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 March 31,September 30, 2019
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 COMPANYCOMPANY
(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
(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 valueADMNew York Stock Exchange
Indicate by check mark whether the registrant: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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  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  o
Non-accelerated filer     o
Large Accelerated Filer
Smaller reporting company  o
☒		Accelerated Filer☐Emerging Growth Company☐
Emerging growth company  o
Non-accelerated Filer		☐Smaller Reporting Company☐ 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 – 560,165,196556,686,315 shares
(April 25,October 30, 2019)

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, 2018, 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
Archer-Daniels-Midland Company

Consolidated Statements of Earnings
(Unaudited)
Three Months Ended 
 March 31,		Three Months Ended
September 30,		 Nine Months Ended
September 30,
2019 20182019 2018 2019 2018
(In millions, except per share amounts)(In millions, except per share amounts)
          
Revenues$15,304
 $15,526
$16,726
 $15,800
 $48,327
 $48,394
Cost of products sold14,376
 14,637
15,648
 14,742
 45,349
 45,266
Gross Profit928
 889
1,078
 1,058
 2,978
 3,128
          
Selling, general, and administrative expenses659
 513
578
 534
 1,839
 1,607
Asset impairment, exit, and restructuring costs11
 16
53
 1
 200
 41
Interest expense101
 91
97
 87
 307
 267
Equity in (earnings) losses of unconsolidated affiliates(101) (147)(88) (131) (279) (378)
Interest income(49) (33)(47) (40) (142) (115)
Other (income) expense – net(8) (15)(18) (25) (39) (42)
Earnings Before Income Taxes315
 464
503
 632
 1,092
 1,748
          
Income taxes81
 68
95
 96
 212
 250
Net Earnings Including Noncontrolling Interests234
 396
408
 536
 880
 1,498
          
Less: Net earnings attributable to noncontrolling interests1
 3
1
 —
 5
 3
          
Net Earnings Attributable to Controlling Interests$233
 $393
$407
 $536
 $875
 $1,495
          
Average number of shares outstanding – basic565
 563
562
 565
 564
 564
          
Average number of shares outstanding – diluted566
 565
563
 568
 565
 567
          
Basic earnings per common share$0.41
 $0.70
$0.72
 $0.95
 $1.55
 $2.65
          
Diluted earnings per common share$0.41
 $0.70
$0.72
 $0.94
 $1.55
 $2.64
          
Dividends per common share$0.35
 $0.335
$0.35
 $0.335
 $1.05
 $1.005

See notes to consolidated financial statements.






Archer-Daniels-Midland Company

Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended 
 March 31,		Three Months Ended
September 30,		 Nine Months Ended
September 30,
2019 20182019 2018 2019 2018
(In millions)(In millions)
          
Net earnings including noncontrolling interests$234
 $396
$408
 $536
 $880
 $1,498
Other comprehensive income (loss):          
Foreign currency translation adjustment(79) 211
(251) (178) (236) (369)
Tax effect(10) (3)(35) (1) (38) (23)
Net of tax amount(89) 208
(286) (179) (274) (392)
          
Pension and other postretirement benefit liabilities adjustment7
 2
7
 8
 10
 23
Tax effect13
 (3)—
 (3) 15
 (7)
Net of tax amount20
 (1)7
 5
 25
 16
          
Deferred gain (loss) on hedging activities(77) (25)(2) 77
 (65) (12)
Tax effect12
 6
8
 (17) 13
 4
Net of tax amount(65) (19)6
 60
 (52) (8)
          
Unrealized gain (loss) on investments(2) (2)7
 (7) 12
 (11)
Tax effect—
 —
—
 —
 (1) —
Net of tax amount(2) (2)7
 (7) 11
 (11)
Other comprehensive income (loss)(136) 186
(266) (121) (290) (395)
Comprehensive income (loss) including noncontrolling interests98
 582
142
 415
 590
 1,103
          
Less: Comprehensive income (loss) attributable to noncontrolling interests1
 3
—
 —
 4
 3
          
Comprehensive income (loss) attributable to controlling interests$97
 $579
$142
 $415
 $586
 $1,100

See notes to consolidated financial statements.







Archer-Daniels-Midland Company

Consolidated Balance Sheets
(In millions)March 31, 2019 December 31, 2018September 30, 2019 December 31, 2018
(Unaudited)  (Unaudited)  
Assets      
Current Assets      
Cash and cash equivalents$926
 $1,997
$932
 $1,997
Short-term marketable securities9
 6
26
 6
Segregated cash and investments4,241
 4,506
4,389
 4,506
Trade receivables2,515
 2,233
2,241
 2,233
Inventories8,946
 8,813
8,075
 8,813
Other current assets3,625
 3,033
3,515
 3,033
Total Current Assets20,262
 20,588
19,178
 20,588
      
Investments and Other Assets 
  
 
  
Investments in and advances to affiliates5,332
 5,317
5,399
 5,317
Long-term marketable securities22
 7
10
 7
Goodwill and other intangible assets5,459
 4,041
5,401
 4,041
Other assets1,777
 927
1,715
 927
Total Investments and Other Assets12,590
 10,292
12,525
 10,292
      
Property, Plant, and Equipment 
  
 
  
Land and land improvements586
 545
597
 545
Buildings5,404
 5,171
5,309
 5,171
Machinery and equipment18,534
 18,399
18,868
 18,399
Construction in progress1,121
 987
960
 987
25,645
 25,102
25,734
 25,102
Accumulated depreciation(15,346) (15,149)(15,633) (15,149)
Net Property, Plant, and Equipment10,299
 9,953
10,101
 9,953
Total Assets$43,151
 $40,833
$41,804
 $40,833
      
Liabilities, Temporary Equity, and Shareholders’ Equity 
  
 
  
Current Liabilities 
  
 
  
Short-term debt$1,595
 $108
$1,242
 $108
Trade payables3,538
 3,545
2,973
 3,545
Payables to brokerage customers4,616
 4,628
4,863
 4,628
Accrued expenses and other payables2,998
 2,913
2,927
 2,913
Current maturities of long-term debt614
 582
15
 582
Total Current Liabilities13,361
 11,776
12,020
 11,776
      
Long-Term Liabilities 
  
 
  
Long-term debt7,675
 7,698
7,631
 7,698
Deferred income taxes1,250
 1,067
1,302
 1,067
Other1,906
 1,247
1,903
 1,247
Total Long-Term Liabilities10,831
 10,012
10,836
 10,012
      
Temporary Equity - Redeemable noncontrolling interest49
 49
53
 49
      
Shareholders’ Equity 
  
 
  
Common stock2,584
 2,560
2,617
 2,560
Reinvested earnings18,553
 18,527
18,651
 18,527
Accumulated other comprehensive income (loss)(2,242) (2,106)(2,395) (2,106)
Noncontrolling interests15
 15
22
 15
Total Shareholders’ Equity18,910
 18,996
18,895
 18,996
Total Liabilities, Temporary Equity, and Shareholders’ Equity$43,151
 $40,833
$41,804
 $40,833
      
See notes to consolidated financial statements.



Archer-Daniels-Midland Company

Consolidated Statements of Cash Flows
(Unaudited)
(In millions)Three Months Ended 
 March 31,		Nine Months Ended
September 30,
2019 20182019 2018
Operating Activities      
Net earnings including noncontrolling interests$234
 $396
$880
 $1,498
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities 
  
 
  
Depreciation and amortization245
 235
742
 706
Asset impairment charges9
 12
50
 33
Deferred income taxes39
 (21)8
 (124)
Equity in earnings of affiliates, net of dividends(4) (105)(92) (147)
Stock compensation expense43
 29
66
 88
Deferred cash flow hedges(77) (25)(65) (11)
Gains on sales of assets and businesses(15) (6)(37) (45)
Other – net(8) 38
148
 (92)
Changes in operating assets and liabilities 
  
 
  
Segregated investments28
 308
300
 1,144
Trade receivables34
 (185)276
 (62)
Inventories166
 (600)994
 578
Deferred consideration in securitized receivables(1,778) (2,450)(5,714) (5,413)
Other current assets(495) (432)(444) (720)
Trade payables(260) (567)(808) (776)
Payables to brokerage customers(27) (432)263
 (433)
Accrued expenses and other payables(169) 231
(206) 96
Total Operating Activities(2,035) (3,574)(3,639) (3,680)
      
Investing Activities 
  
 
  
Purchases of property, plant, and equipment(198) (196)(566) (555)
Proceeds from sales of business and assets18
 14
43
 177
Net assets of businesses acquired(1,876) —
(1,946) (324)
Purchases of marketable securities(26) —
Proceeds from sales of marketable securities50
 —
67
 —
Investments in and advances to affiliates(9) —
(12) (127)
Investments in retained interest in securitized receivables(1,313) (1,298)(3,813) (3,391)
Proceeds from retained interest in securitized receivables3,091
 3,656
9,527
 8,804
Other – net(34) 4
(23) (9)
Total Investing Activities(271) 2,180
3,251
 4,575
      
Financing Activities 
  
 
  
Long-term debt borrowings3
 762
Long-term debt payments(4) (1)(615) (13)
Net borrowings (payments) under lines of credit agreements1,309
 1,474
960
 (317)
Share repurchases(150) —
Cash dividends(198) (190)(592) (568)
Other – net(42) (6)(36) 32
Total Financing Activities1,065
 1,277
(430) (104)
      
Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents(1,241) (117)(818) 791
Cash, cash equivalents, restricted cash, and restricted cash equivalents - beginning of period3,843
 1,858
3,843
 1,858
Cash, cash equivalents, restricted cash, and restricted cash equivalents - end of period$2,602
 $1,741
$3,025
 $2,649
      
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the consolidated balance sheets      
      
Cash and cash equivalents$926
 $797
$932
 $915
Restricted cash and restricted cash equivalents included in segregated cash and investments1,676
 944
2,093
 1,734
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$2,602
 $1,741
$3,025
 $2,649
      
Supplemental Disclosure of Noncash Investing Activity:      
Retained interest in securitized receivables$1,831
 $2,368
$5,657
 $5,598

See notes to consolidated financial statements.



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, 2017557
 $2,398
 $17,552
 $(1,637) $9
 $18,322
Comprehensive income 
  
  
  
  
  
Net earnings   
 393
  
 3
  
Other comprehensive income (loss) 
  
  
 186
 —
  
Total comprehensive income 
  
  
  
  
 582
Dividends paid - $0.335 per share 
  
 (190)  
  
 (190)
Stock compensation expense2
 29
  
  
  
 29
Other—
 1
 —
 —
 (7) (6)
Balance, March 31, 2018559
 $2,428
 $17,755
 $(1,451) $5
 $18,737
            
Balance, December 31, 2018559
 $2,560
��$18,527
 $(2,106) $15
 $18,996
Comprehensive income 
  
  
  
  
  
Net earnings   
 233
  
 1
  
Other comprehensive income (loss) 
  
  
 (136) —
  
Total comprehensive income 
  
  
  
  
 98
Dividends paid - $0.35 per share 
  
 (198)  
  
 (198)
Stock compensation expense1
 43
  
  
  
 43
Other—
 (19) (9) —
 (1) (29)
Balance, March 31, 2019560
 $2,584
 $18,553
 $(2,242) $15
 $18,910

 Common Stock 
Reinvested
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
Total
Shareholders’
Equity
(In millions, except per share amounts)Shares Amount    
Balance, June 30, 2019558
 $2,588
 $18,497
 $(2,130) $24
 $18,979
Comprehensive income 
  
  
  
  
  
Net earnings   
 407
  
 1
  
Other comprehensive income (loss) 
  
  
 (265) (1)  
Total comprehensive income 
  
  
  
  
 142
Dividends paid - $0.35 per share 
  
 (197)  
  
 (197)
Share repurchases(2)   (56)     (56)
Stock compensation expense1
 21
  
  
  
 21
Other—
 8
 —
 —
 (2) 6
Balance, September 30, 2019557
 $2,617
 $18,651
 $(2,395) $22
 $18,895
            
Balance, December 31, 2018559
 $2,560
 $18,527
 $(2,106) $15
 $18,996
Comprehensive income 
  
  
  
  
  
Net earnings   
 875
  
 5
  
Other comprehensive income (loss) 
  
  
 (289) (1)  
Total comprehensive income 
  
  
  
  
 590
Dividends paid - $1.05 per share 
  
 (592)  
  
 (592)
Share repurchases(4)   (150)     (150)
Stock compensation expense2
 66
  
  
  
 66
Other


 (9) (9) 


 3
 (15)
Balance, September 30, 2019557
 $2,617
 $18,651
 $(2,395) $22
 $18,895
            
Balance, June 30, 2018559
 $2,489
 $18,132
 $(1,911) $2
 $18,712
Comprehensive income 
  
  
  
  
  
Net earnings   
 536
  
 —
  
Other comprehensive income (loss) 
  
  
 (121) —
  
Total comprehensive income 
  
  
  
  
 415
Dividends paid - $0.335 per share 
  
 (189)  
  
 (189)
Stock compensation expense—
 25
  
  
  
 25
Other1
 27
 (1) —
 11
 37
Balance, September 30, 2018560
 $2,541
 $18,478
 $(2,032) $13
 $19,000
            
Balance, December 31, 2017557
 $2,398
 $17,552
 $(1,637) $9
 $18,322
Comprehensive income 
  
  
  
  
  
Net earnings   
 1,495
  
 3
  
Other comprehensive income (loss) 
  
  
 (395) —
  
Total comprehensive income 
  
  
  
  
 1,103
Dividends paid - $1.005 per share 
  
 (568)  
  
 (568)
Stock compensation expense1
 88
  
  
  
 88
Other2
 55
 (1) —
 1
 55
Balance, September 30, 2018560
 $2,541
 $18,478
 $(2,032) $13
 $19,000
            
See notes to consolidated financial statements.



Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements
(Unaudited)
Note 1.Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 threenine months ended March 31,September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.  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, 2018.

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.

Reclassifications

In May 2019, the Company announced the creation of a new business unit. The former Origination and Oilseeds businesses were merged into a combined Ag Services and Oilseeds segment which enables the Company to better respond to market changes by integrating the supply and value chains and risk management, while delivering significant simplification and efficiency to the day-to-day business. As part of the Company’s efforts for a streamlined management structure, the combined segment is led by the former President of Oilseeds expanding his role to President of Ag Services and Oilseeds. Effective July 1, 2019, the Company changed its segment reporting to reflect the creation of the combined Ag Services and Oilseeds segment.

Throughout this quarterly report on Form 10-Q, prior period results have been reclassified to conform to the current period presentation.

Segregated Cash and Investments

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

Last-in, First-out (LIFO)(“LIFO”) Inventories

Interim period LIFO calculations are based on interim period costs and management’s estimates of year-end inventory levels.  Because the availability and price of agricultural commodity-based LIFO inventories are unpredictable due 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.


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 2.New Accounting Standards

Effective January 1, 2019, the Company adopted the new guidance of ASCAccounting Standards Codification (“ASC”) Topic 842, Leases (Topic 842)(“Topic 842”), which superseded ASC Topic 840, Leases. Topic 842 requires lessees to recognize assets and liabilities for all leases. The Company adopted Topic 842 using the optional transition method that allows entities to forgoforego the comparative reporting requirements under the modified retrospective transition method. In addition, the Company elected to apply the package of practical expedients that allows entities to forego reassessing at the transition date: (1) whether any expired or existing contracts are or contain leases; (2) lease classification for any expired or existing leases; and (3) whether unamortized initial direct costs for existing leases meet the definition of initial direct costs under the new guidance. The Company also elected to use the practical expedient that allows the combination of lease and non-lease contract components in all of its underlying asset categories, as well as the optional transition practical expedient that permits entities to continue applying current accounting policy for land easements that existed as of or expired before January 1, 2019. The adoption of Topic 842 resulted in the recording of right-of-use assets and lease liabilities of $793 million and $795 million, respectively, at January 1, 2019. The new guidance did not have a material impact on the Company’s consolidated statement of earnings and had no impact on the consolidated statement of cash flows. For more information about the adoption of Topic 842, see Note 12.

