the three and nine months ended September 30, 2017,2021, respectively and $5$4 million and $17$15 million for the three and nine months ended September 30, 2016,2020, respectively, is included in interestinvestment income in the consolidated statements of earnings.


(2) Non-trade receivables included $75$28 million and $223$40 million of reinsurance recoverables as of September 30, 20172021 and December 31, 2016,2020, respectively.


28

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 9.     Accrued Expenses and Other Payables


The following table sets forth the items in accrued expenses and other payables:

September 30,December 31,
20212020
 (In millions)
Unrealized losses on derivative contracts$1,881 $2,584 
Accrued compensation421 396 
Income tax payable132 41 
Other taxes payable154 127 
Insurance claims payable207 238 
Contract liability374 626 
Other accruals and payables952 931 
 $4,121 $4,943 
 September 30, December 31,
 2017 2016
 (In millions)
    
Unrealized losses on derivative contracts$564
 $651
Reinsurance premiums payable104
 479
Insurance claims payables260
 373
Deferred income570
 1,065
Other accruals and payable1,050
 1,414
 $2,548
 $3,982



Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 10.Debt and Financing Arrangements

Note 10.    Debt and Financing Arrangements

On September 14, 2017,10, 2021, the Company issued $750 million aggregate principal amount of 2.700% Notes due September 15, 2051 (the “Notes”). Net proceeds before expenses were $732 million.

In September 2021, the Company used the proceeds of the Notes to redeem $500 million aggregate principal amount of 3.75%2.750% notes due in 2047. Proceeds before expenses were $493 million.

On September 29, 2017, the Company redeemed $559 million aggregate principal amount of 5.45% notes due on March 15, 201827, 2025 and incurred an earlyrecognized a debt extinguishment charge of $11$36 million in the quarter ended September 30, 2017.2021.


On March 25, 2021, the Company issued, in a private placement transaction, €500 million aggregate principal amount of Fixed-to-Floating Rate Senior Notes due September 25, 2022.

At September 30, 2017,2021, the fair value of the Company’s long-term debt exceeded the carrying value by $1.1$1.7 billion,, as estimated using quoted market prices (a Level 2 measurement under applicable accounting standards).


At September 30, 2017,2021, the Company had lines of credit, including the accounts receivable securitization programs described below, totaling $6.9$12.4 billion,, of which $4.8$10.5 billion was unused.  Of the Company’s total lines of credit, $4.0$6.5 billion support a supported the combined U.S. and European commercial paper borrowing facility,programs, against which there was $0.6 billion ofno commercial paper outstanding at September 30, 2017.2021.


The Company has accounts receivable securitization programs (the “Programs”). The Programs provide the Company with up to $1.7$2.1 billion in funding resulting from the sale of accounts receivable. Asreceivable with $0.6 billion unused capacity as of September 30, 2017, the Company utilized $1.4 billion of its facility under the Programs2021 (see Note 16 for more information onabout the Programs).

29
Note 11.Income Taxes


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 11.    Income Taxes

The Company’s effective tax raterates for the three and nine months ended September 30, 2017 was 13.3%2021 were 18.4% and 24.0%15.8%, respectively, compared to 28.3%a benefit of 13.0% and 27.7%an expense of 3.4% for the three and nine months ended September 30, 2016,2020, respectively. The changelow rate in the ratesthree months September 30, 2020 included the effects of the significant early debt retirement, the sale of a portion of the Company’s shares in Wilmar and changes in the forecasted geographical mix of pretax earnings on the 2020 annual effective tax rate in that period. The favorable tax rate in the nine months ended September 30, 2020 was primarily due to the impact of changesU.S. tax credits signed into law in December 2019, including a $73 million discrete tax items, including the favorable resolution of an uncertain tax positionbenefit related to a 2014 acquisition45G railroad maintenance expenses, and return to provision in the current quarter, partially offset by changes in the forecasted geographicgeographical mix of pre-tax earnings and the expiration of U.S. tax credits, including the biodiesel credit, at the end of 2016.pretax earnings.


The Company is subject to income taxation and routine examination by domestic and foreign tax authoritiesexaminations in many jurisdictions around the world and frequently faces challenges regarding the amount of taxes due.  These challenges include positions taken by the Company related to the timing, nature, and amount of deductions and the allocation of income among various tax jurisdictions.  In its routine evaluations of the exposure associated with various tax filing positions, the Company recognizes a liability, when necessary, for estimated potential tax owed by the Company in accordance with applicable accounting standards. Resolution of the related tax positions, through negotiationnegotiations with relevant tax authorities or through litigation, may take years to complete. Therefore, it is difficult to predict the timing for resolution of tax positions. In its routine evaluations of the exposure associated with various tax filing positions the Company recognizes a liability, when necessary, for estimated potential additional tax owed by the Company in accordance with the applicable accounting standard.  However,and the Company cannot predict or provide assurance as to the ultimate outcome of these ongoing or future examinations.

The Company’s wholly-owned subsidiary, ADM do Brasil Ltda. (ADM do Brasil), has received three separate However, the Company does not anticipate that the total amount of unrecognized tax assessments frombenefits will increase or decrease significantly in the Brazilian Federal Revenue Service(BFRS)challengingnext twelve months. Given the long periods of time involved in resolving tax deductibility of commodity hedging losses and related expenses forpositions, the tax years 2004, 2006, and 2007. As of September 30, 2017, these assessments, updated for estimated penalties, interest, and variation in currency exchange rates, totaled approximately $490 million. The statute of limitations for tax years 2005 and 2008 to 2011 has expired. The Company does not expect to receive any additionalthat the recognition of unrecognized tax assessments.

ADM do Brasil enters into commodity hedging transactions that can result in gains, which are included in ADM do Brasil’s calculations of taxable income in Brazil, and losses, which ADM do Brasil deducts from its taxable income in Brazil. The Company has evaluated its tax position regarding these hedging transactions and concluded, based upon advice from Brazilian legal counsel, that it was appropriate to recognize both gains and losses resulting from hedging transactions when determining its Brazilianbenefits will have a material impact on the Company’s effective income tax expense. Therefore, the Company has continued to recognize the tax benefit from hedging lossesrate in its financial statements and has not recorded any tax liability for the amounts assessed by the BFRS.given period.





Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 11.     Income Taxes (Continued)

ADM do Brasil filed an administrative appeal for each of the assessments. The appeal panel found in favor of the BFRS on these assessments and ADM do Brasil filed a second level administrative appeal. The second administrative appeal panel continues to conduct customary procedural activities, including ongoing dialogue with the BFRS auditor. If ADM do Brasil continues to be unsuccessful in the administrative appellate process, the Company intends to file appeals in the Brazilian federal courts. While the Company believes its consolidated financial statements properly reflect the tax deductibility of these hedging losses, the ultimate resolution of this matter could result in the future recognition of additional payments of, and expense for, income tax and the associated interest and penalties.


The Company intends to vigorously defend its position against the current assessments and any similar assessments that may be issued for years subsequent to 2011.

The Company’s subsidiariessubsidiary in Argentina, haveADM Agro SRL (formerly ADM Argentina SA and Alfred C. Toepfer Argentina SRL), received tax assessments challenging transfer prices used to price grain exports totaling $128for the tax years 1999 through 2011. As of September 30, 2021, these assessments totaled $9 million (inclusive of in tax and $39 million in interest and adjusted(adjusted for variation in currency exchange rates) for the tax years 2004 through 2010.. The Argentine tax authorities have been conductingconducted a review of income and other taxes paid by large exporters and processors of cereals and other agricultural commodities resulting in allegations of income tax evasion. While theThe Company believes that it has complied with all Argentine tax laws, itlaws. To date, the Company has not received assessments for closed years subsequent to 2011. While the statute of limitations has expired for tax years 2012 and 2013, the Company cannot rule out receiving additional assessments challenging transfer prices used to price grain exports for years subsequent to 2010,2013, and estimates that these potential assessments wouldcould be approximately $213$62 million (as of September 30, 2017in tax and subject to$35 million in interest (adjusted for variation in currency exchange rates)rates as of September 30, 2021).  In the second quarter of 2021, Argentine tax authorities initiated criminal tax proceedings related to the Argentine tax matters. The Company believes that it has appropriately evaluated the transactions underlying these assessments, and has concluded, based on Argentine tax law, that its tax position would be sustained, and accordingly, has not recorded a tax liability for these assessments. In accordance with the accounting requirements for uncertain tax positions, the Company has not recorded an uncertain tax liability for this assessment because it has concluded that it is more likely than not to prevail on the matter based upon its technical merits and because the taxing jurisdiction’s process does not provide a mechanism for settling at less than the full amount of the assessment. The Company intends to vigorously defend its position against the current assessments and any similar assessments that may be issued for years subsequent to 2010.2013.
In accordance with2014, the accounting requirements for uncertain tax positions, the Company has not recorded an uncertain tax liability for these assessments because it has concluded that it is more likely than not to prevail on the Brazil and Argentina matters based upon their technical merits and because the taxing jurisdictions’ processes do not provide a mechanism for settling at less than the full amount of the assessment. The Company’s consideration of these tax assessments requires judgments about the application of income tax regulations to specific facts and circumstances. The final outcome of these matters cannot reliably be predicted, may take many years to resolve, and could result in financial impacts of up to the entire amount of these assessments.

The Company’s wholly-owned subsidiary in the Netherlands, ADM Europe B.V., has received a tax assessment totaling $106 million from the Netherlands tax authority challenging the transfer pricing aspects of a 2009 business reorganization, which involved two of its subsidiary companies in the Netherlands. As of September 30, 2021, this assessment was $94 million in tax and $33 million in interest (adjusted for variation in currency exchange rates). In September 2019, the Company received an interim decision on its appeal which directed the parties to work toward a settlement. On April 23, 2020, the court issued an unfavorable ruling and in October 2020, assigned a third party expert to establish a valuation by early 2021. During the second quarter of 2021, the third party expert issued a final valuation. The Company has appealedexpects the assessment and carefully evaluatedcourt to issue a ruling on this matter in the underlying transactions and has concluded that the amountfirst quarter of the gain recognized on the reorganization for tax purposes was appropriate. While the Company plans to vigorously defend its position against the assessment, it has accrued an amount it believes would be the likely outcome of the litigation. The Company’s defense of the judicial appeal2022. Subsequent appeals may take an extended period of time and could result in additional financial impacts of up to the entire amount of thisthe assessment. The Company has carefully reviewed the valuation and evaluated the underlying transactions and has concluded that the amount of gain recognized on the reorganization for tax purposes was appropriate. As of September 30, 2021, the Company has accrued its best estimate of what it believes will be the likely outcome of the litigation and will vigorously defend its position against the assessment.



30

Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 12.     Accumulated Other Comprehensive Income (AOCI)


The following tables set forth the changes in AOCI by component for the three and nine months ended September 30, 20172021 and the reclassifications out of AOCI for the three and nine months ended September 30, 20172021 and 2016:2020:
Three months ended September 30, 2021
 Foreign Currency Translation AdjustmentDeferred Gain (Loss) on Hedging ActivitiesPension Liability AdjustmentUnrealized Gain (Loss) on InvestmentsTotal
 (In millions)
Balance at June 30, 2021$(2,143)$328 $(303)$(3)$(2,121)
Other comprehensive income (loss) before reclassifications(149)197 5 6 59 
Gain (loss) on net investment hedges126 — — — 126 
Amounts reclassified from AOCI— (122)8 — (114)
Tax effect(30)(1)5 — (26)
Net of tax amount(53)74 18 6 45 
Balance at September 30, 2021$(2,196)$402 $(285)$3 $(2,076)
Nine months ended September 30, 2021
 Foreign Currency Translation AdjustmentDeferred Gain (Loss) on Hedging ActivitiesPension Liability AdjustmentUnrealized Gain (Loss) on InvestmentsTotal
 (In millions)
Balance at December 31, 2020$(2,424)$185 $(365)$— $(2,604)
Other comprehensive income (loss) before reclassifications14 693 12 4 723 
Gain (loss) on net investment hedges292 — — — 292 
Amounts reclassified from AOCI— (435)90 — (345)
Tax effect(78)(41)(22)(1)(142)
Net of tax amount228 217 80 3 528 
Balance at September 30, 2021$(2,196)$402 $(285)$3 $(2,076)

31
 Three months ended September 30, 2017
 Foreign Currency Translation Adjustment Deferred Gain (Loss) on Hedging Activities Pension Liability Adjustment Unrealized Gain (Loss) on Investments Total
 (In millions)
          
Balance at June 30, 2017$(1,684) $39
 $(510) $14
 $(2,141)
Other comprehensive income (loss) before reclassifications244
 (41) 160
 6
 369
Amounts reclassified from AOCI—
 15
 14
 —
 29
Tax effect(40) 6
 (66) —
 (100)
Net current period other comprehensive income204
 (20) 108
 6
 298
Balance at September 30, 2017$(1,480) $19
 $(402) $20
 $(1,843)
          
 Nine months ended September 30, 2017
 Foreign Currency Translation Adjustment Deferred Gain (Loss) on Hedging Activities Pension Liability Adjustment Unrealized Gain (Loss) on Investments Total
 (In millions)
          
Balance at December 31, 2016$(2,102) $6
 $(521) $19
 $(2,598)
Other comprehensive income before reclassifications626
 (10) 151
 1
 768
Amounts reclassified from AOCI—
 22
 42
 —
 64
Tax effect(4) 1
 (74) —
 (77)
Net current period other comprehensive income622
 13
 119
 1
 755
Balance at September 30, 2017$(1,480) $19
 $(402) $20
 $(1,843)

Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 12.     Accumulated Other Comprehensive Income (AOCI) (Continued)

Amount reclassified from AOCI
Three months ended September 30,Nine months ended September 30,Affected line item in the consolidated statements of earnings
Details about AOCI components2021202020212020
(In millions)
Deferred loss (gain) on hedging activities
$— $13 $15 $46 Revenues
(122)(79)(450)(19)Cost of products sold
— — — 8 Interest expense
(122)(66)(435)35 Total before tax
29 19 108 5 Tax
$(93)$(47)$(327)$40 Net of tax
Pension liability adjustment
Amortization of defined benefit pension items:
Prior service credit$(4)$(9)$(71)$(25)Other (income) expense-net
Actuarial losses12 9 161 30 Other (income) expense-net
8 — 90 5 Total before tax
6 1 (20)(10)Tax
$14 $1 $70 $(5)Net of tax
The Company’s accounting policy is to release the income tax effects from AOCI when the individual units of account are sold, terminated, or extinguished.

Note 13.    Other (Income) Expense - Net
  Amount reclassified from AOCI  
  Three months ended Nine months ended  
Details about AOCI components Sep 30
2017		 Sep 30
2016		 Sep 30
2017		 Sep 30
2016		 Affected line item in the consolidated statement of earnings
  (In millions)  
           
Foreign currency translation adjustment          
  $—
 $(2) $—
 $(75) Other income/expense
  —
 —
 —
 —
 Tax
  $—
 $(2) $—
 $(75) Net of tax
           
Deferred loss (gain) on hedging activities          
  $15
 $37
 $20
 $61
 Cost of products sold
  —
 2
 —
 2
 Interest expense
  —
 3
 2
 25
 Other income/expense
  —
 9
 —
 14
 Revenues
  15
 51
 22
 102
 Total before tax
  (5) (19) (8) (38) Tax
  $10
 $32
 $14
 $64
 Net of tax
           
Pension liability adjustment          
Amortization of defined benefit pension items:          
Prior service credit $(2) $(5) $(8) $(12) Selling, general, and administrative expenses
Actuarial losses 16
 15
 50
 44
 Selling, general, and administrative expenses
  14
 10
 42
 32
 Total before tax
  (5) (4) (15) (7) Tax
  $9
 $6
 $27
 $25
 Net of tax
           
Unrealized loss on investments          
  $—
 $6
 $—
 $6
 Asset impairment, exit, and restructuring costs
  —
 —
 —
 —
 Tax
  $—
 $6
 $—
 $6
 Net of tax
           

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 13.Other (Income) Expense - Net


The following table sets forth the items in other (income) expense:
Three Months EndedNine Months Ended
September 30,September 30,
 2021202020212020
 (In millions)
Gains on sales of assets$(7)$(68)$(46)$(132)
Debt extinguishment charges36 396 36 410 
Pension settlement1 — 83 — 
Other – net(10)(46)(37)(76)
Other (Income) Expense - Net$20 $282 $36 $202 
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
 (In millions)
(Gains) losses on sales of assets and businesses$(15) $7
 $(66) $(117)
Loss on debt extinguishment11
 —
 11
 —
Other – net—
 (11) 42
 (21)
Other (Income) Expense - Net$(4) $(4) $(13) $(138)


Gains on sales of assets forin the three and nine months ended September 30, 2017 included2021 consisted of gains on the sale of certain assets and disposals of individually insignificant assets in the ordinary course of business. Gains on sales of assets in the three and businesses for the nine months ended September 30, 20172020 included gains related to the sale of a portion of the crop risk services businessCompany's shares in Wilmar, which decreased the Company’s ownership interest from 24.8% as of December 31, 2019 to 22.1% as of September 30, 2020, and net gains on the sale of certain other assets, and disposals of other individually insignificant assets in the ordinary course of business, partially offset by an adjustment ofbusiness.