Effective January 1, 2019, the Company adopted the amended guidance of ASC Topic 220, Income Statement - Reporting Comprehensive Income (“Topic 220)220”), which allows the reclassification from accumulated other comprehensive income (AOCI)(“AOCI”) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Act”), eliminating the stranded tax effects resulting from the Act and improving the usefulness of information reported to financial statement users. In addition, the Company is required to disclose: (1) a description of its accounting policy for releasing income tax effects from accumulated other comprehensive income;AOCI; (2) whether it elects to reclassify the stranded income tax effects from the Act; and (3) information about other income tax effects related to the application of the Act that are reclassified from AOCI to retained earnings, if any. The Company has made aCompany’s accounting policy electionis to not release income tax effects from accumulated comprehensive income, includingAOCI when individual units of account are sold, terminated, or extinguished. However, the Company has elected to not release from AOCI the stranded income tax effects resulting from the Act.

Note 3.Pending Accounting Standards

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 replaces today’s “incurred loss” approach with an “expected loss” model and 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. The Company will be required to adopt the amended guidance on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is evaluating its current accounting policymethodology of recordingestimating allowance for doubtful accounts for compliance withand the risk profile of its receivable portfolio and is developing a model that includes the qualitative and forecasting aspects of the “expected loss” model under the amended guidance. Based on that evaluation,The Company is in the Companyprocess of finalizing its assessment of the impact of the amended guidance and does not expect the adoption of this amended guidance to have a significant impact on the Company’sits financial results.

Effective January 1, 2020, the Company will be required to adopt the amended guidance of ASC Topic 820, Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. Early adoption is permitted. The adoption of this amended guidance will not impact the Company’s financial results.

Effective December 31, 2020, the Company will be required to adopt the amended guidance of ASC Subtopic 715-20, Compensation - Retirement Benefits - Defined Benefit Plans - General, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Early adoption is permitted. The adoption of this amended guidance will not impact the Company’s financial results.
 

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.Revenues

Revenue Recognition

The Company principally generates revenue from merchandising and transporting agricultural commodities and manufactured products used as ingredients in food, feed, energy, and industrial products. 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)(“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. 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)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 $477$319 million and $501 million as of March 31,September 30, 2019 and December 31, 2018, respectively, were recorded in accrued expenses and other payables in the consolidated balance sheet.sheets. Contract liabilities recognized as revenues were $193 million and $519 million for the three and nine months ended March 31,September 30, 2019, respectively and 2018 were $166$107 million and $326$616 million for the three and nine months ended September 30, 2018, respectively.





















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 March 31,September 30, 2019 and 2018.

Three Months Ended March 31, 2019Three Months Ended September 30, 2019
Topic 606 Revenue
Topic 815(1)
TotalTopic 606 Revenue
Topic 815(1)
Total
Point in TimeOver TimeTotalRevenueRevenuesPoint in TimeOver TimeTotalRevenueRevenues
(In millions)(In millions)
Origination 
Merchandising and Handling$592
$49
$641
$5,417
$6,058
Transportation—
66
66
—
66
Total Origination592
115
707
5,417
6,124
Oilseeds 
Crushing and Origination171
—
171
3,085
3,256
Refining, Packaging, Biodiesel, and Other512
—
512
1,646
2,158
Total Oilseeds683
—
683
4,731
5,414
Ag Services and Oilseeds 
Ag Services$1,369
$134
$1,503
$6,743
$8,246
Crushing175
—
175
2,290
2,465
Refined Products and Other628
—
628
1,277
1,905
Total Ag Services and Oilseeds2,172
134
2,306
10,310
12,616
Carbohydrate Solutions  
Starches and Sweeteners1,199
—
1,199
423
1,622
1,296
—
1,296
428
1,724
Bioproducts781
—
781
—
781
841
—
841
—
841
Total Carbohydrate Solutions1,980
—
1,980
423
2,403
2,137
—
2,137
428
2,565
Nutrition  
Wild Flavors and Specialty Ingredients674
—
674
—
674
703
—
703
—
703
Animal Nutrition608
—
608
—
608
754
—
754
—
754
Total Nutrition1,282
—
1,282
—
1,282
1,457
—
1,457
—
1,457
  
Other81
—
81
—
81
88
—
88
—
88
Total Revenues$4,618
$115
$4,733
$10,571
$15,304
$5,854
$134
$5,988
$10,738
$16,726

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.Revenues (Continued)


 Nine Months Ended September 30, 2019
 Topic 606 Revenue
Topic 815(1)
Total
 Point in TimeOver TimeTotalRevenueRevenues
 (In millions)
Ag Services and Oilseeds     
Ag Services$2,509
$377
$2,886
$20,767
$23,653
Crushing546
—
546
6,584
7,130
Refined Products and Other1,665
—
1,665
3,934
5,599
Total Ag Services and Oilseeds4,720
377
5,097
31,285
36,382
Carbohydrate Solutions     
Starches and Sweeteners3,755
—
3,755
1,275
5,030
Bioproducts2,379
—
2,379
—
2,379
Total Carbohydrate Solutions6,134
—
6,134
1,275
7,409
Nutrition     
Wild Flavors and Specialty Ingredients2,105
—
2,105
—
2,105
Animal Nutrition2,158
—
2,158
—
2,158
Total Nutrition4,263
—
4,263
—
4,263
      
Other273
—
273
—
273
Total Revenues$15,390
$377
$15,767
$32,560
$48,327


















Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.Revenues (Continued)


Three Months Ended March 31, 2018Three Months Ended September 30, 2018
Topic 606 Revenue
Topic 815(1)
TotalTopic 606 Revenue
Topic 815(1)
Total
Point in TimeOver TimeTotalRevenueRevenuesPoint in TimeOver TimeTotalRevenueRevenues
(In millions)(In millions)
Origination 
Merchandising and Handling$671
$62
$733
$5,479
$6,212
Transportation—
55
55
—
55
Total Origination671
117
788
5,479
6,267
Oilseeds 
Crushing and Origination186
—
186
3,099
3,285
Refining, Packaging, Biodiesel, and Other527
—
527
1,790
2,317
Total Oilseeds713
—
713
4,889
5,602
Ag Services and Oilseeds 
Ag Services$396
$121
$517
$7,106
$7,623
Crushing330
—
330
2,358
2,688
Refined Products and Other593
—
593
1,356
1,949
Total Ag Services and Oilseeds1,319
121
1,440
10,820
12,260
Carbohydrate Solutions  
Starches and Sweeteners1,157
—
1,157
481
1,638
1,261
—
1,261
445
1,706
Bioproducts963
—
963
—
963
828
—
828
—
828
Total Carbohydrate Solutions2,120
—
2,120
481
2,601
2,089
—
2,089
445
2,534
Nutrition  
Wild Flavors and Specialty Ingredients636
—
636
—
636
641
—
641
—
641
Animal Nutrition314
—
314
—
314
281
—
281
—
281
Total Nutrition950
—
950
—
950
922
—
922
—
922
  
Other106
—
106
—
106
84
—
84
—
84
Total Revenues$4,560
$117
$4,677
$10,849
$15,526
$4,414
$121
$4,535
$11,265
$15,800

 Nine Months Ended September 30, 2018
 Topic 606 Revenue
Topic 815(1)
Total
 Point in TimeOver TimeTotalRevenueRevenues
 (In millions)
Ag Services and Oilseeds     
Ag Services$1,542
$361
$1,903
$21,866
$23,769
Crushing647
—
647
7,191
7,838
Refined Products and Other1,787
—
1,787
4,037
5,824
Total Ag Services and Oilseeds3,976
361
4,337
33,094
37,431
Carbohydrate Solutions     
Starches and Sweeteners3,699
—
3,699
1,349
5,048
Bioproducts2,734
—
2,734
—
2,734
Total Carbohydrate Solutions6,433
—
6,433
1,349
7,782
Nutrition     
Wild Flavors and Specialty Ingredients1,970
—
1,970
—
1,970
Animal Nutrition920
—
920
—
920
Total Nutrition2,890
—
2,890
—
2,890
      
Other291
—
291
—
291
Total Revenues$13,590
$361
$13,951
$34,443
$48,394

(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.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.Revenues (Continued)

Origination
Ag Services and Oilseeds

The OriginationAg Services and Oilseeds segment generates revenue from the sale of commodities, and from service fees for the transportation of goods.goods, and from the sale of products manufactured in its global processing facilities. 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, in Transportation, 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. 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.

Oilseeds

The Oilseeds segment generates revenue primarily from the sale of products manufactured in its global processing facilities.  The segment also generates revenue from the sale of raw commodities in its South American grain origination business and from the sale of peanuts, tree nuts, and peanut-derived ingredients.  Revenue is recognized when a performance obligation is satisfied by transferring control over a product. 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.


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.Revenues (Continued)


Carbohydrate Solutions

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

Nutrition

The Nutrition segment sells specialty products including natural flavor ingredients, flavor systems, natural colors, animal nutrition products, 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

Other 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 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

The Company acquired Neovia SAS (Neovia) and Florida Chemical Company (FCC) in January 2019 and March 2019, respectively. Both acquisitions are in line with the Company’s strategy to become one of the world’s leading nutrition companies. The post-acquisition financial results of Neovia and FCC, which were not material, are reported in the Nutrition segment.

During the threenine months ended March 31,September 30, 2019, the Company acquired Neovia FCC,SAS (“Neovia”), Florida Chemical Company (“FCC”), The Ziegler Group (“Ziegler”), and the remaining 50% interest in Gleadell Agriculture Ltd (Gleadell)(“Gleadell”), for an aggregate consideration of $1,953 million$2.0 billion in cash. The aggregate consideration of these acquisitions, net of $91$95 million in cash acquired, plus the $15 million acquisition-date value of the Company’s previously held equity interest in Gleadell, of $14 million, were preliminarily allocated as follows:

In millionsNeoviaFCCGleadellTotal
Working capital$102
$40
$(6)$136
Property, plant, and equipment409
17
13
439
Goodwill784
90
10
884
Other intangible assets583
23
—
606
Other long-term assets87
—
—
87
Long-term liabilities(274)—
(2)(276)
Aggregate cash consideration, net of cash acquired, plus acquisition-date fair value of previously held equity interest$1,691
$170
$15
$1,876

Goodwill allocated in connection with the acquisitions is primarily attributablefollows, subject to synergies expected to arise after the Company’s acquisition of the businesses. Of the $884 million preliminarily allocated to goodwill, $90 million is expected to be deductible for tax purposes.

final measurement period adjustments:

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.Acquisitions (Continued)


In millionsNeoviaFCCZieglerGleadellTotal
Working capital$104
$40
$18
$(6)$156
Property, plant, and equipment384
17
3
13
417
Goodwill739
85
23
10
857
Other intangible assets679
29
35
—
743
Other long-term assets83
—
—
9
92
Long-term liabilities(297)(1)(10)(11)(319)
Aggregate cash consideration, net of cash acquired, plus acquisition-date fair value of previously held equity interest$1,692
$170
$69
$15
$1,946

Goodwill allocated in connection with the acquisitions is primarily attributable to synergies expected to arise after the Company’s acquisition of the businesses. Of the $857 million preliminarily allocated to goodwill, $90 million is expected to be deductible for tax purposes.

The Company recognized pre-tax gains of $3$4 million on the Gleadell transaction, representing the difference between the carrying value and acquisition-date fair value of the Company’s previously held equity interest. The acquisition-date fair value was determined based on a discounted cash flow analysis using market participant assumptions (a Level 3 measurement under applicable accounting standards).

The following table sets forth the preliminary fair values and the useful lives of the other intangible assets acquired.

Useful LifeNeoviaFCCTotalUseful LivesNeoviaFCCZieglerTotal
(In years)(In millions)(In years)(In millions)
Intangible assets with finite lives:  
Trademarks/brands5 to 13$166
$7
$173
5to15$216
$10
$4
$230
Customer lists10 to 20289
12
301
10to20304
15
5
324
Developed technology6 to 11128
4
132
Other intellectual property6to11159
4
26
189
Total other intangible assets acquired $583
$23
$606
 $679
$29
$35
$743


The Neovia, FCC, and Ziegler acquisitions are in line with the Company’s strategy to become one of the world’s leading nutrition companies. The post-acquisition financial results of these acquisitions are reported in the Nutrition segment.


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

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 March 31,September 30, 2019 and December 31, 2018.
Fair Value Measurements at March 31, 2019Fair Value Measurements at September 30, 2019

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:              
Inventories carried at market$—
 $3,000
 $1,511
 $4,511
$—
 $2,613
 $1,430
 $4,043
Unrealized derivative gains:              
Commodity contracts—
 257
 212
 469
—
 263
 161
 424
Foreign currency contracts—
 191
 —
 191
—
 171
 —
 171
Interest rate contracts—
 4
 —
 4
Cash equivalents432
 —
 —
 432
490
 —
 —
 490
Marketable securities30
 1
 —
 31
35
 1
 —
 36
Segregated investments1,073
 —
 —
 1,073
777
 —
 —
 777
Deferred receivables consideration—
 430
 —
 430
—
 330
 —
 330
Total Assets$1,535
 $3,879
 $1,723
 $7,137
$1,302
 $3,382
 $1,591
 $6,275
              
Liabilities:              
Unrealized derivative losses:              
Commodity contracts$—
 $291
 $143
 $434
$—
 $331
 $140
 $471
Foreign currency contracts—
 155
 —
 155
—
 128
 —
 128
Interest rate contracts—
 32
 —
 32
—
 43
 —
 43
Inventory-related payables—
 1,123
 16
 1,139
—
 577
 41
 618
Total Liabilities$—
 $1,601
 $159
 $1,760
$—
 $1,079
 $181
 $1,260
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.Fair Value Measurements (Continued)

 Fair Value Measurements at December 31, 2018
 
 
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$—
 $3,032
 $1,515
 $4,547
Unrealized derivative gains:       
Commodity contracts—
 306
 155
 461
Foreign currency contracts—
 175
 —
 175
Cash equivalents1,288
 —
 —
 1,288
Marketable securities12
 1
 —
 13
Segregated investments1,044
 —
 —
 1,044
Deferred receivables consideration—
 379
 —
 379
Total Assets$2,344
 $3,893
 $1,670
 $7,907
        
Liabilities:       
Unrealized derivative losses:       
Commodity contracts$—
 $344
 $245
 $589
Foreign currency contracts—
 152
 —
 152
Interest rate contracts—
 20
 —
 20
Inventory-related payables—
 579
 18
 597
Total Liabilities$—
 $1,095
 $263
 $1,358


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)(“OTC”) markets.  Market valuations for the Company’s inventories are adjusted for location and quality because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. 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.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

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 differences are generally determined using inputs from broker or dealer quotations or market transactions in either the listed or OTC markets.  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 changes in the fair value of derivatives designated as cash flow hedges are recognized in the consolidated balance sheets as a component of accumulated other comprehensive income (loss) (AOCI)(“AOCI”) until the hedged items are recorded in earnings or it is probable the hedged transaction will no longer occur.

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

The Company’s marketable securities are comprised of U.S. Treasury securities and corporate debt securities.  U.S. Treasury securities are valued using quoted market prices and are classified in Level 1.  Corporate 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 debt 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 from the purchasers under the Programs (see Note 17 for more information). This amount is reflected in other current assets on the consolidated balance sheet (see Note 8 for more information). The Company carries the deferred consideration at fair value determined by calculating the expected amount of cash to be received. The fair value is principally based on observable inputs (a Level 2 measurement) consisting mainly of the face amount 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 transferred under the Programs, which have historically been insignificant.

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 three months ended March 31,September 30, 2019.

Level 3 Fair Value Asset Measurements atLevel 3 Fair Value Asset Measurements at
March 31, 2019September 30, 2019
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, 2018$1,515
 $155
 $1,670
Balance, June 30, 2019$1,388
 $159
 $1,547
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*(27) 144
 117
27
 91
 118
Purchases2,689
 —
 2,689
2,772
 —
 2,772
Sales(2,824) —
 (2,824)(2,643) —
 (2,643)
Settlements—
 (103) (103)—
 (106) (106)
Transfers into Level 3297
 23
 320
213
 21
 234
Transfers out of Level 3(139) (7) (146)(327) (4) (331)
Ending balance, March 31, 2019$1,511
 $212
 $1,723
Ending balance, September 30, 2019$1,430
 $161
 $1,591

* Includes increase in unrealized gains of $210165 million relating to Level 3 assets still held at March 31,September 30, 2019.

The following table presents a rollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31,September 30, 2019.

Level 3 Fair Value Liability Measurements atLevel 3 Fair Value Liability Measurements at
March 31, 2019September 30, 2019
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 
 
Total 
Liabilities
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 
 
Total 
Liabilities
(In millions)(In millions)
          
Balance, December 31, 2018$18
 $245
 $263
Balance, June 30, 2019$22
 $216
 $238
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*—
 18
 18
(3) 82
 79
Purchases4
 —
 4
26
 —
 26
Sales(6) —
 (6)(4) —
 (4)
Settlements—
 (99) (99)—
 (167) (167)
Transfers into Level 3—
 7
 7
—
 13
 13
Transfers out of Level 3—
 (28) (28)—
 (4) (4)
Ending balance, March 31, 2019$16
 $143
 $159
Ending balance, September 30, 2019$41
 $140
 $181

* Includes increase in unrealized losses of $2081 million relating to Level 3 liabilities still held at March 31,September 30, 2019.

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 three months ended March 31,September 30, 2018.
Level 3 Fair Value Asset Measurements atLevel 3 Fair Value Asset Measurements at
March 31, 2018September 30, 2018
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, 2017$1,486
 $111
 $1,597
Balance, June 30, 2018$1,378
 $208
 $1,586
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*173
 47
 220
183
 130
 313
Purchases2,239
 —
 2,239
3,518
 —
 3,518
Sales(2,150) —
 (2,150)(3,282) —
 (3,282)
Settlements—
 (66) (66)—
 (150) (150)
Transfers into Level 3187
 28
 215
235
 38
 273
Transfers out of Level 3(106) (4) (110)(233) (9) (242)
Ending balance, March 31, 2018$1,829
 $116
 $1,945
Ending balance, September 30, 2018$1,799
 $217
 $2,016

* Includes increase in unrealized gains of $174$243 million relating to Level 3 assets still held at March 31,September 30, 2018.

The following table presents a rollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31,September 30, 2018.
Level 3 Fair Value Liability Measurements atLevel 3 Fair Value Liability Measurements at
March 31, 2018September 30, 2018
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 
 
Total 
Liabilities
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 
 
Total 
Liabilities
(In millions)(In millions)
          
Balance, December 31, 2017$39
 $103
 $142
Balance, June 30, 2018$22
 $200
 $222
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*17
 198
 215
4
 114
 118
Purchases21
 —
 21
30
 —
 30
Sales(2) —
 (2)(12) —
 (12)
Settlements—
 (57) (57)—
 (130) (130)
Transfers into Level 3—
 65
 65
—
 30
 30
Transfers out of Level 3—
 (18) (18)—
 (11) (11)
Ending balance, March 31, 2018$75
 $291
 $366
Ending balance, September 30, 2018$44
 $203
 $247

* Includes increase in unrealized losses of $198$118 million relating to Level 3 liabilities still held at March 31,September 30, 2018.
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, 2019.
 Level 3 Fair Value Asset Measurements at
 September 30, 2019
 
Inventories
 Carried at
 Market
 
Commodity
Derivative
Contracts
Gains
 
 
Total 
Assets
 (In millions)
      
Balance, December 31, 2018$1,515
 $155
 $1,670
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*148
 319
 467
Purchases8,118
 —
 8,118
Sales(8,425) —
 (8,425)
Settlements—
 (346) (346)
Transfers into Level 3213
 54
 267
Transfers out of Level 3(139) (21) (160)
Ending balance, September 30, 2019$1,430
 $161
 $1,591


* Includes increase in unrealized gains of $656 million relating to Level 3 assets still held at September 30, 2019.

The 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, 2019.

 Level 3 Fair Value Liability Measurements at
 September 30, 2019
 
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 
 
Total 
Liabilities
 (In millions)
      
Balance, December 31, 2018$18
 $245
 $263
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*(2) 254
 252
Purchases41
 —
 41
Sales(16) —
 (16)
Settlements—
 (354) (354)
Transfers into Level 3—
 37
 37
Transfers out of Level 3—
 (42) (42)
Ending balance, September 30, 2019$41
 $140
 $181


* Includes increase in unrealized losses of $258 million relating to Level 3 liabilities still held at September 30, 2019.

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, 2018.
 Level 3 Fair Value Asset Measurements at
 September 30, 2018
 
Inventories
 Carried at
 Market
 
Commodity
Derivative
Contracts
Gains
 
 
Total 
Assets
 (In millions)
      
Balance, December 31, 2017$1,486
 $111
 $1,597
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*559
 302
 861
Purchases7,890
 —
 7,890
Sales(8,264) —
 (8,264)
Settlements—
 (294) (294)
Transfers into Level 3235
 123
 358
Transfers out of Level 3(107) (25) (132)
Ending balance, September 30, 2018$1,799
 $217
 $2,016


* Includes increase in unrealized gains of $523 million relating to Level 3 assets still held at September 30, 2018.

The 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, 2018.
 Level 3 Fair Value Liability Measurements at
 September 30, 2018
 
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 
 
Total 
Liabilities
 (In millions)
      
Balance, December 31, 2017$39
 $103
 $142
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*12
 360
 372
Purchases54
 —
 54
Sales(61) —
 (61)
Settlements—
 (348) (348)
Transfers into Level 3—
 136
 136
Transfers out of Level 3—
 (48) (48)
Ending balance, September 30, 2018$44
 $203
 $247



* Includes increase in unrealized losses of $364 million relating to Level 3 liabilities still held at September 30, 2018.


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.Fair Value Measurements (Continued)

For all periods presented, the Company had no transfers between LevelLevels 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 to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts falling below the 10% threshold and thus permitting reclassification to Level 2.

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

The following table sets forth the weighted average percentage of the unobservable price components included in the Company’s Level 3 valuations as of March 31,September 30, 2019 and December 31, 2018. The Company’s Level 3 measurements may include basis only, transportation cost only, or both price components. As an example, for Level 3 inventories with basis, the unobservable component as of March 31,September 30, 2019 is a weighted average 200.1%78.0% of the total price for assets and 13.0%28.1% of the total price for liabilities.

Weighted Average % of Total PriceWeighted Average % of Total Price
March 31, 2019 December 31, 2018September 30, 2019 December 31, 2018
Component TypeAssets Liabilities Assets LiabilitiesAssets Liabilities Assets Liabilities
Inventories and Related Payables              
Basis200.1% 13.0% 18.5% 125.0%78.0% 28.1% 18.5% 125.0%
Transportation cost24.8% 55.0% 25.9% 39.4%30.5% 31.4% 25.9% 39.4%
              
Commodity Derivative Contracts              
Basis26.3% 20.6% 21.6% 19.1%23.4% 31.2% 21.6% 19.1%
Transportation cost30.9% 35.2% 29.5% 35.1%61.7% 46.7% 29.5% 35.1%


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

Note 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 commodity 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, and inventories of certain merchandisable agricultural commodities, 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.
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 March 31,September 30, 2019 and December 31, 2018.

March 31, 2019 December 31, 2018September 30, 2019 December 31, 2018
Assets Liabilities Assets LiabilitiesAssets Liabilities Assets Liabilities
(In millions)(In millions)
              
Foreign Currency Contracts$191
 $155
 $175
 $152
$132
 $128
 $175
 $152
Commodity Contracts469
 434
 461
 589
424
 471
 461
 589
Total$660
 $589
 $636
 $741
$556
 $599
 $636
 $741

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 March 31,September 30, 2019 and 2018.
    Other expense (income) - net      Other expense (income) - net  
  Cost of products sold    Cost of products sold  
(In millions)Revenues Other expense (income) - net Revenues Other expense (income) - net 
Three Months Ended March 31, 2019  
  
Three Months Ended September 30, 2019  
  
Consolidated Statement of Earnings$15,304
 $14,376
 $(8)  $16,726
 $15,648
 $(18)  
              
Pre-tax gains (losses) on:              
Foreign Currency Contracts$8
 $—
 $(30)  $17
 $(81) $(6)  
Commodity Contracts—
 120
 —
  —
 153
 —
  
Total gain (loss) recognized in earnings$8
 $120
 $(30) $98
$17
 $72
 $(6) $83
              
Three Months Ended March 31, 2018       
Three Months Ended September 30, 2018       
Consolidated Statement of Earnings$15,526
 $14,637
 $(15)  $15,800
 $14,742
 $(25)  
              
Pre-tax gains (losses) on:              
Foreign Currency Contracts$(3) $(15) $64
  $(4) $12
 $(30)  
Commodity Contracts—
 (313) —
  —
 84
 —
  
Total gain (loss) recognized in earnings$(3) $(328) $64
 $(267)$(4) $96
 $(30) $62
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 7.Derivative Instruments and Hedging Activities (Continued)

     Other expense (income) - net  
   Cost of products sold   
(In millions)Revenues    
Nine Months Ended September 30, 2019       
Consolidated Statement of Earnings$48,327
 $45,349
 $(39)  
        
Pre-tax gains (losses) on:       
Foreign Currency Contracts$15
 $(30) $(22)  
Commodity Contracts—
 142
 —
  
Total gain (loss) recognized in earnings$15
 $112
 $(22) $105
        
Nine Months Ended September 30, 2018       
Consolidated Statement of Earnings$48,394
 $45,266
 $(42)  
        
Pre-tax gains (losses) on:       
Foreign Currency Contracts$21
 $(189) $(91)  
Commodity Contracts—
 163
 —
  
Total gain (loss) recognized in earnings$21
 $(26) $(91) $(96)

Changes in the market value of inventories of certain merchandisable agricultural commodities, forward cash purchase and sales contracts, exchange-traded futures and exchange-traded and OTC options contracts are recognized in earnings immediately as a component of cost of products sold.

Derivatives Designated as Cash Flow, or Fair Value or Net Investment Hedging Strategies

As of March 31,September 30, 2019 and December 31, 2018, the Company had certain derivatives designated as cash flow and fair value hedges.

For derivative instruments that are designated and qualify as highly-effective cash flow hedges, the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income (loss) (AOCI)(“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.
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 7.Derivative Instruments and Hedging Activities (Continued)

The Company uses interest rate swaps designated as fair value hedges to protect the fair value of $496 million in 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. The terms of the interest rate swaps match the terms of the underlying debt. At March 31,September 30, 2019, the Company had $1$4 million in other current liabilitiesassets representing the fair value of the interest rate swaps and a corresponding decreaseincrease in the underlying debt for the same amount with no net impact to earnings.

The Company uses cross-currency swaps designated as net investment hedges to protect the Company’s investment in a foreign subsidiary against changes in foreign currency exchange rates. During the three months ended September 30, 2019, the Company executed USD-fixed to Euro-fixed cross-currency swaps maturing on various dates with an aggregate notional amount of $1.2 billion. As of September 30, 2019, the Company had after-tax gains of $30 million in AOCI related to foreign exchange gains and losses from the net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 7.Derivative Instruments and Hedging Activities (Continued)

The Company uses interest rate swaps designated as cash flow hedges to hedge the forecasted interest payments on certain letters of 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 other (income) expense - net over the period in which the related interest payments are paid to the banks. At March 31,September 30, 2019, the Company had $31$43 million of after-tax losses in AOCI related to these interest rate swaps. The Company expects to recognize this amount in its consolidated statement of earnings during the next 12 months.life of the instruments.

For each of the commodity hedge programs described below, the derivatives are designated as cash flow hedges.  Assuming normal market conditions, the changes in the market value of such derivative contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of the hedged item.  Once the hedged item is recognized in earnings, the gains/losses arising from the hedge are reclassified from AOCI to either revenues or cost of products sold, as applicable. As of March 31,September 30, 2019, the Company had $10$7 million of after-tax losses in AOCI related to gains and losses from commodity cash flow hedge transactions.  The Company expects to recognize $10$7 million of these after-tax losses in its consolidated statement of earnings during the next 12 months.

The Company uses futures or options contracts to hedge the purchase price of anticipated volumes of corn to be purchased and processed in a future month.  The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s forecasted purchases of corn.  The Company’s corn processing plants currently grind approximately 72 million bushels of corn per month.  During the past 12 months, the Company hedged between 19% and 95% of its monthly anticipated grind.  At March 31,September 30, 2019, the Company had designated hedges representing between 1%4% and 50%60% 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 hedge 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, the Company hedged between 20 million and 121 million gallons of ethanol sales per month under these programs.  At March 31,September 30, 2019, the Company had designated hedges representing between 1 million0 and 4291 million gallons of ethanol sales per month over the next 312 months.

The Company uses futures and options contracts to hedge the purchase price of anticipated volumes of soybeans to be purchased and processed in a future month for certain of its U.S. soybean crush facilities. The Company also uses futures or options contracts to hedge the sales prices of anticipated soybean meal and soybean oil sales proportionate to the soybean crushing process at these facilities. During the past 12 months, the Company hedged between 99%79% and 100% of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities. The Company has designated hedges representing between 0% and 100% of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities over the next 12 months.

The following table sets forth the fair value of derivatives designated as hedging instruments as of March 31,September 30, 2019 and December 31, 2018.

March 31, 2019 December 31, 2018September 30, 2019 December 31, 2018
Assets Liabilities Assets LiabilitiesAssets Liabilities Assets Liabilities
(In millions)(In millions)
Foreign Currency Contracts$39
 $—
 $—
 $—
Interest Rate Contracts$—
 $32
 $—
 $20
4
 43
 —
 20
Total$—
 $32
 $—
 $20
$43
 $43
 $—
 $20








Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 7.Derivative Instruments and Hedging Activities (Continued)

The following table setstables set 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 March 31,September 30, 2019 and 2018.
 
  Cost of products sold Interest expense Other expense (income) - net    Cost of products sold Interest expense Other expense (income) - net  
(In millions)Revenues   Revenues  
Three Months Ended March 31, 2019      
Three Months Ended September 30, 2019      
Consolidated Statement of Earnings$16,726
 $15,648
 $97
 $(18)  
         
Effective amounts recognized in earnings         
Pre-tax gains (losses) on:         
Commodity Contracts$3
 $1
 $—
 $—
  
Interest Contracts—
 —
 —
 (21)  
Total gain (loss) recognized in earnings$3
 $1
 $—
 $(21) $(17)
         
Three Months Ended September 30, 2018         
Consolidated Statement of Earnings$15,304
 $14,376
 $101
 $(8)  $15,800
 $14,742
 $87
 $(25)  
                  
Effective amounts recognized in earnings                  
Pre-tax gains (losses) on:                  
Commodity Contracts$(13) $5
 $—
 $—
  $15
 $(87) $—
 $—
  
Total gain (loss) recognized in earnings$(13) $5
 $—
 $—
 $(8)$15
 $(87) $—
 $—
 $(72)
         
Three Months Ended March 31, 2018         
Consolidated Statement of Earnings$15,526
 $14,637
 $91
 $(15)  
         
Effective amounts recognized in earnings         
Pre-tax gains (losses) on:         
Commodity Contracts$2
 $6
 $—
 $—
  
Total gain (loss) recognized in earnings$2
 $6
 $—
 $—
 $8

         
   Cost of products sold Interest expense Other expense (income) - net  
(In millions)Revenues     
Nine Months Ended September 30, 2019       
Consolidated Statement of Earnings$48,327
 $45,349
 $307
 $(39)  

         
Effective amounts recognized in earnings
        
Pre-tax gains (losses) on:

        
Commodity Contracts$(5) $7
 $—
 $—
  
Interest Contracts—
 —
 —
 (29)  
Total gain (loss) recognized in earnings$(5) $7
 $—
 $(29) $(27)
          
Nine Months Ended September 30, 2018

        
Consolidated Statement of Earnings$48,394
 $45,266
 $267
 $(42)  

         
Effective amounts recognized in earnings         
Pre-tax gains (losses) on:         
Commodity Contracts$16
 $(115) $—
 $—
  
Interest Contracts—
 —
 1
 —
  
Total gain (loss) recognized in earnings$16
 $(115) $1
 $—
 $(98)






Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 7.Derivative Instruments and Hedging Activities (Continued)

Other Net Investment Hedging Strategies

The Company issued €500 million aggregate principal amount of Floating Rate Notes and €600 million aggregate principal amount of 1.75% Notes on June 24, 2015 and €650 million aggregate principal amount of 1.0% Notes on September 12, 2018 (collectively, the “Notes”). The Company has designated €1.75€2.2 billion of the Notesits outstanding long-term debt and commercial paper borrowings and €1.1 billion of its outstanding long-term debt at September 30, 2019 and December 31, 2018, respectively, as a hedgehedges of its net investment in a foreign subsidiary. As of March 31,September 30, 2019 and December 31, 2018, the Company had after-tax gains of $3$63 million and after-tax losses of $26 million, respectively, in AOCI related to foreign exchange gains and losses from the net investment hedge transaction.transactions. The amount is deferred in AOCI until the underlying investment is divested.