Debt extinguishment charges in the proceeds of the 2015 sale of the cocoa business. Losses on sale of assets for the three months ended September 30, 2016 related principally to a loss on the sale of an investment. Gains on sales of assets and businesses for the nine months ended September 30, 2016 included realized additional considerationcurrent period were related to the saleearly redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025. Debt extinguishment charges in the Company’s equity investment in Gruma S.A.B. de C.V. in December 2012, recovery of loss provisions and gainprior period were related to the sale of the Company’s Brazilian sugar ethanol facilities, and gain relatedmultiple early debt redemptions.
32
Archer-Daniels-Midland Company

Notes to the revaluation of the remaining interest toConsolidated Financial Statements (Continued)
(Unaudited)

Note 13.    Other (Income) Expense - Net (Continued)

Pension settlement value in conjunction with the acquisition of the remaining interest in Amazon Flavors.

Loss on debt extinguishment for the three and nine months ended September 30, 20172021 was related to the early redemptionpurchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the Company’s $559 million notes due on March 15, 2018.ADM Retirement Plan and ADM Pension Plan for Hourly-Wage Employees to independent third parties.


Other - net for the nine months ended September 30, 2017 included foreign exchange losses and changes in contingent settlement provisions. Other - net for the three and nine months ended September 30, 20162021 included the non-service components of net pension benefit income of $1 million and $12 million, respectively, foreign exchange gains, and other expense. Other - net in the three and nine months ended September 30, 2020 included the non-service components of net pension benefit income of $7 million and $28 million, respectively, and other income. Other - net in the nine months ended September 30, 2020 also included loss provisions related to the Company’s futures commission and brokerage business and foreign exchange gains.


Note 14.     Segment Information


The Company is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. The Company’s operations are organized, managed, and classified into four3 reportable business segments: AgriculturalAg Services Corn Processing,and Oilseeds, Processing,Carbohydrate Solutions, and Wild Flavors and Specialty Ingredients.Nutrition. Each of these segments is organized based upon the nature of products and services offered. The Company’s remaining operations are not reportable segments, as defined by the applicable accounting standard, and are classified as Other.Other Business.

The Agricultural Services segment utilizes its extensive global grain elevator and transportation networks, and port operations to buy, store, clean, and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, rice, and barley, and resells these commodities primarily as food and feed ingredients and as raw materials for the agricultural processing industry. The Agricultural Services segment includes international agricultural commodities merchandising and handling activities managed through a global trade desk based in Rolle, Switzerland. Agricultural Services’ grain sourcing, handling, and transportation network provides reliable and efficient services to the Company’s customers and agricultural processing operations. Agricultural Services’ transportation network capabilities include barge, ocean-going vessel, truck, rail, and container freight services. The Agricultural Services segment also includes the activities related to structured trade finance, the processing of wheat into wheat flour, and the Company’s share of the results of its Pacificor (formerly Kalama Export Company LLC) joint venture. The Agricultural Services segment also included returns associated with the Company’s 19.8% investment in GrainCorp until its sale in December 2016. In July 2017, the Company completed the acquisition of a 51% controlling interest in Industries Centers, an Israeli company specializing in the import and distribution of agricultural feed products, which is now known as ADM Israel.




Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 14.Segment Information (Continued)

The Company’s Corn Processing segment is engaged in corn wet milling and dry milling activities, utilizing its asset base primarily located in the central part of the United States with additional facilities in China, Bulgaria, France, Morocco, Spain, and Turkey. The Corn Processing segment converts corn into sweeteners, starches, and bioproducts. Its products include ingredients used in the food and beverage industry including sweeteners, starch, syrup, glucose, and dextrose. Dextrose and starch are used by the Corn Processing segment as feedstocks for its bioproducts operations. By fermentation of dextrose, the Corn Processing segment produces alcohol, amino acids, and other food and animal feed ingredients. Ethyl alcohol is produced by the Company for industrial use as ethanol or as beverage grade. Ethanol, in gasoline, increases octane and is used as an extender and oxygenate. Bioproducts also include essential amino acids such as lysine and threonine used in swine and poultry diets to optimize performance. Corn gluten feed and meal, as well as distillers’ grains, are produced for use as animal feed ingredients. Corn germ, a by-product of the wet milling process, is further processed into vegetable oil and protein meal. The Corn Processing segment also includes activities related to the processing and distribution of formula feeds and animal health and nutrition products. Other Corn Processing products include citric acids and glycols, all of which are used in various food and industrial products. The Corn Processing segment also included the activities of the Company’s Brazilian sugarcane ethanol plant and related operations until the Company completed the sale of these operations in May 2016. This segment also includes the Company’s share of the results of its equity investments in Almidones Mexicanos S.A. and Red Star Yeast Company LLC. In February 2017, the Company acquired Crosswind Industries, Inc., an industry leader in the manufacture of contract and private label pet treats and foods, as well as specialty ingredients, and an 89% controlling interest in Biopolis SL, a leading provider of microbial technology with a strong portfolio of novel food ingredients. In June 2017, the Company completed the acquisition of Chamtor SA, a French producer of wheat-based sweeteners and starches.
The Oilseeds Processing segment includes global activities related to the origination, merchandising, crushing, and further processing of oilseeds such as soybeans and soft seeds (cottonseed, sunflower seed, canola, rapeseed, and flaxseed) into vegetable oils and protein meals. Oilseeds products produced and marketed by the Company include ingredients for the food, feed, energy, and industrial products industries. Crude vegetable oils produced by the segment’s crushing activities are sold “as is” or are further processed by refining, blending, bleaching, and deodorizing into salad oils. Salad oils are sold “as is” or are further processed by hydrogenating and/or interesterifying into margarine, shortening, and other food products. Partially refined oils are used to produce biodiesel or are sold to other manufacturers for use in chemicals, paints, and other industrial products. Oilseed protein meals are principally sold to third parties to be used as ingredients in commercial livestock and poultry feeds. In Europe and South America, the Oilseeds Processing segment includes origination and merchandising activities as adjuncts to its oilseeds processing assets. These activities include a network of grain elevators, port facilities, and transportation assets used to buy, store, clean, and transport grains and oilseeds. The Oilseeds Processing segment is a major supplier of peanuts, tree nuts, and peanut-derived ingredients to both the U.S. and export markets. In North America, cottonseed flour is produced and sold primarily to the pharmaceutical industry and cotton cellulose pulp is manufactured and sold to the chemical, paper, and other industrial markets. The Oilseeds Processing segment also includes the Company’s share of the results of its equity investment in Wilmar International Limited (Wilmar) and its share of the results of its Stratas Foods LLC, Edible Oils Limited, and Olenex joint ventures. During the nine months ended September 30, 2017, the Company acquired additional shares in Wilmar, increasing its ownership interest from 23.2% to 24.9% as of September 30, 2017.

The Wild Flavors and Specialty Ingredients (WFSI) segment engages in the manufacturing, sales, and distribution of specialty products including natural flavor ingredients, flavor systems, natural colors, proteins, emulsifiers, soluble fiber, polyols, hydrocolloids, natural health and nutrition products, and other specialty food and feed ingredients. The WFSI segment also includes the activities related to the procurement, processing, and distribution of edible beans.

Other includes the Company’s remaining operations, primarily its financial business units, related to futures commission and insurance activities. On May 1, 2017, the Company completed the sale of its crop risk services business to Validus Holdings, a global group of insurance and reinsurance companies.


Intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on net sales less identifiable operating expenses and specified items.expenses. Also included in operating profit for each segment is equity in earnings of affiliates based on the equity method of accounting. Specified items included in total segment operating profit and certain corporate items are not allocated to the Company’s individual business segments because operating performance of each business segment is evaluated by management exclusive of these items. Corporate results principally include the impact of LIFO-related adjustments, unallocated corporate expenses, and interest costexpense net of investment income,interest income. Corporate results also include revaluation gains and losses on cost method investments and the Company’s share of the results of its equity investmentinvestments in Compagnie Industrialle et Financiere des Produits Amylaces SA (Luxembourg) (CIP).early-stage start-up companies that ADM Ventures has investments in.

For more information about the Company’s business segments, refer to Note 17 of “Notes to Consolidated Financial Statements” included in Item 8, “Financial Statements and Supplementary Data” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
























33
Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 14.Segment Information (Continued)


Note 14.    Segment Information (Continued)
Three Months EndedNine Months Ended
September 30,September 30,
(In millions)2021202020212020
Gross revenues    
Ag Services and Oilseeds$16,410 $13,415 $51,148 $40,196 
Carbohydrate Solutions3,227 2,335 9,132 7,102 
Nutrition1,755 1,481 5,172 4,471 
Other Business88 84 290 277 
Intersegment elimination(1,140)(2,189)(3,583)(5,669)
Total gross revenues$20,340 $15,126 $62,159 $46,377 
Intersegment sales    
Ag Services and Oilseeds$721 $1,888 $2,181 $4,849 
Carbohydrate Solutions361 271 1,223 708 
Nutrition58 30 179 112 
Total intersegment sales$1,140 $2,189 $3,583 $5,669 
Revenues from external customers    
Ag Services and Oilseeds
Ag Services$9,899 $7,352 $32,860 $22,930 
Crushing2,842 2,317 8,411 7,035 
Refined Products and Other2,948 1,858 7,696 5,382 
Total Ag Services and Oilseeds15,689 11,527 48,967 35,347 
Carbohydrate Solutions
Starches and Sweeteners1,972 1,574 5,563 4,769 
Vantage Corn Processors894 490 2,346 1,625 
Total Carbohydrate Solutions2,866 2,064 7,909 6,394 
Nutrition
Human Nutrition808 719 2,410 2,161 
Animal Nutrition889 732 2,583 2,198 
Total Nutrition1,697 1,451 4,993 4,359 
Other Business88 84 290 277 
Total revenues from external customers$20,340 $15,126 $62,159 $46,377 
34
 Three Months Ended Nine Months Ended
 September 30, September 30,
(In millions)2017 2016 2017 2016
Gross revenues       
Agricultural Services$7,022
 $7,953
 $21,351
 $22,486
Corn Processing2,517
 2,630
 7,318
 7,570
Oilseeds Processing6,797
 6,498
 20,109
 19,418
Wild Flavors and Specialty Ingredients586
 614
 1,809
 1,893
Other98
 95
 293
 314
Intersegment elimination(2,193) (1,958) (6,122) (5,836)
Total gross revenues$14,827
 $15,832
 $44,758
 $45,845
        
Intersegment sales 
  
  
  
Agricultural Services$947
 $993
 $2,622
 $2,659
Corn Processing192
 239
 475
 620
Oilseeds Processing1,045
 723
 3,003
 2,547
Wild Flavors and Specialty Ingredients9
 3
 22
 10
Total intersegment sales$2,193
 $1,958
 $6,122
 $5,836
        
Revenues from external customers 
  
  
  
Agricultural Services       
Merchandising and Handling$5,265
 $6,146
 $16,434
 $17,331
Milling and Other757
 754
 2,141
 2,325
Transportation53
 60
 154
 171
Total Agricultural Services6,075
 6,960
 18,729
 19,827
Corn Processing       
Sweeteners and Starches1,087
 1,057
 3,192
 3,061
Bioproducts1,238
 1,334
 3,651
 3,889
Total Corn Processing2,325
 2,391
 6,843
 6,950
Oilseeds Processing       
Crushing and Origination3,665
 3,660
 10,850
 10,799
Refining, Packaging, Biodiesel, and Other2,025
 2,042
 6,064
 5,852
Asia62
 73
 192
 220
Total Oilseeds Processing5,752
 5,775
 17,106
 16,871
        
Wild Flavors and Specialty Ingredients577
 611
 1,787
 1,883
Total Wild Flavors and Specialty Ingredients577
 611
 1,787
 1,883
        
Other - Financial98
 95
 293
 314
Total Other98
 95
 293
 314
Total revenues from external customers$14,827
 $15,832
 $44,758
 $45,845
        
        
        
        
        
Archer-Daniels-Midland Company


Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 14.
Note 14.    Segment Information (Continued)

Three Months Ended Nine Months EndedThree Months EndedNine Months Ended
September 30, September 30,September 30,September 30,
(In millions)2017 2016 2017 2016(In millions)2021202020212020
Segment operating profit       Segment operating profit
Agricultural Services$87
 $195
 284
 328
Corn Processing253
 214
 648
 506
Oilseeds Processing119
 145
 639
 641
Wild Flavors and Specialty Ingredients61
 73
 228
 237
Other21
 23
 78
 84
Ag Services and OilseedsAg Services and Oilseeds$618 $436 $1,965 $1,271 
Carbohydrate SolutionsCarbohydrate Solutions213 246 855 509 
NutritionNutrition176 147 531 447 
Other BusinessOther Business(5)20 10 69 
Specified Items:       Specified Items:
Gains (losses) on sales of assets and businesses(1)
12
 (4) 20
 114
Gains (losses) on sales of assets and businesses(1)
— 57 22 80 
Impairment, restructuring, settlement charges(2)
(63) (4) (98) (16)
Hedge timing effects(3)
(5) 3
 4
 4
Impairment, restructuring, and settlement charges(2)
Impairment, restructuring, and settlement charges(2)
(2)(2)(133)(60)
Total segment operating profit485
 645
 1,803
 1,898
Total segment operating profit1,000 904 3,250 2,316 
Corporate(260) (165) (737) (705)Corporate(347)(704)(948)(1,189)
Earnings before income taxes$225
 $480
 $1,066
 $1,193
Earnings before income taxes$653 $200 $2,302 $1,127 
       

(1) Current quarter gain related to disposalsyear-to-date gains consisted of individually insignificant assets in the ordinary course of business Current year to date gain related to the sale of the crop risk services business and disposals of other individually insignificant assets in the ordinary course of business, partially offset by an adjustment of the proceeds of the 2015 sale of the cocoa business. Prior quarter loss related principally to a lossgains on the sale of an investment.certain assets. Prior year to datequarter and year-to-date gains consisted of a gain primarily related to recovery of loss provisions and gain related toon the sale of the Company’s Brazilian sugar ethanol facilities, realized contingent consideration on the December 2012 salea portion of the Company’s equity investmentshares in Gruma S.A. de C.V.,Wilmar and revaluation of the remaining interest to settlement value in conjunction with the acquisition of the remaining interest in Amazon Flavors.certain other assets.


(2) Current quarter and year to date charges consisted of asset impairmentswere related to the reconfiguration of the Company’s Peoria, Illinois ethanol complex in the Corn processing segment and several individually insignificant asset impairments and restructuring charges. Prior quarter and YTDrestructuring. Current year-to-date charges primarily related to impairment of certain long-lived assets, restructuring, and a legal settlement. Prior quarter and year-to-date charges related to the impairment of certain long-lived assets, restructuring, charges.and a settlement.


(3) Hedge timing effects relate to hedge ineffectiveness associated with documented hedge programs.