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:

March 31, December 31,
2019 2018September 30, December 31,
(In millions)2019 2018
   (In millions)
Unrealized gains on derivative contracts$660
 $636
$599
 $636
Deferred receivables consideration430
 379
330
 379
Customer omnibus receivable686
 450
743
 450
Financing receivables - net (1)
430
 424
507
 424
Insurance premiums receivable27
 35
53
 35
Prepaid expenses263
 184
248
 184
Tax receivables527
 379
514
 379
Non-trade receivables (2)
430
 323
311
 323
Other current assets172
 223
210
 223
$3,625
 $3,033
$3,515
 $3,033
      

(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 $3 million at March 31,September 30, 2019 and December 31, 2018. Interest earned on financing receivables of $8$5 million and $7$19 million for the three and nine months ended March 31,September 30, 2019, respectively, and $6 million and $18 million for the three and nine months ended September 30, 2018, respectively, is included in interest income in the consolidated statements of earnings.

(2) Non-trade receivables included $82$81 million and $84 million of reinsurance recoverables as of March 31,September 30, 2019 and December 31, 2018, respectively.


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:
March 31, December 31,
2019 2018September 30, December 31,
(In millions)2019 2018
   (In millions)
Unrealized losses on derivative contracts$621
 $761
$642
 $761
Accrued compensation283
 337
304
 337
Income tax payable64
 —
55
 —
Other taxes payable112
 98
107
 98
Reinsurance premiums payable9
 15
11
 15
Insurance claims payable297
 277
294
 277
Contract liability477
 501
319
 501
Current maturities - operating leases186
 —
Other accruals and payables1,135
 924
1,009
 924
$2,998
 $2,913
$2,927
 $2,913



Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 10.Debt and Financing Arrangements

At March 31,September 30, 2019, 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 March 31,September 30, 2019, the Company had lines of credit, including the accounts receivable securitization programs described below, totaling $9.0$8.5 billion, of which $6.2$5.5 billion was unused.  Of the Company’s total lines of credit, $5.0 billion supported the combined U.S. and European commercial paper borrowing programs, against which there was $1.3$1.1 billion of U.S. commercial paper outstanding at March 31, 2019. There was no commercial paper outstanding under the European program at March 31,September 30, 2019.

The Company has accounts receivable securitization programs (the “Programs”). The Programs, as amended, provide the Company with up to $1.8 billion in funding resulting from the sale of accounts receivable, of which $0.4$0.1 billion was unused as of March 31,September 30, 2019 (see Note 17 for more information about the Programs).

Note 11.Income Taxes

The Company’s effective tax rate for the three and nine months ended March 31,September 30, 2019 was 25.7%18.9% and 19.4%, respectively, compared to 14.7%15.2% and 14.3% for the three and nine months ended March 31, 2018.September 30, 2018, respectively. The higher rate for the current year quarterchange in rates was primarily due to a lower annual effective tax rate in the absenceprior year that included the favorable impacts of both the 2017 retroactive biodiesel tax credit recorded in the first quarter of 2018 and an unfavorable change incertain favorable discrete tax items, primarily related to U.S. tax reform transition tax adjustments.and current year changes in the geographic mix of forecasted pretax earnings.

The Company is subject to income taxation and routine examinations in many jurisdictions around the world and frequently faces challenges regarding the amount of taxes due.  These challenges include positions taken by the Company related to the timing, nature and amount of deductions and the allocation of income among various tax jurisdictions.  In its routine evaluations of the exposure associated with various tax filing positions, the Company recognizes a liability, when necessary, for estimated potential tax owed by the Company in accordance with applicable accounting standards. Resolution of the related tax positions, through negotiations with relevant tax authorities or through litigation, may take years to complete. Therefore, it is difficult to predict the timing for resolution of tax positions and the Company cannot predict or provide assurance as to the ultimate outcome of these ongoing or future examinations. However, the Company does not anticipate that the total amount of unrecognized tax benefits will increase or decrease significantly in the next twelve months. Given the long periods of time involved in resolving tax positions, the Company does not expect that the recognition of unrecognized tax benefits will have a material impact on the Company’s effective income tax rate in any given period.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 11.     Income Taxes (Continued)

The Company’s wholly-owned subsidiary, ADM do Brasil Ltda. (ADM(“ADM do Brasil)Brasil”), received three3 separate tax assessments from the Brazilian Federal Revenue Service (BFRS)(“BFRS”) challenging the tax deductibility of commodity hedging losses and related expenses for the tax years 2004, 2006, and 2007. These assessments totaled approximately $108$101 million in tax and $309$295 million in interest and penalties as of March 31,September 30, 2019 (adjusted for variation in currency exchange rates). The statute of limitations for tax years 2005 and 2008 to 20112008-2011 has expired. The Company does not expect to receive any additional tax assessments with respect to this issue.

ADM do Brasil enters into commodity hedging transactions that can result in gains, which are included in ADM do Brasil’s calculation 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 Brazilian income tax expense. Therefore, the Company has continued to recognize the tax benefit from hedging losses in its financial statements and has not recorded any tax liability for the amounts assessed by the BFRS.

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 levelsecond-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.
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 11.     Income Taxes (Continued)

In 2012, theThe Company’s subsidiary in Argentina, ADM Agro SRL (formerly ADM Argentina SA and Alfred C. Toepfer Argentina SRL), received tax assessments challenging transfer prices used to price grain exports for the tax years 20041999 through 2010.2011. As of March 31,September 30, 2019, these assessments totaled $15 million in tax and $55$52 million in interest and penalties (adjusted for variation in currency exchange rates). The Argentine tax authorities conducted 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. The Company strongly believes that it has complied with all Argentine tax laws. To date, the Company has not received assessments for closed years subsequent to 2010.2011. However, it cannot rule out receiving additional assessments challenging transfer prices used to price grain exports for these years, and estimates that these potential assessments could be approximately $52$33 million in tax and $58$43 million in interest (adjusted for variation in currency exchange rates as of March 31,September 30, 2019).  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. The Company intends to vigorously defend its position against the current assessments and any similar assessments that may be issued for years subsequent to 2010.2011.
  
In accordance with 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.

In 2014, the Company’s wholly-owned subsidiary in the Netherlands, ADM Europe B.V., received a tax assessment from the Netherlands tax authority challenging the transfer pricing aspects of a 2009 business reorganization, which involved two of its subsidiary companies in the Netherlands. As of March 31,September 30, 2019, this assessment was $91$88 million in tax and $31$32 million in interest (adjusted for variation in currency exchange rates). The Company has appealedreceived an interim decision on its appeal at the assessment andend of the reporting period which directed the parties to work toward a hearing was heldsettlement. If no agreement is reached, the court will issue a final decision which could be based in the first quarter of 2019. The Company expects to receivepart on a decision in the second quarter of 2019. Furthervaluation from a third party expert. Subsequent appeals may take an extended period of time and could result in additional financial impacts of up to the entire amount of the assessment. The Company has carefully evaluated the underlying transactions and has concluded that the amount of the gain recognized on the reorganization for tax purposes was appropriate. The Company has accrued an amount it believes will be the likely outcome of the litigation and will vigorously defend its position against the assessment.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 12.Leases

Lessee Accounting

The Company leases certain transportation equipment, plant equipment, office equipment, land, buildings, and storage facilities. Most leases include options to renew, with renewal terms that can extend the lease term from 1 month to 49 years. Certain leases also include index and non-index escalation clauses and options to purchase the leased property. Leases accounted for as finance leases were immaterial at March 31,September 30, 2019.

As an accounting policy election, the Company does not apply the recognition requirements of Topic 842 to short-term leases in all of its underlying asset categories. The Company recognizes short-term lease payments in earnings on a straight-line basis over the lease term, and variable lease payments in the period in which the obligation for those payments is incurred.








Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 12.     Leases (Continued)


The following table sets forth the amounts relating to the Company’s total lease cost and other information.
Three Months Ended 
 March 31, 2019		Three Months Ended
September 30, 2019		Nine Months Ended
September 30, 2019
(Amounts in millions)(In millions)
Lease cost:  
Operating lease cost$73
$51
$197
Short-term lease cost23
24
71
Total lease cost$96
$75
$268
  
Other information:  
Operating lease liability principal payments$40

$149
Right-of-use assets obtained in exchange for new operating lease liabilities$61

$192
 
 September 30, 2019
Weighted-average remaining lease term - operating leases (in years)7


8
Weighted average discount rate - operating leases4.6%
4.7%

Below is a tabular disclosure of the future annual undiscounted cash flows for operating lease liabilities.
Undiscounted
Cash Flows
(In millions)
Remainder of 2019$173
$59
2020181
209
2021150
176
2022121
145
202386
105
202448
58
Thereafter224
244
Total983
996
 
Less interest (1)
166
165
Lease liability$817
$831

(1) Calculated using the implicit rate of the lease, if available, or the incremental borrowing rate that is appropriate for the tenor and geography of the lease.
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 12.     Leases (Continued)


As of March 31,September 30, 2019, the Company had $797$810 million of right-of-use assets included in Other assets, $195$186 million of current lease liabilities included in Accrued expenses and other payables, and $622$645 million of non-current lease liabilities included in Other long-term liabilities in its consolidated balance sheet.



Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 13.     Accumulated Other Comprehensive Income (AOCI)

The following tables set forth the changes in AOCI by component for the three and nine months ended March 31,September 30, 2019 and the reclassifications out of AOCI for the three and nine months ended March 31,September 30, 2019 and 2018:
 Three months ended March 31, 2019
 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, 2018$(1,962) $61
 $(220) $15
 $(2,106)
Other comprehensive income (loss) before reclassifications(78) (85) 10
 (2) (155)
Amounts reclassified from AOCI(1) 8
 (3) —
 4
Tax effect(10) 12
 13
 —
 15
Net of tax amount(89) (65) 20
 (2) (136)
Balance at March 31, 2019$(2,051) $(4) $(200) $13
 $(2,242)
  Amount reclassified from AOCI  
  Three months ended March 31, Affected line item in the
Details about AOCI components 2019 2018 consolidated statement of earnings
  (In millions)  
Deferred loss (gain) on hedging activities    
  $(5) $(6) Cost of products sold
  13
 (2) Revenues
  8
 (8) Total before tax
  (2) 2
 Tax
  $6
 $(6) Net of tax
Pension liability adjustment      
Amortization of defined benefit pension items:      
Prior service credit $(4) $(8) Other (income) expense - net
Actuarial losses 1
 16
 Other (income) expense - net
  (3) 8
 Total before tax
  14
 (4) Tax
  $11
 $4
 Net of tax
 Three months ended September 30, 2019
 Foreign Currency Translation Adjustment Deferred Gain (Loss) on Hedging Activities Pension Liability Adjustment Unrealized Gain (Loss) on Investments Total
 (In millions)
Balance at June 30, 2019$(1,950) $3
 $(202) $19
 $(2,130)
Other comprehensive income (loss) before reclassifications(250) (19) 4
 7
 (258)
Amounts reclassified from AOCI—
 17
 3
 —
 20
Tax effect(35) 8
 —
 —
 (27)
Net of tax amount(285) 6
 7
 7
 (265)
Balance at September 30, 2019$(2,235) $9
 $(195) $26
 $(2,395)
          
 Nine months ended September 30, 2019
 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, 2018$(1,962) $61
 $(220) $15
 $(2,106)
Other comprehensive income (loss) before reclassifications(234) (92) 13
 12
 (301)
Amounts reclassified from AOCI(1) 27
 (3) —
 23
Tax effect(38) 13
 15
 (1) (11)
Net of tax amount(273) (52) 25
 11
 (289)
Balance at September 30, 2019$(2,235) $9
 $(195) $26
 $(2,395)



Archer-Daniels-Midland







Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 13.     Accumulated Other Comprehensive Income (Continued)

 Amount reclassified from AOCI 
 Three months ended September 30, Nine months ended September 30,Affected line item in the consolidated statement
Details about AOCI components2019 2018 2019 2018of earnings
 (In millions) 
Foreign currency translation adjustment       
 $—
 $(1) $(1) $(1)Other (income) expense-net
 —
 —
 —
 —
Tax
 $—
 $(1) $(1) $(1)Net of tax
         
Deferred loss (gain) on hedging activities        
 $(3) $(15) $5
 $(16)Revenues
 (1) 87
 (7) 115
Cost of products sold
 21
 —
 29
 —
Other (income) expense-net
 —
 —
 —
 (1)Interest expense
 17
 72
 27
 98
Total before tax
 4
 (18) —
 (24)Tax
 $21
 $54
 $27
 $74
Net of tax
         
Pension liability adjustment        
Amortization of defined benefit pension items:        
Prior service credit$—
 $(8) $(13) $(25)Other (income) expense-net
Actuarial losses3
 16
 10
 48
Other (income) expense-net
 3
 8
 (3) 23
Total before tax
 1
 (3) 16
 (6)Tax
 $4
 $5
 $13
 $17
Net of tax


Note 14.Other (Income) Expense - Net

The following table sets forth the items in other (income) expense:
Three Months EndedThree Months Ended Nine Months Ended
March 31,September 30, September 30,
2019 20182019 2018 2019 2018
(In millions)(In millions)
          
Gains on sales of assets$(15) $(6)$(7) $(33) $(37) $(45)
Other – net7
 (9)(11) 8
 (2) 3
Other (Income) Expense - Net$(8) $(15)$(18) $(25) $(39) $(42)


Gains on sales of assets in the three months ended March 31,September 30, 2019 included gains on the sale of certain assets and step-up gains on equity investments. Gains on sales of assets in the three months ended March 31, 2018 included gains on disposals of individually insignificant assets in the ordinary course of business. Gains on sales of assets in the nine months ended September 30, 2019 included gains on the sale of certain assets, step-up gains on equity investments, and gains on disposals of individually insignificant assets in the ordinary course of business. Gains on sales of assets in the three and nine months ended September 30, 2018 included gains on the sale of the Company’s oilseed operations in Bolivia and an equity investment, and disposals of individually insignificant assets in the ordinary course of business.
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 14.     Other (Income) Expense - Net (Continued)


Other - net in the three and nine months ended March 31,September 30, 2019 included foreign exchange losses, partially offset by other income. Other - net in the three months ended March 31,and 2018 included other income, partially offset by foreign exchange losses. Other-net also included the non-service components of net pension benefit income of $2 million in the three months ended March 31, 2019 compared to $3and $10 million in the three and nine months ended March 31, 2018.September 30, 2019, respectively, compared to a net pension benefit expense of $1 million and an income of $4 million in the three and nine months ended September 30, 2018, respectively.

Note 15.     Segment Information

In May 2019, the Company announced the creation of a new business unit. The former Origination and Oilseeds businesses were merged into a combined Ag Services and Oilseeds segment which enables the Company to better respond to market changes by integrating the supply and value chains and risk management, while delivering significant simplification and efficiency to the day-to-day business. As part of the Company’s efforts for a streamlined management structure, the combined segment is led by the former President of Oilseeds expanding his role to President of Ag Services and Oilseeds. Effective July 1, 2019, the Company changed its segment reporting to reflect the creation of the combined Ag Services and Oilseeds segment.

Prior period results have been reclassified to conform to the current period presentation.

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

The Origination segment utilizes its extensive global grain elevatorAg Services 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 Origination segment includes international agricultural commodities merchandising and handling activities managed through a global trade desk based in Rolle, Switzerland. The Origination segment’s grain sourcing, handling, and transportation network provides reliable and efficient services to the Company’s customers and agricultural processing operations. The Origination segment’s transportation network capabilities include barge, ocean-going vessel, truck, rail, and container freight services. The Origination segment also includes the activities related to structured trade finance, the import and distribution of agricultural feed products, and the Company’s share of the results of its Pacificor joint venture. In February 2019, the Company purchased the remaining 50% interest owned by Invivo in the Gleadell Agriculture Ltd. joint venture.













Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 15.Segment Information (Continued)

The Oilseeds 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.meals, in addition to the origination, transportation, and storage of agricultural commodities. 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 and glycols 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 South America, the Oilseeds segment includes originationThe Ag Services 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 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. As adjuncts to its processing assets, the segment operates an extensive global network of grain elevator and transportation assets 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 Ag Services and Oilseeds segment's grain sourcing, handling, and transportation network (including barge, ocean-going vessel, truck, rail, and container freight services) provides reliable and efficient services to the Company's customers and agricultural processing operations. The Ag Services and Oilseeds segment also includes agricultural commodity and feed product import, export, and global distribution activities, structured trade finance, and the Company’s share of the results of its equity investment in Wilmar International Limited (Wilmar)(“Wilmar”) and its share of the results of its Stratas Foods LLC, Edible Oils Limited, and Olenex Sarl (Olenex)(“Olenex”), and Pacificor joint ventures. In February 2019, the Company purchased the remaining 50% interest owned by InVivo Group in the Gleadell Agriculture Ltd. joint venture.

The Company’s Carbohydrate Solutions segment is engaged in corn and wheat wet and dry milling and other activities. The Carbohydrate Solutions segment converts corn and wheat into sweeteners, corn and wheat starches, wheat flour, and bioproducts. Its products include ingredients used in the food and beverage industry including sweeteners, starch, syrup, glucose, flour, and dextrose. Dextrose and starch are used by the Carbohydrate Solutions segment as feedstocks for its bioproducts operations. By fermentation of dextrose, the Carbohydrate Solutions segment produces alcohol 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. 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. Other Carbohydrate Solutions products include citric acids which are used in various food and industrial products. This segment also includes the Company’s share of the results of its equity investments in Hungrana Ltd., Almidones Mexicanos S.A., and Red Star Yeast Company, LLC.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 15.Segment Information (Continued)

The Nutrition segment 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 Nutrition segment includes activities related to the procurement, processing, and distribution of edible beans. The Nutrition segment also includes activities related to the processing and distribution of formula feeds and animal health and nutrition products and the manufacture of contract and private label pet treats and foods. In JanuaryDuring the nine months ended September 30, 2019, the Company completed the acquisitionacquisitions of Neovia, a French-based global provider of value-added animal nutrition solutions, with 72 production facilities and a presence in 25 countries. In March 2019, the Company completed the acquisition ofcountries; Florida Chemical Company, one of the world’s largest producers of citrus oils and ingredients; and The Ziegler Group, a leading European provider of natural citrus flavor ingredients.

Other includes the Company’s remaining operations, primarily its financial business units, related to futures commission and insurance activities.

Intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on net sales less identifiable operating expenses. Also included in operating profit for each segment is equity in earnings of affiliates based on the equity method of accounting. Specified items 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, interest cost net of investment income, and the Company’s share of the results of its equity investment in Compagnie Industrialle et Financiere des Produits Amylaces SA (Luxembourg) (CIP)(“CIP”).


































Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 15.Segment Information (Continued)

Three Months EndedThree Months Ended Nine Months Ended
March 31,September 30, September 30,
(In millions)2019 20182019 2018 2019 2018
Gross revenues          
Origination$6,975
 $7,179
Oilseeds6,409
 6,835
Ag Services and Oilseeds$14,440
 $14,206
 $41,041
 $42,797
Carbohydrate Solutions2,576
 2,812
3,018
 2,909
 8,472
 8,625
Nutrition1,300
 958
1,481
 933
 4,322
 2,920
Other81
 106
88
 84
 273
 291
Intersegment elimination(2,037) (2,364)(2,301) (2,332) (5,781) (6,239)
Total gross revenues$15,304
 $15,526
$16,726
 $15,800
 $48,327
 $48,394
          
Intersegment sales 
  
 
  
  
  
Origination$851
 $912
Oilseeds995
 1,233
Ag Services and Oilseeds$1,824
 $1,946
 $4,659
 $5,366
Carbohydrate Solutions173
 211
453
 375
 1,063
 843
Nutrition18
 8
24
 11
 59
 30
Total intersegment sales$2,037
 $2,364
$2,301
 $2,332
 $5,781
 $6,239
          
Revenues from external customers 
  
 
  
  
  
Origination   
Merchandising and Handling$6,058
 $6,212
Transportation66
 55
Total Origination6,124
 6,267
Oilseeds   
Crushing and Origination3,256
 3,285
Refining, Packaging, Biodiesel, and Other2,158
 2,317
Total Oilseeds5,414
 5,602
Ag Services and Oilseeds       
Ag Services$8,246
 $7,623
 $23,653
 $23,769
Crushing2,465
 2,688
 7,130
 7,838
Refined Products and Other1,905
 1,949
 5,599
 5,824
Total Ag Services and Oilseeds12,616
 12,260
 36,382
 37,431
Carbohydrate Solutions          
Starches and Sweeteners1,622
 1,638
1,724
 1,706
 5,030
 5,048
Bioproducts781
 963
841
 828
 2,379
 2,734
Total Carbohydrate Solutions2,403
 2,601
2,565
 2,534
 7,409
 7,782
Nutrition          
Wild Flavors and Specialty Ingredients674
 636
703
 641
 2,105
 1,970
Animal Nutrition608
 314
754
 281
 2,158
 920
Total Nutrition1,282
 950
1,457
 922
 4,263
 2,890
          
Other81
 106
88
 84
 273
 291
Total revenues from external customers$15,304
 $15,526
$16,726
 $15,800
 $48,327
 $48,394
          
          
          
          
          
       
       
       
       
       

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 15.Segment Information (Continued)

Three Months EndedThree Months Ended Nine Months Ended
March 31,September 30, September 30,
(In millions)2019 20182019 2018 2019 2018
Segment operating profit          
Origination$76
 $46
Oilseeds341
 349
Ag Services and Oilseeds$417
 $478
 $1,196
 $1,405
Carbohydrate Solutions96
 213
182
 288
 470
 748
Nutrition81
 96
118
 67
 316
 277
Other14
 13
47
 28
 72
 72
Specified Items:          
Gains (losses) on sales of assets and businesses(1)
12
 —
—
 21
 12
 21
Impairment, restructuring, and settlement charges(2)
(9) (13)(6) (1) (52) (36)
Total segment operating profit611
 704
758
 881
 2,014
 2,487
Corporate(296) (240)(255) (249) (922) (739)
Earnings before income taxes$315
 $464
$503
 $632
 $1,092
 $1,748
          


(1) Current quarteryear-to-date gains consisted of a gain on the sale of certain assets and a step-up gain on an equity investment. Prior quarter and year-to-date gains related to the sale of a business and an equity investment.

(2) Current quarter and year-to-date charges primarily related to the impairment of certain long-lived assets. Prior quarter charge related to a settlement. Prior year-to-date charges consisted of an impairment chargecharges related to a long-term financing receivable and an equity investment, restructuring charges, and restructuring charges.a settlement charge.

Note 16.     Asset Impairment, Exit, and Restructuring Costs

Asset impairment, exit, and restructuring costs in the three months ended March 31, 2019 consisted of $9$6 million and $50 million of impairments related to certain long-lived assets presented as specified items within segment operating profit in the three and $2nine months ended September 30, 2019, respectively, and $47 million and $150 million of restructuring and pension settlement and remeasurement charges in Corporate primarily related to early retirement and reorganization initiatives during the three and nine months ended September 30, 2019, respectively.

Asset impairment, exit, and restructuring costs in the three months ended September 30, 2018 consisted of $1 million of individually insignificant restructuring charges in Corporate. Asset impairment, exit, and restructuring costs in the threenine months ended March 31,September 30, 2018 consisted of $12 million of an equity investment impairment, $21 million of long-term receivable impairment, and $1$2 million of individually insignificant restructuring charges presented as specified items within segment operating profit, and $3$6 million of individually insignificant restructuring charges in Corporate.

A $35 million impairment reported in the nine months ended September 30, 2019 related to a Company facility and was based on the fair value of the asset determined using a third-party market participant’s offer to purchase the facility.

The $21 million impairment in the nine months ended September 30, 2018 related to a long-term receivable included in other assets in the accompanying balance sheet, and was based on the fair value of the collateral provided as security for the advance. The fair value was determined using internal and external sources, including published information on Brazilian land values.
 

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 17.     Sale of Accounts Receivable

Since March 2012, theThe Company has had an accounts receivable securitization program (the “Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “First Purchasers”). Under the Program, certain U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Receivables, LLC (“ADM Receivables”). ADM Receivables in turn transfers 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 receives a cash payment of up to $1.21.3 billion, as amended, and an additional amount upon the collection of the accounts receivable (deferred consideration). The Program terminates on June 20, 2019,18, 2020, unless extended.

In March 2014, theThe Company entered into a secondalso has an accounts receivable securitization program (the “Second Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “Second Purchasers”). Under the Second Program, certain non-U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Ireland Receivables Company (“ADM Ireland Receivables”). ADM Ireland Receivables in turn transfers 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 receives a cash payment of up to $0.6$0.5 billion (€0.5 billion) and an additional amount upon the collection of the accounts receivable (deferred consideration). The Second Program terminates on March 13, 2020, unless extended.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 17.     Sale of Accounts Receivable (Continued)

Under the Program and Second Program (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 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. At March 31,September 30, 2019 and December 31, 2018, the Company did not record a servicing asset or liability related to its retained responsibility, based on its assessment of the servicing fee, market values for similar transactions, and its cost of servicing the receivables sold.

As of March 31,September 30, 2019 and December 31, 2018, the fair value of trade receivables transferred to the Purchasers under the Programs and derecognized from the Company’s consolidated balance sheet was $1.82.0 billion and $1.9 billion, respectively. In exchange for the transfers as of March 31,September 30, 2019 and December 31, 2018, the Company received cash of $1.41.7 billion and $1.5 billion, respectively, and recorded a receivable for deferred consideration included in other current assets of $430330 million and $379 million, respectively. Cash collections from customers on receivables sold were $8.425.1 billion and $8.926.3 billion for the threenine months ended March 31,September 30, 2019 and 2018, respectively. Of this amount, $3.1$9.5 billion and $3.7$8.8 billion were cash collections on the deferred consideration reflected as cash inflows from investing activities for the threenine months ended March 31,September 30, 2019 and 2018, respectively.. Deferred consideration is paid to the Company in cash on behalf of the Purchasers as receivables are collected; however, as this is a revolving facility, cash collected from the Company’s customers is reinvested by the Purchasers daily in new receivable purchases under the Programs.

The Company’s risk of loss following the transfer of accounts receivable under the Programs is limited to the deferred consideration outstanding. The Company carries the deferred consideration at fair value determined by calculating the expected amount of cash to be received and is 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 consideration is not subject to significant risks other than delinquencies and credit losses on accounts receivable transferred under the Programs which have historically been insignificant.

Transfers of receivables under the Programs resulted in an expense for the loss on sale of $8$5 million and $4 million for the three months ended March 31,September 30, 2019 and 2018, respectively, and $14 million for the nine months ended September 30, 2019 and 2018, which is classified as selling, general, and administrative expenses in the consolidated statements of earnings.
  
In accordance with the amended guidance of Topic 230, the Company reflects cash flows related to the deferred consideration of the Programs as investing activities in its consolidated statements of cash flows. All other cash flows are classified as operating activities because the cash received from Purchasers upon both the sale and collection of the receivables is not subject to significant interest rate risk given the short-term nature of the Company’s trade receivables.
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 18.     Subsequent Event17.     Sale of Accounts Receivable (Continued)

The Company recently announcedalso sells certain of its receivables in their entirety to independent third-party institutions without recourse and no continuing involvement.  The sold receivables are considered a series of actions to enhance agility, accelerate growth,true sale for accounting purposes, and strengthen customer service. These actions encompass organizational changes to centralize and standardize business activities and processes, and enhance productivity and effectiveness; accelerating the capture of planned synergies from recent acquisitions; and offering enhanced early retirement for some colleagues in the U.S. and Canada. Related to the enhanced early retirement offer, the Company expects to recognize an estimated pension remeasurement charge of $55 million to $75 million in the second quarter of 2019. Colleagues electing to retire early may also choose to receive their benefit in the form of a lump sum payment. Dependent upon the final number of colleagues that elect to retire early and also receive their benefit in the form of a lump sum payment, it is possible that a pension settlement charge of up to $50 million may also be triggered in the second half of 2019 or first half of 2020. The impact of the other actionstherefore, are not reflected on the Company's financial statements cannot be estimated at this time.






Company’s consolidated balance sheet.


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 Company is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities, products, and ingredients. The Company uses its significant global asset base to originate and transport agricultural commodities, connecting to markets in more than 170 countries. The Company also processes corn, oilseeds, and wheat into products for food, animal feed, chemical, and energy uses. In addition, the Company 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 its shareholders, principally from margins earned on these activities.

In May 2019, the Company announced the creation of a new business unit. The former Origination and Oilseeds businesses were merged into a combined Ag Services and Oilseeds segment which enables the Company to better respond to market changes by integrating the supply and value chains and risk management, while delivering significant simplification and efficiency to the day-to-day business. As part of the Company’s efforts for a streamlined management structure, the combined segment is led by the former President of Oilseeds expanding his role to President of Ag Services and Oilseeds. Effective July 1, 2019, the Company changed its segment reporting to reflect the creation of the combined Ag Services and Oilseeds segment.

Prior period results have been reclassified to conform to the current period presentation.

The Company’s operations are organized, managed, and classified into fourthree reportable business segments: Origination,Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. Each of these segments is organized based upon the nature of products and services offered. The Company’s remaining operations are not reportable business segments, as defined by the applicable accounting standard, and are classified as Other. Financial information with respect to the Company’s reportable business segments is set forth in Note 15 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements”.

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

the acquisition in January 2019 of Neovia, a French-based global provider of value-added animal nutrition solutions, with 72 production facilities and a presence in 25 countries;
the purchase in February 2019 of the remaining 50% interest owned by InvivoInVivo Group in the Gleadell Agriculture Ltd. joint venture;
the acquisition in March 2019 of Florida Chemical Company, one of the world’s largest producers of citrus oils and ingredients;
the announcement in March 2019 of an agreement to acquire the Ziegler Group, a leading European provider of natural citrus flavor ingredients, which is subject to regulatory approval and expected to close in the second quarter of 2019; and
the formal launch in March 2019 of GrainBridge LLC, a 50% joint venture with Cargill that will develop digital tools to help North American farmers consolidate information on production economics and grain marketing activities into a single digital platform.platform; and
the acquisition in May 2019 of The Ziegler Group, a leading European provider of natural citrus flavor ingredients.

The Company executes its strategic vision through three pillars: Optimize the Core, Drive Efficiencies, and Expand Strategically, all supported by its Readiness effort. During 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. Readiness will also support the execution of the Company’s growth strategies across its five key growth platforms: Taste, Nutrition, Animal Nutrition, Health and Wellness, and Carbohydrates.


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

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, 2018.

The Company’s OriginationAg Services and Oilseeds 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, changes in agricultural commodity prices have relatively equal impacts on both revenues and cost of products sold. Thus, changes in revenues of these businesses do not necessarily correspond to the changes in margins or gross profit.