Note 15.     Asset Impairment, Exit, and Restructuring Costs


Asset impairment, exit, and restructuring costs in the quarterthree months ended September 30, 20172021 consisted of $107 million included $63 million of asset impairments principally in the Corn Processing segment related to the reconfiguration of the Peoria, Illinois ethanol complex due to the Company’s decision to focus on the more profitable high grade industrial and beverage alcohol as well as export fuel. The impaired assets were determined to have no alternative use with zero net salvage value. Other costs in the current quarter included $44$2 million of restructuring charges, related to the reduction of certain positionspresented as specified items within the Company’s global workforce.segment operating profit. Asset impairment, exit, and restructuring costs in the nine months ended September 30, 2017 of $140 million2021 consisted of $63$54 million of asset impairments in the Corn processing segment primarily related to the reconfigurationcertain long-lived assets and $26 million of the Company’s Peoria, Illinois ethanol complex, $47restructuring charges, presented as specified items within segment operating profit, and $4 million of restructuring charges in Corporate primarily related to the reductionCorporate.

Long-lived assets held for sale with a net book value of certain positions within the Company’s global workforce, and $30 million$0.1 billion were not considered impaired as of several individually insignificant asset impairments and restructuring charges.September 30, 2021.


Asset impairment, exit, and restructuring costs in the quarterthree months ended September 30, 20162020 consisted of $6 million of other-than-temporary impairment charges on available for sale equity security investments in Corporate and $5 million of several individually insignificant long-lived asset impairments of $3 million and restructuring charges.charges of $1 million. Asset impairment, exit, and restructuring costs in the nine months ended September 30, 20162020 consisted of $17$50 million of software impairmentimpairments related to certain intangible and other-than-temporary impairment charges on available for sale equity security investments in Corporate, $5other long-lived assets and $11 million of asset impairments in the Corn Processing segment, and $14 million of other individually insignificant asset impairments and restructuring charges.


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 16.     Sale of Accounts Receivable


Since March 2012, theThe Company has had an accounts receivable securitization program (the “Program”“First Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “Purchasers”“First Purchasers”).  Under the First Program, certain U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Receivables, LLC (“ADM Receivables”). Prior to October 1, 2020, ADM Receivables in turn transferstransferred such purchased accounts receivable in their entirety to the First Purchasers pursuant to a receivables purchase agreement.  In exchange for the transfer of the accounts receivable, ADM Receivables receivesreceived a cash payment of up to $1.2 billiona certain amount and an additional amount upon the collection of the accounts receivable (deferred consideration). On October 1, 2020, the Company restructured the First Program from a deferred purchase price to a pledge structure. Under the new structure, ADM Receivables transfers certain of the purchased accounts receivable to each of the First Purchasers together with a security interest in all of its right, title, and interest in the remaining purchased accounts receivable. In exchange, ADM Receivables receives a cash payment of up to $1.5 billion, an increase from $1.2 billion as of December 31, 2020, for the accounts receivable transferred. The First Program terminates on June 22, 2018,May 18, 2022, unless extended.

In March 2014, the
35
Archer-Daniels-Midland Company entered into a second

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 16.     Sale of Accounts Receivable (Continued)
The Company also has an accounts receivable securitization program (the “Second Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “Second Purchasers”). Under the Second Program, certain non-U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Ireland Receivables Company (“ADM(ADM Ireland Receivables”)Receivables). Prior to April 1, 2020, ADM Ireland Receivables in turn transferstransferred such purchased accounts receivable in their entirety to the Second Purchasers pursuant to a receivables purchase agreement. In exchange for the transfer of the accounts receivable, ADM Ireland Receivables receivesreceived a cash payment of up to $0.5 billion, as amended,a certain amount and an additional amount upon the collection of the accounts receivable (deferred consideration). On April 1, 2020, the Company restructured the Second Program from a deferred purchase price to a pledge structure. Under the new structure, ADM Ireland Receivables transfers certain of the purchased accounts receivable to each of the Second Purchasers together with a security interest in all of its right, title, and interest in the remaining purchased accounts receivable. In exchange, ADM Ireland Receivables receives a cash payment of up to $0.6 billion (€0.5 billion) for the accounts receivables transferred. The Second Program terminates on March 16, 2018,February 14, 2022, unless extended.


Under the ProgramFirst and Second ProgramPrograms (collectively, the “Programs”), ADM Receivables and ADM Ireland Receivables use the cash proceeds from the transfer of receivables to the First Purchasers and Second Purchasers (collectively, the “Purchasers”) and other consideration, as applicable, to finance the purchase of receivables from the Company and the ADM subsidiaries originating the receivables.

The Company accounts for these transfers as sales. The Company has no retained interests in the transferred receivables, other than collection and administrative responsibilities and its right to the deferred consideration.responsibilities. At September 30, 20172021 and December 31, 2016,2020, the Company did not record a servicing asset or liability related to its retained responsibility, based on its assessment of the servicing fee, market values for similar transactions, and its insignificant cost of servicing the receivables sold.


As of September 30, 20172021 and December 31, 2016,2020, the fair value of trade receivables transferred to the Purchasers and Second Purchasers under the Programs and derecognized from the Company’s consolidated balance sheetsheets was $1.8$1.5 billion and $1.6 billion, respectively. In exchangeTotal receivables sold were $36.7 billion and $24.9 billion for the transfer as of nine months ended September 30, 20172021 and December 31, 2016, the Company received cash of $1.4 billion and $1.0 billion and recorded a receivable for deferred consideration included in other current assets of $399 million and $540 million,2020, respectively. Cash collections from customers on receivables sold were $24.3$34.2 billion and $24.4$24.2 billion for the nine months ended September 30, 20172021 and 2016,2020, respectively. Of thisthe amount $24.3in the nine months ended September 30, 2020, $6.7 billion and $23.9 billion pertain towere cash collections on the deferred receivables consideration reflected as cash inflows from investing activities for the nine months ended September 30, 20172020. As of September 30, 2021 and 2016, respectively. Deferred consideration is paidDecember 31, 2020, receivables pledged as collateral to the Company in cash on behalf ofPurchasers were $1.1 billion and $0.4 billion, respectively.

Under the Purchasers as receivables are collected; however, as this is a revolving facility, cash collected fromPrograms’ previous structure, the Company’s customers is reinvested by the Purchasers daily in new receivable purchases under the Program.

The Company’s risk of loss following the transfer of accounts receivable under the Program iswas limited to the deferred receivables consideration outstanding. The Company carriescarried the deferred receivables consideration at fair value determined by calculating the expected amount of cash to be received and iswas principally based on observable inputs (a Level 2 measurement under the applicable accounting standards) consisting mainly of the face amount of the receivables adjusted for anticipated credit losses and discounted at the appropriate market rate. Payment of deferred receivables consideration iswas not subject to significant risks other than delinquencies and credit losses on accounts receivable transferred under the Programs which havehad historically been insignificant.


Transfers of receivables under the Programs resulted in an expense for the loss on sale of $2 million duringand $8 million for the three months ended September 30, 2017 and 2016, and $7 million and $4 million for the nine months ended September 30, 20172021, respectively, and 2016,$2 million and $7 million for the three and nine months ended September 30, 2020, respectively, which is classified as selling, general, and administrative expenses in the consolidated statements of earnings.

TheIn accordance with the amended guidance of Topic 230, the Company reflects allreflected cash flows related to the Programsdeferred receivables consideration as operatinginvesting activities in its consolidated statementstatements of cash flows. All other cash flows for the nine months ended September 30, 2017 and 2016are classified as operating activities because the cash received from the Purchasers and Second Purchasers upon both the sale and collection of the receivables is not subject to significantly different riskssignificant interest rate risk given the short-term nature of the Company’s trade receivables.









36

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 17.     Subsequent Events

In October 2021, the Company executed acquisition and investment agreements with a total aggregate consideration of approximately $0.7 billion. In addition, the Company executed an agreement to sell its ethanol production complex in Peoria, Illinois with a book value of approximately $0.1 billion, which will have an immaterial impact on operating results. These transactions are expected to close before December 31, 2021, subject to the satisfaction of customary closing conditions and regulatory approval.

37



ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Overview


This MD&A should be read in conjunction with the accompanying unaudited consolidated financial statements.


The CompanyADM is principally engageda global leader in procuring, transporting, storing,human and animal nutrition and one of the world’s premier agricultural origination and processing companies. It is one of the world’s leading producers of ingredients for human and merchandising agricultural commoditiesanimal nutrition, and products.other products made from nature. The Company uses its significant global asset base to originate and transport agricultural commodities, connecting to markets in 163200 countries.  The Company also processes corn, oilseeds, and wheat into products for food, animal feed, chemical and energy uses.  The Company also engages in the manufacturing, sale, and distribution of specialty products including natural flavor ingredients, flavor systems, natural colors, proteins, emulsifiers, soluble fiber, polyols, hydrocolloids, natural health and nutrition products, and other specialty food and feed ingredients. The Company uses its global asset network, business acumen, and its relationships with suppliers and customers to efficiently connect the harvest to the home thereby generating returns for itsour shareholders, principally from margins earned on these activities.


The Company’s operations are organized, managed, and classified into fourthree reportable business segments: AgriculturalAg Services Corn Processing,and Oilseeds, Processing,Carbohydrate Solutions, and Wild Flavors and Specialty Ingredients.Nutrition. Each of these segments is organized based upon the nature of products and services offered. The Company’s remaining operations are not reportable business segments, as defined by the applicable accounting standard, and are classified as Other. SeeOther Business. Financial information with respect to the Company’s reportable business segments is set forth in Note 14 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information about the Company’s business segments..


The Company’s recent significant portfolio actions and announcements include:


•the announcement in March 2021 of a new ADM policy to protect forests, biodiversity and communities, furthering the Company’s commitment to sustainable, ethical, and responsible production;
•the announcement in April 2021 of the resumption of dry mill ethanol production;
•the acquisition in February 2017April 2021 of Crosswind Industries, Inc., an industry leaderGolden Farm Production & Commerce Company Limited;
•the announcement in May 2021 of ADM’s participation as a signatory to the German Charter for Diversity in the manufactureWorkplace which aims to advance the recognition and inclusion of contractdiversity in companies;
•the announcement in May 2021 of a plan to build a dedicated soybean crushing plant and refinery in North Dakota to meet fast-growing demand from food, feed, industrial and biofuel customers, including producers of renewable diesel, which is expected to be open in 2023;
•the announcement in June 2021 of ADM Ventures, the corporate venture capital arm of ADM, joining the Genesis Consortium, a global alliance of venture capital firms and corporations dedicated to supporting startups that leverage biology to promote human and planetary health;
•the announcement in July 2021 of an agreement to purchase, subject to regulatory approvals, Sojaprotein for $0.4 billion, a leading European provider of non-GMO soy ingredients;
•the announcement in August 2021 of an agreement to form a joint venture with Marathon Petroleum Corp. for the production of soybean oil to supply rapidly growing demand for renewable diesel fuel;
•the acquisition in September 2021 of a 75% majority stake in P4, premier providers of private label pet treats and foods, as well as specialty ingredients;supplements;
•the acquisitionannouncement in February 2017September 2021 of a memorandum of understanding with LG Chem, a leading global diversified chemical company, to explore US-based production of lactic acid to meet growing demand for a wide variety of plant-based products, including bioplastics, through the creation of two joint ventures;
•the unveiling in September 2021 of a state-of-the-art, fully automated flavor production facility situated in Pinghu, Zhejiang Province, China;
•the announcement in October 2021 of an 89% controlling interest in Biopolis SL,agreement with Qingdao Vland Biotech Group Co., Ltd., a leading providerproducer of microbial technology withenzymes and probiotics, to form a strong portfoliojoint venture, subject to regulatory approval, to manufacture and sell human probiotics to serve growing Chinese demand;
•the announcement in October 2021 of novel food ingredients;
the construction of a new feed-premix facility in Xiangtan, China, which is expectedan agreement to be completed in 2019;
the sale in May 2017 of the Company's crop risk services business to Validus Holdings, a global group of insurance and reinsurance companies;
the completion in May 2017 of a series of major enhancements atsell the Company’s export terminalethanol production complex in Santos,Peoria, Illinois to BioUrja Group;
•the announcement in the Brazilian stateOctober 2021 of Sao Paulo;
the construction ofan equity investment in Acies Bio, a new flour mill in Mendota, Illinois, which is expected to be completed in 2019;
the expansion of a Golden Peanut and Tree Nuts production facility in Blakely, Georgia, which is expected to be completed in 2018;
the completion of a new silo located on the Danube River in Silistra, Bulgaria;
the acquisition in June 2017 of Chamtor, a French producer of wheat-based sweeteners and starches;
the acquisition in July 2017 of a 51% controlling interest in Industries Centers, an IsraeliSlovenia-based biotechnology company specializing in research and development and manufacturing services for developing and scaling synthetic biology and precision fermentation technologies for food, agriculture, and industrial applications; and
38


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
•the importannouncement in October 2021 of a memorandum of understanding with Gevo, Inc., a pioneer in transforming renewable energy into low carbon, energy-dense liquid hydrocarbons, to support the production of up to 500 million gallons of sustainable aviation fuel and distribution of agricultural feed products, which will now be known as ADM Israel; andother low carbon-footprint hydrocarbon fuels.
the modernization of the flour mill in Enid, Oklahoma, which is expected to be completed in 2018.

As part of the implementationThe next phase of the Company’s strategic plan,transformation is focused on two strategic pillars: Productivity and Innovation.

The Productivity pillar includes (1) advancing the roles of the Company’s Centers of Excellence in procurement, supply chain, and operations to deliver additional efficiencies across the enterprise; (2) continued roll out of the 1ADM business transformation program and implementation of improved standardized business processes; and (3) increased use of technology, analytics, and automation at production facilities, in offices, and with customers.

Innovation activities include expansions and investments in (1) improving the customer experience, including leveraging producer relationships and enhancing the use of state-of-the-art digital technology to help customers grow; (2) sustainability-driven innovation, which encompasses the full range of products, solutions, capabilities, and commitments to serve customers’ needs; and (3) growth initiatives, including organic growth to support additional capacity and meet growing demand, and mergers and acquisitions opportunities.

ADM will support both pillars with investments in technology, which include expanding digital capabilities and investing further in product research and development. All of these efforts will continue to be strengthened by the Company’s ongoing commitment to Readiness.

Environmental and Social Responsibility

The Company’s new policy to protect forests, biodiversity, and communities includes provisions that promote conservation of water resources and biodiversity in agricultural landscapes, promote solutions to reduce climate change and greenhouse gas emissions, and support agriculture as a means to advance sustainable development by reducing poverty and increasing food security. Additionally, the policy confirms ADM’s commitment to protect human rights defenders, whistleblowers, complainants, and community spokespersons; ADM’s aspiration to cooperate with all parties necessary to enable access to fair and just remediation; and the Company’s non-compliance protocol for suppliers. By the end of 2022, the Company continuesexpects to evaluate the capital intensityachieve full traceability of its operationsdirect and portfolio, seeking waysindirect sourcing throughout its soy supply chains in Brazil, Paraguay, and Argentina. ADM aims to eliminate deforestation from all of the Company’s supply chains by 2030.

In 2020, ADM announced new environmental goals, collectively called “Strive 35” – an ambitious plan to, by 2035, reduce absolute greenhouse gas emissions by 25 percent, reduce energy intensity by 15 percent, reduce water intensity by 10 percent, and achieve a 90 percent landfill diversion rate, as part of an aggressive plan to continue to reduce and redeploy capital in its efforts to drive long-term returns.the Company’s environmental footprint.


Operating Performance Indicators


The Company is exposed to certain risks inherent to an agricultural-based commodity business. These risks are further described in Item 1A, “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2020.


The Company’s agricultural servicesAg Services and oilseeds processingOilseeds operations are principally agricultural commodity-based businesses where changes in
selling prices move in relationship to changes in prices of the commodity-based agricultural raw materials. Therefore,As a result, changes in agricultural commodity prices have relatively equal impacts on both revenues and cost of products sold. Thus,Therefore, changes in revenues of these businesses do not necessarily correspond to the changes in margins or gross profit. Thus, gross margins per volume or metric ton are more meaningful than gross margins as percentage of revenues.


The Company’s corn processingCarbohydrate Solutions operations and Wild Flavors and Specialty IngredientsNutrition businesses also utilize agricultural commodities (or products derived from agricultural commodities) as raw materials. However, in these operations, agricultural commodity market price changes do not necessarily equalcorrelate to changes in cost of products sold. Thus,Therefore, changes in revenues of these businesses may correspond to changes in margins or gross profit. Thus, gross margin rates are more meaningful as a performance indicator in these businesses.