The Company’s Carbohydrate Solutions and Nutrition businesses also utilize agricultural commodities (or products derived from agricultural commodities) as raw materials. However, in these businesses, agricultural commodity market price changes do not necessarily correlate to changes in cost of products sold. Thus, changes in revenues of these businesses may correspond to changes in margins or gross profit.



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

The Company has consolidated subsidiaries in more than 80 countries. For the majority of the Company’s subsidiaries located outside the United States, the local currency 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, the functional currency is the U.S. dollar; however, certain transactions, including taxes, occur in local currency and require remeasurement to the functional currency. Changes in revenues are expected to correlate 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, 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 March 31,September 30, 2019

As an agricultural commodity-based business, theThe Company is subject to a variety of market factors which affect the Company's operating results. In Origination,Ag Services and Oilseeds, sales volumes and margins were impacted by severe weather conditions in the U.S. and the continuing global trade tensions with China. In Oilseeds, continuedHandling volumes in North America were impacted by the late harvest due to weather conditions that delayed planting. Continued good global meal demand resulted in strong global crushing volumes and stable margins. South American origination benefited from strong farmer selling in Brazil driven by the devaluation of the Real and higher volumes were lowerin Argentina due to softer Chinese demand and slower farming selling caused by a weak U.S. dollar.larger crop. Global demand and margins for refined oil and biodiesel remained solid. Excess global peanut supply resulted in weak peanut margins. In Carbohydrate Solutions, operations were adversely impacted by severe weather conditions in North America. Demanddemand and prices for sweeteners and starches remained solid in North America while co-product prices were stable. Although ethanol demand remained steadywas seasonably higher in North America, margins wereremained pressured for most of the quarter as U.S. industry ethanol production and stocks remained at high levels.levels and U.S. exports to China were limited. Nutrition benefited from stronggrowing demand for flavor ingredients, flavorflavors, flavors systems, and certain non-flavor food ingredients.plant-based proteins but was negatively impacted by the African swine fever in Asia Pacific, which also resulted in pricing pressures in the global lysine market.

Three Months Ended March 31,September 30, 2019 Compared to Three Months Ended March 31,September 30, 2018

Net earnings attributable to controlling interests decreased $160$129 million to $233$407 million. Segment operating profit decreased $93$123 million to $611$758 million. Included in segment operating profit in the current quarter was a net gaincharge of $3$6 million consisting of asset impairment charges, a gain on sale of assets, and a step-up gain on an equity investment.charges. Included in segment operating profit in the prior year quarter was a chargenet gain of $13$20 million related toconsisting of gains on sales of a business and an asset impairment and restructuring.a settlement charge. Adjusted segment operating profit decreased $109$97 million to $608$764 million due to the absence of the 2017 biodiesel tax credit recorded in the first quarter of 2018, lower margins in Carbohydrate Solutions, lower results in the Animal Nutrition business,Crushing and Carbohydrate Solutions and lower equity earnings from the Wilmar investment, partially offset by higher marginsresults in CrushingRefined Products and Origination, MerchandisingOther and Handling, and Wild Flavors and Specialty Ingredients.Nutrition. Corporate results were a net charge of $296$255 million in the current quarter compared to $240$249 million in the prior year quarter. Corporate results in the current quarter included restructuring and pension settlement charges of $47 million related to early retirement and reorganization initiatives. Also included in Corporate results in the current quarter is a chargecredit of $1$16 million from the effect of changes in agricultural commodity prices on LIFO inventory valuation reserves, compared to a creditcharge of $8$7 million in the prior year quarter.

Income taxes of $81 million increased $13 million due to a higher effective tax rate. The Company’s effective tax rate for the quarter ended March 31, 2019 was 25.7% compared to 14.7% for the quarter ended March 31, 2018. The higher rate for the current year quarter was primarily due to the absence of the 2017 biodiesel tax credit recorded in the first quarter of 2018 and an unfavorable change in discrete tax items primarily related to U.S. tax reform transition tax adjustments.



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

Income taxes of $95 million decreased $1 million. The Company’s effective tax rate for the quarter ended September 30, 2019 was 18.9% compared to 15.2% for the quarter ended September 30, 2018. The change in rate was primarily due to a lower annual effective tax rate in the prior year that included the favorable impacts of both the 2017 retroactive biodiesel tax credit and certain favorable discrete tax items, and current year changes in the geographic mix of forecasted pretax earnings.
Analysis of Statements of Earnings

Processed volumes by product for the quarter are as follows (in metric tons):
Three Months Ended Three Months Ended 
March 31,  September 30,  
(In thousands)2019 2018 Change2019 2018 Change
Oilseeds9,167
 9,047
 120
9,062
 9,181
 (119)
Corn5,132
 5,591
 (459)5,619
 5,599
 20
Total14,299
 14,638
 (339)14,681
 14,780
 (99)

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. Processed volumes of oilseeds increased due to increasing global demand for oilseed products. The overall decrease in corn is primarily related to lower production caused by adverse weather conditions and production issues in the Decatur, Illinois corn complex.

Revenues by segment for the quarter are as follows:
 Three Months Ended  
 March 31,  
 2019 2018 Change
 (In millions)
Origination     
Merchandising and Handling$6,058
 $6,212
 $(154)
Transportation66
 55
 11
Total Origination6,124
 6,267
 (143)
      
Oilseeds 
  
  
Crushing and Origination3,256
 3,285
 (29)
Refining, Packaging, Biodiesel, and Other2,158
 2,317
 (159)
Total Oilseeds5,414
 5,602
 (188)
      
Carbohydrate Solutions 
  
  
Starches and Sweeteners1,622
 1,638
 (16)
Bioproducts781
 963
 (182)
Total Carbohydrate Solutions2,403
 2,601
 (198)
      
Nutrition     
Wild Flavors and Specialty Ingredients674
 636
 38
Animal Nutrition608
 314
 294
Total Nutrition1,282
 950
 332
      
Other81
 106
 (25)
Total$15,304
 $15,526
 $(222)






ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
 Three Months Ended  
 September 30,  
 2019 2018 Change
 (In millions)
Ag Services and Oilseeds     
Ag Services$8,246
 $7,623
 $623
Crushing2,465
 2,688
 (223)
Refined Products and Other1,905
 1,949
 (44)
Total Ag Services and Oilseeds12,616
 12,260
 356
      
Carbohydrate Solutions 
  
  
Starches and Sweeteners1,724
 1,706
 18
Bioproducts841
 828
 13
Total Carbohydrate Solutions2,565
 2,534
 31
      
Nutrition     
Wild Flavors and Specialty Ingredients703
 641
 62
Animal Nutrition754
 281
 473
Total Nutrition1,457
 922
 535
      
Other88
 84
 4
Total$16,726
 $15,800
 $926

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



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

Revenues decreased $0.2increased $0.9 billion to $15.3$16.7 billion due to overall higher sales volumes, partially offset by lower sales prices. The increase in sales volumes was due principally to soybeans, barley, corn, wheat, and higher sales volumes of feed ingredients related to acquisitions. The decrease in sales prices was due principally to soybeans, oils,meal, wheat, and meal, partially offset by wheat. Origination revenues decreased 2% to $6.1 billion due to lower sales volumes ($226 million), partially offset by higher sales prices ($83 million).soybeans. Ag Services and Oilseeds revenues decreasedincreased 3% to $5.4 billion due to lower sales prices ($264 million), partially offset by higher sales volumes ($76 million). Carbohydrate Solutions revenues decreased 8% to $2.4 billion due to lower sales volumes ($216 million), partially offset by higher sales prices ($18 million). Nutrition revenues increased 35% to $1.3$12.6 billion due to higher sales volumes ($390 million) primarily related to acquisitions,1.0 billion) partially offset by lower sales prices ($58 million)0.6 billion). Carbohydrate Solutions revenues increased 1% to $2.6 billion due to higher sales volumes ($0.1 billion) offset by lower sales prices ($0.1 billion). Nutrition revenues increased 58% to $1.5 billion due to higher sales volumes ($0.5 billion) primarily related to acquisitions.
  
Cost of products sold of $14.4increased $0.9 billion decreased $261 millionto $15.6 billion due principally to overall higher sales volumes, partially offset by lower prices of commodities. Included in cost of products sold in the current quarter was a chargecredit of $1$16 million from the effect of changes in agricultural commodity prices on LIFO inventory valuation reserves compared to a creditcharge of $8$7 million in the prior year quarter. Manufacturing expenses increased $96 million toof $1.4 billion duewere comparable to individually insignificant increases in certain expense categories.the prior period. Increases related to acquisitions were offset by lower energy costs and reclassifications.

Foreign currency translation impacts decreased both revenues and cost of products sold by $0.3$0.1 billion.

Gross profit of $0.9$1.1 billion was comparable to the prior year quarter. Higherperiod. Lower results in CrushingAg Services and OriginationOilseeds ($17537 million) and Merchandising and HandlingCarbohydrate Solutions ($4695 million), were partially offset by lowerhigher results in Refining, Packaging, Biodiesel, and OtherNutrition ($94 million) and Bioproducts ($73126 million). These factors are explained in the segment operating profit discussion on page 37.44. The effect of changes in agricultural commodity prices on LIFO inventory valuation reserves had a negativepositive impact on gross profit of $1$16 million in the current quarter compared to a positivenegative impact of $8$7 million in the prior year quarter.

Selling, general, and administrative expenses increased $146$44 million to $659$578 million due principally to new acquisitions and higher spending on IT, growth-related investments, and Readiness-related projects, partially offset by lower variable performance-related and stock compensation expenses, and higher spending in IT and growth-related projects.expenses.

Asset impairment, exit, and restructuring costs decreased $5increased $52 million to $11$53 million. Current period chargesCharges in the current quarter consisted of $9$6 million of impairments related to certain long-lived assets presented as specified items within segment operating profit and $2$47 million of individually insignificant restructuring and pension settlement charges in Corporate. Prior period chargesCorporate related to early retirement and reorganization initiatives. Charges in the prior year quarter consisted of $12 million of an equity investment impairment and $1 million of individually insignificant restructuring charges presented as specified items within segment operating profit, and $3 million of individually insignificant restructuring charges in Corporate.

Interest expense increased $10 million to $101$97 million due to higher borrowings to fund recent acquisitions.

Equity in earnings of unconsolidated affiliates decreased $46$43 million to $101$88 million primarily due to lower earnings from the Company’s investmentinvestments in Wilmar and CIP, partially offset by improved results inhigher earnings from the Company’s investmentsinvestment in CIP and Olenex.

Other income - net decreased $7 million to $8$18 million. Current periodIncome in the current quarter included gains on disposals of individually insignificant assets in the ordinary course of business and other income, partially offset by foreign exchange losses. Income in the prior year quarter included gains on the sale of certain assetsthe Company’s oilseeds operations in Bolivia, an equity investment, and step-up gains on equity investments, partially offset by foreign exchange losses and other income. Prior period income included gains on disposals of individually insignificant assets in the ordinary course of business and other income, partially offset by foreign exchange losses.



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  Three Months Ended  
March 31,  September 30,  
Segment Operating Profit (Loss)2019 2018 Change2019 2018 Change
(In millions)(In millions)
Origination     
Merchandising and Handling$61
 $43
 $18
Transportation15
 3
 12
Total Origination76
 46
 30
     
Oilseeds 
  
  
Crushing and Origination211
 60
 151
Refining, Packaging, Biodiesel, and Other76
 180
 (104)
Asia54
 109
 (55)
Total Oilseeds341
 349
 (8)
Ag Services and Oilseeds     
Ag Services$161
 $157
 $4
Crushing138
 197
 (59)
Refined Products and Other80
 44
 36
Wilmar38
 80
 (42)
Total Ag Services and Oilseeds417
 478
 (61)
          
Carbohydrate Solutions 
  
  
 
  
  
Starches and Sweeteners170
 216
 (46)207
 245
 (38)
Bioproducts(74) (3) (71)(25) 43
 (68)
Total Carbohydrate Solutions96
 213
 (117)182
 288
 (106)
          
Nutrition          
Wild Flavors and Specialty Ingredients88
 73
 15
102
 80
 22
Animal Nutrition(7) 23
 (30)16
 (13) 29
Total Nutrition81
 96
 (15)118
 67
 51
          
Other14
 13
 1
47
 28
 19
          
Specified Items:          
Gains (losses) on sales of assets and businesses12
 —
 12
—
 21
 (21)
Asset impairment, restructuring, and settlement charges(9) (13) 4
Asset impairment and settlement charges(6) (1) (5)
Total Specified Items3
 (13) 16
(6) 20
 (26)
          
Total Segment Operating Profit$611
 $704
 $(93)$758
 $881
 $(123)
          
Adjusted Segment Operating Profit(1)
$608
 $717
 $(109)$764
 $861
 $(97)
          
Segment Operating Profit$611
 $704
 $(93)$758
 $881
 $(123)
Corporate(296) (240) (56)(255) (249) (6)
Earnings Before Income Taxes$315
 $464
 $(149)$503
 $632
 $(129)

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








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

Origination operating profit increased 65%. MerchandisingAg Services and Handling results were higher than the first quarter of 2018, which had been impacted negatively by significant mark-to-market timing effects. Good execution that drove solid margins in North American grain, a strong performance in structured trade finance, and the reversal of some timing impacts from the fourth quarter of 2018, all helped to offset a softer performance in global trade, which was impacted by normalized South American soybean and soybean meal margins versus the first quarter of 2018. Results in the current quarter were also negatively impacted by high water conditions, which limited grain movement and sales in North America. Transportation results were up due to higher freight rates and improved northbound movements, partially offset by lower overall average barge volumes caused by unfavorable river conditions.

Oilseeds operating profit decreased 2%13%. Crushing and OriginationAg Services results were up significantly compared toin line with the firstprior-year quarter of 2018,on improved origination margins in Brazil, increased export volumes from Argentina, and improved merchandising results from favorable ownership positions in North America, which included significant negative timing effects. Higher executedhelped offset a continued challenging volume and margin environment for U.S. exports. Crushing results were lower year-over-year driven by global crush margins aroundthat were substantially below the globerecord high levels seen in 2018, though still solid in North America and favorableEMEA. In South America, margins were pressured by continued strong exports of soybeans to China. Global crush margins benefited from positive net timing effects from hedges entered inof approximately $50 million during the prior year drove improved results, partially offset by the impacts of slow farmer selling and lower Chinese demand on South American origination. Refining, Packaging, Biodiesel,quarter. Refined Products and Other results were lowersignificantly higher than the firstprior-year quarter, of 2018, which includedlargely driven by significant improvements in the 2017 biodiesel tax credit. Increased contributions from the Olenex joint venture as well as improved margins in North American refined oils and European specialty food oils contributed to the current quarter results. Asia was down due topeanut shelling business. Wilmar results were lower earnings from the Company’s investment in Wilmar.year-over-year.

Carbohydrate Solutions operating profit decreased 55%37%. Starches and Sweeteners results were down due to pressured sweetener industry volumes and margins in European markets, impacts of severe weatherversus the prior-year quarter. Results in North America were affected by higher net corn costs, partially offset by lower manufacturing costs, which included improvements at the Decatur, IL complex,corn complex. EMEA results were impacted by lower selling prices and weakercontinued pressure from Turkish sweetener quotas. Additionally, an increase in volumes in the wheat milling business was more than offset by lower margins in flour milling.due to limited wheat procurement opportunities. Bioproducts results were down due to significantly lower, ethanol margins amiddriven by a continued weakunfavorable ethanol industry environment and production volumes that were affected by severe weather.margin environment.

Nutrition operating profit decreased 16%increased 76%. Wild Flavors and Specialty Ingredients results were 21%significantly higher across all businesses due to increasedthan the prior-year quarter on higher sales and an improved product mix.margins in Wild Flavors globally, continued expansion in the protein business amid the growing consumer market for alternative proteins, and continued contributions from growth investments in bioactives and fibers. Animal Nutrition results were up year-over-year, driven largely by contributions from Neovia. Improvements in vitamin additives also helped contribute to positive results. Lysine production improved, though pricing was negatively impacted by lower than the first quarter of 2018, which benefited from temporary industry effects on vitamin additives. Additional upfront costs related to inventory revaluation of newly-acquired Neovia, weaker lysine sales volumes, and higher costs also contributed to the current quarter results.global demand.