39


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company has consolidated subsidiaries in 76more than 70 countries. For the majority of the Company’s subsidiaries located outside the United States, the local currency is the functional currency except certain significant subsidiaries in Switzerland where Euro is the functional currency, and Brazil and Argentina where U.S. dollar is the functional currency. Revenues and expenses denominated in foreign currencies are translated into U.S. dollars at the weighted average exchange rates for the applicable periods. For the majority of the Company’s business activities in Brazil and Argentina, the functional currency is the U.S. dollar; however, certain transactions, including taxes, occur in local currency and require conversionremeasurement to the functional currency. Changes in revenues are expected to be correlated to changes in expenses reported by the Company caused by fluctuations in the exchange rates of foreign currencies, primarily the Euro, British pound, Canadian dollar, and Brazilian real, as compared to the U.S. dollar.


The Company measures its performance using key financial metrics including net earnings, gross margins, segment operating profit, return on invested capital, EBITDA, economic value added, manufacturing expenses, and selling, general, and administrative expenses. The Company’s financial results can vary significantly due to changes in factors such as fluctuations in energy prices, weather conditions, crop plantings, government programs and policies, trade policies, changes in global demand, general global economic conditions, changes in standards of living, and global production of similar and competitive crops. Due to these unpredictable factors, the Company undertakes no responsibility for updating any forward-looking information contained within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


Market Factors Influencing Operations or Results in the Three Months Ended September 30, 20172021


As an agricultural commodity-based business, theThe Company is subject to a variety of market factors which affect the Company's operating results. AgriculturalIn Ag Services and Oilseeds, North America origination was impacted by weak U.S. grainwidening elevation margins and Hurricane Ida impacting export competitiveness. Overallexecution. South American origination volumes were negatively impacted by low market prices and price volatility continuedfarmer selling activity. Ocean freight rates remain high due to a surplus of grains and oilseeds in theincreased global market. In Corn Processing, demand and prices for sweeteners and starches remained solid in North America while co-product prices were stable. Ethanol continues to face a challenging environment. Although ethanol demand remained strong both in North America and export markets due to favorable gasoline blending economics and ethanol's continuing status as a competitive octane enhancer, U.S. industry ethanol production also remained at high levels, limiting margins. Global oilseeds processing volumes remained strong but competition from Argentine exports significantly decreasedsupply chain bottlenecks. Crushing margins especially in Europe. Slow selling by farmers in Brazil lowered volumes and pressured grain origination and soy crushing margins. While demand and margins for refined oil remained solid across all regions, the uncertainty surrounding the biodiesel tax credit has negatively impacted biodiesel margins. Wild Flavors and Specialty Ingredients benefited from strong demand and tight soybean and canola/rapeseed stocks. Refined oil margins were driven by strong demand, declining global oil stocks, and increased biofuels consumption. In Carbohydrate Solutions, margins in starches and sweeteners were negatively impacted by higher corn basis cost while demand remained steady. Ethanol demand and margins were negatively impacted early in the quarter due to the limited availability of affordable corn but improved when the North American corn harvest started. Increased corn prices drove ethanol industry production volumes lower causing stocks on hand to decline. Domestic ethanol demand remained steady in the quarter, but slightly below pre-pandemic levels. Nutrition benefited from overall strong demand in various product categories. In Human Nutrition, demand for flavor ingredients andflavors, flavor systems, but continuedspecialty proteins, bioactives, and fibers were strong. In Animal Nutrition, weak demand and higher input costs as a result of COVID-19 in South America were partially offset by the growing demand in complete food for petfood. Amino acids pricing and margins improved due to be adversely affected by start-up costs and margin pressure in certain non-flavor food ingredient markets.a tighter global supply environment.


Three Months Ended September 30, 20172021 Compared to Three Months Ended September 30, 20162020


Net earnings attributable to controlling interests was $192increased $301 million in the third quarter of 2017 comparedfrom $225 million to $341 million in the third quarter of 2016.$526 million. Segment operating profit was $485increased $96 million in the third quarter of 2017 comparedfrom $904 million to $645 million in the third quarter of 2016.$1.0 billion. Included in segment operating profit in the current quarter was a net charge of $56 million consisting of a net gain on sales of assets, impairment andwere restructuring charges and corn hedge timing effects.of $2 million. Included in segment operating profit in the prior year quarter was net income of $55 million consisting of gains related to the sale of a portion of the Company’s shares in Wilmar and certain other assets of $57 million, partially offset by asset impairment, restructuring, and settlement charges of $2 million. Adjusted segment operating profit increased $153 million to $1.0 billion due primarily to higher results in Crushing, Refined Products and Other, Vantage Corn Processors, and Human and Animal Nutrition, partially offset by lower results in Ag Services, Starches and Sweeteners, and Other Business, and lower equity earnings from the Wilmar investment. Corporate results were a net charge of $5$347 million consisting of a loss on sale of an investment, impairment and restructuring charges, and corn hedge timing effects. Adjusted segment operating profit decreased $109 million to $541 million due to the lack of competitiveness of U.S. grains in the global markets, compressed global crush margins, risk management losses, and start-up costs. Corporate results were a charge of $260 million thiscurrent quarter compared to $165a net charge of $704 million in last year’sthe prior year quarter. Corporate results thisin the current quarter included early debt retirement charges of $36 million, a mark-to-market gain of $7 million on the conversion option of the exchangeable bonds issued in August 2020, expenses related to an immaterialacquisition of $3 million, and a pension settlement charge from the effect of changing agricultural commodity prices on LIFO inventory valuation reserves, compared to a credit of $85 million$1 million. Corporate results in the thirdprior year quarter included early debt retirement charges of 2016.$396 million, a mark-to-market loss of $15 million on the conversion option of the exchangeable bonds issued in August 2020, and an impairment charge of $6 million.






40


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Income taxes decreased $106tax expense increased $146 million to $30 million due to lower earnings before income taxes and a lower effective tax rate.$120 million. The Company’s effective tax rate for the quarter ended September 30, 2017 decreased to 13.3%2021 was an expense of 18.4% compared to 28.3%a benefit of 13.0% for the quarter ended September 30, 2016, primarily due to2020. The low prior year quarter rate included the impacteffects of changesthe significant early debt retirement, the sale of a portion of the Company’s shares in discrete tax items, including the favorable resolution of an uncertain tax position related to a 2014 acquisitionWilmar, and return to provision in the current quarter, partially offset by changes in the forecasted geographicgeographical mix of pre-taxpretax earnings andon the expiration of U.S.2020 annual effective tax credits, including the biodiesel credit, at the end of 2016.rate in that period.




ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Analysis of Statements of Earnings


Processed volumes by product for the quarter are as follows (in metric tons):
Three Months Ended Three Months Ended
September 30,  September 30,
(In thousands)2017 2016 Change(In thousands)20212020Change
Oilseeds8,265
 8,388
 (123)Oilseeds8,509 8,970 (461)
Corn5,621
 5,794
 (173)Corn5,051 4,084 967 
Total13,886
 14,182
 (296) Total13,560 13,054 506 
The Company generally operates its production facilities, on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions. The overall decrease in oilseeds processed volumes is primarily related to scheduled downtime at multiple facilities in North America during the quarter. The overall increase in corn is primarily related to the reconfigurationidling of two dry mill facilities in the Company’s Peoria, Illinois ethanol complex.second quarter of 2020 in response to the challenging operating environment. The Company restarted these idled facilities in April 2021.


Revenues by segment for the quarter are as follows:
Three Months Ended
September 30,
 20212020Change
 (In millions)
Ag Services and Oilseeds
Ag Services$9,899 $7,352 $2,547 
Crushing2,842 2,317 525 
Refined Products and Other2,948 1,858 1,090 
Total Ag Services and Oilseeds15,689 11,527 4,162 
Carbohydrate Solutions   
Starches and Sweeteners1,972 1,574 398 
Vantage Corn Processors894 490 404 
Total Carbohydrate Solutions2,866 2,064 802 
Nutrition
Human Nutrition808 719 89 
Animal Nutrition889 732 157 
Total Nutrition1,697 1,451 246 
Other Business88 84 4 
Total$20,340 $15,126 $5,214 



41


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
 Three Months Ended  
 September 30,  
 2017 2016 Change
 (In millions)
Agricultural Services     
Merchandising and Handling$5,265
 $6,146
 $(881)
Milling and Other757
 754
 3
Transportation53
 60
 (7)
Total Agricultural Services6,075
 6,960
 (885)
      
Corn Processing 
  
  
Sweeteners and Starches1,087
 1,057
 30
Bioproducts1,238
 1,334
 (96)
Total Corn Processing2,325
 2,391
 (66)
      
Oilseeds Processing 
  
  
Crushing and Origination3,665
 3,660
 5
Refining, Packaging, Biodiesel, and Other2,025
 2,042
 (17)
Asia62
 73
 (11)
Total Oilseeds Processing5,752
 5,775
 (23)
      
Wild Flavors and Specialty Ingredients577
 611
 (34)
Total Wild Flavors and Specialty Ingredients577
 611
 (34)
      
Other - Financial98
 95
 3
Total Other98
 95
 3
Total$14,827
 $15,832
 $(1,005)







ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


Revenues and cost of products sold in a commodity merchandising and processing business are affected bysignificantly correlated to the underlying commodity prices and volumes. During periods of significant changes in commodity prices, the underlying performance of the Company is better evaluated by looking at margins sincebecause both revenues and cost of products sold, particularly in Oilseeds ProcessingAg Services and Agricultural Services,Oilseeds, generally have a relatively equal impact from commodity price changes which generally result in an insignificant impact to gross profit.


Revenues decreased $1.0increased $5.2 billion to $14.8$20.3 billion due to higher sales prices ($5.6 billion) partially offset by lower sales volumes ($0.9 billion) and lower average selling prices ($0.10.4 billion). The decrease inHigher sales prices of animal feeds, alcohol, biodiesel, meal, oils, corn, soybeans, and wheat, and higher volumes of wheat and cotton, were partially offset by lower sales volumes was due principallyof soybeans. Ag Services and Oilseeds revenues increased 36% to a decrease in volumes of unprocessed commodities, in particular volumes of soybeans, corn, and rapeseed. Agricultural Services revenues decreased 13% to $6.1$15.7 billion due to higher sales prices ($4.8 billion) partially offset by lower sales volumes ($0.8 billion) and lower average selling prices ($0.10.6 billion). Corn ProcessingCarbohydrate Solutions revenues decreased 3%increased 39% to $2.3$2.9 billion due to lowerhigher sales prices ($0.7 billion) and higher sales volumes ($0.1 billion). Oilseeds ProcessingNutrition revenues of $5.8increased 17% to $1.7 billion due to higher sales prices ($0.1 billion) and Wild Flavors and Specialty Ingredients revenues of $0.6 billion were in line with the prior year’s quarter.higher sales volumes ($0.1 billion).

Cost of products sold decreased $0.7increased $4.9 billion to $14.0$19.0 billion due principally to lower sales volumes. Included inhigher average commodity costs. Manufacturing expenses increased $0.2 billion to $1.6 billion due principally to higher energy costs, maintenance, operating supplies, storage and warehousing, and salaries and benefits.

Foreign currency translation increased revenues and cost of products sold during this quarter was an immaterial charge from the effect of changing agricultural commodity prices on LIFO inventory valuation reserves compared to a credit of $85 million in the prior year’s quarter. Manufacturing expenses of $1.3 billion in the current quarter was in line with the prior year’s quarter.by $0.2 billion.


Gross profit decreasedincreased $0.3 billion or 27%, to $0.8 billion. The decrease$1.3 billion due principally to higher results in gross profit consisted principally ofCrushing ($223 million), Refined Products and Other ($103 million), and Nutrition ($56 million), partially offset by lower results in merchandising and handlingAg Services ($7253 million), soybean and canola processingCarbohydrate Solutions ($6435 million) and biodieselOther ($51 million) in Oilseeds Processing, partially offset by higher results in sweeteners and starches ($187 million). These factors are explained in the segment operating profit discussion on page 38. Current period gross profit included an immaterial charge from the effect of changing agricultural commodity prices on LIFO inventory valuation reserves compared to a credit of $85 million during the same period last year.44.


Selling, general, and administrative expenses decreased $68increased $84 million to $478$720 million due principallyprimarily to prior period expenses related to a settled legal matterhigher salaries and lower pension expense in the current quarter.benefits and IT expenses.


Asset impairment, exit, and restructuring charges increased $96costs decreased $2 million to $107$2 million. Current period chargesCharges in the current quarter consisted of $63 million of asset impairments primarily related to the reconfiguration of the Company’s Peoria, Illinois ethanol complex in the Corn Processing segment and $44$2 million of restructuring charges, related topresented as specified items within segment operating profit. Charges in the reductionprior year quarter consisted of certain positions within the Company’s global workforce. Prior period charges included $6 million of other-than-temporary impairment charges on two available for sale equity security investments in Corporate and $5 million of several individually insignificant long-lived asset impairments of $3 million and restructuring charges.charges of $1 million.

Interest expense increased $1 million to $79 million due principally to higher interest rates on short-term debt and the issuance of the $1 billion fixed-rate notes in August 2016.


Equity in earnings of unconsolidated affiliates increased from a loss of $2decreased $50 million to income of $46$110 million due primarily due to lower earnings from the Company’s investments in Wilmar, Almidones Mexicanos S.A., Olenex Sarl, SoyVen, and Hungrana Ltd., partially offset by higher earnings from the Company’s investment in Wilmar resulting from the increased ownership stake in and higher results from Wilmar, partially offset by lower results from the Company’s equity investment in CIP.Stratas Foods LLC.


OtherInvestment income of $4$20 million was comparable to the prior period. Current period income

Interest expense decreased $39 million to $61 million due to lower interest rates and the favorable liability management actions taken in the prior year. Interest expense in the current quarter also included gainsa $7 million mark-to-market gain adjustment related to the conversion option of the exchangeable bonds issued in August 2020 compared to a $15 million mark-to-market loss adjustment in the prior year quarter.

Other expense - net decreased $262 million to $20 million. Expense in the current quarter included charges of $36 million related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025 and other expense, partially offset by gains on the sale of certain assets and disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, and foreign exchange gains. Expense in the prior year quarter included charges of $396 million related to multiple early debt redemptions, partially offset by a charge related to the early redemption of the Company’s $559$58 million notes due on March 15, 2018. Prior period income included foreign exchange gains and other income partially offset by a lossgain on the sale of an investment.a portion of the Company’s shares in Wilmar, gains on the sales of certain other assets, the non-service components of net pension benefit income, and other income.


42

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)



ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Segment operating profit (loss), adjusted segment operating profit (a non-GAAP measure), and earnings before income taxes for the quarter are as follows:


Three Months Ended
September 30,
Segment Operating Profit (Loss)20212020Change
(In millions)
Ag Services and Oilseeds
Ag Services$36 $147 $(111)
Crushing280 66 214 
Refined Products and Other236 127 109 
Wilmar66 96 (30)
Total Ag Services and Oilseeds618 436 182 
Carbohydrate Solutions   
Starches and Sweeteners178 257 (79)
Vantage Corn Processors35 (11)46 
Total Carbohydrate Solutions213 246 (33)
Nutrition
Human Nutrition139 128 11 
Animal Nutrition37 19 18 
Total Nutrition176 147 29 
Other Business(5)20 (25)
Specified Items:
Gains (losses) on sales of assets and businesses— 57 (57)
Asset impairment and restructuring charges(2)(2)— 
Total Specified Items(2)55 (57)
Total Segment Operating Profit$1,000 $904 $96 
Adjusted Segment Operating Profit(1)
$1,002 $849 $153 
Segment Operating Profit$1,000 $904 $96 
Corporate(347)(704)357 
Earnings Before Income Taxes$653 $200 $453 
 Three Months Ended  
 September 30,  
Segment Operating Profit2017 2016 Change
 (In millions)
Agricultural Services     
Merchandising and Handling$20
 $92
 $(72)
Milling and Other53
 60
 (7)
Transportation14
 43
 (29)
Total Agricultural Services87
 195
 (108)
      
Corn Processing 
  
  
Sweeteners and Starches202
 176
 26
Bioproducts51
 38
 13
Total Corn Processing253
 214
 39
      
Oilseeds Processing 
  
  
Crushing and Origination39
 76
 (37)
Refining, Packaging, Biodiesel, and Other66
 119
 (53)
Asia14
 (50) 64
Total Oilseeds Processing119
 145
 (26)
      
Wild Flavors and Specialty Ingredients61
 73
 (12)
Total Wild Flavors and Specialty Ingredients61
 73
 (12)
      
Other - Financial21
 23
 (2)
Total Other21
 23
 (2)
      
Specified Items:     
Gains (losses) on sales of assets and businesses12
 (4) 16
Impairment and restructuring charges(63) (4) (59)
Hedge timing effects(5) 3
 (8)
Total Specified Items(56) (5) (51)
      
Total Segment Operating Profit$485
 $645
 $(160)
      
Adjusted Segment Operating Profit(1)
$541
 $650
 $(109)
      
Segment Operating Profit$485
 $645
 $(160)
Corporate(260) (165) (95)
Earnings Before Income Taxes$225
 $480
 $(255)


(1) Adjusted segment operating profit is segment operating profit excluding the above specified items.









43


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
AgriculturalAg Services and Oilseeds operating profit increased 42%. Ag Services executed well in a challenging environment, including a rapid return to operation after Hurricane Ida. Overall results were significantly lower versus the prior-year quarter driven by net negative timing effects that should reverse in coming quarters and a $54 million insurance settlement recorded in the prior-year quarter and lower export volumes caused by Hurricane Ida. Global trade continued its strong performance. Crushing had substantially higher year-over-year results. The business executed well, delivering stronger margins in a dynamic environment that included strong demand for vegetable oil to support existing food customers as well as increasing production of renewable diesel. Results were also driven by net positive timing effects in the current quarter. Refined Products and Other results were significantly higher than the prior-year period, driven by positive timing effects that are expected to reverse in future quarters, along with strong execution in Europe, Middle East, and Africa (EMEA) and North American biodiesel and strong refining premiums due to demand for renewable diesel and foodservice recovery in North America. Equity earnings from Wilmar were lower versus the third quarter of 2020.

Carbohydrate Solutions operating profit decreased 55%13%. MerchandisingStarches and Handling operatingSweeteners, including ethanol production from the wet mills, managed through dynamic market conditions, optimizing mix between sweeteners and ethanol production through the quarter. Year-over-year results decreasedwere significantly lower primarily due to higher input costs. Vantage Corn Processors results were much higher versus the lackthird quarter of competitiveness2020, supported by the resumption of U.S. grainsproduction at the two dry mills and improved fuel ethanol margins, particularly late in the global markets resultingquarter.

Nutrition operating profit increased 20%. Human Nutrition results were higher than the prior-year quarter. Higher volume and improved product mix, with particular strength in a significant decreasebeverage, drove support strong flavor results in marginsEMEA and lower U.S. grain export volumes. Global Trade generated good results from international origination and destination marketing businessesNorth America, partially offset by some hedge position losses. Milling and Otherlower results declined due to decreased volumes, mainly in the U.S., while maintaining steady product margins. Transportation results decreased primarily due to low U.S. grain exports and a slower start to harvest in North America resulting in lower barge freight volumes and margins.

Corn Processing operating profit increased 18%Asia Pacific (APAC). Sweeteners and Starches operating profit increased due to strong margins in North America while international operationsSpecialty ingredients continued to provide solid contributions to overall results. Bioproductsbenefit from strong demand for alternative proteins, offset by some higher costs. Health and wellness results increased with better ethanol margins.were higher on robust sales growth in bioactives and fiber. Animal Nutrition results were higher year-over-year, driven primarily by strength in amino acids as well as feed additives and ingredients, partially offset by higher costs in Latin America and slower demand recovery in APAC.


Oilseeds ProcessingOther Business operating profit decreased 18%. Crushing and Origination operating profit decreased due to compressed global crush margins amid ample meal supplies, weak canola margins due in part to higher seed costs, increased competition from Argentine meal exports, and weak South America origination margins resulting from continued low commodity prices that reduced the pace125% driven primarily by captive insurance underwriting losses, most of farmer selling forcing higher basis costs. Refining, Packaging, Biodiesel, and Other operating profit declined due to the uncertainty surrounding the biodiesel tax credit that has negatively impacted biodiesel margins. Asia results increased on higher earnings from the Company’s investment in Wilmar due to the increased ownership stake in and higher results from Wilmar.

Wild Flavors and Specialty Ingredients operating profit decreased 16%. Weaker results in specialty ingredients, due in part to operational start-up costs,which were partially offset by the continuing strong demand for flavor ingredients and flavor systemscorresponding recoveries in Africa and Asia.other business segments.

Other - Financial operating profit decreased 9% primarily due to lower results from the captive insurance operations.


Corporate results for the quarter are as follows:

Three Months Ended
September 30,
 20212020Change
 (In millions)
Interest expense-net$(66)$(83)$17 
Unallocated corporate costs(231)(196)(35)
Expenses related to acquisitions(3)— (3)
Debt extinguishment charges(36)(396)360 
Gain (loss) on debt conversion option7 (15)22 
Asset impairment, restructuring, and settlement charges(1)(6)5 
Other income (charges)(17)(8)(9)
Total Corporate$(347)$(704)$357 











44


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
 Three Months Ended  
 September 30,  
 2017 2016 Change
 (In millions)
LIFO credit (charge)$—
 $85
 $(85)
Interest expense - net(72) (74) 2
Unallocated corporate costs(109) (106) (3)
Other charges(55) (74) 19
Minority interest and other(24) 4
 (28)
Total Corporate$(260) $(165) $(95)


Corporate results were a net charge of $260 million this quarter compared to $165$347 million in last year’s quarter. The effect of changing agricultural commodity prices on LIFO inventory valuation reserves resulted in an immaterial charge thisthe current quarter compared to a creditnet charge of $85$704 million in the prior year quarter. OtherInterest expense-net decreased $17 million due to lower interest rates and the favorable liability management actions taken in the prior year. Unallocated corporate costs increased $35 million due primarily to higher IT operating and project-related costs and the continued cost centralization in procurement, supply chain, and operations. Acquisition expenses were related to the P4 acquisition. Debt extinguishment charges in the current period included a chargequarter were related to the early redemption of the Company’s $559$500 million aggregate principal amount of 2.750% notes due in March 2025. Debt extinguishment charges in the prior year quarter were related to multiple early debt redemptions. Gain (loss) on March 15, 2018 and restructuring chargesdebt conversion option was related to the reductionmark-to-market adjustment of certain positions within the Company’s global workforce.conversion option of the exchangeable bonds issued in August 2020. Other charges in the current quarter included railroad repairs and maintenance expenses of $31 million, partially offset by an investment revaluation gain of $9 million, the non-service components of net pension benefit income of $1 million, and other income. Other charges in the prior periodyear quarter included legal settlement costs and legal fees, other-than-temporary impairment charges on available for sale equity security investments, a loss on the salerailroad maintenance expenses of $28 million, partially offset by an investment and restructuring charges. Minority interestrevaluation gain of $4 million, the non-service components of net pension benefit income of $7 million, and other expense increased $28 million due principally to lower results from the Company’s equity investment in CIP.income.




ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Non-GAAP Financial Measures


The Company uses adjusted earnings per share (EPS), adjusted earnings before taxes, interest, andtaxes, depreciation, and amortization (EBITDA), and adjusted segment operating profit, non-GAAP financial measures as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. These performance measures are not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.


Adjusted EPS is defined as diluted EPS adjusted for the effects on reported diluted EPS of certain specified items. Adjusted EBITDA is defined as earnings before taxes, interest, andtaxes, 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. Adjusted segment operating profit is segment operating profit adjusted, where applicable, for specified items.


Management believes that adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are useful measures of the Company’s performance because they provide investors additional information about the Company’s operations allowing better evaluation of underlying business performance and better period-to-period comparability. Adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are not intended to replace or be an alternative to diluted EPS, earnings before income taxes, and segment operating profit, respectively, the most directly comparable amounts reported under GAAP.
























45


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The table below provides a reconciliation of diluted EPS to adjusted EPS for the three months ended September 30, 20172021 and 2016.2020.
Three months ended September 30,
20212020
In millionsPer shareIn millionsPer share
Average number of shares outstanding - diluted566 562 
Net earnings and reported EPS (fully diluted)$526 $0.93 $225 $0.40 
Adjustments:
(Gains) losses on sales of assets and businesses - net of tax of $3 million in 2020 (1)
— — (54)(0.10)
Debt extinguishment charges - net of tax of $9 million in 2021 and $96 million in 2020 (1)
27 0.05 300 0.53 
(Gain) loss on debt conversion option - net of tax of $0 (1)
(7)(0.01)15 0.03 
Asset impairment, restructuring, and settlement charges - net of tax of $0 million in 2021 and $3 million in 2020 (1)
3 0.01 5 0.01 
Expenses related to acquisitions - net of tax of $1 million in 20212 — — — 
Certain discrete tax adjustments(3)(0.01)8 0.02 
Total adjustments22 0.04 274 0.49 
Adjusted net earnings and adjusted EPS$548 $0.97 $499 $0.89 
 Three months ended September 30,
 2017 2016
 In millions Per share In millions Per share
Average number of shares outstanding - diluted569
   589
  
        
Net earnings and reported EPS (fully diluted)$192
 $0.34
 $341
 $0.58
Adjustments:       
LIFO charge (credit) - net of tax of $32 million(1)
—
 —
 (53) (0.09)
(Gains) losses on sales of assets and businesses - net of tax of $2 million in 2017 and at 0% in 2016 (2)
(10) (0.02) 9
 0.02
Asset impairment, restructuring, and settlement charges - net of tax of $38 million in 2017 and $25 million in 2016 (2)
69
 0.12
 48
 0.08
Loss on debt extinguishment - net of tax of $4 million(1)
7
 0.01
 —
 —
Total adjustments66
 0.11
 4
 0.01
Adjusted net earnings and adjusted EPS$258
 $0.45
 $345
 $0.59

(1)Tax effected using the Company’s U.S. tax rate.
(2) Tax effected using the U.S. and other applicable tax rates.
















ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the three months ended September 30, 20172021 and 2016.2020.
Three months ended
September 30,
(In millions)20212020Change
Earnings before income taxes$653 $200 $453 
Interest expense61 100 (39)
Depreciation and amortization247 238 9 
(Gains) losses on sales of assets and businesses— (57)57 
Debt extinguishment charges36 396 (360)
Expenses related to acquisitions3 — 3 
Railroad maintenance expenses31 28 3 
Asset impairment, restructuring, and settlement charges3 8 (5)
Adjusted EBITDA$1,034 $913 $121 
Three months ended
September 30,
(In millions)20212020Change
Ag Services and Oilseeds$711 $527 $184 
Carbohydrate Solutions297 323 (26)
Nutrition230 201 29 
Other Business(3)21 (24)
Corporate(201)(159)(42)
Adjusted EBITDA$1,034 $913 $121 

46
 Three months ended September 30,  
(In millions)2017 2016 Change
Earnings before income taxes$225
 $480
 $(255)
Interest expense79
 78
 1
Depreciation and amortization232
 225
 7
LIFO—
 (85) 85
(Gains) losses on sales of assets and businesses(12) 9
 (21)
Loss on debt extinguishment11
 —
 11
Asset impairment, restructuring, and settlement charges107
 73
 34
Adjusted EBITDA$642
 $780
 $(138)
      
 Three months ended September 30,  
(In millions)2017 2016 Change
Agricultural Services$138
 $245
 $(107)
Corn Processing338
 306
 32
Oilseeds Processing171
 194 (23)
Wild Flavors and Specialty Ingredients85
 95
 (10)
Other - Financial26
 26
 —
Corporate(116) (86) (30)
Adjusted EBITDA$642
 $780
 $(138)





ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Market Factors Influencing Operations or Results in the Nine Months Ended September 30, 20172021


As an agricultural commodity-based business, theThe Company is subject to a variety of market factors which affect the Company's operating results. In AgriculturalAg Services U.S.and Oilseeds, North American origination volumes benefited from strong export competitiveness was strong during the first half ofdemand early in the year but weakened duringwhile South American origination volumes were impacted by the third quarter. Overalldelayed harvest and low market volatility continued due to surplus in the global market. In Corn Processing, demand and prices for sweeteners and starches remained solid in North America while co-product prices were stable. Ethanol continues to face a challenging environment. Although ethanol demand remained strong both in North America and export markets due to favorable gasoline blending economics and ethanol's continuing status as a competitive octane enhancer, U.S. industry ethanol production also remained at high levels limiting margins. Global oilseeds processing volumes remained strong, although slower meal demand growth pressuredfarmer selling activity. Crushing margins due to meal exports from Argentina and ample supply of competing proteins. Slow selling by farmers in Brazil continues to depress grain origination margins despite strong export volumes. While demand and margins for refined oil remained solid across all regions, the uncertainty surrounding the biodiesel tax credit has negatively impacted biodiesel margins. Wild Flavors and Specialty Ingredients benefited from strong demand and tight soybean and canola/rapeseed stocks. Demand for flavor ingredientsrefined oils was strong, driven by the regional lifting of COVID-19 restrictions in the U.S. and flavor systems, butdemand for renewable green diesel. In Carbohydrate Solutions, margins in starches and sweeteners were solid despite softer sweetener demand early in the year due to continued COVID-19 restrictions. Starch demand continued to be adversely affectedrobust. Co-product prices were strong. Ethanol demand remained steady as COVID-19 restrictions were lifted regionally. Ethanol margins were volatile initially supported by start-upimproving domestic demand, then challenged in the summer months prior to harvest due to limited availability of corn. Nutrition benefited from overall strong demand in various product categories. In Human Nutrition, demand for flavors, flavor systems, specialty proteins, bioactives, and fibers were strong. In Animal Nutrition, weak demand and higher input costs as a result of COVID-19 in South America were partially offset by the growing demand in complete food for petfood. Amino acids pricing and margin pressure in certain non-flavor food ingredient markets.margins improved due to a tighter global supply environment.


Nine Months Ended September 30, 20172021 Compared to Nine Months Ended September 30, 20162020


Net earnings attributable to controlling interests decreased $48 millionincreased $0.8 billion to $807 million.$1.9 billion. Segment operating profit was $1.8increased $0.9 billion in the current period compared to $1.9 billion in the prior period.$3.3 billion. Included in segment operating profit in the current period was a net charge of $74$111 million consisting of a net gain on sales of assets and businesses,asset impairment, restructuring, and settlement charges and corn hedge timing effects.of $133 million, partially offset by gains on the sale of certain assets of $22 million. Included in segment operating profit in the prior period was net income of $102$20 million consisting of gains on the sale of a net gain on salesportion of the Company’s shares in Wilmar and certain other assets of $80 million, partially offset by asset impairment, restructuring, and businesses/revaluation, impairment and restructuringsettlement charges and corn hedge timing effects.of $60 million. Adjusted segment operating profit increased $0.1$1.1 billion to $1.9$3.4 billion due primarily to solidhigher results in Corn Processing,Crushing, Refined Products and Other, Carbohydrate Solutions, and Human and Animal Nutrition, partially offset by weaker South American origination margins, lower soybean crush margins, and weaker results in some specialty ingredients.Ag Services and Other Business, and lower equity earnings from the Wilmar investment. Corporate results were a net charge of $737 million for$0.9 billion in the nine monthscurrent period compared to $705 million$1.2 billion in the same period last year.prior period. Corporate results forin the nine monthscurrent period included a pension settlement charge of $83 million, early debt retirement charges of $36 million, a mark-to-market gain of $17 million on the conversion option of the exchangeable bonds issued in August 2020, expenses related to an acquisition of $3 million, and a restructuring charge of $4 million. Corporate results in the prior period included a credit of $4$91 million from the effectelimination of increasing agricultural commodity pricesthe LIFO reserve in connection with the accounting change effective January 1, 2020 and early debt retirement charges of $410 million, a mark-to-market loss of $15 million on LIFO inventory valuation reserves, compared to athe conversion option of the exchangeable bonds issued in August 2020, and an impairment charge of $17 million the same period last year.$5 million.