Other operating profit increased 8% due to improved results68% driven by higher earnings from the Company’s captive insurance and futures commission brokerage business, partially offset by unfavorable underwriting results from its captive insurance business.businesses.

Corporate results for the quarter are as follows:
Three Months Ended  Three Months Ended  
March 31,  September 30,  
2019 2018 Change2019 2018 Change
(In millions)(In millions)
LIFO credit (charge)$(1) $8
 $(9)$16
 $(7) $23
Interest expense - net(90) (83) (7)
Interest expense-net(85) (80) (5)
Unallocated corporate costs(183) (146) (37)(139) (161) 22
Acquisition-related expenses(14) —
 (14)
Adjustments related to acquisitions—
 4
 (4)
Restructuring charges(2) (3) 1
(47) (1) (46)
Other charges(6) (16) 10
—
 (4) 4
Total Corporate$(296) $(240) $(56)$(255) $(249) $(6)

Corporate results were a net charge of $296$255 million in the current quarter compared to $240$249 million in the prior year quarter. The effect of changes in agricultural commodity prices on LIFO inventory valuation reserves resulted in a chargecredit of $1$16 million in the current quarter compared to a creditcharge of $8$7 million in the prior year quarter. Interest expense - netexpense-net increased $7$5 million due principally to higher borrowings to fund recent acquisitions. Unallocated corporate costs increased $37decreased $22 million due principally to centralization of certain activities from the business units, resulting in a transfer-in of costs; higherlower variable performance-related and stock compensation expenses, andpartially offset by higher spending on IT, growth-related investments, Readiness-related projects, and costs transferred in ITfrom the business units related to the centralization of certain activities. Adjustments related to acquisitions in the prior year quarter consisted of net gains on foreign exchange derivative contracts entered into to economically hedge certain acquisitions. Restructuring charges, which included pension settlement charges, increased due to early retirement and growth-related projects. Acquisition expensesreorganization initiatives in the current quarter related to the Neovia acquisition. Other charges decreased $10 million primarily due to improved results in the Company’s equity investment in CIP.quarter.


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 specified items. Adjusted EBITDA is defined as earnings before taxes, interest, and depreciation and amortization, adjusted for specified items. The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of interest expense and depreciation and amortization to earnings before income taxes. 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.

The table below provides a reconciliation of diluted EPS to adjusted EPS for the three months ended March 31,September 30, 2019 and 2018.
Three months ended March 31,Three months ended September 30,
2019 20182019 2018
In millions Per share In millions Per shareIn millions Per share In millions Per share
Average number of shares outstanding - diluted566
   565
  563
   568
  
              
Net earnings and reported EPS (fully diluted)$233
 $0.41
 $393
 $0.70
$407
 $0.72
 $536
 $0.94
Adjustments:              
LIFO charge (credit) - net of tax of $0 million in 2019 and $2 million in 2018 (1)
1
 —
 (6) (0.01)
(Gains) losses on sales of assets and businesses - net of tax of $3 million in 2019 (2)
(9) (0.02) —
 —
Asset impairment, restructuring, and settlement charges - net of tax of $1 million in 2019 and $4 million in 2018 (2)
10
 0.02
 12
 0.02
Acquisition-related transaction expenses - net of tax of $5 million in 2019 (2)
9
 0.02
 —
 —
LIFO charge (credit) - net of tax of $4 million in 2019 and $2 million in 2018 (1)
(12) (0.02) 5
 0.01
(Gains) losses on sales of assets and businesses - net of tax of $1 million in 2018 (2)
—
 —
 (20) (0.04)
Asset impairment, restructuring, and settlement charges - net of tax of $12 million in 2019 and $0 million in 2018 (2)
41
 0.08
 2
 —
Adjustments related to acquisitions - net of tax of $1 million (2)
—
 —
 (3) —
Certain discrete tax adjustments17
 0.03
 (14) (0.03)(5) (0.01) 3
 0.01
Total adjustments28
 0.05
 (8) (0.02)24
 0.05
 (13) (0.02)
Adjusted net earnings and adjusted EPS$261
 $0.46
 $385
 $0.68
$431
 $0.77
 $523
 $0.92

(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 March 31,September 30, 2019 and 2018.
Three months ended  Three months ended  
March 31,  September 30,  
(In millions)2019 2018 Change2019 2018 Change
Earnings before income taxes$315
 $464
 $(149)$503
 $632
 $(129)
Interest expense101
 91
 10
97
 87
 10
Depreciation and amortization245
 235
 10
249
 232
 17
LIFO1
 (8) 9
(16) 7
 (23)
(Gains) losses on sales of assets and businesses(12) —
 (12)—
 (21) 21
Acquisition-related transaction expenses14
 —
 14
Adjustments related to acquisitions—
 (4) 4
Asset impairment, restructuring, and settlement charges11
 16
 (5)53
 2
 51
Adjusted EBITDA$675
 $798
 $(123)$886
 $935
 $(49)
          
Three months ended  Three months ended  
March 31,  September 30,  
(In millions)2019 2018 Change2019 2018 Change
Origination$116
 $90
 $26
Oilseeds394
 403
 (9)
Ag Services and Oilseeds$511
 $580
 $(69)
Carbohydrate Solutions178
 297
 (119)264
 364
 (100)
Nutrition134
 133
 1
175
 103
 72
Other24
 19
 5
55
 37
 18
Corporate(171) (144) (27)(119) (149) 30
Adjusted EBITDA$675
 $798
 $(123)$886
 $935
 $(49)



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, 2019

The Company is subject to a variety of market factors which affect the Company's operating results. In Ag Services and Oilseeds, sales volumes and margins were impacted by high water conditions in the Mississippi river system in the first half of the year and the continuing global trade tensions with China. Handling volumes in North America were impacted by the late harvest as planting was delayed due to the spring flooding. Continued good global meal demand resulted in strong global crushing volumes and stable margins. South American origination volumes were impacted by softer Chinese demand and intermittent farmer selling. Global demand and margins for refined oil and biodiesel remained solid. In Carbohydrate Solutions, demand and prices for sweeteners and starches remained solid in North America while co-product prices were stable. Although ethanol demand remained steady in North America, margins were pressured as U.S. industry ethanol production and stocks remained at high levels and U.S. exports to China were limited. In addition, severe weather conditions in North America adversely impacted operations in the Ag Services and Oilseeds and Carbohydrate Solutions business units. Nutrition benefited from growing demand for flavors, flavors systems, and plant-based proteins but was negatively impacted by the African swine fever in Asia Pacific, which also resulted in pricing pressures in the global lysine market.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Net earnings attributable to controlling interests decreased $0.6 billion to $0.9 billion. Segment operating profit decreased $0.5 billion to $2.0 billion. Included in segment operating profit in the current period was a net charge of $40 million consisting of asset impairment and settlement charges, a gain on sale of assets, and a step-up gain on an equity investment. Included in segment operating profit in the prior period was a net charge of $15 million consisting of asset impairment, restructuring and settlement charges and gains on sales of a business and an asset. Adjusted segment operating profit decreased $0.4 billion to $2.1 billion due to the absence of the 2017 biodiesel tax credit recorded in the first quarter of 2018, lower results in Ag Services, Refined Products and Other, and Carbohydrate Solutions and lower equity earnings from the Wilmar investment, partially offset by higher results in Crushing and Nutrition. Corporate results were a net charge of $922 million for the nine months compared to $739 million the same period last year. Corporate results for the nine months included restructuring and pension settlement and remeasurement charges of $150 million primarily related to early retirement and reorganization initiatives. Also included in Corporate results in the current period is a charge of $10 million from the effect of changes in agricultural commodity prices on LIFO inventory valuation reserves, compared to a credit of $14 million the same period last year.

Income taxes of $212 million decreased $38 million. The Company’s effective tax rate for the nine months ended September 30, 2019 was 19.4% compared to 14.3% for the nine months ended September 30, 2018. The change in rate was primarily due to a lower annual effective tax rate in the prior year that included the favorable impacts of both the 2017 retroactive biodiesel tax credit and certain favorable discrete tax items, and current year changes in the geographic mix of forecasted pretax earnings.
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)2019 2018 Change
Oilseeds27,002
 27,303
 (301)
Corn16,297
 16,708
 (411)
   Total43,299
 44,011
 (712)

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. Processed volumes of oilseeds decreased from the high prior year levels primarily due to extended downtime in the Quincy, Illinois facility caused by weather-related logistical challenges and weak meal demand. The overall decrease in Corn is primarily related to production disruptions in the Columbus, Nebraska corn processing plant due to flooding and production issues in the Decatur, Illinois corn complex.




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,  
 2019 2018 Change
 (In millions)
Ag Services and Oilseeds     
Ag Services$23,653
 $23,769
 $(116)
Crushing7,130
 7,838
 (708)
Refined Products and Other5,599
 5,824
 (225)
Total Ag Services and Oilseeds36,382
 37,431
 (1,049)
      
Carbohydrate Solutions     
Starches and Sweeteners5,030
 5,048
 (18)
Bioproducts2,379
 2,734
 (355)
Total Carbohydrate Solutions7,409
 7,782
 (373)
     

Nutrition     
Wild Flavors and Specialty Ingredients2,105
 1,970
 135
Animal Nutrition2,158
 920
 1,238
Total Nutrition4,263
 2,890
 1,373
     
Other273
 291
 (18)
Total$48,327
 $48,394
 $(67)
      

Revenues and cost of products sold in a commodity merchandising and processing business are affected by 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 since both revenues and cost of products sold, particularly in Ag Services and Oilseeds, generally have a relatively equal impact from commodity price changes which generally result in an insignificant impact to gross profit.

Revenues decreased $0.1 billion to $48.3 billion due to lower sales prices, partially offset by overall higher sales volumes. The decrease in sales prices was due principally to soybeans, meal, and oils. The increase in sales volumes was due principally to soybeans, wheat, cotton, and higher sales volumes of feed ingredients related to acquisitions. Ag Services and Oilseeds revenues decreased 3% to $36.4 billion due to lower sales prices ($2.0 billion) partially offset by higher sales volumes ($0.9 billion). Carbohydrate Solutions revenues decreased 5% to $7.4 billion due to lower sales volumes ($0.1 billion) and lower sales prices ($0.3 billion). Nutrition revenues increased 48% to $4.3 billion due to higher sales volumes ($1.3 billion), primarily related to acquisitions, and higher sales prices ($0.1 billion).
Cost of products sold increased $0.1 billion to $45.3 billion due to overall higher sales volumes, partially offset by lower prices of commodities. Included in cost of products sold in the current period was a charge of $10 million from the effect of changes in agricultural commodity prices on LIFO inventory valuation reserves compared to a credit of $14 million in the prior year’s period. Manufacturing expenses increased $0.3 billion to $4.3 billion due principally to new acquisitions and individually insignificant increases in certain expense categories.

Foreign currency translation impacts decreased both revenues and cost of products sold by $0.7 billion.





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

Gross profit decreased $0.2 billion to $3.0 billion. Lower results in Ag Services and Oilseeds ($137 million) and Carbohydrate Solutions ($255 million), were partially offset by higher results in Nutrition ($272 million). These factors are explained in the segment operating profit discussion on page 51. The effect of changes in agricultural commodity prices on LIFO inventory valuation reserves had a negative impact on gross profit of $10 million in the current period compared to a positive impact of $14 million in the prior period.
Selling, general, and administrative expenses increased 14% to $1.8 billion due principally to new acquisitions and higher spending on IT, growth-related investments, and Readiness-related projects, partially offset by lower variable performance-related and stock compensation expenses.

Asset impairment, exit, and restructuring costs increased $159 million to $200 million. Current period charges consisted of $50 million of impairments related to certain long-lived assets presented as specified items within segment operating profit, and $150 million of restructuring and pension settlement and remeasurement charges in Corporate primarily related to early retirement and reorganization initiatives. Prior period charges consisted of $12 million of an equity investment impairment, $21 million of asset impairment related to a financing receivable, and $2 million of individually insignificant restructuring charges presented as specified items within segment operating profit, and $6 million of individually insignificant restructuring charges in Corporate.

Interest expense increased $40 million to $307 million due to higher borrowings to fund recent acquisitions.

Equity in earnings of unconsolidated affiliates decreased $99 million to $279 million due to lower earnings from the Company’s investments in Wilmar and CIP, partially offset by higher earnings from the Company’s investment in Olenex.

Other income - net decreased $3 million to $39 million. Current period income included gains on the sale of certain assets, step-up gains on equity investments, gains on disposals of individually insignificant assets in the ordinary course of business, and other income, partially offset by foreign exchange losses. Prior period income included gains on disposals of a business, an equity investment, and individually insignificant assets in the ordinary course of business and other income, partially offset by foreign exchange losses.









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)2019 2018 Change
 (In millions)
Ag Services and Oilseeds    

Ag Services$326
 $473
 $(147)
Crushing493
 393
 100
Refined Products and Other223
 298
 (75)
Wilmar154
 241
 (87)
Total Ag Services and Oilseeds1,196
 1,405
 (209)
      
Carbohydrate Solutions

   

Starches and Sweeteners595
 699
 (104)
Bioproducts(125) 49
 (174)
Total Carbohydrate Solutions470
 748
 (278)
      
Nutrition     
Wild Flavors and Specialty Ingredients293
 259
 34
Animal Nutrition23
 18
 5
Total Nutrition316
 277
 39
     

Other72
 72
 —
      
Specified Items:     
Gains (losses) on sales of assets and businesses12
 21
 (9)
Asset impairment, restructuring, and settlement charges(52) (36) (16)
Total Specified Items(40) (15) (25)
      
Total Segment Operating Profit$2,014
 $2,487
 $(473)
      
Adjusted Segment Operating Profit(1)
$2,054
 $2,502
 $(448)
      
Segment Operating Profit$2,014
 $2,487
 $(473)
Corporate(922) (739) (183)
Earnings Before Income Taxes$1,092
 $1,748
 $(656)

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







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

Ag Services and Oilseeds operating profit decreased 15%. Ag Services results were lower due to weaker margins and lower volumes in North American grain. Results in the current period were also negatively impacted by high water conditions in the first half of the year, which limited grain movement and sales in North America. Slow farmer selling and lower Chinese demand on South American origination in part due the African swine fever also impacted results. Crushing results were up compared to the prior period, which included significant negative timing effects. Higher executed crush margins around the globe and favorable timing effects of approximately $107 million from hedges entered in the prior year drove improved results. Refined Products and Other results were down compared to the prior period, which included the 2017 biodiesel tax credit. Wilmar results were lower year over year.

Carbohydrate Solutions operating profit decreased 37%. Starches and Sweeteners results were down due to higher manufacturing costs at the Decatur, IL complex and weaker margins in flour milling. Results in EMEA were pressured by lower margins due to low sugar prices and the Turkish quota on starch-based sweeteners. Bioproducts results were down due to significantly lower ethanol margins amid a continued unfavorable ethanol industry margin environment.

Nutrition operating profit increased 14%. Wild Flavors and Specialty Ingredients results were higher year over year on strong sales and margin growth in North America and EMEAI and contributions from acquisitions. Animal Nutrition results were up driven largely by contributions from Neovia, partially offset by additional upfront costs related to inventory valuation of newly-acquired Neovia and weaker lysine results.