Income taxes decreased $75of $364 million due to lower earnings before income taxes and a lower effective tax rate.increased $326 million. The Company’s effective tax rate for the nine months ended September 30, 2017 decreased to 24.0%2021 was 15.8% compared to 27.7%3.4% for the nine months ended September 30, 2016, primarily2020. The favorable 2020 tax rate was due to the impact of changesU.S. tax credits signed into law in December 2019, including a $73 million discrete tax items, including the favorable resolution of an uncertain tax positionbenefit related to a 2014 acquisition and return to provision45G railroad tax credits recognized in the current period, partially offset byquarter ended March 31, 2020, and changes in the forecasted geographicgeographical mix of pre-tax earnings and the expiration of U.S.pretax earnings. The 45G railroad tax credits including the biodiesel credit, at the endhave an offsetting impact in cost of 2016.products sold.

Analysis of Statements of Earnings


Processed volumes by product for the nine months are as follows (in metric tons):


Nine Months Ended
September 30,
(In thousands)20212020Change
Oilseeds26,247 27,236 (989)
Corn13,743 13,717 26 
   Total39,990 40,953 (963)

47
 Nine Months Ended 
 September 30,  
(In thousands)2017 2016 Change
Oilseeds25,602
 25,137
 465
Corn16,851
 16,623
 228
   Total42,453
 41,760
 693



ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company generally operates its production facilities, on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions. ProcessedThe overall decrease in oilseeds processed volumes of oilseeds increasedwas due to the strong demand environment forcold weather and natural gas curtailments in North America and delays in soybean meal and canola oil.harvest in South America. The overall increase in corn is dueprocessed volumes was primarily related to the strong demand environment for ethanol, partially offset by the production disruption in oneidling of the Company’s plants due to a water pipe leaktwo dry mill facilities in the firstsecond quarter and the reconfiguration of the Company’s Peoria, Illinois ethanol complex.2020. The Company restarted these idled facilities in April 2021.





ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


Revenues by segment for the nine months are as follows:


 Nine Months Ended  
 September 30,  
 2017 2016 Change
 (In millions)
Agricultural Services 
  
  
Merchandising and Handling$16,434
 $17,331
 $(897)
Milling and Other2,141
 2,325
 (184)
Transportation154
 171
 (17)
Total Agricultural Services18,729
 19,827
 (1,098)
      
Corn Processing 
  
  
Sweeteners and Starches3,192
 3,061
 131
Bioproducts3,651
 3,889
 (238)
Total Corn Processing6,843
 6,950
 (107)
      
Oilseeds Processing     
Crushing and Origination10,850
 10,799
 51
Refining, Packaging, Biodiesel, and Other6,064
 5,852
 212
Asia192
 220
 (28)
Total Oilseeds Processing17,106
 16,871
 235
      
Wild Flavors and Specialty Ingredients1,787
 1,883
 (96)
Total Wild Flavors and Specialty Ingredients1,787
 1,883
 (96)
      
Other - Financial293
 314
 (21)
Total Other293
 314
 (21)
Total$44,758
 $45,845
 $(1,087)

Nine Months Ended
September 30,
 20212020Change
 (In millions)
Ag Services and Oilseeds
Ag Services$32,860 $22,930 $9,930 
Crushing8,411 7,035 1,376 
Refined Products and Other7,696 5,382 2,314 
Total Ag Services and Oilseeds48,967 35,347 13,620 
   
Carbohydrate Solutions
Starches and Sweeteners5,563 4,769 794 
Vantage Corn Processors2,346 1,625 721 
Total Carbohydrate Solutions7,909 6,394 1,515 
Nutrition
Human Nutrition2,410 2,161 249 
Animal Nutrition2,583 2,198 385 
Total Nutrition4,993 4,359 634 
Other Business290 277 13 
Total$62,159 $46,377 $15,782 
Revenues and cost of products sold in a commodity merchandising and processing business are affected bysignificantly correlated to the underlying commodity prices and volumes. During periods of significant changes in commodity prices, the underlying performance of the Company is better evaluated by looking at margins sincebecause both revenues and cost of products sold, particularly in Oilseeds ProcessingAg Services and Agricultural Services,Oilseeds, generally have a relatively equal impact from commodity price changes which generally result in an insignificant impact to gross profit.


Revenues decreased $1.1increased $15.8 billion to $44.8$62.2 billion due to higher sales prices ($16.0 billion) partially offset by lower sales volumes ($1.10.2 billion) in Agricultural. Higher sales prices of animal feed, alcohol, biodiesel, meal, oils, corn, soybeans, wheat, and corn by products and higher sales volumes of wheat, cotton, and barley, were partially offset by lower sales volumes of meal, oils, and soybeans. Ag Services and Oilseeds revenues increased 39% to $49.0 billion due to higher sales prices ($1.113.5 billion), Corn Processing and higher sales volumes ($0.1 billion), and Wild Flavors and Specialty Ingredients. Carbohydrate Solutions revenues increased 24% to $7.9 billion due to higher sales prices ($0.11.8 billion), partially offset by lower sales volumes ($0.3 billion). Nutrition revenues increased 15% to $5.0 billion due to higher sales volumes in Oilseeds Processingprices ($0.20.7 billion). The decrease in sales volumes was due principally to a decrease in volumes of unprocessed commodities, in particular volumes of soybeans, corn, rapeseed, and wheat.





48


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Cost of products sold decreased $1.0increased $14.5 billion to $42.2$57.8 billion due principally to lower sales volumes.higher average commodity costs. Included in cost of products sold in the prior period was a credit of $4$91 million from the effect of increasing agricultural commodity prices onthe elimination of the LIFO inventory valuation reserves compared to a charge of $17 millionreserve in connection with the prior year’s period.accounting change effective January 1, 2020. Manufacturing expenses increased $0.1$0.3 billion to $3.9$4.5 billion due principally to higher energy costs, maintenance, storage and warehousing, operating supplies, salaries and benefits, and contracted labor, partially offset by lower railroad maintenance expenses.

Foreign currency translation impacts increased revenues and cost of goods sold by $1.0 billion.

Gross profit increased $1.2 billion or 40% to $4.3 billion due to higher salaries and benefits and increased expenses for energy, operating and maintenance supplies, and contracted labor.





ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Gross profit of $2.6 billion in the current period was comparable to the prior period. Lower results in soybean processingAg Services and Oilseeds ($143 million) and grain origination ($67 million) were offset by higher results in canola processing ($46746 million), sweeteners and starchesCarbohydrate Solutions ($51333 million), Nutrition ($148 million), and ethanolOther ($7549 million). These factors are explained in the segment operating profit discussion on page 45. Current period51. In Corporate, the elimination of the LIFO reserve in connection with the accounting change effective January 1, 2020 had a positive impact on gross profit included a credit of $4$91 million fromin the effect of changing agricultural commodity prices on LIFO inventory valuation reserves compared to a charge of $17 million during the same period last year.prior period.

Selling, general, and administrative expenses of $1.5increased $0.3 billion was comparable to the prior period. Current period increase in$2.2 billion due principally to higher salaries and benefits, cost related to increased investments in the Company’s business transformation,performance-based compensation accruals, IT expenses, and innovation initiatives was offset by prior period expenses related to a settled legal matter.settlement.


Asset impairment, exit, and restructuring costs increased $104$23 million to $140$84 million. CurrentCharges in the current period charges consisted of $63$54 million of asset impairments in the Corn processing segment primarily related to the reconfigurationcertain long-lived assets and $26 million of the Company’s Peoria, Illinois ethanol complex, $47restructuring charges, presented as specified items within segment operating profit, and $4 million of restructuring charges in Corporate primarily related to the reduction of certain positions within the Company’s global workforce, and $30 million of several individually insignificant asset impairments and restructuring charges. Prior period charges included $17 million of software impairment and other-than-temporary impairment charges on available for sale equity security investments in Corporate, $5 million of asset impairments in the Corn Processing segment, and $14 million of other individually insignificant asset impairments and restructuring charges.

Interest expense increased $33 million to $246 million due principally to higher interest rates on short-term debt, the issuance of the $1 billion fixed-rate notes in August 2016, and interest related to a prior year foreign income tax amended return, partially offset by the retirement of the $261 million bond that matured in April 2017. Interest expenseCorporate. Charges in the prior period also included a creditconsisted of $8$50 million for the revaluation of the mandatorily redeemable 10% interest in Harvest Innovations.impairments related to certain intangible and other long-lived assets and $11 million of restructuring charges.


Equity in earnings of unconsolidated affiliates increased $174decreased $5 million to $327$398 million primarily due to lower earnings from the Company’s investments in Wilmar, Olenex Sarl, SoyVen, and Hungrana Ltd., partially offset by higher earnings from the Company’s investment in Wilmar resulting from the increased ownership stakeStratas Foods LLC.

Investment income decreased $11 million to $83 million due to lower interest rates on segregated funds in and higher results from Wilmar and improved results from the Company’s equity investment in CIP,futures commission and brokerage business, partially offset by losses from a new equity$49 million investment andrevaluation gain in the current period compared to a $23 million investment revaluation gain in the prior period.

Interest expense decreased earnings resulting from the disposal of an equity investment.

Other income decreased $125$82 million to $13 million. Current$188 million due to lower interest rates and the favorable liability management actions taken in the prior year. Interest expense in the current period incomealso included gainsa $17 million mark-to-market gain adjustment related to the conversion option of the exchangeable bonds issued in August 2020 compared to a $15 million mark-to-market loss adjustment in the prior period.

Other expense - net decreased $166 million to $36 million. Expense in the current quarter included a non-cash pension settlement charge of $83 million related to the purchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the Company’s ADM Retirement Plant and ADM Pension Plan for Hourly-Wage Employees, charges of $36 million related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025, and other expense, partially offset by gains on the sale of the crop risk services businesscertain assets and disposals of other individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, and foreign exchange gains. Expense in the prior period included charges of $410 million related to multiple early debt redemptions and loss provisions related to the Company’s futures commission and brokerage business, partially offset by an adjustment of the proceeds of the 2015 sale of the cocoa business, a charge related to the early redemption of the Company’s $559 million notes due on March 15, 2018, foreign exchange losses, and changes in contingent settlement provisions. Prior period income included realized additional consideration related to the December 2012 sale of the Company’s equity investment in Gruma S.A.B de C.V., recovery of loss provisions as well as gaingains related to the sale of a portion of the Company’s Brazilian sugar ethanol facilities, gain related toshares in Wilmar and certain other assets, the revaluationnon-service components of the remaining interest to settlement value in conjunction with the acquisition of the remaining interest in Amazon Flavors,net pension benefit income, foreign exchange gains, and other income.














49

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)



ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Segment operating profit, adjusted segment operating profit (a non-GAAP measure), and earnings before income taxes for the nine months are as follows:


Nine Months Ended
September 30,
Segment Operating Profit (Loss)20212020Change
(In millions)
Ag Services and Oilseeds
Ag Services$435 $482 $(47)
Crushing812 249 563 
Refined Products and Other467 286 181 
Wilmar251 254 (3)
Total Ag Services and Oilseeds1,965 1,271 694 
   
Carbohydrate Solutions
Starches and Sweeteners706 533 173 
Vantage Corn Processors149 (24)173 
Total Carbohydrate Solutions855 509 346 
Nutrition
Human Nutrition429 372 57 
Animal Nutrition102 75 27 
Total Nutrition531 447 84 
Other Business10 69 (59)
Specified Items:
Gains (losses) on sales of assets and businesses22 80 (58)
Asset impairment, restructuring, and settlement charges(133)(60)(73)
Total Specified Items(111)20 (131)
Total Segment Operating Profit$3,250 $2,316 $934 
Adjusted Segment Operating Profit(1)
$3,361 $2,296 $1,065 
Segment Operating Profit$3,250 $2,316 $934 
Corporate(948)(1,189)241 
Earnings Before Income Taxes$2,302 $1,127 $1,175 
 Nine Months Ended  
 September 30,  
Segment Operating Profit2017 2016 Change
 (In millions)
Agricultural Services 
  
  
Merchandising and Handling$79
 $102
 $(23)
Milling and Other156
 164
 (8)
Transportation49
 62
 (13)
Total Agricultural Services284
 328
 (44)
      
Corn Processing 
  
  
Sweeteners and Starches561
 499
 62
Bioproducts87
 7
 80
Total Corn Processing648
 506
 142
      
Oilseeds Processing     
Crushing and Origination197
 331
 (134)
Refining, Packaging, Biodiesel, and Other208
 251
 (43)
Asia234
 59
 175
Total Oilseeds Processing639
 641
 (2)
      
Wild Flavors and Specialty Ingredients228
 237
 (9)
Total Wild Flavors and Specialty Ingredients228
 237
 (9)
  
  
  
Other - Financial78
 84
 (6)
Total Other78
 84
 (6)
      
Specified Items:     
Gains (losses) on sales of assets and businesses20
 114
 (94)
Impairment, restructuring, settlement charges(98) (16) (82)
Hedge timing effects4
 4
 —
Total Specified Items(74) 102
 (176)
      
Total Segment Operating Profit$1,803
 $1,898
 $(95)
      
Adjusted Segment Operating Profit(1)
$1,877
 $1,796
 $81
      
Segment Operating Profit$1,803
 $1,898
 $(95)
Corporate(737) (705) (32)
Earnings Before Income Taxes$1,066
 $1,193
 $(127)


(1) Adjusted segment operating profit is segment operating profit excluding the above specified items.






50


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
AgriculturalAg Services and Oilseeds operating profits decreased 13%profit increased 55%. MerchandisingAg Services results were lower than the prior year period. In North America, strong Chinese demand and Handling operatingfavorable positions in a dynamic pricing environment delivered significantly higher results. South American origination results decreasedwere significantly lower due to decreased volumesfarmer selling activity versus the prior year period and the effects from the slightly delayed harvest and higher freight costs. Global Trade results were impacted by negative timing effects related to ocean freight positions which are expected to reverse in the U.S. corn exports and lower export margins. Global Trade generated solidcoming quarters. Crushing results benefiting from improved margins which was partially offset by some hedge position losses. Milling and Other decreased due to lower volumes and margins. Transportation results decreased due to river conditions and lower barge freight volumes and margins.

Corn Processing operating profit increased 28%. Sweeteners and Starches operating profit increased due to improved domestic demand andwere significantly higher volumes and margins from the international business. Bioproducts profit increased due to strong ethanol export demandsoftseed crush margins driven by tight supplies and improved margins, and improved lysine margins, partially offset by lower volumes caused by a mild winter.

Oilseeds Processing operating profit was comparable tonegative timing impacts in the prior year period. CrushingRefined Products and Origination operating profit decreased from the prior period. Higher softseedOther results were higher year-over-year on stronger margins in North America and Europe, Middle East, Africa, and India (EMEAI), partially offset by impacts related to the reduction in Brazilian biodiesel mandates. Equity earnings from Wilmar were lower versus the prior year period.

Carbohydrate Solutions operating profit increased 68%. Starches and Sweeteners results, including ethanol production from the wet mills, were significantly higher than the prior year period. The business managed risk well, capitalizing on rising prices in the ethanol complex and favorable co-product values in an industry environment of improving margins, falling inventories, and higher input costs. Corn oil results significantly improved from the prior year period, which had been impacted by significant mark-to-market effects. Demand for flour by the foodservice sector remained below the prior year period. Vantage Corn Processors results were substantially higher, driven by improved margins on the distribution of fuel ethanol and strong performance in USP-grade alcohol and the resumption of production at the two dry mills.

Nutrition operating profit increased 19%. Human Nutrition results were higher than the prior year period. Flavors results were up, driven by strong sales across various market segments. In North America and EMEAI, the flavors business delivered strong volumes and improved product mix, particularly in the beverage segment. Specialty Ingredients delivered strong sales growth in specialty proteins, though results were negatively impacted by the effects of pantry loading in the prior year period, normalization of prices in the wholesale ingredients business, COVID-related shifts in demand across the portfolio, and higher costs. Health and Wellness results were strong, with robust demand driving strong results in probiotics and fibers. Animal Nutrition results were higher on favorable results in amino acids, driven by improved margins and product mix, partially offset by lower crushingdemand and origination resultshigher input costs as a result of pandemic effects in South America as margins remain challenged. A competitive global protein meal market continued to pressure soybean crush margins in all regions. Refining, Packaging, Biodiesel, and America.

Other operating profit declined due to the uncertainty surrounding the biodiesel tax credit that has negatively impacted biodiesel margins partially offset by higher results in South American refined and packaged oils and the global peanut business. Asia results increased on higher earnings from the Company’s investment in Wilmar due to the increased ownership stake in and higher results from Wilmar.

Wild Flavors and Specialty IngredientsBusiness operating profit decreased 4%. Weaker results in specialty ingredients, due in part to operational start-up costs, were partially offset by the continuing strong demand for flavor ingredients and flavor systems especially in Africa and Asia.

Other - Financial operating profit decreased 7%86% primarily due to the absence of the Company’s share in the earnings of an equity investment that was sold in the third quarter of fiscal 2016 partially offset by improvedlower underwriting results from the captive insurance operations.operations, most of which were offset by corresponding recoveries in other business segments.

Corporate results for the nine months are as follows:
Nine Months Ended
September 30,
20212020Change
(In millions)
LIFO credit (charge)$— $91 $(91)
Interest expense-net(200)(246)46 
Unallocated corporate costs(681)(579)(102)
Expenses related to acquisitions(3)— (3)
Debt extinguishment charges(36)(410)374 
Gain (loss) on debt conversion option17 (15)32 
Impairment, restructuring, and settlement charges(87)(5)(82)
Other income (charges)42 (25)67 
Total Corporate$(948)$(1,189)$241 








51
 Nine Months Ended  
 September 30,  
 2017 2016 Change
 (In millions)
LIFO credit (charge)$4
 $(17) $21
Interest expense - net(232) (205) (27)
Unallocated corporate costs(376) (325) (51)
Other charges(58) (87) 29
Minority interest and other(75) (71) (4)
Total Corporate$(737) $(705) $(32)



ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Corporate results were a net charge of $737 million$0.9 billion in the current period compared to $705 million$1.2 billion in the prior period. The effectselimination of increasing commodity prices onthe LIFO inventory valuationsreserve in connection with the accounting change effective January 1, 2020 resulted in a credit of $4 million in the current period compared to a charge of $17$91 million in the prior period. Interest expense - net increased $27expense-net decreased $46 million due principally to higherlower interest rates on short-term debt,and the issuance offavorable liability management actions taken in the new $1 billion fixed-rate debt in August 2016, and interest related to a prior year foreign income tax amended return, partially offset by the retirement of the $261 million bond that matured in April 2017.year. Unallocated corporate costs increased $51$102 million due principallyprimarily to increasedhigher variable performance-related compensation expense accruals, the continued cost centralization in procurement, supply chain, and operations, and additional investments in the Company’s business transformation, IT and innovation initiatives. Otherrelated projects. Acquisition expenses were related to the P4 acquisition. Debt extinguishment charges in the current period were related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025. Debt extinguishment charges in the prior period were related to multiple early debt redemptions. Gain (loss) on debt conversion option was related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020. Impairment, restructuring, and settlement charges in the current period included a non-cash pension settlement charge of $83 million related to the early redemptionpurchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the Company’s $559 million notes due on March 15, 2018ADM Retirement Plant and ADM Pension Plan for Hourly-Wage Employees to independent third parties, and restructuring charges related tocharges. Other income in the reductioncurrent period included the non-service components of certain positions within the Company’s global workforce.net pension benefit income of $12 million, an investment revaluation gain of $49 million, and other income, partially offset by railroad maintenance expenses of $34 million. Other charges in the prior period included legal settlement costs and legal fees, a software impairment charge, other-than-temporary impairment charges on available for sale equity security investments, a loss on the salerailroad maintenance expenses of $101 million that had an offsetting benefit in income tax expense, partially offset by an investment revaluation gain of $23 million, and the non-service components of net pension benefit income of $28 million, and other asset impairment and restructuring charges.income.



ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


Non-GAAP Financial Measures


The Company uses adjusted earnings per share (EPS),EPS, adjusted earnings before taxes, interest, and depreciation and amortization (EBITDA),EBITDA, and adjusted segment operating profit, non-GAAP financial measures as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. These performance measures are not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.


Adjusted EPS is defined as diluted EPS adjusted for the effects on reported diluted EPS of certain specified items. Adjusted EBITDA is defined as earnings before taxes, interest, andtaxes, 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. Adjusted segment operating profit is segment operating profit adjusted, where applicable, for specified items.


Management believes that adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are useful measures of the Company’s performance because they provide investors additional information about the Company’s operations allowing better evaluation of underlying business performance and better period-to-period comparability. Adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are not intended to replace or be an alternative to diluted EPS, earnings before income taxes, and segment operating profit, respectively, the most directly comparable amounts reported under GAAP.



















52


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The table below provides a reconciliation of diluted EPS to adjusted EPS for the nine months ended September 30, 20172021 and 2016.2020.
Nine months ended September 30,
20212020
In millionsPer shareIn millionsPer share
Average number of shares outstanding - diluted566 563 
Net earnings and reported EPS (fully diluted)$1,927 $3.41 $1,085 $1.93 
Adjustments:
LIFO charge (credit) - net of tax of $22 million (1)
— — (69)(0.12)
(Gains) losses on sales of assets and businesses - net of tax of $5 million in 2021 and $8 million in 2020 (2)
(17)(0.03)(72)(0.13)
Asset impairment, restructuring, and settlement charges - net of tax of $53 million in 2021 and $16 million in 2020 (2)
167 0.30 49 0.09 
Expenses related to acquisitions - net of tax of $1 million (2)
2 — — — 
Debt extinguishment charges - net of tax of $9 million in 2021 and $99 million in 2020 (2)
27 0.05 311 0.55 
Gain (loss) on debt conversion option - net of tax of $0 (2)
(17)(0.03)15 0.03 
Certain discrete tax adjustments(4)(0.01)16 0.03 
Total adjustments158 0.28 250 0.45 
Adjusted net earnings and adjusted EPS$2,085 $3.69 $1,335 $2.38 
 Nine months ended September 30,
 2017 2016
 In millions Per share In millions Per share
Average number of shares outstanding - diluted574
   593
  
        
Net earnings and reported EPS (fully diluted)$807
 $1.41
 $855
 $1.44
Adjustments:       
LIFO charge (credit) - net of tax of $2 million in 2017 and $6 million in 2016 (1)
(2) —
 11
 0.02
(Gains) losses on sales of assets and businesses - net of tax of $32 million in 2017 and $17 million in 2016 (2)
12
 0.02
 (92) (0.15)
Asset impairment, restructuring, and settlement charges - net of tax of $47 million in 2017 and $34 million in 2016 (2)
98
 0.17
 64
 0.10
Loss on debt extinguishment - net of tax of $4 million(1)
7
 0.01
 —
 —
Certain discrete tax adjustments4
 0.01
 —
 —
Total adjustments119
 0.21
 (17) (0.03)
Adjusted net earnings and adjusted EPS$926
 $1.62
 $838
 $1.41
        
(1) Tax effected using the Company’s U.S. tax rate. LIFO accounting was discontinued effective January 1, 2020.
(2) Tax effected using the U.S. and other applicable tax rates.











































53


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the nine months ended September 30, 20172021 and 2016.2020.
Nine months ended
September 30,
(In millions)20212020Change
Earnings before income taxes$2,302 $1,127 $1,175 
Interest expense188 270 (82)
Depreciation and amortization739 727 12 
LIFO— (91)91 
(Gains) losses on sales of assets and businesses(22)(80)58 
Debt extinguishment charges36 410 (374)
Expenses related to acquisitions3 — 3 
Railroad maintenance expenses34 101 (67)
Asset impairment, restructuring, and settlement charges220 65 155 
Adjusted EBITDA$3,500 $2,529 $971 
Nine months ended
September 30,
(In millions)20212020Change
Ag Services and Oilseeds$2,243 $1,543 $700 
Carbohydrate Solutions1,106 745 361 
Nutrition692 617 75 
Other Business15 75 (60)
Corporate(556)(451)(105)
Adjusted EBITDA$3,500 $2,529 $971 
54
 Nine months ended September 30,  
(In millions)2017 2016 Change
Earnings before income taxes$1,066
 $1,193
 $(127)
Interest expense246
 213
 33
Depreciation and amortization684
 677
 7
LIFO(4) 17
 (21)
(Gains) losses on sales of assets and businesses(20) (109) 89
Loss on debt extinguishment11
 —
 11
Asset impairment, restructuring, and settlement charges145
 98
 47
Adjusted EBITDA$2,128
 $2,089
 $39
      
      
 Nine months ended September 30,  
(In millions)2017 2016 Change
Agricultural Services$434
 $479
 $(45)
Corn Processing918
 777
 141
Oilseeds Processing790
 788
 2
Wild Flavors and Specialty Ingredients299
 304
 (5)
Other - Financial90
 91
 (1)
Corporate(403) (350) (53)
Adjusted EBITDA$2,128
 $2,089
 $39




ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources


A Company objective is to have sufficient liquidity, balance sheet strength, and financial flexibility to fund the operating and capital requirements of a capital intensivecapital-intensive agricultural commodity-based business.  The Company’s strategy involves expanding the volume and diversity of crops that it merchandises and processes, expanding the global reach of its core model, and expanding its value-added product portfolio.  The Company depends on access to credit markets, which can be impacted by its credit rating and factors outside of the Company’sADM’s control, to fund its working capital needs and capital expenditures. The primary source of funds to finance the Company’sADM’s operations, capital expenditures, and advancement of its growth strategy is cash generated by operations and lines of credit, including a commercial paper borrowing facility.facility and accounts receivable securitization programs.  In addition, the Company believes it has access to funds from public and private equity and debt capital markets in both U.S. and international markets.


Cash provided by operating activities was $5.9 billion for the nine months ended September 30, 2021 compared to a use of $1.5 billion for the same period last year. Working capital changes as described below increased cash by $2.8 billion for the nine months ended September 30, 2021 compared to a decrease of $3.8 billion for the same period last year which included the impact of deferred consideration. During 2020, the Company restructured its accounts receivable securitization programs from a deferred purchase price to a pledge structure. As a result, operating cash flows in the current period no longer include the impact of deferred consideration which decreased operating cash flows in previous years.

Inventories decreased approximately $0.4 billion due to lower inventory volumes partially offset by higher inventory prices. Brokerage payables increased approximately $2.2 billion due to increased customer segregated trading activity. Trade payables increased approximately $0.2 billion principally reflecting seasonal cash payments for North American harvest-related grain purchases.

Deferred consideration in securitized receivables of $4.6 billion for the nine months ended September 30, 2020 was offset by the same amount of net consideration received for beneficial interest obtained for selling trade receivables.

Cash used in investing activities was $1.3 billion for the nine months ended September 30, 2021 compared to cash provided of $4.7 billion for the same period last year. Capital expenditures for the nine months ended September 30, 2021 were $0.7 billion compared to $0.6 billion for the same period last year. Net assets of businesses acquired were $0.5 billion for the nine months ended September 30, 2021 compared to $3 million for the same period last year primarily due to the P4 acquisition in September 2021. Proceeds from sales of business and assets for the nine months ended September 30, 2021 were $0.1 billion compared to $0.7 billion for the same period last year which related to the sale of a portion of the Company’s shares in Wilmar and certain other assets. Net consideration received for beneficial interest obtained related to selling trade receivables was $4.6 billion for the nine months ended September 30, 2020.

Cash used in financing activities was $1.6 billion for the nine months ended September 30, 2021 compared to $1.9 billion for the same period last year. Long-term debt borrowings for the nine months ended September 30, 2021 of $1.3 billion consisted of the $750 million aggregate principal amount of 2.700% Notes due 2051 issued on September 10, 2021 and the €0.5 billion aggregate principal amount of Fixed-to-Floating Rate Senior Notes due 2022 issued in a private placement on March 25, 2021, compared to long-term debt borrowings for the same period last year of $1.8 billion which consisted of the $0.5 billion and $1.0 billion aggregate principal amounts of 2.75% Notes due in 2025 and 3.25% Notes due in 2030, respectively, issued on March 27, 2020 and the $0.3 billion aggregate principal amount of zero coupon exchangeable bonds due in 2023 issued on August 26, 2020. Proceeds from the borrowings in the current period were used to redeem debt and for general corporate purposes. Proceeds from the borrowings in the prior period were used to reduce short-term debt. Commercial paper net payments for the nine months ended September 30, 2021 were $1.7 billion compared to $1.0 billion for the same period last year. Long-term debt payments of $0.5 billion for the nine months ended September 30, 2021 consisted of the early redemption of the $500 million aggregate principal amount of 2.750% notes due 2025 in September 2021, compared to $2.0 billion for the same period last year which consisted of the early redemption of the $0.5 billion and $0.4 billion aggregate principal amounts of 4.479% debentures due in 2021 and 3.375% debentures due in 2022, respectively, the repurchase of $0.7 billion aggregate principal amount of debentures, and the redemption of $0.1 billion aggregate principal amount of private placement notes due in 2021 and 2024. Share repurchases for the nine months ended September 30, 2021 were insignificant compared to $0.1 billion for the same period last year. Dividends of $0.6 billion for the nine months ended September 30, 2021were comparable to the same period last year.




55


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
At September 30, 2017,2021, the Company had $0.8$1.1 billion of cash and cash equivalents and short-term marketable securities and a current ratio, defined as current assets divided by current liabilities, of 1.6 to 1. Included in working capital was $5.3$7.4 billion of readily marketable commodity inventories. Cash provided by operating activities was $2.2 billion for the nine months compared to $1.3 billion the same period last year. Working capital changes increased cash by $0.6 billion for the nine months compared to a decrease of $0.3 billion for the same period last year. Trade receivables decreased $0.1 billion due to lower revenues. Inventories decreased approximately $0.7 billion due to lower inventory quantities partially offset by higher prices. Trade payables declined approximately $0.3 billion principally reflecting seasonal cash payments for North American harvest-related grain purchases. Cash used in investing activities was $0.9 billion for the nine months compared to $1.2 billion the same period last year. Sales of marketable securities, net of purchases, were $73 million for the nine months compared to $35 million the same period last year. Capital expenditures and net assets of businesses acquired were $0.9 billion for the nine months compared to $0.8 billion the same period last year. Investments in and advances to affiliates included the additional investment in Wilmar of $0.3 billion for the nine months compared to $0.6 billion the same period last year. Cash used in financing activities was $1.0 billion for the nine months compared to $0.1 billion the same period last year. Long-term debt borrowings for the nine months were $0.5 billion related to the 3.75% notes issued on September 14, 2017 compared to long-term debt borrowings of $1.0 billion the same period last year which related to the 2.5% debt issued on August 11, 2016. Long-term debt payments for the nine months of $0.8 billion primarily related to the redemption of the $559 million notes due on 2018 and the retirement of the $261 million bond that matured in April 2017 compared to long-term debt payments of $9 million the same period last year. Commercial paper borrowings for the nine months were $0.6 billion compared to $0.1 billion the same period last year. Share repurchases for the nine months were $0.7 billion compared to $0.8 billion the same period last year.

At September 30, 2017,2021, the Company’s capital resources included net worthshareholders’ equity of $17.6$22.0 billion and lines of credit, including the accounts receivable securitization programs described below, totaling $6.9$12.4 billion, of which $4.8$10.5 billion was unused. The Company’s ratio of long-term debt to total capital (the sum of the Company’s long-term debt and shareholders’ equity) was 27% and 28% at September 30, 20172021 and 27% at December 31, 2016.2020, respectively. The Company uses this ratio as a measure of the Company’s long-term indebtedness and as an indicator of financial flexibility. The Company’s ratio of net debt (the sum of short-term debt, current maturities of long-term debt, and long-term debt less the sum of cash and cash equivalents and short-term marketable securities) to capital (the sum of net debt and shareholders’ equity) was 26% and 32% at September 30, 2021 and December 31, 2020, respectively. Of the Company’s total lines of credit, $4.0$6.5 billion supported athe combined U.S. and European commercial paper borrowing facility,programs, against which there was $0.6 billion ofno commercial paper outstanding at September 30, 2017.2021.


As of September 30, 2017,2021, the Company had $0.5$1.1 billion of cash and cash equivalents, $0.4$0.5 billion of which was cash held by foreign subsidiaries whose undistributed earnings are considered permanentlyindefinitely reinvested. Based on the Company’s historical ability to generate sufficient cash flows from its U.S. operations and unused and available U.S. credit capacity of $3.7$8.1 billion, the Company has asserted that these funds are permanentlyindefinitely reinvested outside the U.S.