Other operating profit was comparable to the prior period. Improved results from the Company’s futures commission brokerage business was offset by increased captive insurance underwriting losses.
Corporate results for the nine months are as follows:
 Nine Months Ended  
 September 30,  
 2019 2018 Change
 (In millions)
LIFO credit (charge)$(10) $14
 $(24)
Interest expense-net(276) (236) (40)
Unallocated corporate costs(454) (487) 33
Adjustments related to acquisitions(14) 4
 (18)
Restructuring charges(150) (6) (144)
Other charges(18) (28) 10
Total Corporate$(922) $(739) $(183)

Corporate results were a net charge of $922 million in the current period compared to $739 million in the prior period. The effect of changes in agricultural commodity prices on LIFO inventory valuation reserves resulted in a charge of $10 million in the current period compared to a credit of $14 million in the prior period. Interest expense-net increased $40 million due principally to higher borrowings to fund recent acquisitions. Unallocated corporate costs decreased $33 million due principally to lower variable performance-related and stock compensation expenses, partially offset by higher spending on IT, growth-related investments, Readiness-related projects, and costs transferred in from the business units related to the centralization of certain activities. Current period adjustments related to acquisitions consisted of expenses related to the Neovia acquisition compared to prior period’s net gains on foreign exchange derivative contracts entered into to economically hedge certain acquisitions. Restructuring charges, which include pension settlement and remeasurement charges, increased due to early retirement and reorganization initiatives in the current period. Other charges decreased due to lower foreign exchange losses, partially offset by decreased earnings from the Company’s equity investment in CIP.


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

Non-GAAP Financial Measures

The Company uses adjusted EPS, adjusted 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 specified items. Adjusted EBITDA is defined as earnings before taxes, interest, and depreciation and amortization, adjusted for specified items. The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of interest expense and depreciation and amortization to earnings before income taxes. 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.

The table below provides a reconciliation of diluted EPS to adjusted EPS for the nine months ended September 30, 2019 and 2018.
 Nine months ended September 30,
 2019 2018
 In millions Per share In millions Per share
Average number of shares outstanding - diluted565
   567
  
        
Net earnings and reported EPS (fully diluted)$875
 $1.55
 $1,495
 $2.64
Adjustments:       
LIFO charge (credit) - net of tax of $2 million in 2019 and $3 million in 2018 (1)
8
 0.01
 (11) (0.02)
(Gains) losses on sales of assets and businesses - net of tax of $3 million in 2019 and $1 million in 2018 (2)
(9) (0.02) (20) (0.04)
Asset impairment, restructuring, and settlement charges - net of tax of $46 million in 2019 and $12 million in 2018 (2)
156
 0.28
 30
 0.05
Certain discrete tax adjustments(7) (0.01) (4) (0.01)
Adjustments related to acquisitions - net of tax of $5 million in 2019 and $1 million in 2018 (2)
9
 0.02
 (3) —
Total adjustments157
 0.28
 (8) (0.02)
Adjusted net earnings and adjusted EPS$1,032
 $1.83
 $1,487
 $2.62
        
(1) Tax effected using the Company’s U.S. tax rate.
(2) Tax effected using the 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 nine months ended September 30, 2019 and 2018.
 Nine months ended  
 September 30,  
(In millions)2019 2018 Change
Earnings before income taxes$1,092
 $1,748
 $(656)
Interest expense307
 267
 40
Depreciation and amortization742
 706
 36
LIFO10
 (14) 24
(Gains) losses on sales of assets and businesses(12) (21) 9
Adjustments related to acquisitions14
 (4) 18
Asset impairment, restructuring, and settlement charges202
 42
 160
Adjusted EBITDA$2,355
 $2,724
 $(369)
      
      
 Nine months ended  
 September 30,  
(In millions)2019 2018 Change
Ag Services and Oilseeds$1,478
 $1,699
 $(221)
Carbohydrate Solutions716
 1,001
 (285)
Nutrition482
 387
 95
Other97
 95
 2
Corporate(418) (458) 40
Adjusted EBITDA$2,355
 $2,724
 $(369)




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

Liquidity and Capital Resources

A Company objective is to have sufficient liquidity, balance sheet strength, and financial flexibility to fund the operating and capital requirements of a capital intensive agricultural commodity-based business.  The Company depends on access to credit markets, which can be impacted by its credit rating and factors outside of the Company’s control, to fund its working capital needs and capital expenditures. The primary source of funds to finance the Company’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.  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 used in operating activities was $2.0$3.6 billion for the threenine months compared to $3.6$3.7 billion for the same period last year. Working capital changes, including the increase in deferred consideration, decreased cash by $2.5$5.3 billion for the threenine months compared to $4.1$5.6 billion for the same period last year. Inventories decreased approximately $0.2$1.0 billion primarily due to lower quantities partially offset by higher inventory prices.quantities. Trade payables declined approximately $0.3$0.8 billion principally reflecting seasonal cash payments for North American harvest-related grain purchases.

Increase in deferred consideration in securitized receivables of $1.8$5.7 billion and $2.5$5.4 billion for the threenine months and the same period last year, respectively, was offset by $1.8$5.7 billion and $2.4$5.4 billion of net consideration received for beneficial interest obtained for selling trade receivables for the threenine months and the same period last year, respectively.

Cash used inprovided by investing activities was $0.3$3.3 billion for the threenine months compared to cash provided of $2.2$4.6 billion for the same period last year. Capital expenditures and netof $0.6 billion for the nine months were comparable to the same period last year. Net assets of businesses acquired were $2.1$1.9 billion for the threenine months compared to $0.2$0.3 billion for the same period last year. Net consideration received for beneficial interest obtained for selling trade receivables was $1.8$5.7 billion for the threenine months compared to $2.4$5.4 billion the same period last year.

Cash provided byused in financing activities was $1.1$0.4 billion for the threenine months compared to $1.3$0.1 billion for the same period last year. Long-term debt borrowings for the nine months were $3 million compared to $762 million for the same period last year, which primarily related to the €650 million ($754 million as of September 30, 2018) aggregate principal amount of 1.0% Notes issued on September 12, 2018. Long-term debt payments for the nine months of $615 million primarily related to the €500 million Floating Rate Notes that matured in June 2019, compared to $13 million for the same period last year. Commercial paper borrowings for the threenine months were $1.31.0 billion compared to commercial paper borrowings of $1.5$0.3 billion for the same period last year. There were no significant shareShare repurchases for the threenine months andwere $0.2 billion compared to an insignificant amount for the same period last year. Dividends of $0.6 billion for the nine months were comparable to the same period last year.

At March 31,September 30, 2019, the Company had $0.9$1.0 billion of cash, cash equivalents, and short-term marketable securities and a current ratio, defined as current assets divided by current liabilities, of 1.51.6 to 1. Included in working capital was $5.5$4.7 billion of readily marketable commodity inventories. At March 31,September 30, 2019, the Company’s capital resources included shareholders’ equity of $19$18.9 billion and lines of credit, including the accounts receivable securitization programs described below, totaling $9.0$8.5 billion, of which $6.2$5.5 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 29% at March 31,September 30, 2019 and December 31, 2018. The Company uses this ratio as a measure of the Company’s long-term indebtedness and an indicator of financial flexibility. The Company’s ratio of net debt (the sum of short-term debt, 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 32%30% at March 31,September 30, 2019 and 25% at December 31, 2018. Of the Company’s total lines of credit, $5.0 billion supported the combined U.S. and European commercial paper borrowing programs, against which there was $1.3$1.1 billion of U.S. and European commercial paper outstanding at March 31, 2019. There was no commercial paper outstanding under the European program at March 31,September 30, 2019.

As of March 31,September 30, 2019, the Company had $0.9 billion of cash and cash equivalents, $0.4 billion of which was cash held by foreign subsidiaries whose undistributed earnings are considered indefinitely reinvested. Based on the Company’s historical ability to generate sufficient cash flows from its U.S. operations and unused and available U.S. credit capacity of $3.8$3.9 billion, the Company has asserted that these funds are indefinitely reinvested outside the U.S.





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

The Company has accounts receivable securitization programs (the “Programs”) with certain commercial paper conduit purchasers and committed purchasers. The Programs, as amended, provide the Company with up to $1.8 billion 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 17 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information and disclosures on the Programs). As of March 31,September 30, 2019, the Company utilized $1.4$1.7 billion of its facility under the Programs.




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

For the threenine months ended March 31,September 30, 2019, the Company spent approximately $0.2$0.6 billion in capital expenditures and $0.2$0.6 billion in dividends. The Company has a stock repurchase program. Under the program, the Company acquired an insignificant number of3.7 million shares for the threenine months ended March 31,September 30, 2019, and has 12.1108.3 million shares remaining that may be repurchased until December 31, 2019. On August 7, 2019, the Company’s Board of Directors approved the extension of the stock repurchase program through December 31, 2024 and the repurchase of up to an additional 100,000,000 shares under the extended program.
 
The Company expects capital expenditures of approximately $0.8 billion to $0.9 billion, and additional cash outlaysdividends of approximately $0.8 billion, in dividendsand share repurchases of about $150 million during 2019.

Contractual Obligations and Commercial Commitments

The Company’s purchase obligations as of March 31,September 30, 2019 and December 31, 2018 were $12.7$13.0 billion and $11.8 billion, respectively.  The increase is related to obligations to purchase higher quantities of agricultural commodity inventories, obligations from new acquisitions, and othernew commitments. As of March 31,September 30, 2019,, the Company expects to make payments related to purchase obligations of $11.8$12.1 billion within the next twelve months. There were no other material changes in the Company’s contractual obligations during the quarter ended March 31,September 30, 2019.

Off Balance Sheet Arrangements

In September 2019, the Company amended its accounts receivable securitization program (the “Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “First Purchasers”) and increased its facility from $1.2 billion to $1.3 billion. The program terminates on June 18, 2020 unless extended (see Note 17 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information and disclosures on the Programs).

There were no significantother material changes in the Company’s off balance sheet arrangements during the quarter ended March 31,September 30, 2019.

Critical Accounting Policies

There were no material changes in the Company’s critical accounting policies during the quarter ended March 31,September 30, 2019.

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 March 31,September 30, 2019 are described below.  There were no material changes during the period in the Company’s potential loss arising from changes in foreign currency exchange rates and interest rates.

For detailed information regarding the Company’s market risk sensitive instruments and positions, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

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.




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


The fair value of the Company’s commodity position is a summation of the fair values calculated for each commodity by valuing all of the commodity positions at quoted market prices for the period, where available, or utilizing a close proxy. The Company has established metrics to monitor the amount of market risk exposure, which consist of volumetric limits and value-at-risk (VaR)(“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.











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


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:
  
 Three months ended Year ended Nine months ended Year ended
 March 31, 2019 December 31, 2018 September 30, 2019 December 31, 2018
Long/(Short) (In millions)
 Fair Value Market Risk Fair Value Market Risk Fair Value Market Risk Fair Value Market Risk
Highest position $348
 $35
 $434
 $43
 $549
 $55
 $434
 $43
Lowest position 39
 4
 25
 2
 (83) (8) 25
 2
Average position 198
 20
 237
 24
 241
 24
 237
 24

The change in fair value of the average position was the result of a decreasean increase in average quantities underlying the weekly commodity position.position offset by a decrease in prices.

ITEM 4.CONTROLS AND PROCEDURES

As of March 31,September 30, 2019, 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 (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (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.

During 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)(“ERP”) system on a worldwide basis, which is expected to occur in phases over the next several years. The Company continues 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 in these circumstances has not materially affected its internal control over financial reporting.

In January 2019, the Company completed the acquisition of Neovia. As a result of the acquisition, the Company is in the process of reviewing its internal control structure and, if necessary, will make appropriate changes as the Company incorporates its controls and procedures into the acquired business. In addition, during the quarter, the Company added certain controls related to the adoption of Topic 842 with no material effect to its internal control over financial reporting.



PART II – OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

The Company is routinely involved in a number of actual or threatened legal actions, including those involving alleged personal injuries, employment law, product liability, intellectual property, environmental issues, alleged tax liability (see Note 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. 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 has been a party to numerous lawsuits pending in various U.S. state and federal courts arising out of Syngenta Corporation’s (Syngenta)(“Syngenta”) marketing and distribution of genetically modified corn products, Agrisure Viptera and Agrisure Duracade, in the U.S. First, the Company brought a state court action in Louisiana against Syngenta in 2014, alleging Syngenta was negligent in commercializing its products before the products were approved in China. In December 2017, the Company and Syngenta reached a confidential settlement of this action. Second, Syngenta brought third-party claims against the Company in 2015 in a federal multidistrict litigation (MDL)(“MDL”) in Kansas City, Kansas, a state court MDL in Minneapolis, Minnesota, and other courts, seeking contribution in the event Syngenta is held liable in class actions by farmers and other parties. In the December 2017 settlement, Syngenta agreed to dismiss all of these third-party claims against the Company. Third, farmers and other parties have sued the Company and other grain companies in numerous individual and purported class action suits in Illinois 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. On January 4, 2017, a federal court in the Southern District of Illinois dismissed, subject to appeal, all of the pending federal complaints against the Company, and thus the Company remains a defendant only in certain Illinois state court actions by farmers and other parties, which actions the Company has moved to dismiss as well. 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 of these actions are in pretrial proceedings. At this time, the Company is unable 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.

On September 4, 2019, AOT Holding AG (“AOT”) filed a putative class action under the U.S. Commodities Exchange Act in federal district court in Urbana, Illinois, alleging that the Company sought to manipulate the benchmark price used to price and settle ethanol derivatives traded on futures exchanges. AOT alleges that members of the putative class suffered “hundreds of millions of dollars in damages” as a result of the Company’s alleged actions.  The Company denies liability, and is vigorously defending itself, in this action.  As this action is in pretrial proceedings, the Company is unable at this time to predict the final outcome with any reasonable degree of certainty, but believes the outcome will not have a material adverse effect on its financial condition, results of operations, or cash flows.

On September 5, 2019, D&M Farms, Mark Hasty, and Dustin Land filed a putative class action on behalf of a purported class of peanut farmers under the U.S. federal antitrust laws in federal court in Norfolk, Virginia, alleging that the Company’s subsidiary, Golden Peanut, and another peanut shelling company, conspired to fix the price they paid to farmers for raw peanuts.  The Company filed a motion to dismiss this suit on October 21, 2019, and that motion is awaiting decision by the court. The Company denies liability, and is vigorously defending itself, in this action.  As this action is in pretrial proceedings, the Company is unable at this time to predict the final outcome with any reasonable degree of certainty, but believes the outcome will not have a material adverse effect on its financial condition, results of operations, or cash flows.

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.RISK FACTORS

There were no significant changes in the Company’s risk factors during the quarter ended March 31,September 30, 2019. 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, 2018.




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)
January 1, 2019 to        
January 31, 2019 702
 $41.069
 22
 12,063,392
         
February 1, 2019 to  
  
  
  
February 28, 2019 538,643
 41.828
 63
 12,063,329
         
March 1, 2019 to  
  
    
March 31, 2019 6,882
 42.910
 37
 12,063,292
Total 546,227
 $41.841
 122
 12,063,292
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, 2019 to        
July 31, 2019 977,512
 $40.706
 972,639
 8,732,702
         
August 1, 2019 to  
  
  
  
August 31, 2019 418,627
 39.847
 417,145
 108,315,557
         
September 1, 2019 to  
  
    
September 30, 2019 509
 39.735
 15
 108,315,542
Total 1,396,648
 $40.448
 1,389,799
 108,315,542

(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 March 31,September 30, 2019, there were 546,1056,849 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. On August 7, 2019, the Company’s Board of Directors approved the extension of the stock repurchase program through December 31, 2024 and the repurchase of up to an additional 100,000,000 shares under the extended program.
 



ITEM 6.EXHIBITS
(3)(i) 
Composite Certificate of Incorporation, as amended, (incorporated by reference to Exhibit 3(i) to the Company’s Form 10-Q for the quarter ended September 30, 2001 (File No. 1-44)).
   
(3)(ii) 
Bylaws, as amended, through February 9, 2017May 1, 2019 (incorporated by reference to Exhibit 3(ii) to the Company’s Form 8-K filed on February 13, 2017May 7, 2019 (File No. 1-44)).
   
(31.1) 
Certification of Chief Executive Officer pursuant to Rule 13a–14(a) and Rule 15d–14(a) of the Securities Exchange Act, as amended.
   
(31.2) 
Certification of Chief Financial Officer pursuant to Rule 13a–14(a) and Rule 15d–14(a) of the Securities Exchange Act, as amended.
   
(32.1) 
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
(32.2) 
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
(101) Interactive Data File
(104)Cover Page Interactive Data File (formatted as Inline XBRL and incorporated by reference to Exhibit 101)




SIGNATURES

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

 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: April 26,October 31, 2019

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