The Company has accounts receivable securitization programs (the “Programs”) with certain commercial paper conduit purchasers and committed purchasers. The Programs provide the Company with up to $1.7$2.1 billion, an increase from $1.8 billion as amended,of December 31, 2020, in funding against accounts receivable transferred into the Programs and expands the Company’s access to liquidity through efficient use of its balance sheet assets (see Note 16 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information and disclosures on the Programs). As of September 30, 2017,2021, the Company utilized $1.4$1.5 billion of its facility under the Programs.


For the nine months ended September 30, 2017,2021, the Company spent approximately $0.7 billion in capital expenditures $0.2and $0.6 billion in acquisitions, $0.3 billion in additional Wilmar investment, $0.5 billion in dividends, and $0.7 billion in share repurchases.dividends. The Company has a stock repurchase program. Under the program, and hasthe Company acquired approximately 15.7 millionan insignificant number of shares duringfor the nine months ended September 30, 2017. The Company2021, and has 15.7104.5 million shares remaining that may be repurchased under the program until December 31, 2019.2024.




ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

TheIn 2021, the Company expects total capital expenditures of approximately $0.9 billion to $1.0 billion, during 2017. In 2017, the Company expects aggregate cash outlays of approximately $0.7$0.8 billion in dividends, and up to $1.0$0.5 billion in share repurchases, subject to other strategic capital requirementsuses of capital.

In October 2021, the Company executed acquisition and leverage considerations.investment agreements with a total aggregate consideration of approximately $0.7 billion. In addition, the Company executed an agreement to sell its ethanol production complex in Peoria, Illinois with a book value of approximately $0.1 billion, which will have an immaterial impact to operating results. These transactions are expected to close before December 31, 2021, subject to the satisfaction of closing conditions and regulatory approval. In addition, the previously announced Sojaprotein acquisition of $0.4 billion is also expected to close before December 31, 2021.


Contractual Obligations and Commercial Commitments


The Company’s purchase obligations as of September 30, 20172021 and December 31, 20162020 were $10.0$16.9 billion and $10.6$19.7 billion, respectively.  The decrease is primarily related to obligations to purchase lower quantities of agricultural commodity inventories and lower prices as well as lower obligations in other commitments.inventories. As of September 30, 2017,2021, the Company expects to make payments related to purchase obligations of $8.8$12.9 billion within the next twelve months. There were no other material changes in the Company’s contractual obligations during the quarter ended September 30, 2017.2021.


Off Balance Sheet Arrangements


InOn September 2017,24, 2021, the Company amended its second accounts receivable securitization program (the “Second Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “Second Purchasers”)First Program and increased itsthe facility from $0.3$1.4 billion as of March 31, 2021 to $0.5$1.5 billion. The program terminates on March 16, 2018 unless extended (seeSee Note 16 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information and disclosures onabout the Program).

First Program. There were no other material changes in the Company’s off balance sheet arrangements during the quarter ended September 30, 2017.2021.



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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Critical Accounting Policies

Retirement Benefit Changes

On July 31, 2017, the Company announced that all participants in the Company’s U.S. salaried pension plan and the Supplemental Executive Retirement Plan (SERP) will begin accruing benefits under the cash balance formula effective January 1, 2022. Benefits for participants who were accruing under the final average pay formula will be frozen as of December 31, 2021, including pay and service through that date.

This change, along with other changes in participation associated with divestitures and restructuring, triggered a remeasurement of the salaried pension plan and the SERP resulting in decreases in the fiscal 2017 pension expense, accumulated other comprehensive loss, and underfunded status by $18 million, $182 million, and $164 million, respectively.

Concurrent with this change, the Company also changed the method used to estimate the service and interest cost components of the net periodic pension and postretirement benefit costs for its U.S. plans. The new method uses the spot rate yield curve approach to estimate the service and interest costs. Previously, those costs were determined using a single weighted-average discount rate applied to all future cash outflows. The change does not affect the measurement of the Company’s benefit obligations and was accounted for as a change in accounting estimate in accordance with the guidance of ASC Topic 250, Accounting Estimates and Error Corrections, thereby impacting the current and future quarters. The impact of this change on after-tax earnings and diluted earnings per share for the quarter ended September 30, 2017 was immaterial.


There were no other material changes in the Company’s critical accounting policies during the quarter ended September 30, 2017.2021.


ITEM 3.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


The market risk inherent in the Company’s market risk sensitive instruments and positions is the potential loss arising from adverse changes in: commodity market prices as they relate to the Company’s net commodity position, foreign currency exchange rates, and interest rates.  Significant changes in market risk sensitive instruments and positions for the quarter ended September 30, 20172021 are described below.  There were no material changes during the period in the Company’s potential loss arising from changes in foreign currency exchange rates and interest rates.





ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)


For detailed information regarding the Company’s market risk sensitive instruments and positions, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2020.


Commodities


The availability and prices of agricultural commodities are subject to wide fluctuations due to factors such as changes in weather conditions, crop disease, plantings, government programs and policies, competition, changes in global demand, changes in customer preferences and standards of living, and global production of similar and competitive crops.


The fair value of the Company’s commodity position is a summation of the fair values calculated for each commodity by valuing all significantof the commodity risk positions at quoted market prices for the period, where available, or utilizing a close proxy. The Company has established metrics to monitor the amount of market risk exposure, which consist of volumetric limits and value-at-risk (VaR) limits. VaR measures the potential loss, at a 95% confidence level, that could be incurred over a one-year period. Volumetric limits are monitored daily and VaR calculations and sensitivity analysis are monitored weekly.


In addition to measuring the hypothetical loss resulting from an adverse two standard deviation move in market prices (assuming no correlations) over a one-year period using VaR, sensitivity analysis is performed measuring the potential loss in fair value resulting from a hypothetical 10% adverse change in market prices. The highest, lowest, and average weekly position together with the market risk from a hypothetical 10% adverse price change is as follows:
Nine months endedYear ended
September 30, 2021December 31, 2020
Long/(Short) (In millions)
Fair ValueMarket RiskFair ValueMarket Risk
Highest position$1,426 $143 $966 $97 
Lowest position(98)(10)(842)(84)
Average position710 71 111 11 
  Nine months ended Year ended
  September 30, 2017 December 31, 2016
Long/(Short) (In millions)
 Fair Value Market Risk Fair Value Market Risk
Highest position $455
 $46
 $876
 $88
Lowest position (82) (8) (529) (53)
Average position 215
 21
 27
 3


The change in fair value of the average position was principally the result ofdue to an increase in average quantities, partially offset by a decrease in price underlying the weekly commodity position and, to a lesser extent, an increase in prices.position.


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ITEM 4.
ITEM 4.    CONTROLS AND PROCEDURES


As of September 30, 2017,2021, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (a)(i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (b)(ii) accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure. There was no change in the Company’s internal controls over financial reporting during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.


TheDuring 2018, the Company launched Readiness to drive new efficiencies and improve the customer experience in the Company’s existing businesses through a combination of data analytics, process simplification and standardization, and behavioral and cultural change, building upon its earlier 1ADM and operational excellence programs. As part of this transformation, the Company is implementing a new enterprise resource planning (ERP) system on a worldwide basis, as part of its ongoing business transformation program, which is expected to improve the efficiency and effectiveness of certain financial and business transaction processes. The implementation is expected to occur in phases over the next several years. The Company has currently implemented changesis also beginning the transition of certain portions of its corporate operations to certain processes in corporate finance, two processing businesses, and in over 200 locations, and will continuea global professional services firm which is expected to roll out the ERP system over the next several years.be substantially completed by end of fiscal 2021. The Company has appropriately consideredcontinues to consider these changes in its design of and testing for effectiveness of internal controls over financial reporting and concluded, as part of the evaluation described in the above paragraph, that the implementation of the new ERP system and the transition of certain corporate operations to a professional services firm in these circumstances hashave not materially affected its internal control over financial reporting.




PART II – OTHER INFORMATION


ITEM 1.LEGAL PROCEEDINGS

ITEM 1.    LEGAL PROCEEDINGS

The Company is routinely involved in a number of actual or threatened legal actions, including those involving alleged personal injuries, employment law, product liability, intellectual property, environmental issues, alleged tax liability (see Note 11 for information on income tax matters), and class actions. The Company also routinely receives inquiries from regulators and other government authorities relating to various aspects of our business, and at any given time, the Company has matters at various stages of resolution with the applicable government authorities.resolution. The outcomes of these matters are not within our complete control and may not be known for prolonged periods of time. In some actions, claimants seek damages, as well as other relief including injunctive relief, that could require significant expenditures or result in lost revenues. In accordance with applicable accounting standards, the Company records a liability in its consolidated financial statements for material loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a material loss contingency is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict, particularly when the matters are in early procedural stages, with incomplete facts or legal discovery; involve unsubstantiated or indeterminate claims for damages; potentially involve penalties, fines, disgorgement, or punitive damages; or could result in a change in business practice.


The Company is








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ITEM 1.    LEGAL PROCEEDINGS (Continued)

On September 4, 2019, AOT Holding AG (AOT) filed a party to numerous lawsuits pending in various U.S. state and federal courts arising out of Syngenta Corporation’s (Syngenta) marketing and distribution of genetically modified corn products, Agrisure Viptera and Agrisure Duracade, inputative class action under the U.S. First,Commodities Exchange Act in federal district court in Urbana, Illinois, alleging that the Company broughtsought to manipulate the benchmark price used to price and settle ethanol derivatives traded on futures exchanges. On March 16, 2021, AOT filed an amended complaint adding a state courtsecond named plaintiff Maize Capital Group, LLC. AOT and Maize allege that members of the putative class suffered “hundreds of millions of dollars in damages” as a result of the Company’s alleged actions. On July 14, 2020, Green Plains Inc. and its related entities (“GP”) filed a putative class action in Louisiana against Syngenta in 2014,lawsuit, alleging Syngenta was negligent in commercializing its products beforesubstantially the products were approved in China. Second, the Company is a party in a number of purported class actions filed beginning in 2013 by farmers and other parties against Syngenta in federal and state courts, again alleging that Syngenta was negligent in commercializing its products. The federal actions have been consolidated for pretrial proceedings in a multidistrict litigation (MDL) proceedingsame operative facts, in federal court in Kansas City, Kansas, and some state actions have been consolidated for pretrial proceedingsNebraska, seeking to represent sellers of ethanol. On July 23, 2020, Midwest Renewable Energy, LLC (“MRE”) filed a putative class action in MDL in Minnesota state court. In the fourth quarter of 2015, Syngenta filed third-party claims against the Company and other grain companies in these MDLs seeking contribution in the event Syngenta is held liable in these lawsuits. In September 2017, Syngenta filed similar third-party claims against the Company in Iowa state court. The federal court in Illinois alleging substantially the Kansas MDL dismissed allsame operative facts and asserting claims againstunder the Company on April 4, 2016,Sherman Act. On November 11, 2020, United Wisconsin Grain Producers LLC (“UWGP”) and the statefive other ethanol producers filed a lawsuit in federal court in Illinois alleging substantially the Minnesota MDL dismissed allsame facts and asserting claims againstunder the Company on September 6, 2016. Therefore, the Company is no longer a third-party defendant in the federal or state MDL.Sherman Act and Illinois, Iowa, and Wisconsin law. The Company also intends to movecourt granted ADM’s motion to dismiss the third-party claims in Iowa state court. InMRE and UWGP complaints without prejudice on August 9, 2021 and September 2017, Syngenta and the farmer plaintiffs announced a tentative settlement, subject to court approval, of all claims by those plaintiffs. Third, the Company and other grain companies have been named as defendants in numerous individual and purported class action suits filed by farmers and other parties in state and federal courts beginning in the fourth quarter of 2015, alleging the Company and other grain companies were negligent in failing to screen for genetically modified corn. As noted, on September 6, 2016,28, 2021, respectively. On August 16, 2021, the court ingranted ADM’s motion to dismiss the MinnesotaGP complaint, dismissing one claim with prejudice and declining jurisdiction over the remaining state MDL dismissed all claims against the Company, andlaw claim. MRE filed an amended complaint on January 4, 2017, a federal court in the Southern District of Illinois similarly dismissed all of the pending complaints against the Company in Southern Illinois. Some parties are expected to appeal some or all of these dismissals. Currently, the Company remains a defendant in only certain state court actions by farmers and other parties pending in Illinois state court,August 30, 2021, which the Company hasADM moved to dismiss as well.on September 27, 2021. UWGP filed an amended complaint on October 19, 2021. The Company denies liability, in all of the actions in which it has been named as a third-party defendant or defendant and is vigorously defending itself in these cases. All ofactions. As these actions are in pretrial proceedings. At this time,proceedings, the Company is unable at this time to predict the final outcome of this matter with any reasonable degree of certainty, but believes the outcome will not have a material adverse effect on its financial condition, results of operations, or cash flows.


The Company is not currently a party to any legal proceeding or environmental claim that it believes would have a material adverse effect on its financial position, results of operations, or liquidity.




ITEM 1A.
ITEM 1A.    RISK FACTORS


There were no significant changes in the Company’s risk factors during the quarter ended September 30, 2017.2021. For further information about the Company’s risk factors, refer to Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2020.


ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities


Period
Total Number of Shares Purchased(1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of a Publicly Announced Program(2)
Number of Shares Remaining that May be Purchased Under the Program(2)
July 1, 2021 to    
July 31, 2021804 $59.498 191 104,505,894 
August 1, 2021 to    
August 31, 20216,748 60.602 85 104,505,809 
September 1, 2021 to   
September 30, 20214,308 60.424 106 104,505,703 
Total11,860 $60.462 382 104,505,703 

(1)Total shares purchased represents those shares purchased in the open market as part of the Company’s publicly announced share repurchase program described below, shares received as payment for the exercise price of stock option exercises, and shares received as payment for the withholding taxes on vested restricted stock awards. During the three-month period ended September 30, 2021, there were 11,478 shares received as payments for the minimum withholding taxes on vested restricted stock awards and for the exercise price of stock option exercises.

(2)On August 7, 2019, the Company’s Board of Directors approved the extension of the stock repurchase program through December 31, 2024 and the repurchase of up to an additional 100,000,000 shares under the extended program. 
59
Period 
Total Number of Shares Purchased (1)
 Average Price Paid per Share 
Total Number of Shares Purchased as Part of a Publicly Announced Program (2)
 
Number of Shares Remaining that May be Purchased Under the Program (2)
July 1, 2017 to        
July 31, 2017 475,697
 $41.000
 475,697
 19,123,029
         
August 1, 2017 to  
  
  
  
August 31, 2017 1,959,118
 41.835
 1,959,118
 17,163,911
         
September 1, 2017 to  
  
  
  
September 30, 2017 1,494,187
 42.433
 1,494,187
 15,669,724
Total 3,929,002
 $41.961
 3,929,002
 15,669,724


(1)Total shares purchased represents those shares purchased in the open market as part of the Company’s publicly announced share repurchase program described below, shares received as payment for the exercise price of stock option exercises, and shares received as payment for the withholding taxes on vested restricted stock awards. During the three-month period ended September 30, 2017, there were no shares received as payments for the minimum withholding taxes on vested restricted stock awards and for the exercise price of stock option exercises.

(2)On November 5, 2014, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to 100,000,000 shares of the Company’s common stock during the period commencing January 1, 2015 and ending December 31, 2019.




ITEM 6.    EXHIBITS
ITEM 6.EXHIBITS
(3)(i)
(3)(ii)
(4.1)The registrant hereby agrees that it will, upon request of the Securities and Exchange Commission, furnish a copy of each instrument with respect to long-term debt.
(12)
(31.1)
(31.2)
(32.1)
(32.2)
(101)Interactive Data FileInline XBRL file set for the consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.
(104)Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL file set.




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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


ARCHER-DANIELS-MIDLAND COMPANY
ARCHER-DANIELS-MIDLAND COMPANY
/s/ R. G. Young
R. G. Young
Executive Vice President and Chief Financial Officer
/s/ D. C. Findlay
D. C. Findlay
Senior Vice President, General Counsel, and Secretary


Dated: October 31, 2017

26, 2021
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